PRIA, Government Policy, Made Personal

Summary

Small business investment companies must provide equity capital — money in exchange for an ownership stake — to both incorporated (officially registered) and unincorporated small businesses. The company sets the exact terms, but it must follow rules from the Small Business Administration. Before giving money, the company can require the business to refinance existing debts so the company becomes the only debt holder. The business must agree not to take on new debt without the company’s approval and must give the company the first chance to finance any new debt, unless SBA rules say otherwise. The equity can be given directly or together with other investors through immediate participation agreements. A part of the original law was repealed on October 11, 1967.

Title 15, §684

Commerce and Trade, Source: USLM XML via OLRC

(a)Function of investment companies

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)Conditions

Before any capital is provided to a small-business concern under this section— (1)

(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(c)Repealed. Pub. L. 90–104, title II, § 206, Oct. 11, 1967, 81 Stat. 271

(d)Direct or cooperative provision of capital

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 L. 90–104 repealed subsec.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