| Home > 106th Congressional Bills > S. 3243 (is) To enhance fair and open competition in the production and sale of agricultural commodities. [Introduced in Senate] ...
S. 3243 (is) To enhance fair and open competition in the production and sale of agricultural commodities. [Introduced in Senate] ...
106th CONGRESS 2d Session S. 3242 To amend the Consolidated Farm and Rural Development Act to encourage equity investment in rural cooperatives and other rural businesses, and for other purposes. _______________________________________________________________________ IN THE SENATE OF THE UNITED STATES October 25 (legislative day, September 22), 2000 Mr. Harkin (for himself, Mr. Craig, Mr. Daschle, Mr. Jeffords, and Mr. Johnson) introduced the following bill; which was read twice and referred to the Committee on Agriculture, Nutrition, and Forestry _______________________________________________________________________ A BILL To amend the Consolidated Farm and Rural Development Act to encourage equity investment in rural cooperatives and other rural businesses, and for other purposes. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, SECTION 1. NATIONAL RURAL COOPERATIVE AND BUSINESS EQUITY FUND. The Consolidated Farm and Rural Development Act (7 U.S.C. 1921 et seq.) is amended by adding at the end the following: ``Subtitle F--National Rural Cooperative and Business Equity Fund ``SEC. 391A. SHORT TITLE. ``This subtitle may be cited as the `National Rural Cooperative and Business Equity Fund Act'. ``SEC. 391B. PURPOSE. ``The purpose of this subtitle is to revitalize rural communities and enhance farm income through sustainable rural business development by providing Federal funds and credit enhancements to a private equity fund in order to encourage investments by institutional and noninstitutional investors for the benefit of rural America. ``SEC. 391C. DEFINITIONS. ``In this subtitle: ``(1) Authorized private investor.--The term `authorized private investor' means an individual, legal entity, or affiliate or subsidiary of an individual or legal entity that-- ``(A) is eligible to receive a loan guarantee under this title; ``(B) is eligible to receive a loan guarantee under the Rural Electrification Act of 1936 (7 U.S.C. 901 et seq.); ``(C) is created under the National Consumer Cooperative Bank Act (12 U.S.C. 3011 et seq.); ``(D) is an insured depository institution; or ``(E) is determined by the Fund to be an appropriate investor in the Fund. ``(2) Board.--The term `Board' means the board of directors of the Fund established under section 391G. ``(3) Fund.--The term `Fund' means the National Rural Cooperative and Business Equity Fund established under section 391D. ``(4) Group of similar investors.--The term `group of similar investors' means any 1 of the following: ``(A) Insured depository institutions with total assets of more than $250,000,000. ``(B) Insured depository institutions with total assets equal to or less than $250,000,000. ``(C) Farm Credit System institutions under the Farm Credit Act of 1971 (12 U.S.C. 2001 et seq.). ``(D) Cooperative financial institutions (other than Farm Credit System institutions). ``(E) Authorized private investors, other than those described in subparagraphs (A) through (D). ``(F) Other nonprofit organizations, including credit unions. ``(5) Insured depository institution.--The term `insured depository institution' means any bank or savings association the deposits of which are insured under the Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.). ``(6) Rural area.--The term `rural area' means an area that is located-- ``(A) outside a standard metropolitan statistical area; or ``(B) within a community that has a population of 50,000 individuals or fewer. ``(7) Rural business.--The term `rural business' means a rural cooperative, a value-added agricultural enterprise, or any other business located or locating in a rural area. ``SEC. 391D. ESTABLISHMENT OF THE FUND. ``(a) In General.-- ``(1) Authority to establish.--A group of authorized private investors may establish, as a non-Federal entity under State law, and manage a fund to be known as the `National Rural Cooperative and Business Equity Fund', to raise and provide equity capital to rural businesses. ``(2) Composition of group.--The group of authorized private investors referred to in paragraph (1) shall be composed, to the maximum extent practicable, of representatives of a majority of groups of similar investors. ``(b) Purposes.--The purposes of the Fund shall be-- ``(1) to strengthen the economy of rural areas; ``(2) to further sustainable rural business development; ``(3) to encourage start-up rural businesses, increased opportunities for small and minority-owned rural businesses, and the formation of new rural businesses; ``(4) to enhance rural employment opportunities; ``(5) to provide equity capital to rural businesses that have been unable to obtain equity capital; and ``(6) to leverage non-Federal funds for rural businesses. ``(c) Articles of Incorporation and By-Laws.--The articles of incorporation and by-laws of the Fund shall set forth purposes of the Fund that are consistent with subsection (b). ``SEC. 391E. INVESTMENT IN THE FUND. ``(a) In General.--The Secretary, using funds of the Commodity Credit Corporation, shall-- ``(1) subject to subsection (b)(1), make available to the Fund $50,000,000 for each of fiscal years 2001 through 2003; ``(2) subject to subsection (c), guarantee 50 percent of each investment made by an authorized private investor in the Fund; and ``(3) subject to subsection (d), guarantee the repayment of principal to authorized private investors in debentures issued by the Fund. ``(b) Private Investment.-- ``(1) Matching requirement.--Under subsection (a)(1), the Secretary shall make an amount available to the Fund only after an equal amount has been invested in the Fund by authorized private investors in accordance with this subtitle and the terms and conditions set forth in the by-laws of the Fund. ``(2) Investments by insured depository institutions.