II 

109TH CONGRESS 

1ST SESSION S. 1923 

To address small business investment companies licensed to issue participating 

debentures, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

OCTOBER 26, 2005 

Ms. SNOWE (for herself, Mr. TALENT, and Mr. BOND) introduced the following bill; which was read twice and referred to the Committee on Small 

Business and Entrepreneurship 

A BILL 

To address small business investment companies licensed to 

issue participating debentures, and for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Small Business Invest5 ment and Growth Act of 2005’’. 

6 SEC. 2. PARTICIPATING DEBENTURE COMPANIES. 

7 Part A of title III of the Small Business Investment 

8 Act of 1958 (15 U.S.C. 681 et seq.) is amended by adding 

9 at the end the following: 
2 

•S 1923 IS

1 ‘‘SEC. 321. PARTICIPATING DEBENTURE COMPANIES. 

2 ‘‘(a) DEFINITIONS.—As used in this section, the fol3 lowing definitions shall apply: 

4 ‘‘(1) GENERAL PARTNER.—The term ‘general 

5 partner’ means an investor in a small business in6 vestment company that participates in the daily 

7 management of the small business investment com8 pany, and may include a managing partner in a lim9 ited liability company. 

10 ‘‘(2) GROSS RECEIPTS.—The term ‘gross re11 ceipts’ means any cash received by a small business 

12 investment company, including investment proceeds 

13 (both return of capital and profit), interest, divi14 dends, and fees, other than capital contributed by a 

15 partner, the proceeds of the issuance of participating 

16 debentures, and other money (if any) borrowed by 

17 the small business investment company. 

18 ‘‘(3) INTERIM FUNDING PROVIDER.—The term 

19 ‘interim funding provider’ means any entity that 

20 providers funding guaranteed by the Administration 

21 to a licensed company in between the periodic pools 

22 created by any trustee. 

23 ‘‘(4) LICENSED COMPANY.—The term ‘licensed 

24 company’ means a small business investment com25 pany authorized to issue participating debentures by 

26 a license issued under section 301 for that purpose. 
3 

•S 1923 IS

1 ‘‘(5) LIMITED PARTNER.—The term ‘limited 

2 partner’ means an investor in a small business in3 vestment company, other than the Administrator, 

4 that does not participate in the daily management of 

5 the small business investment company. 

6 ‘‘(6) PARTICIPATING DEBENTURE.—The term 

7 ‘participating debenture’ means a debt security that 

8 is— 

9 ‘‘(A) in a form prescribed by the Adminis10 trator that obligates the issuing company to 

11 pay— 

12 ‘‘(i) on the fifth anniversary of the 

13 date of issuance of the debenture, all ac14 crued interest on that debenture that has 

15 not previously been paid; 

16 ‘‘(ii) semiannually thereafter, interest 

17 accruing after the fifth anniversary of the 

18 date of issuance of the debenture; and 

19 ‘‘(iii) any other amount required by 

20 this subsection; and 

21 ‘‘(B) is subject to the terms and conditions 

22 set forth in this subsection and to any addi23 tional terms and conditions as may be pre24 scribed by the Administrator that are consistent 

25 with this subsection. 
4 

•S 1923 IS

1 ‘‘(7) PRIVATE COLLATERAL.—The term ‘private 

2 collateral’ means any money that any private part3 ner has contractually committed to invest in a li4 censed company during the most recent licensing of 

5 the licensed company, but that has not yet been paid 

6 to the licensed company. 

7 ‘‘(8) TRUSTEE.—The term ‘trustee’ means an 

8 entity that combines any securities, interests, or ob9 ligations from licensed companies in the partici10 pating debenture program under subsection (b) into 

11 pools and issues trust certificates. 

12 ‘‘(9) TRUST CERTIFICATE.—The term ‘trust 

13 certificate’ means a certificate issued by the trustee 

14 that represents an interest in a particular pool of 

15 any securities, interests, or obligations from licensed 

16 companies in the participating debenture program. 

17 ‘‘(10) TRUST CERTIFICATE HOLDER.—The 

18 term ‘trust certificate holder’ means an investor that 

19 purchases a trust certificate. 

