---
kind: "section"
citation: "15 U.S.C. § 80a–60"
title: "15"
title_heading: "Commerce and Trade"
number: "80a–60"
heading: "Capital structure"
release: "119-102"
date: "2026-07-12"
url: "https://uscodex.org/usc/15/80a-60"
units:
  - "Chapter 2D — Investment Companies and Advisers"
  - "Subchapter I — Investment Companies"
---

# §80a–60. Capital structure

- (a) **Exceptions for business development company—** Notwithstanding the exemption set forth in [section 80a–6(f) of this title](/usc/15/80a–6.md?p=f), [section 80a–18 of this title](/usc/15/80a–18.md) shall apply to a [business development company](/usc/15/80a–2.md?p=a-48) to the same extent as if it were a registered closed-end investment [company](/usc/15/80a–2.md?p=a-8), except as follows:
  - (1) Except as provided in [paragraph (2)](#a-2), the asset coverage requirements of subparagraphs (A) and (B) of [section 80a–18(a)(1) of this title](/usc/15/80a–18.md?p=a-1) (and any related rule promulgated under this subchapter) applicable to [business development companies](/usc/15/80a–2.md?p=a-48) shall be 200 percent.
  - (2) The asset coverage requirements of subparagraphs (A) and (B) of [section 80a–18(a)(1) of this title](/usc/15/80a–18.md?p=a-1) and of subparagraphs (A) and (B) of [section 80a–18(a)(2) of this title](/usc/15/80a–18.md?p=a-2) (and any related rule promulgated under this subchapter) applicable to a [business development company](/usc/15/80a–2.md?p=a-48) shall be 150 percent if—
    - (A) not later than 5 business days after the date on which those asset coverage requirements are approved under subparagraph (D) of this paragraph, the [business development company](/usc/15/80a–2.md?p=a-48) discloses that the requirements were approved, and the effective date of the approval, in—
      - (i) any filing submitted to the [Commission](/usc/15/80a–2.md?p=a-7) under section [78m(a)](/usc/15/78m.md?p=a) or [78o(d)](/usc/15/78o.md?p=d) of this title; and
      - (ii) a notice on the website of the [business development company](/usc/15/80a–2.md?p=a-48);
    - (B) the [business development company](/usc/15/80a–2.md?p=a-48) discloses, in each periodic filing required under [section 78m(a) of this title](/usc/15/78m.md?p=a)—
      - (i) the aggregate outstanding principal amount or liquidation preference, as applicable, of the senior [securities](/usc/15/80a–2.md?p=a-36) issued by the [business development company](/usc/15/80a–2.md?p=a-48) and the asset coverage percentage as of the date of the [business development company](/usc/15/80a–2.md?p=a-48)’s most recent financial statements included in that filing;
      - (ii) that the [business development company](/usc/15/80a–2.md?p=a-48), under [subparagraph (D)](#a-2-D), has approved the asset coverage requirements under this paragraph; and
      - (iii) the effective date of the approval described in [clause (ii)](#a-2-B-ii);
    - (C) with respect to a [business development company](/usc/15/80a–2.md?p=a-48) that is an [issuer](/usc/15/80a–2.md?p=a-22) of common equity [securities](/usc/15/80a–2.md?p=a-36), each periodic filing of the [company](/usc/15/80a–2.md?p=a-8) required under [section 78m(a) of this title](/usc/15/78m.md?p=a) includes disclosures that are reasonably designed to ensure that shareholders are informed of—
