Corporation for Small Business Investment Charter Act

(Reported to House from the Committee on Small Business with amendment, H. Rept. 100-708 (Part I))

Corporation for Small Business Investment Charter Act - Amends the Small Business Investment Act of 1958 to establish timetables to govern the promulgation of regulations by the Small Business Administration (SBA) and the qualification of licensees to do business with the Corporation for Small Business Investment and the special-purpose trust established by this Act.

Establishes the Corporation for Small Business Investment as a Government-sponsored private corporation. Requires the President to appoint its interim Board of Directors. Sets forth procedures for selection of the permanent Board and describes Board duties.

Sets out the Corporation's stock structure. Permits only small business investment companies to hold voting common stock. Requires the Corporation to mandate certain contributions from these companies in order to accumulate capital surplus funds from private sources. Includes depository institutions as eligible contributors entitled to receive stock and dispose of it.

Authorizes the Corporation to issue obligations and securities, within prescribed limits. Prohibits the Secretary of the Treasury from approving the issuance of obligations or guarantees that would impair the financial soundness of the Corporation. Permits the Secretary of the Treasury to purchase such obligations but sets amount and yield restrictions. Permits such purchases only to prevent default or enable the Corporation to correct a default in amounts due on obligations issued or guaranteed. Makes all obligations issued by the Corporation acceptable as security for any fiduciary, trust, and public funds controlled by the United States.

Authorizes the Corporation to issue commitments or otherwise deal in small business investment securities after the permanent Board has been duly constituted. Sets forth the procedure for perfecting a security or ownership interest in small business investment securities created by the Corporation. Authorizes the Corporation to guarantee specified securities.

Directs the Corporation to establish criteria, including private capital amount requirements, for the qualification of small business investment companies to conduct business with it.

Instructs the Corporation to enter into agreements with small business investment companies, which are authorized to provide equity capital and loans to small businesses. Restricts the financing activities of the investment companies, setting time limits, aggregate securities acquisition limits, and use restrictions with respect to loan funds. Prohibits the Corporation from purchasing or guaranteeing securities in excess of ten percent of its assets. Provides for both financial and compliance audits of small business investment companies.

Exempts loans made by small business investment companies from State usury law, unless the State expressly enacts overriding legislation.

Directs the Corporation to adopt independent criteria in connection with the qualification of a special type of small business investment company to invest solely in disadvantaged small businesses.

Establishes a special-purpose trust to benefit special small business investment companies. Provides for its operation in accordance with a trust agreement with the Corporation. Sets forth procedures for appointing the trustees. Requires the trustees to establish separate accounting for all preferred securities, debentures, loss reserves, and other funds acquired and to make an annual accounting of trust operations to the Secretary of the Treasury. Sets forth the powers of the trustees.

Provides for SBA conveyance to the Corporation of all right, title, and interest to all securities and outstanding debentures issued by small business investment companies that are not in liquidation.

Requires the trust to apply all of the funds held in trust and income to: (1) cover any losses realized on debentures purchased or guaranteed by the Corporation; (2) reduce the interest rate on debentures issued by special small business investment companies or purchase their preferred securities; and (3) pay administrative costs.

Authorizes the trustees to purchase preferred securities and the Corporation to purchase or guarantee the payment of principal and interest on debentures issued by special small business investment companies. Sets forth the terms and conditions for these purchases.

Authorizes a special small business investment company to request that the Corporation purchase or guarantee its debentures. Provides that such debentures shall be subordinate to any other obligations of such companies. Sets forth restrictions on the interest rate on and total amount of such debentures.

Requires that all outstanding preferred securities purchased by the trust from special small business investment companies be redeemed and transferred to the Treasury 50 years after the effective date of this Act.

Gives the SBA review authority over the Corporation and requires annual reporting in connection with this review.

Mandates an annual independent audit of the Corporation's financial statements, with reporting to the Secretary of the Treasury, who must subsequently report to the President and to the House and Senate Small Business Committees. Subjects Corporation books and records to audit by the General Accounting Office and by the Office of the Inspector General of the SBA under specified conditions. Requires annual Corporation reporting to the President, the SBA, and relevant congressional committees.

Directs the Secretary of the Treasury to sell to the Corporation on September 30, 1988, all the right and interest in small business investment company securities guaranteed by the SBA and held by the Federal Financing Bank, providing such securities are due in FY 1989 or later. Sets a minimum final purchase price of $720,000,000, a specified amount of which must be retained by the Corporation as a contribution to its capital.

Requires the Secretary of the Treasury to propose a sale price for the securities that the Corporation is to purchase. Sets forth procedures for determining the purchase price if the Board finds the Secretary's proposal unacceptable. Directs the Corporation to issue to the SBA: (1) rights to purchase preferred stock in accordance with a detailed schedule; and (2) warrants to purchase nonvoting common stock equivalent to a 28 percent interest in the Corporation.

Requires the Corporation to report, within 30 days of the completion of the purchase of the securities, to the House and Senate Committees on Small Business.

Prohibits the SBA from: (1) making any payments to the Department of the Treasury on debentures guaranteed under the Small Business Investment Act after they are sold to the Corporation; or (2) selling or encumbering loans or debentures it has made or issued, except as specified in this Act.

Requires the General Accounting Office, by January 1, 1993, to prepare a report for the House and Senate Small Business Committees on the Corporation's effectiveness in achieving the purposes of this Act.