15 U.S.C. § 681 — Organization

Page 1087 TITLE 15—COMMERCE AND TRADE § 681 trator, and shall receive compensation at the rate provided by law for other Associate Admin- istrators of the Small Business Administration. (Pub. L. 85–699, title II, § 201, Aug. 21, 1958, 72 Stat. 690; Pub. L. 89–117, title III, § 316(b), Aug. 10, 1965, 79 Stat. 484; Pub. L. 89–779, § 2, Nov. 6, 1966, 80 Stat. 1359.) Editorial Notes AMENDMENTS 1966—Pub. L. 89–779 substituted ‘‘Associated Adminis- trator’’ for ‘‘Deputy Administrator’’ as the head of the Small Business Investment Division of the Small Busi- ness Administration, substituted the rate provided by law for other Associate Administrators of the Small Business Administration for the rate provided by law for the other Deputy Administrators of the Small Busi- ness Administration as the standard of compensation for the head of the Small Business Investment Division, and struck out provisions spelling out the proper exer- cise of the powers conferred on the Administration and on the Administrator through the Small Business In- vestment Division and the Division head. See section 687(f) of this title. 1965—Pub. L. 89–117 provided that the powers con- ferred by subchapters IV–A and V of this chapter shall be exercised through such divisions, sections, or other personnel as the Administrator in his discretion deter- mines. § 672. Repealed. Pub. L. 87–341, § 11(h)(1), Oct. 3, 1961, 75 Stat. 757 Section, Pub. L. 85–699, title II, § 202(b), Aug. 21, 1958, 72 Stat. 691, authorized appropriations for business ex- penses. SUBCHAPTER III—INVESTMENT DIVISION PROGRAMS PART A—SMALL BUSINESS INVESTMENT COMPANIES § 681. Organization (a) Incorporation and charter under State law, period of succession; area of operations A small business investment company shall be an incorporated body, a limited liability com- pany, or a limited partnership organized and chartered or otherwise existing under State law solely for the purpose of performing the func- tions and conducting the activities con- templated under this subchapter, which, if in- corporated, has succession for a period of not less than thirty years unless sooner dissolved by its shareholders, and if a limited partnership, has succession for a period of not less than ten years, and possesses the powers reasonably nec- essary to perform such functions and conduct such activities. The area in which the company is to conduct its operations, and the establish- ment of branch offices or agencies (if authorized by the articles), shall be subject to the approval of the Administration. (b) Articles of incorporation; approval The articles of any small business investment company shall specify in general terms the ob- jects for which the company is formed, the name assumed by such company, the area or areas in which its operations are to be carried on, the place where its principal office is to be located, and the amount and classes of its shares of cap- ital stock. Such articles may contain any other provisions not inconsistent with this chapter that the company may see fit to adopt for the regulation of its business and the conduct of its affairs. Such articles and any amendments thereto adopted from time to time shall be sub- ject to the approval of the Administration. (c) Issuance of license (1) Submission of application Each applicant for a license to operate as a small business investment company under this chapter shall submit to the Administrator an application, in a form and including such doc- umentation as may be prescribed by the Ad- ministrator. (2) Procedures (A) Status Not later than 90 days after the initial re- ceipt by the Administrator of an application under this subsection, the Administrator shall provide the applicant with a written report detailing the status of the application and any requirements remaining for comple- tion of the application. (B) Approval or disapproval Within a reasonable time after receiving a completed application submitted in accord- ance with this subsection and in accordance with such requirements as the Adminis- trator may prescribe by regulation, the Ad- ministrator shall— (i) approve the application and issue a li- cense for such operation to the applicant if the requirements of this section are satis- fied; or (ii) disapprove the application and notify the applicant in writing of the disapproval. (3) Matters considered In reviewing and processing any application under this subsection, the Administrator— (A) shall determine whether— (i) the applicant meets the requirements of subsections (a) and (c) of section 682 of this title; and (ii) the management of the applicant is qualified and has the knowledge, experi- ence, and capability necessary to comply with this chapter; (B) shall take into consideration— (i) the need for and availability of fi- nancing for small business concerns in the geographic area in which the applicant is to commence business; (ii) the general business reputation of the owners and management of the appli- cant; and (iii) the probability of successful oper- ations of the applicant, including adequate profitability and financial soundness; (C) shall not take into consideration any projected shortage or unavailability of lever- age; and (D) shall give first priority to an applicant that is located in an underlicensed State with below median financing, as determined by the Administrator. Page 1088 TITLE 15—COMMERCE AND TRADE § 681 (4) Exception (A) In general Notwithstanding any other provision of this chapter, the Administrator may, in the discretion of the Administrator and based on a showing of special circumstances and good cause, approve an application and issue a li- cense under this subsection with respect to any applicant that— (i) has private capital of not less than $3,000,000; (ii) would otherwise be issued a license under this subsection, except that the ap- plicant does not satisfy the requirements of section 682(a) of this title; and (iii) has a viable business plan reason- ably projecting profitable operations and a reasonable timetable for achieving a level of private capital that satisfies the re- quirements of section 682(a) of this title. (B) Leverage An applicant licensed pursuant to the ex- ception provided in this paragraph shall not be eligible to receive leverage as a licensee until the applicant satisfies the require- ments of section 682(a) of this title, unless the applicant— (i) is located in a State that— (I) is not served by a licensee; or (II) is an underlicensed State; and (ii) agrees to be limited to 1 tier of lever- age available under section 682(b) of this title, until the applicant meets the re- quirements of section 682(a) of this title. (d) Repealed. Pub. L. 104–208, div. D, title II, § 208(b)(3)(A), Sept. 30, 1996, 110 Stat. 3009–742 (e) Fees (1) In general The Administration may prescribe fees to be paid by each applicant for a license to operate as a small business investment company under this chapter. (2) Use of amounts Fees collected under this subsection— (A) shall be deposited in the account for salaries and expenses of the Administration; and (B) are authorized to be appropriated sole- ly to cover the costs of licensing examina- tions. (Pub. L. 85–699, title III, § 301, Aug. 21, 1958, 72 Stat. 691; Pub. L. 86–502, § 4, June 11, 1960, 74 Stat. 196; Pub. L. 87–341, § 11(a), (b), Oct. 3, 1961, 75 Stat. 756; Pub. L. 90–104, title II, § 202, Oct. 11, 1967, 81 Stat. 269; Pub. L. 92–595, § 2(b), Oct. 27, 1972, 86 Stat. 1314; Pub. L. 94–305, title I, § 106(b)–(d), June 4, 1976, 90 Stat. 666; Pub. L. 95–507, title I, § 104, Oct. 24, 1978, 92 Stat. 1758; Pub. L. 100–590, title I, § 105, Nov. 3, 1988, 102 Stat. 2993; Pub. L. 104–208, div. D, title II, § 208(b)(1)–(3)(A), Sept. 30, 1996, 110 Stat. 3009–741, 3009–742; Pub. L. 105–135, title II, §§ 212, 214, Dec. 2, 1997, 111 Stat. 2601; Pub. L. 115–333, § 2(2), Dec. 19, 2018, 132 Stat. 4488.) Editorial Notes REFERENCES IN TEXT For definition of ‘‘this chapter’’, referred to in sub- secs. (b), (c), and (e), see References in Text note set out under section 661 of this title. AMENDMENTS 2018—Subsec. (c)(3)(D). Pub. L. 115–333, § 2(2)(A), added subpar. (D). Subsec. (c)(4)(B)(i). Pub. L. 115–333, § 2(2)(B)(ii), (iii), redesignated cl. (ii) as (i) and amended it generally. Prior to amendment, cl. read as follows: ‘‘is located in a State that is not served by a licensee; and’’. Pub. L. 115–333, § 2(2)(B)(i), struck out cl. (i) which read as follows: ‘‘files an application for a license not later than 180 days after December 2, 1997;’’. Subsec. (c)(4)(B)(ii), (iii). Pub. L. 115–333, § 2(2)(B)(ii), redesignated cls. (ii) and (iii) as (i) and (ii), respec- tively. 1997—Subsec. (c)(4)(B). Pub. L. 105–135, § 212, amended heading and text of subpar. (B) generally. Prior to amendment, text read as follows: ‘‘An applicant li- censed pursuant to the exception provided in this para- graph shall not be eligible to receive leverage as a li- censee until the applicant satisfies the requirements of section 682(a) of this title.’’ Subsec. (e). Pub. L. 105–135, § 214, added subsec. (e). 