20 ‘‘(b) PARTICIPATING DEBENTURES PROGRAM.— 

21 ‘‘(1) GUARANTEE OF PARTICIPATING DEBEN22 TURES.— 

23 ‘‘(A) REDEMPTION PRICE AND INTER24 EST.—The Administrator is authorized to guar25 antee the payment of the redemption price and 
5 

•S 1923 IS

1 interest on a participating debenture issued by 

2 a licensed company to the interim funding pro3 vider under such terms and conditions as the 

4 Administrator shall establish by regulation. 

5 ‘‘(B) REPAYMENT IN DEFAULT.—The Ad6 ministration is authorized to guarantee the re7 payment to the interim funding provider in the 

8 event of a default by a licensed company, of the 

9 funds advanced by the interim funding provider 

10 to the licensed company pursuant to the agree11 ment between the Administration and the li12 censed company, under such terms and condi13 tions as the Administrator shall establish by 

14 regulation. 

15 ‘‘(C) TRUST CERTIFICATES.—The Admin16 istrator is authorized to guarantee the payment 

17 of the redemption price and interest on a trust 

18 certificate issued by the trustee to the trust cer19 tificate holders under such terms and conditions 

20 as the Administrator shall establish by regula21 tion. 

22 ‘‘(2) GUARANTEE FEE.—The Administration is 

23 authorized to charge a separate fee— 

24 ‘‘(A) under paragraph (1)(A), to the in25 terim funding provider; 
6 

•S 1923 IS

1 ‘‘(B) under paragraph (1)(B), to the li2 censed company; and 

3 ‘‘(C) under paragraph (1)(C), to the trust4 ee. 

5 ‘‘(3) ZERO-SUBSIDY.—Each of the fees author6 ized under paragraph (2) shall be sufficient to re7 duce the cost of each corresponding guarantee in 

8 paragraph (1) to zero, as that term is defined under 

9 the Federal Credit Reform Act of 1990. 

10 ‘‘(4) MATCHING PAYMENT STREAMS.—With re11 spect to any participating debenture issued by a li12 censed company, or with respect to any security 

13 issued representing an interest in a pool of such se14 curities, the amount and schedule of— 

15 ‘‘(A) the interest payment obligations of 

16 the Administration to the trust certificate hold17 ers shall be equal to the amount and schedule 

18 of the interest obligations of the licensed com19 pany to the Administration; and 

20 ‘‘(B) the principal redemption obligations 

21 of the Administration to the trust certificate 

22 holders shall be the same as the amount and 

23 schedule of the licensed company’s principal re24 demption obligations to the Administration. 
7 

•S 1923 IS

1 ‘‘(5) INTEREST TO INTERIM FUNDING PRO2 VIDER.— 

3 ‘‘(A) RIGHT TO RECEIVE INTEREST.—For 

4 the advancing of monies to a licensed company 

5 pursuant to the license of that company, the in6 terim funding provider shall have the right to 

7 receive interest from the licensed company. 

8 ‘‘(B) AMOUNTS.—The interest authorized 

9 under subparagraph (A) shall be calculated 

10 based on the time period beginning on the date 

11 on which the interim funding provider advances 

12 the funding, and ending when the interim fund13 ing provider provides the securities of the li14 censed company to a trustee for the purpose of 

15 pooling those securities and selling interests in 

16 that pool. 

17 ‘‘(C) COLLECTION OF INTEREST.—The in18 terim funding provider may collect interest re19 ferred to in this paragraph by withholding 

20 money from the money advanced to the licensed 

21 company by the interim funding provider. 

22 ‘‘(6) MAXIMUM LEVERAGE.—Notwithstanding 

23 any other provision of this subsection, the Adminis24 trator may not guarantee a new participating deben25 ture to be issued by a small business investment 
8 

•S 1923 IS

1 company, and the company shall not make any dis2 tribution to its private investors, if immediately after 

3 such issuance or distribution the aggregate unpaid 

4 principal balance of the participating debentures 

5 issued by the company would exceed 200 percent of 

6 the leverageable capital of the licensed company. 

