Louisiana Administrative Code › Title 10 - FINANCIAL INSTITUTIONS, CONSUMER CREDIT, INVESTMENT SECURITIES AND UCC › Part XV - Other Regulated Entities › Chapter 17 - Louisiana Community Development Financial Institution Program › Section XV-1702 - Definitions

Current through Register Vol. 50, No. 6, June 20, 2024
A. The following terms shall have the meanings provided
				  herein, unless the context clearly indicates otherwise.
Affiliate and/or Affiliated Company
-
a. the term
affiliate
is defined as
				  follows:
i. when used with respect to a specified person or legal
				  entity,
affiliate
means a person or legal entity controlling,
				  controlled by or under common control with, another person or legal entity,
				  directly or indirectly through one or more intermediaries;
ii. when used with respect to a Louisiana entrepreneurial
				  business,
affiliate
means a legal entity that directly, or
				  indirectly, through one or more intermediaries,
controls,
is
controlled
by, or is under common control with, a Louisiana
				  entrepreneurial business;
Applicant
- a Louisiana corporation organized
				  under an incorporating statute which applies to the commissioner for
				  certification as a LCDFI.
Application
- a completed application as
				  determined by the commissioner.
Associate of a LCDFI
-
a. any of the following:
i. a person serving a LCDFI, or an entity that directly or
				  indirectly controls a LCDFI, as any of the following: officer, director
				  (including advisory, regional directors and directors emeritus), employee
				  (provided such employee has significant management and policy responsibilities
				  and powers, or is highly compensated in comparison with the other employees),
				  agent, investment or other advisor, manager (in the case of a manager-managed
				  limited liability company), managing member (in the case of a member-managed
				  limited liability company), external accountant, or outside general/special
				  counsel;
ii. a person directly or indirectly owning, controlling or
				  holding with the power to vote 10 percent or more of the outstanding voting
				  securities or other ownership interests of the LCDFI;
iii. a current or former spouse, parent, child, sibling,
				  father-in-law, mother-in-law, brother-in-law, sister-in-law, son-in-law or
				  daughter-in-law of any person described in §1702
Associate of a
				  LCDFI
.a.i or ii;
iv. a person individually or collectively controlled by or
				  under common control, directly or indirectly, with any person described in
				  §1702
Associate of a LCDFI
.a.i, ii or iii;
v. a person that invests in the LCDFI and has received an
				  income tax credit reduction under the LCDFI Act;
vi. an affiliate of any person described in §1702
Associate of a LCDFI
.a.v; or
vii.(a). a person that, within six months before or at any
				  time after the date that a LCDFI invests in the person, is controlled by a
				  LCDFI or any of its affiliates;
(b). however, even though a LCDFI may not intend to control a
				  business in which it invests, it may obtain short-term (less than one year)
				  control over the Louisiana entrepreneurial business after its initial
				  investment if such control is acquired as a means of protecting the LCDFI's
				  investment resulting from a material breach of any financing agreement. Such
				  control will not create an associate relationship under §1702
Associate of a LCDFI
.a.vii.(a);
b. for the purposes of this definition, if any associate
				  relationship described in §1702
Associate of a
				  LCDFI
.a.i-vi exists between a person and the LCDFI at any time within
				  six months before or at any time after the date that the LCDFI makes its
				  initial investment in such person, that associate relationship is considered to
				  exist on the date of the investment.
Business Plan
- a written narrative providing
				  a general description of the proposed Louisiana community development financial
				  institution ("LCDFI") which should include, at a minimum, a description of the
				  LCDFI's organizational structure; its location; the types of lending and
				  financing it intends to offer and to whom; whether it intends to provide
				  management assistance and if so, to what extent and to whom; and whether the
				  LCDFI will operate as a profit or nonprofit corporation.
Capitalization
- for purposes of initial
				  certification, pursuant to
				  R.S.
				  51:3086(B):
a.
Generally Accepted Accounting Principles (GAAP)
				  Capital
- common stock, preferred stock, general partnership
				  interests, limited partnership interests, surplus and any other equivalent
				  ownership interest, all of which shall be exchanged for cash; undivided profits
				  or loss which shall be reduced by a fully-funded loan loss reserve; contingency
				  or other capital reserves and minority interests; less all organization
				  costs;
b.
