History: L. 1986, ch. 285, § 1; May 22.
History: L. 1986, ch. 285, § 2; L. 1987, ch. 322, § 1; April 16.
(a) "Department" means the department of commerce;
(b) "equity" means all forms of equity such as common stock, preferred stock with or without voting rights and without regard to seniority of equity position, forms of subordinate or convertible debt, or both, with warrants or other means of equity conversion attached, or any other means of financing which meet generally accepted national standards for venture capital investment in the United States;
(c) "Kansas business" means any small business owned by an individual, any partnership, association or corporation domiciled in Kansas, or any corporation, even if a wholly owned subsidiary of a foreign corporation, that does business primarily in Kansas or does substantially all of its production in Kansas;
(d) "Kansas venture capital company" means any for-profit partnership, limited liability company or corporation that has as its primary business activity the investment of funds in return for equity in ventures that are in need of capital for expansion, new product development or similar business purposes and that may be certified by the secretary as meeting the criteria of this act and thus eligible for the tax credit provided in this act;
(e) "secretary" means the secretary of the department of commerce;
(f) "cash investment" means money or its equivalent in consideration for:
(1) An equity interest, such as a general or limited partnership interest, common or preferred stock with or without voting rights and without regard to seniority position, forms of subordinate or convertible debt, or both, with warrants or other means of equity conversion attached; or
(2) a debt instrument, such as a note or debenture, which is unsecured, subordinated to the general creditors of the debtor, and requires no payments of principal (other than principal payments required to be made out of any future profits of such debtor) for at least a seven-year period after commencement of its term.
History: L. 1986, ch. 285, § 3; L. 1987, ch. 320, § 1; L. 1998, ch. 108, § 4; July 1.
(b) The secretary of revenue shall allow credits that are attributable to not more than $50,000,000 of cash investments in certified Kansas venture capital companies and certified local seed capital pools allowable pursuant to K.S.A. 74-8401 and amendments thereto, which shall include not more than $10,000,000 for Kansas Venture Capital, Inc. The credits shall be allocated by the secretary for cash investments in certified Kansas venture capital companies in the order that completed applications for designation as Kansas venture capital companies are received by the secretary. Any certified Kansas venture capital company may apply to the secretary at any time for additional allocation of such credit based upon then committed cash investments, but priority as to such additional allocation shall be determined at the time of such subsequent application. Notwithstanding the provisions of subsection (c), investors in Kansas venture capital companies established after July 1, 1984, which otherwise meet the requirements specified in this act, shall be, upon certification of the Kansas venture capital company, entitled to the tax credit provided in subsection (a) in the calendar year in which the investment was made.
(c) No taxpayer shall claim a credit under this section for cash investment in Kansas Venture Capital, Inc. No Kansas venture capital company shall qualify for the tax credit allowed by Chapter 332 of the 1986 Session Laws of Kansas for investment in stock of Kansas Venture Capital, Inc.
(d) The provisions of this section, and amendments thereto, shall be applicable to cash investments made in any taxable year commencing after December 31, 1985, and prior to January 1, 1998.
History: L. 1986, ch. 285, § 4; L. 1987, ch. 320, § 2; L. 1987, ch. 321, § 1; L. 1988, ch. 313, § 3; L. 1989, ch. 241, § 1; L. 1990, ch. 291, § 2; L. 1993, ch. 151, § 1; L. 1998, ch. 108, § 5; July 1.
History: L. 1987, ch. 322, § 2; April 16.
History: L. 1986, ch. 285, § 5; May 22.
(b) The secretary shall promulgate rules and regulations defining the equivalent of money for the purposes of cash investments under the provisions of this act.
(c) The department, through the secretary, shall review the articles of incorporation or the articles of partnership of each applicant for certification and the business history of the applicant and determine that the capitalization is at least $1,500,000.
(d) Within 60 days of application, the secretary shall issue the certification and notify the department of revenue of such certification, or shall refuse the certification and issue an order so providing.
History: L. 1986, ch. 285, § 6; L. 1987, ch. 320, § 3; May 7.
(1) Invest at least 30% of its original capitalization at the end of the initial three years in such a manner as to acquire equity in the ventures in which the investments are made;
(2) have invested at least 50% in the same manner at the end of five years; and
(3) have invested at least 75% in the same manner at the end of seven years.
(b) Invest at least 60% of the total investment of the Kansas venture capital company in Kansas businesses in which the funds so invested were to be used solely for the purpose of enhancing their productive capacity within the state, or to add value to goods or services produced or processed within the state.
