Ohio Admin. Code 150-1-01
The Ohio venture capital program investment policy (the "investment policy") outlines the policies and procedures to be followed by the program administrator selected by the Ohio venture capital authority (the "authority") to manage the Ohio venture capital program (the "program") established under Chapter 150. of the Revised Code. Specifically, this investment policy:
Chapter 150. of the Revised Code authorizes the creation and management of the program fund as a fund of private equity funds for the expressed purpose of making investments in venture capital funds in support of "Ohio-based business enterprises" thereby increasing the amount of private investment capital available in Ohio for and in support of "Ohio-based business enterprises" and promoting "research and development purposes" (as defined in division (A)(8) of section 150.01 of the Revised Code). For purposes of this investment policy, an "Ohio-based business enterprise" is a business entity that employs at least one individual on a full-time or part-time basis, or a self-employed individual, that in either case satisfies the following additional conditions:
The program administrator shall have the authority to secure loans to the program fund; provided, however, the program administrator shall structure the loans to ensure that payments of principal, interest or interest equivalent due in any fiscal year do not exceed twenty million dollars.
The program administrator shall invest not less than seventy-five per cent of program fund monies under its investment authority in "Ohio-based venture capital funds" as defined in division (A)(6) of section 150.01 of the Revised Code.
The program administrator may invest monies from the program fund in private, for-profit venture capital funds that invest or commit to invest in enterprises in the seed or early stage of business development and that demonstrate potential to generate high levels of successful investment performance. To determine whether a venture capital fund possesses an appropriate commitment to invest in seed or early stage businesses so as to qualify for program investment (an "eligible venture capital fund"), the program administrator may rely on factors including, but not limited to the following:
The maximum aggregate commitment of program fund monies by the program administrator to any single venture capital fund shall not exceed ten million dollars; subject, however, to the following additional limitations:
In calculating the aggregate commitment of program fund monies, the program administrator shall include commitments to a venture capital fund and to any other venture capital fund under the same management as that venture capital fund. The program administrator shall consider a venture capital fund to be under the "same management" as another fund if:
As indicated in paragraph (C)(4) of this rule, the program administrator shall not commit capital from the program fund to a venture capital fund until the venture capital fund receives a commitment from other investors in the venture capital fund (the "matching commitment") of at least the same amount (in the case of an Ohio-based venture capital fund) or at least four times that amount (in the case of a venture capital fund that is not Ohio-based). Further, the program administrator will require that any draws against program fund commitments shall not exceed the program fund's pro rata share of the aggregate commitments to the venture capital fund from all investors.
The program administrator will require that not less than an amount equal to fifty per cent of program fund money invested in any venture capital fund be invested by the venture capital fund in an "Ohio-based business enterprise". To determine whether a business entity, or the business of the individual, is in the seed or early stages of business development and requires initial or early stage funding (as specified in the definition of "Ohio-based business enterprise"), the venture capital fund shall consider a variety of factors, including, but not limited to the maturity of the business, the stage of development of the business' products or services and the business' capitalization history and structure; provided, however, if a business is not clearly in the seed or early stages of business development, the venture capital fund may request a determination by the program administrator who shall use the same factors and whose determination shall be final.
The program administrator will require that, commencing with the first program fund commitment to each venture capital fund, the aggregate amount funded into "Ohio-based business enterprises" by all venture capital funds to which the program fund has made commitments will be not less than the aggregate amount of all program fund monies funded into those venture capital funds.
In making any program fund commitments, the program administrator will require that each venture capital fund provide it with information that is consistent with the standards established in paragraph (C)(6)(a) of this rule and any agreement entered into by the authority and an "issuer" (as defined in division (A)(2) of section 150.01 of the Revised Code) pursuant to division (E) of section 150.02 of the Revised Code (an "issuer agreement"), and that is sufficient, in the reasonable judgment of the program administrator, to establish compliance with paragraph (C)(6)(b) of this rule. The program administrator shall report to the authority on such compliance, and on any additional information required pursuant to any issuer agreement, at the same time each year that it is required to report the annual audit to the authority under section 150.05 of the Revised Code.
In accordance with the terms of the agreement between the program administrator and the authority and any issuer agreement, the program administrator shall immediately certify any lender's loss incurred in connection with the lender's loan to the program fund or with the utilization of any reserves established and maintained by a trustee on behalf of an issuer to pay losses consistent with the issuer agreement. The authority, in conjunction with the tax commissioner, shall develop a system for issuing tax credit certificates and for the purpose of verifying that any credit claimed is a credit issued under section 150.07 of the Revised Code and is properly taken in the year specified in the certificate and in compliance with divisions (B) and (D) in section 150.07 of the Revised Code.
The program administrator shall apply program fund revenue first to the payment of principal borrowed by the program fund for investment under the program and then to interest related to that principal, including any prepayments of such principal and related interest and any deposits to establish, fund, maintain, restore or otherwise provide for funds for the payment of principal and interest (including, without limitation, debt service payment and prepayment funds, debt service reserve or sinking funds, and reserves to fund principal, interest and other commitments or obligations of the program fund), all as required under the applicable lending documents, any applicable "issuer agreement" or a related trust agreement or indenture ("reserves"), and then to amounts necessary to cover the principal and interest on the program administrator's loan to the program fund (which loan must be equal to, but may not exceed, one per cent of the amount of outstanding loans by other lenders to the program fund). The program administrator shall then pay to the authority for deposit in the Ohio venture capital fund, as described in section 150.08 of the Revised Code, not less than ninety per cent of the amount by which program fund revenue attributable to investments of program fund monies exceeds amounts applied in accordance with the preceding sentence. The determination regarding the existence and amount of excess funds in the program fund shall be made in accordance with the provisions of the agreement between the program administrator and the authority and any "issuer agreement".
In addition to the program fund revenues, the lenders to the program fund, with the exception of the program administrator, may be entitled to the following additional security against losses:
Management fees payable to the program administrator in accordance with the contract between the program administrator and the authority, and any issuer fees payable to the issuer in accordance with an "issuer agreement," shall be payable from monies in the program fund, whether such funds constitute loan proceeds or revenues generated from program fund investments, or from other available monies. Any such payment from monies in the program fund shall not be deemed to be an "investment of money from the program fund" as described under division (J) of section 150.03 of the Revised Code.
In making the investments from the program fund, the program administrator will:
Ohio Admin. Code 150-1-01
Five Year Review (FYR) Dates: 11/05/2015 and 01/22/2021
Promulgated Under: 119.03
Statutory Authority: ORC 150.03
Rule Amplifies: ORC 150, Section 4582.71
Prior Effective Dates: 6/25/04, 12/2/09 (Ener.), 1/18/10