04 NCAC 16F .0109. ISSUANCE OF SECURITIES BY FINANCE SUBSIDIARIES

(a)  A finance subsidiary may issue any security which its parent is authorized to issue (or, if the parent is a mutual savings institution, would be authorized to issue if it converted to the stock form), subject to the provisions of this Subchapter as it relates to finance subsidiaries.

(b)  A finance subsidiary shall not issue or deal in the deposits and savings accounts of its parent.  A finance subsidiary shall not state or imply that securities issued by it are insured by the insurer of accounts of the parent.

(c)  A finance subsidiary shall not issue any security the payment, maturity, or redemption of which may be accelerated upon the condition that its parent is insolvent or has been placed into receivership.

(d)  A savings institution providing capital to a finance subsidiary shall own 100 percent of the finance subsidiary's outstanding voting common stock and may not transfer or otherwise assign any interest in such stock to any other person or entity, without the prior written approval of the Commissioner of Banks upon a showing by the savings institution that adherence to the limit would work a hardship upon the savings institution and that approval of the exception would enhance the safe and sound operation of the savings institution.

(e)  A finance subsidiary may provide for voting rights for holders of preferred stock, under such conditions and in such manner and to the extent customary to protect the rights of such holders of preferred stock, including but not limited to the following conditions (except that, upon the expiration of any event giving rise to the exercise of such voting rights, the voting rights shall be vested exclusively as provided in Paragraph (d) of this Rule):

(1)           The finance subsidiary fails to pay dividends for at least one dividend period;

(2)           Any merger, consolidation, or reorganization of the finance subsidiary or its parent (except in a supervisory case) is sought to be authorized, where the issuing finance subsidiary or its parent is not the survivor, provided that the net worth of the resulting finance subsidiary or parent available for payment of any class of preferred stock is less than the net worth available for such class prior to the merger, consolidation, or reorganization;

(3)           Action is sought to be authorized which would create any class of preferred stock having a preference or priority over an outstanding class or classes of preferred stock;

(4)           Action is sought to be authorized which would adversely change the specific terms of any class of preferred stock;

(5)           Action is sought to be authorized which would increase the number of shares of a class of preferred stock, or the number of shares of a class of preferred stock ranking prior to or in parity with another class of preferred stock; or

(6)           Action is sought which would authorize the issuance of an additional class or classes of preferred stock without the finance subsidiary having met specific financial standards as set forth in the preferred stock.

 

History Note:        Authority G.S. 54B-55; 54B-77; 54B-195; 54C-53; 54C-144; 54C-146;

Eff. October 1, 1984;

Temporary Amendment Eff. October 2, 1991 for a period of 180 days to expire on March 31, 1992;

Amended Eff. December 1, 2011; May 11, 1992.