Each member of the corporation must make loans to the corporation when called upon pursuant to a written loan call agreement approved by the board of directors of the corporation and entered into between the corporation and all members. The loan call agreement must describe the mutual agreement of the corporation and the members as to the loan limits of each member, the method for determining the loan limits, the terms and conditions of each member's rights and obligations pertaining to loan calls by the corporation, and the corporation's rights to make loan calls of the members. The loan call agreement may be modified and amended unilaterally by the corporation only for the purpose of adding new members as parties to the loan call agreement if the new members execute and deliver addendums to the loan call agreement binding them to all terms, conditions, and loan limits of the agreement. The corporation and any member may agree mutually to increase the loan limit of the member if all other members have the opportunity to increase their loan limits in the same proportion or percentage relative to their original loan limits as provided in the loan call agreement. The loan call agreement is subject to the following further conditions and limitations:

(1) All loan limits must be established at the thousand dollar amount nearest to the amount computed in accordance with this section.

(2) A loan to the corporation under the loan call agreement may not be made if, immediately after the loan, the total amount of the obligations of the corporation under the loan call agreement exceeds ten times the greater of the net worth of the corporation or the amount then paid in on the outstanding capital stock of the corporation.

(3) The total amount outstanding on loans to the corporation made by a member at any one time under the loan call agreement may not exceed:

(a) ten percent of the total amount then outstanding or committed, or both, under the loan call agreement; or

(b) any federal or state statutory or regulatory limitations applicable to the members.

(4) Subject to item (3)(a), each loan call made by the corporation must be prorated among the members of the corporation in substantially the same proportion that the loan limit of each member bears to the aggregate of the loan limits of all members. Loan calls may require all members to fund the loan call contemporaneously with the loan call or, alternatively, may require that the loan call be funded on a revolving basis in periodic disbursements by groups of members as designated by the corporation on a rotating basis so that, in a single loan call, the disbursement by one designated group may retire at a future date the outstanding balance of another group of members.

(5) All loans to the corporation by members must be evidenced by bonds, debentures, notes, or other evidences of indebtedness of the corporation which are freely transferable at all times. For administrative purposes, loans made by members pursuant to loan calls by the corporation must be funded by one or more members, designated by the corporation, which shall sell participation interests to other members in the proportions provided in this section.

(6) A member is not obligated to make loans to the corporation pursuant to calls made after the withdrawal of the member.

HISTORY: 1962 Code Section 12-1146; 1958 (50) 1886; 1960 (51) 1646; 1961 (52) 499; 1993 Act No. 181, Section 51995 Act No. 123, Section 4; 1996 Act No. 353, Section 3; 2000 Act No. 234, Section 5; 2005 Act No. 157, Section 4.B, eff June 10, 2005, applicable for taxable years beginning January 1, 2006; 2015 Act No. 60 (S.389), Section 1, eff June 4, 2015.

Editor's Note

2005 Act No. 157, Section 5, as amended by 2006 Act No. 389, Section 4 provides as follows:

"(A) The General Assembly finds that many tax incentives outlive their usefulness and should exist only for a time certain. It is the intent of the General Assembly to provide for a sunset provision on each tax incentive, including credits and exemptions, enacted by this act.

"(B) Each tax incentive, including credits and exemptions, enacted by this act shall be repealed for tax years beginning after five years from the date of enactment, unless a different time frame is otherwise provided herein, but this repeal does not apply to the small business targeted jobs tax credit allowed pursuant to Section 12-6-3360(C)(2), as amended by this act."

Effect of Amendment

The 2005 amendment, in item (2), added "under the loan call agreement" in two places and "the greater of the net worth of the corporation or"; and rewrote item (3) and subitem (3)(a).

2015 Act No. 60, Section 1, reenacted this section with no change.