Sec. 408. Authority for warrants and debt instruments
1,703 words·~8 min read·
/bill/116/hr/6321/ih/section-408A research copy — for the controlling text, always check the official state or federal source. Not legal advice.
In this section: The term asset means any financial instrument that the Secretary, after consultation with the Chairman of the Board of Governors of the Federal Reserve System, determines the purchase of which or the guarantee of which is necessary to promote economic stability. The term company means any entity that is not subject to the prohibitions in subsection (e). The term Secretary means the Secretary of the Treasury. The Secretary may not purchase, or make any commitment to purchase, or guarantee, or make any commitment to guarantee, any asset in response to the coronavirus disease (COVID–19) outbreak, unless the Secretary receives from the company from which such assets are to be purchased or are to be guaranteed— in the case of a company, the securities of which are traded on a national securities exchange, a warrant giving the right to the Secretary to receive preferred voting stock; or in the case of any company other than one described in paragraph (1), a warrant for preferred voting stock, or a senior debt instrument from such company.
The terms and conditions of any warrant or senior debt instrument required under subsection
(b)shall meet the following requirements: Such terms and conditions shall, at a minimum, be designed— to provide for reasonable participation by the Secretary, for the benefit of taxpayers, in equity appreciation in the case of a warrant or other equity security, or a reasonable interest rate premium, in the case of a debt instrument; and to provide additional protection for the taxpayer against losses from sale of assets by the Secretary and any associated administrative expenses. Any preferred voting stock received from a company should include the following terms: The Secretary shall have the right to vote on matters brought before the stockholders generally. The Secretary shall control a percentage of votes equal to the percentage of the total value of the company the government’s share will represent after the investment. The rights associated with the preferred voting stock shall not be subject to modification, amendment, or any change by the bankruptcy laws of the United States or any other state. For the primary benefit of taxpayers, the Secretary may sell, exercise, or surrender a warrant or any senior debt instrument received under this section, based on the conditions established under paragraph (1). Of any proceeds received through the sale, exercise, or surrender of any warrant or any senior debt instrument— 65 percent shall be transferred or credited to the Housing Trust Fund established under section 1338 of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 ( 12 U.S.C. 4568 ); and 35 percent shall be transferred or credited to the Capital Magnet Fund under section 1339 of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 ( 12 U.S.C. 4569 ). The warrant shall provide that if, after the warrant is received by the Secretary under this section, the company that issued the warrant is no longer listed or traded on a national securities exchange or securities association, as described in subsection (b)(1), the Secretary will have an option to convert the warrants to senior debt to ensure that the Treasury is appropriately compensated for the value of the warrant, in an amount determined by the Secretary for the primary benefit of taxpayers. Any warrant representing securities to be received by the Secretary under this section shall contain anti-dilution provisions of the type employed in capital market transactions, as determined by the Secretary for the primary benefit of taxpayers. Such provisions shall protect the value of the securities from market transactions such as stock splits, stock distributions, dividends, and other distributions, mergers, and other forms of reorganization or recapitalization. The exercise price for any warrant issued pursuant to this section shall be set by the Secretary, for the primary benefit of taxpayers. The company shall guarantee to the Secretary that it has authorized shares of stock available to fulfill its obligations under this section. Should the company not have sufficient authorized shares, including preferred shares that may carry dividend rights equal to a multiple number of common shares, the Secretary may, to the extent necessary for the primary benefit of taxpayers, accept a senior debt note in an amount, and on such terms as will compensate the Secretary with equivalent value, in the event that a sufficient shareholder vote to authorize the necessary additional shares cannot be obtained. The Secretary may establish an exception to the requirements of this section and appropriate alternative requirements for any participating company that is legally prohibited from issuing securities and debt instruments, so as not to allow circumvention of the requirements of this section. The Secretary may not purchase, or make any commitment to purchase, or guarantee, or make any commitment to guarantee, any asset in response to the coronavirus disease (COVID–19) outbreak from— any foreign incorporated entity that the Secretary has determined is an inverted domestic corporation or any subsidiary of such entity; or any joint venture if more than 10 percent of the joint venture (by vote or value) is held by a foreign incorporated entity that the Secretary has determined is an inverted domestic corporation or any subsidiary