      - (i) the amount of senior [securities](/usc/15/80a–2.md?p=a-36) (and the associated asset coverage ratios) of the [company](/usc/15/80a–2.md?p=a-8), determined as of the date of the most recent financial statements of the [company](/usc/15/80a–2.md?p=a-8) included in that filing; and
      - (ii) the principal risk factors associated with the senior [securities](/usc/15/80a–2.md?p=a-36) described in [clause (i)](#a-2-C-i), to the extent that risk is incurred by the [company](/usc/15/80a–2.md?p=a-8); and
    - (D) the [company](/usc/15/80a–2.md?p=a-8)—
      - (i)
        - (I) through a vote of the required majority (as defined in [section 80a–56(o)](/usc/15/80a–56.md?p=o) of this title), approves the application of this paragraph to the [company](/usc/15/80a–2.md?p=a-8), to become effective on the date that is 1 year after the date of the approval; or
        - (II) obtains, at a special or annual meeting of shareholders or partners at which a quorum is present, the approval of more than 50 percent of the votes cast for the application of this paragraph to the [company](/usc/15/80a–2.md?p=a-8), to become effective on the first day after the date of the approval; and
      - (ii) if the [company](/usc/15/80a–2.md?p=a-8) is not an [issuer](/usc/15/80a–2.md?p=a-22) of common equity [securities](/usc/15/80a–2.md?p=a-36) that are listed on a [national securities exchange](/usc/15/80a–2.md?p=a-26), extends, to each [person](/usc/15/80a–2.md?p=a-28) that is a shareholder as of the date of an approval described in subclause [(I)](#a-2-D-i-I) or [(II)](#a-2-D-i-II) of clause (i), as applicable, the opportunity (which may include a tender offer) to sell the [securities](/usc/15/80a–2.md?p=a-36) held by that shareholder as of that applicable approval date, with 25 percent of those [securities](/usc/15/80a–2.md?p=a-36) to be repurchased in each of the 4 calendar quarters following the calendar quarter in which that applicable approval date takes place.
  - (3) Notwithstanding [section 80a–18(c) of this title](/usc/15/80a–18.md?p=c), a [business development company](/usc/15/80a–2.md?p=a-48) may issue more than one class of senior [security](/usc/15/80a–2.md?p=a-36) representing indebtedness.
  - (4) Notwithstanding [section 80a–18(d) of this title](/usc/15/80a–18.md?p=d)—
    - (A) a [business development company](/usc/15/80a–2.md?p=a-48) may issue warrants, options, or rights to subscribe or convert to [voting securities](/usc/15/80a–2.md?p=a-42) of such [company](/usc/15/80a–2.md?p=a-8), accompanied by [securities](/usc/15/80a–2.md?p=a-36), if—
      - (i) such warrants, options, or rights expire by their terms within ten years;
      - (ii) such warrants, options, or rights are not separately transferable unless no class of such warrants, options, or rights and the [securities](/usc/15/80a–2.md?p=a-36) accompanying them has been publicly distributed;
      - (iii) the exercise or conversion price is not less than the current market value at the date of issuance, or if no such market value exists, the current net asset value of such [voting securities](/usc/15/80a–2.md?p=a-42); and
      - (iv) the proposal to issue such [securities](/usc/15/80a–2.md?p=a-36) is authorized by the shareholders or partners of such [business development company](/usc/15/80a–2.md?p=a-48), and such issuance is approved by the required majority (as defined in [section 80a–56(o)](/usc/15/80a–56.md?p=o) of this title) of the [directors](/usc/15/80a–2.md?p=a-12) of or general partners in such [company](/usc/15/80a–2.md?p=a-8) on the basis that such issuance is in the best interests of such [company](/usc/15/80a–2.md?p=a-8) and its shareholders or partners;
