Section 0080-05-13-.04 - SECURITY REQUIREMENTS(1) Every person licensed as a grain dealer shall have filed with the department a surety bond signed by the dealer as principal and by a responsible company authorized to execute surety bonds with the State of Tennessee. A grain dealer may file with the department, in lieu of a surety bond, a certificate of deposit payable to the commissioner as trustee or an irrevocable letter of credit. The principal amount of such certificate of deposit or letter of credit shall be the same as that required for a surety bond under this chapter and the interest thereon shall be payable to the purchaser thereof.(2)(a) Surety bonds shall have a principal amount (to the nearest $1,000) equal to ten percent (10%) of the aggregate dollar amount paid by the dealer to producers for grain purchased from them during the dealer's last completed fiscal year; or, in the case of a dealer who has been engaged in business as a grain dealer for less than one year or who has not heretofore engaged in such business, ten percent (100%) of the estimated aggregate dollar amount to be paid by the dealer to producers for grain purchased from them during the next fiscal year. Such bond shall not be less than $20,000 nor more than $100,000, except as otherwise authorized by the act. All dealers licensed after January 1, 1994 shall in addition to amount of surety required by this paragraph be required to have additional surety in the amount equal to eighty percent (80%) of the amount of the grain purchased through price later contracts.(b) The department may, when they question a grain dealer's ability to pay producers for grain purchased, require a grain dealer to post an additional bond or certificate of deposit in a dollar amount deemed appropriate by the department. Failure to post such additional bond or certificate of deposit constitutes grounds for suspension or revocation of a license issued under this act.(c) Such bond or additional bond shall be made payable to the State of Tennessee, with the commissioner of the department as trustee; it shall be conditioned on the grain dealer's faithful performance of his duties as a grain dealer and his compliance with this act; and shall be for the use and benefits of any producer from whom the grain dealer and his compliance with this act; and shall be for the use and benefit of any producer from whom the grain dealer may purchase grain and who is not paid by such grain dealer. Such bond or additional bond shall not be cancelled, except upon at least sixty (60) days notice in writing to the department. In no event shall the total aggregate liability of a surety exceed the face amount of its bond.(3) Any grain dealer who is of the opinion that his net worth and assets are sufficient to guarantee payment to producers for grain purchased by him may request the department relieve it from the obligation of filing a bond in excess of the minimum bond of $20,000. Such request shall be accompanied by a financial statement as follows: (a) Class 2 grain dealers shall submit a complied financial statement prepared by a certified public accountant or a licensed public accountant and shall include a balance sheet and an income statement.(b) Class 1 grain dealers shall submit a reviewed financial statement prepared by a certified public accountant or a licensed public accountant and shall include a balance sheet and an income statement, statement of retained earnings, cash flow statements and notes to financial statements.(4) The department may waive that portion of the required bond in excess of $20,000; if the department is otherwise satisfied as to the financial ability and resources of the applicant; if the financial statements submitted disclose a net worth of an amount equal to at least 3 times the amount of bond required; and if the applicant or licensee has met the following requirements:(a) The applicant or licensee's financial statement and balance sheet show a current ratio of total adjusted current assets to the total adjusted current liabilities of at least one to one. Adjusted current assets shall be calculated by deducting from the stated current assets shown on the balance sheet submitted by the applicant or licensee, any non-liquid current assets including, but not limited to, notes receivable from officers and stockholders, stock subscriptions receivable, intra company receivables or receivables from an affiliate or any related party receivable. Any disallowed asset shall be netted against any related liability and the net result, if an asset, shall be subtracted from the current assets, or if a liability, it shall remain an adjusted current liability.(b) The financial statement and balance sheet show an adjusted debt to adjusted equity ratio of not more than 3 to one when calculated as follows: 1. Adjusted debt shall be obtained by totaling current and long term liabilities and reducing the total liabilities, up to the amount of current liabilities, by the liquid assets appearing in the cur7 rent asset section of the balance sheet submitted by the applicant or licensee. Liquid assets shall include but not be limited to cash, marketable securities, accounts receivable from the sale of grain, grain in transit, drying and storage receivables on stored grain, grain inventory, margin accounts and tax funds.2. Adjusted equity shall be calculated by deducting from the stated net worth shown on the balance sheet submitted by the applicant or licensee after disallowing any non-liquid current asset including, but not limited to, notes receivable from officers or stockholders, accounts receivable from officers or stockholders, stock subscriptions receivable, intra-company receivables or receivables from an affiliate or any other related party receivables. Any disallowed assets shall be netted against any related payable and the new result, if an asset, shall be subtracted from the financial statement; or, if a liability, it shall remain a liability.(c) Such person's financial statement and balance sheet show an adjusted equity of at least $50,000 as determined pursuant to the method specified in paragraph (2), subparagraph (b). However, in the case of a grain dealer whose net worth is not equal to three times the amount of bond required, the department may allow such grain dealer to waive, in $1,000 increments, a portion of the bond required in excess of $20,000. The percentage factor to be applied to the bond required in excess of $20,000 shall be determined by dividing actual net worth by the net worth required to waive all bond in excess of $20,000. If the result of this computation provides a percentage factor of 80 percent or greater, then that same percentage of the amount in excess of $20,000 may be waived, The grain dealer shall then provide to the department a surety bond in the amount of $20,000 plus any additional bond required in excess thereof.Tenn. Comp. R. & Regs. 0080-05-13-.04
Original rule filed July 10, 1991; effective August 24, 1991. Amendment filed June 10, 1993; effective July 25, 1993.Authority: TC.A. §§ 4-3-203, 43-32-213 and 43-32-106.