9-1104.Limitation on loans and borrowing; determination of limits;
compliance with section; definitions.
(a) Definitions. As used in this section:
(1) "Borrower" means an individual, sole proprietorship,
partnership, joint venture, association, trust, estate, business trust,
corporation, limited liability company, not for profit corporation, government
unit or agency, instrumentality, or political subdivision thereof, or
any similar entity or organization.
(2) "Capital" means the total of capital stock, surplus, undivided
profits, 100% of the allowance for loan and lease loss, capital notes and
debentures, and reserve for contingencies. Intangibles, such as goodwill,
shall not be included in the definition of capital when determining
lending limits.
(3) "Loan" means:
(A) A bank's direct or indirect advance of funds to or on behalf
of a borrower based on an obligation of the borrower to repay the funds;
(B) a contractual commitment to advance funds;
(C) an overdraft;
(D) loans that have been charged off the bank's books in whole
or in part, unless the loan is unenforceable by reason of:
(i) Discharge in bankruptcy;
(ii) expiration of the statute of limitations;
(iii) judicial decision; or
(iv) the bank's forgiveness of the debt.
(b) General Lending Limit Rule. Subject to the provisions in
(d), (e) and (f), loans to one borrower, including any bank officer or
employee, shall not exceed 25% of a bank's capital.
(c) Calculation of the Lending Limit. (1) The bank's lending limit
shall be calculated on the
date the loan or written commitment is made. The renewal or refinancing of a
loan shall not constitute a new lending limit calculation date unless new funds
are advanced.
(2) If the bank's lending limit increases subsequent to the origination
date, a bank may use the current lending limit to determine compliance when
advancing funds. An advance of funds includes the lending of money or the
repurchase of any portion of a participation.
(3) If the bank's lending limit decreases subsequent to the origination
date, a bank is not prohibited from advancing on a prior commitment that
was legal on the date the commitment was made.
(d) Exemptions. That portion of a loan which is continuously
secured on a dollar for dollar basis by any of the following will be exempt
from any lending limit:
(1) A guaranty, commitment or agreement to
take over or to purchase, made by any federal reserve bank or by any
department, bureau, board, commission, agency or establishment of the United
States of America, including any corporation wholly owned, directly or
indirectly by the United States;
(2) a perfected interest in a time deposit
account in the lending bank. In the case of a time deposit which may be
withdrawn in whole or in part prior to maturity, the bank shall establish
written internal procedures to prevent the release of the deposit;
(3) a bonded warehouse receipt
issued to the borrower by some other person;
(4) treasury bills, certificates of
indebtedness, or bonds or notes of the United States of America or
instrumentalities or agencies thereof, or those fully guaranteed by them;
(5) general obligation bonds or notes
of the state of Kansas or any other state in the United States of America;
(6) general obligation bonds or
notes of any Kansas municipality or quasi-municipality; or
(7) a perfected interest in a repurchase
agreement of United States government securities with the lending bank.
(e) Special Rules. (1) The total liability of any borrower may
exceed the general 25%
limit by up to an additional 10% of the bank's capital. To qualify for this
expanded limit:
(A) The bank shall have as collateral a first lien or liens on
real estate securing a portion of the liability equal to at least the amount by
which the total liability exceeds the 25% limit;
(B) the amount of the recorded lien or liens shall equal at least
the amount of the
excess liability;
(C) the appraised value of the real estate shall equal at least twice the
amount of the excess liability; and
(D) a portion of the loan equal to at least the excess
liability shall have installment payments sufficient to amortize that portion
within 20 years.
(2) That portion of any loan endorsed or guaranteed by a borrower will not
be added to that borrower's
liability until the endorsed or guaranteed loan is past due 10 days.
(3) If the total liability of any active bank officer will exceed $50,000,
prior approval from the bank's
board of directors shall be noted in the minutes.
(4) To the extent they are insured by the federal deposit insurance
corporation, time deposits purchased by a bank from another financial
institution shall not be considered a loan to that financial institution and
shall not be subject to the bank's lending limit.
