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1 1 Section 1. NEW SECTION. 15E.175 SESQUICENTENNIAL
1 2 BUSINESS DEVELOPMENT FUNDS – PURPOSE.
1 3 The purpose of this division is to encourage and strengthen
1 4 economic development in Iowa by increasing the availability of
1 5 development capital to new businesses in Iowa, by promoting
1 6 the growth of existing Iowa businesses, and by stimulating the
1 7 expansion of business activities that promote and maintain the
1 8 economic stability of the state. To carry out this purpose, a
1 9 refund is authorized for sesquicentennial business development
1 10 funds which make investments under this division.
1 11 Sec. 2. NEW SECTION. 15E.176 SESQUICENTENNIAL BUSINESS
1 12 DEVELOPMENT FUNDS ESTABLISHED – QUALIFICATIONS.
1 13 A sesquicentennial business development fund, to qualify
1 14 for the refund under section 15E.177, shall meet the following
1 15 requirements:
1 16 1. The fund shall not be a governmental entity.
1 17 2. The fund may be either a for profit or not for profit
1 18 entity created for the purpose of making capital available to
1 19 businesses.
1 20 3. The fund shall register with the securities bureau of
1 21 the insurance division of the department of commerce.
1 22 Information to be filed with the securities bureau includes at
1 23 least the following:
1 24 a. The name of the fund, which must be unique, and contain
1 25 the words "sesquicentennial business development fund".
1 26 b. The principal place of business of the fund, which
1 27 shall be in Iowa.
1 28 c. That the fund has an initial capitalization of at least
1 29 ten million dollars.
1 30 d. That the fund manager certifies that the fund makes
1 31 debt, equity, or other investments in qualified businesses or
1 32 in other businesses which may be located outside of the state.
1 33 e. Only investments in qualified businesses shall qualify
1 34 for the refund.
1 35 4. To remain a qualified fund under this division, the
2 1 fund must renew its registration with the securities bureau
2 2 annually, recertifying the facts upon which the initial
2 3 qualification was based. The fund shall also file a report
2 4 with the securities bureau detailing its investments upon
2 5 dissolution of the fund.
2 6 Applications for registration and renewal of registration
2 7 shall be on forms prescribed by the administrator of the
2 8 securities bureau. The administrator may require supporting
2 9 documentation to be filed with an application. All
2 10 applications shall be signed by the administrator or
2 11 authorized agent of the fund.
2 12 Sec. 3. NEW SECTION. 15E.177 INVESTMENT REFUND –
2 13 APPORTIONMENT TO INVESTORS – APPROPRIATION.
2 14 1. A qualified sesquicentennial business development fund
2 15 shall receive the following refunds on investments made by the
2 16 fund in qualified businesses:
2 17 a. Twenty-five percent of the share of an early-phase
2 18 investment in a qualified business.
2 19 b. Twelve percent of the share of a growth-phase
2 20 investment in a qualified business.
2 21 c. Six percent of the share of a mezzanine-phase
2 22 investment in a qualified business.
2 23 2. For the purposes of this division:
2 24 a. "Early-phase investment" means an investment in a
2 25 qualified business which was formed within the last three
2 26 years and which has annual gross revenue during that period of
2 27 one million dollars or less, determined in accordance with
2 28 generally accepted accounting principles.
2 29 b. "Growth-phase investment" means an investment in a
2 30 qualified business with an annual gross revenue between one
2 31 million and five million dollars, determined in accordance
2 32 with generally accepted accounting principles.
2 33 c. "Mezzanine-phase investment" means an investment in a
2 34 qualified business with annual gross revenue of over five
2 35 million dollars but not more than twenty-five million dollars,
3 1 determined in accordance with generally accepted accounting
3 2 principles.
3 3 d. To qualify for a refund under this section, an
3 4 investment must be in an unaffiliated and nonrelated qualified
3 5 business, person, partnership, or corporation.
3 6 3. An investor, in order to be qualified to receive a
3 7 refund from the fund, must invest in a qualified fund and
3 8 shall not withdraw moneys invested in the fund for at least
3 9 three hundred sixty-five consecutive days following the date
3 10 of original investment.
3 11 4. The fund holds debt, equity, or other investments of
3 12 the same value for at least three hundred sixty-five
3 13 consecutive days following the date of the investment except
3 14 that the debt, equity, or other investment may be divested and
3 15 replaced with other eligible investments of the same type
3 16 prior to the end of the three hundred sixty-five day period.
