[USC02] 7 USC CHAPTER 50, SUBCHAPTER VIII: RURAL BUSINESS INVESTMENT PROGRAM
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7 USC CHAPTER 50, SUBCHAPTER VIII: RURAL BUSINESS INVESTMENT PROGRAM
From Title 7—AGRICULTURECHAPTER 50—AGRICULTURAL CREDIT

SUBCHAPTER VIII—RURAL BUSINESS INVESTMENT PROGRAM

§2009cc. Definitions

In this subchapter:

(1) Articles

The term "articles" means articles of incorporation for an incorporated body or the functional equivalent or other similar documents specified by the Secretary for other business entities.

(2) Developmental capital

The term "developmental capital" means capital in the form of equity capital investments in rural business investment companies with an objective of fostering economic development in rural areas.

(3) Employee welfare benefit plan; pension plan

(A) In general

The terms "employee welfare benefit plan" and "pension plan" have the meanings given the terms in section 1002 of title 29.

(B) Inclusions

The terms "employee welfare benefit plan" and "pension plan" include—

(i) public and private pension or retirement plans subject to this subchapter; and

(ii) similar plans not covered by this subchapter that have been established, and that are maintained, by the Federal Government or any State (including by a political subdivision, agency, or instrumentality of the Federal Government or a State) for the benefit of employees.

(4) Equity capital

The term "equity capital" means—

(A) common or preferred stock or a similar instrument, including subordinated debt with equity features; and

(B) any other type of equity-like financing that might be necessary to facilitate the purposes of this Act, excluding financing such as senior debt or other types of financing that competes with routine loanmaking of commercial lenders.

(5) Leverage

The term "leverage" includes—

(A) debentures purchased or guaranteed by the Secretary;

(B) participating securities purchased or guaranteed by the Secretary; and

(C) preferred securities outstanding as of May 13, 2002.

(6) License

The term "license" means a license issued by the Secretary as provided in section 2009cc–3(e) of this title.

(7) Limited liability company

The term "limited liability company" means a business entity that is organized and operating in accordance with a State limited liability company law approved by the Secretary.

(8) Member

The term "member" means, with respect to a rural business investment company that is a limited liability company, a holder of an ownership interest or a person otherwise admitted to membership in the limited liability company.

(9) Operational assistance

The term "operational assistance" means management, marketing, and other technical assistance that assists a rural business concern with business development.

(10) Participation agreement

The term "participation agreement" means an agreement, between the Secretary and a rural business investment company granted final approval under section 2009cc–3(e) of this title, that requires the rural business investment company to make investments in smaller enterprises in rural areas.

(11) Private capital

(A) In general

The term "private capital" means the total of—

(i)(I) the paid-in capital and paid-in surplus of a corporate rural business investment company;

(II) the contributed capital of the partners of a partnership rural business investment company; or

(III) the equity investment of the members of a limited liability company rural business investment company; and

(ii) unfunded binding commitments from investors that meet criteria established by the Secretary to contribute capital to the rural business investment company, except that—

(I) unfunded commitments may be counted as private capital for purposes of approval by the Secretary of any request for leverage; but

(II) leverage shall not be funded based on the commitments.

(B) Exclusions

The term "private capital" does not include—

(i) any funds borrowed by a rural business investment company from any source;

(ii) any funds obtained through the issuance of leverage; or

(iii) any funds obtained directly or indirectly from the Federal Government or any State (including by a political subdivision, agency, or instrumentality of the Federal Government or a State), except for—

(I) funds obtained from the business revenues (excluding any governmental appropriation) of any federally chartered or government-sponsored enterprise established prior to May 13, 2002;

(II) funds invested by an employee welfare benefit plan or pension plan; and

(III) 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 rural business investment company).

(12) Qualified nonprivate funds

The term "qualified nonprivate funds" means any—

(A) funds directly or indirectly invested in any applicant or rural business investment company on or before May 13, 2002, by any Federal agency, other than the Department of Agriculture, under a provision of law explicitly mandating the inclusion of those funds in the definition of the term "private capital"; and

(B) funds invested in any applicant or rural business investment company by 1 or more entities of any State (including by a political subdivision, agency, or instrumentality of the State and including any guarantee extended by those entities) in an aggregate amount that does not exceed 33 percent of the private capital of the applicant or rural business investment company.

(13) Rural business concern

The term "rural business concern" means—

(A) a public, private, or cooperative for-profit or nonprofit organization;

(B) a for-profit or nonprofit business controlled by an Indian tribe on a Federal or State reservation or other federally recognized Indian tribal group; or

(C) any other person or entity;


that primarily operates in a rural area, as determined by the Secretary.

(14) Rural business investment company

The term "rural business investment company" means a company that—

(A) has been granted final approval by the Secretary under section 2009cc–3(e) of this title; and

(B) has entered into a participation agreement with the Secretary.

