[Code of Federal Regulations]

[Title 12, Volume 6]

[Revised as of January 1, 2006]

From the U.S. Government Printing Office via GPO Access

[CITE: 12CFR611.1210]



[Page 72-73]

 

                       TITLE 12--BANKS AND BANKING

 

                 CHAPTER VI--FARM CREDIT ADMINISTRATION

 

PART 611_ORGANIZATION--Table of Contents

 

           Subpart P_Termination of System Institution Status

 

Sec. 611.1210  Commencement resolution and advance notice.



    (a) Adoption of commencement resolution. Your board of directors 

must begin the termination process by adopting a commencement resolution 

stating your intention to terminate Farm Credit status under section 

7.10 of the Act.

    (b) Advance notice. Within 5 days after adopting the commencement 

resolution, you must:

    (1) Send a certified copy of the commencement resolution to us and 

the Farm Credit System Insurance Corporation (FCSIC). If your 

institution is an association, also send a copy to your affiliated bank. 

If your institution is a bank, also send a copy to your affiliated 

associations, the other Farm Credit banks, the Federal Farm Credit Banks 

Funding Corporation (Funding Corporation), and the Farm Credit System 

Financial Assistance Corporation (FAC);

    (2) Mail an announcement to all equity holders stating you are 

taking steps to terminate Farm Credit status and describing the 

following:

    (i) The process of termination;

    (ii) The expected effect of termination on equity holders, including 

the effect on borrower rights and the consequences of any stock 

retirements before termination;

    (iii) The type of charter the successor institution will have; and

    (iv) Any bylaw creating a special class of borrower stock and 

participation certificates under paragraph (f) of this section.

    (c) Bank negotiations on joint and several liability. If your 

institution is a terminating bank, within 10 days of adopting the 

commencement resolution, your bank and the other Farm Credit banks must 

begin negotiations to provide for your satisfaction of liabilities 

(other than your primary liability) under section 4.4 of the Act. The 

Funding Corporation may, at its option, be a party to the negotiations 

to the extent necessary to fulfill its duties with respect to financing 

and disclosure. The agreement must comply with the requirements in Sec. 

611.1270(c).

    (d) Disclosure to customers after commencement resolution. Between 

the date of the commencement resolution and the termination date, you 

must give the following information to your customers:

    (1) For each applicant who is not a current stockholder, describe at 

the time of loan application:

    (i) The effect of the proposed termination on the borrower's loan; 

and

    (ii) Whether the borrower will continue to have any of the borrower 

rights provided under the Act and regulations.

    (2) For any equity holders who ask to have their equities retired, 

explain that the retirement would extinguish the holder's right to 

exchange those equities for an interest in the successor institution. In 

addition, inform holders



[[Page 73]]



of equities entitled to your residual assets in liquidation that 

retirement before termination would extinguish their right to dissent 

from the termination and have their equities retired.

    (e) Terminating bank's right to continue issuing debt. Through the 

termination date, a terminating bank may continue to participate in the 

issuance of consolidated and Systemwide obligations to the same extent 

it would be able to participate if it were not terminating.

    (f) Special class of stock. Notwithstanding any requirements to the 

contrary in Sec. 615.5230(b) of this chapter, you may adopt bylaws 

providing for the issuance of a special class of stock and participation 

certificates between the date of adoption of a commencement resolution 

and the termination date. Your stockholders must approve the special 

class before you adopt the commencement resolution. The equities must 

comply with section 4.3A of the Act and be identical in all respects to 

existing classes of equities that are entitled to the residual assets of 

the institution in a liquidation, except for the value a holder will 

receive in a termination. In a termination, the holder of the special 

class of stock receives value equal to the lower of either par (or face) 

value, or the value calculated under Sec. 611.1280(c) and (d). A holder 

must have the same right to vote (if the equity is held on the voting 

record date) and to dissent as holders of similar equities issued before 

the commencement resolution. If the termination does not occur, the 

special classes of stock and participation certificates must 

automatically convert into shares of the otherwise identical equities.