-- Investments in the Fund by an insured depository institution shall be considered part of the record of the insured depository institution for meeting the credit needs of its entire community for the purposes of Federal law. ``(c) Guarantee of Private Investments.-- ``(1) In general.--The Secretary shall guarantee, under terms and conditions determined by the Secretary, 50 percent of any loss of the principal of an investment made in the Fund by an authorized private investor. ``(2) Maximum total guarantee.--The aggregate liability of the Secretary with respect to all guarantees under paragraph (1) shall not apply to more than $300,000,000 in private investments. ``(3) Redemption of guarantee.-- ``(A) Date.--An authorized private investor in the Fund may redeem a guarantee under paragraph (1), with respect to the total investments in the Fund and the total losses of the authorized private investor as of the date of redemption-- ``(i) on the date that is 5 years after the date of incorporation of the Fund; or ``(ii) annually thereafter. ``(B) Effect of redemption.--On redemption of a guarantee under subparagraph (A)-- ``(i) the shares in the Fund of the authorized private investor shall be redeemed; and ``(ii) the authorized private investor shall be prohibited from making any future investment in the Fund. ``(d) Debt.-- ``(1) In general.--The Fund may, at the discretion of the Board, raise additional capital through the issuance of debentures and through other means determined to be appropriate by the Board. ``(2) Guarantee of debt by secretary.-- ``(A) In general.--The Secretary may guarantee 100 percent of the principal of, and accrued interest on, debentures issued by the Fund that are approved by the Secretary. ``(B) Maximum debt guaranteed by secretary.--The outstanding value of debentures issued by the Fund and guaranteed by the Secretary shall not exceed the lesser of-- ``(i) the amount equal to twice the value of the assets held by the Fund; or ``(ii) $500,000,000. ``(C) Recapture of guarantee payments.--If the Secretary makes a payment on a debenture issued by the Fund as a result of a guarantee of the Secretary under this paragraph, the Secretary shall have priority over other creditors for repayment of the debenture. ``(3) Authorized private investors.--An authorized private investor may purchase debentures and other securities issued by the Fund. ``SEC. 391F. INVESTMENTS AND OTHER ACTIVITIES OF THE FUND. ``(a) Investments.-- ``(1) In general.-- ``(A) Types.--Subject to subparagraphs (B) and (C), the Fund may-- ``(i) make equity investments in an entity that meets the requirements of paragraph (6) and such other requirements as the Board may establish; and ``(ii) extend credit to such an entity in-- ``(I) the form of mezzanine debt or subordinated debt; or ``(II) any other form of quasi- equity. ``(B) Limitation on equity investments.--After the initial equity investment in an entity described in subparagraph (A)(i), the Fund may not make additional equity investments in the entity if the additional equity investments would result in the Fund owning more than 30 percent of the equity of the entity. ``(C) Limitation on nonequity investments.--Except in the case of a project to assist a rural cooperative, the total amount of nonequity investments described in subparagraph (A)(ii) that may be provided by the Fund shall not exceed 20 percent of the total investments of the Fund in the project. ``(2) Procedures.--The Fund shall implement procedures to ensure that-- ``(A) the financing arrangements of the Fund meet the Fund's primary focus of providing equity capital; and ``(B) the Fund does not compete with conventional sources of credit. ``(3) Diversity of projects.--The Fund-- ``(A) shall seek to make equity investments in a variety of viable projects, with a significant share of investments-- ``(i) in smaller projects in rural communities of diverse sizes; and ``(ii) in cooperative and noncooperative enterprises; and ``(B) shall be managed in such a way as to diversify the risks to the Fund among a variety of projects. ``(4) Limitation on rural businesses assisted.--The Fund shall not invest in any rural business that is primarily retail in nature (as determined by the Board), other than a purchasing cooperative. ``(5) Interest rate limitations.--Returns on investments in and by the Fund and returns on the extension of credit by participants in projects assisted by the Fund, shall not be subject to any State or Federal law establishing a maximum allowable interest rate. ``(6) Requirements for recipients.-- ``(A) Other investments.--Any recipient of amounts from the Fund shall make or obtain a significant investment from a source of capital other than the Fund. ``(B) Sponsorship.--Rural business investment projects to be considered for an equity investment from the Fund shall be sponsored by a regional, State, or local sponsoring or endorsing organization such as-- ``(i) a financial institution; ``(ii) a development organization; or ``(iii) any other established entity engaging or assisting in rural business development, including a rural cooperative. ``(b) Technical Assistance.--The Board shall use not less than 1 percent of the net earnings of the Fund to provide technical assistance to rural businesses seeking an equity investment from the Fund. ``(c) Annual Audit.-- ``(1) In general.--The Board shall authorize an annual audit of the financial statements of the Fund by a nationally recognized auditing firm using generally accepted auditing procedures. ``(2) Availability of audit results.--The results of the audit required by paragraph (1) shall be made available to investors in the Fund. ``(d) Annual Report.--The Board shall prepare and make available to the public an annual report that-- ``(1) describes the projects funded with amounts from the Fund; ``(2) specifies the recipients of amounts from the Fund; ``(3) specifies the co-investors in all projects that receive amounts from the Fund; and ``(4) meets the reporting requirements, if any, of the State under the law of which the Fund is established. ``(e) Other Authorities.--The Board may exercise such other authorities as are necessary to carry out this subtitle.
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