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[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[S. 1784 Reported in Senate (RS)]

                                                       Calendar No. 455

104th CONGRESS

  2d Session

                                S. 1784

_______________________________________________________________________

                                 A BILL

   To amend the Small Business Investment Act of 1958, and for other 
                               purposes.

_______________________________________________________________________

                             June 25, 1996

                       Reported with an amendment

                                                       Calendar No. 455
104th CONGRESS
  2d Session
                                S. 1784

   To amend the Small Business Investment Act of 1958, and for other 
                               purposes.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                              May 20, 1996

   Mr. Bond introduced the following bill; which was read twice and 
              referred to the Committee on Small Business

                             June 25, 1996

                Reported by Mr. Bond, with an amendment
 [Strike out all after the enacting clause and insert the part printed 
                               in italic]

_______________________________________________________________________

                                 A BILL

 
   To amend the Small Business Investment Act of 1958, and for other 
                               purposes.

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

<DELETED>SECTION 1. SHORT TITLE; INCORPORATED DEFINITIONS.</DELETED>

<DELETED>    This Act may be cited as the ``Small Business Investment 
Company Improvement Act of 1996''.</DELETED>

<DELETED> SEC. 2. DEFINITIONS.</DELETED>

<DELETED>    (a) Small Business Concern.--Section 103(5) of the Small 
Business Investment Act of 1958 (15 U.S.C. 662(5)) is amended by 
inserting before the semicolon the following: ``, except that, for 
purposes of this Act, an investment by a venture capital firm, 
investment company (including a small business investment company) 
employee welfare benefit plan or pension plan, or trust, foundation, or 
endowment that is exempt from Federal income taxation--</DELETED>
        <DELETED>    ``(A) shall not cause a business concern to be 
        deemed not independently owned and operated;</DELETED>
        <DELETED>    ``(B) shall be disregarded in determining whether 
        a business concern satisfies size standards established 
        pursuant to section 3(a)(2) of the Small Business Act; 
        and</DELETED>
        <DELETED>    ``(C) shall be disregarded in determining whether 
        a small business concern is a smaller enterprise''.</DELETED>
<DELETED>    (b) Private Capital.--Section 103(9) of the Small Business 
Investment Act of 1958 (15 U.S.C. 662(9)) is amended to read as 
follows:</DELETED>
        <DELETED>    ``(9) the term `private capital'--</DELETED>
                <DELETED>    ``(A) means the sum of--</DELETED>
                        <DELETED>    ``(i) the paid-in capital and 
                        paid-in surplus of a corporate licensee, the 
                        contributed capital of the partners of a 
                        partnership licensee, or the equity investment 
                        of the members of a limited liability company 
                        licensee; and</DELETED>
                        <DELETED>    ``(ii) unfunded binding 
                        commitments, from investors that meet criteria 
                        established by the Administrator, to contribute 
                        capital to the licensee; provided that such 
                        unfunded commitments may be counted as private 
                        capital for purposes of approval by the 
                        Administrator of any request for leverage, but 
                        leverage shall not be funded based on such 
                        commitments; and</DELETED>
                <DELETED>    ``(B) does not include any--</DELETED>
                        <DELETED>    ``(i) funds borrowed by a licensee 
                        from any source;</DELETED>
                        <DELETED>    ``(ii) funds obtained through the 
                        issuance of leverage; or</DELETED>
                        <DELETED>    ``(iii) funds obtained directly or 
                        indirectly from any Federal, State, or local 
                        government, or any government agency or 
                        instrumentality, except for--</DELETED>
                                <DELETED>    ``(I) funds invested by an 
                                employee welfare benefit plan or 
                                pension plan; and</DELETED>
                                <DELETED>    ``(II) any qualified 
                                nonprivate funds (if the investors of 
                                the qualified nonprivate funds do not 
                                control, directly or indirectly, the 
                                management, board of directors, general 
                                partners, or members of the 
                                licensee);''.</DELETED>
<DELETED>    (c) New Definitions.--Section 103 of the Small Business 
Investment Act of 1958 (15 U.S.C. 662) is amended by striking paragraph 
(10) and inserting the following:</DELETED>
        <DELETED>    ``(10) the term `leverage' includes--</DELETED>
                <DELETED>    ``(A) debentures purchased or guaranteed 
                by the Administration;</DELETED>
                <DELETED>    ``(B) participating securities purchased 
                or guaranteed by the Administration; and</DELETED>
                <DELETED>    ``(C) preferred securities outstanding as 
                of October 1, 1995;</DELETED>
        <DELETED>    ``(11) the term `third party debt' means any 
        indebtedness for borrowed money, other than indebtedness owed 
        to the Administration;</DELETED>
        <DELETED>    ``(12) the term `smaller enterprise' means any 
        small business concern that, together with its affiliates--
        </DELETED>
                <DELETED>    ``(A) has--</DELETED>
                        <DELETED>    ``(i) a net financial worth of not 
                        more than $6,000,000, as of the date on which 
                        assistance is provided under this Act to that 
                        business concern; and</DELETED>
                        <DELETED>    ``(ii) an average net income for 
                        the 2-year period preceding the date on which 
                        assistance is provided under this Act to that 
                        business concern, of not more than $2,000,000, 
                        after Federal income taxes (excluding any 
                        carryover losses); or</DELETED>
                <DELETED>    ``(B) satisfies the standard industrial 
                classification size standards established by the 
                Administration for the industry in which the small 
                business concern is primarily engaged;</DELETED>
        <DELETED>    ``(13) the term `qualified nonprivate funds' means 
        any--</DELETED>
                <DELETED>    ``(A) funds directly or indirectly 
                invested in any applicant or licensee on or before 
                August 16, 1982, by any Federal agency, other than the 
                Administration, under a provision of law explicitly 
                mandating the inclusion of those funds in the 
                definition of the term `private capital';</DELETED>
                <DELETED>    ``(B) funds directly or indirectly 
                invested in any applicant or licensee by any Federal 
                agency under a provision of law enacted after September 
                4, 1992, explicitly mandating the inclusion of those 
                funds in the definition of the term `private capital'; 
                and</DELETED>
                <DELETED>    ``(C) funds invested in any applicant or 
                licensee by one or more State or local government 
                entities (including any guarantee extended by those 
                entities) in an aggregate amount that does not exceed--
                </DELETED>
                        <DELETED>    ``(i) 33 percent of the private 
                        capital of the applicant or licensee if such 
                        funds were invested before June 30, 1996; 
                        or</DELETED>
                        <DELETED>    ``(ii) 20 percent of the private 
                        capital of the applicant or licensee if such 
                        funds were invested on or after June 30, 
                        1996;</DELETED>
        <DELETED>    ``(14) the terms `employee welfare benefit plan' 
        and `pension plan' have the same meanings as in section 3 of 
        the Employee Retirement Income Security Act of 1974, and are 
        intended to include--</DELETED>
                <DELETED>    ``(A) public and private pension or 
                retirement plans subject to such Act; and</DELETED>
                <DELETED>    ``(B) similar plans not covered by such 
                Act that have been established and that are maintained 
                by the Federal Government or any State or political 
                subdivision, or any agency or instrumentality thereof, 
                for the benefit of employees;</DELETED>
        <DELETED>    ``(15) the term `member' means, with respect to a 
        licensee that is a limited liability company, a holder of an 
        ownership interest or a person otherwise admitted to membership 
        in the limited liability company; and</DELETED>
        <DELETED>    ``(16) the term `limited liability company' means 
        a business entity that is organized and operating in accordance 
        with a State limited liability company statute approved by the 
        Administration.''.</DELETED>

