---
kind: "section"
citation: "13 C.F.R. § 107.850"
title: "13"
number: "107.850"
heading: "Restrictions on redemption of Equity Securities."
url: "https://uscodex.org/cfr/13/107.850"
---

# §107.850. Restrictions on redemption of Equity Securities.

- (a) A Portfolio Concern cannot be required to redeem Equity Securities earlier than one year from the date of the first closing unless:
  - (1) The concern makes a public offering, or has a change of management or control, or files for protection under the provisions of the Bankruptcy Code, or materially breaches your Financing agreement; or
  - (2) You make a follow-on investment, in which case the new securities may be redeemed in less than one year, but no earlier than the redemption date associated with your earliest Financing of the concern.
- (b) The redemption price must be either:
  - (1) A fixed amount that is no higher than the price you paid for the securities; or
  - (2) **An amount that cannot be fixed or determined before the time of redemption.** In this case, the redemption price must be based on:
    - (i) A reasonable formula that reflects the performance of the concern (such as one based on earnings or book value); or
    - (ii) The fair market value of the concern at the time of redemption, as determined by a professional appraisal performed under an agreement acceptable to both parties.
- (c) Any method for determining the redemption price must be agreed upon no later than the date of the first (or only) closing of the Financing.

## Notes

### Amendments

[61 FR 3189, Jan. 31, 1996, as amended at 64 FR 52646, Sept. 30, 1999; 69 FR 8098, Feb. 23, 2004]

### Authority

Authority: 15 U.S.C. 662, 681-687, 687b-h, 687k-m.

### Source

Source: 61 FR 3189, Jan. 31, 1996, unless otherwise noted.

### Amendments

[61 FR 3189, Jan. 31, 1996, as amended at 64 FR 52646, Sept. 30, 1999; 69 FR 8098, Feb. 23, 2004]