La. Admin. Code tit. 10 § XV-320

Current through Register Vol. 50, No. 11, November 20, 2024

Section XV-320 - Investment in Approved Funds

A. Any certified Louisiana capital company that has capital certified pursuant to R.S. 51:1924 for the calendar years 1999 or 2000, and which qualifies for credits pursuant to R.S. 22:1068(E) shall invest an amount, as determined by the secretary, into the following investments:

1. 50 percent of the amount determined by the secretary shall be invested in one or more capital management funds as approved by the secretary whose primary investment objectives include pre-seed, seed, and early stage business ventures, and whose investment in any such business and its affiliates is limited to $1 million or less. Investments made by such funds must give special emphasis to the Targeted Technology Clusters identified in Vision 2020-Master Plan For Economic Development as adopted by the Louisiana Economic Development Council; and

2. 50 percent of the amount determined by the secretary shall be invested in any certified Louisiana capital company whose primary investment objectives include investing in the following three categories:

a. certified disadvantaged businesses;

b. business ventures operating in economically distressed areas; or

c. Louisiana businesses and affiliates in an amount not exceeding $1 million.

B. The amount to be invested by each certified Louisiana capital company pursuant to Subsection A shall be determined annually by the secretary beginning January 1, 2000. Such amount shall not exceed 10 percent of all capital certified by such certified Louisiana capital company in the previous calendar year that are eligible for credits pursuant to R.S. 22:1068(E). The amount to be invested pursuant to Subsection A shall be invested within 120 days from the end of the calendar year in which the capital is certified or 120 days from the date the secretary determines the amount to be invested, whichever is later. If certified capital is paid in pursuant to a debt instrument in accordance with the provisions of R.S. 22:1068(E)(1)(a) and LAC 10:XV.303.Investment.a.iii, the investment required to be made by this Section may be made at the rate of 10 percent of actual cash received each year.

C. The capital management fund referred to in Paragraph A.1 shall be managed by a qualified individual or individuals or entity that is managed by a qualified individual or individuals and governed by a board consisting of one representative from each certified Louisiana capital company that has invested in the management fund as required by this Section and the secretary or his designee, who shall act in an advisory capacity only, with the right to attend meetings but with no voting privileges. The governing board of the capital management fund will develop policies for the administration and operation of the capital management fund. Certified Louisiana capital companies investing in such capital management fund, shall share in the profits and losses of such fund in accordance with the documents providing for the creation and organization of the fund. The fund shall submit reports to the secretary, semi-annually within 30 days of June 30 and December 31. The report shall include information on all investments made be the fund and a copy of the most recent financial statements of the fund and shall be submitted on a form provided by the secretary.

D. Any entities receiving funds pursuant to Paragraphs A.1 or A.2 shall comply with all requirements of R.S. 51:1921 et seq. (Chapter 26 of Title 51 of the Louisiana Revised Statutes) and with this Chapter with respect to such funds received as if those funds were certified capital as defined in R.S. 51:1923(1) with the exception that:

1. such funds shall earn no additional tax credits;

2. for purposes of R.S. 51:1926(A)(1), 50 percent must be invested in qualified investments and for purposes of R.S. 51:1926(A)(2), 80 percent must be invested in qualified investments; and

3. 100 percent of such funds shall be invested in qualified investments within eight years.

E. Amounts invested pursuant to Paragraph A.2 shall be invested directly into a certified Louisiana capital company. Investments directly into a business shall not qualify as an investment pursuant to Paragraph A.2.

F. With respect to capital raised and certified pursuant to R.S. 22:1068(E) during the calendar year 1999 only, if a certified Louisiana capital company demonstrates to the secretary that investments made from 1999 certified capital were made or committed prior to December 1, 2000, were made with the understanding that they would qualify under R.S. 51:1935 and were made in accordance with the terms of a previous agreement entered into by the secretary, such investments will be deemed to qualify pursuant to this Section.

G. If a certified Louisiana capital company which is required to invest funds by this Section is also a certified Louisiana capital company described in Paragraph A.2 above, it shall not be required to reinvest part of its certified capital into another certified Louisiana capital company pursuant to the requirements of Paragraph A.2; however, it must still make the investment required by Paragraph A.2.

H. Any certified Louisiana capital company may request a determination from the secretary that it is a certified Louisiana capital company described in Paragraph A.2. A request for a determination shall be addressed to the secretary and shall include a copy of the certified Louisiana capital company's:

1. articles of organization;

2. by-laws;

3. investment policy; and

4. any disclosure statement distributed to prospective investors. If any of those documents have been amended from its original form, a copy of both the original and amended documents must be provided. The secretary may request any additional information that he deems necessary to make a determination.

I. Failure to comply with this Section shall result in the following consequences.

1. In the event any certified Louisiana capital company subject to the provisions of Subsection A, fails to comply with the requirements of this Section, the certified Louisiana capital company shall be subject to involuntary decertification of its capital in an amount equal to the amount of funds required to be invested pursuant to this Section. Such involuntary decertification shall result in the disallowance and recapture of any tax credits related to such capital.

2. If any entity that receives funds pursuant to Paragraphs A.1 or A.2 fails to comply with the provisions of this Section regarding the investment of such funds, the secretary shall have the authority to specifically direct how such funds shall be invested, including the authority to name a specific business and amount for an investment. If the entity fails to comply with such directive, the entity shall remit such funds to the secretary for investment. The entity shall retain ownership of any funds and investments made with such funds.

J. For purposes of this Section only, the following terms shall have the meaning provided in this Subsection:

Business Ventures Operating in Economically Distressed Areas-a business whose principal place of business is located in a Census Block Group designated by the Department of Economic Development as an Enterprise Zone pursuant to R.S. 51:1784(A) and (B) and not considering any designation pursuant R.S. 51:1785(B).

Certified Disadvantaged Businesses-shall include any business which has received certification as such from any federal, state or local government agency or has been certified as a small and emerging business by the division of small and emerging business development in the Department of Economic Development.

Early Stage Business Venture-shall include and enterprise that has high growth potential, minimal revenues or minimal profits.

Pre-Seed-shall include an enterprise that conducts research and development to demonstrate proof of concept, files for initial patents and plans the enterprise for at least the two rounds of financing subsequent to initial investment in the enterprise.

Seed-shall include an enterprise that is completing its initial product research and development, building a prototype, completing market research, hiring the initial management team members and formulating a strategy to achieve very high growth.

La. Admin. Code tit. 10, § XV-320

Promulgated by the Department of Economic Development, Office of the Secretary, LR 27:675 (May 2001), amended LR 28:989 (May 2002), amended by the Department of Economic Development, Office of the Secretary and the Office of the Governor, Office of Financial Institutions, LR 30:37 (January 2004).

AUTHORITY NOTE: Promulgated in accordance with R.S. 51:1935.