(c) Until such time as Kansas Venture Capital, Inc. redeems the nonvoting preferred stock representing the investment made by the pooled money investment board pursuant to K.S.A. 74-8203, and amendments thereto, funds invested by Kansas Venture Capital, Inc. shall be invested at 100% in Kansas businesses or in Kansas venture capital companies which invest 100% of the funds invested in such companies by Kansas Venture Capital, Inc. in Kansas businesses in which the funds so invested were to be used solely for the purpose of enhancing their productive capacity within the state, or to add value to goods or services produced or processed within the state. After such redemption by Kansas Venture Capital, Inc., the requirements of this subsection shall expire.
(d) No more than 20% of the assets of a Kansas venture capital company may be invested in the equity of a single business at any one time, unless the Kansas venture capital company can reasonably demonstrate that a greater percentage in a single company at any one time is the result of losses suffered by the Kansas venture capital company in other investments.
(e) The use of invested funds by a Kansas business for oil and gas exploration and development, for real estate development or appreciation, for banking or lending operations, or service or retail are not acceptable investments to qualify for the tax credit provided in this act. Any investments by Kansas venture capital companies in any of these sectors shall not be counted as equity investments for the purpose of continuing certification under this section.
(f) For a service sector firm to be considered as an eligible investment under the provisions of this act, the firm must fall within standard industrial classification codes major service sector groups 70 through 89, and must also demonstrate one of the following:
(1) More than one-half of its gross revenues are a result of sales to commercial or governmental customers outside the state of Kansas; or
(2) more than one-half of its gross revenues are a result of sales to Kansas manufacturing firms within major groups 20 through 39; or
(3) more than one-half of its gross revenues are a result of a combination of sales described in (1) and (2).
(g) Documents and other materials submitted by Kansas venture capital companies or by Kansas businesses for purposes of the continuance and certification shall not be public records if such records are trade secrets under the uniform trade secrets act (K.S.A. 60-3320 et seq. and amendments thereto) or determined by the secretary to be business secrets and shall be maintained in a secured environment by the secretary.
(h) At the time of an initial investment by a certified Kansas venture capital company, no investors in that certified Kansas venture capital company shall own a majority equity interest in a business in which the venture capital company is investing.
History: L. 1986, ch. 285, § 7; L. 1987, ch. 319, § 3; L. 1990, ch. 291, § 1; L. 1994, ch. 268, § 2; L. 1998, ch. 108, § 6; L. 2005, ch. 67, § 12; July 1.
(b) The secretary shall provide this information contained in subsection (a) to the department of revenue on an annual basis.
(c) The secretary shall conduct an annual review of each Kansas venture capital company certified under the program to determine if the Kansas venture capital company is in compliance with the requirements of certification, to advise the Kansas venture capital company as to the certification status of its investments, and to ensure that no investment has been made in violation of the provisions of this act or rules and regulations promulgated by the department. The reasonable costs of the annual review shall be paid by each Kansas venture capital company according to a reasonable fee schedule adopted by the secretary. Any violation shall be grounds for decertification under this section.
(d) If the Kansas venture capital company has met the fifth year, seventh year and ninth year investment levels and has subsequently sold any of the companies in which those equity investments were made, the temporary liquidity of the Kansas venture capital company prior to reinvestment in the equity of new ventures will not be cause for decertification.
(e) In undertaking the annual review the secretary shall use reasonable and generally accepted national standards of venture capital company practice. If the secretary determines that a company is not in substantial compliance with the requirements for continuing in certification, the secretary shall, by written notice, inform the officers of the company and the board of directors or partners that they will be decertified in 120 days from the date of mailing of the notice unless they correct the deficiencies and are once again in compliance with the requirements for certification.
(f) At the end of the 120-day period, if the Kansas venture capital company is still not in substantial compliance, the secretary shall send a notice of decertification to the company and to the secretary of the department of revenue. Decertification of a Kansas venture capital company shall cause the forfeiture of any right or interest to the tax credit under the provisions of this act and shall cause the total amount of tax credit previously claimed by persons under the program to be due and payable with that year's income tax liability.
(g) Following each annual examination, the secretary shall notify the department of revenue of any Kansas venture capital companies that are not in compliance with this section.
(h) The department of revenue shall send written notice to the address of each person whose tax credit has been forfeited, using the address last shown on the person's last income tax filing.
History: L. 1986, ch. 285, § 8; L. 1987, ch. 322, § 3; April 16.
(b) Investors in a Kansas venture capital company are entitled to keep all of the tax credits claimed under the Kansas venture capital company act if the Kansas venture capital company is in compliance with the Kansas venture capital company act and voluntarily decertifies itself after the end of the seventh year following its certification.
(c) A Kansas venture capital company may voluntarily decertify itself by sending written notice of decertification to the secretary of commerce.
