Ala. Admin. Code r. 281-2-1-.06 - Application

Current through Register Vol. 40, No. 6, March 31, 2022

An applicant that has not previously been certified by the ADO as a Certified Capital Company must file an application to become certified as a CAPCO in the form prescribed by the ADO, as that form may be amended from time to time by the ADO. The ADO may certify for participation in program two any previously certified CAPCO that has remained in compliance with the requirements of the Act upon the submission of an application for recertification and participation in program two in the form prescribed by the ADO, as that form may be amended from time to time by the ADO. An application for recertification and participation in program two shall be considered a separate certification from a prior certification under this section and investments in and by such CAPCO shall be considered separately.

(1) Applications may be submitted by hand or by certified mail to the ADO, Alabama Center for Commerce, 401 Adams Avenue, Suite 670 Montgomery, Alabama 36104, Attention F. Neal Wade, Director. Applications with respect to program one may be submitted no earlier than 9:00 am (Montgomery, Alabama time) on October 1, 2003. Applications for certification as a CAPCO with respect to program two and for recertification and participation in program two may be submitted no earlier than 9:00 a.m. (Montgomery, Alabama time) on December 10, 2007.
(2) Each applicant must submit three (3) original applications for certification as a CAPCO or for recertification and participation in program two, as applicable.
(3) An application shall be considered received by the ADO when the ADO receives three (3) original applications, each of which is complete in all material respects, along with the nonrefundable application fee set forth below. The ADO shall stamp applications received by the ADO with the date and time of receipt by the ADO. The following applications shall be considered as not having been filed with the ADO and will be returned by the ADO to the applicant by mail in which case the ADO shall have no further obligation to provide additional notices to the applicant:
(a) Applications submitted prior to the stated time; and
(b) Applications determined by the ADO to be materially incomplete.
(4) A completed application to become certified as a CAPCO shall include the following:
(a) A nonrefundable application fee in the amount of $7,500 in the form of a cashier's check, certified check or company check made payable to "Alabama Development Office" which the ADO shall use to offset the administrative costs related to the CAPCO program;
(b) A nonrefundable program administration fee in the amount of $17,500 in the form of a cashier's check, certified check or company check made payable to "Alabama Development Office" which the ADO shall use to offset the administrative costs related to the CAPCO program;
(c) A completed disclosure statement identifying all persons who may financially benefit from the applicant's designation as a CAPCO. Such statement must be submitted in the form prescribed by the ADO, as that statement may be amended from time to time by the ADO;
(d) A notarized and sworn affidavit from all of the managers of the applicant stating that each of the managers (or providing details and an explanation as to why such manager cannot state that he or she):
1. Has read the Act and these regulations;
2. Fully understands the requirements of the Act and these regulations;
3. Is not, and will not become during tenure as manager of the applicant or the CAPCO, as the case may be, affiliated with an employee of the ADO;
4. Is not, and will not become during tenure as manager of the applicant or the CAPCO, as the case may be, affiliated with a certified investor of the applicant or CAPCO, as the case may be;
5. Has not been convicted of and is not currently under indictment or prosecution for securities fraud or other criminal acts, other than minor traffic offenses. As used in this subsection, "MINOR TRAFFIC OFFENSES" means all traffic offenses other than serious traffic offenses as set forth in Chapter 5A of Title 32 of the Code of Ala. 1975, as amended;
6. Has not filed for bankruptcy within the past seven (7) years; and
7. Has not been ordered to pay and is not currently involved in legal action with the State of Alabama or any agency or department thereof for the payment of funds owed to the State of Alabama or other parties that the State of Alabama represents.
(e) A notarized and sworn affidavit from all of the managers of the applicant stating that:
1. The primary business activity of the applicant is, and will remain, the investment of cash in qualified technology businesses;
2. The key employees have at least four (4) years of experience making venture capital investments in small businesses on behalf of or as an institutional or accredited investor; and
3. The key employees will work in the office established by the applicant as its headquarters for at least 1,400 hours per year and will reside in the State of Alabama, as determined for purposes of Alabama income taxation.
(f) A detailed description of the following signed by the key employees and the managers of the applicant:
1. The key employees' connection and commitment to the State of Alabama; and
2. The key employees' experience with the Alabama economic landscape, especially with regard to making venture capital investments in qualified technology businesses.
(g) Appropriate documentation regarding the due authorization of the application.
(h) A certification from the chief executive officer or its equivalent of the applicant that the managers named in the application are a complete and accurate listing of all managers of the applicant and any affiliates of the applicant involved in the management of the applicant and that persons affiliated with a certified investor of the applicant are not, and will not, control the direction of investments of the applicant.
(i) The complete organizational documents of the applicant reflecting appropriate filing with appropriate state agencies, if any is required. In addition, if the applicant is to be managed by a management or similar company, the complete organizational documents of the management company.
(j) The names and complete contact information of the key employees of the applicant.
(k) Any assumed or "doing business as" names that the applicant conducts business under and any required assumed or "doing business as" filings with an agency of the State of Alabama, if applicable. If the applicant is to be managed by a management or similar company, any assumed or "doing business as" names that the management company conducts business under and any required assumed or "doing business as" filing with an agency of the State of Alabama, if applicable.
