CITE

    15 USC Sec. 80a-60                                          01/05/2009

EXPCITE

    TITLE 15 - COMMERCE AND TRADE
    CHAPTER 2D - INVESTMENT COMPANIES AND ADVISERS
    SUBCHAPTER I - INVESTMENT COMPANIES

HEAD

    Sec. 80a-60. Capital structure

STATUTE

    (a) Exceptions for business development company
      Notwithstanding the exemption set forth in section 80a-6(f) of
    this title, section 80a-18 of this title shall apply to a business
    development company to the same extent as if it were a registered
    closed-end investment company, except as follows:
        (1) The asset coverage requirements of section 80a-18(a)(1)(A)
      and (B) of this title applicable to business development
      companies shall be 200 per centum.
        (2) Notwithstanding section 80a-18(c) of this title, a business
      development company may issue more than one class of senior
      security representing indebtedness.
        (3) Notwithstanding section 80a-18(d) of this title -
          (A) a business development company may issue warrants,
        options, or rights to subscribe or convert to voting securities
        of such company, accompanied by securities, if -
            (i) such warrants, options, or rights expire by their terms
          within ten years;
            (ii) such warrants, options, or rights are not separately
          transferable unless no class of such warrants, options, or
          rights and the securities accompanying them has been publicly
          distributed;
            (iii) the exercise or conversion price is not less than the
          current market value at the date of issuance, or if no such
          market value exists, the current net asset value of such
          voting securities; and
            (iv) the proposal to issue such securities is authorized by
          the shareholders or partners of such business development
          company, and such issuance is approved by the required
          majority (as defined in section 80a-56(o) of this title) of
          the directors of or general partners in such company on the
          basis that such issuance is in the best interests of such
          company and its shareholders or partners;
          (B) a business development company may issue, to its
        directors, officers, employees, and general partners, warrants,
        options, and rights to purchase voting securities of such
        company pursuant to an executive compensation plan, if -
            (i)(I) in the case of warrants, options, or rights issued
          to any officer or employee of such business development
          company (including any officer or employee who is also a
          director of such company), such securities satisfy the
          conditions in clauses (i), (iii), and (iv) of subparagraph
          (A); or (II) in the case of warrants, options, or rights
          issued to any director of such business development company
          who is not also an officer or employee of such company, or to
          any general partner in such company, the proposal to issue
          such securities satisfies the conditions in clauses (i) and
          (iii) of subparagraph (A), is authorized by the shareholders
          or partners of such company, and is approved by order of the
          Commission, upon application, on the basis that the terms of
          the proposal are fair and reasonable and do not involve
          overreaching of such company or its shareholders or partners;
            (ii) such securities are not transferable except for
          disposition by gift, will, or intestacy;
            (iii) no investment adviser of such business development
          company receives any compensation described in paragraph (1)
          of section 80b-5 (!1) of this title, except to the extent
          permitted by clause (A) or (B) of that section; and
            (iv) such business development company does not have a
          profit-sharing plan described in section 80a-56(n) of this
          title; and
          (C) a business development company may issue warrants,
        options, or rights to subscribe to, convert to, or purchase
        voting securities not accompanied by securities, if -
            (i) such warrants, options, or rights satisfy the
          conditions in clauses (i) and (iii) of subparagraph (A); and
            (ii) the proposal to issue such warrants, options, or
          rights is authorized by the shareholders or partners of such
          business development company, and such issuance is approved
          by the required majority (as defined in section 80a-56(o) of
          this title) of the directors of or general partners in such
          company on the basis that such issuance is in the best
          interests of the company and its shareholders or partners.
      Notwithstanding this paragraph, the amount of voting securities
      that would result from the exercise of all outstanding warrants,
      options, and rights at the time of issuance shall not exceed 25
      per centum of the outstanding voting securities of the business
      development company, except that if the amount of voting
      securities that would result from the exercise of all outstanding
      warrants, options, and rights issued to such company's directors,
      officers, employees, and general partners pursuant to any
      executive compensation plan meeting the requirements of
      subparagraph (B) of this paragraph would exceed 15 per centum of
      the outstanding voting securities of such company, then the total
      amount of voting securities that would result from the exercise
      of all outstanding warrants, options, and rights at the time of
      issuance shall not exceed 20 per centum of the outstanding voting
      securities of such company.
        (4) For purposes of measuring the asset coverage requirements
      of section 80a-18(a) of this title, a senior security created by
      the guarantee by a business development company of indebtedness
      issued by another company shall be the amount of the maximum
      potential liability less the fair market value of the net
      unencumbered assets (plus the indebtedness which has been
      guaranteed) available in the borrowing company whose debts have
      been guaranteed, except that a guarantee issued by a business
      development company of indebtedness issued by a company which is
      a wholly-owned subsidiary of the business development company and
      is licensed as a small business investment company under the
      Small Business Investment Act of 1958 [15 U.S.C. 661 et seq.]
      shall not be deemed to be a senior security of such business
      development company for purposes of section 80a-18(a) of this
      title if the amount of the indebtedness at the time of its
      issuance by the borrowing company is itself taken fully into
      account as a liability by such business development company, as
      if it were issued by such business development company, in
      determining whether such business development company, at that
      time, satisfies the asset coverage requirements of section 80a-
      18(a) of this title.
    (b) Compliance
      A business development company shall comply with the provisions
    of this section at the time it becomes subject to sections 80a-54
    through 80a-64 of this title, as if it were issuing a security of
    each class which it has outstanding at such time.

SOURCE

    (Aug. 22, 1940, ch. 686, title I, Sec. 61, as added Pub. L. 96-477,
    title I, Sec. 105, Oct. 21, 1980, 94 Stat. 2286; amended Pub. L.
    104-290, title V, Sec. 506, Oct. 11, 1996, 110 Stat. 3446.)

REFERENCES IN TEXT

      Section 80b-5 of this title, referred to in subsec.
    (a)(3)(B)(iii), was amended generally by Pub. L. 100-181, title
    VII, Sec. 703, Dec. 4, 1987, 101 Stat. 1263, and, as so amended,
    the subject matter of former paragraph (1) and clauses (A) and (B)
    of section 80b-5 is contained in subsections (a)(1) and (b)(1) and
    (2) of section 80b-5.
      The Small Business Investment Act of 1958, referred to in subsec.
    (a)(4), is Pub. L. 85-699, Aug. 21, 1958, 72 Stat. 689), as
    amended, which is classified principally to chapter 14B (Sec. 661
    et seq.) of this title. For complete classification of this Act to
    the Code, see Short Title note set out under section 661 of this
    title and Tables.

AMENDMENTS

      1996 - Subsec. (a)(2). Pub. L. 104-290, Sec. 506(1), substituted
    a period for "if such business development company does not have
    outstanding any publicly held indebtedness, and all such securities
    of each class are -
        "(A) privately held or guaranteed by the Small Business
      Administration, or banks, insurance companies, or other
      institutional investors; and
        "(B) not intended to be publicly distributed."
      Subsec. (a)(3)(A). Pub. L. 104-290, Sec. 506(2)(A), (B), inserted
    "accompanied by securities," after "of such company," and struck
    out "senior securities representing indebtedness accompanied by"
    before "warrants, options, or rights".
      Subsec. (a)(3)(A)(ii). Pub. L. 104-290, Sec. 506(2)(C), struck
    out "senior" before "securities".
      Subsec. (a)(3)(C). Pub. L. 104-290, Sec. 506(3), added subpar.
    (C).

FOOTNOTE

    (!1) See References in Text note below.
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