issued to the new association or associations which will be forwarded to the association or associations through the bank. Upon receipt of the approval notice, the bank should provide assistance in transferring all assets in accordance with the consolidation agreement, setting up the new books and establishing such other procedures as may be found necessary. The transfer of assets should be made the day following the effective date of the consolidation, if possible. The manager of each new association should take appropriate action to effect changes in stock issues, and should notify promptly each of the members that the consolidation has been approved. The charters of the constituent associations should be surrendered and sent to the Administration for cancellation. The Administration should be notified by the bank of the completion of the consolidation upon the issuance of new bank stock to the new association or associations in exchange for the stock held by the constituent associations.

[21 F. R. 8647, Nov. 9, 1956, as amended at 27 F.R. 10930, Nov. 9, 1962]

§ 11.1013 Legal reserve.

The legal reserve requirement for the new association or associations at the time of completion of the consolidation shall be the total of the unimpaired legal reserves of the constituent associations.

[21 F.R. 8647, Nov. 9, 1956]

VOLUNTARY LIQUIDATION OF ASSOCIATIONS § 11.1014 Action by directors.

The board of directors of any association desiring to enter into voluntary liquidation shall develop a complete plan of liquidation setting forth in detail the reasons why it is considered advisable for the benefit and best interests of the association members that the association should be liquidated, containing a current financial statement of the association, and specifically providing:

(a) That the association should be liquidated and its charter canceled;

(b) That all liabilities of the association, including contingent liabilities incurred by the association by reason of its endorsement of mortgages, shall be paid in full, or the payment thereof provided for to the satisfaction of the Administration;

(c) That the amount of contingent liabilities shall be mutually agreed upon

by the association and the Federal land bank, but in the event such agreement cannot be reached, the amount of such liabilities shall then be determined by the Administration;

(d) In the event the association does not have sufficient assets to pay all its liabilities without creating an impairment of its capital stock, the manner in which the necessary funds will be raised; (In this connection an association may by unanimous action of its members levy an assessment on the members in proportion to the amount of stock held by each to raise the required funds, or it may accept voluntary contributions from its members for the purpose of restoring the stock to an unimpaired condition after making provision for all liabilities of the association.)

(e) That funds in an amount equal to the net legal reserve of the association after provision for all its liabilities shall be transferred to the bank of the district:

(f) That the remaining assets of the association, other than its capital stock in the Federal land bank, shall be distributed among its stockholders, or their successors in interest, of record on the books of the association as of the effective date of liquidation, pro rata according to their respective shareholdings;

(g) That the plan of liquidation shall not become effective until consent, in writing, is obtained from the Administration; and

(h) That the effective date of liquidation shall be the date specified by the Administration in the written consent to liquidation.

A copy of such plan shall be submitted to the stockholders of the association as provided in § 11.1015.

[21 F.R. 8647, Nov. 9, 1956]

§ 11.1015 Action by members.

A special meeting of the association members shall be called. Notice of the meeting shall be mailed to each stockholder of record at least 20 days prior to the date of such meeting, and shall contain a full statement of the voluntary liquidation proposal or shall have incorporated in it by reference and attached thereto a complete copy of the plan of liquidation developed by the directors of the association. A favorable vote of at least two-thirds of the stockholders of the association, at the special meeting called as herein provided, shall be necessary for

the approval of the proposed liquidation. Such approval shall be evidenced by a resolution of the stockholders approving in its entirety the plan of liquidation developed by the directors and authorizing and instructing the officers of the association to do all things necessary to carry into effect the liquidation and render the plan of liquidation effective. The manager shall certify to the action taken at the meeting of the stockholders, and his certificate shall set out the resolution adopted by the stockholders authorizing the liquidation of the association and the fact that the number of stockholders voting for the motion in the assembled meeting constituted at least two-thirds of the stockholders of record of the association on the date of the meeting.

[21 F.R. 8648, Nov. 9, 1956, as amended at 27 F.R. 10930, Nov. 9, 1962]

§ 11.1016

Procedure for obtaining consent of Administration.