(15) Smaller enterprise

The term "smaller enterprise" means any rural 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 subchapter to the rural business concern; and

(ii) an average net income for the 2-year period preceding the date on which assistance is provided under this subchapter to the rural business concern, of not more than $2,000,000, after Federal income taxes (excluding any carryover losses), except that, for purposes of this clause, if the rural business concern is not required by law to pay Federal income taxes at the enterprise level, but is required to pass income through to the shareholders, partners, beneficiaries, or other equitable owners of the business concern, the net income of the business concern shall be determined by allowing a deduction in an amount equal to the total of—

(I) if the rural business concern is not required by law to pay State (and local, if any) income taxes at the enterprise level, the net income (determined without regard to this clause), multiplied by the marginal State income tax rate (or by the combined State and local income tax rates, as applicable) that would have applied if the business concern were a corporation; and

(II) the net income (so determined) less any deduction for State (and local) income taxes calculated under subclause (I), multiplied by the marginal Federal income tax rate that would have applied if the rural business concern were a corporation; or


(B) satisfies the standard industrial classification size standards established by the Administrator of the Small Business Administration for the industry in which the rural business concern is primarily engaged.

(Pub. L. 87–128, title III, §384A, as added Pub. L. 107–171, title VI, §6029, May 13, 2002, 116 Stat. 388; amended Pub. L. 115–334, title VI, §6426(a), Dec. 20, 2018, 132 Stat. 4770.)

References in Text

This Act, referred to in par. (4)(B), means Pub. L. 87–128, Aug. 8, 1961, 75 Stat. 294, known as the Agricultural Act of 1961. For complete classification of this Act to the Code, see Short Title note set out under section 1911 of this title and Tables.

Amendments

2018—Par. (2). Pub. L. 115–334, §6426(a)(1), struck out "venture" after "Developmental" in heading and after " 'developmental" in text.

Par. (4). Pub. L. 115–334, §6426(a)(2), added par. (4) and struck out former par. (4). Prior to amendment, text read as follows: "The term 'equity capital' means common or preferred stock or a similar instrument, including subordinated debt with equity features."

§2009cc–1. Purposes

The purposes of the Rural Business Investment Program established under this subchapter are—

(1) to promote economic development and the creation of wealth and job opportunities in rural areas and among individuals living in those areas by encouraging developmental capital investments in smaller enterprises primarily located in rural areas; and

(2) to establish a developmental capital program, with the mission of addressing the unmet equity investment needs of small enterprises located in rural areas, by authorizing the Secretary—

(A) to enter into participation agreements with rural business investment companies;

(B) to guarantee debentures of rural business investment companies to enable each rural business investment company to make developmental capital investments in smaller enterprises in rural areas; and

(C) to make grants to rural business investment companies, and to other entities, for the purpose of providing operational assistance to smaller enterprises financed, or expected to be financed, by rural business investment companies.

(Pub. L. 87–128, title III, §384B, as added Pub. L. 107–171, title VI, §6029, May 13, 2002, 116 Stat. 391; amended Pub. L. 115–334, title VI, §6426(b), Dec. 20, 2018, 132 Stat. 4770.)

Amendments

Par. (1). Pub. L. 115–334, §6426(b)(1), struck out "venture" before "capital investments".

Par. (2). Pub. L. 115–334, §6426(b)(2)(A), struck out "venture" before "capital program" in introductory provisions.

Par. (2)(B). Pub. L. 115–334, §6426(b)(2)(B), struck out "venture" before "capital investments".

§2009cc–2. Establishment

In accordance with this subchapter, the Secretary shall establish a Rural Business Investment Program, under which the Secretary may—

(1) enter into participation agreements with companies granted final approval under section 2009cc–3(e) of this title for the purposes set forth in section 2009cc–1 of this title;

(2) guarantee the debentures issued by rural business investment companies as provided in section 2009cc–4 of this title; and

(3) make grants to rural business investment companies, and to other entities, under section 2009cc–7 of this title.

(Pub. L. 87–128, title III, §384C, as added Pub. L. 107–171, title VI, §6029, May 13, 2002, 116 Stat. 391.)

§2009cc–3. Selection of rural business investment companies

(a) Eligibility

A company shall be eligible to apply to participate, as a rural business investment company, in the program established under this subchapter if—

(1) the company is a newly formed for-profit entity or a newly formed for-profit subsidiary of such an entity;

(2) the company has a management team with experience in community development financing or relevant venture capital financing; and

(3) the company will invest in enterprises that will create wealth and job opportunities in rural areas, with an emphasis on smaller enterprises.

(b) Application

To participate, as a rural business investment company, in the program established under this subchapter, a company meeting the eligibility requirements of subsection (a) shall submit an application to the Secretary that includes—

(1) a business plan describing how the company intends to make successful developmental capital investments in identified rural areas;

(2) information regarding the community development finance or relevant venture capital qualifications and general reputation of the management of the company;

(3) a description of how the company intends to work with community-based organizations and local entities (including local economic development companies, local lenders, and local investors) and to seek to address the unmet equity capital needs of the communities served;

(4) a proposal describing how the company intends to use the grant funds provided under this subchapter to provide operational assistance to smaller enterprises financed by the company, including information regarding whether the company intends to use licensed professionals, as necessary, on the staff of the company or from an outside entity;

(5) with respect to binding commitments to be made to the company under this subchapter, an estimate of the ratio of cash to in-kind contributions;

(6) a description of the criteria to be used to evaluate whether and to what extent the company meets the purposes of the program established under this subchapter;

(7) information regarding the management and financial strength of any parent firm, affiliated firm, or any other firm essential to the success of the business plan of the company; and

(8) such other information as the Secretary may require.

