U.S. Code of Federal Regulations
Regulations most recently checked for updates: Jun 06, 2023
§ 4290.100 - Business form.
(a) Newly-formed for-profit. An Applicant for a RBIC license must be a newly formed for-profit entity or, subject to § 4290.150, a newly formed for-profit subsidiary of an existing entity. It must be organized under the law of a State. An Applicant may be organized as a corporation (“Corporate RBIC”), a limited partnership (“Partnership RBIC”), or a limited liability company (“LLC RBIC”).
(b) Purpose. An Applicant must be organized solely for the purpose of performing the functions and conducting the activities contemplated under the Act: making Developmental Capital investments and providing Operational Assistance to eligible Smaller Enterprises.
(c) Articles. The RBIC's Articles—
(1) Must specify in general terms:
(i) The purposes for which the RBIC is formed;
(ii) The name of the RBIC;
(iii) The Rural Area or Areas in which it will operate;
(iv) The place where the RBIC's headquarters will be located; and
(v) The amount and classes of the RBIC's ownership interests.
(2) May contain any other provisions consistent with the Act that the RBIC may determine is appropriate to adopt to regulate its business and the conduct of its affairs.
(3) Are subject to the Agency's approval.
(d) Duration—(1) Partnership RBICs. If you are a Partnership RBIC:
(i) You must have a minimum duration of 10 years, or two years following the maturity of your last-maturing Leverage security, whichever is longer. After 10 years, if all Leverage has been repaid or redeemed and all amounts due the Agency, its agent, or Trustee have been paid, the Partnership RBIC may be terminated by a vote of your partners;
(ii) None of your general partner(s) may be removed or replaced by your limited partners without prior written approval of the Agency;
(iii) Any transferee of, or successor in interest to, your general partner shall have only the rights and liabilities of a limited partner prior to the Agency's written approval of such transfer or succession; and
(iv) You must incorporate all the provisions in this paragraph (d) in your limited partnership agreement.
(2) LLC RBICs. If you are a LLC RBIC, you must have a minimum duration of 10 years, or two years following the maturity of your last-maturing Leverage security, whichever is longer. After 10 years, if all Leverage has been repaid or redeemed and all amounts due the Agency, its agent, or Trustee have been paid, the LLC RBIC may be terminated by a vote of your members.
(3) Corporate RBICs. If you are a Corporate RBIC, you must have a duration of not less than 30 years unless earlier dissolved by the shareholders, except that the Corporate RBIC must not dissolve until at least two years following the maturity of your last-maturing Leverage security.
§ 4290.110 - Qualified management.
An Applicant must show, to the satisfaction of the Agency, that its current or proposed management team is qualified and has the knowledge, experience, and capability in Community Development Finance or Relevant Capital Finance, necessary for investing in the types of Enterprises contemplated by the Act, regulations in this part, and its business plan. In determining whether an Applicant's current or proposed management team has sufficient qualifications, the Agency will consider information provided by the Applicant and third parties concerning the background, capability, education, training and reputation (and any other managerial aspect identified by the USDA in a
§ 4290.120 - Plan to invest in Rural Areas.
An Applicant must agree that if licensed as a RBIC, it will make Developmental Capital investments in Enterprises that will create wealth and job opportunities in Rural Areas and among individuals living in those areas.
§ 4290.130 - Identified Rural Areas.
A RBIC must identify the specific Rural Area or Areas in which it intends to make Developmental Capital investments and provide Operational Assistance under the RBIC program. The scope of the identified areas must be consistent with Applicant's business plan, especially as the plan relates to the Applicant's ability to operate actively, soundly, and profitably in such areas.
§ 4290.140 - Approval of initial Management Expenses.
A RBIC must have its Management Expenses approved by the Agency at the time it is licensed. (See § 4290.520 for the definition of Management Expenses.)
§ 4290.150 - Management and ownership diversity requirement.
(a) Diversity requirement. You must have diversity between management and ownership in order to be licensed as a RBIC and to maintain your license. To establish diversity, you must meet the requirements in paragraphs (b) and (c) of this section.
