TITLE 12 - US CODE - SUBCHAPTER VII - RESTRUCTURING OF SYSTEM INSTITUTIONS

Part A - Merger of Banks Within a District

12 USC 2279a - Power to merge

The banks within a district may merge into a single entity (hereinafter in this subchapter referred to as a merged bank) if the plan of merger is approved by

(1) the Farm Credit Administration Board;

(2) the respective boards of directors of the banks involved;

(3) a majority of the stockholders of each bank voting, in person or by proxy, at a duly authorized stockholders meeting with each association entitled to cast a number of votes equal to the number of its voting stockholders; and

(4) in the case of a bank for cooperatives, a majority of the total equity interests in such merging bank for cooperatives (including allocated, but not unallocated, surplus and reserves) held by those stockholders or subscribers to the guaranty fund of the bank voting.

12 USC 2279a1 - Board of directors

Each merged bank shall elect a board of directors of such number, for such term, in such manner, and with such qualifications, as may be required in its bylaws, except that at least one member shall be elected by the other directors, which member shall not be a director, officer, employee, or stockholder of a System institution.

12 USC 2279a2 - Powers of merged banks

(a) In general
Except as otherwise provided in this subchapter, a merged bank shall have all of the powers granted to, and shall be subject to all of the obligations imposed on, any of the constituent entities of the merged bank.

(b) Regulations
The Farm Credit Administration shall issue regulations that establish the manner in which the powers and obligations of the banks that form the merged bank are consolidated, and to the extent necessary, reconciled in the merged bank.

12 USC 2279a3 - Capitalization

In accordance with section 2154a of this title, each merged bank shall provide, through bylaws and subject to Farm Credit Administration regulations, for the capitalization of the bank and the manner in which bank stock shall be issued, held, transferred, and retired and bank earnings distributed.

12 USC 2279a4 - Repealed. Pub. L. 100399, title IV, 408(d), Aug. 17, 1988, 102 Stat. 1001

Section, Pub. L. 92–181, title VII, § 7.4, as added Pub. L. 100–233, title IV, § 416, Jan. 6, 1988, 101 Stat. 1646, related to earnings, reserves, and distributions with regard to merged banks. See section 2279a–3 of this title.

12 USC 2279a5 - Transferred

Part B - Mergers, Transfers of Assets, and Powers of Associations Within a District

subpart 1 - transfers by federal land banks to federal land bank associations

12 USC 2279b - Transfer of lending authority

(a) Voluntary transfers
A Federal land bank or a merged bank having a Federal land bank as one of its constituents, may transfer to a Federal land bank association, and the association may assume, the authority of the transferring bank in the territorial area served by the association, to make and participate in long-term real estate mortgage loans under this chapter if the transfer is approved by

(1) the Farm Credit Administration Board;

(2) the Board of Directors of both institutions; and

(3) a majority of the stockholders of the bank and of the association, in accordance with the voting provisions of sections 2279a and 2279c–1 of this title, respectively.

(b) Direct loans and financial assistance
After a transfer described in subsection (a) or (d) of this section

(1) the Federal land bank association shall possess all of the direct long-term real estate mortgage loan authority, formerly possessed by the transferring bank, in the territory served by the association; and

(2) the bank may provide and extend financial assistance to, and discount for, or purchase from, the transferee Federal land bank association any note, draft, or other obligation with the endorsement or guarantee of the association, the proceeds of which have been advanced to persons eligible and for purposes of financing by the association under subsection (a) of this section.

(c) Regulations
The Farm Credit Administration shall issue regulations that establish the manner in which the powers and obligations of the banks that make transfers are consolidated and, to the extent necessary, reconciled in the association referred to in subsection (a) of this section.

(d) Mandatory transfer
On the merger of one or more production credit associations with one or more Federal land bank associations, the bank supervising the Federal land bank association shall transfer all of the direct lending authority of the bank in the territory served by such Federal land bank association to such merged association.

12 USC 2279c - Equalization of loan-making powers of certain district associations

(a) Equalization of loan-making powers

(1) In general

(A) Federal land bank associations
Subject to paragraph (2), any association that owns a Federal land bank association authorized as of January 1, 2007, to make long-term loans under subchapter I in its chartered territory within the geographic area described in subsection (b) may make short- and intermediate-term loans and otherwise operate as a production credit association under subchapter II within that same chartered territory.