(c) Status

Not later than 90 days after the initial receipt by the Secretary of an application under this section, the Secretary shall provide to the applicant a written report describing the status of the application and any requirements remaining for completion of the application.

(d) Matters considered

In reviewing and processing any application under this section, the Secretary—

(1) shall determine whether—

(A) the applicant meets the requirements of subsection (e); and

(B) the management of the applicant is qualified and has the knowledge, experience, and capability necessary to comply with this subchapter;


(2) shall take into consideration—

(A) the need for and availability of financing for rural business concerns in the geographic area in which the applicant is to commence business;

(B) the general business reputation of the owners and management of the applicant; and

(C) the probability of successful operations of the applicant, including adequate profitability and financial soundness; and


(3) shall not take into consideration any projected shortage or unavailability of grant funds or leverage.

(e) Approval; license

(1) In general

Except as provided in paragraph (2), the Secretary may approve an applicant to operate as a rural business investment company under this subchapter and license the applicant as a rural business investment company, if—

(A) the Secretary determines that the application satisfies the requirements of subsection (b);

(B) the area in which the rural business investment company is to conduct its operations, and establishment of branch offices or agencies (if authorized by the articles), are approved by the Secretary; and

(C) the applicant enters into a participation agreement with the Secretary.

(2) Capital requirements

(A) In general

Notwithstanding any other provision of this subchapter, the Secretary may approve an applicant to operate as a rural business investment company under this subchapter and designate the applicant as a rural business investment company, if the Secretary determines that the applicant—

(i) has private capital of more than $2,500,000;

(ii) would otherwise be approved under this subchapter, except that the applicant does not satisfy the requirements of section 2009cc–8(c) of this title; and

(iii) has a viable business plan that—

(I) reasonably projects profitable operations; and

(II) has a reasonable timetable for achieving a level of private capital that satisfies the requirements of section 2009cc–8(c) of this title.

(B) Leverage

An applicant approved under subparagraph (A) shall not be eligible to receive leverage under this subchapter until the applicant satisfies the requirements of section 2009cc–8(c) of this title.

(C) Grants

An applicant approved under subparagraph (A) shall be eligible for grants under section 2009cc–7 of this title in proportion to the private capital of the applicant, as determined by the Secretary.

(Pub. L. 87–128, title III, §384D, as added Pub. L. 107–171, title VI, §6029, May 13, 2002, 116 Stat. 391; amended Pub. L. 115–334, title VI, §6426(c), Dec. 20, 2018, 132 Stat. 4770.)

Amendments

2018—Subsec. (b)(1). Pub. L. 115–334 substituted "developmental" for "developmental venture".

§2009cc–4. Debentures

(a) In general

The Secretary may guarantee the timely payment of principal and interest, as scheduled, on debentures issued by any rural business investment company.

(b) Terms and conditions

The Secretary may make guarantees under this section on such terms and conditions as the Secretary considers appropriate, except that the term of any debenture guaranteed under this section shall not exceed 15 years.

(c) Full faith and credit of the United States

Section 2009g(i) of this title shall apply to any guarantee under this section.

(d) Maximum guarantee

Under this section, the Secretary may—

(1) guarantee the debentures issued by a rural business investment company only to the extent that the total face amount of outstanding guaranteed debentures of the rural business investment company does not exceed the lesser of—

(A) 300 percent of the private capital of the rural business investment company; or

(B) $105,000,000; and


(2) provide for the use of discounted debentures.

(Pub. L. 87–128, title III, §384E, as added Pub. L. 107–171, title VI, §6029, May 13, 2002, 116 Stat. 393.)

§2009cc–5. Issuance and guarantee of trust certificates

(a) Issuance

The Secretary may issue trust certificates representing ownership of all or a fractional part of debentures issued by a rural business investment company and guaranteed by the Secretary under this subchapter, if the certificates are based on and backed by a trust or pool approved by the Secretary and composed solely of guaranteed debentures.

(b) Guarantee

(1) In general

The Secretary may, under such terms and conditions as the Secretary considers appropriate, guarantee the timely payment of the principal of and interest on trust certificates issued by the Secretary or agents of the Secretary for purposes of this section.

(2) Limitation

Each guarantee under this subsection shall be limited to the extent of principal and interest on the guaranteed debentures that compose the trust or pool.

(3) Prepayment or default

(A) In general

(i) Authority to prepay

A debenture may be prepaid at any time without penalty.

(ii) Reduction of guarantee

Subject to clause (i), if a debenture in a trust or pool is prepaid, or in the event of default of such a debenture, the guarantee of timely payment of principal and interest on the trust certificates shall be reduced in proportion to the amount of principal and interest the prepaid debenture represents in the trust or pool.

(B) Interest

Interest on prepaid or defaulted debentures shall accrue and be guaranteed by the Secretary only through the date of payment of the guarantee.

(C) Redemption

At any time during its term, a trust certificate may be called for redemption due to prepayment or default of all debentures.

(c) Full faith and credit of the United States

Section 2009g(i) of this title shall apply to any guarantee of a trust certificate issued by the Secretary under this section.

(d) Subrogation and ownership rights

(1) Subrogation

If the Secretary pays a claim under a guarantee issued under this section, the claim shall be subrogated fully to the rights satisfied by the payment.

(2) Ownership rights

No Federal, State, or local law shall preclude or limit the exercise by the Secretary of the ownership rights of the Secretary in a debenture residing in a trust or pool against which 1 or more trust certificates are issued under this section.