(b) Percentage ownership requirement. No Person or group of Persons who are Affiliates of one another may own or control, directly or indirectly, more than 70 percent of your Regulatory Capital or your Leverageable Capital.
(c) Non-affiliation requirement. At least 30 percent of your Regulatory Capital and Leverageable Capital must be owned and controlled by Persons unaffiliated with your management and unaffiliated with each other, and whose investments are significant in dollar and percentage terms as determined by the Agency. Such Persons must not be your Associates (except for their status as your shareholders, limited partners or members) and must not Control, be Controlled by, or be under Common Control with any of your Associates. A single “acceptable” Institutional Investor may be substituted for two or three of the three investors who are otherwise required. The following Institutional Investors are “acceptable” for this purpose:
(1) Entities whose overall activities are regulated and periodically examined by State, Federal or other governmental authorities satisfactory to the Agency;
(2) Entities listed on the New York Stock Exchange;
(3) Entities that are publicly-traded and that meet both the minimum numerical listing standards and the corporate governance listing standards of the New York Stock Exchange;
(4) Public or private employee pension funds;
(5) Trusts, foundations, or endowments, but only if exempt from Federal income taxation; and
(6) Other Institutional Investors satisfactory to the Agency.
(d) Voting requirement. The investors relied upon to satisfy the diversity requirement may not delegate their voting rights to any Person who is your Associate, or who Controls, is Controlled by, or is under Common Control with any of your Associates, without prior approval by the Agency.
(e) Requirement to maintain diversity. You must maintain management-ownership diversity while you are a RBIC. If, at any time, you no longer have the required management-ownership diversity, you must:
(1) Notify the Agency within 10 days; and
(2) Re-establish diversity within six months after loss of diversity.
§ 4290.160 - Special rules for Partnership RBICs and LLC RBICs.
(a) Entity General Partner or Entity Managing Member. (1) A general partner of a Partnership RBIC which is a corporation, limited liability company or partnership (an “Entity General Partner”), or a managing member of an LLC RBIC which is a corporation, limited liability company, or partnership (an “Entity Managing Member”) shall be organized under State law solely for the purpose of serving as the general partner or managing member of one or more RBICs, and shall be organized for profit.
(2) The Agency must approve any person who will serve as an officer, director, manager, or general partner of the Entity General Partner or Entity Managing Member and of an entity that Controls the Entity General Partner or Entity Managing Member. This provision must be stated in an Entity General Partner's or Entity Managing Member's articles of incorporation or charter and bylaws if a corporation, operating agreement if a limited liability company, or partnership agreement if a partnership.
(3) An Entity General Partner or Entity Managing Member is subject to the same examination and reporting requirements as a RBIC under sections 384K and 384L of the Act. The restrictions and obligations imposed upon a RBIC by §§ 4290.1810, 4290.30, 4290.410 through 4290.450, 4290.470, 4290.500, 4290.510, 4290.585, 4290.600, 4290.680, 4290.690 through 4290.692, and 4290.1910 apply also to an Entity General Partner or Entity Managing Member of a RBIC.
(4) The general partner(s) of your Entity General Partner(s) or Entity Managing Member(s) will be considered your general partner.
(5) If your Entity General Partner or Entity Managing Member is a limited partnership, its limited partners may be considered your Control Person(s) if they meet the definition for Control Person in § 4290.50.
(b) Liability of general partner of Partnership RBIC. Subject to section 384O(b) of the Act, your general partner(s) is not liable solely by reason of its status as a general partner for repayment of any Leverage or debts you owe to the Agency unless the Agency, in the exercise of reasonable investment prudence, and with regard to your financial soundness, determines otherwise prior to the purchase or guaranty of your Leverage. The conditions specified in § 4290.1810 and § 4290.1910 apply to all general partners.
(c) Special Leverage requirement for Partnership RBICs and LLC RBICs. Before your first issuance of Leverage, you must furnish the Agency with evidence that you qualify as a partnership for tax purposes, either by a ruling from the Internal Revenue Service or by an opinion of counsel.