7 ‘‘(7) PURCHASE OF PARTICIPATING DEBEN8 TURES.—The Administrator may authorize a trust 

9 or pool acting on behalf of the Administration to 

10 purchase participating debentures issued by a small 

11 business investment company, under such terms and 

12 conditions as the Administrator shall establish by 

13 regulation. 

14 ‘‘(8) REDEMPTION.—Not later than 10 years 

15 after the date on which it is issued, a participating 

16 debenture shall be redeemed for an amount equal to 

17 its outstanding principal balance plus any accrued 

18 but unpaid interest on such participating debenture 

19 as of the date on which it is redeemed. 

20 ‘‘(9) INTEREST.— 

21 ‘‘(A) IN GENERAL.—Interest on a partici22 pating debenture is preferred and cumulative 

23 and is prepayable out of any gross receipts 

24 available for distribution and is in any event 
9 

•S 1923 IS

1 payable at the scheduled or accelerated matu2 rity of the participating debenture. 

3 ‘‘(B) INTEREST ON PRINCIPAL BAL4 ANCE.—Interest on the principal balance out5 standing of a participating debenture shall ac6 crue on a daily basis, and unpaid accrued inter7 est shall compound semiannually from the date 

8 of issuance of the debenture, at a rate deter9 mined by the Secretary of the Treasury, taking 

10 into consideration the current average market 

11 yield on outstanding marketable obligations of 

12 the United States with remaining periods to 

13 maturity comparable to the average maturities 

on such securities, adjusted to the nearest 1 14 ⁄8 of 

15 1 percent, plus an additional charge, in an 

16 amount established annually by the Adminis17 trator, as necessary to reduce to zero the cost 

18 (as defined in section 502 of the Federal Credit 

19 Reform Act of 1990 (2 U.S.C. 661a)) to the 

20 Administration of purchasing and guaranteeing 

21 participating debentures under this Act, which 

22 rate may not exceed 1.5 percent per annum, 

23 and which shall be paid to and retained by the 

24 Administration. 

25 ‘‘(10) PAYMENT DEFAULTS.— 
10 

•S 1923 IS

1 ‘‘(A) IN GENERAL.—In the event of a fail2 ure of a small business investment company to 

3 pay any principal or interest on a participating 

4 debenture when due (including any mandatory 

5 prepayment out of gross receipts), the licensed 

6 company shall be in default, and shall be sub7 ject to the provisions of subparagraphs (B) 

8 through (D). 

9 ‘‘(B) ACCELERATION.—The Administra10 tion, in addition to any other remedies it may 

11 have, may demand immediate payment of the 

12 principal balance and accrued interest on any 

13 or all participating debentures issued by the de14 faulting company. 

15 ‘‘(C) DEFAULT RATE OF INTEREST.—The 

16 interest rate on the participating debenture 

17 with respect to which the payment default oc18 curred may increase, at the discretion of the 

19 Administrator, by not greater than 50 basis 

20 points from the date of the payment default, 

21 and by not greater than an additional 50 basis 

22 points on each 6-month anniversary of that 

23 date, up to a maximum total increase of 300 

24 basis points, until all of the payment defaults of 
11 

•S 1923 IS

1 the defaulting company have been cured or 

2 waived. 

3 ‘‘(D) PRIVATE COLLATERAL.—The Admin4 istration may apply the private collateral of the 

5 licensed company to pay any interest or prin6 cipal payment that has not been paid on time 

7 according to the payment schedule for the li8 censed company. 

9 ‘‘(11) LIQUIDATION OF LICENSED COMPANY.— 

10 In the event of the liquidation of a licensed company 

11 issuing participating debentures under this sub12 section, a participating debenture shall be senior in 

13 priority for all purposes to any interest in the 

14 issuing company, whenever created. In liquidation, 

15 the private collateral of the licensed company may, 

16 at the option of the Administrator, be applied to pay 

17 accrued interest and principal of outstanding partici18 pating debentures. 

19 ‘‘(12) DEFAULT OF A LICENSED COMPANY.—In 

20 the event of the default of a licensed company 

21 issuing participating debentures under this sub22 section— 

23 ‘‘(A) a participating debenture shall be 

24 senior in priority for all purposes to any inter-
12 

•S 1923 IS

1 est in the issuing company, whenever created; 

2 and 

3 ‘‘(B) at the option of the Administrator, 

4 the private collateral of the licensed company 

5 may be applied to pay accrued interest and 

6 principal on outstanding participating deben7 tures. 

