Private Investment Company - Explained
What is a Private Investment Company?
Written by Jason Gordon
Updated at July 8th, 2021
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Table of Contents
What is a Private Investment Company?What is Required to be a Private Investment Company?Academic Research on Private Investment Company (PIC)What is a Private Investment Company?
Private investment companies are not covered under the section 3C1 of the 1940 Investment Company Act. They are not required to register with Securities Exchange Commission (SEC) but their investors and investments in stocks or bonds are limited. A private Investment company is made up of a minimum of 100 investors and maximum of 250 investors. An investment company with no intention of making a public offering and whose members have investments elsewhere is a private investment company. Investors of private investment companies are those with an in depth knowledge of the industry. A good example of a private investment company is a hedge fund.
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What is Required to be a Private Investment Company?
A company or a fund is required to meet the criteria and exemptions enlisted the sections 3C1 and 3C7 of the 1940 investment act before it can be called a private investment company. Also, as provided by the act, the number of investors and type of investors that can own shares in a private fund are limited. A company under section 3C1 can have 100 investors while a fund under 3C7 is permitted to have up to 2,000 investors. Ideally, private investment companies do not make public offerings or solicit funds from retail investors, rather, their capitals are generated from wealthy investors who also have investment elsewhere.
Academic Research on Private Investment Company (PIC)
- Private investment in livestock breeding with implications for public research policy, Narrod, C. A., & Fuglie, K. O. (2000). Agribusiness: An International Journal, 16(4), 457-470.
- Venture capital and private equity: A course overview, Lerner, J. (1997).
- The Private Capital and Investment Financing, Doroshenko, Y. A., Shevelev, A. A., & Somina, I. V. (2013). World Applied Sciences Journal, 25(1), 124-132.
- Private Investment Companies Under Section 3 (c)(1) of the Investment Company Act of 1940, Lemke, T. P., & Lins, G. T. (1988). Bus. Law., 44, 401
- Merging private investment company into public mutual fund, Cutler, K. B. (1983). The CPA Journal (pre-1986), 53(000012), 93.
- Expropriations and the Overseas Private Investment Corporation, Gilbert, P. R. (1977). Law & Pol'y Int'l Bus., 9, 515.
- Private equity minority investments in large family firms: What influences the attitude of family firm owners?, Achleitner, A. K., Schraml, S., & Tappeiner, F. (2008).
- The Small Business Investment CompanyA Tool for Economic Self-Help, Zeidman, P. F., Young, S. H., Harrison, M., & Davis, E. (1966). The Business Lawyer, 947-970.
- Making private investment work for the environment, Gentry, B. S. (1997).
- The Massachusetts Business Trust and Registered Investment Companies, Jones, S. A., Moret, L. M., & Storey, J. M. (1988). Del. J. Corp. L., 13, 421.