(5) Third-party paper purchased by the bank will not be considered a
loan to the seller unless and until the bank has the right under the agreement
to require the seller to repurchase the paper.
(f) Combination Rules.
(1) General Rule. Loans to one borrower will be attributed to
another borrower and their total liability will be combined:
(A) When proceeds of a loan are to be used for the direct
benefit of the other borrower, to the extent of the proceeds so used; or
(B) when a common enterprise is deemed to exist between the borrowers.
(2) Direct Benefit. The proceeds of a loan to a borrower will be
deemed to be used for the direct benefit of another person and will be
attributed to the other person when the proceeds, or assets purchased with the
proceeds, are transferred to another person, other than in a bona fide arm's
length transaction where the proceeds are used to acquire property,
goods or services.
(3) Common Enterprise. A common enterprise will be deemed to exist
and loans to separate borrowers will be aggregated:
(A) When the expected source of repayment for each loan or
extension of credit is the same for each borrower and neither borrower has
another source of income from which the loan, together with the borrower's
other obligations, may be fully repaid;
(B) when both of the following circumstances are present:
(i) Loans are made to borrowers who are related directly or indirectly
through common control, including where one borrower is
directly or indirectly controlled by another borrower. Common control
means to own, control or have the power to vote 25%
or more of any class of voting securities or voting interests or to control, in
any manner, the election of a majority of the
directors, or to have the power to exercise a controlling influence over the
management or policies of another person; and
(ii) substantial financial interdependence exists between
or among the borrowers. Substantial financial interdependence is deemed to
exist when 50 percent or more of one borrower's gross receipts or gross
expenditures (on
an annual basis) are derived from transactions with the other
borrower. Gross receipts and expenditures include gross revenues, expenses,
intercompany loans, dividends, capital contributions and similar receipts or
payments; or
(C) when separate persons borrow from a bank to acquire
a business enterprise of which those borrowers will own more than 50% of
the voting securities or voting interests, in which case a common enterprise is
deemed to exist between the borrowers for purposes of combining the acquisition
loan.
(D) An employer will not be treated as a source of repayment for
purposes of determining a common enterprise because of wages and salaries paid
to an employee.
(4) Special Rules for Loans to a Corporate Group. (A) Loans by a bank to a
borrower and the borrower's
subsidiaries shall not, in the aggregate, exceed 50% of the bank's
capital. At no time shall loans to any one borrower or to any one
subsidiary exceed the general lending limit of 25%, except as allowed by other
provisions of this section. For purposes of this paragraph, a corporation or a
limited liability company is a subsidiary of a borrower if the borrower owns or
beneficially owns directly or indirectly more than 50 percent of the voting
securities or voting interests of the corporation or company.
(B) Loans to a borrower and a borrower's subsidiaries that
do not meet the test contained in subsection (f)(4)(A)
will not be combined unless
either the direct benefit or the common enterprise test is met.
(5) Special Rules for Loans to Partnerships, Joint Ventures and
Associations. (A) As used in this subpart (5), the term
"partnership" shall include a partnership, joint venture or association. The
term partner shall include a partner in a partnership or a member in a joint
venture or association.
(B) General Partner. Loans to a partnership are
considered to be loans to a partner, if by the terms of the partnership
agreement that partner is held generally liable for debts or actions of the
partnership.
(C) Limited Partner. If the liability of a
partner is limited by the terms of the partnership agreement, the amount of the
partnership debt attributable to the partner is in direct proportion to that
partner's limited partnership liability.
(D) Notwithstanding the provisions of subsections (f)(5)(B) and (f)(5)(C),
if by the terms of the loan agreement
the liability
of any partner is different than delineated in the partnership agreement, for
the purpose of attributing debt to the partner the loan agreement shall
control.
(E) Loans to a partner are not attributed to the
partnership unless either the direct benefit or the common enterprise test is
met.
(F) Loans to one partner are not attributed
to other partners unless either the direct benefit or common enterprise test is
met.
