PRIA, Government Policy, Made Personal

Summary

The Corporation must create voting common stock with a par value set by the Board. Each voting share gets one vote and cumulative voting is allowed for director elections. The Board will offer these shares to banks, other financial firms, insurers, and System institutions under rules it sets. The offers must be fair and broad so no one gets a disproportionate share and capital contributions are fairly split between entities that can hold Class A and Class B stock. Voting stock is split into two classes with the same par value: Class A for non‑Farm Credit System entities (including national banks) and Class B for Farm Credit System institutions. After the permanent board first meets with a quorum, voting stock can only be issued to originators and certified facilities. The Board can set terms, limits on the number of shares, and transfer rules; shares can move only among eligible holders and transfers must be recorded on the Corporation’s books. Except for Class B holders, no one may directly or indirectly own more than 33 percent of the outstanding shares of a class. The Corporation can require originators and certified facilities to make nonrefundable capital contributions and will issue voting stock for those contributions. The Corporation can also issue nonvoting common stock and nonvoting preferred stock with par value set by the Board. Nonvoting shares are freely transferable but transfers must be recorded on the Corporation’s books. The Board can pay dividends on voting or nonvoting common stock pro rata across both classes, but only if the reserve required under section 2279aa–10(c)(1) is provided and no obligation to the Secretary of the Treasury under section 2279aa–13 is outstanding. Preferred stock terms (dividend rate, redemption, conversion) are set when issued; preferred dividends are cumulative and must be paid before any common dividends. If the Corporation is liquidated, preferred holders are paid in full at par plus accrued dividends before common holders get anything.

Title 12, §2279aa–4

Banks and Banking, Source: USLM XML via OLRC

(a)(1)(A)The Corporation shall issue voting common stock having such par value as may be fixed by the Board from time to time.

(B)Each share of voting common stock shall be entitled to one vote with rights of cumulative voting at all elections of directors.

(C)(i)The Board shall offer the voting common stock to banks, other financial institutions, insurance companies, and System institutions under such terms and conditions as the Board may adopt.

(ii)The voting common stock shall be fairly and broadly offered to ensure that—

(I)no institution or institutions acquire a disproportionate share of the total quantity of the voting common stock outstanding of a class of stock; and

(II)capital contributions and issuances of voting common stock for the contributions are fairly distributed between entities eligible to hold class A stock and class B stock.

(D)(i)The stock shall be divided into two classes with the same par value per share.

(ii)Class A stock may be held only by entities that are not Farm Credit System institutions and that are entitled to vote for directors specified in section 2279aa–2(a)(2)(A) of this title, including national banking associations (which shall be allowed to purchase and hold such stock).

(iii)Class B stock may be held only by Farm Credit System institutions that are entitled to vote for directors specified in section 2279aa–2(a)(2)(B) of this title.

(2)After the date the permanent board first meets with a quorum of its members present, voting common stock of the Corporation may be issued only to originators and certified facilities.

(3)The Board shall adopt such terms, conditions, and procedures with regard to the issue of stock under this section as may be necessary, including the establishment of a maximum amount limitation on the number of shares of voting common stock that may be outstanding at any time.

(4)Subject to such limitations as the Board may impose, any share of any class of voting common stock issued under this section shall be transferable among the institutions or entities to which shares of such class of common stock may be offered under paragraph (1), except that, as to the Corporation, such shares shall be transferable only on the books of the Corporation.

(5)No stockholder, other than a holder of class B stock, may own, directly or indirectly, more than 33 percent of the outstanding shares of such class of the voting common stock of the Corporation.

(b)(1)The Corporation may require each originator and each certified facility to make, or commit to make, such nonrefundable capital contributions to the Corporation as are reasonable and necessary to meet the administrative expenses of the Corporation.

(2)The Corporation, from time to time, shall issue to each originator or certified facility voting common stock evidencing any capital contributions made pursuant to this subsection.

(c)(1)Such dividends as may be declared by the Board, in the discretion of the Board, shall be paid by the Corporation to the holders of the voting common stock of the Corporation pro rata based on the total number of shares of both classes of stock outstanding.

(2)No dividend may be declared or paid by the Board under this section unless the Board determines that adequate provision has been made for the reserve required under section 2279aa–10(c)(1) of this title.

(3)No dividend may be declared or paid by the Board under this section while any obligation issued by the Corporation to the Secretary of the Treasury under section 2279aa–13 of this title remains outstanding.

(d)The Corporation is authorized to issue nonvoting common stock having such par value as may be fixed by the Board from time to time. Such nonvoting common stock shall be freely transferable, except that, as to the Corporation, such stock shall be transferable only on the books of the Corporation. Such dividends as may be declared by the Board, in the discretion of the Board, may be paid by the Corporation to the holders of the nonvoting common stock of the Corporation, subject to paragraphs (2) and (3) of subsection (c).

(e)(1)The Corporation is authorized to issue nonvoting preferred stock having such par value as may be fixed by the Board from time to time. Such preferred stock issued shall be freely transferable, except that, as to the Corporation, such stock shall be transferred only on the books of the Corporation.

(2)Subject to paragraphs (2) and (3) of subsection (c), the holders of the preferred stock shall be entitled to such rate of cumulative dividends, and such holders shall be subject to such redemption or other conversion provisions, as may be provided for at the time of issuance. No dividends shall be payable on any share of common stock at any time when any dividend is due on any share of preferred stock and has not been paid.

(3)In the event of any liquidation, dissolution, or winding up of the business of the Corporation, the holders of the preferred shares of stock shall be paid in full at the par value thereof, plus all accrued dividends, before the holders of the common shares receive any payment.

Notes & Related Subsidiaries

Editorial Notes

Amendments

2018—Subsec. (a)(1). Pub. L. 115–334, within existing provisions, designated first and second sentences as subpars. (A) and (B), respectively, added subpar. (C) and struck out former third sentence which read “Voting shall be by classes as described in section 2279aa–2(a)(9) of this title.”, designated fourth to sixth sentences collectively as subpar. (D) and individually as cls. (i) to (iii), respectively, thereof, substituted “2279aa–2(a)(2)(A)” for “2279aa–2(b)(2)(A)” in subpar. (D)(ii) and “2279aa–2(a)(2)(B)” for “2279aa–2(b)(2)(B)” in subpar. (D)(iii), and inserted subpar. and cl. headings. 1988—Subsec. (a)(1). Pub. L. 100–399, § 601(d), in penultimate sentence, inserted “and” after “institutions” and inserted “, including national banking associations (which shall be allowed to purchase and hold such stock)” before period at end. Subsec. (e)(1). Pub. L. 100–399, § 601(e), substituted “books of the Corporation” for “books of the Association”.

Statutory Notes and Related Subsidiaries

Effective Date

of 1988 AmendmentAmendment by Pub. L. 100–399 effective as if enacted immediately after enactment of Pub. L. 100–233, which was approved Jan. 6, 1988, see section 1001(a) of Pub. L. 100–399, set out as a note under section 2002 of this title.

§2279aa–4 Stock Issuance