The new Agriculture Improvement Act of 2018 (2018-2019 Farm Bill) contains selected revisions to the Rural Business Investment Company (RBIC) program that will affect prospective applicants and funds currently licensed under the RBIC program, including funding the RBIC program through 2023.
On Dec. 11, 2018, Congress passed the 2018-2019 Farm Bill, which authorized more than $867 billion in subsidies and programs related to agriculture and rural America. President Donald Trump signed the bill into law Dec. 20.
The 2018-2019 Farm Bill amends provisions of the Consolidated Farm and Rural Development Act, which impacts private equity, mezzanine, and alternative debt funds applying for licenses as RBICs pursuant to the RBIC program. In addition to funding the RBIC program through 2023, the 2018-2019 Farm Bill allowed for increased license application fees, lifted certain investment restrictions, and expanded the purpose and mission of the RBIC program.
Prior to the 2018-2019 Farm Bill, the license application fee was limited to $500 “solely to cover the costs of licensing examinations.” The 2018-2019 Farm Bill removed this fee cap, instead allowing fees “as the Secretary considers appropriate” and “in such amounts as the Secretary considers appropriate.”
RBICs were also restricted from investing in entities not otherwise eligible to receive financing from the Farm Credit System where Farm Credit System institutions controlled, in the aggregate, more than 25 percent of the ownership interest of an RBIC. The 2018-2019 Farm Bill increased this threshold to 50 percent.
The 2018-2019 Farm Bill expanded the purpose and mission of the RBIC program by eliminating the “venture” qualification from the term “Developmental Venture Capital” and by expanding the definition of “Equity Capital” beyond stock and subordinated debt to include “any other type of equity-like financing that might be necessary to facilitate the purposes of [the] Act.”
If you are interested in applying for a license under the RBIC program, or if you are interested in learning more about how these legislative changes may affect an existing fund, contact your attorney at McGuireWoods.
Mark Kromkowski and McGuireWoods’ private equity practice group are among a small group of lawyers in the United States who have significant transactional and regulatory experience with Small Business Investment Companies and Rural Business Investment Companies.