(G) When a loan is made to a partner to
purchase an interest in a partnership, both the direct benefit and common
enterprise tests are deemed to be met, and the loan is attributed to the
partnership.
(6) Notwithstanding the provisions of this
subsection, the commissioner may determine, based upon an evaluation of the
facts and circumstances of a particular transaction, that a loan to one
borrower may be attributed to another borrower.
(g) The commissioner may order a bank to correct any loan not in compliance
with this section. A violation of this section shall be deemed corrected if
that portion of the borrower's liability which created the violation
could be legally advanced under current lending limits. Failure to comply
with the commissioner's order
within 60 days shall be grounds for the proposed removal of a bank officer
or director pursuant to K.S.A. 9-1805 and amendments thereto.
History: L. 1947, ch. 102, § 33; L. 1949, ch. 110, § 2; L. 1951,
ch. 120, § 1; L. 1975, ch. 44, § 14; L. 1976, ch. 56, § 1; L. 1982,
ch. 51, § 1; L. 1983, ch. 47, § 1;
L. 1986, ch. 56, § 2;
L. 1989, ch. 49, § 1;
L. 1990, ch. 57, § 1;
L. 1994, ch. 50, § 1;
L. 1995, ch. 34, § 1;
L. 1996, ch. 171, § 1;
L. 1997, ch. 180, § 11; May 29.
9-1104.Limitation on loans and borrowing; determination of limits;
compliance with section; definitions.
(a) Definitions. As used in this section:
(1) "Borrower" means an individual, sole proprietorship,
partnership, joint venture, association, trust, estate, business trust,
corporation, limited liability company, not for profit corporation, government
unit or agency, instrumentality, or political subdivision thereof, or
any similar entity or organization.
(2) "Capital" means the total of capital stock, surplus, undivided
profits, 100% of the allowance for loan and lease loss, capital notes and
debentures, and reserve for contingencies. Intangibles, such as goodwill,
shall not be included in the definition of capital when determining
lending limits.
(3) "Loan" means:
(A) A bank's direct or indirect advance of funds to or on behalf
of a borrower based on an obligation of the borrower to repay the funds;
(B) a contractual commitment to advance funds;
(C) an overdraft;
(D) loans that have been charged off the bank's books in whole
or in part, unless the loan is unenforceable by reason of:
(i) Discharge in bankruptcy;
(ii) expiration of the statute of limitations;
(iii) judicial decision; or
(iv) the bank's forgiveness of the debt.
(b) General Lending Limit Rule. Subject to the provisions in
(d), (e) and (f), loans to one borrower, including any bank officer or
employee, shall not exceed 25% of a bank's capital.
(c) Calculation of the Lending Limit. (1) The bank's lending limit
shall be calculated on the
date the loan or written commitment is made. The renewal or refinancing of a
loan shall not constitute a new lending limit calculation date unless new funds
are advanced.
(2) If the bank's lending limit increases subsequent to the origination
date, a bank may use the current lending limit to determine compliance when
advancing funds. An advance of funds includes the lending of money or the
repurchase of any portion of a participation.
(3) If the bank's lending limit decreases subsequent to the origination
date, a bank is not prohibited from advancing on a prior commitment that
was legal on the date the commitment was made.
(d) Exemptions. That portion of a loan which is continuously
secured on a dollar for dollar basis by any of the following will be exempt
from any lending limit:
(1) A guaranty, commitment or agreement to
take over or to purchase, made by any federal reserve bank or by any
department, bureau, board, commission, agency or establishment of the United
States of America, including any corporation wholly owned, directly or
indirectly by the United States;
(2) a perfected interest in a time deposit
account in the lending bank. In the case of a time deposit which may be
withdrawn in whole or in part prior to maturity, the bank shall establish
written internal procedures to prevent the release of the deposit;
(3) a bonded warehouse receipt
issued to the borrower by some other person;
(4) treasury bills, certificates of
indebtedness, or bonds or notes of the United States of America or
instrumentalities or agencies thereof, or those fully guaranteed by them;
(5) general obligation bonds or notes
of the state of Kansas or any other state in the United States of America;
(6) general obligation bonds or
notes of any Kansas municipality or quasi-municipality; or
(7) a perfected interest in a repurchase
agreement of United States government securities with the lending bank.
