§684 — Title 15 Commerce and Trade | U.S. Code

Summary

Small business investment companies must provide equity funding to both incorporated and unincorporated small businesses, under terms the company sets and following the Administration’s rules. Before giving money, the company can require the business to refinance some or all existing debt so the company becomes the sole debt holder. Unless the Administration’s rules say otherwise, the business must agree not to take new debt without the company’s approval and must give the company the first chance to finance it. For incorporated businesses, the equity can be provided directly or together with other investors through immediate participation agreements.

Title 15, §684

Commerce and Trade — Source: USLM XML via OLRC

(a)It shall be a function of each small business investment company to provide a source of equity capital for incorporated and unincorporated small-business concerns, in such manner and under such terms as the small business investment company may fix in accordance with the regulations of the Administration.

(b)Before any capital is provided to a small-business concern under this section—

(1)the company may require such concern to refinance any or all of its outstanding indebtedness so that the company is the only holder of any evidence of indebtedness of such concern; and

(2)except as provided in regulations issued by the Administration, such concern shall agree that it will not thereafter incur any indebtedness without first securing the approval of the company and giving the company the first opportunity to finance such indebtedness.

(c)

(d)Equity capital provided to incorporated small business concerns under this section may be provided directly or in cooperation with other investors, incorporated or unincorporated, through agreements to participate on an immediate basis.

Notes & Related Subsidiaries

Editorial Notes

Amendments

1972—Subsec. (a). Pub. L. 92–595 extended the function of small business investment companies to provide a source of equity capital to unincorporated business concerns. 1967—Subsec. (c). Pub. L. 90–104 repealed subsec. (c) which authorized purchase of stock of investment companies by small-business concerns in an amount equal to 5 per centum of capital provided. 1961—Subsec. (d). Pub. L. 87–341 added subsec. (d). 1960—Subsec. (a). Pub. L. 86–502 struck out “primary” before “function”, and substituted “a source of equity capital for incorporated small-business concerns, in such manner and under such terms as the small business investment company may fix in accordance with the

Regulations

of the Administration” for “a source of needed equity capital for small-business concerns in the manner and subject to the conditions described in this section”. Subsec. (b). Pub. L. 86–502 redesignated subsec. (c) as (b), and repealed former subsec. (b) which required capital to be secured only through the purchase of debenture bonds. Subsecs. (c), (d). Pub. L. 86–502 redesignated subsec. (d) as (c), and substituted “such concern shall have the right, exercisable in whole or in such part as such concern may elect, to become a stockholder-proprietor by investing in the capital stock of the company 5 per centum” for “such concern shall be required to become a stockholder-proprietor of the company by investing in the capital stock of the company, in an amount equal to not less than 2 percent nor more than 5 percent”. Former subsec. (c) redesignated (b).

Statutory Notes and Related Subsidiaries

Effective Date

of 1967 AmendmentAmendment by Pub. L. 90–104 effective 90 days after Oct. 11, 1967, see section 211 of Pub. L. 90–104, set out as a note under section 681 of this title.

§684 Equity capital for small-business concerns