H.R.5191 - Small Business Equity Enhancement Act of 1992102nd Congress (1991-1992)
Summary: H.R.5191 — 102nd Congress (1991-1992)
Passed Senate amended (08/10/1992)
Small Business Equity Enhancement Act of 1992 - Amends the Small Business Investment Act of 1958 to revise provisions with respect to debentures issued by small business investment companies (SBICs) to specify that: (1) the total amount of debentures and participating securities that may be guaranteed by the Small Business Administration (SBA) and outstanding from an SBIC licensed under the Act shall not exceed 300 percent of the private capital of such SBIC; and (2) in no event shall the aggregate amount of outstanding leverage of any such SBIC which is commonly controlled (as determined by the SBA) exceed $90,000,000, except on a case-by-case-basis as determined by the SBA.
Provides that: (1) nothing under such provisions shall require any such SBIC that on March 31, 1993, has outstanding debentures in excess of 300 percent of its private capital to prepay such excess; and (2) any such SBIC may apply for an additional debenture guarantee or participating security with the proceeds to be used solely to pay the amount due on such maturing debenture, but the maturity date of the new debenture or security shall not be later than September 30, 2002.
Sets forth a formula for determining the maximum amount of outstanding leverage made available to an SBIC licensed under the Act, to be effective after March 31, 1993.
Authorizes the SBA to guarantee the payment of the redemption price and prioritized payments (includes stock dividends, interest on debentures, or priority returns on preferred limited partnership interests which are paid only to the extent of earnings) on participating securities issued by SBICs licensed pursuant to the Act, and authorizes a trust or pool acting on behalf of the SBA to purchase such securities. Sets forth: (1) restrictions with respect to redemption of, prioritized payments on, and other issues regarding, such securities; and (2) terms and conditions regarding the computation of amounts due the SBA under such securities.
Revises provisions of the Act related to the issuance and guarantee of trust certificates to provide for the redemption, whether voluntary or involuntary, of all participating securities residing in the pool, as well as debentures. Bars any Federal, State, or local law from precluding or limiting the exercise by the SBA of its ownership rights in participating securities residing in a trust or pool against which trust certificates are issued. Directs the SBA to contract with an agent or agents to carry out on behalf of the SBA pooling and central registration functions (currently, with an agent to carry out central registration functions) including maintenance on behalf of and under the direction of the SBA of such commercial bank accounts as necessary to facilitate trusts or pools backed by debentures or participating securities guaranteed under the Act and issuance of trust certificates to facilitate such pooling.
Amends the Small Business Act to authorize appropriations.
Directs the SBA, prior to licensing and approving any request for financing, to determine the ability of an SBIC to make periodic payments on any debt of the SBIC which is interest bearing, taking into consideration the income which the SBIC anticipates on its contemplated investments, the experience of its owners and managers, its history as an entity, and its financial resources.
Requires each SBIC to adopt written guidelines for determination of the value of its investments. Makes the board of directors of corporations, the general partners of partnerships, and the owners of proprietorships solely responsible for making a good faith determination of the fair market value of the investments made by such SBIC. Requires that such determinations be made and reported to the SBA at least semiannually or at more frequent intervals as the SBA determines appropriate (but any SBIC which does not have outstanding financial assistance under the Act shall be required to make such determinations and reports annually, unless the SBA determines otherwise).
Subjects each SBIC to examinations made by the Investment Division of the SBA (currently, by SBA examiners). Transfers resources related to the examination function under the Act by the Inspector General of the SBA to the SBA's Investment Division.
Specifies that if any SBIC has obtained SBA financing which remains outstanding, the aggregate amount of obligations and securities acquired and for which commitments may be issued by such SBIC under the provisions of the Act for any single enterprise shall not exceed 20 percent of the private capital of such SBIC without SBA approval.
Permits SBICs with outstanding financings (currently, SBICs) to invest funds, subject to specified conditions.
Directs the SBA to: (1) complete a review of regulations intended to provide for the safety and soundness of those SBICs which obtain SBA financing under the Act; and (2) exempt from such regulations, or separately regulate, those SBICs which do not obtain such financing. Sets forth reporting requirements.
Increases minimum capital requirements for SBICs licensed on or after October 1, 1992 (currently, 1979).
Defines "private capital" to mean the private paid-in capital and paid-in surplus of a corporate licensee, or the private partnership capital of an unincorporated licensee, inclusive of any funds invested in the licensee by a public or private pension fund or by a State or local governmental entity (subject to certain restrictions), and unfunded commitments from institutional investors that meet SBA criteria but exclusive of any funds borrowed by the licensee from any source or obtained or derived directly or indirectly from any Federal source.
Directs the SBA to permit those SBICs which have issued debentures pursuant to the Act to charge a maximum rate of interest based upon the coupon rate of interest on the outstanding debentures determined on an annual basis, plus other approved company expenses. Permits SBICs to include in private capital for any purpose funds indirectly obtained from State or local governments.
Amends the Small Business Act to provide that, subject to approval in appropriations Acts, amounts authorized for preferred stock, debentures, or participating securities under the Small Business Investment Act of 1958 may be obligated in one fiscal year and disbursed or guaranteed in the following fiscal year.
Amends the Federal bankruptcy code to prohibit SBICs licensed under the Small Business Investment Act of 1958 from being debtors.
Declares that it is congressional intent that in the award of financial assistance under the Small Business Investment Act of 1958, priority be accorded to small business concerns which lease or purchase equipment which is produced in the United States.