[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: 12CFR611.1280]



[Page 84-85]

 

                       TITLE 12--BANKS AND BANKING

 

                 CHAPTER VI--FARM CREDIT ADMINISTRATION

 

PART 611_ORGANIZATION--Table of Contents

 

           Subpart P_Termination of System Institution Status

 

Sec. 611.1280  Dissenting stockholders' rights.



    (a) Definition. A dissenting stockholder is an equity holder (other 

than a System institution) in a terminating institution on the 

termination date who either:

    (1) Was eligible to vote on the termination resolution and voted 

against termination;

    (2) Was an equity holder on the voting record date but was not 

eligible to vote; or

    (3) Became an equity holder after the voting record date.

    (b) Retirement at option of a dissenting stockholder. A dissenting 

stockholder may require a terminating institution to retire the 

stockholder's equity interest in the terminating institution.

    (c) Value of a dissenting stockholder's interest. You must pay a 

dissenting stockholder according to the liquidation provision in your 

bylaws, except that you must pay at least par or face value for eligible 

borrower stock (as defined in section 4.9A(d)(2) of the Act). If we 

determine that the liquidation provision is inequitable to stockholders, 

we will require you to calculate their share in accordance with another 

formula that we deem equitable.

    (d) Calculation of interest of a dissenting stockholder. Before you 

retire any equity, you must make the following adjustments to the amount 

of stockholder equity as stated in the financial statements on the 

termination date:

    (1) Deduct any FAC obligations and taxes due to the termination that 

you have not yet recorded;

    (2) Deduct the amount of the exit fee; and

    (3) Make any adjustments described under Sec. 611.1250(c) that we 

may require as we deem appropriate.

    (e) Form of payment to a dissenting stockholder. You must pay a 

dissenting stockholder for his equities as follows:

    (1) Pay cash for the par or face value of purchased stock, less any 

impairment;

    (2) For equities other than purchased equities, you may:

    (i) Pay cash;

    (ii) Cause or otherwise provide for the successor institution to 

issue, on the date of termination, subordinated debt to the stockholder 

with a face value equal to the value of the remaining equities. This 

subordinated debt must have a maturity date of 7 years or less, must 

have priority in liquidation ahead of all equity, and must carry a rate 

of interest not less than the rate (at the time of termination) for debt 

of comparable maturity issued by the U.S. Treasury plus 1 percent; or

    (iii) Provide for a combination of cash and subordinated debt as 

described above.

    (f) Payment to holders of special class of stock. If you have 

adopted bylaws under Sec. 611.1210(f), you must pay a dissenting 

stockholder who owns shares of the special class of stock an amount 

equal to the lower of the par (or face) value or the value of such stock 

as determined under Sec. 611.1280(c) and (d).

    (g) Notice to equity holders. The notice to equity holders required 

in



[[Page 85]]



Sec. 611.1240(e) must include a form for stockholders to send back to 

you, stating their intention to exercise dissenters' rights. The notice 

must contain the following information:

    (1) A description of the rights of dissenting stockholders set forth 

in this section and the approximate value per share that a dissenting 

stockholder can expect to receive. State whether the successor 

institution will require borrowers to be stockholders or whether it will 

require stockholders to be borrowers.

    (2) A description of the current book and par value per share of 

each class of equities, and the expected book and market value of the 

stockholder's interest in the successor institution.

    (3) A statement that a stockholder must return the enclosed form to 

you within 30 days if the stockholder chooses to exercise dissenters' 

rights.

    (h) Notice to subsequent equity holders. Equity holders that acquire 

their equities after the termination vote must also receive the notice 

described in paragraph (g) of this section. You must give them at least 

5 business days to decide whether to request retirement of their stock.

    (i) Reconsideration. If a reconsideration vote is held and the 

termination is disapproved, the right of stockholders to exercise 

dissenters' rights is rescinded. If a reconsideration vote is held and 

the termination is approved, you must retire the equities of dissenting 

stockholders as if there had been no reconsideration vote.