8 ‘‘(13) INVESTMENT OBLIGATION.— 

9 ‘‘(A) IN GENERAL.—Any company issuing 

10 a participating debenture under this Act shall 

11 invest or commit to invest an amount equal to 

12 the outstanding face value of such participating 

13 debenture solely in equity capital. 

14 ‘‘(B) EQUITY CAPITAL.—In this subpara15 graph, the term ‘equity capital’ means common 

16 or preferred stock or a similar instrument, in17 cluding subordinated debt with equity features 

18 which is not amortized and which provides for 

19 interest payments from appropriate sources, as 

20 determined by the Administrator. 

21 ‘‘(14) OTHER DEBT.—A licensed company 

22 issuing a participating debenture under this sub23 section shall have no debt other than leverage ob24 tained in accordance with this Act, and temporary 
13 

•S 1923 IS

1 debt in an amount equal to not more than 50 per2 cent of the private capital of the company. 

3 ‘‘(15) USE OF PROCEEDS.—Unless otherwise 

4 determined by the Administration, a licensed com5 pany may use the proceeds of a participating deben6 ture issued by the company to pay the principal 

7 amount and accrued interest due on outstanding 

8 participating debentures issued by that company, if 

9 the company has outstanding equity capital invested 

10 in an amount equal to the amount being refinanced. 

11 ‘‘(16) DISTRIBUTION OF GROSS RECEIPTS.— 

12 ‘‘(A) IN GENERAL.—Except as otherwise 

13 provided in this subsection, gross receipts, from 

14 any source or however categorized for generally 

15 accepted accounting principles or tax account16 ing purposes, shall be utilized first for the pay17 ment of accrued interest on participating deben18 tures, then for repayment of participating de19 benture principal and contributed private cap20 ital, and finally for profit distributions, as pro21 vided in subparagraphs (B) through (G). 

22 ‘‘(B) PAST DUE INTEREST AND PRIN23 CIPAL.—Gross receipts shall first be used, with24 in 10 days of receipt— 
14 

•S 1923 IS

1 ‘‘(i) to pay any past due interest on 

2 participating debentures issued by the li3 censed company; and 

4 ‘‘(ii) when there is no past due inter5 est outstanding, to repay any past due 

6 principal on such debentures (whether such 

7 interest and principal are past due by their 

8 terms or by acceleration). 

9 ‘‘(C) MANDATORY INTEREST PREPAY10 MENT.—If no unpaid accrued interest or past 

11 due principal is outstanding on any partici12 pating debenture issued by a licensed company, 

13 the company shall use its gross receipts, not 

14 later than the end of the calendar quarter in 

15 which they were received (or the following cal16 endar quarter, if received within 15 days before 

17 the end of a calendar quarter) to prepay ac18 crued interest on the participating debentures 

19 issued by the company, which prepayments will 

20 be applied to such accrued interest in the order 

21 in which such interest would otherwise become 

22 due and payable. 

23 ‘‘(D) AMORTIZATION DISTRIBUTIONS.—If 

24 no unpaid accrued interest or past due principal 

25 is outstanding on any participating debenture 
15 

•S 1923 IS

1 issued by a licensed company, the company 

2 shall distribute its gross receipts— 

3 ‘‘(i) to the Administration to amortize 

4 outstanding participating debenture lever5 age; and 

6 ‘‘(ii) to its private investors, pro rata 

7 according to the ratio of outstanding par8 ticipating debenture leverage to out9 standing leverageable capital at the time of 

10 distribution. 

