§ 80a-60. — Capital structure.
[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-60]
TITLE 15--COMMERCE AND TRADE
CHAPTER 2D--INVESTMENT COMPANIES AND ADVISERS
SUBCHAPTER I--INVESTMENT COMPANIES
Sec. 80a-60. Capital structure
(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
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\1\ See References in Text note below.
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(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.
(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).
Section Referred to in Other Sections
This section is referred to in sections 80a-2, 80a-6, 80a-53, 80a-
56, 80a-62, 80b-2, 80b-5 of this title.
