
From the U.S. Code Online via GPO Access
[wais.access.gpo.gov]
[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 15USC681]

 
                      TITLE 15--COMMERCE AND TRADE
 
             CHAPTER 14B--SMALL BUSINESS INVESTMENT PROGRAM
 
              SUBCHAPTER III--INVESTMENT DIVISION PROGRAMS
 
               Part A--Small Business Investment Companies
 
Sec. 681. Organization


(a) Incorporation and charter under State law, period of succession; 
        area of operations

    A small business investment company shall be an incorporated body, a 
limited liability company, or a limited partnership organized and 
chartered or otherwise existing under State law solely for the purpose 
of performing the functions and conducting the activities contemplated 
under this subchapter, which, if incorporated, has succession for a 
period of not less than thirty years unless sooner dissolved by its 
shareholders, and if a limited partnership, has succession for a period 
of not less than ten years, and possesses the powers reasonably 
necessary to perform such functions and conduct such activities. The 
area in which the company is to conduct its operations, and the 
establishment of branch offices or agencies (if authorized by the 
articles), shall be subject to the approval of the Administration.

(b) Articles of incorporation; approval

    The articles of any small business investment company shall specify 
in general terms the objects for which the company is formed, the name 
assumed by such company, the area or areas in which its operations are 
to be carried on, the place where its principal office is to be located, 
and the amount and classes of its shares of capital stock. Such articles 
may contain any other provisions not inconsistent with this chapter that 
the company may see fit to adopt for the regulation of its business and 
the conduct of its affairs. Such articles and any amendments thereto 
adopted from time to time shall be subject to the approval of the 
Administration.

(c) Issuance of license

                    (1) Submission of application

        Each applicant for a license to operate as a small business 
    investment company under this chapter shall submit to the 
    Administrator an application, in a form and including such 
    documentation as may be prescribed by the Administrator.

                           (2) Procedures

        (A) Status

            Not later than 90 days after the initial receipt by the 
        Administrator of an application under this subsection, the 
        Administrator shall provide the applicant with a written report 
        detailing the status of the application and any requirements 
        remaining for completion of the application.

        (B) Approval or disapproval

            Within a reasonable time after receiving a completed 
        application submitted in accordance with this subsection and in 
        accordance with such requirements as the Administrator may 
        prescribe by regulation, the Administrator shall--
                (i) approve the application and issue a license for such 
            operation to the applicant if the requirements of this 
            section are satisfied; or
                (ii) disapprove the application and notify the applicant 
            in writing of the disapproval.

                       (3) Matters considered

        In reviewing and processing any application under this 
    subsection, the Administrator--
            (A) shall determine whether--
                (i) the applicant meets the requirements of subsections 
            (a) and (c) of section 682 of this title; and
                (ii) the management of the applicant is qualified and 
            has the knowledge, experience, and capability necessary to 
            comply with this chapter;

            (B) shall take into consideration--
                (i) the need for and availability of financing for small 
            business concerns in the geographic area in which the 
            applicant is to commence business;
                (ii) the general business reputation of the owners and 
            management of the applicant; and
                (iii) the probability of successful operations of the 
            applicant, including adequate profitability and financial 
            soundness; and

            (C) shall not take into consideration any projected shortage 
        or unavailability of leverage.

                            (4) Exception

        (A) In general

            Notwithstanding any other provision of this chapter, the 
        Administrator may, in the discretion of the Administrator and 
        based on a showing of special circumstances and good cause, 
        approve an application and issue a license under this subsection 
        with respect to any applicant that--
                (i) has private capital of not less than $3,000,000;
                (ii) would otherwise be issued a license under this 
            subsection, except that the applicant does not satisfy the 
            requirements of section 682(a) of this title; and
                (iii) has a viable business plan reasonably projecting 
            profitable operations and a reasonable timetable for 
            achieving a level of private capital that satisfies the 
            requirements of section 682(a) of this title.

        (B) Leverage

            An applicant licensed pursuant to the exception provided in 
        this paragraph shall not be eligible to receive leverage as a 
        licensee until the applicant satisfies the requirements of 
        section 682(a) of this title, unless the applicant--
                (i) files an application for a license not later than 
            180 days after December 2, 1997;
                (ii) is located in a State that is not served by a 
            licensee; and
                (iii) agrees to be limited to 1 tier of leverage 
            available under section 682(b) of this title, until the 
            applicant meets the requirements of section 682(a) of this 
            title.

(e) \1\ Fees
---------------------------------------------------------------------------

    \1\ So in original. No subsec. (d) has been enacted.
---------------------------------------------------------------------------

                           (1) In general

        The Administration may prescribe fees to be paid by each 
    applicant for a license to operate as a small business investment 
    company under this chapter.