<DELETED> SEC. 3. ORGANIZATION OF SMALL BUSINESS INVESTMENT 
              COMPANIES.</DELETED>

<DELETED>    (a) Limited Liability Companies.--Section 301(a) of the 
Small Business Investment Act of 1958 (15 U.S.C. 681(a)) is amended in 
the first sentence, by striking ``body or'' and inserting ``body, a 
limited liability company, or''.</DELETED>
<DELETED>    (b) Issuance of License.--Section 301(c) of the Small 
Business Investment Act of 1958 (15 U.S.C. 681(c)) is amended to read 
as follows:</DELETED>
<DELETED>    ``(c) Issuance of License.--</DELETED>
        <DELETED>    ``(1) Submission of application.--Each applicant 
        for a license to operate as a small business investment company 
        under this Act shall submit to the Administrator an 
        application, in a form and including such documentation as may 
        be prescribed by the Administrator.</DELETED>
        <DELETED>    ``(2) Procedures.--</DELETED>
                <DELETED>    ``(A) Status.--Not later than 90 days 
                after the initial receipt by the Administrator of an 
                application under this subsection, the Administrator 
                shall provide the applicant with a written report 
                detailing the status of the application and any 
                requirements remaining for completion of the 
                application.</DELETED>
                <DELETED>    ``(B) Approval or disapproval.--Within a 
                reasonable time after receiving a completed application 
                submitted in accordance with this subsection and in 
                accordance with such requirements as the Administrator 
                may prescribe by regulation, the Administrator shall--
                </DELETED>
                        <DELETED>    ``(i) approve the application and 
                        issue a license for such operation to the 
                        applicant if the requirements of this section 
                        are satisfied; or</DELETED>
                        <DELETED>    ``(ii) disapprove the application 
                        and notify the applicant in writing of the 
                        disapproval.</DELETED>
        <DELETED>    ``(3) Matters considered.--In reviewing and 
        processing any application under this subsection, the 
        Administrator--</DELETED>
                <DELETED>    ``(A) shall determine whether--</DELETED>
                        <DELETED>    ``(i) the applicant meets the 
                        requirements of subsections (a) and (c) of 
                        section 302; and</DELETED>
                        <DELETED>    ``(ii) the management of the 
                        applicant is qualified and has the knowledge, 
                        experience, and capability necessary to comply 
                        with this Act;</DELETED>
                <DELETED>    ``(B) shall take into consideration--
                </DELETED>
                        <DELETED>    ``(i) the need for and 
                        availability of financing for small business 
                        concerns in the geographic area in which the 
                        applicant is to commence business;</DELETED>
                        <DELETED>    ``(ii) the general business 
                        reputation of the owners and management of the 
                        applicant; and</DELETED>
                        <DELETED>    ``(iii) the probability of 
                        successful operations of the applicant, 
                        including adequate profitability and financial 
                        soundness; and</DELETED>
                <DELETED>    ``(C) shall not take into consideration 
                any projected shortage or unavailability of 
                leverage.</DELETED>
        <DELETED>    ``(4) Exception.--</DELETED>
                <DELETED>    ``(A) In general.--Notwithstanding any 
                other provision of this Act, the Administrator may, in 
                the discretion of the Administrator and based on a 
                showing of special circumstances and good cause, 
                approve an application and issue a license under this 
                subsection with respect to any applicant that--
                </DELETED>
                        <DELETED>    ``(i) has private capital of not 
                        less than $3,000,000;</DELETED>
                        <DELETED>    ``(ii) would otherwise be issued a 
                        license under this subsection, except that the 
                        applicant does not satisfy the requirements of 
                        section 302(a); and</DELETED>
                        <DELETED>    ``(iii) has a viable business plan 
                        reasonably projecting profitable operations and 
                        a reasonable timetable for achieving a level of 
                        private capital that satisfies the requirements 
                        of section 302(a).</DELETED>
                <DELETED>    ``(B) Leverage.--An applicant licensed 
                pursuant to the exception provided in this paragraph 
                shall not be eligible to receive leverage as a licensee 
                until the applicant satisfies the requirements of 
                section 302(a).''.</DELETED>
<DELETED>    (c) Specialized Small Business Investment Companies.--
Section 301(d) of the Small Business Investment Act of 1958 (15 U.S.C. 
681(d)) is repealed.</DELETED>

