§ 68-215-204 — "Participation in the management" defined

(a) "Participating in the management" means that the holder is engaging in decision-making control of, or activities related to, the operation of petroleum underground storage tank or UST system as defined in § 68-215-201 . (b) Actions that are "participation in management": (1) Participation in the management of a petroleum site or petroleum underground storage tank or UST system means, for purposes of this part, actual participation by the holder in the management or control of decision making related to the operation of a petroleum underground storage tank or UST system. "Participation in management" does not include the mere capacity or ability to influence or the unexercised right to control a petroleum site or petroleum underground storage tank or UST system operation. A holder is participating in the management of petroleum underground storage tank or UST system only if the holder either: (A) Exercises decision-making control over the operational (as opposed to financial or administrative) aspects of petroleum underground storage tank or UST system, such that the holder has undertaken responsibility for all or substantially all of the management of petroleum underground storage tank or UST system; or (B) Exercises control at a level comparable to that of a manager of the borrower's enterprise, such that the holder has assumed or manifested responsibility for the overall management of the enterprise encompassing the day-to-day decision making of the enterprise with respect to all, or substantially all, of the operational (as opposed to financial or administrative) aspects of the enterprise; and (2) Operational aspects of the enterprise relate to the use, storage, filling or dispensing of petroleum contained in a petroleum underground storage tank or UST system, and include functions such as that of a facility or plant manager, operations manager, chief operating officer or chief executive officer. Financial or administrative aspects include functions such as that of a credit manager, accounts payable/receivable manager, personnel manager, controller, chief financial officer or similar functions. Operational aspects of the enterprise do not include the financial or administrative aspects of the enterprise, or actions associated with environmental compliance, or actions undertaken voluntarily to protect the environment in accordance with applicable petroleum underground storage tank requirements. (c) Actions that are not participation in management pre-foreclosure: (1) Actions at the inception of the loan or other transaction. No act or omission prior to the time that indicia of ownership are held primarily to protect a security interest constitutes evidence of participation in management within the meaning of this part. A prospective holder who undertakes or requires an environmental investigation (which could include a site assessment, inspection and/or audit) of petroleum underground storage tank or UST system or petroleum site (in which indicia of ownership are to be held), or requires a prospective borrower to clean up contamination from a petroleum underground storage tank or UST system or to comply or come into compliance (whether prior or subsequent to the time that indicia of ownership are held primarily to protect a security interest) with any applicable law or regulation, is not by such action considered to be participating in the management of petroleum underground storage tank or UST system or petroleum site; (2) Loan policing and work out. Actions that are consistent with holding ownership indicia primarily to protect a security interest do not constitute participation in management for purposes of this part. The authority for the holder to take such actions may, but need not, be contained in contractual or other documents specifying requirements for financial, environmental and other warranties, covenants, conditions, representations or promises from the borrower. Loan policing and work out activities cover and include all such activities up to foreclosure, exclusive of any activities that constitute participation in management; (A) Policing the security interest or loan. (i) A holder who engages in policing activities prior to foreclosure will remain within the exemption; provided, that the holder does not, together with other actions, participate in the management of petroleum underground storage tank or UST system. Such policing actions include, but are not limited to, requiring the borrower to clean up contamination from petroleum underground storage tank or UST system during the term of the security interest; requiring the borrower to comply or come into compliance with applicable federal, state and local environmental, and other laws, rules and regulations during the term of the security interest; securing or exercising authority to monitor or inspect the petroleum underground storage tank or UST system or petroleum site (including on-site inspections) in which indicia of ownership are maintained, or the borrower's business or financial condition during the term of the security interest; or taking other actions to adequately police the loan or security interest (such as requiring a borrower to comply with any warranties, covenants, conditions, representations or promises from the borrower); (ii) Policing activities also include undertaking by the holder of UST environmental compliance actions and voluntary environmental actions taken in compliance with applicable petroleum underground storage tank requirements; provided, that the holder does not otherwise participate in the management or daily operation of the petroleum underground storage tank or UST system as provided in this section and § 68-215-203 . Such allowable actions include, but are not limited to, release detection and release reporting, release response and corrective action, temporary or permanent closure of a petroleum site or petroleum underground storage tank or UST system, petroleum underground storage tank upgrading or replacement, and maintenance of corrosion protection. A holder who undertakes these actions must do so in compliance with the applicable petroleum underground storage tank requirements. A holder may directly oversee these environmental compliance actions and voluntary environmental actions, and directly hire contractors to perform the work, and is not by such