Section 13-03-20-01 - DefinitionsFor purposes of this section:
1. "Associated borrower" means any other person or entity with a shared ownership, investment, or other pecuniary interest in a business or commercial endeavor with the borrower. This means any person or entity named as a borrower or debtor in a loan or extension of credit, or any other person or entity, such as a drawer, endorser, or guarantor, engaged in a common enterprise with the borrower, or deriving a direct benefit from the loan to the borrower. Exceptions to this definition for partnerships, joint ventures, and associations are as follows: a. If the borrower is a partnership, joint venture, or association, and the other person with a shared ownership, investment, or other pecuniary interest in a business or commercial endeavor with the borrower, is a member or partner of the borrower, and neither a direct benefit nor a common enterprise exists, such other person is not an associated borrower.b. If the borrower is a member or partner of a partnership, joint venture, or association, and the other entity with a shared ownership, investment, or other pecuniary interest in a business or commercial endeavor with the borrower is the partnership, joint venture, or association and the borrower is a limited partner of that other entity, and by the terms of a partnership or membership agreement valid under applicable law, the borrower is not held generally liable for the debts or actions of that other entity, such other entity is not an associated borrower.c. If the borrower is a member or partner of a partnership, joint venture, or association, and the other person with a shared ownership, investment, or other pecuniary interest in a business or commercial endeavor with the borrower is another member or partner of the partnership, joint venture, or association, and neither a direct benefit nor a common enterprise exists, such other person is not an associated borrower.2. "Common enterprise" means:a. The expected source of repayment for each loan or extension of credit is the same for each borrower and no individual borrower has another source of income from which the loan, together with the borrower's other obligations, may be fully repaid. An employer may not be treated as a source of repayment because of wages and salaries paid to an employee, unless the standards described in subdivision b of this definition are met;b. Loans or extensions of credit are made to borrowers who are related directly or indirectly through common control, including if one borrower is directly or indirectly controlled by another borrower and: (1) Substantial financial interdependence exists between or among the borrowers. Substantial financial interdependence means fifty percent or more of one borrower's gross receipts or gross expenditures, on an annual basis, are derived from transactions with another borrower. Gross receipts and expenditures include gross revenues or expenses, intercompany loans, dividends, capital contributions, and similar receipts or payments; or(2) Separate borrowers obtain loans or extensions of credit to acquire a business enterprise of which those borrowers will own more than fifty percent of the voting securities or voting interests.3. "Control" means a person or entity directly or indirectly, or acting through or together with one or more persons or entities:a. Owns, controls, or has the power to vote twenty-five percent or more of any class of voting securities of another person or entity;b. Controls, in any manner, the election of a majority of the directors, trustees, or other persons exercising similar functions of another person or entity; orc. Has the power to exercise a controlling influence over the management or policies of another person or entity.4. "Credit union" means any state-chartered credit union.5. "Credit union organization" means any organization as determined by the state credit union board established primarily to serve the daily operational needs of its member credit unions. The term does not include trade associations, membership organizations principally composed of credit unions, or corporations, or other businesses which principally provide services to credit union members as opposed to corporations or businesses whose business relates to the daily in-house operations of credit unions.6. "Direct benefit" means the proceeds of a loan or extension of credit to a borrower, or assets purchased with those proceeds, which are transferred to another person or entity, other than in a bona fide arm's-length transaction where the proceeds are used to acquire property, goods, or services.7. "Eligible organization" means a credit union, credit union organization, or financial organization.8. "Financial organization" means any federally chartered or federally insured financial institution and any state or federal government agency, or its subdivisions, including the Bank of North Dakota.9. "Loan participation" means a loan where one or more eligible organizations participate pursuant to a written agreement with the originating lender, and the written agreement requires the originating lender's continuing participation throughout the life of the loan. It does not include a loan interest into a pool of loans.10. "Originating lender" means the participant with which the borrower initially or originally contracts for a loan and who, thereafter or concurrently with the funding of the loan, sells participations to other lenders.N.D. Admin Code 13-03-20-01
Effective January 1, 2007.Amended by Administrative Rules Supplement 371, January 2019, effective 1/1/2019.General Authority: NDCC 6-01-04
Law Implemented: NDCC 6-06-06