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United States · Bill · S

S. 1784 (104th)

Small Business Investment Company Improvement Act of 1996

referredUnited States· United States Congress· EN

Introduced

20 May 1996

Last action

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Status

Referred to the House Committee on Small Business.

Sponsors

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Subjects

Discovery layer

Source updated

7 April 2025

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Summary

Small Business Investment Company Improvement Act of 1996 - Amends the Small Business Investment Act of 1958 to revise and add definitions. (Sec. 3) Includes as a small business investment company (SBIC) a limited liability company organized and operated in accordance with a State statute approved by the Small Business Administration (SBA). Requires each SBIC license applicant to apply to the SBA Administrator. Requires the Administrator to provide a status report to such applicant within 90 days and to act on such application within a reasonable time. Specifies matters to be considered. Provides application approval procedures for certain applicants with private capital of not less than $3 million. Repeals a provision authorizing the organization and chartering of SBICs formed to provide financing to socially or economically disadvantaged persons. (Sec. 4) Increases the private capital requirement of SBICs to: (1) $5 million; or (2) $10 million, for applicants seeking authority to issue participating securities to be purchased or guaranteed by the SBA (with an exception in special circumstances and for good cause). Requires the Administrator to determine the adequacy of the private capital of each licensee. Authorizes the Administrator to exempt from the private capital requirements licensees: (1) with private capital of not less than $2.5 million; (2) that certify that at least 50 percent of such financings will be provided to smaller enterprises; and (3) that have a record of profitable operations and that have not committed any serious or continuing violations of Federal or State law. Authorizes the Administrator to reduce the private capital requirement in special circumstances and for good cause. Directs the Administrator to ensure that the management of each SBIC licensee is sufficiently diversified from and unaffiliated with licensee ownership. (Sec. 5) Requires the Administrator to: (1) prohibit a licensee having outstanding leverage (debentures or securities guaranteed by the SBA) from incurring third party debt that creates or contributes to an unreasonable risk of default or loss to the Government; and (2) permit such licensees to incur third party debt only on established terms and conditions. Directs the Administrator: (1) to require each licensee, as a condition of approval of an application for leverage, to certify that not less than 20 percent of its financings will be provided to smaller enterprises; and (2) before approving such applications, to determine to what extent the applicant's private capital has been impaired. Provides, with respect to SBIC debentures or securities purchased and guaranteed by the SBA, for: (1) a revised equity investment requirement; (2) a leverage fee; and (3) calculation of the appropriate subsidy rate. (Sec. 7) Allows qualified private sector entities to assist the Investment Division of the SBA in the examination of SBICs. Requires each SBIC licensee to submit semiannual valuations of its loans and investments, except that licensees with no outstanding leverage shall submit such valuations annually. Requires a licensee to notify the Administrator quarterly of material adverse changes in its loans, investments, or operations. Provides independent certification and audit requirements for SBICs. Requires valuation criteria to be established or approved by the Administrator. (Sec. 8) Provides for the appointment of principal receivers and agents upon the Administrator's appointment as a trustee or receiver over an SBIC licensee. Directs the SBA to contract with private sector entities for the orderly liquidation of all licensee assets in SBA receivership or trust. (Sec. 9) States that nothing in the Act shall prohibit the utilization of a book entry or other electronic form of registration for trust certificates. (Sec. 11) Amends the Small Business Act to increase the authorization of appropriations for the guarantee of debentures.

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Documents

10 official files

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