Current through Register Vol. XLI, No. 49, December 6, 2024
Section 106-9-4 - Combining Loans to Non-Affiliated Persons or Entities4.1. General Rule. -- Loans or extensions of credit to one (1) person shall be attributed to other persons, for purposes of this rule, when: (a) the proceeds of the loans or extensions of credit are to be used for the direct benefit of the other person or persons, or(b) a "Common Enterprise" is determined to exist between the persons.4.2. Determination of a common enterprise. (a) Whether two (2) or more persons are engaged in a common enterprise depends upon a realistic evaluation of the facts and circumstances of particular transactions.(b) Where the expected source of repayment for each loan or extension of credit is the same for each person and neither person has another source of income from which the loan may be fully repaid, a common enterprise shall be determined to exist and the loans or extensions of credit shall be combined. An employer shall not be treated as a source of repayment because of wages and salaries paid to an employee, provided the employee does not exercise control over the employer.(c) Where there is "Substantial Financial Interdependence" between the persons, a common enterprise shall be determined to exist and the loans or extensions of credit shall be combined. "Substantial Financial Interdependence" shall be determined to exist when fifty percent (50%) or more of one person's gross receipts or gross expenditures (on an annual basis) are derived from transactions with another person. Gross receipts and expenditures include gross revenues and expenses, intercompany loans, dividends, capital contributions, and similar receipts or payments.(d) A common enterprise shall also be determined to exist when separate persons borrow from a bank for the purpose of acquiring a business enterprise of which those persons combined will own more than twenty-five percent (25%) of the voting securities or other voting ownership interests of the entity.