(e) Special Rules. (1) The total liability of any borrower may
exceed the general 25%
limit by up to an additional 10% of the bank's capital. To qualify for this
expanded limit:
(A) The bank shall have as collateral a first lien or liens on
real estate securing a portion of the liability equal to at least the amount by
which the total liability exceeds the 25% limit;
(B) the amount of the recorded lien or liens shall equal at least
the amount of the
excess liability;
(C) the appraised value of the real estate shall equal at least twice the
amount of the excess liability; and
(D) a portion of the loan equal to at least the excess
liability shall have installment payments sufficient to amortize that portion
within 20 years.
(2) That portion of any loan endorsed or guaranteed by a borrower will not
be added to that borrower's
liability until the endorsed or guaranteed loan is past due 10 days.
(3) If the total liability of any active bank officer will exceed $50,000,
prior approval from the bank's
board of directors shall be noted in the minutes.
(4) To the extent they are insured by the federal deposit insurance
corporation, time deposits purchased by a bank from another financial
institution shall not be considered a loan to that financial institution and
shall not be subject to the bank's lending limit.
(5) Third-party paper purchased by the bank will not be considered a
loan to the seller unless and until the bank has the right under the agreement
to require the seller to repurchase the paper.
(f) Combination Rules.
(1) General Rule. Loans to one borrower will be attributed to
another borrower and their total liability will be combined:
(A) When proceeds of a loan are to be used for the direct
benefit of the other borrower, to the extent of the proceeds so used; or
(B) when a common enterprise is deemed to exist between the borrowers.
(2) Direct Benefit. The proceeds of a loan to a borrower will be
deemed to be used for the direct benefit of another person and will be
attributed to the other person when the proceeds, or assets purchased with the
proceeds, are transferred to another person, other than in a bona fide arm's
length transaction where the proceeds are used to acquire property,
goods or services.
(3) Common Enterprise. A common enterprise will be deemed to exist
and loans to separate borrowers will be aggregated:
(A) When the expected source of repayment for each loan or
extension of credit is the same for each borrower and neither borrower has
another source of income from which the loan, together with the borrower's
other obligations, may be fully repaid;
(B) when both of the following circumstances are present:
(i) Loans are made to borrowers who are related directly or indirectly
through common control, including where one borrower is
directly or indirectly controlled by another borrower. Common control
means to own, control or have the power to vote 25%
or more of any class of voting securities or voting interests or to control, in
any manner, the election of a majority of the
directors, or to have the power to exercise a controlling influence over the
management or policies of another person; and
(ii) substantial financial interdependence exists between
or among the borrowers. Substantial financial interdependence is deemed to
exist when 50 percent or more of one borrower's gross receipts or gross
expenditures (on
an annual basis) are derived from transactions with the other
borrower. Gross receipts and expenditures include gross revenues, expenses,
intercompany loans, dividends, capital contributions and similar receipts or
payments; or
(C) when separate persons borrow from a bank to acquire
a business enterprise of which those borrowers will own more than 50% of
the voting securities or voting interests, in which case a common enterprise is
deemed to exist between the borrowers for purposes of combining the acquisition
loan.
(D) An employer will not be treated as a source of repayment for
purposes of determining a common enterprise because of wages and salaries paid
to an employee.
(4) Special Rules for Loans to a Corporate Group. (A) Loans by a bank to a
borrower and the borrower's
subsidiaries shall not, in the aggregate, exceed 50% of the bank's
capital. At no time shall loans to any one borrower or to any one
subsidiary exceed the general lending limit of 25%, except as allowed by other
provisions of this section. For purposes of this paragraph, a corporation or a
limited liability company is a subsidiary of a borrower if the borrower owns or
beneficially owns directly or indirectly more than 50 percent of the voting
securities or voting interests of the corporation or company.