<DELETED>SEC. 4. CAPITAL REQUIREMENTS.</DELETED>

<DELETED>    (a) Increased Minimum Capital Requirements.--Section 
302(a) of the Small Business Investment Act of 1958 (15 U.S.C. 682(a)) 
is amended by striking ``(a)'' and all that follows through ``The 
Administration shall also determine the ability of the company,'' and 
inserting the following:</DELETED>
<DELETED>    ``(a) Amount.--</DELETED>
        <DELETED>    ``(1) In general.--Except as provided in paragraph 
        (2), the private capital of each licensee shall be not less 
        than--</DELETED>
                <DELETED>    ``(A) $5,000,000; or</DELETED>
                <DELETED>    ``(B) $10,000,000, with respect to each 
                licensee authorized or seeking authority to issue 
                participating securities to be purchased or guaranteed 
                by the Administration under this Act.</DELETED>
        <DELETED>    ``(2) Exception.--The Administrator may, in the 
        discretion of the Administrator and based on a showing of 
        special circumstances and good cause, permit the private 
        capital of a licensee authorized or seeking authorization to 
        issue participating securities to be purchased or guaranteed by 
        the Administration to be less than $10,000,000, but not less 
        than $5,000,000, if the Administrator determines that such 
        action would not create or otherwise contribute to an 
        unreasonable risk of default or loss to the Federal 
        Government.</DELETED>
        <DELETED>    ``(3) Adequacy.--In addition to the requirements 
        of paragraph (1), the Administrator shall--</DELETED>
                <DELETED>    ``(A) determine whether the private 
                capital of each licensee is adequate to assure a 
                reasonable prospect that the licensee will be operated 
                soundly and profitably, and managed actively and 
                prudently in accordance with its articles; 
                and</DELETED>
                <DELETED>    ``(B) determine that the licensee will be 
                able''.</DELETED>
<DELETED>    (b) Exemption for Certain Licensees.--Section 302(a) of 
the Small Business Investment Act of 1958 (15 U.S.C. 682(a)) is amended 
by adding at the end the following new paragraph:</DELETED>
        <DELETED>    ``(4) Exemption from capital requirements.--
        </DELETED>
                <DELETED>    ``(A) Authority to exempt.--The 
                Administrator may, in the discretion of the 
                Administrator, exempt from the capital requirements in 
                paragraph (1) any licensee licensed under subsection 
                (c) or (d) of section 301 before the date of enactment 
                of the Small Business Investment Company Improvement 
                Act of 1996, if--</DELETED>
                        <DELETED>    ``(i) the private capital of the 
                        licensee is not less than $2,500,000;</DELETED>
                        <DELETED>    ``(ii) the licensee certifies in 
                        writing that not less than 50 percent of the 
                        aggregate dollar amount of its financings after 
                        the date of enactment of the Small Business 
                        Investment Company Improvement Act of 1996 will 
                        be provided to smaller enterprises; 
                        and</DELETED>
                        <DELETED>    ``(iii) the Administrator 
                        determines that the licensee--</DELETED>
                                <DELETED>    ``(I) has a record of 
                                profitable operations; and</DELETED>
                                <DELETED>    ``(II) has not committed 
                                any serious or continuing violation of 
                                any applicable provision of Federal or 
                                State law or regulation.</DELETED>
                <DELETED>    ``(B) Reduction of private capital 
                requirement.--If the Administrator determines that such 
                action would not create or otherwise contribute to an 
                unreasonable risk of default or loss to the United 
                States Government, the Administrator, in the discretion 
                of the Administrator and based on a showing of special 
                circumstances and good cause, may reduce the private 
                capital requirement under subparagraph (A)(i) with 
                respect to any licensee.''.</DELETED>
<DELETED>    (c) Diversification of Ownership.--Section 302(c) of the 
Small Business Investment Act of 1958 (15 U.S.C. 682(c)) is amended to 
read as follows:</DELETED>
<DELETED>    ``(c) Diversification of Ownership.--The Administrator 
shall ensure that the management of each licensee licensed after the 
date of enactment of the Small Business Investment Company Improvement 
Act of 1996 is sufficiently diversified from and unaffiliated with the 
ownership of the licensee in a manner that ensures independence and 
objectivity in the financial management and oversight of the 
investments and operations of the licensee.''.</DELETED>

<DELETED>SEC. 5. BORROWING.</DELETED>

<DELETED>    (a) Debentures.--Section 303(b) of the Small Business 
Investment Act of 1958 (15 U.S.C. 683(b)) is amended in the first 
sentence, by striking ``(but only'' and all that follows through 
``terms)''.</DELETED>
<DELETED>    (b) Third Party Debt.--Section 303(c) of the Small 
Business Investment Act of 1958 (15 U.S.C. 683(c)) is amended to read 
as follows:</DELETED>
<DELETED>    ``(c) Third Party Debt.--The Administrator--</DELETED>
        <DELETED>    ``(1) shall not permit a licensee having 
        outstanding leverage to incur third party debt that would 
        create or contribute to an unreasonable risk of default or loss 
        to the Federal Government; and</DELETED>
        <DELETED>    ``(2) shall permit such licensees to incur third 
        party debt only on such terms and subject to such conditions as 
        may be established by the Administrator, by regulation or 
        otherwise.''.</DELETED>
<DELETED>    (c) Requirement To Finance Smaller Enterprises.--Section 
303(d) of the Small Business Investment Act of 1958 (15 U.S.C. 683(d)) 
is amended to read as follows:</DELETED>
<DELETED>    ``(d) Requirement To Finance Smaller Enterprises.--The 
Administrator shall require each licensee, as a condition of approval 
of an application for leverage, to certify in writing that not less 
than 20 percent of the aggregate dollar amount of the financings of the 
licensee will be provided to smaller enterprises.''.</DELETED>
<DELETED>    (d) Capital Impairment Requirements.--Section 303(e) of 
the Small Business Investment Act of 1958 (15 U.S.C. 683(e)) is amended 
to read as follows:</DELETED>
<DELETED>    ``(e) Capital Impairment.--Before approving any 
application for leverage submitted by a licensee under this Act, the 
Administrator--</DELETED>
        <DELETED>    ``(1) shall determine that the private capital of 
        the licensee meets the requirements of section 302(a); 
        and</DELETED>
        <DELETED>    ``(2) shall determine, taking into account the 
        nature of the assets of the licensee, the amount and terms of 
        any third party debt owed by such licensee, and any other 
        factors determined to be relevant by the Administrator, that 
        the private capital of the licensee has not been impaired to 
        such an extent that the issuance of additional leverage would 
        create or otherwise contribute to an unreasonable risk of 
        default or loss to the Federal Government.''.</DELETED>
<DELETED>    (e) Equity Investment Requirement.--Section 303(g)(4) of 
the Small Business Investment Act of 1958 (15 U.S.C. 683(g)(4)) is 
amended by striking ``and maintain''.</DELETED>
<DELETED>    (f) Fees.--Section 303 of the Small Business Investment 
Act of 1958 (15 U.S.C. 683) is amended--</DELETED>
        <DELETED>    (1) in subsection (b), in the fifth sentence, by 
        striking ``1 per centum,'' and all that follows before the 
        period at the end of the sentence and inserting the following: 
        ``1 percent, plus an additional charge of .50 percent per annum 
        which shall be paid to and retained by the 
        Administration'';</DELETED>
        <DELETED>    (2) in subsection (g)(2), by striking ``1 per 
        centum,'' and all that follows before the period at the end of 
        the paragraph and inserting the following: ``1 percent, plus an 
        additional charge of .50 percent per annum which shall be paid 
        to and retained by the Administration''; and</DELETED>
        <DELETED>    (3) by adding at the end the following new 
        subsections:</DELETED>
<DELETED>    ``(i) Leverage Fee.--With respect to leverage granted by 
the Administration to a licensee, the Administration shall collect from 
the licensee a nonrefundable fee in an amount equal to 3 percent of the 
face amount of leverage granted to the licensee, payable upon the 
earlier of the date of entry into any commitment for such leverage or 
the date on which the leverage is drawn by the licensee.</DELETED>
<DELETED>    ``(j) Calculation of Subsidy Rate.--All fees, interest, 
and profits received and retained by the Administration under this 
section shall be included in the calculations made by the Director of 
the Office of Management and Budget to offset the cost (as that term is 
defined in section 502 of the Federal Credit Reform Act of 1990) to the 
Administration of purchasing and guaranteeing debentures and 
participating securities under this Act.''.</DELETED>