3 17 5. A qualified sesquicentennial business development fund
3 18 may apply once each year to the department of revenue and
3 19 finance for an investment refund. A fund shall only receive
3 20 one refund per qualified investment in a qualified business.
3 21 The application shall contain the information and be on a form
3 22 prescribed by the department, and shall specify the amount of
3 23 refund being claimed for each type of investment under
3 24 subsection 1. The department shall review the application and
3 25 shall issue a warrant in the amount of the combined refunds
3 26 under subsection 1 to the fund.
3 27 6. The fund shall apportion the refund received among the
3 28 qualified investors in the fund in proportion to moneys
3 29 invested in the fund by each qualified investor.
3 30 Apportionment shall be made within forty-five days of the
3 31 receipt of the refund from the department. An investor shall
3 32 only receive one refund per qualified investment in a
3 33 qualified fund.
3 34 7. There is appropriated from the general fund of the
3 35 state for each fiscal year beginning on or after July 1, 1997,
4 1 eight million dollars, to be used to pay refunds under this
4 2 division. Refunds under this division shall be paid in full
4 3 in the order in which the requests for refunds are received.
4 4 Sec. 4. NEW SECTION. 15E.178 QUALIFIED BUSINESS.
4 5 As used in this division, "qualified business" means a
4 6 business which is unable to obtain adequate financing on
4 7 suitable terms from conventional sources in order to remain
4 8 viable or to commence or expand its ability to provide goods
4 9 or services, and which meets the following requirements:
4 10 1. The business complies with the requirements of chapter
4 11 502 and is designated a qualified business pursuant to a
4 12 registration with the securities bureau which contains at
4 13 least the following:
4 14 a. A financial statement for the most recent fiscal year
4 15 or years which has been prepared and certified by an
4 16 independent certified public accountant.
4 17 b. The business could not be subject to a stop order under
4 18 section 502.209 for either of the reasons stated in section
4 19 502.207A, subsection 7, paragraphs "a" or "b".
4 20 c. That the business engages in one of the following
4 21 activities:
4 22 (1) Interstate or intrastate commerce for the purpose of
4 23 manufacturing, processing, or assembling products.
4 24 (2) Agricultural, fishery, or forestry processing.
4 25 (3) Software development.
4 26 (4) The provision of services in intrastate or interstate
4 27 commerce, excluding retail, real estate, insurance, or
4 28 professional services.
4 29 (5) Research and development of products and processes
4 30 associated with any of the activities enumerated in
4 31 subparagraph (1), (2), or (3).
4 32 d. The business meets the income requirements for early,
4 33 growth, or mezzanine-phase investments.
4 34 2. To remain a qualified business, the business shall
4 35 renew its registration annually by applying for renewal with
5 1 the securities division. The application shall at least
5 2 contain a financial statement for the most recent fiscal year
5 3 and information sufficient to show that the business continues
5 4 to be a early, growth, or mezzanine-phase business.
5 5 3. Applications for registration and renewal of
5 6 registration under this section shall be on forms prescribed
5 7 by the administrator of the securities bureau. The
5 8 administrator may require supporting documentation to be filed
5 9 with applications. All applications shall be signed by a
5 10 person with the authority to enter into contracts on behalf of
5 11 the business.
5 12 Sec. 5. NEW SECTION. 15E.179 EXAMINATIONS.
5 13 The administrator of the securities bureau may examine the
5 14 business records of a sesquicentennial business development
5 15 fund at the times and in the manner the administrator
5 16 determines to be necessary. The administrator may obtain the
5 17 services of private persons with expertise in securities
5 18 matters to conduct the examinations. Examinations of a fund
5 19 may be made without prior notice to the fund. Expenses
5 20 reasonably attributable to the examination shall be paid by
5 21 the fund whose investments are being examined. The
5 22 administrator is directed to cooperate with other state
5 23 agencies to minimize duplicative examinations.
5 24 The administrator of the securities bureau may also conduct
5 25 an examination of a qualified business to determine if it has
5 26 met the requirements of this division.
5 27 Sec. 6. NEW SECTION. 15E.180 VIOLATIONS – REMEDIES –
5 28 CRIMINAL PENALTY.
5 29 1. In addition to any other penalties, a violation of any
5 30 of the provisions of this division is grounds for loss of
5 31 status as a qualifying business. A business alleged to have
5 32 violated a provision of this division shall be allowed a one
5 33 hundred twenty-day grace period to remedy the violation or to
5 34 comply with the provisions of this division.
