13 CFR 107.865 - Control of a Small Business by a Licensee.

§ 107.865 Control of a Small Business by a Licensee.

(a)In general. You, or you and your Associates (in the latter case, the “Investor Group”), may exercise Control over a Small Business for purposes connected to your investment, through ownership of voting securities, management agreements, voting trusts, majority representation on the board of directors, or otherwise. The period of such Control will be limited to the seventh anniversary of the date on which such Control was initially acquired, or any earlier date specified by the terms of any investment agreement.

(b)Presumption of control. Control over a Small Business based on ownership of voting securities will be presumed to exist whenever you or the Investor Group own or control, directly or indirectly:

(1) At least 50 percent of the outstanding voting securities, if there are fewer than 50 shareholders; or

(2) More than 25 percent of the outstanding voting securities, if there are 50 or more shareholders; or

(3) At least 20 percent of the outstanding voting securities, if there are 50 or more shareholders and no other party holds a larger block.

(c)Rebuttals to presumption of Control. A presumption of Control under paragraph (b) of this section is rebutted if:

(1) The management of the Small Business owns at least a 25 percent interest in the voting securities of the business; and

(2) The management of the Small Business can elect at least 40 percent of the board members of a corporation, general partners of a limited partnership, or managers of a limited liability company, as appropriate, and the Investor Group can elect no more than 40 percent. The balance of such officials may be elected through mutual agreement by management and the Investor Group.

(d)Extension of Control. With SBA's prior written approval you, or the Investor Group, may retain Control for such additional period as may be reasonably necessary to complete divestiture of Control or to ensure the financial stability of the portfolio company.

(e)Additional Financing for businesses under Licensee's Control. If you assume Control of a Small Business, you may later provide additional Financing, without an exemption under § 107.730(a)(1).

[ 61 FR 3189, Jan. 31, 1996, as amended at 63 FR 5867, Feb. 5, 1998; 64 FR 52646, Sept. 30, 1999; 67 FR 64790, Oct. 22, 2002]

This is a list of United States Code sections, Statutes at Large, Public Laws, and Presidential Documents, which provide rulemaking authority for this CFR Part.

This list is taken from the Parallel Table of Authorities and Rules provided by GPO [Government Printing Office].

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United States Code
Statutes at Large

Title 13 published on 04-May-2017 03:04

The following are ALL rules, proposed rules, and notices (chronologically) published in the Federal Register relating to 13 CFR Part 107 after this date.

  • 2017-05-02; vol. 82 # 83 - Tuesday, May 2, 2017
    1. 82 FR 20433 - Small Business Investment Companies: Passive Business Expansion and Technical Clarifications
      GPO FDSys XML | Text
      Final rule; delay of effective date and request for comment.
      The effective date of the SBA final rule published December 28, 2016 (81 FR 95419), delayed until March 21, 2017 at 82 FR 8499 and then further delayed until May 20, 2017 at 82 FR 14428, is further delayed until August 18, 2017. Comments on this document must be submitted no later than June 1, 2017.
      13 CFR Part 107
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