1996—Subsec. (a). Pub. L. 104–208, § 208(b)(1), sub- stituted ‘‘body, a limited liability company, or’’ for ‘‘body or’’ in first sentence. Subsec. (c). Pub. L. 104–208, § 208(b)(2), inserted head- ing and amended text of subsec. (c) generally. Prior to amendment, subsec. (c) read as follows: ‘‘The articles and amendments thereto shall be forwarded to the Ad- ministration for consideration and approval or dis- approval. In determining whether to approve such a company’s articles and permit it to operate under the provisions of this chapter, the Administration shall give due regard, among other things, to the need and availability for the financing of small business con- cerns in the geographic area in which the proposed company is to commence business, the general business reputation and character of the proposed owners and management of the company, and the probability of successful operations of such company including ade- quate profitability and financial soundness. After con- sideration of all relevant factors, if it approves the company’s articles, the Administration may in its dis- cretion approve the company to operate under the pro- visions of this chapter and issue the company a license for such operation.’’ Subsec. (d). Pub. L. 104–208, § 208(b)(3)(A), struck out subsec. (d) which read as follows: ‘‘Notwithstanding any other provision of this chapter, a small business in- vestment company, the investment policy of which is that its investments will be made solely in small busi- ness concerns which will contribute to a well-balanced national economy by facilitating ownership in such concerns by persons whose participation in the free en- terprise system is hampered because of social or eco- nomic disadvantages may be organized and chartered under State business or nonprofit corporation statutes, or formed as a limited partnership, and may be licensed by the Administration to operate under the provisions of this chapter.’’ 1988—Subsec. (a). Pub. L. 100–590 substituted ‘‘, if in- corporated, has succession for a period of not less than thirty years unless sooner dissolved by its share- holders, and if a limited partnership, has succession for a period of not less than ten years,’’ for ‘‘has succession for a period of not less than thirty years unless sooner dissolved by its shareholders or partners’’. 1978—Subsec. (d). Pub. L. 95–507 authorized small business investment companies to form as limited part- nerships. 1976—Subsec. (a). Pub. L. 94–305, § 106(b), inserted ref- erence to limited partnership and reference to partners, struck out ‘‘of incorporation’’ after ‘‘by the articles’’, and inserted ‘‘or otherwise existing’’ after ‘‘chartered’’. Page 1089 TITLE 15—COMMERCE AND TRADE § 682 1 So in original. Probably should be followed by a comma. Subsec. (b). Pub. L. 94–305, § 106(c), struck out ‘‘of in- corporation’’ after ‘‘The articles’’. Subsec. (c). Pub. L. 94–305, § 106(d), struck out ‘‘of in- corporation’’ after ‘‘articles’’ wherever appearing. 1972—Subsec. (d). Pub. L. 92–595 added subsec. (d). 1967—Subsec. (c). Pub. L. 90–104 provided for consider- ation of availability of financing, the geographic area, the business reputation, ownership factor, and prob- ability of successful operations of company including adequate profitability and financial soundness and eliminated from consideration the number of such com- panies previously organized in the United States and the volume of their operations. 1961—Subsec. (a). Pub. L. 87–341, § 11(a), provided that small business investment companies shall be incor- porated, organized and chartered under State law, with a minimum succession period of thirty years unless sooner dissolved by its activities and functions, its area of operation shall be subject to the Administration’s approval, and deleted provisions setting the minimum number of incorporators at 10, no company shall be chartered by the Administration unless it determined that none could be chartered under the laws of the State and operate in accordance with this chapter, and that no such company shall be chartered by the Admin- istration under this section after June 30, 1961. Subsec. (c). Pub. L. 87–341, § 11(b)(1), (2), substituted ‘‘such a company’s articles of incorporation and permit it to operate under the provisions of this chapter’’ for ‘‘the establishment of such a company and its proposed articles of incorporation’’, and provided that if the Ad- ministration approves the company to operate under the provisions of this chapter, it may issue the com- pany a license for such operation. Subsec. (d). Pub. L. 87–341, § 11(b)(3), repealed subsec. (d) which specified the general powers of a company formed under this section. Subsec. (e). Pub. L. 87–341, § 11(b)(3), repealed subsec. (e) which provided for a board of directors for a com- pany formed under this section. 