Home > Legal Library > Article




Join Matindale-Hubbell Connected


SBIC Annual Recertification of Institutional Investor Status




by:
Christopher J. Douglass
Edwards Wildman Palmer LLP - Chicago Office

Kate L. Price
Edwards Wildman Palmer LLP - Washington Office

Alan B. Roth
Edwards Wildman Palmer LLP - Chicago Office

 
May 10, 2013

Previously published on May 2013

On May 8, 2013, the U.S. Small Business Administration (“SBA”) issued Memorandum #2013-1 regarding annual recertification of the Institutional Investors of Small Business Investment Companies (“SBICs”). The Investment Division of the SBA requires certain SBICs to recertify the status of all limited partners classified as Institutional Investors on an annual basis. Recertifications will be required each year from SBICs with outstanding SBA leverage, outstanding SBA leverage commitments or both.

Because the unfunded portion of an Institutional Investor’s commitment to an SBIC is included when calculating Regulatory Capital, the SBA has determined that it is essential to take steps on a regular basis to ensure all Institutional Investors remain qualified for that designation. If limited partners are no longer qualified, the SBIC’s Regulatory Capital must be adjusted accordingly and a new Capital Certificate must be filed with the SBA.

An SBIC’s level of Regulatory Capital has a direct bearing on its operations including its capital impairment ratio, over-line limitation, management fee calculation, leverage commitment eligibility, etc. Misstatements of Regulatory Capital can be a violation of Federal law and may subject violators to criminal prosecution and civil penalties.

SBICs may accomplish the annual recertification of the status of their investors by submitting to their SBA Operations Analyst either:

OPTION 1: a fully executed Capital Certificate which reflects any revisions in its Institutional Investors and/or Regulatory Capital, or

OPTION 2: a letter certifying that a review of unfunded commitments of Institutional Investors has occurred and that no changes are required in the Capital Certificate most recently filed by the SBIC with the SBA.

SBICs licensed between October 1, 2012 and September 30, 2013, do not need to recertify until 2014.

Based on the level of Regulatory Capital reflected on the last Capital Certificate submitted to the SBA by an SBIC, the SBIC must recertify according to the following schedule:

Unfunded Commitments

Filing Schedule

Low

High

June 30, 2013

$20,000,000

$20,000,000+

July 31, 2013

$12,500,000

$19,999,999

August 31, 2013

$7,500,000

$12,499,999

September 30, 2013

$5,000,000

$7,499,999

October 31, 2013

$2,500,000

$4,999,999

November 30, 2013

$1

$2,499,999

 



 

The views expressed in this document are solely the views of the author and not Martindale-Hubbell. This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance.
 

View More Library Documents By...

 
 
Edwards Wildman Palmer LLP Overview