2005 Vermont Code - § 291. — Vermont seed capital fund; authorization; limitations

§ 291. Vermont seed capital fund; authorization; limitations

(a) The Vermont economic development authority shall cause to be formed a private investment fund to be named "the Vermont seed capital fund" or "the fund" is authorized for the purpose of increasing the amount of investment capital provided to new Vermont firms or to existing Vermont firms for the purpose of expansion. The authority may contract with one or more persons for the operation of the fund.

(b) The Vermont seed capital fund shall be formed as either a business corporation or a limited partnership pursuant to Title 11 and shall be subject to all the following:

(1) The Vermont seed capital fund shall not invest in any firm in which a total of more than a 25 percent interest in that firm is held by an investor of the Vermont seed capital fund combined with any interest held in the firm by the spouse or dependent children of the investor.

(2) Before the fund makes any investments, the fund shall:

(A) If organized as a corporation, have and thereafter maintain a board of nine directors to be elected by the shareholders.

(B) If organized as a partnership, have and maintain a board of three advisors appointed by the authority. The board of advisors shall represent solely the economic interest of the state with respect to the management of the fund and shall have no civil liability for the financial performance of the fund. The board of advisors shall be advised of investments made by the fund and shall have access to all information held by the fund with respect to investments made by the fund.

(3) The Vermont seed capital fund, within 120 days after the close of each fiscal year of its operations, shall issue a report that includes an audited financial statement certified by an independent certified public accountant. This report shall be distributed to the governor and the legislative council and made available to the public. The report shall include a discussion of the fund's impact on the Vermont economy and employment.

(4) The Vermont seed capital fund shall not make distributions of more than 75 percent of its net profit to its investors during its first five years of operation.

(5) No person shall be allocated more than 10 percent of the available tax credits. For the purposes of determining allocation, the attribution rules of Section 318 of the Internal Revenue Code in effect as of the effective date of this chapter shall apply.

(6) The first $5 million of capitalization of the Vermont seed capital fund raised from Vermont taxpayers on or before January 1, 2014, shall be eligible for partial tax credits as specified in 32 V.S.A. § 5830b.

(7) All investments and related business dealings using funds that qualify for partial tax credits under 32 V.S.A. § 5830b shall be subject to the following restrictions:

(A) The investments shall be restricted to Vermont firms, which for the purposes of this chapter means that their Vermont apportionment equals or exceeds 50 percent, using the apportionment rules under 32 V.S.A. § 5833, and they maintain headquarters and a principal facility in Vermont. Any funds invested in Vermont firms shall be used for the purpose of enhancing their Vermont investments. Investment shall be restricted to firms that export the majority of their products and services outside the state or add substantial value to products and materials within the state. In its investments, the fund shall give priority to new firms and existing firms that are developing new products.

(B) Each Vermont seed capital fund investment in any one firm, in any 12-month period shall be limited to a maximum of ten percent of the Vermont seed capital fund's capitalization and, for the life of the fund, to a maximum of 20 percent of the fund's total capitalization.

(C) At least two-thirds of the monies invested by the Vermont seed capital fund and qualifying for a tax credit under 32 V.S.A. § 5830b shall at all times be invested in the form of equity or convertible securities. This provision shall not prohibit the generally accepted business practice of earning interest on working funds deposited in relatively secure accounts such as savings and money market funds. (Added 2003, No. 164 (Adj. Sess.), § 6, eff. June 12, 2004; amended 2005, No. 184 (Adj. Sess.), § 17a.)