1960—Subsec. (d)(9) to (11). Pub. L. 86–502 repealed par. (9) which empowered companies to act as depositories or fiscal agents of the United States, and redesignated pars. (10) and (11) as (9) and (10), respectively. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1997 AMENDMENT Amendment by Pub. L. 105–135 effective Oct. 1, 1997, see section 3 of Pub. L. 105–135, set out as a note under section 631 of this title. EFFECTIVE DATE OF 1967 AMENDMENT Pub. L. 90–104, title II, § 211, Oct. 11, 1967, 81 Stat. 272, provided that: ‘‘The effective date of this title [amend- ing this section and sections 682 to 684, 686, 687, 687b, and 692 of this title] shall be ninety days after enact- ment [Oct. 11, 1967], except that, with respect to section 207 [amending section 686 of this title], it shall be Janu- ary 1, 1968.’’ SAVINGS PROVISION Pub. L. 104–208, div. D, title II, § 208(b)(3)(B), Sept. 30, 1996, 110 Stat. 3009–742, provided that: ‘‘The repeal under subparagraph (A) [repealing subsec. (d) of this section] shall not be construed to require the Administrator to cancel, revoke, withdraw, or modify any license issued under section 301(d) of the Small Business Investment Act of 1958 [subsec. (d) of this section] before the date of enactment of this Act [Sept. 30, 1996].’’ REGULATORY REVIEW Pub. L. 102–366, title IV, § 408(d), Sept. 4, 1992, 106 Stat. 1017, directed Small Business Administration, not later than 90 days after Sept. 4, 1992, to complete a review of regulations intended to provide for safety and sound- ness of small business investment companies which ob- tain financing from the Administration under provi- sions of the Small Business Investment Act of 1958, 15 U.S.C. 661 et seq., and to exempt from such regulations, or to separately regulate, companies which do not ob- tain financing from the Administration. REPORTS TO CONGRESS Pub. L. 102–366, title IV, § 408(e), Sept. 4, 1992, 106 Stat. 1017, directed Administration, within 180 days after Sept. 4, 1992, to report on actions taken pursuant to section 408(d) of Pub. L. 102–366, formerly set out above, to the Committees on Small Business of the Senate and the House of Representatives, including the rationale for its actions. Pub. L. 102–366, title IV, § 417(b), Sept. 4, 1992, 106 Stat. 1019, provided that not later than 4 years after Sept. 4, 1992, the Comptroller General was to transmit to Con- gress a report that reviewed the Small Business Invest- ment Company program established under the Small Business Investment Act of 1958 (15 U.S.C. 661 et seq.) for the 3-year period following Sept. 4, 1992, with re- spect to each item listed in section 687(g)(3) of this title. § 682. Capital requirements (a) Amount (1) In general Except as provided in paragraph (2), the pri- vate capital of each licensee shall be not less than— (A) $5,000,000; or (B) $10,000,000, with respect to each li- censee authorized or seeking authority to issue participating securities to be pur- chased or guaranteed by the Administration under this chapter. (2) Exception The Administrator may, in the discretion of the Administrator and based on a showing of special circumstances and good cause, permit the private capital of a licensee authorized or seeking authorization to issue participating securities to be purchased or guaranteed by the Administration to be less than $10,000,000, but not less than $5,000,000, if the Adminis- trator determines that such action would not create or otherwise contribute to an unreason- able risk of default or loss to the Federal Gov- ernment. (3) Adequacy In addition to the requirements of paragraph (1), the Administrator shall— (A) determine whether the private capital of each licensee is adequate to assure a rea- sonable prospect that the licensee will be op- erated soundly and profitably, and managed actively and prudently in accordance with its articles; and (B) determine that the licensee will be able 1 both prior to licensing and prior to ap- proving any request for financing, to make periodic payments on any debt of the com- pany which is interest bearing and shall take into consideration the income which the company anticipates on its con- templated investments, the experience of the company’s owners and managers, the history of the company as an entity, if any, and the company’s financial resources. (4) Exemption from capital requirements The Administrator may, in the discretion of the Administrator, approve leverage for any