Upon completion of the stockholder action two certified true copies of the resolution and two copies of the plan, together with the charter of the association, should be forwarded to the bank. The association shall be examined by a farm credit examiner as soon as possible following receipt by the bank of the liquidation plan. After the examination is made, the bank should forward to the Administration one copy of the resolution and plan, together with the charter of the association, and its recommendations in the matter with the supporting reasons for such recommendations. If the Administration consents to the plan, notices of such consent, setting forth the effective date of the liquidation and any other requirements of the Administration, will be sent to the bank and to the association.

[21 F.R. 8648, Nov. 9, 1956]

§ 11.1017 Completing liquidation.

Upon receipt of notice of consent from the Administration, the association shall immediately take the necessary action to liquidate its affairs, as required by the plan of liquidation and the consent thereto. When the necessary action has been completed, evidence thereof in the form required by the Administration in its written consent to the liquidation shall be transmitted to the bank and, if the bank is satisfied that all requirements of the plan have been carried out, such

evidence shall be forwarded to the Administration. If the Administration is satisfied that all liquidation steps have properly been taken, it will advise the bank, and the bank upon receipt of such advice shall cancel the stock held by the association in the bank and thereupon issue its stock to the borrowers through the association pursuant to the provisions of 12 U. S. C. 966. The Administration should be notified when the cancellation and reissuance of stock have been completed by the bank.

[21 F.R. 8648, Nov. 9, 1956]

§ 11.1018 Disposition of association records.

Upon completion of liquidation, the books and records of the association shall be forwarded to the office of the resident farm credit examiner for final examination: Provided, however, That upon the written request of the manager of the association, such final examination shall be made at the association's office prior to the release of the books and records by the association. Upon completion of the examination, the books and records will be forwarded to the Administration by the resident farm credit examiner. [21 F.R. 8648, Nov. 9, 1956, as amended at 27 F.R. 10930, Nov. 9, 1962]

INVOLUNTARY LIQUIDATION OF

ASSOCIATIONS

§ 11.1019 Method of liquidation.

Any association may be liquidated by the retirement by a bank, with the approval of the Administration, of all the stock held by the association in the bank and the retirement of the corresponding shares of stock in the association. In the absence of special circumstances, approval will not be given to a liquidation by this method unless the association has less than 10 members and it appears to the satisfaction of the Administration that the association cannot or will not function and that its continuance will not serve a useful purpose. [21 F.R. 8648, Nov. 9, 1956]

§ 11.1020 Action by bank.

The board of directors of the bank shall adopt a resolution requesting approval of the Administration to pay off at par and retire all stock held by the association in the bank. The resolution should specifically state that, in the judgment of the board, it is advisable for the benefit and best interests of the associa

tion members and those engaged in agriculture in the territory of such association that all stock held by the association in the bank and all corresponding shares of stock in the association held by borrowers through it should be retired and the association liquidated. In the event an association is unable to pay its indebtedness in full, the resolution should further state the consideration the bank has given to the enforcement of the liability of the stockholders for the payment of the association's debts and the conclusion reached.

[21 F.R. 8648, Nov. 9, 1956] § 11.1021

bank.

Certification by officer of

The appropriate bank officer shall certify to the action taken at the meeting of the board of directors, and his certificate shall set out the resolution adopted by the board.

[21 F.R. 8648, Nov. 9, 1956]

§ 11.1022

Approval by Administration.

Upon completion of the board's action, a certified copy of the resolution, accompanied by a detailed statement of facts concerning the condition, operations, and prospects of the association, should be forwarded to the Administration. Upon approval or disapproval of the bank's request by the Administration, notice of such decision will be sent to the bank. Upon receipt of approval notice, the bank shall take the necessary action to pay off at par and retire the stock held by the association in the bank, and when such action has been completed, the bank shall notify the Administration.

[21 F.R. 8648, Nov. 9, 1956]

§ 11.1023 Distribution of assets; completing liquidation.

The Administration will advise the association of the retirement by the bank of its stock. Upon receipt of this information the association shall have recorded on its books the retirement of the corresponding stock of the association held by the borrowers; determine by agreement with the bank the amount of contingent liabilities incurred by the association on account of endorsed mortgages and include such amount in the liabilities of the association; apply all assets of the association to the extent necessary to the payment of its liabilities; distribute any remaining assets to its stockholders, or their successors in

interest, of record on the books of the association as of the effective date of liquidation, pro rata according to their respective shareholdings; and return the charter of the association to the bank for transmittal to the Administration for cancellation.

