MISSISSIPPI LEGISLATURE

1998 Regular Session

To: Economic Dev, Tourism and Parks

By: Senator(s) Horhn

Senate Bill 2920

AN ACT TO CREATE A NEW CODE SECTION TO BE CODIFIED AS SECTION 57-77-41, MISSISSIPPI CODE OF 1972, TO PROVIDE FOR THE REPEAL OF THE VENTURE CAPITAL ACT OF 1994 FROM AND AFTER JULY 1, 1998; TO AMEND SECTION 57-77-11, MISSISSIPPI CODE OF 1972, TO PROVIDE THAT NO FUNDS IN THE MAGNOLIA VENTURE CAPITAL FUND MAY BE USED TO PROVIDE FINANCING FOR ANY BUSINESS IN WHICH A DIRECTOR OR AN EMPLOYEE OF THE MAGNOLIA CAPITAL CORPORATION OR THE MAGNOLIA VENTURE CAPITAL CORPORATION HAS A DIRECT OR INDIRECT INTEREST; AND FOR RELATED PURPOSES. 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:

 

SECTION 1. The following provision shall be codified as Section 57-77-41, Mississippi Code of 1972:

57-77-41. Sections 57-77-1 through 57-77-39, Mississippi Code of 1972, which are the Venture Capital Act of 1994, shall stand repealed from and after July 1, 1998.

SECTION 2. Section 57-77-11, Mississippi Code of 1972, is amended as follows:

57-77-11. (1) The Magnolia Venture Capital Corporation shall be formed and operated pursuant to the laws of this state. The articles of incorporation, bylaws and any other agreement relating to the organization or operation of the Magnolia Venture Capital Corporation must comply with the provisions set forth in this section. The Magnolia Venture Capital Corporation will be a for profit corporation.

(2) The executive director of the department shall cause the Magnolia Venture Capital Corporation to be formed, and he shall designate the incorporators. The initial board of directors shall consist of five (5) members, all of whom will be appointed by the executive director of the department. Members of the initial board of directors shall serve staggered terms as follows: three (3) for terms of five (5) years each and two (2) for terms of three (3) years each, in accordance with the bylaws. After the terms of initial directors expire, successors shall be chosen in the manner provided by the bylaws of the Magnolia Venture Capital Corporation. Members of the initial board are eligible to succeed themselves. If a director is a full-time state employee, he may not receive per diem.

(3) The articles of incorporation shall provide that the name of the entity is the "Magnolia Venture Capital Corporation," and the registered agent shall be designated by the executive director of the department. The Magnolia Venture Capital Corporation's existence begins upon filing of the articles of incorporation. The Magnolia Venture Capital Corporation's existence is perpetual, unless dissolved as provided herein. The Magnolia Venture Capital Corporation is authorized to issue shares of a number, class and par or no-par value as provided in its articles of incorporation. The general nature of the business of the Magnolia Venture Capital Corporation is to serve as general partner of the Magnolia Venture Capital Fund Limited Partnership, to provide venture capital to Mississippi businesses, to provide financing to high-growth oriented businesses, and to undertake any acts appropriate or necessary to carry out the foregoing. The bylaws, the organizational minutes, the election of officers, the issuance of any stock of the Magnolia Venture Capital Corporation, and any other actions appropriate or necessary for the organization and operation of the Magnolia Venture Capital Corporation shall be of that form and content as determined by the board of directors. Nothing contained in this chapter may prohibit the shareholders or board of directors of the corporation from altering, amending or otherwise modifying the articles of incorporation, bylaws or any other agreement governing the Magnolia Venture Capital Corporation as otherwise permitted under the laws of this state, except that the general nature of the business of the Magnolia Venture Capital Corporation may not be amended, altered or otherwise modified or restricted and except that the Magnolia Venture Capital Corporation may be dissolved, merged or otherwise cease to exist pursuant to the appropriate vote of the board of directors and shareholders. The executive director of the department may expend any discretionary funds he has available and considers appropriate for the purpose of organizing the Magnolia Venture Capital Corporation and promoting the sale of the qualified investments.

(4) The Magnolia Venture Capital Corporation shall cause the fund to be formed as a limited partnership. The partnership agreement relating to the organization and operation of the fund must be of that form and content as determined by the board of directors of the Magnolia Venture Capital Corporation. The Magnolia Venture Capital Corporation shall be the sole general partner of the fund, and the initial limited partner shall be a person or entity designated by the Magnolia Venture Capital Corporation's board of directors. Additional limited partners may be admitted to the fund in accordance with the terms of the partnership agreement.

(5) The fund shall raise funds to provide financing to high-growth oriented businesses. A "high-growth oriented business" is a corporation, general partnership, limited partnership, joint venture, trust, proprietorship, or other similar entity or organization which is expected to experience significant sales growth over the subsequent five-year period. All investments made from investment monies raised by the fund, for which the tax credit provided by this chapter is allowed and for which the tax credit is made available by the fund in the prospectus or offering, must be made to provide venture capital to Mississippi businesses, this venture capital to be used primarily for the purpose of enhancing the production capacity of these businesses or their ability to do business in Mississippi. Seventy percent (70%) of these investment monies acquired by the fund for which the tax credit is allowed and available must be invested to provide venture capital financing of start-up businesses. The remaining thirty percent (30%) may be invested as the general partner of the fund determines to provide capital to Mississippi businesses.

(6) No business may be transacted or indebtedness incurred (not including indebtedness authorized to be incurred in Sections 57-77-15 and 57-77-17) except that as is incidental to the organization of the Magnolia Venture Capital Corporation or of the fund or to obtaining subscriptions to or payment for qualified interests, until consideration of Four Million Five Hundred Thousand Dollars ($4,500,000.00) has been paid to Magnolia Venture Capital Corporation or to the fund.

(7) All securities issued by either the Mississippi Venture Capital Corporation or the fund shall be exempt securities with regard to the Mississippi Uniform Securities Act.

(8) No funds in the Magnolia Venture Capital Fund may be used to provide financing for any business in which a director or an employee of the Magnolia Capital Corporation or the Magnolia Venture Capital Corporation or the spouse of any such director or employee has a direct or indirect interest. No funds in the Magnolia Venture Capital Fund may be used to provide financing for any business in which a person who has been engaged pursuant to Section 57-77-23 or the spouse of such person has a direct or indirect interest.

SECTION 3. This act shall take effect and be in force from and after its passage.