Collapse to view only § 2009cc-9. Financial institution investments
- § 2009cc. Definitions
- § 2009cc-1. Purposes
- § 2009cc-2. Establishment
- § 2009cc-3. Selection of rural business investment companies
- § 2009cc-4. Debentures
- § 2009cc-5. Issuance and guarantee of trust certificates
- § 2009cc-6. Fees
- § 2009cc-7. Operational assistance grants
- § 2009cc-8. Rural business investment companies
- § 2009cc-9. Financial institution investments
- § 2009cc-10. Reporting requirements
- § 2009cc-11. Examinations
- § 2009cc-12. Injunctions and other orders
- § 2009cc-13. Additional penalties for noncompliance
- § 2009cc-14. Unlawful acts and omissions; breach of fiduciary duty
- § 2009cc-15. Removal or suspension of directors or officers
- § 2009cc-16. Repealed.
- § 2009cc-17. Regulations
- § 2009cc-18. Authorization of appropriations
§ 2009cc. DefinitionsIn this subchapter:
(1) Articles
(2) Developmental capital
(3) Employee welfare benefit plan; pension plan
(A) In general
(B) InclusionsThe terms “employee welfare benefit plan” and “pension plan” include—
(i) public and private pension or retirement plans subject to this subchapter; and
(ii) similar plans not covered by this subchapter that have been established, and that are maintained, by the Federal Government or any State (including by a political subdivision, agency, or instrumentality of the Federal Government or a State) for the benefit of employees.
(4) Equity capitalThe term “equity capital” means—
(A) common or preferred stock or a similar instrument, including subordinated debt with equity features; and
(B) any other type of equity-like financing that might be necessary to facilitate the purposes of this Act, excluding financing such as senior debt or other types of financing that competes with routine loanmaking of commercial lenders.
(5) LeverageThe term “leverage” includes—
(A) debentures purchased or guaranteed by the Secretary;
(B) participating securities purchased or guaranteed by the Secretary; and
(C) preferred securities outstanding as of May 13, 2002.
(6) License
(7) Limited liability company
(8) Member
(9) Operational assistance
(10) Participation agreement
(11) Private capital
(A) In generalThe term “private capital” means the total of—
(i)(I) the paid-in capital and paid-in surplus of a corporate rural business investment company;(II) the contributed capital of the partners of a partnership rural business investment company; or(III) the equity investment of the members of a limited liability company rural business investment company; and
(ii) unfunded binding commitments from investors that meet criteria established by the Secretary to contribute capital to the rural business investment company, except that—(I) unfunded commitments may be counted as private capital for purposes of approval by the Secretary of any request for leverage; but(II) leverage shall not be funded based on the commitments.
(B) ExclusionsThe term “private capital” does not include—
(i) any funds borrowed by a rural business investment company from any source;
(ii) any funds obtained through the issuance of leverage; or
(iii) any funds obtained directly or indirectly from the Federal Government or any State (including by a political subdivision, agency, or instrumentality of the Federal Government or a State), except for—(I) funds obtained from the business revenues (excluding any governmental appropriation) of any federally chartered or government-sponsored enterprise established prior to May 13, 2002;(II) funds invested by an employee welfare benefit plan or pension plan; and(III) 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 rural business investment company).
(12) Qualified nonprivate fundsThe term “qualified nonprivate funds” means any—
(A) funds directly or indirectly invested in any applicant or rural business investment company on or before May 13, 2002, by any Federal agency, other than the Department of Agriculture, under a provision of law explicitly mandating the inclusion of those funds in the definition of the term “private capital”; and
(B) funds invested in any applicant or rural business investment company by 1 or more entities of any State (including by a political subdivision, agency, or instrumentality of the State and including any guarantee extended by those entities) in an aggregate amount that does not exceed 33 percent of the private capital of the applicant or rural business investment company.
(13) Rural business concernThe term “rural business concern” means—
(A) a public, private, or cooperative for-profit or nonprofit organization;
(B) a for-profit or nonprofit business controlled by an Indian tribe on a Federal or State reservation or other federally recognized Indian tribal group; or
(C) any other person or entity;
that primarily operates in a rural area, as determined by the Secretary.