(B) Loans to a borrower and a borrower's subsidiaries that
do not meet the test contained in subsection (f)(4)(A)
will not be combined unless
either the direct benefit or the common enterprise test is met.
(5) Special Rules for Loans to Partnerships, Joint Ventures and
Associations. (A) As used in this subpart (5), the term
"partnership" shall include a partnership, joint venture or association. The
term partner shall include a partner in a partnership or a member in a joint
venture or association.
(B) General Partner. Loans to a partnership are
considered to be loans to a partner, if by the terms of the partnership
agreement that partner is held generally liable for debts or actions of the
partnership.
(C) Limited Partner. If the liability of a
partner is limited by the terms of the partnership agreement, the amount of the
partnership debt attributable to the partner is in direct proportion to that
partner's limited partnership liability.
(D) Notwithstanding the provisions of subsections (f)(5)(B) and (f)(5)(C),
if by the terms of the loan agreement
the liability
of any partner is different than delineated in the partnership agreement, for
the purpose of attributing debt to the partner the loan agreement shall
control.
(E) Loans to a partner are not attributed to the
partnership unless either the direct benefit or the common enterprise test is
met.
(F) Loans to one partner are not attributed
to other partners unless either the direct benefit or common enterprise test is
met.
(G) When a loan is made to a partner to
purchase an interest in a partnership, both the direct benefit and common
enterprise tests are deemed to be met, and the loan is attributed to the
partnership.
(6) Notwithstanding the provisions of this
subsection, the commissioner may determine, based upon an evaluation of the
facts and circumstances of a particular transaction, that a loan to one
borrower may be attributed to another borrower.
(g) The commissioner may order a bank to correct any loan not in compliance
with this section. A violation of this section shall be deemed corrected if
that portion of the borrower's liability which created the violation
could be legally advanced under current lending limits. Failure to comply
with the commissioner's order
within 60 days shall be grounds for the proposed removal of a bank officer
or director pursuant to K.S.A. 9-1805 and amendments thereto.
History: L. 1947, ch. 102, § 33; L. 1949, ch. 110, § 2; L. 1951,
ch. 120, § 1; L. 1975, ch. 44, § 14; L. 1976, ch. 56, § 1; L. 1982,
ch. 51, § 1; L. 1983, ch. 47, § 1;
L. 1986, ch. 56, § 2;
L. 1989, ch. 49, § 1;
L. 1990, ch. 57, § 1;
L. 1994, ch. 50, § 1;
L. 1995, ch. 34, § 1;
L. 1996, ch. 171, § 1;
L. 1997, ch. 180, § 11; May 29.
9-1104.Limitation on loans and borrowing; determination of limits;
compliance with section; definitions.
(a) Definitions. As used in this section:
(1) "Borrower" means an individual, sole proprietorship,
partnership, joint venture, association, trust, estate, business trust,
corporation, limited liability company, not for profit corporation, government
unit or agency, instrumentality, or political subdivision thereof, or
any similar entity or organization.
(2) "Capital" means the total of capital stock, surplus, undivided
profits, 100% of the allowance for loan and lease loss, capital notes and
debentures, and reserve for contingencies. Intangibles, such as goodwill,
shall not be included in the definition of capital when determining
lending limits.
(3) "Loan" means:
(A) A bank's direct or indirect advance of funds to or on behalf
of a borrower based on an obligation of the borrower to repay the funds;
(B) a contractual commitment to advance funds;
(C) an overdraft;
(D) loans that have been charged off the bank's books in whole
or in part, unless the loan is unenforceable by reason of:
(i) Discharge in bankruptcy;
(ii) expiration of the statute of limitations;
(iii) judicial decision; or
(iv) the bank's forgiveness of the debt.
(b) General Lending Limit Rule. Subject to the provisions in
(d), (e) and (f), loans to one borrower, including any bank officer or
employee, shall not exceed 25% of a bank's capital.