(B) Production credit associations
Subject to paragraph (2), any association that under its charter has subchapter I lending authority and that owns a production credit association authorized as of January 1, 2007, to make short- and intermediate-term loans under subchapter II in the geographic area described in subsection (b) may make long-term loans and otherwise operate, directly or through a subsidiary association, as a Federal land bank association or Federal land credit association under subchapter I in the geographic area.

(C) Farm credit bank
Notwithstanding section 2252 (a) of this title, the Farm Credit Bank with which any association had a written financing agreement as of January 1, 2007, may make loans and extend other comparable financial assistance with respect to, and may purchase, any loans made under the new authority provided under subparagraph (A) or (B) by an association exercising such authority.

(2) Required approvals
An association may exercise the additional authority provided for in paragraph (1) only after the exercise of the authority is approved by

(A) the board of directors of the association; and

(B) a majority of the voting stockholders of the association (or, if the association is a subsidiary of another association, the voting stockholders of the parent association) voting, in person or by proxy, at a duly authorized meeting of stockholders in accordance with the process described in section 2279e of this title.

(b) Applicability
This section applies only to associations the chartered territory of which was within the geographic area served by the Federal intermediate credit bank immediately prior to its merger with a Farm Credit Bank under section 410(e)(1) of the Agricultural Credit Act of 1987 (12 U.S.C. 2011 note ; Public Law 100233).

subpart 2 - merger of like and unlike associations

12 USC 2279c1 - Merger of associations

(a) In general
Two or more associations within the same district, whether or not organized under the same subchapter of this chapter, may merge into a single entity (hereinafter in this subchapter referred to as a merged association) if the plan of merger is approved by

(1) the Farm Credit Administration Board;

(2) the boards of directors of the associations;

(3) a majority of the shareholders of each association voting, in person or by proxy, at a duly authorized stockholders meeting; and

(4) the Farm Credit Bank.

(b) Powers, obligations, and consolidation

(1) Powers and obligations
Except as otherwise provided by this subchapter, a merged association shall

(A) possess all powers granted under this chapter to the associations forming the merged association; and

(B) be subject to all of the obligations imposed under this chapter on the associations forming the merged association.

(2) Consolidation
The Farm Credit Administration shall issue regulations that establish the manner in which the powers and obligations of the associations that form the merged association are consolidated and, to the extent necessary, reconciled in the merged association.

(1) Plan of merger
Subject to section 2154a of this title, the number of shares of capital stock issued by a merged association to the stockholders of any association forming such merged association, and the rights and privileges of such shares (including voting power, preferences on liquidation, and the right to dividends), shall be determined by the plan of merger adopted by the merged associations.

(2) Capitalization
In accordance with section 2154a of this title, each merged association shall provide, through bylaws and subject to Farm Credit Administration regulations, for the capitalization of the association and the manner in which association stock shall be issued, held, transferred, and retired, and association earnings shall be distributed.

subpart 3 - reconsideration

12 USC 2279c2 - Reconsideration

(a) Period
A stockholder vote in favor of

(1) the merger of districts under this chapter;

(2) the merger of banks within a district under section 2279a of this title;

(3) the transfer of the lending authority of a Federal land bank or a merged bank having a Federal land bank as one of its constituents, under section 2279b of this title;

(4) the merger of two or more associations under section 2279c–1 or 2279f–1 of this title;

(5) the termination of the status of an institution as a System institution under section 2279d of this title; or

(6) the merger of similar banks under section 2279f of this title;

shall not take effect except in accordance with subsection (b) of this section.

(b) Reconsideration

(1) Notice
Not later than 30 days after a stockholder vote in favor of any of the actions described in subsection (a) of this section, the officer or employee that records such vote shall ensure that all stockholders of the voting entity receive notice of the final results of the vote.

(2) Effective date
A voluntary merger, transfer, or termination that is approved by a vote of the stockholders of two or more banks or associations shall not take effect until the expiration of 30 days after the date on which the stockholders of such banks or associations are notified of the final result of the vote in accordance with paragraph (1).