<DELETED>SEC. 6. LIABILITY OF THE UNITED STATES.</DELETED>

<DELETED>    Section 308(e) of the Small Business Investment Act of 
1958 (15 U.S.C. 687(e)) is amended by striking ``Nothing'' and 
inserting ``Except as expressly provided otherwise in this Act, 
nothing''.</DELETED>

<DELETED>SEC. 7. EXAMINATIONS; VALUATIONS.</DELETED>

<DELETED>    (a) Examinations.--Section 310(b) of the Small Business 
Investment Act of 1958 (15 U.S.C. 687b(b)) is amended in the first 
sentence by inserting ``which may be conducted with the assistance of a 
private sector entity that has both the qualifications to conduct and 
expertise in conducting such examinations,'' after ``Investment 
Division of the Administration,''.</DELETED>
<DELETED>    (b) Valuations.--Section 310(d) of the Small Business 
Investment Act of 1958 (15 U.S.C. 687b(d)) is amended to read as 
follows:</DELETED>
<DELETED>    ``(d) Valuations.--</DELETED>
        <DELETED>    ``(1) Frequency of valuations.--</DELETED>
                <DELETED>    ``(A) In general.--Each licensee shall 
                submit to the Administrator a written valuation of the 
                loans and investments of the licensee not less often 
                than semiannually or otherwise upon the request of the 
                Administrator, except that any licensee with no 
                leverage outstanding shall submit such valuations 
                annually, unless the Administrator determines 
                otherwise.</DELETED>
                <DELETED>    ``(B) Material adverse changes.--Not later 
                than 30 days after the end of a fiscal quarter of a 
                licensee during which a material adverse change in the 
                aggregate valuation of the loans and investments or 
                operations of the licensee occurs, the licensee shall 
                notify the Administrator in writing of the nature and 
                extent of that change.</DELETED>
                <DELETED>    ``(C) Independent certification.--
                </DELETED>
                        <DELETED>    ``(i) In general.--Not less than 
                        once during each fiscal year, each licensee 
                        shall submit to the Administrator the financial 
                        statements of the licensee, audited by an 
                        independent certified public accountant 
                        approved by the Administrator.</DELETED>
                        <DELETED>    ``(ii) Audit requirements.--Each 
                        audit conducted under clause (i) shall 
                        include--</DELETED>
                                <DELETED>    ``(I) a review of the 
                                procedures and documentation used by 
                                the licensee in preparing the 
                                valuations required by this section; 
                                and</DELETED>
                                <DELETED>    ``(II) a statement by the 
                                independent certified public accountant 
                                that such valuations were prepared in 
                                conformity with the valuation criteria 
                                applicable to the licensee established 
                                in accordance with paragraph 
                                (2).</DELETED>
        <DELETED>    ``(2) Valuation criteria.--Each valuation 
        submitted under this subsection shall be prepared by the 
        licensee in accordance with valuation criteria, which shall--
        </DELETED>
                <DELETED>    ``(A) be established or approved by the 
                Administrator; and</DELETED>
                <DELETED>    ``(B) include appropriate safeguards to 
                ensure that the noncash assets of a licensee are not 
                overvalued.''.</DELETED>

<DELETED>SEC. 8. TRUSTEE OR RECEIVERSHIP OVER LICENSEES.</DELETED>

<DELETED>    (a) In General.--Section 311 of the Small Business 
Investment Act of 1958 (15 U.S.C. 687c) is amended by adding at the end 
the following new subsection:</DELETED>
<DELETED>    ``(d) Appointment of Principal Receivers and Agents.--
</DELETED>
        <DELETED>    ``(1) In general.--Upon appointment as a receiver, 
        as described in subsection (c), the Administrator may appoint 
        principal receivers and receiver's agents.</DELETED>
        <DELETED>    ``(2) Compensation.--A receiver's agent appointed 
        under paragraph (1) may be paid--</DELETED>
                <DELETED>    ``(A) at any time from salaries and 
                expense amounts appropriated for the Administration, 
                and the Administration may be reimbursed for such 
                amounts from amounts recovered from the liquidation of 
                any assets of the licensee at the conclusion of the 
                receivership; or</DELETED>
                <DELETED>    ``(B) from amounts recovered from the 
                liquidation of any assets of the licensee, but only at 
                the conclusion of the receivership.''.</DELETED>
<DELETED>    (b) Contracts With Private Sector Entities.--</DELETED>
        <DELETED>    (1) In general.--Not later than June 30, 1997, the 
        Small Business Administration shall enter into one or more 
        contracts or arrangements with private sector entities to 
        provide for the orderly liquidation of all licensee assets in 
        liquidation, including assets of licensees in receivership or 
        in trust with respect to which the court has appointed the 
        Administration as receiver or trustee under section 311 of the 
        Small Business Investment Act of 1958.</DELETED>
        <DELETED>    (2) Definition.--For purposes of this subsection, 
        the term ``licensee'' has the same meaning as in section 103 of 
        the Small Business Investment Act of 1958.</DELETED>

<DELETED>SEC. 9. BOOK ENTRY REGISTRATION.</DELETED>

<DELETED>    Subsection 321(f) of the Small Business Investment Act of 
1958 (15 U.S.C. 687l) is amended by adding at the end the following new 
paragraph:</DELETED>
<DELETED>    ``(5) Nothing in this subsection shall prohibit the 
utilization of a book entry or other electronic form of registration 
for trust certificates.''.</DELETED>