(l) If the applicant is to be managed by a management or similar company, a copy of the fully-executed contract pursuant to which the management company will manage the applicant and a copy of any other agreements between the management company and the applicant. The management contract must fully describe the nature of the relationship between the management company and the applicant and any actions that the management company may take on behalf of the applicant.
(m) The names and full contact information of all members of the applicant's governing body of the applicant, including a description of the level of control over the applicant.
(n) The names and full contact information of contacts at the applicant's existing office locations.
(o) Financial statements audited in accordance with generally accepted auditing standards, including an income statement, balance sheet and statement of cash flows. The financial statements must be accompanied by an original, executed and unqualified opinion of an independent certified public accountant stating that the applicant has an equity capitalization of at least $500,000. The opinion of the independent certified public accountant shall:
1. Be dated no earlier than thirty-five (35) days before the application is submitted to the ADO; and
2. Be printed on the letterhead of the independent certified public accountant, containing complete contact information for the independent certified public accountant.
(p) The following information relating to the key employees:
1. A detailed description and supporting documentation of how each of the key employees qualifies as having at least four (4) years of experience making venture capital investments in small businesses on behalf of or as an institutional or accredited investor. Such description and supporting documents shall include, but not be limited to the following, and shall be certified as accurate by each key employee:
(i) A detailed resume with a listing of references including full contact information for each reference;
(ii) A description of the success of the key employee in performing his/her function;
(iii) The attainment of investment return goals; The number of enterprises funded;
(iv) The annual dollar amount of money for which he/she had primary responsibility; and
(v) Any other information reasonably requested by the ADO.
2. A listing of all applicable licenses and degrees that each key employee holds (or has held within the last ten (10) years). Such listing shall indicate the following and shall be certified as accurate by each key employee:
(i) Whether the license is active and in good standing;
(ii) The date on which it will expire or did expire;
(iii) Whether any license has been revoked and the date of revocation and an explanation surrounding such revocation;
(iv) Whether any disciplinary action has ever been imposed upon the applicant and/or the key employees with regards to such license;
(v) The date of such disciplinary action and a description surrounding such disciplinary action; and
(vi) Whether any investigation has ever been carried out on the applicant and/or the key employees with regards to such license and the date of investigation and a description surrounding such investigation.
3. The applicant's overall investment strategy and the applicant's three (3) year business plan, including an organizational chart, that has been prepared by the key employees, as applicable, and which demonstrates the key employee's ability to make investments of cash in qualified technology businesses; and
4. An instrument authorizing the ADO to conduct a background and credit investigation of the applicant and the key employees.
(q) A statement signed by the chief executive officer or its equivalent of the applicant stating that:
1. Neither the applicant nor any of its investors have violated or will violate the provisions of the Act or these regulations;
2. The information submitted in connection with the application is complete, accurate and true; and
3. The information submitted as part of the application will endure and continue to be legally binding if an applicant is certified as a CAPCO by the ADO. This statement shall state that the applicant understands that the ADO shall continue to rely on original applications.
(r) A listing of all persons that have an ownership interest in the applicant, including voting and non-voting ownership interests. This listing must include the percentage ownership interest of each and a description of the ownership interest. Provided, however, that where the applicant is an entity that is registered with the U.S. Securities and Exchange Commission under Section 12(g) or Section 15(d) of the Securities Exchange Act of 1934, the applicant must include only those persons having beneficial ownership of equity securities of the applicant of more than five percent (5%).
(s) In the event that the listing provided in response to (q) above contains the name of a corporation, general or limited partnership, trust, limited liability company or other entity that is not a natural person, a listing of all persons that have an ownership interest in such entity, including voting and non-voting ownership interests.
(t) A sample of offering materials used or to be used in investor solicitations.
(u) A covenant and agreement of the managers and the applicant to the State of Alabama and its people that:
1. The applicant will not use the CAPCO program as a pretext for any transaction that will subvert the purpose of the Act;
2. The applicant will act in the best interests of the State of Alabama and its people, recognizing that the reason for the Act is the welfare and prosperity of the State of Alabama and its people;
3. The managers and the applicant will comply with any and all requirements of the Act and these regulations; and
4. The applicant will submit to the State of Alabama a ten percent (10%) share of any distributions (other than qualified distributions, the principal and interest portions of any payments made with respect to a qualified debt instrument, and the return of the initial $500,000 equity contribution and any other equity contributions) from the applicant to its equity holders.

Covenant (iv) shall be effective separately and independently from the Act and these regulations, and shall continue to be binding after the applicant has made qualified investments in an amount cumulatively equal to one hundred percent (100%) of the certified capital.

