2023 Laws of Puerto Rico › TITLE SEVEN - Banking (§§ 1 — 3116) › PART VII - Other Financial Institutions (§§ 3001-3012 — 3116) › Chapter 142 - Capital Investment Funds Act of 1999 (§§ 3021 — 3047) › § 3021 - Definitions

For the purposes of this chapter, the following terms shall have the meaning stated below:
(a) Administrator of the fund. — Is the person in charge of investing the capital of a capital investment fund, administering the tax credits provided in this chapter, administering the resulting stock portfolio, keeping the books and registers, and filing the reports, returns or other documents required under this chapter and the regulations promulgated thereunder.
(b) Fiscal year. — Is the accounting year of the capital investment fund for the purposes of its financial statements.
(c) Technical assistance. — Shall mean the services provided to small businesses in which a fund invests, in areas such as accounting, marketing, legal counseling or management counseling, among others. The capital investment fund employees may provide technical assistance which would otherwise be provided by outside consultants. Only a proportional part of the salaries of the employees of the fund may be deemed as technical assistance expenses, depending on the time devoted by said employees in rendering such services. Any costs for evaluations incurred by the fund such as the study of new companies or proposals related to possible investments to be made by the fund, shall not be deemed as technical assistance expenses. Technical assistance shall be provided pursuant to the provisions of § 3033 of this title and with the intervention of the Government Development Bank for Puerto Rico which will work together with the Economic Development Bank to offer such technical assistance under collaborative agreements, as the case may be.
(d) Associate. — Shall mean any of the following:
(1)
(A) An officer, director, employee, agent or person in control of a fund.
(B) The Administrator of any fund.
(C) Any person who regularly renders professional services to a fund.
(2) Any person who holds or has control, or who has entered into an agreement to hold or control, directly or indirectly, at least ten percent (10%) of any kind of proprietary interest of a fund. Nevertheless, an investor in a fund shall not be deemed as an associate if said investor is an acceptable institutional investor whose investment in the fund, including commitments, represents less than thirty-three percent (33%) of the capital of the fund, and less than five percent (5%) of the capital of the investor.
(3) Any official, director, partner (who is not a general partner), manager, agent, or employee of an associate described in clauses (1) or (2) of this subsection.
(4) Any person who directly or indirectly controls or is controlled by, or is under the common control of a fund.
(5) A person who, directly or indirectly, controls or is controlled by, or is under common control with any person described in clauses (1) and (2) of this subsection.
(6) Any close relative of any person described in clauses (1), (2), (4) and (5) of this subsection.
(7) Any secondary relative of any person described in clauses (1), (2), (4) and (5) of this subsection.
(8) Any entity in which:
(A) Any person described in clauses (1)—(6) of this subsection who is an official or an associate, or
(B) any of the persons mentioned above, solely or collectively, controls or holds direct or indirect interest in participation of at least ten percent (10%) (excluding interest which said person(s) hold(s) indirectly through interests which said person(s) hold(s) in the fund).
(9) Any entity in which any person described in clause (7) of this subsection, solely or collectively holds a majority proprietary share (including beneficial interest) or otherwise has control. As used in this clause “collectively” shall mean, together with any person described in clauses (1)—(7) of this subsection.
(10) Any person who has any relationship as associate described in clauses (1)—(7) of this subsection at any time within six (6) months or before or after the date on which the fund invests in a specific project or business.
(11) A fund that has proprietary interests in another fund.
(12) For the purposes of this subsection, the term “common control” shall mean that two or more funds are under the control of a person or group whether through proprietorship, management, contract or otherwise. It is presumed that two or more funds are under common control if they are affiliated for having proprietors, officials, directors, or general partners in common; or if both funds are directed by the same investment advisor. For the effects of determining eligibility, this presumption may be defeated through evidence acceptable to the Government Development Bank for Puerto Rico.
(e) Bank. — Shall mean the Government Development Bank for Puerto Rico created by §§ 551 et seq. of this title, or any government entity authorized thereby. In the event it is another government entity, it shall be that one, and not the Government Development Bank, which shall be responsible for the activities listed in §§ 3022, 3024, 3032, 3033 and 3036 of this title.