<DELETED> SEC. 10. TECHNICAL AND CONFORMING AMENDMENTS.</DELETED>

<DELETED>    The Small Business Investment Act of 1958 (15 U.S.C. 661 
et seq.) is amended--</DELETED>
        <DELETED>    (1) in section 303--</DELETED>
                <DELETED>    (A) in subsection (a), by striking 
                ``debenture bonds,'' and inserting 
                ``securities,'';</DELETED>
                <DELETED>    (B) by striking subsection (f) and 
                inserting the following:</DELETED>
<DELETED>    ``(f) Redemption or Repurchase of Preferred Stock.--
Notwithstanding any other provision of law--</DELETED>
        <DELETED>    ``(1) the Administrator may allow the issuer of 
        any preferred stock sold to the Administration before November 
        1, 1989 to redeem or repurchase such stock, upon the payment to 
        the Administration of an amount less than the par value of such 
        stock, for a repurchase price determined by the Administrator 
        after consideration of all relevant factors, including--
        </DELETED>
                <DELETED>    ``(A) the market value of the 
                stock;</DELETED>
                <DELETED>    ``(B) the value of benefits provided and 
                anticipated to accrue to the issuer;</DELETED>
                <DELETED>    ``(C) the amount of dividends paid, 
                accrued, and anticipated; and</DELETED>
                <DELETED>    ``(D) the Administrator's estimate of any 
                anticipated redemption; and</DELETED>
        <DELETED>    ``(2) any moneys received by the Administration 
        from the repurchase of preferred stock shall be available 
        solely to provide debenture leverage to licensees having 50 
        percent or more in aggregate dollar amount of their financings 
        invested in smaller enterprises.''; and</DELETED>
                <DELETED>    (C) in subsection (g)(8)--</DELETED>
                        <DELETED>    (i) by striking ``partners or 
                        shareholders'' and inserting ``partners, 
                        shareholders, or members'';</DELETED>
                        <DELETED>    (ii) by striking ``partner's or 
                        shareholder's'' and inserting ``partner's, 
                        shareholder's, or member's''; and</DELETED>
                        <DELETED>    (iii) by striking ``partner or 
                        shareholder'' and inserting ``partner, 
                        shareholder, or member'';</DELETED>
        <DELETED>    (2) in section 308(h), by striking ``subsection 
        (c) or (d) of section 301'' each place that term appears and 
        inserting ``section 301'';</DELETED>
        <DELETED>    (3) in section 310(c)(4), by striking ``not less 
        than four years in the case of section 301(d) licensees and in 
        all other cases,'';</DELETED>
        <DELETED>    (4) in section 312--</DELETED>
                <DELETED>    (A) by striking ``shareholders or 
                partners'' and inserting ``shareholders, partners, or 
                members''; and</DELETED>
                <DELETED>    (B) by striking ``shareholder, or 
                partner'' each place that term appears and inserting 
                ``shareholder, partner, or member'';</DELETED>
        <DELETED>    (5) by striking sections 317 and 318, and 
        redesignating sections 319 through 322 as sections 317 through 
        320, respectively;</DELETED>
        <DELETED>    (6) in section 319, as redesignated--</DELETED>
                <DELETED>    (A) in subsection (a), by striking ``, 
                including companies operating under the authority of 
                section 301(d),''; and</DELETED>
                <DELETED>    (B) in subsection (f)(2), by inserting 
                ``or investments in obligations of the United States'' 
                after ``accounts'';</DELETED>
        <DELETED>    (7) in section 320, as redesignated, by striking 
        ``section 321'' and inserting ``section 319''; and</DELETED>
        <DELETED>    (8) in section 509--</DELETED>
                <DELETED>    (A) in subsection (a)(1), by striking the 
                second sentence; and</DELETED>
                <DELETED>    (B) in subsection (e)(1)(B), by striking 
                ``subsection (c) or (d) of section 301'' and inserting 
                ``section 301''.</DELETED>

<DELETED>SEC. 11. AUTHORIZATION OF APPROPRIATIONS.</DELETED>

<DELETED>    Section 20(p)(3) of the Small Business Act (15 U.S.C. 631 
note) is amended by striking subparagraph (B) and inserting the 
following:</DELETED>
                <DELETED>    ``(B) $300,000,000 in guarantees of 
                debentures; and''.</DELETED>

<DELETED>SEC. 12. EFFECTIVE DATE.</DELETED>

<DELETED>    This Act and the amendments made by this Act shall become 
effective on the date of enactment of this Act.</DELETED>

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Small Business Investment Company 
Improvement Act of 1996''.

 SEC. 2. DEFINITIONS.

    (a) Small Business Concern.--Section 103(5) of the Small Business 
Investment Act of 1958 (15 U.S.C. 662(5)) is amended by inserting 
before the semicolon the following: ``, except that, for purposes of 
this Act, an investment by a venture capital firm, investment company 
(including a small business investment company) employee welfare 
benefit plan or pension plan, or trust, foundation, or endowment that 
is exempt from Federal income taxation--
            ``(A) shall not cause a business concern to be deemed not 
        independently owned and operated;
            ``(B) shall be disregarded in determining whether a 
        business concern satisfies size standards established pursuant 
        to section 3(a)(2) of the Small Business Act; and
            ``(C) shall be disregarded in determining whether a small 
        business concern is a smaller enterprise''.
    (b) Private Capital.--Section 103(9) of the Small Business 
Investment Act of 1958 (15 U.S.C. 662(9)) is amended to read as 
follows:
            ``(9) the term `private capital'--
                    ``(A) means the sum of--
                            ``(i) the paid-in capital and paid-in 
                        surplus of a corporate licensee, the 
                        contributed capital of the partners of a 
                        partnership licensee, or the equity investment 
                        of the members of a limited liability company 
                        licensee; and
                            ``(ii) unfunded binding commitments, from 
                        investors that meet criteria established by the 
                        Administrator, to contribute capital to the 
                        licensee: Provided, That such unfunded 
                        commitments may be counted as private capital 
                        for purposes of approval by the Administrator 
                        of any request for leverage, but leverage shall 
                        not be funded based on such commitments; and
                    ``(B) does not include any--
                            ``(i) funds borrowed by a licensee from any 
                        source;
                            ``(ii) funds obtained through the issuance 
                        of leverage; or
                            ``(iii) funds obtained directly or 
                        indirectly from any Federal, State, or local 
                        government, or any government agency or 
                        instrumentality, except for--
                                    ``(I) funds invested by an employee 
                                welfare benefit plan or pension plan; 
                                and
                                    ``(II) any qualified nonprivate 
                                funds (if the investors of the 
                                qualified nonprivate funds do not 
                                control, directly or indirectly, the 
                                management, board of directors, general 
                                partners, or members of the 
                                licensee);''.
    (c) New Definitions.--Section 103 of the Small Business Investment 
Act of 1958 (15 U.S.C. 662) is amended by striking paragraph (10) and 
inserting the following:
            ``(10) the term `leverage' includes--
                    ``(A) debentures purchased or guaranteed by the 
                Administration;
                    ``(B) participating securities purchased or 
                guaranteed by the Administration; and
                    ``(C) preferred securities outstanding as of 
                October 1, 1995;
            ``(11) the term `third party debt' means any indebtedness 
        for borrowed money, other than indebtedness owed to the 
        Administration;
            ``(12) the term `smaller enterprise' means any small 
        business concern that, together with its affiliates--
                    ``(A) has--
                            ``(i) a net financial worth of not more 
                        than $6,000,000, as of the date on which 
                        assistance is provided under this Act to that 
                        business concern; and
                            ``(ii) an average net income for the 2-year 
                        period preceding the date on which assistance 
                        is provided under this Act to that business 
                        concern, of not more than $2,000,000, after 
                        Federal income taxes (excluding any carryover 
                        losses); or
                    ``(B) satisfies the standard industrial 
                classification size standards established by the 
                Administration for the industry in which the small 
                business concern is primarily engaged;
            ``(13) the term `qualified nonprivate funds' means any--
                    ``(A) funds directly or indirectly invested in any 
                applicant or licensee on or before August 16, 1982, by 
                any Federal agency, other than the Administration, 
                under a provision of law explicitly mandating the 
                inclusion of those funds in the definition of the term 
                `private capital';
                    ``(B) funds directly or indirectly invested in any 
                applicant or licensee by any Federal agency under a 
                provision of law enacted after September 4, 1992, 
                explicitly mandating the inclusion of those funds in 
                the definition of the term `private capital'; and
                    ``(C) funds invested in any applicant or licensee 
                by one or more State or local government entities 
                (including any guarantee extended by those entities) in 
                an aggregate amount that does not exceed--
                            ``(i) 33 percent of the private capital of 
                        the applicant or licensee, if such funds were 
                        committed for investment before the date 
of enactment of the Small Business Investment Company Improvement Act 
of 1996; or
                            ``(ii) 20 percent of the private capital of 
                        the applicant or licensee, if such funds were 
                        committed for investment on or after the date 
                        of enactment of the Small Business Investment 
                        Company Improvement Act of 1996;
            ``(14) the terms `employee welfare benefit plan' and 
        `pension plan' have the same meanings as in section 3 of the 
        Employee Retirement Income Security Act of 1974, and are 
        intended to include--
                    ``(A) public and private pension or retirement 
                plans subject to such Act; and
                    ``(B) similar plans not covered by such Act that 
                have been established and that are maintained by the 
                Federal Government or any State or political 
                subdivision, or any agency or instrumentality thereof, 
                for the benefit of employees;
            ``(15) the term `member' means, with respect to a licensee 
        that is a limited liability company, a holder of an ownership 
        interest or a person otherwise admitted to membership in the 
        limited liability company; and
            ``(16) the term `limited liability company' means a 
        business entity that is organized and operating in accordance 
        with a State limited liability company statute approved by the 
        Administration.''.