(e) Management and administration

(1) Registration

The Secretary shall provide for a central registration of all trust certificates issued under this section.

(2) Creation of pools

The Secretary may—

(A) maintain such commercial bank accounts or investments in obligations of the United States as may be necessary to facilitate the creation of trusts or pools backed by debentures guaranteed under this subchapter; and

(B) issue trust certificates to facilitate the creation of those trusts or pools.

(3) Fidelity bond or insurance requirement

Any agent performing functions on behalf of the Secretary under this paragraph shall provide a fidelity bond or insurance in such amount as the Secretary considers to be necessary to fully protect the interests of the United States.

(4) Regulation of brokers and dealers

The Secretary may regulate brokers and dealers in trust certificates issued under this section.

(5) Electronic registration

Nothing in this subsection prohibits the use of a book-entry or other electronic form of registration for trust certificates issued under this section.

(Pub. L. 87–128, title III, §384F, as added Pub. L. 107–171, title VI, §6029, May 13, 2002, 116 Stat. 393; amended Pub. L. 110–234, title VI, §6027(a), May 22, 2008, 122 Stat. 1182; Pub. L. 110–246, §4(a), title VI, §6027(a), June 18, 2008, 122 Stat. 1664, 1943.)

Codification

Pub. L. 110–234 and Pub. L. 110–246 made identical amendments to this section. The amendments by Pub. L. 110–234 were repealed by section 4(a) of Pub. L. 110–246.

Amendments

2008—Subsec. (b)(3)(A). Pub. L. 110–246, §6027(a), added cl. (i), designated existing provisions as cl. (ii), inserted heading, and substituted "Subject to clause (i), if" for "In the event".

Effective Date of 2008 Amendment

Amendment of this section and repeal of Pub. L. 110–234 by Pub. L. 110–246 effective May 22, 2008, the date of enactment of Pub. L. 110–234, see section 4 of Pub. L. 110–246, set out as an Effective Date note under section 8701 of this title.

§2009cc–6. Fees

(a) In general

The Secretary may charge such fees as the Secretary considers appropriate, so long as those fees are proportionally equal for each rural business investment company, with respect to any guarantee or grant issued under this subchapter.

(b) Trust certificate

Notwithstanding subsection (a), the Secretary shall not collect a fee for any guarantee of a trust certificate under section 2009cc–5 of this title, except that any agent of the Secretary may collect such fees as the Secretary considers appropriate, so long as those fees are proportionally equal for each rural business investment company, for the functions described in section 2009cc–5(e)(2) of this title.

(c) License

(1) In general

Except as provided in paragraph (3), the Secretary may prescribe fees to be paid by each applicant for a license to operate as a rural business investment company under this subchapter.

(2) Use of amounts

Fees collected under this subsection—

(A) shall be deposited in the account for salaries and expenses of the Secretary;

(B) are authorized to be appropriated as the Secretary considers appropriate; and

(C) shall be in such amounts as the Secretary considers appropriate.

(3) Prohibition on collection of certain fees

In the case of a license described in paragraph (1) that was approved before July 1, 2007, the Secretary shall not collect any fees due on or after the date of enactment of this paragraph.

(Pub. L. 87–128, title III, §384G, as added Pub. L. 107–171, title VI, §6029, May 13, 2002, 116 Stat. 395; amended Pub. L. 110–234, title VI, §6027(b), May 22, 2008, 122 Stat. 1182; Pub. L. 110–246, §4(a), title VI, §6027(b), June 18, 2008, 122 Stat. 1664, 1943; Pub. L. 115–334, title VI, §6426(d), Dec. 20, 2018, 132 Stat. 4771.)

References in Text

The date of enactment of this paragraph, referred to in subsec. (c)(3), is the date of enactment of Pub. L. 110–246, which was approved June 18, 2008.

Codification

Pub. L. 110–234 and Pub. L. 110–246 made identical amendments to this section. The amendments by Pub. L. 110–234 were repealed by section 4(a) of Pub. L. 110–246.

Amendments

2018—Subsecs. (a), (b). Pub. L. 115–334, §6426(d)(1), substituted "such fees as the Secretary considers appropriate, so long as those fees are proportionally equal for each rural business investment company," for "a fee that does not exceed $500".

Subsec. (c)(2)(B). Pub. L. 115–334, §6426(d)(2)(A), substituted "as the Secretary considers appropriate" for "solely to cover the costs of licensing examinations".

Subsec. (c)(2)(C). Pub. L. 115–334, §6426(d)(2)(B), added subpar. (C) and struck out former subpar. (C) which read as follows: "shall not exceed $500 for any fee collected under this subsection."

2008—Subsec. (a). Pub. L. 110–246, §6027(b)(1), substituted "a fee that does not exceed $500" for "such fees as the Secretary considers appropriate".

Subsec. (b). Pub. L. 110–246, §6027(b)(2), substituted "that does not exceed $500" for "approved by the Secretary".

Subsec. (c)(1). Pub. L. 110–246, §6027(b)(3)(A), substituted "Except as provided in paragraph (3), the" for "The".

Subsec. (c)(2)(C). Pub. L. 110–246, §6027(b)(3)(B), added subpar. (C).

Subsec. (c)(3). Pub. L. 110–246, §6027(b)(3)(C), added par. (3).