(c) Calculation of the Lending Limit. (1) The bank's lending limit
shall be calculated on the
date the loan or written commitment is made. The renewal or refinancing of a
loan shall not constitute a new lending limit calculation date unless new funds
are advanced.
(2) If the bank's lending limit increases subsequent to the origination
date, a bank may use the current lending limit to determine compliance when
advancing funds. An advance of funds includes the lending of money or the
repurchase of any portion of a participation.
(3) If the bank's lending limit decreases subsequent to the origination
date, a bank is not prohibited from advancing on a prior commitment that
was legal on the date the commitment was made.
(d) Exemptions. That portion of a loan which is continuously
secured on a dollar for dollar basis by any of the following will be exempt
from any lending limit:
(1) A guaranty, commitment or agreement to
take over or to purchase, made by any federal reserve bank or by any
department, bureau, board, commission, agency or establishment of the United
States of America, including any corporation wholly owned, directly or
indirectly by the United States;
(2) a perfected interest in a time deposit
account in the lending bank. In the case of a time deposit which may be
withdrawn in whole or in part prior to maturity, the bank shall establish
written internal procedures to prevent the release of the deposit;
(3) a bonded warehouse receipt
issued to the borrower by some other person;
(4) treasury bills, certificates of
indebtedness, or bonds or notes of the United States of America or
instrumentalities or agencies thereof, or those fully guaranteed by them;
(5) general obligation bonds or notes
of the state of Kansas or any other state in the United States of America;
(6) general obligation bonds or
notes of any Kansas municipality or quasi-municipality; or
(7) a perfected interest in a repurchase
agreement of United States government securities with the lending bank.
(e) Special Rules. (1) The total liability of any borrower may
exceed the general 25%
limit by up to an additional 10% of the bank's capital. To qualify for this
expanded limit:
(A) The bank shall have as collateral a first lien or liens on
real estate securing a portion of the liability equal to at least the amount by
which the total liability exceeds the 25% limit;
(B) the amount of the recorded lien or liens shall equal at least
the amount of the
excess liability;
(C) the appraised value of the real estate shall equal at least twice the
amount of the excess liability; and
(D) a portion of the loan equal to at least the excess
liability shall have installment payments sufficient to amortize that portion
within 20 years.
(2) That portion of any loan endorsed or guaranteed by a borrower will not
be added to that borrower's
liability until the endorsed or guaranteed loan is past due 10 days.
(3) If the total liability of any active bank officer will exceed $50,000,
prior approval from the bank's
board of directors shall be noted in the minutes.
(4) To the extent they are insured by the federal deposit insurance
corporation, time deposits purchased by a bank from another financial
institution shall not be considered a loan to that financial institution and
shall not be subject to the bank's lending limit.
(5) Third-party paper purchased by the bank will not be considered a
loan to the seller unless and until the bank has the right under the agreement
to require the seller to repurchase the paper.
(f) Combination Rules.
(1) General Rule. Loans to one borrower will be attributed to
another borrower and their total liability will be combined:
(A) When proceeds of a loan are to be used for the direct
benefit of the other borrower, to the extent of the proceeds so used; or
(B) when a common enterprise is deemed to exist between the borrowers.
(2) Direct Benefit. The proceeds of a loan to a borrower will be
deemed to be used for the direct benefit of another person and will be
attributed to the other person when the proceeds, or assets purchased with the
proceeds, are transferred to another person, other than in a bona fide arm's
length transaction where the proceeds are used to acquire property,
goods or services.
