Section 26-A5605. QUALIFIED INVESTMENTS

5605.1 Prior to making a proposed investment in a business, a certified capital company shall request from the Commissioner a written determination of whether the business is considered a “qualified business,” as defined in the Act.

5605.2  A certified capital company shall provide the Commissioner with the following information in support of its request for a determination of whether a business is eligible to receive an initial or follow-on investment:

(a) A complete Qualified Business Application signed by an executive officer of the applicant;

 

(b) A term sheet or other detailed description of the proposed equity investment or loan to be made by the certified capital company;

 

(c) The applicant’s business plan;

 

(d) The applicant’s current financial statements, including an income statement, balance sheet and cash flow statement;

 

(e)An affidavit that is signed by the president or chief executive officer of the applicant that includes the following statements:

(1)The applicant agrees to use one hundred percent (100%) of the funds received from the certified capital company solely for the purpose of supporting the applicant’s business operations in the District, except for advertising, promotions and sales purposes;

(2)The applicant is current on all District tax obligations;

(3) The applicant has obtained all required business licenses and permits, and the business is currently in good standing in the District at the time of the filing of the Qualified Business Application; and

(4)The applicant currently satisfies all of the criteria to be a qualified business, as defined by the Act, unless a waiver is obtained, and will continue to meet such criteria for six (6) consecutive months immediately following the receipt of an initial or follow-on investment from the CAPCO.

(f) A copy of the applicant’s articles of incorporation or organization, as filed with the District or other state of incorporation or organization;

 

(g) A copy of a letter from a bank or other commercial lender denying the applicant’s request for conventional financing.  The letter shall include the amount of financing requested by the applicant and shall not be dated more than one hundred twenty (120) days prior to the date the Qualified Business Application is filed with the Commissioner; 

(h) A copy of the applicant’s lease, sublease or property deed establishing the location of its business operations in the District;

 

(i) A current list of all of the applicant’s full and part-time employees. An owner of the applicant who also manages the activities of the applicant or provides any type of services to the applicant on a regular basis, regardless of whether he or she is compensated by the applicant, shall be deemed an employee;

 

(j) The following information for a sufficient number of employees to determine that at least twenty-five percent (25%) of the employees listed in paragraph (i) of this subsection are residents of the District:

 

(1) A copy of the employee’s IRS form W-4;

 

(2) A current payroll report showing the wages or salaries paid, and the taxes withheld for each employee;

 

(3) A copy of each employee’s driver’s license or non-driver identification card issued by the District’s Department of Motor Vehicles; and

 

(4) A copy of a telephone, cable or utility bill, residential lease or voter registration card that shows each employee’s home address.

 

(k)Each document filed pursuant to paragraph (j) of this subsection to establish an employee’s residency in the District shall have identical addresses.  Documents with different addresses will be unacceptable.

5605.3 The Commissioner shall consider the following factors in determining if a person is an employee or an independent contractor:

(a) Whether the person performing services is engaged in an occupation or business distinct from that of the alleged employer;

(b) Whether or not the work is a part of the regular business of the alleged employee or alleged employer;

(c) Whether the alleged employer or the worker supplies the instrumentalities, tools, and the place of business for the person doing the work;

(d) The alleged employee’s investment in the equipment or materials required by his or her task, or the cost of any labor needed to perform the task;

(e) Whether the service rendered requires a special skill;

(f) The kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the alleged employer or by a specialist without supervision;

(g) The alleged employee’s opportunity for profit or loss depending on his or her managerial skill;

(h) The length of time for which the services are to be performed;

(i) The degree of permanence of the working relationship;

(j) The method of payment, whether by time or by the job; and

(k) Whether the parties believe they are creating an employer-employee relationship.

5605.4  A certified capital company that applies to make a certified investment in a business that is unable to provide all of the information required in subsection 5604.2(k)(3) and (4) shall file a detailed written explanation describing the circumstances of the employee’s residency status, and request a waiver of the requirement to provide one (1) or more documents for that employee.  Acceptable reasons for being unable to provide one (1) or more of the required documents include the fact that an employee is homeless; does not have a fixed address in the District; or has a temporary living arrangement in the District and does not have any utilities in his or her name at that address.  The Commissioner may, at his or her discretion, waive one (1) or more of the documents required to be filed to establish an employee’s residency status in the District. 