 SEC. 3. ORGANIZATION OF SMALL BUSINESS INVESTMENT COMPANIES.

    (a) Limited Liability Companies.--Section 301(a) of the Small 
Business Investment Act of 1958 (15 U.S.C. 681(a)) is amended in the 
first sentence, by striking ``body or'' and inserting ``body, a limited 
liability company, or''.
    (b) Issuance of License.--Section 301(c) of the Small Business 
Investment Act of 1958 (15 U.S.C. 681(c)) is amended to read as 
follows:
    ``(c) Issuance of License.--
            ``(1) Submission of application.--Each applicant for a 
        license to operate as a small business investment company under 
        this Act shall submit to the Administrator an application, in a 
        form and including such documentation as may be prescribed by 
        the Administrator.
            ``(2) Procedures.--
                    ``(A) Status.--Not later than 90 days after the 
                initial receipt by the Administrator of an application 
                under this subsection, the Administrator shall provide 
                the applicant with a written report detailing the 
                status of the application and any requirements 
                remaining for completion of the application.
                    ``(B) Approval or disapproval.--Within a reasonable 
                time after receiving a completed application submitted 
                in accordance with this subsection and in accordance 
                with such requirements as the Administrator may 
                prescribe by regulation, the Administrator shall--
                            ``(i) approve the application and issue a 
                        license for such operation to the applicant if 
                        the requirements of this section are satisfied; 
                        or
                            ``(ii) disapprove the application and 
                        notify the applicant in writing of the 
                        disapproval.
            ``(3) Matters considered.--In reviewing and processing any 
        application under this subsection, the Administrator--
                    ``(A) shall determine whether--
                            ``(i) the applicant meets the requirements 
                        of subsections (a) and (c) of section 302; and
                            ``(ii) the management of the applicant is 
                        qualified and has the knowledge, experience, 
                        and capability necessary to comply with this 
                        Act;
                    ``(B) shall take into consideration--
                            ``(i) the need for and availability of 
                        financing for small business concerns in the 
                        geographic area in which the applicant is to 
                        commence business;
                            ``(ii) the general business reputation of 
                        the owners and management of the applicant; and
                            ``(iii) the probability of successful 
                        operations of the applicant, including adequate 
                        profitability and financial soundness; and
                    ``(C) shall not take into consideration any 
                projected shortage or unavailability of leverage.
            ``(4) Exception.--
                    ``(A) In general.--Notwithstanding any other 
                provision of this Act, the Administrator may, in the 
                discretion of the Administrator and based on a showing 
                of special circumstances and good cause, approve an 
                application and issue a license under this subsection 
                with respect to any applicant that--
                            ``(i) has private capital of not less than 
                        $3,000,000;
                            ``(ii) would otherwise be issued a license 
                        under this subsection, except that the 
                        applicant does not satisfy the requirements of 
                        section 302(a); and
                            ``(iii) has a viable business plan 
                        reasonably projecting profitable operations and 
                        a reasonable timetable for achieving a level of 
                        private capital that satisfies the requirements 
                        of section 302(a).
                    ``(B) Leverage.--An applicant licensed pursuant to 
                the exception provided in this paragraph shall not be 
                eligible to receive leverage as a licensee until the 
                applicant satisfies the requirements of section 
                302(a).''.
    (c) Specialized Small Business Investment Companies.--Section 
301(d) of the Small Business Investment Act of 1958 (15 U.S.C. 681(d)) 
is repealed.

SEC. 4. CAPITAL REQUIREMENTS.

    (a) Increased Minimum Capital Requirements.--Section 302(a) of the 
Small Business Investment Act of 1958 (15 U.S.C. 682(a)) is amended by 
striking ``(a)'' and all that follows through ``The Administration 
shall also determine the ability of the company,'' and inserting the 
following:
    ``(a) Amount.--
            ``(1) In general.--Except as provided in paragraph (2), the 
        private capital of each licensee shall be not less than--
                    ``(A) $5,000,000; or
                    ``(B) $10,000,000, with respect to each licensee 
                authorized or seeking authority to issue participating 
                securities to be purchased or guaranteed by the 
                Administration under this Act.
            ``(2) Exception.--The Administrator may, in the discretion 
        of the Administrator and based on a showing of special 
        circumstances and good cause, permit the private capital of a 
        licensee authorized or seeking authorization to issue 
        participating securities to be purchased or guaranteed by the 
        Administration to be less than $10,000,000, but not less than 
        $5,000,000, if the Administrator determines that such action 
        would not create or otherwise contribute to an unreasonable 
        risk of default or loss to the Federal Government.
            ``(3) Adequacy.--In addition to the requirements of 
        paragraph (1), the Administrator shall--
                    ``(A) determine whether the private capital of each 
                licensee is adequate to assure a reasonable prospect 
                that the licensee will be operated soundly and 
                profitably, and managed actively and prudently in 
                accordance with its articles; and
                    ``(B) determine that the licensee will be able''.
    (b) Exemption for Certain Licensees.--Section 302(a) of the Small 
Business Investment Act of 1958 (15 U.S.C. 682(a)) is amended by adding 
at the end the following new paragraph:
            ``(4) Exemption from capital requirements.--The 
        Administrator may, in the discretion of the Administrator, 
        exempt from the capital requirements in paragraph (1) any 
        licensee licensed under subsection (c) or (d) of section 301 
        before the date of enactment of the Small Business Investment 
        Company Improvement Act of 1996, if--
                    ``(A) the licensee certifies in writing that not 
                less than 50 percent of the aggregate dollar amount of 
                its financings after the date of enactment of the Small 
                Business Investment Company Improvement Act of 1996 
                will be provided to smaller enterprises; and
                    ``(B) the Administrator determines that--
                            ``(i) the licensee has a record of 
                        profitable operations;
                            ``(ii) the licensee has not committed any 
                        serious or continuing violation of any 
                        applicable provision of Federal or State law or 
                        regulation; and
                            ``(iii) such action would not create or 
                        otherwise contribute to an unreasonable risk of 
                        default or loss to the United States 
                        Government.''.
    (c) Diversification of Ownership.--Section 302(c) of the Small 
Business Investment Act of 1958 (15 U.S.C. 682(c)) is amended to read 
as follows:
    ``(c) Diversification of Ownership.--The Administrator shall ensure 
that the management of each licensee licensed after the date of 
enactment of the Small Business Investment Company Improvement Act of 
1996 is sufficiently diversified from and unaffiliated with the 
ownership of the licensee in a manner that ensures independence and 
objectivity in the financial management and oversight of the 
investments and operations of the licensee.''.