LESS
- the following, when any preferred
				  or common stock, partnership interests, or other equivalent ownership interests
				  are subject to redemption or repurchase by the LCDFI: preferred stock, common
				  stock, partnership interests, limited partnership interests, and other
				  equivalent ownership interests shall be multiplied by the following percentage
				  reductions and deducted from capital.
Within 5 years from redemption or repurchase
20 percent
Within 4 years from redemption or repurchase
40 percent
Within 3 years from redemption or repurchase
60 percent
Within 2 years from redemption or repurchase
80 percent
Within 1 year from redemption or repurchase
100 percent
c. Notwithstanding the foregoing, there will be no reduction
				  for a withdrawal of capital within five years after certification, provided the
				  withdrawal is contemplated by all governing documents and disclosed to all
				  prospective investors and any such withdrawal is concurrently replaced by an
				  equal amount of cash GAAP capital. Moreover, the amount contemplated to be
				  withdrawn shall not be the basis for any income tax credit reduction.
Change of Control
- for purposes of
				  R.S.
				  51:3087(F) shall
				  mean:
a. a change in beneficial ownership of 50 percent or more of
				  the outstanding voting shares of the LCDFI; or
b. individuals who constitute the voting power of the board
				  of directors, board of managers or other governing board of the LCDFI as of the
				  later of the LCDFI's certification date or the date of the LCDFI's last
				  notification under
				  R.S.
				  51:3087(F) cease to comprise
				  more than 50 percent of the voting power of such board of directors, board of
				  managers, or other board; or
c. a change in the general partner or manager of the LCDFI or
				  a
change of control
with respect to such general partner or
				  manager; or
d. any merger or consolidation if a
change of
				  control
has occurred based upon the surviving entity being considered
				  to be a continuation of the LCDFI that was the party to the merger or
				  consolidation transaction.
Control
-
a. solely for purposes of determining whether a Louisiana
				  entrepreneurial business
controls
, is
controlled
by, or is under common
control
with another person, or if a person is an associate of a LCDFI,
control
means:
i. the power or authority, whether exercised directly or
				  indirectly, to direct or cause the direction of management and/or policies of a
				  legal entity by contract or otherwise; or
ii. to directly or indirectly own of record or beneficially
				  hold with the power to vote, or hold proxies with discretionary authority to
				  vote, 50 percent or more of the then outstanding voting securities issued by a
				  legal entity, when such control is exercised with respect to a specified person
				  or legal entity;
b. for all other purposes,
control
-
i. the power or authority, whether exercised directly or
				  indirectly, to direct or cause the direction of management and/or policies of a
				  legal entity by contract or otherwise; or
ii. to directly or indirectly own of record or beneficially
				  hold with the power to vote, or hold proxies with discretionary authority to
				  vote 25 percent or more of the then outstanding voting securities issued by a
				  legal entity.
Date on Which an Investment Pool Transaction Closes
- date that a LCDFI designates, and notifies the commissioner of such
				  designated date, that it has received an investment of certified capital in an
				  investment pool. For purposes of this definition, an investment pool
				  transaction may not close prior to:
a. execution of all required documents and elimination of all
				  material contingencies associated with the consummation of the transaction;
				  and
b. the date that the LCDFI receives a cash investment of
				  certified capital that is available for investment in Louisiana entrepreneurial
				  businesses.
Employees
-
a. full-time and part-time employees and officers, converted
				  to a full-time equivalent basis;
b. the term
employees
shall not
				  include:
i. attorneys, accountants or advisors providing consulting or
				  professional services to a Louisiana entrepreneurial business on a contract
				  basis; or
ii. employees of any business that perform services
				  (contractor) for a Louisiana entrepreneurial business.
For example: a contractor may enter into an agreement to
				  perform services for a Louisiana entrepreneurial business. The contractor's
				  employees that perform services under that agreement would not be employees
				  under this definition.
Equity Features
- includes [pursuant to
				  R.S.
				  51:3084(5)(b)] the
				  following.
a.
Royalty Right
- rights to receive a
				  percent of gross or net revenues, either fixed or variable, whether providing
				  for a minimum or maximum dollar amount per year or in total, for an indefinite
				  or fixed period of time, and may be based upon revenues in excess of a base
				  amount.
b.