Effective Date of 2008 Amendment

Amendment of this section and repeal of Pub. L. 110–234 by Pub. L. 110–246 effective May 22, 2008, the date of enactment of Pub. L. 110–234, see section 4 of Pub. L. 110–246, set out as an Effective Date note under section 8701 of this title.

§2009cc–7. Operational assistance grants

(a) In general

In accordance with this section, the Secretary may make grants to rural business investment companies and to other entities, as authorized by this subchapter, to provide operational assistance to smaller enterprises financed, or expected to be financed, by the entities.

(b) Terms

Grants made under this section shall be made over a multiyear period (not to exceed 10 years) under such terms as the Secretary may require.

(c) Use of funds

The proceeds of a grant made under this section may be used by the rural business investment company receiving the grant only to provide operational assistance in connection with an equity or prospective equity investment in a business located in a rural area.

(d) Submission of plans

A rural business investment company shall be eligible for a grant under this section only if the rural business investment company submits to the Secretary, in such form and manner as the Secretary may require, a plan for use of the grant.

(e) Grant amount

(1) Rural business investment companies

The amount of a grant made under this section to a rural business investment company shall be equal to the lesser of—

(A) 10 percent of the private capital raised by the rural business investment company; or

(B) $1,000,000.

(2) Other entities

The amount of a grant made under this section to any entity other than a rural business investment company shall be equal to the resources (in cash or in kind) raised by the entity in accordance with the requirements applicable to rural business investment companies under this subchapter.

(Pub. L. 87–128, title III, §384H, as added Pub. L. 107–171, title VI, §6029, May 13, 2002, 116 Stat. 395.)

§2009cc–8. Rural business investment companies

(a) Organization

For the purpose of this subchapter, a rural business investment company shall—

(1) be an incorporated body, a limited liability company, or a limited partnership organized and chartered or otherwise existing under State law solely for the purpose of performing the functions and conducting the activities authorized by this subchapter;

(2)(A) if incorporated, have succession for a period of not less than 30 years unless earlier dissolved by the shareholders of the rural business investment company; and

(B) if a limited partnership or a limited liability company, have succession for a period of not less than 10 years; and

(3) possess the powers reasonably necessary to perform the functions and conduct the activities.

(b) Articles

The articles of any rural business investment company—

(1) shall specify in general terms—

(A) the purposes for which the rural business investment company is formed;

(B) the name of the rural business investment company;

(C) the area or areas in which the operations of the rural business investment company are to be carried out;

(D) the place where the principal office of the rural business investment company is to be located; and

(E) the amount and classes of the shares of capital stock of the rural business investment company;


(2) may contain any other provisions consistent with this subchapter that the rural business investment company may determine appropriate to adopt for the regulation of the business of the rural business investment company and the conduct of the affairs of the rural business investment company; and

(3) shall be subject to the approval of the Secretary.

(c) Capital requirements

(1) In general

Except as provided in paragraph (2), the private capital of each rural business investment company shall be not less than—

(A) $5,000,000; or

(B) $10,000,000, with respect to each rural business investment company authorized or seeking authority to issue participating securities to be purchased or guaranteed by the Secretary under this subchapter.

(2) Exception

The Secretary may, in the discretion of the Secretary and based on a showing of special circumstances and good cause, permit the private capital of a rural business investment company described in paragraph (1)(B) to be less than $10,000,000, but not less than $5,000,000, if the Secretary determines that the action would not create or otherwise contribute to an unreasonable risk of default or loss to the Federal Government.

(3) Time frame

Each rural business investment company shall have a period of 2 years to meet the capital requirements of this subsection.

(4) Adequacy

In addition to the requirements of paragraph (1), the Secretary shall—

(A) determine whether the private capital of each rural business investment company is adequate to ensure a reasonable prospect that the rural business investment company will be operated soundly and profitably, and managed actively and prudently in accordance with the articles of the rural business investment company;

(B) determine that the rural business investment company will be able to comply with the requirements of this subchapter;

(C) require that at least 75 percent of the capital of each rural business investment company is invested in rural business concerns and not more than 10 percent of the investments shall be made in an area containing a city of over 150,000 in the last decennial census and the Census Bureau defined urbanized area containing or adjacent to that city;

(D) ensure that the rural business investment company is designed primarily to meet equity capital needs of the businesses in which the rural business investment company invests and not to compete with traditional small business financing by commercial lenders; and

(E) require that the rural business investment company makes short-term non-equity investments of less than 5 years only to the extent necessary to preserve an existing investment.

(d) Diversification of ownership

The Secretary shall ensure that the management of each rural business investment company licensed after May 13, 2002, is sufficiently diversified from and unaffiliated with the ownership of the rural business investment company so as to ensure independence and objectivity in the financial management and oversight of the investments and operations of the rural business investment company.

(Pub. L. 87–128, title III, §384I, as added Pub. L. 107–171, title VI, §6029, May 13, 2002, 116 Stat. 396; amended Pub. L. 110–234, title VI, §6027(c), May 22, 2008, 122 Stat. 1182; Pub. L. 110–246, §4(a), title VI, §6027(c), June 18, 2008, 122 Stat. 1664, 1944.)

Codification

Pub. L. 110–234 and Pub. L. 110–246 made identical amendments to this section. The amendments by Pub. L. 110–234 were repealed by section 4(a) of Pub. L. 110–246.