[21 F.R. 8648, Nov. 9, 1956]

§ 11.1024 Examination; disposition of books and records.

Upon completion of liquidation the books and records of the association shall be forwarded to the office of the resident farm credit examiner for final examination: Provided, however, That upon the written request of the manager of the association, such final examination shall be made at the association's office prior to the release of the books and records by the association. Upon completion of the examination, the books and records will be forwarded to the Administration by the resident farm credit examiner.

[21 F.R. 8648, Nov. 9, 1956, as amended at 27 F.R. 10930, Nov. 9, 1962]

§ 11.1035

ELIGIBLE MEMBERS

Eligibility determined by location of land.

A farm owner shall be eligible to membership in the association within whose chartered territory any part of the land to be mortgaged is located, regardless of the applicant's place of residence. If the farm to be mortgaged lies within the territory of two or more associations, the applicant shall be eligible to join any one of the associations, but if the lands to be mortgaged are not adjoining, they will be treated as a single farm for loan purposes only if the separate units are under common management and are in such proximity to each other as to constitute practically one operative agricultural unit.

[21 F.R. 8648, Nov. 9, 1956, as amended at 27 F.R. 10930, Nov. 9, 1962]

§ 11.1036 Husband or wife as sole

owner.

When husband and wife both sign a mortgage but one or the other is sole owner, only the one in whose name the title stands is eligible to membership in the association.

[21 F.R. 8649, Nov. 9, 1956] § 11.1037 Joint owners.

In cases of joint ownership, each owner who assumes personal liability for

a loan must be elected to membership in the association through which the loan is made and the association stock must be issued jointly to all such owners. [21 F.R. 8649, Nov. 9, 1956]

§ 11.1038 Farming corporations.

A corporation engaged in farming operations which obtains or properly assumes a loan should be elected to membership and the association stock issued in its name. The corporation must authorize, by power of attorney, one of its shareholders to act for it in all association matters. The person so authorized to act for the corporation may be elected a director of the association, provided he is a bona fide resident of the territory within which the association is authorized to do business. The power of attorney referred to should be so drawn that it will continue in full force and effect until the association has received another power of attorney to supersede the old one or until the old power has been revoked.

[21 F.R. 8649, Nov. 9, 1956]

§ 11.1039 Voting by proxy.

Voting by proxy shall not be permitted at stockholders' meetings of associations unless the proxy holder is (a) the person authorized to act for a farming corporation owning the stock, (b) a joint owner of the stock, or (c) the husband or wife of the owner of the stock. In the latter case, said husband or wife shall not be eligible to any office in the association. [21 F.R. 8649, Nov. 9, 1956]

CONDUCT OF EMPLOYEES

§ 11.1074 Prohibition against fee splitting.

No officer, director, or employee of an association shall receive, directly or indirectly, any part of any fee, commission, or other consideration paid to any other person for or in connection with abstracts prepared for applicants for loans, insurance on security for such loans, the sale of farms mortgaged to a land bank, or any services performed on behalf of applicants for loans or borrowers from a land bank: Provided, however, That a person employed and compensated by an association solely for the purpose of taking applications for loans may also receive compensation from applicants and borrowers for services as attorney, abstracter or insurance agent if his charges for such other services are reasonable or at standard rates.

[27 F.R. 10930, Nov. 9, 1962]

§ 11.1075 Prohibition against officers, directors, and employees acquiring

certain stock or claims based thereon.

No officer, director, or employee of an association shall acquire any interest in the stock of such association or any other such association, or in any claim arising from the retirement of such stock, by voluntary transfer or assignment, except such interests as he may acquire in connection with the transfer to him of land mortgaged to a Federal land bank. [27 F.R. 10930, Nov. 9, 1962]

§ 11.1076 Prohibition against managers making farm loans for any other company or agency.