(14) Rural business investment companyThe term “rural business investment company” means a company that—
(A) has been granted final approval by the Secretary under section 2009cc–3(e) of this title; and
(B) has entered into a participation agreement with the Secretary.
(15) Smaller enterpriseThe term “smaller enterprise” means any rural business concern that, together with its affiliates—
(A) has—
(i) a net financial worth of not more than $6,000,000, as of the date on which assistance is provided under this subchapter to the rural business concern; and
(ii) an average net income for the 2-year period preceding the date on which assistance is provided under this subchapter to the rural business concern, of not more than $2,000,000, after Federal income taxes (excluding any carryover losses), except that, for purposes of this clause, if the rural business concern is not required by law to pay Federal income taxes at the enterprise level, but is required to pass income through to the shareholders, partners, beneficiaries, or other equitable owners of the business concern, the net income of the business concern shall be determined by allowing a deduction in an amount equal to the total of—(I) if the rural business concern is not required by law to pay State (and local, if any) income taxes at the enterprise level, the net income (determined without regard to this clause), multiplied by the marginal State income tax rate (or by the combined State and local income tax rates, as applicable) that would have applied if the business concern were a corporation; and(II) the net income (so determined) less any deduction for State (and local) income taxes calculated under subclause (I), multiplied by the marginal Federal income tax rate that would have applied if the rural business concern were a corporation; or
(B) satisfies the standard industrial classification size standards established by the Administrator of the Small Business Administration for the industry in which the rural business concern is primarily engaged.
(Pub. L. 87–128, title III, § 384A, as added Pub. L. 107–171, title VI, § 6029, May 13, 2002, 116 Stat. 388; amended Pub. L. 115–334, title VI, § 6426(a), Dec. 20, 2018, 132 Stat. 4770.)
§ 2009cc–1. PurposesThe purposes of the Rural Business Investment Program established under this subchapter are—
(1) to promote economic development and the creation of wealth and job opportunities in rural areas and among individuals living in those areas by encouraging developmental capital investments in smaller enterprises primarily located in rural areas; and
(2) to establish a developmental capital program, with the mission of addressing the unmet equity investment needs of small enterprises located in rural areas, by authorizing the Secretary—
(A) to enter into participation agreements with rural business investment companies;
(B) to guarantee debentures of rural business investment companies to enable each rural business investment company to make developmental capital investments in smaller enterprises in rural areas; and
(C) to make grants to rural business investment companies, and to other entities, for the purpose of providing operational assistance to smaller enterprises financed, or expected to be financed, by rural business investment companies.
(Pub. L. 87–128, title III, § 384B, as added Pub. L. 107–171, title VI, § 6029, May 13, 2002, 116 Stat. 391; amended Pub. L. 115–334, title VI, § 6426(b), Dec. 20, 2018, 132 Stat. 4770.)
§ 2009cc–2. Establishment
In accordance with this subchapter, the Secretary shall establish a Rural Business Investment Program, under which the Secretary may—
(1) enter into participation agreements with companies granted final approval under section 2009cc–3(e) of this title for the purposes set forth in section 2009cc–1 of this title;
(2) guarantee the debentures issued by rural business investment companies as provided in section 2009cc–4 of this title; and
(3) make grants to rural business investment companies, and to other entities, under section 2009cc–7 of this title.
(Pub. L. 87–128, title III, § 384C, as added Pub. L. 107–171, title VI, § 6029, May 13, 2002, 116 Stat. 391.)
§ 2009cc–3. Selection of rural business investment companies
(a) EligibilityA company shall be eligible to apply to participate, as a rural business investment company, in the program established under this subchapter if—
(1) the company is a newly formed for-profit entity or a newly formed for-profit subsidiary of such an entity;
(2) the company has a management team with experience in community development financing or relevant venture capital financing; and
(3) the company will invest in enterprises that will create wealth and job opportunities in rural areas, with an emphasis on smaller enterprises.
