Section 40-9H-5 Growth Fund Forfeitures; Notice; Application to Exit Program.

(a) A growth fund shall forfeit its management fee, the SSBCI loan shall be immediately due and its subordination immediately revoked, and remaining draws on the SSBCI loan shall be forfeited if: (1) Within 12 months of the closing date: a. The growth fund does not invest 100 percent of its investment authority in growth investments in this state, of which at least 25 percent shall be invested in agribusiness and at least 25 percent shall be invested in minority owned businesses, and of which at least 50 percent shall be invested in growth businesses located in rural areas and at least 25 percent shall be invested in growth businesses located in qualified opportunity zones. b. With respect to awards of investment authority less than seven million five hundred thousand dollars ($7,500,000), the growth fund does not invest 100 percent of its investment authority in this state, of which at least 50 percent of growth investments shall be made in agribusiness or minority owned businesses and at least 75 percent of growth investments shall be made in rural areas or opportunity zones. (2) The growth fund, after satisfying subdivision (1), fails to maintain growth investments equal to 100 percent of its investment authority until the sixth anniversary of the closing date in accordance with the levels set forth in subdivision (1). For the purposes of this subdivision, a growth investment is maintained even if it is sold or repaid so long as the growth fund reinvests an amount equal to the capital returned or recovered from the original investment, exclusive of any profits realized, in other growth investments in this state within 12 months of the receipt of the capital. Amounts received periodically by a growth fund shall be treated as continuously invested in growth investments if the amounts are reinvested in one or more growth investments by the end of the following calendar year. (3) The growth fund, before program exit, makes a distribution or payment that results in the growth fund having less than 100 percent of its investment authority invested in growth investments in this state or available for investment in growth investments and held in cash and other marketable securities, or makes a distribution or payment to an equity holder, other than to fund payments with respect to matching capital funded indirectly as debt, without consent of the department. (4) The growth fund makes a growth investment in a growth business that directly or indirectly through an affiliate owns, has the right to acquire an ownership interest in, makes a loan to, or makes an investment in the growth fund, an affiliate of the growth fund, or an investor in the growth fund. This subdivision does not apply to investments in publicly traded securities by a growth business or an owner or affiliate of the growth business. For purposes of this subdivision, a growth fund shall not be considered an affiliate of a growth business solely because of its growth investment. (b) The maximum amount of growth investments in a growth business, including amounts invested in affiliates of the growth business, that may be counted towards its satisfaction of the requirements of subdivisions (a)(1) and (2) is the greater of three million dollars ($3,000,000) or 20 percent of its total investment authority, exclusive of repaid or redeemed growth investments. (c) Upon violation of this section, the department shall notify the growth fund. The growth fund shall have 90 days from the date the notice was received to correct any violation outlined in the notice to the satisfaction of the department and to avoid the penalties set forth in subsection (a). (d) If an SSBCI loan is accelerated, the remaining draws on the SSBCI loan and associated investment authority shall not count toward the limit on the SSBCI loans and total investment authority described by subsection (c) of Section 40-9H-3. The department shall first award reverted investment authority and SSBCI loans on a pro rata basis to each growth fund that was awarded less than the amount requested in an application. The department may award any remaining investment authority and SSBCI loans to new applicants. (e)(1) On or after the seventh anniversary of the closing date, a growth fund may apply to the department to exit the program and no longer be subject to regulation except as set forth in subdivision (2). The application shall include a calculation of the follow-on percentage and the new jobs and retained jobs percentage. The department shall respond to the application within 30 days of receipt. In evaluating the application, the fact that the SSBCI loan has not been violated and that the growth fund has not received a notice of revocation that has not been cured under subsection (c) shall be sufficient evidence to prove that the growth fund is eligible for exit. The department may not unreasonably deny an application submitted under this subsection. If the application is denied, the notice shall include the reasons for the determination. (2) On or after an exit under this subsection, the growth fund may make distributions and payments as follows: a. First, to pay principal and interest on matching capital funded directly or indirectly as debt. b. Second, to pay management fees unless prohibited under this section. c. Third, to pay any principal and interest on the SSBCI loan not deemed to be forgiven pursuant to paragraph (24)b. of Section 40-9H-2. d. Fourth, to make distributions to its equity holders.