                         (2) Use of amounts

        Fees collected under this subsection--
            (A) shall be deposited in the account for salaries and 
        expenses of the Administration; and
            (B) are authorized to be appropriated solely to cover the 
        costs of licensing examinations.

(Pub. L. 85-699, title III, Sec. 301, Aug. 21, 1958, 72 Stat. 691; Pub. 
L. 86-502, Sec. 4, June 11, 1960, 74 Stat. 196; Pub. L. 87-341, 
Sec. 11(a), (b), Oct. 3, 1961, 75 Stat. 756; Pub. L. 90-104, title II, 
Sec. 202, Oct. 11, 1967, 81 Stat. 269; Pub. L. 92-595, Sec. 2(b), Oct. 
27, 1972, 86 Stat. 1314; Pub. L. 94-305, title I, Sec. 106(b)-(d), June 
4, 1976, 90 Stat. 666; Pub. L. 95-507, title I, Sec. 104, Oct. 24, 1978, 
92 Stat. 1758; Pub. L. 100-590, title I, Sec. 105, Nov. 3, 1988, 102 
Stat. 2993; Pub. L. 104-208, div. D, title II, Sec. 208(b)(1)-(3)(A), 
Sept. 30, 1996, 110 Stat. 3009-741, 3009-742; Pub. L. 105-135, title II, 
Secs. 212, 214, Dec. 2, 1997, 111 Stat. 2601.)

                       References in Text

    For definition of ``this chapter'', referred to in subsecs. (b), 
(c), and (e), see References in Text note set out under section 661 of 
this title.


                               Amendments

    1997--Subsec. (c)(4)(B). Pub. L. 105-135, Sec. 212, amended heading 
and text of subpar. (B) generally. Prior to amendment, text read as 
follows: ``An applicant licensed pursuant to the exception provided in 
this paragraph shall not be eligible to receive leverage as a licensee 
until the applicant satisfies the requirements of section 682(a) of this 
title.''
    Subsec. (e). Pub. L. 105-135, Sec. 214, added subsec. (e).
    1996--Subsec. (a). Pub. L. 104-208, Sec. 208(b)(1), substituted 
``body, a limited liability company, or'' for ``body or'' in first 
sentence.
    Subsec. (c). Pub. L. 104-208, Sec. 208(b)(2), inserted heading and 
amended text of subsec. (c) generally. Prior to amendment, subsec. (c) 
read as follows: ``The articles and amendments thereto shall be 
forwarded to the Administration for consideration and approval or 
disapproval. In determining whether to approve such a company's articles 
and permit it to operate under the provisions of this chapter, the 
Administration shall give due regard, among other things, to the need 
and availability for the financing of small business concerns in the 
geographic area in which the proposed company is to commence business, 
the general business reputation and character of the proposed owners and 
management of the company, and the probability of successful operations 
of such company including adequate profitability and financial 
soundness. After consideration of all relevant factors, if it approves 
the company's articles, the Administration may in its discretion approve 
the company to operate under the provisions of this chapter and issue 
the company a license for such operation.''
    Subsec. (d). Pub. L. 104-208, Sec. 208(b)(3)(A), struck out subsec. 
(d) which read as follows: ``Notwithstanding any other provision of this 
chapter, a small business investment company, the investment policy of 
which is that its investments will be made solely in small business 
concerns which will contribute to a well-balanced national economy by 
facilitating ownership in such concerns by persons whose participation 
in the free enterprise system is hampered because of social or economic 
disadvantages may be organized and chartered under State business or 
nonprofit corporation statutes, or formed as a limited partnership, and 
may be licensed by the Administration to operate under the provisions of 
this chapter.''
    1988--Subsec. (a). Pub. L. 100-590 substituted ``, if incorporated, 
has succession for a period of not less than thirty years unless sooner 
dissolved by its shareholders, and if a limited partnership, has 
succession for a period of not less than ten years,'' for ``has 
succession for a period of not less than thirty years unless sooner 
dissolved by its shareholders or partners''.
    1978--Subsec. (d). Pub. L. 95-507 authorized small business 
investment companies to form as limited partnerships.
    1976--Subsec. (a). Pub. L. 94-305, Sec. 106(b), inserted reference 
to limited partnership and reference to partners, struck out ``of 
incorporation'' after ``by the articles'', and inserted ``or otherwise 
existing'' after ``chartered''.
    Subsec. (b). Pub. L. 94-305, Sec. 106(c), struck out ``of 
incorporation'' after ``The articles''.
    Subsec. (c). Pub. L. 94-305, Sec. 106(d), struck out ``of 
incorporation'' after ``articles'' wherever appearing.
    1972--Subsec. (d). Pub. L. 92-595 added subsec. (d).
    1967--Subsec. (c). Pub. L. 90-104 provided for consideration of 
availability of financing, the geographic area, the business reputation, 
ownership factor, and probability of successful operations of company 
including adequate profitability and financial soundness and eliminated 
from consideration the number of such companies previously organized in 
the United States and the volume of their operations.
    1961--Subsec. (a). Pub. L. 87-341, Sec. 11(a), provided that small 
business investment companies shall be incorporated, organized and 
chartered under State law, with a minimum succession period of thirty 
years unless sooner dissolved by its activities and functions, its area 
of operation shall be subject to the Administration's approval, and 
deleted provisions setting the minimum number of incorporators at 10, no 
company shall be chartered by the Administration unless it determined 
that none could be chartered under the laws of the State and operate in 
accordance with this chapter, and that no such company shall be 
chartered by the Administration under this section after June 30, 1961.
    Subsec. (c). Pub. L. 87-341, Sec. 11(b)(1), (2), substituted ``such 
a company's articles of incorporation and permit it to operate under the 
provisions of this chapter'' for ``the establishment of such a company 
and its proposed articles of incorporation'', and provided that if the 
Administration approves the company to operate under the provisions of 
this chapter, it may issue the company a license for such operation.
    Subsec. (d). Pub. L. 87-341, Sec. 11(b)(3), repealed subsec. (d) 
which specified the general powers of a company formed under this 
section.
    Subsec. (e). Pub. L. 87-341, Sec. 11(b)(3), repealed subsec. (e) 
which provided for a board of directors for a company formed under this 
section.
    1960--Subsec. (d)(9) to (11). Pub. L. 86-502 repealed par. (9) which 
empowered companies to act as depositories or fiscal agents of the 
United States, and redesignated pars. (10) and (11) as (9) and (10), 
respectively.


