15-3-122. Purchase of qualified securities — Prerequisites — Advisory committees.

15-3-122. Purchase of qualified securities — Prerequisites — Advisory committees. (a) The Arkansas Economic Development Commission may utilize moneys as appropriated by the General Assembly to purchase qualified securities issued by enterprises as a part of a scientific and technological project for the purpose of raising the initial capitalization for such scientific and technological projects subject to the conditions set forth in this section. (b) The commission shall purchase qualified securities issued by an enterprise as a part of a scientific and technological project only after: (1) Receipt of an application from the enterprise which contains: (A) A business plan, including a description of the enterprise and its management, product, and market; (B) A statement of the amount, timing, and projected use of the capital required; (C) A statement of the potential economic impact of the enterprise, including the number, location, and types of jobs expected to be created; and (D) Such other information as the commission shall request; and (2) Approval of the investment by the Director of the Arkansas Economic Development Commission, with the advice of the Board of Directors of the Division of Science and Technology of the Arkansas Economic Development Commission, after the director shall find, based upon the application submitted by the enterprise and such additional investigation as the staff of the commission shall make, and incorporate in its minutes that: (A) The proceeds of the investment will only be used to cover the initial capitalization needs of the enterprise except as hereinafter authorized; (B) The enterprise has a reasonable chance of success; (C) The commission's participation is necessary to the success of the enterprise because funding for the enterprise is unavailable in the traditional capital markets or because funding has been offered on terms that would substantially hinder the success of the enterprise; (D) The enterprise has the reasonable potential to create a substantial amount of primary employment within the state; (E) The entrepreneur and other founders of the enterprise have already made or are contractually committed to make a substantial financial and time commitment to the enterprise; (F) The securities to be purchased are qualified securities; (G) There is a reasonable possibility that the commission will recoup at least its initial investment; and (H) Binding commitments have been made to the commission by the enterprise for adequate reporting of financial data to the commission, which shall include a requirement for an annual or other periodic audit of the books of the enterprise and for such control on the part of the commission as the director shall consider prudent over the management of the enterprise so as to protect the investment of the commission, including, in the discretion of the director and without limitation, right of access to financial and other records of the enterprise. (c)(1) In carrying out his or her functions under this section, the director may create such advisory committees as may be useful in evaluating potential investments in qualified securities. (2) The memberships of these advisory committees may include both directors of the board and staff members of the commission and other persons drawn from sources other than the commission, all of whom shall serve at the pleasure of the director. (3) Members of these advisory committees shall serve without compensation for their membership on the committees but may receive expense reimbursement in accordance with § 25-16-901 et seq. (d) The commission shall not make investments in qualified securities issued by enterprises in excess of the following limits: (1) Not more than five hundred thousand dollars ($500,000) shall be invested in the qualified securities of any one (1) enterprise; and (2) The commission shall not own securities representing more than forty-nine percent (49%) of the voting stock of any one (1) enterprise at the time of the purchase by the commission, after giving effect to the conversion of all outstanding convertible securities of the enterprise. However, in the event of severe financial difficulty of the enterprise threatening, in the judgment of the director, the investment of the commission therein, a greater percentage of such securities may be owned by the commission. (e) The commission may not invest nor may it commit to invest in any qualified securities prior to the commission's adopting rules to govern the programs authorized under this section.