CFR > Title 12 - Banks and Banking > CHAPTER VI—FARM CREDIT ADMINISTRATION > SUBCHAPTER B—FARM CREDIT SYSTEM (parts 609 to 655) > PART 611—ORGANIZATION > SUBPART P—Termination of System Institution Status (§611.1200 to §611.1290) > 611.1275—Retirement of equities held by other System institutions.

611.1275—Retirement of equities held by other System institutions.

(a) Retirement at option of equity holder. If your institution is a terminating institution, System institutions that own your equities have the right to require you to retire the equities on the termination date.
(b) Value of equity holders' interests. You must retire the equities in accordance with the liquidation provisions in your bylaws unless we determine that the liquidation provisions would result in an inequitable distribution to stockholders. If we make such a determination, we will require you to distribute the equity in accordance with another method that we deem equitable to stockholders. Before you retire any equity, you must make the following adjustments to the amount of stockholder equity as stated in the financial statements on the termination date:
(1) Make deductions for any taxes due to the termination that have not yet been recorded;
(2) Deduct the amount of the exit fee; and
(3) Make any adjustments described under § 611.1250(c) that we may require as we deem appropriate.
(c) Transfer of affiliated association's investment. As an alternative to equity retirement, an affiliated association that reaffiliates with another Farm Credit bank instead of terminating with its bank has the right to require the terminating bank to transfer its investment to its new affiliated bank when it reaffiliates. If your institution is a terminating bank, at the time of reaffiliation you must transfer the purchased and allocated equities held by the association, as well as its share of unallocated surplus, to the new affiliated bank. Calculate the association's share before deduction of the exit fee as of the month end preceding the reaffiliation date (or the termination date if it is the same as the reaffiliation date) in accordance with the liquidation provisions of your bylaws, unless we determine that the liquidation provisions would result in an inequitable distribution. If we make such a determination, we will require you to distribute the association's share of your unallocated surplus in accordance with another method that we deem equitable to stockholders. Before you distribute any unallocated surplus, you must make the following adjustments to stockholder equity as stated in the financial statements as of the month end preceding the reaffiliation date (or the termination date if it is the same as the reaffiliation date):
(1) Add back any taxes due to the termination, and the exit fee; and
(2) Make any adjustments described under § 611.1250(c) that we may require as we deem appropriate.
(d) Prohibition on certain affiliations. No Farm Credit institution may retain an equity interest otherwise prohibited by law in a successor institution