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Illinois Sudan Divestment Legislation

The IVCA and its members worked for over two years to resolve the unintended consequences of Illinois Public Act 94-0079, enacted in 2005, which severely restricted under-funded pensions’ ability to invest in venture capital and private equity. In February 2007 through litigation brought by the National Foreign Trade Council the state was permanently enjoined from enforcing this law.

New Sudan divestment legislation (S.B. 1169) was approved by the General Assembly in May 2007 and was signed by the Governor in August 2007 (Public Act 095-0521). The IVCA believes the new legislation is significantly improved over the 2005 Act and should provide a workable compliance system for pension funds and private equity/venture capital firms that will achieve the intent of the legislation while eliminating negative unintended consequences.

 

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Iran Divestiture Legislation

Legislation affecting the investment of public funds in "scrutinized entities" in Iran was enacted into law in September 2007.

 

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Gross Receipts Tax

IVCA is opposed to this tax. It makes Illinois' VC/Private Equity firms less competitive and harms early-stage companies that have little or no profit. It also harms mature companies that will experience the pyramiding effect of paying higher prices due to taxs on each component it requires to finish its product or service.

  

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Personal Property Replacement Tax

Resolving of problem with the Personal Property Replacement Tax (PPRT), which created unfair costs for LPs investing in Illinois funds

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Freedom of Information Act

Clarifying the Freedom of Information Act (FOIA), to explain the requirements for private companies receiving investments from public pension funds

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Complying with New Ethics Requirements
Are private equity and venture funds with Illinois public pension funds as LPs covered under the new ethics requirements?
Illinois Public Act 95-971, which became effective January 1, 2009, imposes certain registration and notification requirements and campaign contribution prohibitions. The Governor's Executive Order 3, which also became effective January 1, 2009, imposed additional campaign contribution prohibitions.

On April 3, 2009, Governor Quinn rescinded Executive Order 3 by issuing Executive Order 9.  The new Executive Order noted the uncertainty and confusion regarding the scope of Executive Order 3 and its relationship to Public Act 95-971 and pending campaign finance and procurement reforms, concluding that rescinding the earlier Order was appropriate.

Although there was initial concern that a new 2008 law and Executive Order addressing Illinois' “pay-to-play” culture may cover private equity and venture funds which accept investments from the state pension plans, after careful review, it is the consensus among several prominent private equity attorneys that as a general matter private equity and venture funds with Illinois pension funds as LPs are likely not subject to the act or the Executive Order solely because of the investments made by the public pension funds.

From a practical perspective, however, it may be advisable to comply with the political contributions ban to executive officeholders (Governor, Lt. Governor, Treasurer, Attorney General and Comptroller) if one has or will pursue contracts influenced by that office.  The law covers Illinois public pension plans and designates the Governor as the official responsible for awarding contracts in this area.   Many believe this would be the most prudent course of action given the considerable risks associated with making these political contributions while receiving public investments.

Each individual investment situation is different, however, so readers should seek legal advice on the applicability of these requirements to any specific investments.

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