Notwithstanding the exemption set forth in section 80a–6(f) of this title, section 80a–18 of this title shall apply to a business development company to the same extent as if it were a registered closed-end investment company, except as follows:

(1) Except as provided in paragraph (2), the asset coverage requirements of subparagraphs (A) and (B) of section 80a–18(a)(1) of this title (and any related rule promulgated under this subchapter) applicable to business development companies shall be 200 percent.

The asset coverage requirements of subparagraphs (A) and (B) of section 80a–18(a)(1) of this title and of subparagraphs (A) and (B) of section 80a–18(a)(2) of this title (and any related rule promulgated under this subchapter) applicable to a business development company shall be 150 percent if—

(A) not later than 5 business days after the date on which those asset coverage requirements are approved under subparagraph (D) of this paragraph, the business development company discloses that the requirements were approved, and the effective date of the approval, in— (i) any filing submitted to the Commission under section 78m(a) or 78o(d) of this title; and (ii) a notice on the website of the business development company;

(B) the business development company discloses, in each periodic filing required under section 78m(a) of this title— (i) the aggregate outstanding principal amount or liquidation preference, as applicable, of the senior securities issued by the business development company and the asset coverage percentage as of the date of the business development company’s most recent financial statements included in that filing; (ii) that the business development company, under subparagraph (D), has approved the asset coverage requirements under this paragraph; and (iii) the effective date of the approval described in clause (ii);

(C) with respect to a business development company that is an issuer of common equity securities, each periodic filing of the company required under section 78m(a) of this title includes disclosures that are reasonably designed to ensure that shareholders are informed of— (i) the amount of senior securities (and the associated asset coverage ratios) of the company, determined as of the date of the most recent financial statements of the company included in that filing; and (ii) the principal risk factors associated with the senior securities described in clause (i), to the extent that risk is incurred by the company; and

(D) the company— (i) (I) through a vote of the required majority (as defined in section 80a–56(o) of this title), approves the application of this paragraph to the company, to become effective on the date that is 1 year after the date of the approval; or (II) obtains, at a special or annual meeting of shareholders or partners at which a quorum is present, the approval of more than 50 percent of the votes cast for the application of this paragraph to the company, to become effective on the first day after the date of the approval; and (ii) if the company is not an issuer of common equity securities that are listed on a national securities exchange, extends, to each person that is a shareholder as of the date of an approval described in subclause (I) or (II) of clause (i), as applicable, the opportunity (which may include a tender offer) to sell the securities held by that shareholder as of that applicable approval date, with 25 percent of those securities to be repurchased in each of the 4 calendar quarters following the calendar quarter in which that applicable approval date takes place.

(3) Notwithstanding section 80a–18(c) of this title, a business development company may issue more than one class of senior security representing indebtedness.

Notwithstanding section 80a–18(d) of this title—

(A) a business development company may issue warrants, options, or rights to subscribe or convert to voting securities of such company, accompanied by securities, if— (i) such warrants, options, or rights expire by their terms within ten years; (ii) such warrants, options, or rights are not separately transferable unless no class of such warrants, options, or rights and the securities accompanying them has been publicly distributed; (iii) the exercise or conversion price is not less than the current market value at the date of issuance, or if no such market value exists, the current net asset value of such voting securities; and (iv) the proposal to issue such securities is authorized by the shareholders or partners of such business development company, and such issuance is approved by the required majority (as defined in section 80a–56(o) of this title) of the directors of or general partners in such company on the basis that such issuance is in the best interests of such company and its shareholders or partners;

(B) a business development company may issue, to its directors, officers, employees, and general partners, warrants, options, and rights to purchase voting securities of such company pursuant to an executive compensation plan, if— (i) (I) in the case of warrants, options, or rights issued to any officer or employee of such business development company (including any officer or employee who is also a director of such company), such securities satisfy the conditions in clauses (i), (iii), and (iv) of subparagraph (A); or (II) in the case of warrants, options, or rights issued to any director of such business development company who is not also an officer or employee of such company, or to any general partner in such company, the proposal to issue such securities satisfies the conditions in clauses (i) and (iii) of subparagraph (A), is authorized by the shareholders or partners of such company, and is approved by order of the Commission, upon application, on the basis that the terms of the proposal are fair and reasonable and do not involve overreaching of such company or its shareholders or partners; (ii) such securities are not transferable except for disposition by gift, will, or intestacy; (iii) no investment adviser of such business development company receives any compensation described in section 80b–5(a)(1) of this title, except to the extent permitted by paragraph (1) or (2) of section 80b–5(b) of this title; and (iv) such business development company does not have a profit-sharing plan described in section 80a–56(n) of this title; and

(C) a business development company may issue warrants, options, or rights to subscribe to, convert to, or purchase voting securities not accompanied by securities, if— (i) such warrants, options, or rights satisfy the conditions in clauses (i) and (iii) of subparagraph (A); and (ii) the proposal to issue such warrants, options, or rights is authorized by the shareholders or partners of such business development company, and such issuance is approved by the required majority (as defined in section 80a–56(o) of this title) of the directors of or general partners in such company on the basis that such issuance is in the best interests of the company and its shareholders or partners.

(5) For purposes of measuring the asset coverage requirements of section 80a–18(a) of this title, a senior security created by the guarantee by a business development company of indebtedness issued by another company shall be the amount of the maximum potential liability less the fair market value of the net unencumbered assets (plus the indebtedness which has been guaranteed) available in the borrowing company whose debts have been guaranteed, except that a guarantee issued by a business development company of indebtedness issued by a company which is a wholly-owned subsidiary of the business development company and is licensed as a small business investment company under the Small Business Investment Act of 1958 [15 U.S.C. 661 et seq.] shall not be deemed to be a senior security of such business development company for purposes of section 80a–18(a) of this title if the amount of the indebtedness at the time of its issuance by the borrowing company is itself taken fully into account as a liability by such business development company, as if it were issued by such business development company, in determining whether such business development company, at that time, satisfies the asset coverage requirements of section 80a–18(a) of this title.

A business development company shall comply with the provisions of this section at the time it becomes subject to sections 80a–54 through 80a–64 of this title, as if it were issuing a security of each class which it has outstanding at such time.

(Aug. 22, 1940, ch. 686, title I, § 61, as added Pub. L. 96–477, title I, § 105, Oct. 21, 1980, 94 Stat. 2286; amended Pub. L. 104–290, title V, § 506, Oct. 11, 1996, 110 Stat. 3446; Pub. L. 111–203, title IX, § 985(d)(5), July 21, 2010, 124 Stat. 1934; Pub. L. 115–141, div. S, title VIII, § 802(a), Mar. 23, 2018, 132 Stat. 1138.)