(5) A completed application for recertification and participation in program two shall include the following:
(a) A nonrefundable application fee in the amount of $7,500 in the form of a cashier's check, certified check or company check made payable to "Alabama Development Office" which the ADO shall use to offset the administrative costs related to the CAPCO program;
(b) A nonrefundable program administration fee in the amount of $17,500 in the form of a cashier's check, certified check or company check made payable to "Alabama Development Office" which the ADO shall use to offset the administrative costs related to the CAPCO program;
(c) Appropriate documentation regarding the due authorization of the application for recertification and participation in program two.
(d) An original executed report of an independent certified public accountant stating that the applicant has at least $500,000 in net worth and at least $500,000 in liquid assets. The report of the independent certified public accountant shall:
1. Be dated no earlier than thirty-five (35) days before the application for recertification and participation in program two is submitted to the ADO; and
2. Be printed on the letterhead of the independent certified public accountant, containing complete contact information for the independent certified public accountant.
(e) A statement signed by the chief executive officer or its equivalent of the applicant stating that:
1. Neither the applicant nor any of its managers, key employees, governing body, or investors have violated or will violate the provisions of the Act or these regulations;
2. The information submitted in connection with the application for recertification and participation in program two is complete, accurate and true; and
3. The information submitted as part of the application for recertification and participation in program two will endure and continue to be legally binding with respect to certification under any program. This statement shall state that the applicant understands that the ADO shall continue to rely on original applications.
(f) A sample of offering materials used or to be used in investor solicitations in program two.
(g) A sworn statement in an affidavit from its chief executive officer that all of the information contained within the original application is true and correct as of the date of the application for recertification and participation in program two except as specifically set forth in an attachment to such affidavit. Any information being updated and appended to the affidavit shall reference the section of the original application for certification as a CAPCO being updated.
(6) The ADO shall not recognize applications or will not certify an applicant as a CAPCO with respect to either program one or program two if there has been an exchange of money or other consideration for purposes of attempting to gain from the ADO a favorable review of an application for certification. If an applicant or affiliate of an applicant has purchased the assets or otherwise taken control of another CAPCO for the purpose of gaining certification, such CAPCO shall be immediately be decertified. Further, the ADO shall not certify an applicant as a CAPCO if the applicant is directly or indirectly owned or operated by or is otherwise associated with:
(a) public employee;
(b) public official;
(c) family member of the public employee, or
(d) family member of the public official.

Notwithstanding the foregoing, the ADO may, in its discretion, certify an applicant as a CAPCO that would otherwise meet the requirements for certification but for the application of the immediately preceding sentence, if and only if (i) the disqualifying relationship is one of a public employee and not a public official and (ii) such relationship cannot reasonably be deemed to be potentially harmful to the economic interest of the state.

(7) Any false, inaccurate, or misleading information provided in an application submitted to the ADO may be grounds for rejection of the application and denial of further consideration, as well as decertification of the CAPCO and each of its investment pools, if such information discovered at a subsequent date would have resulted in the denial of such certification.
(8) Whenever any material information that an applicant supplied in its application has become inaccurate or obsolete, the applicant shall file an amended application, including originally executed signature pages. Such amended applications must be submitted within five (5) business days of the information becoming inaccurate or obsolete during the application process. Such amended applications shall be filed in the same manner as the application; provided, however, that, based on the extent of the revisions that need to be made by the applicant and then reviewed by the ADO, the ADO shall determine if a new application fee or portion thereof will be charged. The review period for the application shall begin upon the filing of the amended application.
(9) The applicant shall, as soon as possible or within five (5) business days, notify the ADO in writing:
(a) When the applicant is unable to continue as a viable going concern;
(b) When the applicant is subject to litigation which may affect its viability as a going concern; and/or
(c) If a merger or acquisition of the applicant or by the applicant has occurred. In the case of a merger or acquisition, the ADO shall request additional information as needed to determine if the requirements of the Act and these regulations continue to be met.
(10) The ADO reserves the right to determine what information is material regarding the completion, execution and filing of an application, an amended application or a notification required under this section. The ADO may request any such additional information from the applicant as the ADO deems necessary to appropriately review an application, amended application or notification.
(11) In the event that an incomplete application is submitted that is not considered materially complete by the ADO or additional information is requested by the ADO, the ADO shall notify the applicant within fifteen (15) days of receipt of the application. If an incomplete application is completed or incomplete information is supplied within five (5) business days of the applicant's receipt of such notice from the ADO, the application will be considered filed with the ADO on the date it was first received by the ADO. If an incomplete application is not completed or the additional information is not supplied within five (5) business days of the applicant's receipt of the notice thereof, then the ADO may, in its discretion, deem the application to not have been filed with the ADO and return the application to the applicant by mail in which case the ADO shall have no further obligation to provide additional notices to the applicant.
(12) Any manager of a CAPCO that has not submitted the affidavits, certifications and statements provided in this section as part of the application process shall submit such affidavits, certifications and statements prior to participating in the management of the CAPCO.

F. Neal Wade

Notes

Ala. Admin. Code r. 281-2-1-.06
New Rule: Filed July 25, 2003, effective August 29, 2003. Amended: Filed February 6, 2008; effective March 12, 2008.

Statutory Authority: Code of Ala. 1975, as amended; Act 2002-429.

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