(f) Internal base. — Shall mean, with regard to each proprietary interest in a fund, the sum of money received by the fund in the primary issue of said proprietary interest, adjusted with regard to the tax credits pursuant to § 3033 of this title, and reduced, but not to less than zero, by the amount of the distributions made by the fund with regard to said proprietary interest. The internal base of each proprietary interest in a fund shall be determined solely and exclusively by said fund, and shall not be affected by sales, exchanges, provisions or other transfers of said proprietary interest after the primary issue thereof.
(g) Capital of the fund. — Shall mean what is provided in § 3024 of this title.
(h) Venture capital. — Shall mean the source of financing for start-up companies which entail a high degree of risk, but which offer, in turn, an above-average yield potential.
(i) Restricted use capital. — Shall mean that portion of the capital in cash received by the fund from the sale of private proprietary interests, proprietary bank interests, and tax credits.
(j) Unrestricted use capital. — Shall mean that portion of the moneys received by the fund that are not derived from the sale of private proprietary interests, proprietary bank interests, or the sale of tax credits.
(k) Paid-in capital. — Shall mean the total amount of money received by a fund for proprietary interests therein.
(l) Commissioner. — Shall mean the Commissioner of Financial Institutions as provided in §§ 2001 et seq. of this title.
(m) Control. — Shall mean the direct or indirect authority to direct or execute the direction of the management and the policies of a fund or otherwise, whether through the transfer of voting stock contractually or otherwise, or for any other reason.
(n) Exempted distribution. — Shall mean any distribution made and designated as such by the fund through a written notice sent by mail to the investors or persons who have a proprietary interest in said fund, no later than sixty (60) days following the close of the fiscal year of the fund, and which arises from industrial development income distributions, tourist development income and agricultural development income received by the fund.
(o) Distribution of tourist development income. — Shall mean any dividend or distribution (including a distribution of assets) received by a fund, from an exempt business whose operations are covered by a tax exemption decree issued under §§ 6001 et seq. of Title 23, known as the “Tourist Development Act of 1993”, and which consists of “tourist development income”, as said term is defined in those sections.
(p) Distribution of industrial development income. — Shall mean any dividend or distribution (including a distribution of assets) received by a fund from a business whose operations are covered by a tax exemption decree issued under §§ 10038 et seq. of Title 13, known as the “Industrial Tax Incentives Act of Puerto Rico of 1987” and which consists of “industrial development income”, as said term is defined in [those sections].
(q) Distribution of agribusiness income. — Shall mean any dividend or distribution, (including a distribution of assets) received by a fund from an exempted business whose operations are covered by §§ 10401 et seq. of Title 13, known as the “Agricultural Tax Incentives Act”, which consists of income derived directly from the agribusiness.
(r) Primary issue. — Shall mean the distribution made on the date that a share, stock or other proprietary interest in a fund is first put on sale.
(s) Real estate enterprises. — Shall mean entities engaged in real estate brokerage, speculation in real estate, appraisals, contractors and construction companies.
(t) Close relative. — Shall mean:
(1) Present or former spouse;
(2) father, mother or guardian, brother or sister, son or daughter, or
(3) father or mother-in-law, brother or sister-in-law, son or daughter-in-law.
(u) Secondary relative. — Shall mean:
(1) Grandfather, grandmother, grandchild, or any other direct line ascendant or descendant that is not considered a close relative;
(2) uncle, aunt, niece, nephew, cousin, or
(3) spouse of a person described in clauses (1) or (2) of this subsection.
(v) Capital investment fund or fund. — Shall mean any trust, corporation or partnership created with the purpose of investing in high risk business ventures, without including partnerships or corporations under §§ 8630—8657 and §§ 8680—8694 of Title 13. For an entity to be deemed a capital investment fund, it shall meet all the purposes and requirements established in this chapter.
(w) Proprietary interests. — Shall mean, indistinctly, proprietary interests of the Bank and private proprietary interests.
(x) Proprietary interests of the Bank. — Shall mean preferred proprietary interests in a fund, which in some cases may be of a convertible nature, sold or issued in a primary issue in favor of the Bank or any other government entity authorized by the Bank. These proprietary interests shall have preferred shares in the earnings of the Bank as provided in § 3036 of this title and shall not be entitled to vote. In addition, in those cases in which the proprietary interests of the Bank or any other authorized government entity are convertible in nature, the same could be converted, at the option or authorization of the Bank, for other shares or capital stock deemed as private proprietary interests of said fund.