Net Profit Interests
- rights to receive a
				  percent of operating or net profits, either fixed or variable, whether
				  providing for a minimum or maximum dollar amount per year or in total, for an
				  indefinite or fixed period of time, and may be based upon operating or net
				  profits in excess of a base amount.
c.
Warrants for Future Ownership
- options on
				  the stock of the Louisiana entrepreneurial business. The Louisiana
				  entrepreneurial business may repurchase a warrant (a "call") or the Louisiana
				  entrepreneurial business may be required to sell a warrant (a "put") at some
				  stated amount or an amount based on a pre-agreed upon formula.
d.
Equity
Sale
Participation Right
- conversion options of debt, to
				  convert all or a portion of the debt to the corporate stock of the Louisiana
				  entrepreneurial business, then to participate in the sale of the stock of the
				  Louisiana entrepreneurial business.
e.
Equity Rights
- the receipt or creation of
				  a significant equity interest in a Louisiana entrepreneurial business.
f. And such other conceptually similar rights and elements as
				  the OFI may approve.
Financing Assistance Provided in Cash
and
the Investment of Cash
- transaction, which in substance and
				  in form, results in a disbursement of cash.
Examples of transactions excluded from this definition are:
				  circular transactions as determined by the commissioner; capitalization of
				  accrued principal, interest, royalty or other income; letters of credit; loan
				  guarantees; prepaid debt; loan collection expenses or legal fees incurred by a
				  LCDFI in protecting its collateral interest in an investment.
Institution Affiliated Party
- a director,
				  officer, employee, agent, controlling person, and other person participating in
				  the affairs of the LCDFI.
Investment
-
a. at all times, in order to perfect the tax credits earned
				  as a result of an investment described in
				  R.S. 51:3084(3) and
				  (9), or
				  R.S. 51:3085(A) and
				  (B), the LCDFI shall have at least 50 percent
				  of the certified capital of each investment pool that is received in cash:
i. available to be invested in
qualified
				  investments
;
ii. invested in qualified investments made subsequent to the
				  date on which the investment pool transaction closes; or
iii. a combination of §1702
Investment.
a.i and ii.
b. i. an
Investment
furthers economic
				  development within Louisiana if the proceeds from an investment are used in a
				  manner consistent with representations contained in the affidavit required to
				  be obtained from the Louisiana entrepreneurial business prior to an investment
				  in the business and the documented use of such proceeds promote Louisiana
				  economic development. Proceeds shall be determined to promote Louisiana
				  economic development if more than 90 percent of the proceeds derived from the
				  investment are used by the Louisiana entrepreneurial business for two or more
				  of the following purposes:
(a). to hire significantly more Louisiana employees;
(b). to directly purchase or lease furniture, fixtures, land
				  or equipment that will be used in the Louisiana operations of the business or
				  to construct or expand production or operating facilities located in Louisiana.
				  This does not include the purchase of these assets as part of a company
				  buyout;
(c). to purchase inventory for resale from Louisiana-based
				  operations or outlets;
(d). to capitalize a business in order for the business to
				  secure future debt financing to support the Louisiana operations of the
				  business. Such future debt financing must be obtained within three months of
				  the
qualified investment
date;
(e). to increase or preserve working capital and/or cash
				  flows for Louisiana operations of the business. However, except as allowed in
				  Subclause (d) above, this does not include those
investments
whereby the proceeds of the
investment
will be utilized to
				  refinance existing debt of the business;
(f). to preserve or expand Louisiana corporate headquarters
				  operations.
Preserve
means a company that is in danger of
				  failing or contemplating a move out-of-state;
(g). to support research and development or technological
				  development within Louisiana;
(h). to fund start-up businesses that will operate primarily
				  in Louisiana ; or
(i). to provide for an additional economic benefit not
				  otherwise described above. However, before this purpose may be used as a basis
				  for a determination that the
investment
furthers economic
				  development within Louisiana, the LCDFI shall request in writing and the
				  commissioner shall issue a written response to the LCDFI that, based upon
				  relevant facts and circumstances, the proposed
investment
will
				  further Louisiana economic purposes and result in a significant net benefit to
				  the state. The commissioner's letter opinion shall be issued within 30 days of
				  the request by the LCDFI, and shall be part of the annual review required to be
				  performed by the office and billed according to provisions contained in
				  §1710. A.1 However, upon written notification to the LCDFI, the 30-day
				  review period can be extended by the commissioner if he determines that the
				  initial information submitted is insufficient or incomplete for such
				  determination;
ii. an
investment
by a LCDFI in an interim
				  construction project shall not be considered to further economic development
				  within Louisiana unless the same LCDFI also provides the permanent financing.