(3) Common Enterprise. A common enterprise will be deemed to exist
and loans to separate borrowers will be aggregated:
(A) When the expected source of repayment for each loan or
extension of credit is the same for each borrower and neither borrower has
another source of income from which the loan, together with the borrower's
other obligations, may be fully repaid;
(B) when both of the following circumstances are present:
(i) Loans are made to borrowers who are related directly or indirectly
through common control, including where one borrower is
directly or indirectly controlled by another borrower. Common control
means to own, control or have the power to vote 25%
or more of any class of voting securities or voting interests or to control, in
any manner, the election of a majority of the
directors, or to have the power to exercise a controlling influence over the
management or policies of another person; and
(ii) substantial financial interdependence exists between
or among the borrowers. Substantial financial interdependence is deemed to
exist when 50 percent or more of one borrower's gross receipts or gross
expenditures (on
an annual basis) are derived from transactions with the other
borrower. Gross receipts and expenditures include gross revenues, expenses,
intercompany loans, dividends, capital contributions and similar receipts or
payments; or
(C) when separate persons borrow from a bank to acquire
a business enterprise of which those borrowers will own more than 50% of
the voting securities or voting interests, in which case a common enterprise is
deemed to exist between the borrowers for purposes of combining the acquisition
loan.
(D) An employer will not be treated as a source of repayment for
purposes of determining a common enterprise because of wages and salaries paid
to an employee.
(4) Special Rules for Loans to a Corporate Group. (A) Loans by a bank to a
borrower and the borrower's
subsidiaries shall not, in the aggregate, exceed 50% of the bank's
capital. At no time shall loans to any one borrower or to any one
subsidiary exceed the general lending limit of 25%, except as allowed by other
provisions of this section. For purposes of this paragraph, a corporation or a
limited liability company is a subsidiary of a borrower if the borrower owns or
beneficially owns directly or indirectly more than 50 percent of the voting
securities or voting interests of the corporation or company.
(B) Loans to a borrower and a borrower's subsidiaries that
do not meet the test contained in subsection (f)(4)(A)
will not be combined unless
either the direct benefit or the common enterprise test is met.
(5) Special Rules for Loans to Partnerships, Joint Ventures and
Associations. (A) As used in this subpart (5), the term
"partnership" shall include a partnership, joint venture or association. The
term partner shall include a partner in a partnership or a member in a joint
venture or association.
(B) General Partner. Loans to a partnership are
considered to be loans to a partner, if by the terms of the partnership
agreement that partner is held generally liable for debts or actions of the
partnership.
(C) Limited Partner. If the liability of a
partner is limited by the terms of the partnership agreement, the amount of the
partnership debt attributable to the partner is in direct proportion to that
partner's limited partnership liability.
(D) Notwithstanding the provisions of subsections (f)(5)(B) and (f)(5)(C),
if by the terms of the loan agreement
the liability
of any partner is different than delineated in the partnership agreement, for
the purpose of attributing debt to the partner the loan agreement shall
control.
(E) Loans to a partner are not attributed to the
partnership unless either the direct benefit or the common enterprise test is
met.
(F) Loans to one partner are not attributed
to other partners unless either the direct benefit or common enterprise test is
met.
(G) When a loan is made to a partner to
purchase an interest in a partnership, both the direct benefit and common
enterprise tests are deemed to be met, and the loan is attributed to the
partnership.
(6) Notwithstanding the provisions of this
subsection, the commissioner may determine, based upon an evaluation of the
facts and circumstances of a particular transaction, that a loan to one
borrower may be attributed to another borrower.
(g) The commissioner may order a bank to correct any loan not in compliance
with this section. A violation of this section shall be deemed corrected if
that portion of the borrower's liability which created the violation
could be legally advanced under current lending limits. Failure to comply
with the commissioner's order
within 60 days shall be grounds for the proposed removal of a bank officer
or director pursuant to K.S.A. 9-1805 and amendments thereto.
History: L. 1947, ch. 102, § 33; L. 1949, ch. 110, § 2; L. 1951,
ch. 120, § 1; L. 1975, ch. 44, § 14; L. 1976, ch. 56, § 1; L. 1982,
ch. 51, § 1; L. 1983, ch. 47, § 1;
L. 1986, ch. 56, § 2;
L. 1989, ch. 49, § 1;
L. 1990, ch. 57, § 1;
L. 1994, ch. 50, § 1;
L. 1995, ch. 34, § 1;
L. 1996, ch. 171, § 1;
L. 1997, ch. 180, § 11; May 29.