Sec. 2. Definitions
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In this Act: The term 1940 Act Company means an investment company subject to registration under the Investment Company Act of 1940 ( 15 U.S.C. 80a–1 et seq. ). The term 1980 Act Company means an investment company subject to registration under the Small Business Investment Incentive Act of 1980 ( 15 U.S.C. 80a–51 et seq. ). The term articles means— articles of incorporation for an incorporated body; or the functional equivalent or other similar documents specified by the Secretary for other business entities.
The term capital interest means an interest in a subsidiary LLC determined at the time of receipt that gives the holder of the interest a share of the proceeds in a complete liquidation of the subsidiary LLC if the assets of the subsidiary LLC are sold at fair market value. The term covered business concern means an enterprise, regardless of any size standard, that is independently owned and operated, except that an investment by a venture capital firm, investment company, employee welfare benefit plan or pension plan, or trust, foundation, or endowment that is exempt from Federal income taxation shall not cause a business concern to be deemed not independently owned and operated regardless of the allocation of control during the investment period under any investment agreement between the business concern and the entity making the investment.
The term covered investment means, with respect to an investment in a covered business concern— the provision of capital to finance the sale of an ownership interest of a covered business concern, including a covered business concern created as a result of a corporate divestiture, to an employee stock ownership plan or eligible worker-owned cooperative if such sale results in— the employee stock ownership plan or eligible worker-owned cooperative, respectively, holding a majority interest of the outstanding stock of the covered business concern; and with respect to such a sale to an employee stock ownership plan, the appointment of an independent trustee for the transaction; or the provision of capital to finance a covered business concern if— an employee stock ownership plan or eligible worker-owned cooperative holds a majority interest of the outstanding stock of the covered business concern, prior to and immediately following the provision of capital; and the provision of capital does not reduce the percentage of stock of the covered business concern held by the employee stock ownership plan or eligible worker-owned cooperative (as applicable), excluding any synthetic equity.
The term Department means the Department of Commerce. The term eligible worker-owned cooperative has the meaning given that term in section 1042(c) of the Internal Revenue Code of 1986. The term employee stock ownership plan has the meaning given that term in section 4975(e) of the Internal Revenue Code of 1986. The terms employee welfare benefit plan and pension plan — have the meanings given those terms in section 3 of the Employee Retirement Income Security Act of 1974 ( 29 U.S.C. 1002 ); and include— public and private pension or retirement plans subject to such Act; and similar plans not covered by such Act that have been established and that are maintained by the Federal Government or any State or political subdivision, or any agency or instrumentality thereof, for the benefit of employees.
The term independent financial advisor means a financial or valuation advisor that— is in the profession of serving as a financial or valuation advisor for transactions involving employee stock ownership plans; has never— performed services, including a preliminary valuation, for or on behalf of— any party selling an ownership interest in the covered business concern to the employee stock ownership plan involved in the transaction that the advisor is evaluating; or the covered business concern, unless the services were provided solely to an existing employee stock ownership plan sponsored by the covered business concern; or been a director, officer, or employee of the covered business concern; has not performed services related to the transaction the advisor is evaluating, including a preliminary valuation, for or on behalf of— the ownership investment company that is preparing to or has already allocated capital to the covered business concern; or any other entity that is structuring or financing the transaction for any party other than the employee stock ownership plan; and does not have a familial or corporate relationship (such as a parent-subsidiary relationship) to any of person or entity described in subparagraph
(B)or (C). The term independent trustee means a trustee that— is in the profession of serving as a fiduciary for employee stock ownership plans; has never— performed services for or on behalf of any party selling an ownership interest in the covered business concern to the employee stock ownership plan involved in the transaction that the trustee is considering; or been a director, officer, or employee of the covered business concern; has not performed services for or on behalf of the covered business concern at any time during the 5-year period ending on the date of execution of the transaction the trustee is considering, unless such services solely consisted of acting as a fiduciary of an employee benefit plan (including an employee stock ownership plan) under the Employee Retirement Income Security Act of 1974 ( 29 U.S.C. 1001 et seq. ); has not performed