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.