(b) ApplicationTo participate, as a rural business investment company, in the program established under this subchapter, a company meeting the eligibility requirements of subsection (a) shall submit an application to the Secretary that includes—
(1) a business plan describing how the company intends to make successful developmental capital investments in identified rural areas;
(2) information regarding the community development finance or relevant venture capital qualifications and general reputation of the management of the company;
(3) a description of how the company intends to work with community-based organizations and local entities (including local economic development companies, local lenders, and local investors) and to seek to address the unmet equity capital needs of the communities served;
(4) a proposal describing how the company intends to use the grant funds provided under this subchapter to provide operational assistance to smaller enterprises financed by the company, including information regarding whether the company intends to use licensed professionals, as necessary, on the staff of the company or from an outside entity;
(5) with respect to binding commitments to be made to the company under this subchapter, an estimate of the ratio of cash to in-kind contributions;
(6) a description of the criteria to be used to evaluate whether and to what extent the company meets the purposes of the program established under this subchapter;
(7) information regarding the management and financial strength of any parent firm, affiliated firm, or any other firm essential to the success of the business plan of the company; and
(8) such other information as the Secretary may require.
(c) Status
(d) Matters consideredIn reviewing and processing any application under this section, the Secretary—
(1) shall determine whether—
(A) the applicant meets the requirements of subsection (e); and
(B) the management of the applicant is qualified and has the knowledge, experience, and capability necessary to comply with this subchapter;
(2) shall take into consideration—
(A) the need for and availability of financing for rural business concerns in the geographic area in which the applicant is to commence business;
(B) the general business reputation of the owners and management of the applicant; and
(C) the probability of successful operations of the applicant, including adequate profitability and financial soundness; and
(3) shall not take into consideration any projected shortage or unavailability of grant funds or leverage.
(e) Approval; license
(1) In generalExcept as provided in paragraph (2), the Secretary may approve an applicant to operate as a rural business investment company under this subchapter and license the applicant as a rural business investment company, if—
(A) the Secretary determines that the application satisfies the requirements of subsection (b);
(B) the area in which the rural business investment company is to conduct its operations, and establishment of branch offices or agencies (if authorized by the articles), are approved by the Secretary; and
(C) the applicant enters into a participation agreement with the Secretary.
(2) Capital requirements
(A) In generalNotwithstanding any other provision of this subchapter, the Secretary may approve an applicant to operate as a rural business investment company under this subchapter and designate the applicant as a rural business investment company, if the Secretary determines that the applicant—
(i) has private capital of more than $2,500,000;
(ii) would otherwise be approved under this subchapter, except that the applicant does not satisfy the requirements of section 2009cc–8(c) of this title; and
(iii) has a viable business plan that—(I) reasonably projects profitable operations; and(II) has a reasonable timetable for achieving a level of private capital that satisfies the requirements of section 2009cc–8(c) of this title.
(B) Leverage
(C) Grants
(Pub. L. 87–128, title III, § 384D, as added Pub. L. 107–171, title VI, § 6029, May 13, 2002, 116 Stat. 391; amended Pub. L. 115–334, title VI, § 6426(c), Dec. 20, 2018, 132 Stat. 4770.)
§ 2009cc–4. Debentures
(a) In general
(b) Terms and conditions
(c) Full faith and credit of the United States
(d) Maximum guaranteeUnder this section, the Secretary may—
(1) guarantee the debentures issued by a rural business investment company only to the extent that the total face amount of outstanding guaranteed debentures of the rural business investment company does not exceed the lesser of—
(A) 300 percent of the private capital of the rural business investment company; or
(B) $105,000,000; and
(2) provide for the use of discounted debentures.
(Pub. L. 87–128, title III, § 384E, as added Pub. L. 107–171, title VI, § 6029, May 13, 2002, 116 Stat. 393.)
§ 2009cc–5. Issuance and guarantee of trust certificates
(a) Issuance
(b) Guarantee
(1) In general
(2) Limitation
(3) Prepayment or default
(A) In general
(i) Authority to prepay
(ii) Reduction of guarantee
(B) Interest
(C) Redemption
(c) Full faith and credit of the United States
(d) Subrogation and ownership rights
(1) Subrogation
(2) Ownership rights
(e) Management and administration
(1) Registration
(2) Creation of pools
The Secretary may—
(A) maintain such commercial bank accounts or investments in obligations of the United States as may be necessary to facilitate the creation of trusts or pools backed by debentures guaranteed under this subchapter; and
(B) issue trust certificates to facilitate the creation of those trusts or pools.