5 35 2. In addition to any other penalties, a violation of the
6 1 provisions in this division shall be grounds for revocation of
6 2 the registration of the fund as a qualified sesquicentennial
6 3 business development fund. A fund alleged to have violated
6 4 this division or to be out of compliance with this division
6 5 shall be allowed a one hundred twenty-day grace period to
6 6 remedy the violation or to comply with the provisions of this
6 7 division. Revocation shall cause the forfeiture of any right
6 8 to a refund under this section and shall cause the total
6 9 amount of a refund for all years under this section to be due
6 10 and payable with interest from the time registration is
6 11 effective.
6 12 3. A person who willfully attempts in any manner to
6 13 violate a provision of this division for the purposes of
6 14 obtaining an investment or a refund commits a class "D"
6 15 felony.
6 16 Sec. 7. NEW SECTION. 15E.181 LEGISLATIVE REVIEW AND
6 17 OVERSIGHT.
6 18 The director of the department of revenue and finance and
6 19 the administrator of the securities bureau of the insurance
6 20 division shall each report on an annual basis in accordance
6 21 with section 7A.11 concerning sesquicentennial funds receiving
6 22 refunds under this division.
6 23 EXPLANATION
6 24 This bill provides for the creation of sesquicentennial
6 25 business development funds to provide capital for small
6 26 businesses as a means to promote economic development in the
6 27 state. The bill does the following:
6 28 1. Section 15E.176 authorizes the establishment of
6 29 sesquicentennial business development funds. Funds are to be
6 30 nongovernmental entities which must register with the
6 31 securities bureau of the insurance division of the department
6 32 of commerce. Funds are limited to making debt, equity, or
6 33 other investments in Iowa or foreign businesses.
6 34 2. Section 15E.177 provides that a fund is to receive a
6 35 payment from the state based upon the amount of investments
7 1 made in qualified businesses. The payment is 25 percent of an
7 2 early-phase investment by the fund in a qualified business, 12
7 3 percent of a growth-phase investment in a qualified business,
7 4 and 6 percent of a mezzanine-phase investment by the fund in a
7 5 qualified business.
7 6 An early-phase investment is an investment in a qualified
7 7 business which was formed within the past three years and has
7 8 less than $1 million in gross revenue each year. A growth-
7 9 phase investment is an investment in a qualified business
7 10 which has annual revenues between $1 million and $5 million.
7 11 A mezzanine-phase investment is an investment in a qualified
7 12 business with over $5 million but not more than $25 million in
7 13 annual revenues.
7 14 A sesquicentennial business development fund which receives
7 15 a payment shall apportion the moneys received among the
7 16 investors of the fund within 45 days. A standing
7 17 appropriation of $8 million is made to fund the payments
7 18 beginning in fiscal year 1998.
7 19 3. Section 15E.178 sets out the requirements for a
7 20 qualified business. A qualified business is one which
7 21 complies with chapter 502 regarding securities issuance, meets
7 22 the requirements for early, growth, or mezzanine-phase
7 23 investments, has its principal place of business in Iowa and
7 24 most of its employees in Iowa, and engages in certain
7 25 activities, including interstate or intrastate manufacturing
7 26 or processing of products, agricultural processing, software
7 27 development, or research and development. The business must
7 28 show that it meets eligibility requirements annually with the
7 29 securities bureau of the insurance division.
7 30 4. Section 15E.179 provides for examinations of a fund and
7 31 of businesses in which a fund invests and examinations of
7 32 sesquicentennial funds by the administrator of the securities
7 33 bureau. Examinations shall be in cooperation with those of
7 34 other agencies to minimize duplication of effort.
7 35 5. Section 15E.180 provides that a business or fund which
8 1 violates a provision or requirement regarding investment or
8 2 qualifications has 120 days to remedy the violation or be
8 3 subject to loss of qualification status. A person who
8 4 willfully attempts to violate a provision regarding a fund or
8 5 business for the purposes of obtaining an investment or refund
8 6 commits a class "D" felony.
8 7 6. Section 15E.181 requires the director of the department
8 8 of revenue and finance and the administrator of the securities
8 9 bureau to report to the general assembly regarding the
8 10 payments received by sesquicentennial business development
8 11 funds.
8 12 LSB 4035HZ 76
8 13 mk/sc/14
Text: HF02489 Text: HF02491 Text: HF02400 - HF02499 Text: HF Index Bills and Amendments: General Index Bill History: General Index
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