Mo. Code Regs. tit. 20 § 1140-6.050

Current through Register Vol. 50, No. 1, January 2, 2025

Section 20 CSR 1140-6.050 - Contingent Additional Interest or Stock Purchase Warrants

PURPOSE: The legal separation of deposit taking from investment banking prevents banks from investing in the stock of other corporations. It has also raised a question whether banks can contract to receive additional interest or stock purchase warrants from a borrower contingent upon the success of the borrower's business. This rule authorizes contract provisions to receive additional interest or stock purchase warrants from the borrower contingent upon the success of the borrower's business. Further, it permits a new business to negotiate a loan agreement with a commercial bank which may substantially reduce interest expense in the early years until a date when the business is more established.

(1) A bank may contract to receive additional interest on any loan for business purposes contingent only upon the profitability and successful operation of the business receiving the proceeds of the loan. In no event shall the repayment of principal be subject to any contingency.

(2) A bank may contract to receive stock purchase warrants in lieu of part of the interest on any loan. The bank, however, may not use these warrants to purchase the stock of any private corporation.

20 CSR 1140-6.050

AUTHORITY: sections 361.105 and 362.105.3, RSMo 1986.* This rule originally filed as 4 CSR 140-6.050. Original rule filed June 14, 1982, effective Sept. 11, 1982. Moved to 20 CSR 1140-6.050, effective Aug. 28, 2006.

*Original authority: 361.105 RSMo 1967; and 362.105.3, RSMo 1939, amended 1949, 1963, 1965, 1967, 1977, 1983, 1986.