(3) Fidelity bond or insurance requirement
(4) Regulation of brokers and dealers
(5) Electronic registration
(Pub. L. 87–128, title III, § 384F, as added Pub. L. 107–171, title VI, § 6029, May 13, 2002, 116 Stat. 393; amended Pub. L. 110–234, title VI, § 6027(a), May 22, 2008, 122 Stat. 1182; Pub. L. 110–246, § 4(a), title VI, § 6027(a), June 18, 2008, 122 Stat. 1664, 1943.)
§ 2009cc–6. Fees
(a) In general
(b) Trust certificate
(c) License
(1) In general
(2) Use of amounts
Fees collected under this subsection—
(A) shall be deposited in the account for salaries and expenses of the Secretary;
(B) are authorized to be appropriated as the Secretary considers appropriate; and
(C) shall be in such amounts as the Secretary considers appropriate.
(3) Prohibition on collection of certain fees
(Pub. L. 87–128, title III, § 384G, as added Pub. L. 107–171, title VI, § 6029, May 13, 2002, 116 Stat. 395; amended Pub. L. 110–234, title VI, § 6027(b), May 22, 2008, 122 Stat. 1182; Pub. L. 110–246, § 4(a), title VI, § 6027(b), June 18, 2008, 122 Stat. 1664, 1943; Pub. L. 115–334, title VI, § 6426(d), Dec. 20, 2018, 132 Stat. 4771.)
§ 2009cc–7. Operational assistance grants
(a) In general
(b) Terms
(c) Use of funds
(d) Submission of plans
(e) Grant amount
(1) Rural business investment companies
The amount of a grant made under this section to a rural business investment company shall be equal to the lesser of—
(A) 10 percent of the private capital raised by the rural business investment company; or
(B) $1,000,000.
(2) Other entities
(Pub. L. 87–128, title III, § 384H, as added Pub. L. 107–171, title VI, § 6029, May 13, 2002, 116 Stat. 395.)
§ 2009cc–8. Rural business investment companies
(a) OrganizationFor the purpose of this subchapter, a rural business investment company shall—
(1) 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 authorized by this subchapter;
(2)
(A) if incorporated, have succession for a period of not less than 30 years unless earlier dissolved by the shareholders of the rural business investment company; and
(B) if a limited partnership or a limited liability company, have succession for a period of not less than 10 years; and
(3) possess the powers reasonably necessary to perform the functions and conduct the activities.
(b) ArticlesThe articles of any rural business investment company—
(1) shall specify in general terms—
(A) the purposes for which the rural business investment company is formed;
(B) the name of the rural business investment company;
(C) the area or areas in which the operations of the rural business investment company are to be carried out;
(D) the place where the principal office of the rural business investment company is to be located; and
(E) the amount and classes of the shares of capital stock of the rural business investment company;
(2) may contain any other provisions consistent with this subchapter that the rural business investment company may determine appropriate to adopt for the regulation of the business of the rural business investment company and the conduct of the affairs of the rural business investment company; and
(3) shall be subject to the approval of the Secretary.
(c) Capital requirements
(1) In generalExcept as provided in paragraph (2), the private capital of each rural business investment company shall be not less than—
(A) $5,000,000; or
(B) $10,000,000, with respect to each rural business investment company authorized or seeking authority to issue participating securities to be purchased or guaranteed by the Secretary under this subchapter.
(2) Exception
(3) Time frame
(4) AdequacyIn addition to the requirements of paragraph (1), the Secretary shall—
(A) determine whether the private capital of each rural business investment company is adequate to ensure a reasonable prospect that the rural business investment company will be operated soundly and profitably, and managed actively and prudently in accordance with the articles of the rural business investment company;
(B) determine that the rural business investment company will be able to comply with the requirements of this subchapter;
(C) require that at least 75 percent of the capital of each rural business investment company is invested in rural business concerns and not more than 10 percent of the investments shall be made in an area containing a city of over 150,000 in the last decennial census and the Census Bureau defined urbanized area containing or adjacent to that city;
(D) ensure that the rural business investment company is designed primarily to meet equity capital needs of the businesses in which the rural business investment company invests and not to compete with traditional small business financing by commercial lenders; and
(E) require that the rural business investment company makes short-term non-equity investments of less than 5 years only to the extent necessary to preserve an existing investment.