SEC. 5. BORROWING.

    (a) Debentures.--Section 303(b) of the Small Business Investment 
Act of 1958 (15 U.S.C. 683(b)) is amended in the first sentence, by 
striking ``(but only'' and all that follows through ``terms)''.
    (b) Third Party Debt.--Section 303(c) of the Small Business 
Investment Act of 1958 (15 U.S.C. 683(c)) is amended to read as 
follows:
    ``(c) Third Party Debt.--The Administrator--
            ``(1) shall not permit a licensee having outstanding 
        leverage to incur third party debt that would create or 
        contribute to an unreasonable risk of default or loss to the 
        Federal Government; and
            ``(2) shall permit such licensees to incur third party debt 
        only on such terms and subject to such conditions as may be 
        established by the Administrator, by regulation or 
        otherwise.''.
    (c) Requirement To Finance Smaller Enterprises.--Section 303(d) of 
the Small Business Investment Act of 1958 (15 U.S.C. 683(d)) is amended 
to read as follows:
    ``(d) Requirement To Finance Smaller Enterprises.--The 
Administrator shall require each licensee, as a condition of approval 
of an application for leverage, to certify in writing that not less 
than 20 percent of the aggregate dollar amount of the financings of the 
licensee will be provided to smaller enterprises.''.
    (d) Capital Impairment Requirements.--Section 303(e) of the Small 
Business Investment Act of 1958 (15 U.S.C. 683(e)) is amended to read 
as follows:
    ``(e) Capital Impairment.--Before approving any application for 
leverage submitted by a licensee under this Act, the Administrator--
            ``(1) shall determine that the private capital of the 
        licensee meets the requirements of section 302(a); and
            ``(2) shall determine, taking into account the nature of 
        the assets of the licensee, the amount and terms of any third 
        party debt owed by such licensee, and any other factors 
        determined to be relevant by the Administrator, that the 
        private capital of the licensee has not been impaired to such 
        an extent that the issuance of additional leverage would create 
        or otherwise contribute to an unreasonable risk of default or 
        loss to the Federal Government.''.
    (e) Equity Investment Requirement.--Section 303(g)(4) of the Small 
Business Investment Act of 1958 (15 U.S.C. 683(g)(4)) is amended by 
striking ``and maintain''.
    (f) Fees.--Section 303 of the Small Business Investment Act of 1958 
(15 U.S.C. 683) is amended--
            (1) in subsection (b), in the fifth sentence, by striking 
        ``1 per centum'', and all that follows before the period at the 
        end of the sentence and inserting the following: ``1 percent, 
        plus an additional charge of .50 percent per annum which shall 
        be paid to and retained by the Administration'';
            (2) in subsection (g)(2), by striking ``1 per centum,'' and 
        all that follows before the period at the end of the paragraph 
        and inserting the following: ``1 percent, plus an additional 
        charge of .50 percent per annum which shall be paid to and 
        retained by the Administration''; and
            (3) by adding at the end the following new subsections:
    ``(i) Leverage Fee.--With respect to leverage granted by the 
Administration to a licensee, the Administration shall collect from the 
licensee a nonrefundable fee in an amount equal to 3 percent of the 
face amount of leverage granted to the licensee, payable upon the 
earlier of the date of entry into any commitment for such leverage or 
the date on which the leverage is drawn by the licensee.
    ``(j) Calculation of Subsidy Rate.--All fees, interest, and profits 
received and retained by the Administration under this section shall be 
included in the calculations made by the Director of the Office of 
Management and Budget to offset the cost (as that term is defined in 
section 502 of the Federal Credit Reform Act of 1990) to the 
Administration of purchasing and guaranteeing debentures and 
participating securities under this Act.''.

SEC. 6. LIABILITY OF THE UNITED STATES.

    Section 308(e) of the Small Business Investment Act of 1958 (15 
U.S.C. 687(e)) is amended by striking ``Nothing'' and inserting 
``Except as expressly provided otherwise in this Act, nothing''.

SEC. 7. EXAMINATIONS; VALUATIONS.

    (a) Examinations.--Section 310(b) of the Small Business Investment 
Act of 1958 (15 U.S.C. 687b(b)) is amended in the first sentence by 
inserting ``which may be conducted with the assistance of a private 
sector entity that has both the qualifications to conduct and expertise 
in conducting such examinations,'' after ``Investment Division of the 
Administration,''.
    (b) Valuations.--Section 310(d) of the Small Business Investment 
Act of 1958 (15 U.S.C. 687b(d)) is amended to read as follows:
    ``(d) Valuations.--
            ``(1) Frequency of valuations.--
                    ``(A) In general.--Each licensee shall submit to 
                the Administrator a written valuation of the loans and 
                investments of the licensee not less often than 
                semiannually or otherwise upon the request of the 
                Administrator, except that any licensee with no 
                leverage outstanding shall submit such valuations 
                annually, unless the Administrator determines 
                otherwise.
                    ``(B) Material adverse changes.--Not later than 30 
                days after the end of a fiscal quarter of a licensee 
                during which a material adverse change in the aggregate 
                valuation of the loans and investments or operations of 
                the licensee occurs, the licensee shall notify the 
                Administrator in writing of the nature and extent of 
                that change.
                    ``(C) Independent certification.--
                            ``(i) In general.--Not less than once 
                        during each fiscal year, each licensee shall 
                        submit to the Administrator the financial 
                        statements of the licensee, audited by an 
                        independent certified public accountant 
                        approved by the Administrator.
                            ``(ii) Audit requirements.--Each audit 
                        conducted under clause (i) shall include--
                                    ``(I) a review of the procedures 
                                and documentation used by the licensee 
                                in preparing the valuations required by 
                                this section; and
                                    ``(II) a statement by the 
                                independent certified public accountant 
                                that such valuations were prepared in 
                                conformity with the valuation criteria 
                                applicable to the licensee established 
                                in accordance with paragraph (2).
            ``(2) Valuation criteria.--Each valuation submitted under 
        this subsection shall be prepared by the licensee in accordance 
        with valuation criteria, which shall--
                    ``(A) be established or approved by the 
                Administrator; and
                    ``(B) include appropriate safeguards to ensure that 
                the noncash assets of a licensee are not overvalued.''.

