General. This § 4290.900 applies to management services that you or your Associate provide to a Portfolio Concern during the term of a Financing or prior to Financing. It does not apply to management services that you or your Associate provide to an Enterprise that you do not finance.

The Secretary's approval. You must obtain the Secretary's prior written approval of any management services fees and other fees described in this section that you or your Associate charge.

Permitted management fees. You or your Associate may provide management services to a Portfolio Concern financed by you if:

You or your Associate have entered into a written contract with the Portfolio Concern;

The fees charged are for services actually performed;

Services are provided on an hourly fee, project fee, or other reasonable basis;

You can demonstrate to the Secretary, upon request, that the rate does not exceed the prevailing rate charged for comparable services by other organizations in the geographic area of the Portfolio Concern; and

All of the management services fees paid to your Associate by a Portfolio Concern for management services provided by the Associate are allocated back to you for your benefit.

Fees for service as a board member. You or your Associate may receive fees in the form of cash, warrants, or other payments, for services provided as members of the board of directors of a Portfolio Concern Financed by you. The fees must not exceed those paid to other outside board members. In the absence of such board members, fees must be reasonable when compared with amounts paid to outside directors of similar companies. At least 50 percent of any board member services fees paid to your Associate by a Portfolio Concern for board member services provided by the Associate must be allocated back to you for your benefit.

Approval required. You must obtain the Secretary's prior written approval of any management contract that does not satisfy paragraphs (c) or (d) of this section.

Transaction fees. (1) You or your Associate may charge reasonable transaction fees for work performed preparing an Enterprise for a public offering, private offering, or sale of all or part of the business, and for assisting with the transaction. Compensation may be in the form of cash, notes, stock, and/or options. All of the transaction services fees paid to your Associate by a Portfolio Concern for transaction services provided by the Associate must be allocated back to you for your benefit.

Your Associate may charge market rate investment banking fees to a Portfolio Concern on that portion of a Financing that you do not provide.

Recordkeeping Requirements. You must keep a record of hours spent and amounts charged to the Portfolio Concern, including expenses charged.