Control of business firm prohibited; exceptions.

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(a) Either by itself or in concert with 1 or more of its directors, officers, principal shareholders or affiliates, 1 or more other licensees or 1 or more directors, officers, principal shareholders or affiliates of another licensee or licensees, a licensee shall not hold control of a business firm, except as follows:

(1) If and to the extent necessary to protect the interests of a licensee as a creditor of, or investor in, a business firm, a licensee that has provided financing assistance to a business firm may acquire and hold control of such business firm. Unless the Commissioner approves a longer period, a licensee holding control of a business firm under this paragraph shall divest itself of the interest which constitutes holding control as soon as practicable or within 3 years after acquiring such interest, whichever is earlier.

(2) With the approval of the Commissioner, a licensee may acquire and hold control of a corporation which is licensed as a small business investment company under the Small Business Investment Act of 1958 [15 U.S.C. § 661 et seq.], as amended.

(3) With the approval of the Commissioner, a licensee may acquire and hold control of a company which is a development company, whether or not such development company has been or may become certified by the United States Small Business Administration pursuant to the Small Business Investment Act of 1958 [15 U.S.C. § 661 et seq.], as amended.

(4) With the approval of the Commissioner, a licensee may acquire and hold control of another business firm which is engaged in no business other than the business of providing financing assistance or management assistance to business firms.

(5) With the approval of the Commissioner, a licensee may acquire and hold control of a business firm not referred to in paragraphs (1)-(4) of this subsection. The Commissioner shall not approve an application under this paragraph unless the Commissioner determines that such an acquisition will promote the purposes of this chapter.

(b) If a licensee anticipates acquiring and holding control of a business firm under subsection (a)(1) of this section, the licensee shall file with the Commissioner a plan for acquiring and holding control of such business firm that shall include, at minimum, the following:

(1) The reasons it is necessary for the licensee to acquire and hold control of such business firm;

(2) The percentage of outstanding voting securities of such business firm that the licensee anticipates acquiring and holding;

(3) The licensee's proposed course of action upon obtaining control of such business firm; and

(4) The length of time the licensee anticipates it will be necessary to hold control of such business firm.

(c) The Commissioner may require a licensee to demonstrate the necessity for such licensee to hold control of a business firm under subsection (a)(1) of this section.

(d) For the purposes of this section, “hold control” means ownership, directly or indirectly, of record or beneficially, of voting securities greater than:

(1) For a business firm with outstanding voting securities held by fewer than 50 shareholders, 40 percent of such outstanding voting securities.

(2) For a business firm with outstanding voting securities held by 50 or more shareholders, 25 percent of the outstanding voting securities.


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