Investment Company Act of 1940 – Section 23(b) and 63
Kohlberg Capital Corporation

March 12, 2009

RESPONSE OF THE OFFICE OF CHIEF COUNSEL DIVISION OF INVESTMENT MANAGEMENT

IM Ref. No. 20088191347 Kohlberg Capital Corporation File No. 333-151268

Your letter dated March 6, 2009, requests our assurance that we would not recommend enforcement action to the Commission against Kohlberg Capital Corporation (“Kohlberg”) under section 23(b) or section 63 of the Investment Company Act of 1940 (the “Act”) if Kohlberg sells its common stock at a price below the stock's current net asset value ("NAV") within one year after obtaining shareholder approval of such sale at a special meeting, rather than an annual meeting of shareholders.

Facts

You state that Kohlberg, a Delaware corporation, is a closed-end investment company that has elected to be regulated under the Act as a business development company (“BDC”). You state that shares of Kohlberg's common stock are listed and traded on The Nasdaq Global Select Market and frequently trade at a price that is less than the current NAV of those shares. You state that, consequently, it may be necessary for Kohlberg, if it chooses to raise capital by issuing additional common stock, to do so at a price which is less than the current NAV of such stock in order to ensure the marketability of that stock.

You state that Kohlberg, with the approval of its board of directors, sought shareholder approval of a proposal to authorize Kohlberg to sell shares of its common stock or warrants, options or rights to acquire its common stock at a price below the then-current NAV of such stock (the “Proposal”) at its June 13, 2008 annual shareholders meeting (the “Annual Meeting”). You state that at the Annual Meeting, Kohlberg also sought shareholder approval of other proposals, including proposals related to the uncontested election of directors and the ratification of Kohlberg's independent registered public accounting firm.

You state that the uncontested election of directors and the ratification of the selection of the company’s accountant each were considered routine matters on which member organizations could exercise discretionary voting authority with respect to the uninstructed customer shares. You state that the Proposal, however, was considered a matter that could affect substantially the rights or privileges of Kohlberg Capital’s stock. You state that, as a result, brokers voted the uninstructed customer shares for the election of directors and for ratification of the selection of the company’s accountant but could not vote on the Proposal. You state that the uninstructed customer shares were recorded instead as broker non-votes with respect to the Proposal. You state that, at the Annual Meeting, 9,776,147 shares voted in favor of the Proposal, 1,495,045 shares voted against the Proposal, 97,482 shares abstained from voting on the Proposal, and 3,442,382 broker non-votes were recorded. You state that broker non-votes were deemed present at the Annual Meeting and the Proposal therefore was not approved by the required percentage of votes present at the Annual Meeting.

You state that, on June 26, 2008, Kohlberg held a special meeting of shareholders (the “Special Meeting”) at which the Proposal was the only matter submitted for shareholder approval. You state that the absence of a routine matter on the proxy card for which broker discretionary voting was permitted meant that there were no broker non-votes present at the Special Meeting. You state that the Proposal received the requisite percentage of votes present at the Special Meeting.

Legal Analysis

Section 23(b) of the Act generally prohibits a registered closed-end investment company from selling any common stock of which it is the issuer at a price below the current NAV of such stock. Section 23(b)(2) of the Act excepts from this prohibition a sale “with the consent of a majority of [the closed-end fund's] common stockholders.”

Section 63 of the Act makes section 23 of the Act generally applicable to BDCs. Section 63(2)(A) of the Act provides that, notwithstanding section 23(b), a BDC may sell any common stock of which it is the issuer at a price below the current NAV if, among other requirements, the holders of a majority of the BDC’s outstanding voting securities that are not affiliated persons of the BDC “approved [the BDC's] policy and practice of making such sales of securities at the last annual meeting of shareholders . . . within one year immediately prior to any such sale (emphasis added).¹”

You assert that, although the literal wording of section 63(2)(A) provides for shareholder approval at an annual meeting of shareholders, Congress did not intend to distinguish between approval obtained at an annual meeting or a special meeting, so long as approval was obtained within one year immediately prior to the transaction.² You state that Congress simply intended to protect a BDC's shareholders from the potential problems associated with selling the BDC's stock at a price below NAV by providing that such sales could be made only with recent shareholder approval. You also state that, in section 23(b) of the Act, Congress permitted any registered closed-end investment company to sell its common stock at a price below NAV “with the consent of a majority of its common stockholders,” without distinguishing between annual meetings and special meetings.

Conclusion

Based on the facts and representations stated in your letter, and without necessarily agreeing with your legal analysis, we would not recommend enforcement action to the Commission against Kohlberg under section 23(b) of the Act or section 63 of the Act if Kohlberg sells its common stock at a price below the stock's current NAV within one year after obtaining shareholder approval of such sale at a special, rather than an annual, meeting of shareholders. This response represents our view on enforcement action only, and does not express any legal conclusions on the issues presented.

Wendy Friedlander
Senior Counsel

¹ Section 2(a)(42) of the Act defines the “vote of a majority of the outstanding voting securities of a company” to mean “the vote, at the annual or a special meeting of the security holders of such company duly called, (A) of 67 per centum or more of the voting securities present at such meeting, if the holders of more than 50 per centum of the outstanding voting securities of such company are present or represented by proxy; or (B) of more than 50 per centum of the outstanding voting securities of such company, whichever is the less.”

² You cite H.R.Rep. No. 1341, 96th Cong. 2d Sess. 58 (1980) in support of your assertion.

Incoming Letter

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