(d) Diversification of ownership
(Pub. L. 87–128, title III, § 384I, as added Pub. L. 107–171, title VI, § 6029, May 13, 2002, 116 Stat. 396; amended Pub. L. 110–234, title VI, § 6027(c), May 22, 2008, 122 Stat. 1182; Pub. L. 110–246, § 4(a), title VI, § 6027(c), June 18, 2008, 122 Stat. 1664, 1944.)
§ 2009cc–9. Financial institution investments
(a) Investment
(1) In general
Except as otherwise provided in this section and notwithstanding any other provision of law, the following banks, associations, and institutions are eligible both to establish and invest in any rural business investment company or in any entity established to invest solely in rural business investment companies:
(A) Any bank or savings association the deposits of which are insured under the Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.), including an investment pool created entirely by such bank or savings association.
(B) Any Farm Credit System institution described in section 1.2(a) of the Farm Credit Act of 1971 (12 U.S.C. 2002(a)).
(2) Limitation on requirements
(b) Limitation
(c) Limitation on rural business investment companies controlled by Farm Credit System institutions
(Pub. L. 87–128, title III, § 384J, as added Pub. L. 107–171, title VI, § 6029, May 13, 2002, 116 Stat. 397; amended Pub. L. 110–234, title VI, § 6027(d), May 22, 2008, 122 Stat. 1182; Pub. L. 110–246, § 4(a), title VI, § 6027(d), June 18, 2008, 122 Stat. 1664, 1944; Pub. L. 115–334, title VI, § 6426(e), (f), Dec. 20, 2018, 132 Stat. 4771.)
§ 2009cc–10. Reporting requirements
(a) Rural business investment companies
Each rural business investment company that participates in the program established under this subchapter shall provide to the Secretary such information as the Secretary may require, including—
(1) information relating to the measurement criteria that the rural business investment company proposed in the program application of the rural business investment company; and
(2) in each case in which the rural business investment company under this subchapter makes an investment in, or a loan or grant to, a business that is not located in a rural area, a report on the number and percentage of employees of the business who reside in those areas.
(b) Public reports
(1) In general
The Secretary shall prepare and make available to the public an annual report on the program established under this subchapter, including detailed information on—
(A) the number of rural business investment companies licensed by the Secretary during the previous fiscal year;
(B) the aggregate amount of leverage that rural business investment companies have received from the Federal Government during the previous fiscal year;
(C) the aggregate number of each type of leveraged instruments used by rural business investment companies during the previous fiscal year and how each number compares to previous fiscal years;
(D) the number of rural business investment company licenses surrendered and the number of rural business investment companies placed in liquidation during the previous fiscal year, identifying the amount of leverage each rural business investment company has received from the Federal Government and the type of leverage instruments each rural business investment company has used;
(E) the amount of losses sustained by the Federal Government as a result of operations under this subchapter during the previous fiscal year and an estimate of the total losses that the Federal Government can reasonably expect to incur as a result of the operations during the current fiscal year;
(F) actions taken by the Secretary to maximize recoupment of funds of the Federal Government expended to implement and administer the Rural Business Investment Program under this subchapter during the previous fiscal year and to ensure compliance with the requirements of this subchapter (including regulations);
(G) the amount of Federal Government leverage that each licensee received in the previous fiscal year and the types of leverage instruments each licensee used;
(H) for each type of financing instrument, the sizes, types of geographic locations, and other characteristics of the small business investment companies using the instrument during the previous fiscal year, including the extent to which the investment companies have used the leverage from each instrument to make loans or equity investments in rural areas; and
(I) the actions of the Secretary to carry out this subchapter.
(2) Prohibition
In compiling the report required under paragraph (1), the Secretary may not—
(A) compile the report in a manner that permits identification of any particular type of investment by an individual rural business investment company or small business concern in which a rural business investment company invests; and
(B) may not release any information that is prohibited under section 1905 of title 18.
(Pub. L. 87–128, title III, § 384K, as added Pub. L. 107–171, title VI, § 6029, May 13, 2002, 116 Stat. 398.)
§ 2009cc–11. Examinations
(a) In general
(b) Assistance of private sector entities
(c) Costs
(1) In general
(2) Payment
(d) Deposit of funds
Funds collected under this section shall—
(1) be deposited in the account that incurred the costs for carrying out this section;
(2) be made available to the Secretary to carry out this section, without further appropriation; and
(3) remain available until expended.