(y) Private proprietary interests. — Shall mean interests acquired from a fund in cash by any person, including pension funds of public and private employees and other tax-exempt institutional investors (Provided, That tax-exempted entities by virtue of tax exemption decrees under the Incentives Act shall not be considered as tax-exempt institutional investors for the purposes of this chapter), except those interests specifically appointed as proprietary interests of the Bank.
(z) Investment in proprietary interests of the fund. — Shall mean the adjusted basis determined according to §§ 8401 et seq. of Title 13, part of the “Puerto Rico Internal Revenue Code of 1994”, of the proprietary interests in a fund acquired by a resident or non-resident individual, succession, trust, partnership or corporation.
(aa) Acceptable institutional investor. — Shall mean:
(1) Entities that have been qualified by the Bank to invest in the funds.
(2) Public or private employee pension funds.
(bb) Internal Revenue Code. — Shall mean §§ 8006 et seq. of Title 13, known as the “Puerto Rico Internal Revenue Code of 1994”, as amended.
(cc) Solid Waste Authority Act. — Shall mean §§ 1301 et seq. of Title 12.
(dd) Tourist Development Act. — Shall mean §§ 6001 et seq. of Title 23, or any act of a similar nature that succeeds or substitutes it.
(ee) Incentives Act. — Shall mean §§ 10038 et seq. of Title 13, known as the “Puerto Rico Tax Incentives Act of 1987”; §§ 10101 et seq. of Title 13, known as the “Puerto Rico Tax Incentives Act of 1998”; or any act of a similar nature that succeeds or substitutes it.
(ff) Agricultural Tax Incentives Act. — Shall mean §§ 10401 et seq. of Title 13, known as the “Puerto Rico Agricultural Tax Incentives Act”, or any act of a similar nature that succeeds or substitutes it.
(gg) Venture. — Shall mean an economic activity that is undertaken for the development of any of the sectors specified in § 3022(a) of this title.
(hh) Risk-free business. — Shall mean those businesses that do not qualify as a venture as provided in this chapter, or in any future regulation adopted by the Bank.
(ii) Small businesses. — Shall mean those businesses that have a consolidated average, during the last two (2) years, or the period they have been in existence, if said period is less than that stated above, of less than one million dollars ($1,000,000) in net assets; less than three million dollars ($3,000,000) of annual gross income, and whose activities qualify under the parameters established by subsections (a), (b) and (c) § 3022 of this title. For the purposes of this subsection, those affiliated businesses shall be consolidated whose shareholders or partners hold, in common, directly or indirectly, eighty percent (80%) or more of the shares or voting stock issued and outstanding. The requirements based on net assets and gross income provided above may be modified by the Bank from time to time, through regulations.
(jj) Person. — Shall mean an individual, corporation, trust, partnership or succession.
(kk) Exempt person. — Shall mean the United States of America, its agencies, instrumentalities, and political subdivisions; the Commonwealth of Puerto Rico, its agencies, instrumentalities and political subdivisions; foreign governments, including their agencies, instrumentalities and political subdivisions; international bodies (as said term is defined for the purposes of § 8520(b) of Title 13); and the entities and organizations listed in §§ 8501 of Title 13.
(ll) Secretary. — Shall mean the Secretary of the Treasury.
(mm) Financial services. — Shall mean services provided by banking and financing entities, cooperatives, leasing companies, stock brokerage firms, investment companies and any operation engaged in attracting funds or extending credit.
(nn) Professional services. — Shall mean:
(1) Services rendered by individuals whose branch of work requires membership in a professional association, revalidation or a professional license, or
(2) economic, marketing, financial, and management counseling services.
(3) The term “professional services” shall not include medical, health or other similar services.
(oo) Insurance services. — Shall mean the services provided by businesses related to the field of insurance of any type.
Any other terms used in this chapter which have not been expressly defined therein shall have the same meaning that they have in §§ 8401 et seq. of Title 13.
History —Jan. 28, 2000, No. 46, § 2; Sept. 2, 2000, No. 377, § 1.