11 ‘‘(E) POST-AMORTIZATION DISTRIBU12 TIONS.—If no accrued interest or principal is 

13 outstanding on any participating debenture 

14 issued by a licensed company, and the company 

15 has no outstanding leverageable capital, the 

16 gross receipts of the company shall— 

17 ‘‘(i) until aggregate distributions to 

18 private investors under this subparagraph 

19 equal aggregate contributions to the cap20 ital of the company previously made by 

21 private investors, be distributed to the Ad22 ministration, an amount equal to the initial 

23 profit participation percentage of the total 

24 amount being distributed with the remain-
16 

•S 1923 IS

1 ing gross receipts distributed to the private 

2 investors; 

3 ‘‘(ii) if aggregate distributions to pri4 vate investors under this subparagraph 

5 equal or exceed aggregate contributions to 

6 the capital of the company previously made 

7 by private investors, be distributed to the 

8 Administration an amount equal to the 

9 final profit participation percentage of the 

10 total amount being distributed, with the 

11 remaining gross receipts distributed to the 

12 private investors; and 

13 ‘‘(iii) in the case of any post-amortiza14 tion distributions to the Administration 

15 pursuant to this subparagraph, be deemed 

16 to constitute ‘additional’ interest (not ‘ac17 crued’ interest). 

18 ‘‘(F) MANAGEMENT EXPENSES.—For pur19 poses of calculating the amount to be distrib20 uted to the Administration pursuant to sub21 paragraph (E), except as otherwise prescribed 

22 by the Administration, the management ex23 penses of any company which issues partici24 pating debentures under this subsection shall 

25 not be greater than 2.5 percent of the combined 
17 

•S 1923 IS

1 capital of the company per year, plus, in the 

2 case of a company with combined capital of less 

3 than $20,000,000, an additional $125,000. 

4 ‘‘(G) DEFINITIONS.—In this paragraph— 

5 ‘‘(i) the term ‘combined capital’ 

6 means the aggregate amount of private 

7 capital and outstanding leverage; 

8 ‘‘(ii) the term ‘final profit participa9 tion percentage’ means 50 percent of the 

10 leverage ratio, reduced by the weighted av11 erage interest rate on the financing com12 mitments issued by the company; 

13 ‘‘(iii) the term ‘initial profit participa14 tion percentage’ means 25 percent of the 

15 leverage ratio, reduced by the weighted av16 erage interest rate on the financing com17 mitments issued by the company; 

18 ‘‘(iv) the term ‘leverage ratio’ means 

19 the ratio of the aggregate amount of fi20 nancing commitment leverage previously 

21 drawn by the company (including leverage 

22 that has been repaid, and not solely the 

23 maximum amount at any one time out24 standing, if different) to the aggregate 

25 amount of capital previously contributed to 
18 

•S 1923 IS

1 the company by private investors (not sole2 ly the maximum amount at any one time 

3 outstanding, if different); 

4 ‘‘(v) the term ‘management expenses’ 

5 includes management fees and any addi6 tional salaries, office expenses, travel, busi7 ness development costs, office and equip8 ment rental, bookkeeping, and the develop9 ment, investigation, and monitoring of in10 vestments paid by the licensed company, 

11 but does not include the cost of services 

12 provided by specialized outside consultants, 

13 outside lawyers and outside auditors, who 

14 perform services not generally expected of 

15 a venture capital company nor does such 

16 term include the cost of services provided 

17 by any affiliate of the company which are 

18 not part of the normal process of making 

19 and monitoring venture capital invest20 ments; and 

21 ‘‘(vi) the term ‘outstanding 

22 leverageable capital’ means any aggregate 

23 capital contributions received by a licensed 

24 company from private investors which ex-
19 

•S 1923 IS

1 ceed aggregate distributions received by 

2 the private investors from the company. 

3 ‘‘(17) EXCEPTIONS TO ORDER OF DISTRIBU4 TIONS.— 

5 ‘‘(A) IN GENERAL.—Notwithstanding para6 graph (16)(D), if no unpaid accrued interest 

7 (whether or not past due) and no past due prin8 cipal is outstanding on any participating deben9 ture issued by the licensed company subpara10 graph (B) through (D) of this paragraph shall 

11 apply. 