services related to the transaction the trustee is considering, for or on behalf of— the ownership investment company that is preparing to or has already allocated capital to the covered business concern; or any other entity that is structuring or financing the transaction for any party other than the employee stock ownership plan; and does not have a familial or corporate relationship (such as a parent-subsidiary relationship) to any person or entity described in subparagraph (B), (C), or (D). The term leverage means debentures guaranteed by the Department. The term license means a license issued by the Department as provided in section 4(c). The term licensee means a company approved by the Secretary to operate under the provisions of this Act and issued a license provided in section 4(c). The term limited liability company means a business entity that is organized and operating in accordance with a State limited liability company statute approved by the Department. The term member means, with respect to a licensee that is a limited liability company, a holder of an ownership interest or a person otherwise admitted to membership in the limited liability company. The term non-leveraged licensee means a licensee that— has no outstanding leverage or leverage commitment; and certifies to the Department in writing that the licensee will not seek leverage in the future. The term outstanding stock means shares of stock, including synthetic equity. The term ownership investment company means— a company approved by the Secretary to operate under the provisions of this Act and issued a license as provided in section 4(c); and for which— 100 percent of the total capital managed by the investment firm shall be invested in covered investments; not less than 50 percent of the total capital managed by the investment firm shall be invested in covered investments described in paragraph (6)(A); and covered investment returns are obtained from debt, synthetic equity, preferred stock, equity, or a combination thereof, including returns obtained from cash interest, payment-in-kind interest, and stock warrants. The term preferred stock has the meaning given that term in section 351(g)(3) of the Internal Revenue Code of 1986. The term private capital — means the sum of— the paid-in capital and paid-in surplus of a corporate licensee, the contributed capital of the partners of a partnership licensee, or the equity investment of the members of a limited liability company licensee; and unfunded binding commitments, from investors that meet criteria established by the Secretary, to contribute capital to the licensee, provided that such unfunded commitments may be counted as private capital for purposes of approval by the Secretary of any request for leverage, but leverage shall not be funded based on such commitments; and does not include any— funds borrowed by a licensee from any source; funds obtained through the issuance of leverage; or funds obtained directly or indirectly from any Federal, State, or local government, or any government agency or instrumentality, except for— funds obtained from the business revenues (excluding any governmental appropriation) of any federally chartered or government-sponsored corporation established before October 1, 1987; funds invested by an employee welfare benefit plan or pension plan; and any qualified nonprivate funds (if the investors of the qualified nonprivate funds do not control, directly or indirectly, the management, board of directors, general partners, or members of the licensee). The term profits interests means an interest in a subsidiary LLC other than a capital interest. The term Protégé OIC means an entity licensed under section 4(c) as an ownership investment company and selected in accordance with section 6— for which the managers of the firm have a documented record of successful business experience; and that has an investment track record that does not meet the requirements under section 4(c)(3)(B)(i). The term Secretary means the Secretary of Commerce. The term State includes the several States, the territories and possessions of the United States, the Commonwealth of Puerto Rico, and the District of Columbia. The term subsidiary LLC means a limited liability company owned by a corporation through equity ownership of the subsidiary with a common parent corporation, as described in section 1563 of the Internal Revenue Code of 1986, in which— the equity of the subsidiary LLC owned by the corporation possesses not less than 80 percent of the total combined voting power of all classes of equity of the subsidiary LLC entitled to vote; and the equity value of the subsidiary LLC owned by the corporation that represents— not less than 51 percent of the total value of all classes of equity of the subsidiary LLC; and not less than 51 percent equity ownership of the subsidiary LLC. The term synthetic equity includes— synthetic equity, as defined in section 409(p)(6) of the Internal Revenue Code of 1986; a profits interest of a subsidiary LLC granted to, purchased by, or otherwise obtained directly or indirectly by employees and directors of the subsidiary LLC; and nonqualified deferred compensation plans and arrangements subject to section 409A of the Internal Revenue Code of 1986. The term third party debt means any indebtedness for borrowed money, other than indebtedness owed to the Department.
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- 15 USC 80a–1
- 15 USC 80a–51
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