§ 4290.165 - Obligations of Control Persons.
All Control Persons are bound by the provisions of sections 384O and 384P of the Act and by the conflict-of-interest rules under § 4290.730. The term RBIC, as used in §§ 4290.30, 4290.460, and 4290.680, includes all of the RBIC's Control Persons.
§ 4290.200 - Adequate capital for RBICs.
You must meet the requirements of §§ 4290.210 through 4290.230 in order to qualify as a RBIC.
§ 4290.210 - Minimum capital requirements for RBICs.
(a) General Rule. Unless otherwise specified in a
(b) Exception. (1) The Agency in its sole discretion and based on a showing of special circumstances and good cause may license an Applicant with Regulatory Capital of at least $2,500,000, but only if the Applicant:
(i) Has satisfied all eligibility criteria for licensing as a RBIC as described in § 4290.390(a) of this part, except the capital requirement specified in paragraph (a)(1) of that section, as determined solely by the Agency;
(ii) Has a viable business plan reasonably projecting profitable operations; and
(iii) Has a reasonable timetable for achieving Regulatory Capital of at least $10,000,000.
(2) A RBIC licensed under this exception is not eligible to receive Leverage until it has complied with paragraph (a) of this section.
(c) Time frame. Each RBIC shall have a period of 2 years to meet the capital requirements set forth in this section.
(d) Closing. Each RBIC may conduct more than one closing to raise the specific amount of Regulatory Capital that the Applicant had projected in its application that it would raise (see § 4290.310(b)). One or more closings may take place subsequent to licensing as an RBIC to raise the difference between the required Regulatory Capital as provided under paragraphs (a) and (b) of this section and the specific amount of Regulatory Capital that the Applicant had projected to raise in its application.
§ 4290.230 - Private Capital for RBICs.
(a) General. Private Capital means the contributed capital of a RBIC, plus unfunded binding commitments by Institutional Investors (including commitments evidenced by a promissory note) to contribute capital to a RBIC.
(b) Contributed capital. For purposes of this section, contributed capital means the paid-in capital and paid-in surplus of a Corporate RBIC, the members' contributed capital of a LLC RBIC, or the partners' contributed capital of a Partnership RBIC, in each case subject to the limitations in paragraph (c) of this section.
(c) Exclusions from Private Capital. Private Capital does not include:
(1) Funds borrowed by an Applicant or a RBIC from any source.
(2) Funds obtained through the issuance of Leverage.
(3) 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 that the following categories of such funds are not excluded from Private Capital—
(i) Funds obtained directly or indirectly 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) Qualified Non-private Funds in an amount not to exceed 33 percent of the total Private Capital of any Applicant or RBIC, provided, however, that in no event may any investor or investors of Qualified Non-private Funds have the power to Control, directly or indirectly, the management, board of directors, general partners, or members of the RBIC.
(4) Any portion of an unfunded commitment from an Institutional Investor with a net worth of less than $10 million that exceeds 10 percent of such Institutional Investor's net worth.
(5) An unfunded commitment from an investor if the Agency determines that the collectability of the commitment is questionable.
(d) Non-cash capital contributions. Capital contributions in a form other than cash are subject to the limitations in § 4290.240 of this part.
(e) Contributions with borrowed funds. You may not accept any capital contribution made with funds borrowed by a Person seeking to own an equity interest (whether direct or indirect, beneficial or of record) of at least 10 percent of your Private Capital. This exclusion does not apply if:
(1) Such Person's net worth is at least twice the amount borrowed; or
(2) The Agency gives its prior written approval of the capital contribution.
§ 4290.240 - Limitations on non-cash capital contributions in Private Capital.
Non-cash capital contributions to a RBIC or Applicant are included in Private Capital only if they are approved by the Agency and they fall into one of the following categories:
(a) Direct obligations of, or obligations guaranteed as to principal and interest by, the United States having a term of no more than one year.
(b) Services rendered or to be rendered to you, priced at no more than their fair market value.
(c) Other non-cash assets approved by the Agency.