[Code of Federal Regulations]
[Title 13, Volume 1]
[Revised as of January 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 13CFR107.160]

[Page 38-40]
 
                TITLE 13--BUSINESS CREDIT AND ASSISTANCE
 
                CHAPTER I--SMALL BUSINESS ADMINISTRATION
 
PART 107--SMALL BUSINESS INVESTMENT COMPANIES--Table of Contents
 
                Subpart C--Qualifying for an SBIC License
 
Sec. 107.160  Special rules for Licensees formed as limited partnerships.

    A limited partnership organized under State law solely for the 
purpose of performing the functions and conducting the activities 
contemplated

[[Page 39]]

under the Act may apply for a license under section 301(c) or section 
301 (d) of the Act (``Partnership Licensee'').
    (a) Number of Licensee's General Partners. If you are a Partnership 
Licensee, you must have as your general partner(s) at least two 
individuals, or at least one corporation, partnership, or limited 
liability company (LLC), or any combination of individuals, 
corporations, partnerships, or LLCs.
    (b) Entity General Partner of Licensee. A general partner which is a 
corporation, limited liability company or partnership (an ``Entity 
General Partner'') shall be organized under state law solely for the 
purpose of serving as the general partner of one or more Licensees.
    (1) SBA must approve any person who will serve as an officer, 
director, manager, or general partner of the Entity General Partner. 
This provision must be stated in an Entity General Partner's Certificate 
of Incorporation, member agreement, Limited Partnership Agreement or 
other similar governing instrument which must, in each case, accompany 
the license application.
    (2) An Entity General Partner is subject to the same examination and 
reporting requirements as a Licensee under section 310(b) of the Act. 
The restrictions and obligations imposed upon a Licensee by 
Secs. 107.1800 through 107.1820, and 107.30, 107.410 through 107.450, 
107.470, 107.475, 107.500, 107.510, 107.585, 107.600, 107.680, 107.690 
through 107.692, 107.865, and 107.1910 apply also to an Entity General 
Partner of a Licensee.
    (3) The general partner(s) of your Entity General Partner(s) will be 
considered your general partner.
    (4) If your Entity General Partner is a limited partnership, its 
limited partners may be considered your Control Person(s) if they meet 
the definition for Control Person in Sec. 107.50.
    (5) If your Entity General Partner is a limited partnership, it is 
subject to paragraph (a) of this section.
    (c) Other requirements for Partnership Licensees. If you are a 
Partnership Licensee:
    (1) You must have a minimum duration of ten 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 SBA, its agent, or Trustee have been paid, 
the Partnership Licensee may be terminated by a vote of your partners. 
(For purposes of this provision SBA is not considered a partner.);
    (2) None of your general partner(s) may be removed or replaced by 
your limited partners without prior written approval of SBA;
    (3) Any transferee of, or successor in interest to, your general 
partner shall have only the rights and liabilities of a limited partner 
pending SBA's written approval of such transfer or succession; and
    (4) You must incorporate all the provisions in this paragraph (c) in 
your Limited Partnership Agreement.
    (d) Obligations of a Control Person. All Control Persons are bound 
by the disciplinary provisions of sections 313 and 314 of the Act and by 
the conflict-of-interest rules under section 312 of the Act. The term 
Licensee, as used in Secs. 107.30, 107.460, and 107.680 includes all of 
the Licensee's Control Persons. The term Licensee as used in 
Sec. 107.670 includes only the Licensee's general partner(s). The 
conditions specified in Secs. 107.1800 through 107.1820 and 
Sec. 107.1910 apply to all general partners.
    (e) Liability of general partner for partnership debts to SBA. 
Subject to section 314 of the Act, your general partner is not liable 
solely by reason of its status as a general partner for repayment of any 
Leverage or debts you owe to SBA unless SBA, 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.
    (f) Reorganization of Licensee. A corporate Licensee wishing to 
reorganize as a Partnership Licensee, or a Partnership Licensee wishing 
to reorganize as a Corporate Licensee, may apply to SBA for approval 
under Sec. 107.470.
    (g) Special Leverage requirement. Before your first issuance of 
Leverage, you must furnish SBA 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.

[[Page 40]]

                          Capitalizing an SBIC