23.16.122    LOAN EVALUATION - GUARANTOR PAYMENTS

(1) The department will evaluate a transaction to determine if it is a loan using standards in the Uniform Commercial Code, the Internal Revenue Code, and generally accepted commercial lending practices. Loans will also be evaluated in the context of overall financing of the business to determine that a loan rather than an ownership interest exists and that the contract does not grant the lender control of the licensed operation. 

(2) For loans made to a license applicant or licensee, a noninstitutional lender may require loan guarantees and may secure guarantee agreements with assets of the guarantor. The license applicant or licensee must ensure the following requirements are met:

(a) guarantors must meet the requirements of 23-5-176, MCA, prior to closing the noninstitutional loan;

(b) a loan guarantor on a noninstitutional loan must within 90 days of any payment under the guarantee elect to treat payments made under a guarantee agreement as loans, paid in capital, or other equity contributions.

(i) If the guarantor elects to treat the payments as loans to the licensee, the licensee must follow requirements for disclosing noninstitutional lenders found in ARM 23.16.120(7).

(ii) If the guarantor elects to treat payments as an equity contribution, and such election changes the percentage of ownership in the license, an amended license application must be filed with the department at the time of the election to disclose the change.

(3) A gambling license applicant with a loan from a regulated lender, that was acquired prior to receiving a gambling license, must disclose that loan, including all coborrowers, guarantors, or pledgors, to the department in the application. Following that disclosure, the department must complete a suitability investigation under the requirements of 23-5-176, MCA, of all coborrowers, guarantors, or pledgors who are not an owner of the license. No coborrower, guarantor, or pledgor may make a payment on a gambling licensee's loan until the department has determined the payor meets the requirements of 23-5-176, MCA.

(4) A gambling licensee that acquires a loan from a regulated lender must disclose that loan, including all coborrowers, guarantors, or pledgors, no later than the first license renewal following the licensee's receipt of funds under the loan.  Following that disclosure, the department must complete a suitability investigation under the requirements of 23-5-176, MCA, of all coborrowers, guarantors, or pledgors who are not an owner of the licensed entity. No coborrower, guarantor, or pledgor may make a payment on the licensee’s loan until the department has determined the payor meets the requirements of 23-5-176, MCA.

(5) A licensee with a loan from a regulated lender must, within 90 days of a coborrower's, guarantor's, or pledgor's payment on the loan, submit to the department on Form 45 all mandatory disclosures and related documentation.

(6) A licensee participating as a coborrower, guarantor, or pledgor, in a nonlicensee's loan from a regulated lender, must disclose to the department that loan and all parties to the loan no later than the first license renewal following closing of the loan. Following that disclosure, each party to the loan must undergo a suitability investigation by the department under 23-5-176, MCA. The licensee may not make a payment on the borrower’s loan until the department has determined all parties meet the requirements of 23-5-176, MCA.

(7) A licensee participating as a coborrower, guarantor, or pledgor, in a nonlicensee's loan from a regulated lender must, within 90 days of a making a payment on the borrower's loan, submit to the department on Form 45 all mandatory disclosures and related documentation.

 

History: 23-5-115, MCA; IMP, 16-4-801, 23-5-110, 23-5-115, 23-5-118, 23-5-176, MCA; NEW, 1997 MAR p. 404, Eff. 2/25/97; AMD, 2010 MAR p. 1732, Eff. 7/30/10; AMD, 2017 MAR p. 1893, Eff. 10/14/17.