of such entity. For purposes of this subsection, a foreign incorporated entity shall be treated as an inverted domestic corporation if, pursuant to a plan (or a series of related transactions)— the entity completes on or after May 8, 2014, the direct or indirect acquisition of— substantially all of the properties held directly or indirectly by a domestic corporation; or substantially all of the assets of, or substantially all of the properties constituting a trade or business of, a domestic partnership; and after the acquisition, either— more than 50 percent of the stock (by vote or value) of the entity is held— in the case of an acquisition with respect to a domestic corporation, by former shareholders of the domestic corporation by reason of holding stock in the domestic corporation; or in the case of an acquisition with respect to a domestic partnership, by former partners of the domestic partnership by reason of holding a capital or profits interest in the domestic partnership; or the management and control of the expanded affiliated group which includes the entity occurs, directly or indirectly, primarily within the United States, as determined pursuant to regulations prescribed by the Secretary, and such expanded affiliated group has significant domestic business activities. A foreign incorporated entity described in subparagraph
(A)shall not be treated as an inverted domestic corporation if after the acquisition the expanded affiliated group which includes the entity has substantial business activities in the foreign country in which or under the law of which the entity is created or organized when compared to the total business activities of such expanded affiliated group. The Secretary shall establish regulations for determining whether an affiliated group has substantial business activities for purposes of clause (i), except that such regulations may not treat any group as having substantial business activities if such group would not be considered to have substantial business activities under the regulations prescribed under section 7874 of the Internal Revenue Code of 1986, as in effect on January 18, 2017. For purposes of subparagraph (A)(ii)(II), an expanded affiliated group has significant domestic business activities if at least 25 percent of— the employees of the group are based in the United States; the employee compensation incurred by the group is incurred with respect to employees based in the United States; the assets of the group are located in the United States; or the income of the group is derived in the United States. Determinations pursuant to clause
(i)shall be made in the same manner as such determinations are made for purposes of determining substantial business activities under regulations referred to in subparagraph
(B)as in effect on January 18, 2017, but applied by treating all references in such regulations to “foreign country” and “relevant foreign country” as references to “the United States”. The Secretary may issue regulations decreasing the threshold percent in any of the tests under such regulations for determining if business activities constitute significant domestic business activities for purposes of this subparagraph. The Secretary may waive paragraph
(1)if the Secretary determines that the waiver is— required in the interest of national security; or necessary for the efficient or effective administration of Federal or federally funded— programs that provide health benefits to individuals; or public health programs. The Secretary shall, not later than 14 days after issuing such waiver, submit a written notification of the waiver to the relevant authorizing committees of Congress and the Committees on Appropriations of the Senate and the House of Representatives. In this subsection, the terms “expanded affiliated group”, “foreign incorporated entity”, “domestic”, and “foreign” have the meaning given those terms in section 835(c) of the Homeland Security Act of 2002 ( 6 U.S.C. 395(c) ). In applying paragraph
(2)of this subsection for purposes of paragraph
(1)of this subsection, the rules described under 835(c)(1) of the Homeland Security Act of 2002 ( 6 U.S.C. 395(c)(1) ) shall apply. The Secretary shall, for purposes of this subsection, prescribe regulations for purposes of determining cases in which the management and control of an expanded affiliated group is to be treated as occurring, directly or indirectly, primarily within the United States. The regulations prescribed under the preceding sentence shall apply to periods after May 8, 2014. The regulations prescribed under subparagraph
(A)shall provide that the management and control of an expanded affiliated group shall be treated as occurring, directly or indirectly, primarily within the United States if substantially all of the executive officers and senior management of the expanded affiliated group who exercise day-to-day responsibility for making decisions involving strategic, financial, and operational policies of the expanded affiliated group are based or primarily located within the United States. Individuals who in fact exercise such day-to-day responsibilities shall be treated as executive officers and senior management regardless of their title. Any State or Federal laws that prohibit the transactions authorized by this statute, including State or Federal laws that prohibit company directors from agreeing to the transactions authorized by this statute, are preempted and superseded by this statute.
Connectionstraces to 3
Traces to 3 documents
Citation graph
cites case law
Cites 3Cited by 0 across 0 sources