Section 7 of the Federal Farm Loan Act, as amended (12 U.S.C. 714), in describing the powers and duties of managers of associations, provides in part: No such manager shall engage in the making of land mortgage loans eligible at a Federal land bank through or for any other land mortgage company or agency, and the making of any such loan by any manager shall forthwith work a forfeiture of his office. [27 F.R. 10930, Nov. 9, 1962]

§ 11.1077 Administrative interpretation of provision.

This provision is construed by the Administration as prohibiting a manager from participating in, or having a part in, the making of land mortgage loans through or for any land mortgage company or agency whose business consists, in whole or in part, in making land mortgage loans, where the applicant, the security, and the purpose or purposes are eligible at a Federal land bank for a loan in any amount or where any proceeds of the loan are to be used to pay a Federal land bank loan. [27 F.R. 10930, Nov. 9, 1962]

§ 11.1078 Manager should not divert to other agencies business acceptable to land bank.

The manager, as the principal administrative officer of the association, holds a position of trust. He should not divert to other lending agencies business which would be acceptable to the land bank. It is the duty of the board of directors of every association to enforce compliance with this provision of the law.

[27 F.R. 10930, Nov. 9, 1962]

§ 11.1079 Political activity of employees. Employees of associations are expected to so conduct themselves as to avoid criticism on the grounds of political activities. It is imperative that the services of association employees be rendered impartially and not be influenced by political considerations. No individual shall be eligible to become or be a salaried officer or employee of an association if he is or becomes a candidate for or is elected or appointed to any remunerative public office, unless prior to his employment or as a condition to his continued employment the board of directors of the association, after a full consideration of all the facts involved, shall find that such candidacy or the holding of such public office would not in any manner adversely affect the best interests of the borrowers or the operations and public relations of the association and the bank, and said finding is approved by the Federal land bank of the district. Any individual who is or becomes ineligible for employment by an association by reason of the foregoing provision shall not be paid any compensation for services rendered to the association during the period of such ineligibility.

[27 F.R. 10930, Nov. 9, 1962]

§ 11.1080 Other restrictions on activities.

The manager and other employees of an association shall not accept any fee, commission, gratuity, or compensation in any form from any other lending agency in connection with a land mortgage loan made by it even though the loan would not be eligible at a Federal land bank. Officers and employees of the banks and corporations under the supervision of the Administration who are employed on a full-time basis are required to devote their full business time to the duties assigned them in connection with the activities and operations of the organizations in which they are employed. They are also expected to refrain from accepting employment or compensation for activities, even for services rendered outside of business hours, which might embarrass the Administration or cast reflection upon their ability to take an unbiased and impartial view of its problems.

[21 F.R. 8648, Nov. 9, 1956, as amended at 27 F.R. 10931, Nov. 9, 1962]

33-555-65- 3

19.78

Forbearance agreements.

Reamortizations.

Reinstatement of loans.

ASSOCIATION FEES

Applications.

19.79 Closed loans. 19.80

Additional and refunding loans.

AUTHORITY: The provisions of this Part 19 issued under secs. 11, 13, 39 Stat. 369, as amended, 372, as amended; 12 U.S.C. 761, 781.

SOURCE: The provisions of this Part 19 appear at 21 F.R. 8649, Nov. 9, 1956, except as otherwise noted.

NOTE: Where the word "bank" appears alone, it refers to a Federal land bank; the word "association" refers to a Federal land bank association; the word "Administration" refers to the Farm Credit Administration. [27 F.R. 10931, Nov. 9, 1962]

BANK FEES

§ 19.67 Applications.

The banks may collect an application fee of not to exceed $10 on each application, except that in cases wherein the association application fee exceeds $5, the bank's application fee shall be limited to the difference between such association fee and $15.

§ 19.68 Applications on specialized farms.

In the case of applications for loans (or increased loans or divisions of loans) on specialized farms of certain types, such as turpentine farms, timber farms, ranches, and orchards, where appraisal costs are unusually high, the banks may establish, subject to the approval of the Administration, special additional fees in recognition of the higher costs of appraisal of such property.

§ 19.69 Appraisals.

The fee deposits authorized by these regulations should be retained by the bank if an appraisal is made of the property, but in any such case where an appraisal is not made, the fee should be refunded in its entirety to the ap