Establishing a new chapter in Hawaii revised statues that provides for a limited relaxation of the prudent investor or person rule by allowing fiduciaries to invest a small portion of their assets in Hawaii venture capital investments.

A BILL FOR AN ACT

SECTION 1. The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read as follows:

"CHAPTER

§ -101 Definitions. As used in this chapter:

"Fiduciary" means holding something in trust for another and includes pension funds, corporations, limited liability companies, partnerships, banks, savings institutions, trust companies, and the employees retirement system of the State of Hawaii, and the officers, directors, trustees, partners, managers, advisors, employees, and representatives of these entities.

"Hawaii venture capital investment" means a direct debt or equity investment in privately held Hawaii companies with substantial operations in Hawaii, or an investment in limited partnerships, limited liability companies, or other entities that make private debt and equity investments, directly or through investments in limited partnerships, limited liability companies, or entities in privately held Hawaii companies, including but not limited to an investment consisting of shares of capital stock, convertible notes, debt instruments, and other securities, warrants, options, or other rights to acquire such securities from such privately held companies.

"Privately held Hawaii company" means any privately held corporation, limited liability company, partnership, or other entity that is headquartered or conducts a substantial part of its operations in Hawaii.

§ -102 Limited investment in privately held Hawaii companies authorized. (a) Unless prohibited by federal law or regulations adopted thereunder, but notwithstanding any law or regulation of this state to the contrary, fiduciaries may invest up to two and one-half per cent of their funds eligible for investment, but not more than ten per cent of their capital, including common capital stock, certified surplus, capital notes, and undivided profits, in Hawaii venture capital investments, and may manage and liquidate those investments, without being in contravention of any prudent investor or person rule. It shall not constitute a contravention of a prudent investor or person rule if Hawaii venture capital investments made under this section exceed the limitations of this section by virtue of a reduction in the amount of funds eligible for investment.

(b) If the fiduciaries making investments under this section are subject to supervision by state regulators, such regulators may adopt rules and regulations to implement this section."

SECTION 2. This Act shall take effect upon its approval.