(a) What is the process for chartering a service corporation? A Farm Credit bank or association (you or your) may organize a corporation acting alone or with other Farm Credit banks or associations to perform, for you or on your behalf, any function or service that you are authorized to perform under the Act and Farm Credit Administration (we, us, or our) regulations, with two exceptions. Those exceptions are that your corporation may not extend credit or provide insurance services. To organize a service corporation, you must submit an application to us following the applicable requirements of paragraph (c) of this section. If what you propose in your application meets the requirements of the Act, our regulations, and any other conditions we may impose, we may issue a charter for your service corporation making it a federally chartered instrumentality of the United States. Your service corporation will be subject to examination, supervision, and regulation by us.
(b) Who may own equities in your service corporation?
(1) Your service corporation may only issue voting and non-voting stock to:
(i) One or more Farm Credit banks and associations; and
(ii) Persons that are not Farm Credit banks or associations, provided that at least 80 percent of the voting stock is at all times held by Farm Credit banks or associations.
(2) For the purposes of this subpart, we define persons as individuals or legal entities organized under the laws of the United States or any state or territory thereof.
(c) What must be included in your application to form a service corporation? Your application for a corporate charter must include:
(1) The certified resolution of the board of each organizing bank or association authorizing the incorporation;
(2) A request signed by the president(s) of the organizing bank(s) or association(s) to us to issue a charter, supported by a detailed statement demonstrating the need and the justification for the proposed entity; and
(3) The proposed articles of incorporation addressing, at a minimum, the following:
(i) The name of your corporation;
(ii) The city and state where the principal offices of your corporation are to be located;
(iii) The general purposes for the formation of your corporation;
(iv) The general powers of your corporation;
(v) The procedures for a Farm Credit bank or association or persons that are not Farm Credit institutions to become a stockholder;
(vi) The procedures to adopt and amend your corporation's bylaws;
(vii) The title, par value, voting and other rights, and authorized amount of each class of stock that your corporation will issue and the procedures to retire each class;
(viii) The notice and quorum requirement for a meeting of shareholders, and the vote required for shareholder action on various matters;
(ix) The procedures and shareholder voting requirements for the merger, voluntary liquidation, or dissolution of your corporation or the distribution of corporate assets;
(x) The standards and procedures for the application and distribution of your corporation's earnings; and
(xi) The length of time your corporation will exist.
(4) The proposed bylaws, which must include the provisions required by § 615.5220(b) of this chapter;
(5) A statement of the proposed amounts and sources of capitalization and operating funds;
(6) Any agreements between the organizing banks and associations relating to the organization or the operation of the corporation; and
(7) Any other supporting documentation that we may request.
(d) What will we do with your application? If we approve your completed application, we will issue a charter for your service corporation as a corporate body and a federally chartered instrumentality. We may condition the issuance of a charter, including imposing minimum capital requirements, as we deem appropriate. For good cause, we may deny your application.
(e) Once your service corporation is formed, how are its articles of incorporation amended? Your service corporation's articles of incorporation may be amended in either of two ways:
(1) The board of directors of the corporation may request that we amend the articles of incorporation by sending us a certified resolution of the board of directors of the service corporation that states the:
(i) Section(s) to be amended;
(ii) Reason(s) for the amendment;
(iii) Language of the articles of incorporation provision, as amended; and
(iv) Requisite shareholder approval has been obtained. The request will be subject to our approval as stated in paragraphs (a) and (c) of this section.
(2) We may at any time make any changes in the articles of incorporation of your service corporation that are necessary and appropriate for the accomplishment of the purposes of the Act.
(f) When your service corporation issues equities, what are the disclosure requirements? Your service corporation must provide the disclosures described in § 615.5255 of this chapter.
[66 FR 16843, Mar. 28, 2001, as amended at 70 FR 53907, Sept. 13, 2005; 71 FR 65386, Nov. 8, 2006]