SEC. 8. TRUSTEE OR RECEIVERSHIP OVER LICENSEES.

    (a) Finding.--It is the finding of the Congress that increased 
recoveries on assets in liquidation under the Small Business Investment 
Act of 1958 are in the best interests of the Federal Government.
    (b) Definitions.--For purposes of this section--
            (1) the term ``Administrator'' means the Administrator of 
        the Small Business Administration;
            (2) the term ``Administration'' means the Small Business 
        Administration; and
            (3) the term ``licensee'' has the same meaning as in 
        section 103 of the Small Business Investment Act of 1958.
    (c) Liquidation Plan.--
            (1) In general.--Not later than October 15, 1996, the 
        Administrator shall submit to the Committees on Small Business 
        of the Senate and the House of Representatives a detailed plan 
        to expedite the orderly liquidation of all licensee assets in 
        liquidation, including assets of licensees in receivership or 
        in trust held by or under the control of the Administration or 
        its agents.
            (2) Contents.--The plan submitted under paragraph (1) shall 
        include a timetable for liquidating the liquidation portfolio 
        of small business investment company assets owned by the 
        Administration, and shall contain the Administrator's findings 
        and recommendations on various options providing for the fair 
        and expeditious liquidation of such assets within a reasonable 
        period of time, giving due consideration to the option of 
        entering into one or more contracts with private sector 
        entities having the capability to carry out the orderly 
        liquidation of similar assets.

SEC. 9. BOOK ENTRY REGISTRATION.

    Subsection 321(f) of the Small Business Investment Act of 1958 (15 
U.S.C. 687l) is amended by adding at the end the following new 
paragraph:
    ``(5) Nothing in this subsection shall prohibit the utilization of 
a book entry or other electronic form of registration for trust 
certificates.''.

 SEC. 10. TECHNICAL AND CONFORMING AMENDMENTS.

    (a) Small Business Investment Act of 1958.--The Small Business 
Investment Act of 1958 (15 U.S.C. 661 et seq.) is amended--
            (1) in section 303--
                    (A) in subsection (a), by striking ``debenture 
                bonds,'' and inserting ``securities,'';
                    (B) by striking subsection (f) and inserting the 
                following:
    ``(f) Redemption or Repurchase of Preferred Stock.--Notwithstanding 
any other provision of law--
            ``(1) the Administrator may allow the issuer of any 
        preferred stock sold to the Administration before November 1, 
        1989 to redeem or repurchase such stock, upon the payment to 
        the Administration of an amount less than the par value of such 
        stock, for a repurchase price determined by the Administrator 
        after consideration of all relevant factors, including--
                    ``(A) the market value of the stock;
                    ``(B) the value of benefits provided and 
                anticipated to accrue to the issuer;
                    ``(C) the amount of dividends paid, accrued, and 
                anticipated; and
                    ``(D) the Administrator's estimate of any 
                anticipated redemption; and
            ``(2) any moneys received by the Administration from the 
        repurchase of preferred stock shall be available solely to 
        provide debenture leverage to licensees having 50 percent or 
        more in aggregate dollar amount of their financings invested in 
        smaller enterprises.''; and
                    (C) in subsection (g)(8)--
                            (i) by striking ``partners or 
                        shareholders'' and inserting ``partners, 
                        shareholders, or members'';
                            (ii) by striking ``partner's or 
                        shareholder's'' and inserting ``partner's, 
                        shareholder's, or member's''; and
                            (iii) by striking ``partner or 
                        shareholder'' and inserting ``partner, 
                        shareholder, or member'';
            (2) in section 308(h), by striking ``subsection (c) or (d) 
        of section 301'' each place that term appears and inserting 
        ``section 301'';
            (3) in section 310(c)(4), by striking ``not less than four 
        years in the case of section 301(d) licensees and in all other 
        cases,'';
            (4) in section 312--
                    (A) by striking ``shareholders or partners'' and 
                inserting ``shareholders, partners, or members''; and
                    (B) by striking ``shareholder, or partner'' each 
                place that term appears and inserting ``shareholder, 
                partner, or member'';
            (5) by striking sections 317 and 318, and redesignating 
        sections 319 through 322 as sections 317 through 320, 
        respectively;
            (6) in section 319, as redesignated--
                    (A) in subsection (a), by striking ``, including 
                companies operating under the authority of section 
                301(d),''; and
                    (B) in subsection (f)(2), by inserting ``or 
                investments in obligations of the United States'' after 
                ``accounts'';
            (7) in section 320, as redesignated, by striking ``section 
        321'' and inserting ``section 319''; and
            (8) in section 509--
                    (A) in subsection (a)(1), by striking the second 
                sentence; and
                    (B) in subsection (e)(1)(B), by striking 
                ``subsection (c) or (d) of section 301'' and inserting 
                ``section 301''.
    (b) Amendment in Other Law.--Section 11(h) of the Federal Home Loan 
Bank Act (12 U.S.C. 1431(h)) is amended by striking ``301(d)'' and 
inserting ``301''.

SEC. 11. AMENDMENTS TO THE SMALL BUSINESS ACT.

    (a) Powers of the Administrator.--Section 5(b)(7) of the Small 
Business Act (15 U.S.C. 634(b)(7)) is amended by striking the colon and 
all that follows before the semicolon at the end of the paragraph and 
inserting the following: ``: Provided, That with respect to deferred 
participation loans, the Administrator may, in the discretion of and 
pursuant to regulations promulgated by the Administrator, authorize 
participating lending institutions to take actions relating to loan 
servicing on behalf of the Administrator, including determining 
eligibility and creditworthiness and loan monitoring, collection, and 
liquidation''.
    (b) Authorization of Appropriations.--Section 20(p)(3) of the Small 
Business Act (15 U.S.C. 631 note) is amended by striking subparagraph 
(B) and inserting the following:
                    ``(B) $300,000,000 in guarantees of debentures; 
                and''.

SEC. 12. EFFECTIVE DATE.

    This Act and the amendments made by this Act shall become effective 
on the date of enactment of this Act.
```