Amendments

2008—Subsec. (c)(3), (4). Pub. L. 110–246, §6027(c), added par. (3) and redesignated former par. (3) as (4).

Effective Date of 2008 Amendment

Amendment of this section and repeal of Pub. L. 110–234 by Pub. L. 110–246 effective May 22, 2008, the date of enactment of Pub. L. 110–234, see section 4 of Pub. L. 110–246, set out as an Effective Date note under section 8701 of this title.

§2009cc–9. Financial institution investments

(a) Investment

(1) In general

Except as otherwise provided in this section and notwithstanding any other provision of law, the following banks, associations, and institutions are eligible both to establish and invest in any rural business investment company or in any entity established to invest solely in rural business investment companies:

(A) Any bank or savings association the deposits of which are insured under the Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.), including an investment pool created entirely by such bank or savings association.

(B) Any Farm Credit System institution described in section 1.2(a) of the Farm Credit Act of 1971 (12 U.S.C. 2002(a)).

(2) Limitation on requirements

The Secretary may not require that an entity described in paragraph (1) provide investment or capital that is not required of other companies eligible to apply to operate as a rural business investment company under section 2009cc–3(a) of this title.

(b) Limitation

No bank, association, or institution described in subsection (a) may make investments described in subsection (a) that are greater than 5 percent of the capital and surplus of the bank, association, or institution.

(c) Limitation on rural business investment companies controlled by Farm Credit System institutions

If a Farm Credit System institution described in section 1.2(a) of the Farm Credit Act of 1971 (12 U.S.C. 2002(a)) holds more than 50 percent of the shares of a rural business investment company, either alone or in conjunction with other System institutions (or affiliates), the rural business investment company shall not provide equity investments in, or provide other financial assistance to, entities that are not otherwise eligible to receive financing from the Farm Credit System under that Act (12 U.S.C. 2001 et seq.).

(Pub. L. 87–128, title III, §384J, as added Pub. L. 107–171, title VI, §6029, May 13, 2002, 116 Stat. 397; amended Pub. L. 110–234, title VI, §6027(d), May 22, 2008, 122 Stat. 1182; Pub. L. 110–246, §4(a), title VI, §6027(d), June 18, 2008, 122 Stat. 1664, 1944; Pub. L. 115–334, title VI, §6426(e), (f), Dec. 20, 2018, 132 Stat. 4771.)

References in Text

The Federal Deposit Insurance Act, referred to in subsec. (a)(1)(A), is act Sept. 21, 1950, ch. 967, §2, 64 Stat. 873, as amended, which is classified generally to chapter 16 (§1811 et seq.) of Title 12, Banks and Banking. For complete classification of this Act to the Code, see Short Title note set out under section 1811 of Title 12 and Tables.

The Farm Credit Act of 1971, referred to in subsec. (c), is Pub. L. 92–181, Dec. 10, 1971, 85 Stat. 583, as amended, which is classified generally to chapter 23 (§2001 et seq.) of Title 12, Banks and Banking. For complete classification of this Act to the Code, see Short Title note set out under section 2001 of Title 12 and Tables.

Codification

Pub. L. 110–234 and Pub. L. 110–246 made identical amendments to this section. The amendments by Pub. L. 110–234 were repealed by section 4(a) of Pub. L. 110–246.

Amendments

2018—Subsec. (a). Pub. L. 115–334, §6426(f), substituted "Investment" for "In general" in heading, designated existing provisions as par. (1) and inserted heading, redesignated former pars. (1) and (2) as subpars. (A) and (B), respectively, of par. (1), added par. (2), and realigned margins.

Subsec. (c). Pub. L. 115–334, §6426(e), substituted "50" for "25".

2008—Subsec. (a)(1). Pub. L. 110–246, §6027(d)(1), inserted ", including an investment pool created entirely by such bank or savings association" before period at end.

Subsec. (c). Pub. L. 110–246, §6027(d)(2), substituted "25" for "15".

Effective Date of 2008 Amendment

Amendment of this section and repeal of Pub. L. 110–234 by Pub. L. 110–246 effective May 22, 2008, the date of enactment of Pub. L. 110–234, see section 4 of Pub. L. 110–246, set out as an Effective Date note under section 8701 of this title.

§2009cc–10. Reporting requirements

(a) Rural business investment companies

Each rural business investment company that participates in the program established under this subchapter shall provide to the Secretary such information as the Secretary may require, including—

(1) information relating to the measurement criteria that the rural business investment company proposed in the program application of the rural business investment company; and

(2) in each case in which the rural business investment company under this subchapter makes an investment in, or a loan or grant to, a business that is not located in a rural area, a report on the number and percentage of employees of the business who reside in those areas.