Net Income
- net income as defined under or
				  consistent with Generally Accepted Accounting Principles.
Net Worth
- net worth as defined under or
				  consistent with Generally Accepted Accounting Principles.
Office
- the Louisiana Office of Financial
				  Institutions (OFI).
Participation between LCDFIs
- are loans or
				  other investments in which one or more LCDFIs have an ownership interest. If a
				  loan or investment is determined to meet the definition of a qualified
				  investment, a LCDFI may only include its participation (ownership interest) as
				  a qualified investment.
Permissible Investments
- for purposes of
				  R.S.
				  51:3087(G), cash deposited
				  with a federally-insured financial institution; certificates of deposit in
				  federally insured financial institutions; investment securities that are
				  obligations of the United States, its agencies or instrumentalities, or
				  obligations that are guaranteed fully as to principal and interest by the
				  United States; investment-grade instruments (rated in the top four rating
				  categories by a nationally recognized rating organization); obligations of any
				  state, municipality or of any political subdivision thereof; money market
				  mutual funds or mutual funds that only invest in
permissible
				  investments
of a kind and maturity permitted by this definition; or
				  any other
investments
approved in advance and in writing by
				  the commissioner. All
permissible investments
which are
				  included in the calculation under the definition of
Investment
in LAC 10:XV.1702 shall have a maturity of two years or less or the terms of
				  the investment instrument shall provide that the principal is repayable to the
				  LCDFI within 10 days following demand by the LCDFI in connection with funding a
				  qualified investment.
Person
- a natural person or legal entity
				  qualified to seek certification as a LCDFI.
Sophisticated Investor
- any of the
				  following:
a. an institutional investor such as a bank, savings and loan
				  association or other depository institution insured by the Federal Deposit
				  Insurance Corporation, registered investment company or insurance
				  company;
b. a corporation with total assets in excess of
				  $5,000,000;
c. a natural person whose individual net worth, or joint net
				  worth with that person's spouse at the time of his purchase, exceeds
				  $1,000,000; or
d. a natural person with an individual taxable income in
				  excess of $200,000 in each of two most recent years or joint income with that
				  person's spouse in excess of $300,000 in each of those years and has a
				  reasonable expectation of reaching the same income level in the current year.
Total Certified Capital under Management
for
				  purposes of investment limits, pursuant to
				  R.S.
				  51:3087(G):
a.
GAAP Capital
- common stock, preferred
				  stock, general partnership interests, limited partnership interests, surplus
				  and other equivalent ownership interests, all of which shall be exchangeable
				  for cash and which is available for investment in qualified investments ;
				  undivided profits or losses which shall be reduced by a fully-funded loan loss
				  reserve; contingency or other capital reserves and minority interests; reduced
				  by all organization costs.
b.
PLUS
-
Qualified Non-GAAP Capital
: the portion of debentures, notes or any other quasi-equity/debt
				  instruments with a maturity of not less than five years which is available for
				  investment in qualified investments.
c.
LESS
-the following, when any GAAP Capital
				  or Qualified Non-GAAP Capital is subject to redemption or repurchase by the
				  LCDFI:
i. the GAAP Capital and Qualified Non-GAAP Capital subject to
				  redemption or repurchase shall be multiplied by the following percentage
				  reductions and deducted from capital:
Within 5 years from redemption or repurchase
20 percent
Within 4 years from redemption or repurchase
40 percent
Within 3 years from redemption or repurchase
60 percent
Within 2 years from redemption or repurchase
80 percent
Within 1 year from redemption or repurchase
100 percent
d. the portion of an investment that is guaranteed by the
				  United States Small Business Administration or the United States Department of
				  Agriculture's Business and Industry Guaranteed Loan Program shall be excluded
				  from the amount of the investment when determining the investment limit
				  pursuant to
				  R.S.
				  51:3087(G).
AUTHORITY NOTE:
				  Promulgated in accordance with
				  R.S.
				  51:3081 et
				  seq.