(3) Petition filed
If a petition for reconsideration of a merger, transfer, or termination vote, signed by at least 15 percent of the stockholders of one or more of the affected banks or associations, is presented to the Farm Credit Administration within 30 days after the date of the notification required under paragraph (1)

(A) a voluntary merger, transfer, or termination shall not take effect until the expiration of 60 days after the date on which the stockholders were notified of the final result of the vote; and

(B) a special meeting of the stockholders of the affected banks or associations shall be held during the period referred to in subparagraph (A) to reconsider the vote.

(4) Vote on reconsideration
If a majority of stockholders of any one of the affected banks or associations voting, in person or by written proxy, at a duly authorized stockholders meeting, vote against the proposed merger, transfer, or termination, such action shall not take place.

(5) Failure to file petition
If a petition for reconsideration of such vote is either not filed prior to the 60th day after the vote or, if timely filed, is not signed by at least 15 percent of the stockholders, the merger, transfer, or termination shall become effective in accordance with the plan of merger, transfer, or termination.

(1) Issuance of regulations
Notwithstanding any other provision of this chapter, the Farm Credit Administration shall issue regulations under which the stockholders of any association that voluntarily merged with one or more associations after December 23, 1985, and before January 6, 1988, may petition for the opportunity to organize as a separate association.

(2) Requirements
The regulations issued by the Farm Credit Administration shall require that

(A) the petition be filed within 1 year after the date of the implementation of such regulations;

(B) the petition be signed by at least 15 percent of the stockholders of any one of the associations that merged during the period;

(D) if the petition is approved

(i) the loans of the members of the new association will be transferred from the current association to such new association;

(ii) the stock, participation certificates, and other similar equities of the current association held by members of the new association will be retired at book value and the proceeds of such will be transferred to the new association, and an equivalent amount of stock, participation certificates, and other similar equities will be issued to the members by the new association; and

(iii) the other assets of the current association will be distributed equitably among the current association and any resulting new association.

(3) Notification

(A) In general
Not later than 30 days after the filing of the petition for organization, the current association shall notify its stockholders that a petition to establish the separate association has been filed.

(B) Contents
The notification required under this paragraph shall contain

(i) the date of a special stockholders meeting to consider the petition for organization; and

(ii) an enumerated statement of the anticipated benefits and the potential disadvantages to such stockholders if the new association is established.

(i) In general All notifications under this paragraph shall be submitted to the Farm Credit Administration Board for approval prior to being distributed to the stockholders.

(ii) Amending notification The Farm Credit Administration Board shall require that, prior to the distribution of the notification to the stockholders, the notification be amended as determined necessary by the Board to provide accurate information to the stockholders that will enable such stockholders to make an informed decision as to the advisability of establishing a new association.

(D) Special stockholders’ meeting

(i) Timing of meeting The special stockholders meeting to consider the petition shall be held within 60 days after the filing of the petition.

(ii) Approval If, at the special stockholders meeting, a majority of the stockholders of the current association who would be served by the new association approve, by voting in person or by proxy, the establishment of the separate association, the Farm Credit Administration shall, within 30 days of such vote, issue a charter to the new association and amend the charter of the current association to reflect the territory to be served by the new association.

subpart 4 - termination and dissolution of institutions

12 USC 2279d - Termination of System institution status

(a) Conditions
A System institution may terminate the status of the institution as a System institution if

(1) the institution provides written notice to the Farm Credit Administration Board not later than 90 days prior to the proposed termination date;

(2) the termination is approved by the Farm Credit Administration Board;

(3) the appropriate Federal or State authority grants approval to charter the institution as a bank, savings and loan association, or other financial institution;

(4) the institution pays to the Farm Credit Assistance Fund, as created under section 2278b–5 of this title, if the termination is prior to January 1, 1992, or pays to the Farm Credit Insurance Fund, if the termination is after such date, the amount by which the total capital of the institution exceeds, 6 percent of the assets;

(5) the institution pays or makes adequate provision for payment of all outstanding debt obligations of the institution;

(6) the termination is approved by a majority of the stockholders of the institution voting, in person or by written proxy, at a duly authorized stockholders meeting, held prior to giving notice to the Farm Credit Administration Board; and

(7) the institution meets such other conditions as the Farm Credit Administration Board by regulation considers appropriate.