(b) Public reports

(1) In general

The Secretary shall prepare and make available to the public an annual report on the program established under this subchapter, including detailed information on—

(A) the number of rural business investment companies licensed by the Secretary during the previous fiscal year;

(B) the aggregate amount of leverage that rural business investment companies have received from the Federal Government during the previous fiscal year;

(C) the aggregate number of each type of leveraged instruments used by rural business investment companies during the previous fiscal year and how each number compares to previous fiscal years;

(D) the number of rural business investment company licenses surrendered and the number of rural business investment companies placed in liquidation during the previous fiscal year, identifying the amount of leverage each rural business investment company has received from the Federal Government and the type of leverage instruments each rural business investment company has used;

(E) the amount of losses sustained by the Federal Government as a result of operations under this subchapter during the previous fiscal year and an estimate of the total losses that the Federal Government can reasonably expect to incur as a result of the operations during the current fiscal year;

(F) actions taken by the Secretary to maximize recoupment of funds of the Federal Government expended to implement and administer the Rural Business Investment Program under this subchapter during the previous fiscal year and to ensure compliance with the requirements of this subchapter (including regulations);

(G) the amount of Federal Government leverage that each licensee received in the previous fiscal year and the types of leverage instruments each licensee used;

(H) for each type of financing instrument, the sizes, types of geographic locations, and other characteristics of the small business investment companies using the instrument during the previous fiscal year, including the extent to which the investment companies have used the leverage from each instrument to make loans or equity investments in rural areas; and

(I) the actions of the Secretary to carry out this subchapter.

(2) Prohibition

In compiling the report required under paragraph (1), the Secretary may not—

(A) compile the report in a manner that permits identification of any particular type of investment by an individual rural business investment company or small business concern in which a rural business investment company invests; and

(B) may not release any information that is prohibited under section 1905 of title 18.

(Pub. L. 87–128, title III, §384K, as added Pub. L. 107–171, title VI, §6029, May 13, 2002, 116 Stat. 398.)

§2009cc–11. Examinations

(a) In general

Each rural business investment company that participates in the program established under this subchapter shall be subject to examinations made at the direction of the Secretary in accordance with this section.

(b) Assistance of private sector entities

An examination under this section may be conducted with the assistance of a private sector entity that has the qualifications and the expertise necessary to conduct such an examination.

(c) Costs

(1) In general

The Secretary may assess the cost of an examination under this section, including compensation of the examiners, against the rural business investment company examined.

(2) Payment

Any rural business investment company against which the Secretary assesses costs under this paragraph shall pay the costs.

(d) Deposit of funds

Funds collected under this section shall—

(1) be deposited in the account that incurred the costs for carrying out this section;

(2) be made available to the Secretary to carry out this section, without further appropriation; and

(3) remain available until expended.

(Pub. L. 87–128, title III, §384L, as added Pub. L. 107–171, title VI, §6029, May 13, 2002, 116 Stat. 399.)

§2009cc–12. Injunctions and other orders

(a) In general

(1) Application by Secretary

Whenever, in the judgment of the Secretary, a rural business investment company or any other person has engaged or is about to engage in any act or practice that constitutes or will constitute a violation of a provision of this subchapter (including any rule, regulation, order, or participation agreement under this subchapter), the Secretary may apply to the appropriate district court of the United States for an order enjoining the act or practice, or for an order enforcing compliance with the provision, rule, regulation, order, or participation agreement.

(2) Jurisdiction; relief

The court shall have jurisdiction over the action and, on a showing by the Secretary that the rural business investment company or other person has engaged or is about to engage in an act or practice described in paragraph (1), a permanent or temporary injunction, restraining order, or other order, shall be granted without bond.

(b) Jurisdiction

(1) In general

In any proceeding under subsection (a), the court as a court of equity may, to such extent as the court considers necessary, take exclusive jurisdiction over the rural business investment company and the assets of the rural business investment company, wherever located.

(2) Trustee or receiver

The court shall have jurisdiction in any proceeding described in paragraph (1) to appoint a trustee or receiver to hold or administer the assets.

(c) Secretary as trustee or receiver

(1) Authority

The Secretary may act as trustee or receiver of a rural business investment company.

(2) Appointment

On the request of the Secretary, the court shall appoint the Secretary to act as a trustee or receiver of a rural business investment company unless the court considers the appointment inequitable or otherwise inappropriate by reason of any special circumstances involved.

(Pub. L. 87–128, title III, §384M, as added Pub. L. 107–171, title VI, §6029, May 13, 2002, 116 Stat. 399.)

§2009cc–13. Additional penalties for noncompliance

(a) In general

With respect to any rural business investment company that violates or fails to comply with this subchapter (including any rule, regulation, order, or participation agreement under this subchapter), the Secretary may, in accordance with this section—

(1) void the participation agreement between the Secretary and the rural business investment company; and

(2) cause the rural business investment company to forfeit all of the rights and privileges derived by the rural business investment company under this subchapter.

(b) Adjudication of noncompliance

(1) In general

Before the Secretary may cause a rural business investment company to forfeit rights or privileges under subsection (a), a court of the United States of competent jurisdiction must find that the rural business investment company committed a violation, or failed to comply, in a cause of action brought for that purpose in the district, territory, or other place subject to the jurisdiction of the United States, in which the principal office of the rural business investment company is located.

(2) Parties authorized to file causes of action

Each cause of action brought by the United States under this subsection shall be brought by the Secretary or by the Attorney General.

(Pub. L. 87–128, title III, §384N, as added Pub. L. 107–171, title VI, §6029, May 13, 2002, 116 Stat. 400.)

