MicroCap Small Business Investing Act of 2023

Subjects: Commerce


<html><body><pre>[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[S. 1157 Introduced in Senate (IS)]

&lt;DOC&gt;






118th CONGRESS
  1st Session
                                S. 1157

To establish a MicroCap small business investment company designation, 
                        and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             March 30, 2023

    Mr. Hickenlooper (for himself, Mr. Risch, and Ms. Cortez Masto) 
introduced the following bill; which was read twice and referred to the 
            Committee on Small Business and Entrepreneurship

_______________________________________________________________________

                                 A BILL


 
To establish a MicroCap small business investment company designation, 
                        and for other purposes.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``MicroCap Small Business Investing 
Act of 2023''.

SEC. 2. MICROCAP SMALL BUSINESS INVESTMENT COMPANY DESIGNATION.

    (a) In General.--Title III of the Small Business Investment Act of 
1958 (15 U.S.C. 681 et seq.) is amended--
            (1) in section 301(c) (15 U.S.C. 681(c)), by adding at the 
        end the following:
            ``(5) Microcap small business investment company license.--
                    ``(A) In general.--Notwithstanding any other 
                provision of law, the Administrator may approve an 
                application and issue not more than 10 licenses 
                annually under this subsection with respect to any 
                applicant--
                            ``(i) that would otherwise be issued a 
                        license under this subsection, except that the 
                        management of the applicant does not satisfy 
                        the qualification requirements under paragraph 
                        (3)(A)(ii) to the extent that such requirements 
                        relate to investment experience and track 
                        record, including any such requirements further 
                        set forth in section 107.305 of title 13, Code 
                        of Federal Regulations, or any successor 
                        regulation;
                            ``(ii) for which the fund managers have--
                                    ``(I) a documented record of 
                                successful business experience;
                                    ``(II) a record of business 
                                management success; or
                                    ``(III) knowledge in the particular 
                                industry or business in which the 
                                investment strategy is being pursued; 
                                and
                            ``(iii) that, in addition to any other 
                        requirement applicable to the applicant under 
                        this title or the rules issued to carry out 
                        this title (including section 121.301(c)(2) of 
                        title 13, Code of Federal Regulations, or any 
                        successor regulation), will make not less than 
                        25 percent of its investments in--
                                    ``(I) low-income communities, as 
                                that term is defined in section 45D(e) 
                                of the Internal Revenue Code of 1986;
                                    ``(II) a community that has been 
                                designated as a qualified opportunity 
                                zone under section 1400Z-1 of the 
                                Internal Revenue Code of 1986;
                                    ``(III) businesses primarily 
                                engaged in research and development;
                                    ``(IV) manufacturers;
                                    ``(V) businesses primarily owned or 
                                controlled by individuals in 
                                underserved communities before 
                                receiving capital from the applicant; 
                                and
                                    ``(VI) rural areas, as that term is 
                                defined by the Bureau of the Census.
                    ``(B) Priority; streamlined process.--With respect 
                to an application for a license pursuant to this 
                paragraph, the Administrator shall--
                            ``(i) give priority to an applicant for 
                        such a license that is located in an 
                        underlicensed State; and
                            ``(ii) establish a streamlined process for 
                        applicants submitting such an application.
                    ``(C) Timing for issuance of license.--
                Notwithstanding paragraph (2), with respect to an 
                application for a license submitted to the 
                Administrator pursuant to this paragraph, the 
                Administrator shall--
                            ``(i) not later than 60 days after the date 
                        on which the application is submitted to the 
                        Administrator, process and provide complete 
                        feedback with respect to any pre-license 
                        application requirements applicable to the 
                        applicant;
                            ``(ii) not restrict the submission of any 
                        application materials; and
                            ``(iii) not later than 90 days after the 
                        date on which the application is submitted to 
                        the Administrator--
                                    ``(I) approve the application and 
                                issue a license for such operation to 
                                the applicant, if the requirements for 
                                the license are satisfied; or
                                    ``(II) based upon facts in the 
                                record--
                                            ``(aa) disapprove the 
                                        application; and
                                            ``(bb) provide the 
                                        applicant with--

                                                    ``(AA) a clear, 
                                                written explanation of 
                                                the reason for the 
                                                disapproval; and

                                                    ``(BB) a chance to 
                                                remedy any issues with 
                                                the application and 
                                                immediately reapply, 
                                                with technical 
                                                assistance provided as 
                                                needed and a new 
                                                determination made by 
                                                the Administrator not 
                                                later than 30 days 
                                                after the date on which 
                                                the applicant re-
                                                submits the 
                                                application.

                    ``(D) Leverage.--A company licensed pursuant to 
                this paragraph shall--
                            ``(i) not be eligible to receive leverage 
                        in an amount that is more than $25,000,000; and
                            ``(ii) access leverage in an amount that is 
                        not more than 100 percent of the private 
                        capital of the applicant.
                    ``(E) Investment committee.--
                            ``(i) In general.--Each company licensed 
                        pursuant to this paragraph shall have not fewer 
                        than 2 independent members on the investment 
                        committee of the company in a manner that 
                        complies with the following requirements:
                                    ``(I) The independent members of 
                                the investment committee are or have 
                                been licensed managers of small 
                                business investment companies within 
                                the preceding 10-year period.
                                    ``(II) No small business investment 
                                company described in subclause (I) may 
                                be adversely affected by the 
                                relationship of the independent members 
                                of the investment committee with the 
                                company licensed pursuant to this 
                                paragraph.
                                    ``(III) The independent members of 
                                the investment committee are required 
                                to approve each investment made by the 
                                company.
                                    ``(IV) The independent members of 
                                the investment committee shall not be 
                                paid a management fee, but may receive 
                                paid expenses and a portion of any 
                                carried interest.
                            ``(ii) Leverage limits.--Any leverage 
                        associated with a company licensed pursuant to 
                        this paragraph shall not be counted toward the 
                        leverage limits of the independent members of 
                        the investment committee of the company under 
                        this title.''; and
            (2) in section 303(d) (15 U.S.C. 683(d)), by inserting 
        ``(or, with respect to a company licensed under section 
        301(c)(5), 50 percent)'' after ``25 percent''.
    (b) SBA Requirements.--
            (1) Definitions.--In this subsection--
                    (A) the term ``Administrator'' means the 
                Administrator of the Small Business Administration; and
                    (B) the term ``covered company'' means an entity 
                that is licensed to operate as a small business 
                investment company pursuant to paragraph (5) of section 
                301(c) of the Small Business Investment Act of 1958 (15 
                U.S.C. 681(c)), as added by subsection (a).
            (2) Rules.--Not later than 90 days after the date of 
        enactment of this Act, the Administrator shall issue rules to 
        carry out this section and the amendments made by this section.
            (3) Annual report.--Not later than 1 year after the date of 
        enactment of this Act, and annually thereafter, the 
        Administrator shall publicly publish a report that details, for 
        the year covered by the report--
                    (A) the number of covered companies licensed by the 
                Administrator;
                    (B) the industries in which covered companies have 
                invested;
                    (C) the geographic locations of covered companies; 
                and
                    (D) the aggregate performance of covered companies.
                                 &lt;all&gt;
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