Small Business Investment Companies-Investments in Passive Businesses

摘要

The U.S. Small Business Administration (SBA) proposes to revise the regulations for the Small Business Investment Company (SBIC) program concerning investments in passive businesses. SBICs are generally prohibited from investing in passive businesses under the Small Business Investment Act of 1958, as amended, as well as under SBIC program regulations. Currently these program regulations provide for exceptions that allow an SBIC to structure an investment utilizing a passive small business as a pass-through under certain limited circumstances. One such exception provides that an SBIC may make an investment in a passive small business that passes through the investment proceeds to one or more subsidiaries, each of which must be a non-passive small business. The proposed rule would modify this exception to allow an SBIC to structure an investment utilizing two passive small businesses as pass-through entities. This modification would place SBICs on an equal footing with their non-SBIC counterparts in the venture capital and private equity sectors, in which investments structured with two passive levels, are not uncommon. This proposed rule also includes several technical corrections.