§2009cc–14. Unlawful acts and omissions; breach of fiduciary duty

(a) Parties deemed to commit a violation

Whenever any rural business investment company violates this subchapter (including any rule, regulation, order, or participation agreement under this subchapter), by reason of the failure of the rural business investment company to comply with this subchapter or by reason of its engaging in any act or practice that constitutes or will constitute a violation of this subchapter, the violation shall also be deemed to be a violation and an unlawful act committed by any person that, directly or indirectly, authorizes, orders, participates in, causes, brings about, counsels, aids, or abets in the commission of any acts, practices, or transactions that constitute or will constitute, in whole or in part, the violation.

(b) Fiduciary duties

It shall be unlawful for any officer, director, employee, agent, or other participant in the management or conduct of the affairs of a rural business investment company to engage in any act or practice, or to omit any act or practice, in breach of the fiduciary duty of the officer, director, employee, agent, or participant if, as a result of the act or practice, the rural business investment company suffers or is in imminent danger of suffering financial loss or other damage.

(c) Unlawful acts

Except with the written consent of the Secretary, it shall be unlawful—

(1) for any person to take office as an officer, director, or employee of any rural business investment company, or to become an agent or participant in the conduct of the affairs or management of a rural business investment company, if the person—

(A) has been convicted of a felony, or any other criminal offense involving dishonesty or breach of trust; or

(B) has been found liable in a civil action for damages, or has been permanently or temporarily enjoined by an order, judgment, or decree of a court of competent jurisdiction, by reason of any act or practice involving fraud or breach of trust; and


(2) for any person to continue to serve in any of the capacities described in paragraph (1), if—

(A) the person is convicted of a felony or any other criminal offense involving dishonesty or breach of trust; or

(B) the person is found liable in a civil action for damages, or is permanently or temporarily enjoined by an order, judgment, or decree of a court of competent jurisdiction, by reason of any act or practice involving fraud or breach of trust.

(Pub. L. 87–128, title III, §384O, as added Pub. L. 107–171, title VI, §6029, May 13, 2002, 116 Stat. 400.)

§2009cc–15. Removal or suspension of directors or officers

Using the procedures established by the Secretary for removing or suspending a director or an officer of a rural business investment company, the Secretary may remove or suspend any director or officer of any rural business investment company.

(Pub. L. 87–128, title III, §384P, as added Pub. L. 107–171, title VI, §6029, May 13, 2002, 116 Stat. 401.)

§2009cc–16. Repealed. Pub. L. 110–234, title VI, §6027(e), May 22, 2008, 122 Stat. 1183, and Pub. L. 110–246, §4(a), title VI, §6027(e), June 18, 2008, 122 Stat. 1664, 1944

Section, Pub. L. 87–128, title III, §384Q, as added Pub. L. 107–171, title VI, §6029, May 13, 2002, 116 Stat. 401, related to interagency agreement to carry out day-to-day management and operation of the program.

Codification

Pub. L. 110–234 and Pub. L. 110–246 repealed this section. Pub. L. 110–234 was repealed by section 4(a) of Pub. L. 110–246.

Effective Date of Repeal

Repeal of this section and repeal of Pub. L. 110–234 by Pub. L. 110–246 effective May 22, 2008, the date of enactment of Pub. L. 110–234, see section 4 of Pub. L. 110–246, set out as an Effective Date note under section 8701 of this title.

§2009cc–17. Regulations

The Secretary may promulgate such regulations as the Secretary considers necessary to carry out this subchapter.

(Pub. L. 87–128, title III, §384R, as added Pub. L. 107–171, title VI, §6029, May 13, 2002, 116 Stat. 401.)

§2009cc–18. Authorization of appropriations

There is authorized to be appropriated to carry out this subchapter $20,000,000 for each of fiscal years 2014 through 2023.

(Pub. L. 87–128, title III, §384S, as added Pub. L. 110–234, title VI, §6027(f), May 22, 2008, 122 Stat. 1183, and Pub. L. 110–246, §4(a), title VI, §6027(f), June 18, 2008, 122 Stat. 1664, 1944; amended Pub. L. 113–79, title VI, §6028, Feb. 7, 2014, 128 Stat. 850; Pub. L. 115–334, title VI, §6427, Dec. 20, 2018, 132 Stat. 4771.)

Codification

Pub. L. 110–234 and Pub. L. 110–246 enacted identical sections. Pub. L. 110–234 was repealed by section 4(a) of Pub. L. 110–246.

Prior Provisions

A prior section 2009cc–18, Pub. L. 87–128, title III, §384S, as added Pub. L. 107–171, title VI, §6029, May 13, 2002, 116 Stat. 402; amended Pub. L. 109–171, title I, §1403(a), Feb. 8, 2006, 120 Stat. 6, related to subchapter funding through fiscal year 2006, prior to repeal by Pub. L. 110–234, title VI, §6027(f), May 22, 2008, 122 Stat. 1183, and Pub. L. 110–246, §4, title VI, §6027(f), June 18, 2008, 122 Stat. 1664, 1944, effective May 22, 2008.

Amendments

2018Pub. L. 115–334 substituted "2023" for "2018".

2014Pub. L. 113–79 substituted "$20,000,000 for each of fiscal years 2014 through 2018" for "$50,000,000 for the period of fiscal years 2008 through 2012".

Effective Date

Enactment of this section and repeal of Pub. L. 110–234 by Pub. L. 110–246 effective May 22, 2008, the date of enactment of Pub. L. 110–234, see section 4 of Pub. L. 110–246, set out as a note under section 8701 of this title.