Business Development Company Act of 1980

Business Development Company Act of 1980 - Title I: Amendments to the Investment Company Act of 1940 - Amends the Investment Company Act of 1940 to define: (1) "business development company" as any closed-end investment company organized and operated solely for making investments in specified securities transactions and making available managerial assistance to the issuers of such securities; and (2) "eligible portfolio company" as any company which (a) has no class of securities registered pursuant to the Securities Exchange Act of 1934, or with respect to which a member of a national securities exchange, broker, or dealer may maintain credit for a customer; and (b) is neither an investment company nor any person described as a noninvestment company order under such Act.

Provides that certain small business investment companies owning ten percent or more of the outstanding voting securities of the issuer-company shall be considered a beneficial ownership by one person if: (1) the value of all securities of small business investment companies owned by such company does not exceed five percent of its total assets; or (2) such securities of the small business investment company are owned by a specified State development corporation. Deems other specified issuers as a beneficial ownership by one person if the value of all securities owned by all noninvestment company issuers does not exceed five percent of its total assets.

Makes it unlawful for any business development company to hold any asset except: (1) securities purchased in transactions not involving any public offering, or unless as prescribed by the Commission (a) from any eligible portfolio company or controlling person thereof and (b) from any company which is no longer an eligible portfolio company under specified circumstances; (2) securities received in exchange for or distributed with respect to such nonpublic offering securities; (3) cash and Government securities or high quality debt securities maturing in one year or less; and (4) noninvestment property necessary for the operation of a business development company, including certain notes or other evidences of indebtedness.

Authorizes any noncontrolling shareholder affiliate (as defined by this Act) to enter into a joint transaction with a business development company if: (1) such transaction is approved by a majority of the development company's directors having no financial interest in such transaction; and (2) such transaction is recorded in the board's minutes.

Permits an officer or employee of a business development company to borrow money from the company to purchase securities issued by such company pursuant to an executive compensation plan if such loan: (1) has a term of not more than ten years; (2) becomes due not more than 60 days after such person terminates his/her employment; (3) bears interest at not less than the prevailing interest rate at the date of issuance; (4) is fully collateralized; and (5) is approved by a majority of the board of directors having no financial interest in the transaction.

Authorizes a business development company with no outstanding publicly held indebtedness to issue more than one class of senior debt securities if all securities of each class are: (1) privately held by the Small Business Administration or other institutional investors; and (2) not intended for public distribution.

Authorizes a business development company to issue senior debt securities accompanied by options or rights to convert to voting securities if: (1) such conversion rights expire within ten years; (2) such conversion rights are not separately transferable unless no class of such rights and the accompanying senior securities has been publicly distributed; (3) the conversion price is not less than the current market value at the date of issuance; and (4) such securities issuance is authorized by the company's shareholders and approved by a majority of its board of directors having no financial interest in such issuance.

Authorizes a business development company to issue options and rights to purchase voting securities to its officers and employees pursuant to an executive compensation plan under specified conditions.

Authorizes a registered closed-end business development company to issue stock at less than its net value in connection with such senior convertible securities.

Title II: Amendments to the Investment Advisers Act of 1940 - Amends the Investment Advisers Act of 1940 to define "business development company" as any company organized and operated solely for the purposes of making investments in securities purchased in specified transactions and making managerial assistance available to the issuers of such securities.

States that no shareholder, partner, or beneficial owner of a business development company shall be considered a client of an investment adviser unless such person is such a client apart from his/her status as a shareholder, partner, or beneficial owner.

Exempts certain investment advisory contracts between an investment adviser and a business development company from specified mail or interstate commerce contract prohibitions.