Private funds would bear responsibility for controlled companies’ debts

Covered private funds would be responsible for the full amount of obligations owed by companies they acquire and control. Responsibility would also cover obligations of the acquired companies’ affiliates, meaning related people or businesses covered by the bill. The private-fund definition excludes venture capital funds and designated community development financial institutions.

Companies acquired and controlled by covered private funds would face limits on owner payouts and moving work overseas. Separate 10-percent tests tied to company financial obligations would limit payouts and promises of future payouts. The overseas restriction would apply when a plant closing or mass layoff is paired with relocating that work abroad. The payout ban would apply for four years after the acquisition’s closing date. The other payout limits and overseas restriction would apply after that date without a stated four-year end date.

Bankruptcy courts would give substantial weight to preserving workers’ jobs and employment terms when approving property sales or leases. The rules would include sales and leases carried out through a Chapter 11 bankruptcy plan. When at least two offers meet court-approved sale procedures, courts would have to choose the offer that best preserves both. Buyers’ and tenants’ statements about protecting workers would become enforceable parts of the court order.

Certain business payments to controlling investment firms would face an extra income tax. The rule would cover certain controlling firms, and related firms, that regularly raise or return money and invest in or develop assets. Interest and specified distributions to shareholders would be excluded. The tax would apply to covered payments paid or accrued on or after enactment.

The Securities and Exchange Commission would require controlling private funds to file annual reports that the public could read. Reports would identify fund partners, show investment results, and describe fees collected from controlled companies. Reports would follow generally accepted accounting rules. The commission would have to issue final reporting rules within one year after enactment.