5605.5 If the Commissioner fails to notify the certified capital company of its determination within the twenty (20) day period required by section 6(e) of the Act, D.C. Official Code § 31-5235(e), the business shall be deemed to be a qualified business.

5605.6A business that satisfies the requirements of a qualified business at the time of the initial or follow-on investment shall continue to satisfy the requirements for six (6) consecutive months following the initial or follow-on investment; provided, however, that any employee that has resigned their employment with the qualified business, is no longer a resident of District, or has been terminated by the qualified business for cause, shall continue to be considered an employee for purposes of the requirement set forth in sections 2(12)(A)(i) and (ii) of the Act, D.C. Official Code § 31-5231(2)(12)(A)(i) and (ii).

5605.7The certified capital company shall obtain a monthly payroll report from each qualified business within ten (10) days after the end of each calendar month, for six (6) consecutive months following an initial or follow-on investment.  The certified capital company shall make the payroll reports available to the Commissioner during the annual review process.

5605.8  If at any time during the six (6) month period following an initial or follow-on investment in a qualified business the business does not satisfy the requirements of a qualified business, the business shall have thirty (30) days from the date of non-compliance to cure the deficiency.  The business shall provide the certified capital company with proof that it has cured the deficiency, and the certified capital company shall make that information available to the Commissioner during the annual review of the certified capital company.

5605.9For purposes of section 2(12)(A)(v) of the Act, D.C. Official Code § 31-5231(2)(12)(A)(v), a business that has previously obtained conventional financing from a bank or commercial lender and requires additional capital, shall certify that it is unable to obtain the additional capital in the form of conventional financing from a bank or commercial lender.  The business shall provide the proof set forth in section 5605.2(g) of this chapter.

5605.10A certified capital company may make an approved qualified investment to a qualified business in installments or tranches over a period not to exceed six (6) months from the date of the approval of the initial or follow-on investment.  Any amount of the qualified investment that is not provided to a qualified business within the six (6) month period shall not be considered a qualified investment for purposes of the Act without a new approval of such investment by the Commissioner pursuant to this section.

5605.11 Any amount of an initial or follow-on investment that is repaid by a qualified business to a certified capital company within twenty-four (24) months of the date of the certified investment shall not be considered a certified investment for purposes of the Act; provided, however, that this provision shall not apply to any interest, dividend, principal payments made based on an amortization of at least twenty-four (24) months or other profit distribution payments made.  For purposes of this section, there shall be a rebuttable presumption that any amount of the certified investment that is returned to a certified capital company within the twenty four (24) month period was not used by the qualified business for the purposes described in the Qualified Business Application.  A certified capital company shall be permitted to receive credit for one hundred percent (100%) of its investment in a qualified business even though the funds were returned within the aforementioned period, if the certified capital company can provide proof to the Commissioner that the qualified business chose to repay the certified investment from its profits or from some other source such as a private equity investor, lender or debt capital provider.  Nothing in this subsection shall prevent a certified capital company from exercising any of its rights as a creditor, including the acceleration of debt owed upon a default by the qualified business under the terms of the debt instrument or upon the acquisition, merger or sale of all or substantially all of the assets of the qualified business.

authority

The Administrator of the Office of Documents and Administrative Issuances, pursuant to the authority set forth in section 309 of the District of Columbia Administrative Procedure Act, approved October 21, 1968 (82 Stat. 1203; D.C. Official Code § 2-559), and the Acting Commissioner of the Department of Insurance, Securities and Banking (DISB), pursuant to the authority set forth in section 10 of the Certified Capital Companies Act of 2003, effective March 10, 2004 (D.C. Law 15-87; D.C. Official Code § 31-5239).

source

Final Rulemaking published at 51 DCR7555, 7560 (July 30, 2004); as amended by the Notice of Final Rulemaking published at 58 DCR 2229 (March 11, 2011); as corrected by Errata Notice published at 58 DCR 2415 (March 18, 2011).