Current as of: February 2010 (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.Legislative History ________________________________________________________________________
U.S. Code Provisions: SecuritiesState Laws: Securities
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