(Pub. L. 87–128, title III, § 384L, as added Pub. L. 107–171, title VI, § 6029, May 13, 2002, 116 Stat. 399.)
§ 2009cc–12. Injunctions and other orders
(a) In general
(1) Application by Secretary
(2) Jurisdiction; relief
(b) Jurisdiction
(1) In general
(2) Trustee or receiver
(c) Secretary as trustee or receiver
(1) Authority
(2) Appointment
(Pub. L. 87–128, title III, § 384M, as added Pub. L. 107–171, title VI, § 6029, May 13, 2002, 116 Stat. 399.)
§ 2009cc–13. Additional penalties for noncompliance
(a) In general
With respect to any rural business investment company that violates or fails to comply with this subchapter (including any rule, regulation, order, or participation agreement under this subchapter), the Secretary may, in accordance with this section—
(1) void the participation agreement between the Secretary and the rural business investment company; and
(2) cause the rural business investment company to forfeit all of the rights and privileges derived by the rural business investment company under this subchapter.
(b) Adjudication of noncompliance
(1) In general
(2) Parties authorized to file causes of action
(Pub. L. 87–128, title III, § 384N, as added Pub. L. 107–171, title VI, § 6029, May 13, 2002, 116 Stat. 400.)
§ 2009cc–14. Unlawful acts and omissions; breach of fiduciary duty
(a) Parties deemed to commit a violation
(b) Fiduciary duties
(c) Unlawful actsExcept with the written consent of the Secretary, it shall be unlawful—
(1) for any person to take office as an officer, director, or employee of any rural business investment company, or to become an agent or participant in the conduct of the affairs or management of a rural business investment company, if the person—
(A) has been convicted of a felony, or any other criminal offense involving dishonesty or breach of trust; or
(B) has been found liable in a civil action for damages, or has been permanently or temporarily enjoined by an order, judgment, or decree of a court of competent jurisdiction, by reason of any act or practice involving fraud or breach of trust; and
(2) for any person to continue to serve in any of the capacities described in paragraph (1), if—
(A) the person is convicted of a felony or any other criminal offense involving dishonesty or breach of trust; or
(B) the person is found liable in a civil action for damages, or is permanently or temporarily enjoined by an order, judgment, or decree of a court of competent jurisdiction, by reason of any act or practice involving fraud or breach of trust.
(Pub. L. 87–128, title III, § 384O, as added Pub. L. 107–171, title VI, § 6029, May 13, 2002, 116 Stat. 400.)
§ 2009cc–15. Removal or suspension of directors or officers
Using the procedures established by the Secretary for removing or suspending a director or an officer of a rural business investment company, the Secretary may remove or suspend any director or officer of any rural business investment company.
(Pub. L. 87–128, title III, § 384P, as added Pub. L. 107–171, title VI, § 6029, May 13, 2002, 116 Stat. 401.)
§ 2009cc–16. Repealed. Pub. L. 110–234, title VI, § 6027(e), May 22, 2008, 122 Stat. 1183, and Pub. L. 110–246, § 4(a), title VI, § 6027(e), June 18, 2008, 122 Stat. 1664, 1944
§ 2009cc–17. Regulations
The Secretary may promulgate such regulations as the Secretary considers necessary to carry out this subchapter.
(Pub. L. 87–128, title III, § 384R, as added Pub. L. 107–171, title VI, § 6029, May 13, 2002, 116 Stat. 401.)
§ 2009cc–18. Authorization of appropriations
There is authorized to be appropriated to carry out this subchapter $20,000,000 for each of fiscal years 2014 through 2023.
(Pub. L. 87–128, title III, § 384S, as added Pub. L. 110–234, title VI, § 6027(f), May 22, 2008, 122 Stat. 1183, and Pub. L. 110–246, § 4(a), title VI, § 6027(f), June 18, 2008, 122 Stat. 1664, 1944; amended Pub. L. 113–79, title VI, § 6028, Feb. 7, 2014, 128 Stat. 850; Pub. L. 115–334, title VI, § 6427, Dec. 20, 2018, 132 Stat. 4771.)