12 ‘‘(B) TAX DISTRIBUTIONS.— 

13 ‘‘(i) IN GENERAL.—The company may 

14 make a special distribution of gross re15 ceipts or other cash to its private investors 

16 without a corresponding distribution to the 

17 Administration while principal is out18 standing on participating debentures 

19 issued by the company, if— 

20 ‘‘(I) the licensed company has an 

21 investment in a business (referred to 

22 in this subparagraph as the ‘portfolio 

23 company’) organized as a limited li24 ability company (referred to in this 
20 

•S 1923 IS

1 subparagraph as an ‘LLC’) or as a 

2 partnership; 

3 ‘‘(II) the portfolio company has 

4 income which will be taxable to its 

5 members or partners; 

6 ‘‘(III) the portfolio company 

7 makes a distribution to its members 

8 or partners in an amount equal to 

9 their assumed tax liability on the 

10 portfolio company’s taxable income 

11 (referred to in this subparagraph as a 

12 ‘tax distribution’); or 

13 ‘‘(IV) the small business invest14 ment company is itself a partnership 

15 or an LLC, so that any portfolio com16 pany income allocated to it is reallo17 cated to the private investors, and it 

18 is they who are liable for payment of 

19 tax on that income as if it was their 

20 own income, whether or not they re21 ceive any cash in respect of that in22 come. 

23 ‘‘(ii) AUTHORITY TO MAKE DISTRIBU24 TION.—In circumstances described in 

25 clause (i), the issuing company may, prior 
21 

•S 1923 IS

1 to April 15 of each calendar year, dis2 tribute to its private investors up to an 

3 amount equal to the difference between— 

4 ‘‘(I) the estimated aggregate 

5 maximum tax liability of the private 

6 investors on the income of portfolio 

7 companies organized as LLCs or part8 nerships during the preceding cal9 endar year; and 

10 ‘‘(II) the aggregate amount dis11 tributed to the private investors (other 

12 than pursuant to this subparagraph) 

13 since April 15 of the preceding cal14 endar year, but in no event more than 

15 the aggregate amount of tax distribu16 tions that the issuing company re17 ceived from all of its portfolio compa18 nies during the preceding calendar 

19 year. 

20 ‘‘(C) EXPENSES.—A small business invest21 ment company may use its gross receipts to pay 

22 previously incurred expenses (including manage23 ment fees) and other liabilities and it may, in 

24 addition, retain additional gross receipts in an 

25 expense reserve account in an amount which, 
22 

•S 1923 IS

1 added to any existing expense reserve, does not 

2 exceed such reasonably anticipated expenses 

3 and other liabilities for the following 12-month 

4 period, provided such expenses and other liabil5 ities are not prohibited under regulations estab6 lished by the Administrator or other applicable 

7 law. 

8 ‘‘(D) PREPAYMENT.—Subject to any appli9 cable State law requirements, a small business 

10 investment company may use gross receipts or 

11 other cash to prepay outstanding participating 

12 debenture leverage and interest in whole or in 

13 part without penalty at any time. 

14 ‘‘(18) RESTRICTIONS ON DISTRIBUTIONS.— 

15 ‘‘(A) LIQUIDITY AND OTHER ADMINISTRA16 TIVE OR STATE LAW RESTRICTIONS.—A dis17 tribution under this subsection may not violate 

18 liquidity requirements or other applicable re19 strictions on distributions in regulations issued 

20 by the Administrator or under applicable State 

21 law. 

22 ‘‘(B) CAPITAL IMPAIRMENT OR REGU23 LATORY VIOLATION.—If a small business invest24 ment company is in restricted operations or liq25 uidation by reason of capital impairment or reg-
23 

•S 1923 IS

1 ulatory violation, the maturity date of the par2 ticipating debentures issued by that company, 

3 including both principal and accrued interest, is 

4 subject to acceleration at the option of the Ad5 ministrator, and, whether or not there has been 

6 such acceleration, up to 100 percent of all gross 

7 receipts and the private collateral of the li8 censed company may, at the option of the Ad9 ministrator, be required to be distributed to the 

10 Administration until accrued interest and prin11 cipal on the participating debentures issued by 

12 the company have been paid in full, in accord13 ance with any terms and conditions that the 

14 Administrator may establish by regulation. 

15 ‘‘(19) DISTRIBUTIONS IN KIND.— 

16 ‘‘(A) ELECTION OF IN-KIND DISTRIBUTION

17 OF SECURITIES.—A small business investment 

18 company that issues participating debentures 

19 may elect to make an in-kind distribution of se20 curities at any time, subject to applicable secu21 rities laws and regulations, if such securities 

22 are publicly traded and marketable (or ‘market23 able securities’). Marketable securities distrib24 uted in kind shall be deemed to be gross re25 ceipts for purposes of this subsection, and their 
24 

•S 1923 IS

1 distribution shall be subject to the priorities 

2 and restrictions applicable to gross receipts 

3 under this subsection and to applicable regula4 tions issued by the Administrator. 

