Georgia Department of Banking & Finance Rule 80-1-5-.11. Combination of Debt for Legal Lending Limit Purpose
By: Stephen Rountree
For Georgia State chartered banks, legal lending limit’s combining rules (for loans to one borrower calculations) changed as of June 2017. Gone are the former tests for separate sources of repayment and financial interdependence. Under the changes, loans to separate entities are aggregated based on ownership & control of the borrower (person or corporation). Two projects could have separate sources of repayment as well as maintain completely separate financial statements systems, but they will now be grouped together for loans to one borrower / legal lending purposes because of common ownership or control. As defined in the Regulations, common control exists, much like Reg O, when an entity owns ≥25% of the borrowing entity.
To access the Rule directly: http://rules.sos.ga.gov/GAC/80-1-5-.11
Excerpts from the Rule are detailed below:
“Common control” The direct or indirect possession of the power to direct or cause the
direction of the management and policies of a person, whether through the ownership of voting
securities, by contract, or otherwise.
A) Owns, controls or holds with power to vote 25 percent or more of any class of voting
securities of the other person;
(B) Controls in any manner the election of a majority of the directors, trustees, or persons
performing similar functions of the other person; or
(C) Exercises a controlling influence over the management or policies over the other person
as determined by the department.
To access the Rule directly: http://rules.sos.ga.gov/GAC/80-1-5-.11
Excerpts from the Rule are detailed below:
- When proceeds of a loan or extension of credit are to be used for the direct benefit of the
other person - When a common enterprise is deemed to exist between the persons as the persons within
the group are directly or indirectly related through common control - When there is a common use of funds between the persons
“Common control” The direct or indirect possession of the power to direct or cause the
direction of the management and policies of a person, whether through the ownership of voting
securities, by contract, or otherwise.
A) Owns, controls or holds with power to vote 25 percent or more of any class of voting
securities of the other person;
(B) Controls in any manner the election of a majority of the directors, trustees, or persons
performing similar functions of the other person; or
(C) Exercises a controlling influence over the management or policies over the other person
as determined by the department.