    - (B) a [business development company](/usc/15/80a–2.md?p=a-48) may issue, to its [directors](/usc/15/80a–2.md?p=a-12), officers, employees, and general partners, warrants, options, and rights to purchase [voting securities](/usc/15/80a–2.md?p=a-42) of such [company](/usc/15/80a–2.md?p=a-8) pursuant to an executive compensation plan, if—
      - (i)
        - (I) in the case of warrants, options, or rights issued to any officer or employee of such [business development company](/usc/15/80a–2.md?p=a-48) (including any officer or employee who is also a [director](/usc/15/80a–2.md?p=a-12) of such [company](/usc/15/80a–2.md?p=a-8)), such [securities](/usc/15/80a–2.md?p=a-36) satisfy the conditions in clauses [(i)](#a-4-A-i), [(iii)](#a-4-A-iii), and [(iv)](#a-4-A-iv) of subparagraph (A); or (II) in the case of warrants, options, or rights issued to any [director](/usc/15/80a–2.md?p=a-12) of such [business development company](/usc/15/80a–2.md?p=a-48) who is not also an officer or employee of such [company](/usc/15/80a–2.md?p=a-8), or to any general partner in such [company](/usc/15/80a–2.md?p=a-8), the proposal to issue such [securities](/usc/15/80a–2.md?p=a-36) satisfies the conditions in clauses [(i)](#a-4-A-i) and [(iii)](#a-4-A-iii) of subparagraph (A), is authorized by the shareholders or partners of such [company](/usc/15/80a–2.md?p=a-8), and is approved by order of the [Commission](/usc/15/80a–2.md?p=a-7), upon application, on the basis that the terms of the proposal are fair and reasonable and do not involve overreaching of such [company](/usc/15/80a–2.md?p=a-8) or its shareholders or partners;
      - (ii) such [securities](/usc/15/80a–2.md?p=a-36) are not transferable except for disposition by gift, will, or intestacy;
      - (iii) no [investment adviser](/usc/15/80b–2.md?p=a-11) of such [business development company](/usc/15/80a–2.md?p=a-48) receives any compensation described in [section 80b–5(a)(1) of this title](/usc/15/80b–5.md?p=a-1), except to the extent permitted by paragraph (1) or (2) of [section 80b–5(b) of this title](/usc/15/80b–5.md?p=b); and
      - (iv) such [business development company](/usc/15/80a–2.md?p=a-48) does not have a profit-sharing plan described in [section 80a–56(n) of this title](/usc/15/80a–56.md?p=n); and
    - (C) a [business development company](/usc/15/80a–2.md?p=a-48) may issue warrants, options, or rights to subscribe to, convert to, or purchase [voting securities](/usc/15/80a–2.md?p=a-42) not accompanied by [securities](/usc/15/80a–2.md?p=a-36), if—
      - (i) such warrants, options, or rights satisfy the conditions in clauses [(i)](#a-4-A-i) and [(iii)](#a-4-A-iii) of subparagraph (A); and
      - (ii) the proposal to issue such warrants, options, or rights is authorized by the shareholders or partners of such [business development company](/usc/15/80a–2.md?p=a-48), and such issuance is approved by the required majority (as defined in [section 80a–56(o)](/usc/15/80a–56.md?p=o) of this title) of the [directors](/usc/15/80a–2.md?p=a-12) of or general partners in such [company](/usc/15/80a–2.md?p=a-8) on the basis that such issuance is in the best interests of the [company](/usc/15/80a–2.md?p=a-8) and its shareholders or partners.