5 ‘‘(B) TREATMENT OF ADMINISTRATION

6 SHARE.—The licensed company shall either de7 posit the Administration share of such securi8 ties with a trustee designated by the Adminis9 trator, or retain the Administration share, if 

10 the Administrator so directs and with the 

11 agreement of the company. 

12 ‘‘(C) RETENTION OF ADMINISTRATION

13 SHARE.—If the company retains the Adminis14 tration share, it shall sell such share and 

15 promptly remit the proceeds to the Administra16 tion. 

17 ‘‘(D) VALUE OF ADMINISTRATION’S

18 SHARE.—For purposes of this paragraph, the 

19 value of the Administration share is— 

20 ‘‘(i) the value of the securities, as of 

21 the date of distribution to the Administra22 tion under subparagraph (B), or as of the 

23 initial date of retention under subpara24 graph (C); and 
25 

•S 1923 IS

1 ‘‘(ii) the controlling value for the pur2 poses of determining the remaining liability 

3 of the company to the Administration, ex4 cept that the Administration may receive a 

5 greater or lesser amount upon its ultimate 

6 sale of such share or upon the ultimate 

7 sale by the company of such share on be8 half of the Administration. 

9 ‘‘(20) TIMING OF DISTRIBUTIONS.— 

10 ‘‘(A) IN GENERAL.—Subject to paragraphs 

11 (16) and (18), any gross receipts received by a 

12 small business investment company issuing par13 ticipating debentures under this subsection that 

14 are not placed in an expense reserve pursuant 

15 to paragraph (18)(C) shall be distributed by the 

16 last day of the fiscal quarter in which such 

17 gross receipts were received by the company, 

18 except that gross receipts received within 15 

19 days before the end of a fiscal quarter shall be 

20 distributed by the last day of the subsequent 

21 fiscal quarter. 

22 ‘‘(B) EXCEPTIONS TO TIMING OF DIS23 TRIBUTIONS; MARKETABLE SECURITIES.—Gross 

24 receipts consisting of marketable securities shall 

25 be distributed within 6 months of the date of 
26 

•S 1923 IS

1 receipt, unless the small business investment 

2 company has obtained the prior consent of the 

3 Administrator. 

4 ‘‘(21) REINVESTMENT OF GROSS RECEIPTS.— 

5 Subject to such regulations and restrictions as may 

6 be prescribed by the Administrator, and by the 

7 agreement of the private investors in a small busi8 ness investment company, any gross receipts that ex9 ceed the amount needed to make payments required 

10 to be made to the Administration under this sub11 section, may at the option of the company be rein12 vested in qualified small businesses. 

13 ‘‘(c) POST-DISTRIBUTION COMPUTATION.—After dis14 tributions have been made pursuant to this section, the 

15 Administration share of such distributions shall not be re16 duced or recomputed, except as expressly provided in this 

17 section. 

18 ‘‘(d) NO OWNERSHIP INTEREST TO ADMINISTRA19 TION.—This section shall not be construed as creating in 

20 the Administration any ownership interest in any small 

21 business investment company which issues participating 

22 debentures. 

23 ‘‘(e) CONFLICT WITH OTHER PROVISIONS.— 
27 

•S 1923 IS

1 ‘‘(1) IN GENERAL.—In the event of a conflict 

2 between this subsection and any other provision of 

3 this part A, this subsection shall apply. 

4 ‘‘(2) SPECIFIC PROVISIONS.—In particular, the 

5 provisions of this section supersede subsections (g) 

6 and (h) of section 303 in their entirety with respect 

7 to all matters pertaining to participating debentures 

8 issued by a licensed company covered by this sec9 tion.’’. 

Æ