                    Effective Date of 1997 Amendment

    Amendment by Pub. L. 105-135 effective Oct. 1, 1997, see section 3 
of Pub. L. 105-135, set out as a note under section 631 of this title.


                    Effective Date of 1967 Amendment

    Section 211 of title II of Pub. L. 90-104 provided that: ``The 
effective date of this title [amending this section and sections 682 to 
684, 686, 687, 687b, and 692 of this title] shall be ninety days after 
enactment [Oct. 11, 1967], except that, with respect to section 207 
[amending section 686 of this title], it shall be January 1, 1968.''


                            Savings Provision

    Section 208(b)(3)(B) of div. D of Pub. L. 104-208 provided that: 
``The repeal under subparagraph (A) [repealing subsec. (d) of this 
section] shall not be construed to require the Administrator to cancel, 
revoke, withdraw, or modify any license issued under section 301(d) of 
the Small Business Investment Act of 1958 [subsec. (d) of this section] 
before the date of enactment of this Act [Sept. 30, 1996].''


                            Regulatory Review

    Pub. L. 102-366, title IV, Sec. 408(d), Sept. 4, 1992, 106 Stat. 
1017, directed Small Business Administration, not later than 90 days 
after Sept. 4, 1992, to complete a review of regulations intended to 
provide for safety and soundness of small business investment companies 
which obtain financing from the Administration under provisions of the 
Small Business Investment Act of 1958, 15 U.S.C. 661 et seq., and to 
exempt from such regulations, or to separately regulate, companies which 
do not obtain financing from the Administration.


                           Reports to Congress

    Pub. L. 102-366, title IV, Sec. 408(e), Sept. 4, 1992, 106 Stat. 
1017, directed Administration, within 180 days after Sept. 4, 1992, to 
report on actions taken pursuant to section 408(d) of Pub. L. 102-366, 
formerly set out above, to the Committees on Small Business of the 
Senate and the House of Representatives, including the rationale for its 
actions.

    Pub. L. 102-366, title IV, Sec. 417(b), Sept. 4, 1992, 106 Stat. 
1019, provided that: ``Not later than 4 years after the date of 
enactment of this Act [Sept. 4, 1992], the Comptroller General of the 
United States shall transmit to the Committees on Small Business of the 
House of Representatives and the Senate a report that reviews the Small 
Business Investment Company program (established under the Small 
Business Investment Act of 1958 [15 U.S.C. 661 et seq.]) for the 3-year 
period following the date of enactment of this Act, with respect to each 
item listed in section 308(g)(3) of the Small Business Investment Act of 
1958 [15 U.S.C. 687(g)(3)], as amended by subsection (a).''

                  Section Referred to in Other Sections

    This section is referred to in sections 78c, 662, 682, 683, 687, 
689, 697f of this title; title 11 section 109; title 12 sections 1431, 
1464; title 26 sections 1044, 1202; title 42 sections 5305, 9815.