    Notwithstanding this paragraph, the amount of [voting securities](/usc/15/80a–2.md?p=a-42) that would result from the exercise of all outstanding warrants, options, and rights at the time of issuance shall not exceed 25 per centum of the outstanding [voting securities](/usc/15/80a–2.md?p=a-42) of the [business development company](/usc/15/80a–2.md?p=a-48), except that if the amount of [voting securities](/usc/15/80a–2.md?p=a-42) that would result from the exercise of all outstanding warrants, options, and rights issued to such [company](/usc/15/80a–2.md?p=a-8)’s [directors](/usc/15/80a–2.md?p=a-12), officers, employees, and general partners pursuant to any executive compensation plan meeting the requirements of subparagraph (B) of this paragraph would exceed 15 per centum of the outstanding [voting securities](/usc/15/80a–2.md?p=a-42) of such [company](/usc/15/80a–2.md?p=a-8), then the total amount of [voting securities](/usc/15/80a–2.md?p=a-42) that would result from the exercise of all outstanding warrants, options, and rights at the time of issuance shall not exceed 20 per centum of the outstanding [voting securities](/usc/15/80a–2.md?p=a-42) of such [company](/usc/15/80a–2.md?p=a-8).

  - (5) For purposes of measuring the asset coverage requirements of [section 80a–18(a) of this title](/usc/15/80a–18.md?p=a), a senior [security](/usc/15/80a–2.md?p=a-36) created by the guarantee by a [business development company](/usc/15/80a–2.md?p=a-48) of indebtedness issued by another [company](/usc/15/80a–2.md?p=a-8) shall be the amount of the maximum potential liability less the fair market value of the net unencumbered assets (plus the indebtedness which has been guaranteed) available in the borrowing [company](/usc/15/80a–2.md?p=a-8) whose debts have been guaranteed, except that a guarantee issued by a [business development company](/usc/15/80a–2.md?p=a-48) of indebtedness issued by a [company](/usc/15/80a–2.md?p=a-8) which is a wholly-owned subsidiary of the [business development company](/usc/15/80a–2.md?p=a-48) and is licensed as a small business investment [company](/usc/15/80a–2.md?p=a-8) under the Small Business Investment Act of 1958 [[15 U.S.C. 661](/usc/15/661.md) et seq.] shall not be deemed to be a senior [security](/usc/15/80a–2.md?p=a-36) of such [business development company](/usc/15/80a–2.md?p=a-48) for purposes of [section 80a–18(a) of this title](/usc/15/80a–18.md?p=a) if the amount of the indebtedness at the time of its issuance by the borrowing [company](/usc/15/80a–2.md?p=a-8) is itself taken fully into account as a liability by such [business development company](/usc/15/80a–2.md?p=a-48), as if it were issued by such [business development company](/usc/15/80a–2.md?p=a-48), in determining whether such [business development company](/usc/15/80a–2.md?p=a-48), at that time, satisfies the asset coverage requirements of [section 80a–18(a) of this title](/usc/15/80a–18.md?p=a).
- (b) **Compliance—** A [business development company](/usc/15/80a–2.md?p=a-48) shall comply with the provisions of this section at the time it becomes subject to sections [80a–54](/usc/15/80a–54.md) through [80a–64](/usc/15/80a–64.md) of this title, as if it were issuing a [security](/usc/15/80a–2.md?p=a-36) of each class which it has outstanding at such time.

## Source credit

(Aug. 22, 1940, ch. 686, title I, § 61, as added Pub. L. 96–477, title I, § 105, Oct. 21, 1980, 94 Stat. 2286; amended Pub. L. 104–290, title V, § 506, Oct. 11, 1996, 110 Stat. 3446; Pub. L. 111–203, title IX, § 985(d)(5), July 21, 2010, 124 Stat. 1934; Pub. L. 115–141, div. S, title VIII, § 802(a), Mar. 23, 2018, 132 Stat. 1138.)

## Notes

### Editorial Notes

### References in Text

This subchapter, referred to in subsec. (a)(1), (2), was in the original “this Act”, meaning title I of act Aug. 22, 1940, ch. 686, known as the Investment Company Act of 1940, which is classified generally to this subchapter.

The Small Business Investment Act of 1958, referred to in subsec. (a)(5), is Pub. L. 85–699, Aug. 21, 1958, 72 Stat. 689), which is classified principally to chapter 14B (§ 661 et seq.) of this title. For complete classification of this Act to the Code, see Short Title note set out under section 661 of this title and Tables.

### Amendments

2018—Subsec. (a). Pub. L. 115–141 added pars. (1) and (2), redesignated former pars. (2) to (4) as (3) to (5), respectively, and struck out former par. (1) which read as follows: “The asset coverage requirements of section 80a–18(a)(1)(A) and (B) of this title applicable to business development companies shall be 200 per centum.”

2010—Subsec. (a)(3)(B)(iii). Pub. L. 111–203 substituted “section 80b–5(a)(1) of this title” for “paragraph (1) of section 80b–5 of this title” and “paragraph (1) or (2) of section 80b–5(b) of this title” for “clause (A) or (B) of that section”.

1996—Subsec. (a)(2). Pub. L. 104–290, § 506(1), substituted a period for “if such business development company does not have outstanding any publicly held indebtedness, and all such securities of each class are—

“(A) privately held or guaranteed by the Small Business Administration, or banks, insurance companies, or other institutional investors; and

“(B) not intended to be publicly distributed.”

Subsec. (a)(3)(A). Pub. L. 104–290, § 506(2)(A), (B), inserted “accompanied by securities,” after “of such company,” and struck out “senior securities representing indebtedness accompanied by” before “warrants, options, or rights”.

Subsec. (a)(3)(A)(ii). Pub. L. 104–290, § 506(2)(C), struck out “senior” before “securities”.

Subsec. (a)(3)(C). Pub. L. 104–290, § 506(3), added subpar. (C).

### Statutory Notes and Related Subsidiaries

### Effective Date of 2010 Amendment

Amendment by Pub. L. 111–203 effective 1 day after July 21, 2010, except as otherwise provided, see section 4 of Pub. L. 111–203, set out as an Effective Date note under section 5301 of Title 12, Banks and Banking.