13 CFR § 307.21 - Remedies for noncompliance.

§ 307.21 Remedies for noncompliance.

(a) General. If an RLF Recipient fails to operate the RLF in accordance with the RLF Plan, the terms and conditions of the RLF Grant, or this subpart, as detailed in § 307.20, EDA may require one or more of the following actions, as appropriate in the circumstances:

(1) Increased reporting requirements;

(2) Implementation of a corrective action plan;

(3) A special audit;

(4) Sequestration of RLF funds;

(5) Repayment of ineligible loans or other costs to the RLF;

(6) Transfer or merger of the RLF in accordance with § 307.18;

(7) Suspension of the RLF Grant; or

(8) Termination of the RLF Grant, in whole or in part.

(b) Disallowance of a portion of an RLF Grant, liquidation. If the RLF Recipient engages in certain problematic practices, EDA may disallow a corresponding proportion of the Grant or direct the RLF Recipient to transfer loans to an RLF Third Party for liquidation. Problematic practices for which EDA may disallow a portion of an RLF Grant and recover the pro-rata Federal Share (as defined in § 314.5 of this chapter) include the RLF Recipient:

(1) Holding RLF Cash Available for Lending so that it is 50 percent or more of the RLF Capital Base for 24 months without an EDA-approved extension request;

(2) Failing to disburse the EDA funds in accordance with the time schedule prescribed in the RLF Grant; or

(3) Determining that it does not wish to further invest in the RLF or cannot maintain operations at the degree originally contemplated upon receipt of the RLF Grant and requests that a portion of the RLF Grant be disallowed, and EDA agrees to the disallowance.

(c) Termination or suspension. To maintain effective control over and accountability of RLF Grant funds and assets, EDA shall determine the manner and timing of any suspension or termination action. EDA may require the RLF Recipient to repay the Federal Share in a lump-sum payment or enter into a Sale, or EDA may agree to enter into a repayment agreement with the RLF Recipient for repayment of the Federal Share.

(d) Termination, liquidation upon termination. When EDA approves the termination of an RLF Grant, EDA must make all efforts to recover the pro rata Federal Share (as defined in § 314.5 of this chapter). EDA may assign or transfer assets of the RLF to an RLF Third Party for liquidation. The following terms will govern any liquidation:

(1) EDA shall have sole discretion in choosing the RLF Third Party;

(2) The RLF Third Party may be an Eligible Applicant or a for-profit organization not otherwise eligible for Investment Assistance;

(3) EDA may enter into an agreement with the RLF Third Party to liquidate the assets of one or more RLFs or RLF Recipients;

(4) EDA may allow the RLF Third Party to retain a portion of the RLF assets, consistent with the agreement referenced in paragraph (d)(3) of this section, as reasonable compensation for services rendered in the liquidation; and

(5) EDA may require additional reasonable terms and conditions.

(e) Distribution of proceeds. The proceeds resulting from any liquidation upon termination shall be distributed in the following order of priority:

(1) First, for any third party liquidation costs;

(2) Second, for the payment of EDA's Federal Share; and

(3) Third, if any proceeds remain, to the RLF Recipient.

(f) RLF Recipient's request to terminate. EDA may approve a request from an RLF Recipient to terminate an RLF Grant. The RLF Recipient must compensate the Federal Government for the pro rata Federal Share of the RLF Capital Base.

(g) Distribution of proceeds upon termination. Upon termination, distribution of proceeds shall occur in accordance with § 307.21(e).

[82 FR 57058, Dec. 1, 2017]