12 C.F.R. § 611.1210 Commencement resolution and advance notice.
Title 12 - Banks and Banking
(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 §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 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 §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 §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.
Title 12: Banks and Banking
PART 611—ORGANIZATION
Subpart P—Termination of System Institution Status
§ 611.1210 Commencement resolution and advance notice.