(b) Effect
On termination of its status as a System institution

(1) the Farm Credit Administration Board shall revoke the charter of the institution; and

(2) the institution shall no longer be an instrumentality of the United States under this chapter.

Part C - Approval of Disclosure Information and Issuance of Charters by the Farm Credit Administration Board

12 USC 2279e - Approval of disclosure information and issuance of charters

(a) Disclosure of information

(1) Approval of plan
With respect to any plan of merger, transfer of lending authority, dissolution, or termination, prior to submission to the voters (voting stockholders and, where required, contributors to guaranty funds) of the institutions involved, such plan shall be submitted to the Farm Credit Administration Board, together with all information that is to be distributed to the voters with respect to the contemplated action, including an enumerated statement of the anticipated benefits and potential disadvantages of such action.

(2) Notice of approval
On notification that the Farm Credit Administration Board has approved such plan for submission to the stockholders, or after 60 days of no action on the plan by the Board, the submitting institutions may submit the plan, together with the disclosure information, to the voters for the prescribed vote.

(b) Notice of reasons for disapproval
If the Farm Credit Administration Board disapproves the plan for submission to the stockholders, notification to the submitting institutions shall specify the reasons for the determination by the Board. If such plan is determined to be inadequate, it shall not be submitted to the voters for a vote.

(c) Federal charter
Each plan of merger or transfer of lending authority may include a proposed new or revised Federal charter for the merged or transferee entity. The Farm Credit Administration Board shall issue such charter on the approval of the plan, as prescribed in this subchapter, unless the Board determines that the charter submitted is not consistent with this chapter.

Part D - Mergers of Like Entities

12 USC 2279f - Merger of similar banks

(a) In general
Banks organized or operating under this chapter may merge with banks in other districts operating under the same subchapter if the plan of merger is approved by

(1) the Farm Credit Administration Board;

(2) the respective Boards of Directors of the banks involved;

(3) a majority vote of the stockholders of each bank voting, in person or by proxy, at a duly authorized stockholders meeting, with each association having a number of votes equal to the number of such associations voting stockholders; and

(b) Powers and capitalization
Sections 2279a–2 and 2279a–3 of this title shall apply to banks merged under this section.

(1) In general
After a merger under subsection (a) of this section, a board of directors shall be created for the resulting bank.

(2) Composition
The board shall be composed of

(A) two directors elected by each of the bank boards, with at least one such director from each bank being elected by the eligible stockholders of, or subscribers to, the guaranty fund of the merging banks; and

(B) one outside director elected by the directors elected under subparagraph (A).

(3) Outside director

(A) Qualifications
The outside director elected under paragraph (2)(B) shall be experienced in financial services and credit, and within the 2-year period prior to such election, shall not have been a borrower from, shareholder in, or director, officer, employee, or agent of any institution of the Farm Credit System.

(B) Failure to elect
If the other members of the board fail to elect an outside director, the Farm Credit Administration Board shall appoint a qualified person to serve on the board of directors until such member is so elected.

(4) Bylaws
Notwithstanding paragraph (2), the bylaws of the merged bank may, with the approval of the Farm Credit Administration, provide for a different number of directors to be selected in a different manner, except that the bylaws shall provide for at least one outside director.

12 USC 2279f1 - Merger of similar associations

(a) In general
Associations may voluntarily merge with other like associations if the plan of merger is approved by

(1) the Farm Credit Administration Board;

(2) the respective Boards of Directors of the associations involved;

(3) a majority vote of the stockholders of each association voting, in person or by proxy, at a duly authorized stockholders meeting; and

(4) the Farm Credit Banks involved.

(b) Procedures
The provisions of subsections (b) and (c) of section 2279c–1 of this title shall apply to associations merged under this section.

Part E - Taxation of Merger Transactions

12 USC 2279g - Transactions to accomplish mergers exempt from certain State taxes

No State or political subdivision thereof may treat the merger or consolidation of two or more institutions of the Farm Credit System under this subchapter or title IV of the Agricultural Credit Act of 1987 as resulting in a change of ownership of any property owned by any of such merging or consolidating institutions, for purposes of any law of such State or political subdivision providing for reassessment of property on the occurrence of a change of ownership or imposing a tax on the ownership or transfer of property.