History: L. 1986, ch. 285, § 9; L. 1987, ch. 320, § 4; May 7.
(1) The number of Kansas venture capital companies;
(2) the total tax credit generated;
(3) the total investments made in Kansas venture capital companies;
(4) the total investments in Kansas businesses by Kansas venture capital companies;
(5) an estimate of jobs created or preserved under the program; and
(6) an estimate of the multiplier effect on the Kansas economy of the program.
(b) Additionally, in the report the secretary shall evaluate the success of the program in collaboration with Kansas, Inc. and the standing committee on commerce of the senate, the standing committee on economic development of the house of representatives and the joint committee on economic development, and may include specific recommendations for legislation.
History: L. 1986, ch. 285, § 10; L. 1993, ch. 136, § 16; L. 1996, ch. 205, § 11; July 1.
History: L. 1986, ch. 285, § 11; May 22.
(b) The technology-based venture-capital fund may invest the assets as follows:
(1) To carry out the purposes of this act through investments in qualified securities and through the forms of financial assistance authorized by this act, including:
(A) Loans, loans convertible to equity, and equity;
(B) leaseholds;
(C) management or consultant service agreements;
(D) loans with warrants attached that are beneficially owned by the fund;
(E) loans with warrants attached that are beneficially owned by a party other than the fund; and
(F) the fund, in connection with the provision of any form of financial assistance, may enter into royalty agreements with an enterprise.
(2) To invest in such other investments as are lawful for Kansas fiduciaries pursuant to K.S.A. 2002 Supp. 58-24a02 and amendments thereto.
(c) Distributions received by the corporation may be reinvested in any fund consistent with the purposes of this act.
(d) The corporation may invest only in a fund whose investment guidelines permit the fund's purchase of qualified securities issued by an enterprise as a part of a resource and technology project subject to the following:
(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 fund manager or the fund's board of directors shall request.
(2) Approval of the investment by the fund may be made after the fund manager or the fund's board of directors finds, based upon the application submitted by the enterprise and such additional investigation as the fund manager or the fund's board of directors shall make and incorporate in its minutes, that:
(A) The proceeds of the investment will be used only to cover the venture-capital needs of the enterprise except as authorized by this section;
(B) the enterprise has a reasonable possibility of success;
(C) the fund's participation is instrumental to the success of the enterprise because funding otherwise available for the enterprise is not available on commercially feasible terms;
(D) the enterprise has the reasonable potential to create a substantial amount of 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 fund will recoup at least its initial investment; and
(H) binding commitments have been made to the fund by the enterprise for adequate reporting of financial data to the fund, which shall include a requirement for an annual report, or if required by the fund manager, an annual audit of the financial and operational records of the enterprise, and for such control on the part of the fund as the fund manager shall consider prudent over the management of the enterprise, so as to protect the investment of the fund, including in the discretion of the fund manager and without limitation, the right of access to financial and other records of the enterprise.
(e) All investments made pursuant to this section shall be evaluated by the fund's investment committee and the fund shall be audited annually by an independent auditing firm.
(f) The fund shall not make investments in qualified securities issued by enterprises in excess of the amount necessary to own more than 49% of the qualified securities in any one enterprise at the time of the purchase by the fund, after giving effect to the conversion of all outstanding convertible qualified securities of the enterprise, except that in the event of severe financial difficulty of the enterprise, threatening, in the judgment of the fund manager, the investment of the fund therein, a greater percentage of such securities may be owned by the fund.
(g) At least 75% of the total investment of the fund must be in Kansas businesses.
History: L. 1995, ch. 127, § 1; L. 2001, ch. 75, § 12; July 1.
(a) The annual statement of the fund; and
(b) a report, based upon information received by the fund manager, which specifies the following:
(1) The manner in which the purpose as described in this act has been carried out by the fund.
(2) The total investments made annually by the fund in Kansas businesses.
(3) An estimate of jobs created and jobs preserved by investments by the fund in Kansas businesses.
(4) An estimate of the multiplier effect on the Kansas economy of investments by the fund in Kansas businesses.
(5) An analysis of the targeting of scarce resources by the fund by size, sector and location to enterprises of particular need and opportunity.
History: L. 1995, ch. 127, § 2; July 1.
History: L. 1995, ch. 127, § 3; July 1.
(a) "Corporation" means the Kansas technology enterprise corporation;
(b) "fund" means any venture-capital fund whether organized as a corporation, partnership, limited partnership, limited liability company or other business entity, as well as any separately organized entity, which manages any such fund;
(c) "fund manager" means any person or persons, approved by the corporation, legally responsible for the investment and management of a fund's assets pursuant to statute or contract.
History: L. 1995, ch. 127, § 4; July 1.