§ 80a-54. — Acquisition of assets by business development companies.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 15USC80a-54]
TITLE 15--COMMERCE AND TRADE
CHAPTER 2D--INVESTMENT COMPANIES AND ADVISERS
SUBCHAPTER I--INVESTMENT COMPANIES
Sec. 80a-54. Acquisition of assets by business development
companies
(a) Permissible assets; percentage
It shall be unlawful for a business development company to acquire
any assets (other than those described in paragraphs (1) through (7) of
this subsection) unless, at the time the acquisition is made, assets
described in paragraphs (1) through (6) below represent at least 70 per
centum of the value of its total assets (other than assets described in
paragraph (7) below):
(1) securities purchased, in transactions not involving any
public offering or in such other transactions as the Commission may,
by rule, prescribe if it finds that enforcement of this subchapter
and of the Securities Act of 1933 [15 U.S.C. 77a et seq.] with
respect to such transactions is not necessary in the public interest
or for the protection of investors by reason of the small amount, or
the limited nature of the public offering, involved in such
transactions--
(A) from the issuer of such securities, which issuer is an
eligible portfolio company, from any person who is, or who
within the preceding thirteen months has been, an affiliated
person of such eligible portfolio company, or from any other
person, subject to such rules and regulations as the Commission
may prescribe as necessary or appropriate in the public interest
or for the protection of investors; or
(B) from the issuer of such securities, which issuer is
described in section 80a-2(a)(46)(A) and (B) of this title but
is not an eligible portfolio company because it has issued a
class of securities with respect to which a member of a national
securities exchange, broker, or dealer may extend or maintain
credit to or for a customer pursuant to rules or regulations
adopted by the Board of Governors of the Federal Reserve System
under section 78g of this title, or from any person who is an
officer or employee of such issuer, if--
(i) at the time of the purchase, the business
development company owns at least 50 per centum of--
(I) the greatest number of equity securities of such
issuer and securities convertible into or exchangeable
for such securities; and
(II) the greatest amount of debt securities of such
issuer,
held by such business development company at any point in time
during the period when such issuer was an eligible portfolio
company, except that options, warrants, and similar
securities which have by their terms expired and debt
securities which have been converted, or repaid or prepaid
in the ordinary course of business or incident to a public
offering of securities of such issuer, shall not be
considered to have been held by such business development
company for purposes of this requirement; and
(ii) the business development company is one of the 20
largest holders of record of such issuer's outstanding
voting securities;
(2) securities of any eligible portfolio company with respect to
which the business development company satisfies the requirements of
section 80a-2(a)(46)(C)(ii) of this title;
(3) securities purchased in transactions not involving any
public offering from an issuer described in sections 80a-2(a)(46)(A)
and (B) of this title or from a person who is, or who within the
preceding thirteen months has been, an affiliated person of such
issuer, or from any person in transactions incident thereto, if such
securities were--
(A) issued by an issuer that is, or was immediately prior to
the purchase of its securities by the business development
company, in bankruptcy proceedings, subject to reorganization
under the supervision of a court of competent jurisdiction, or
subject to a plan or arrangement resulting from such bankruptcy
proceedings or reorganization;
(B) issued by an issuer pursuant to or in consummation of
such a plan or arrangement; or
(C) issued by an issuer that, immediately prior to the
purchase of such issuer's securities by the business development
company, was not in bankruptcy proceedings but was unable to
meet its obligations as they came due without material
assistance other than conventional lending or financing
arrangements;
(4) securities of eligible portfolio companies purchased from
any person in transactions not involving any public offering, if
there is no ready market for such securities and if immediately
prior to such purchase the business development company owns at
least 60 per centum of the outstanding equity securities of such
issuer (giving effect to all securities presently convertible into
or exchangeable for equity securities of such issuer as if such
securities were so converted or exchanged);
(5) securities received in exchange for or distributed on or
with respect to securities described in paragraphs (1) through (4)
of this subsection, or pursuant to the exercise of options,
warrants, or rights relating to securities described in such
paragraphs;
(6) cash, cash items, Government securities, or high quality
debt securities maturing in one year or less from the time of
investment in such high quality debt securities; and
(7) office furniture and equipment, interests in real estate and
leasehold improvements and facilities maintained to conduct the
business operations of the business development company, deferred
organization and operating expenses, and other noninvestment assets
necessary and appropriate to its operations as a business
development company, including notes of indebtedness of directors,
officers, employees, and general partners held by a business
development company as payment for securities of such company issued
in connection with an executive compensation plan described in
section 80a-56(j) of this title.
(b) Valuation of assets
For purposes of this section, the value of a business development
company's assets shall be determined as of the date of the most recent
financial statements filed by such company with the Commission pursuant
to section 78m of this title, and shall be determined no less frequently
than annually.
(Aug. 22, 1940, ch. 686, title I, Sec. 55, as added Pub. L. 96-477,
title I, Sec. 105, Oct. 21, 1980, 94 Stat. 2278; amended Pub. L. 100-
181, title VI, Sec. 626, Dec. 4, 1987, 101 Stat. 1263; Pub. L. 104-290,
title V, Sec. 505, Oct. 11, 1996, 110 Stat. 3446.)
References in Text
The Securities Act of 1933, referred to in subsec. (a)(1), is act
May 27, 1933, ch. 38, title I, 48 Stat. 74, as amended, which is
classified generally to subchapter I (Sec. 77a et seq.) of chapter 2A of
this title. For complete classification of this Act to the Code, see
section 77a of this title and Tables.
Amendments
1996--Subsec. (a)(1)(A). Pub. L. 104-290 substituted ``from any
person'' for ``or from any person'' and inserted before semicolon ``, or
from any other person, subject to such rules and regulations as the
Commission may prescribe as necessary or appropriate in the public
interest or for the protection of investors''.
1987--Subsec. (a)(1)(B). Pub. L. 100-181 substituted ``described in
section'' for ``described in sections''.
Section Referred to in Other Sections
This section is referred to in sections 80a-2, 80a-6, 80a-53, 80a-
60, 80b-2 of this title.
