Permissibility To Invest In A Small Business Investment Company Organized As A Limited Partnership - Q3 1999

By the Division of Banks

A state-chartered financial institution inquires as to whether Mass. Gen. Laws chapter 167F, section 2, paragraph 5 prohibits an investment in a small business investment company ("SBIC") that has been organized as a limited partnership. Said paragraph 5 permits a state-chartered institution to invest in the capital stock of any SBIC organized under the provisions of the Small Business Investment Act of 1958 (the "Act"). Since a limited partnership does not have capital stock, it raises the question whether the statute would permit such an investment. The Act, 15 U.S.C. §681, as amended in 1997 states, in part, that an SBIC shall be an incorporated body, a limited liability company, or a limited partnership chartered or otherwise existing under State law solely for the purpose of performing the functions and conducting the activities contemplated under that subchapter. The intent of the statute is to permit state-chartered banks to invest in companies organized under the Act. Accordingly, a state-chartered bank may invest in a SBIC organized as a limited partnership if such limited partnership has been organized under the Act, as amended in 1997.