actions considered to be participating in the management of the petroleum underground storage tank or UST system; (B) Loan work out. A holder who engages in work out activities prior to foreclosure will remain within the exemption; provided, that the holder does not, together with other actions, participate in the management of the petroleum underground storage tank or UST system. For purposes of this part, "work out" refers to those actions by which a holder, at any time prior to foreclosure, seeks to prevent, cure or mitigate a default by the borrower or obligor; or to preserve or prevent the diminution of the value of the security. "Work out" activities include, but are not limited to, restructuring or renegotiating the terms of the security interest; requiring payment of additional rent or interest; exercising forbearance; requiring or exercising rights pursuant to an assignment of accounts or other amounts owing to an obligor; requiring or exercising rights pursuant to an escrow agreement pertaining to amounts owing to an obligor; providing specific or general financial or other advice, suggestions, counseling or guidance; and exercising any right or remedy the holder is entitled to by law or under any warranties, covenants, conditions, representations or promises from the borrower. (d) Foreclosure on a petroleum underground storage tank or UST system or a petroleum site, and participation in management activities post-foreclosure. (1) Foreclosure. (A) Indicia of ownership that are held primarily to protect a security interest include legal or equitable title or deed to real or personal property acquired through or incident to foreclosure. The indicia of ownership held after foreclosure continue to be maintained primarily as protection for a security interest; provided, that the holder undertakes to sell, re-lease a petroleum site or petroleum underground storage tank or UST system or petroleum site, held pursuant to a lease financing transaction (whether by a new lease financing transaction or substitution of the lessee), or otherwise divest itself of the petroleum underground storage tank or UST system or petroleum site, in a reasonably expeditious manner, using whatever commercially reasonable means are relevant or appropriate with respect to the petroleum underground storage tank or UST system or petroleum site, taking all facts and circumstances into consideration; provided, that the holder does not participate in management prior to or after foreclosure. (B) For purposes of establishing that a holder is seeking to sell, re-lease pursuant to a lease financing transaction (whether by a new lease financing transaction or substitution of the lessee), or divest in a reasonably expeditious manner a petroleum underground storage tank or UST system or petroleum site, the holder may use whatever commercially reasonable means as are relevant or appropriate with respect to the petroleum underground storage tank or UST system or petroleum site, or may employ the means specified in this section. A holder that outbids, rejects or fails to act upon a written bona fide, firm offer of fair consideration for the petroleum underground storage tank or UST system or petroleum site, as provided in this section, is not considered to hold indicia of ownership primarily to protect a security interest; (2) Holding foreclosed property for disposition and liquidation. A holder, who does not participate in management prior to or after foreclosure, may sell, re-lease, pursuant to a lease financing transaction (whether by a new lease financing transaction or substitution of the lessee), a petroleum underground storage tank or UST system or petroleum site, liquidate, wind up operations, and take measures, prior to sale or other disposition including, but not limited to, apply to, and take full advantage of the petroleum underground storage tank fund to preserve, protect or prepare the secured petroleum underground storage tank or UST system or petroleum site. A holder will only be eligible for reimbursement from the petroleum underground storage tank fund if the release would have been fund-eligible under applicable requirements had there been no foreclosure. A holder may also arrange for an existing or new operator to continue or initiate operation of the petroleum underground storage tank or UST system. The holder may conduct these activities without voiding the security interest exemption, subject to the requirements of this part: (A) A holder establishes that the ownership indicia maintained after foreclosure continue to be held primarily to protect a security interest by, within twelve (12) months following foreclosure or its equivalent, listing the petroleum underground storage tank or UST system or petroleum site, with a broker, dealer or agent who deals with the type of property in question, or by advertising the petroleum underground storage tank or UST system or petroleum site, as being for sale or disposition on at least a monthly basis in either a real estate publication or a trade or other publication suitable for the petroleum underground storage tank or UST system or petroleum site, or a newspaper of general circulation (defined as one suitable under any applicable federal, state or local rules of court for publication required by court order or rules of civil procedure) covering the location of the petroleum underground storage tank or UST system or petroleum site. For purposes of this provision, the twelve-month period begins to run from April 12, 1996, or from the date that the foreclosure or its equivalent occurs, and the holder has obtained access to the petroleum underground storage tank or UST system or petroleum site, whichever is later; provided, that the holder acts diligently in foreclosing and in obtaining access to the petroleum underground storage tank or UST system or petroleum site. If the holder fails to act diligently in foreclosing or obtaining access to the petroleum underground storage tank or UST system or petroleum site, the twelve-month period begins to run from the later of either April 12, 1996, or from the date on which the holder forecloses; (B) (i) A holder that outbids, rejects or fails to act upon an offer of fair consideration for the petroleum underground storage tank or UST system or petroleum site, establishes by such outbidding, rejection or failure to act, that the ownership indicia in the secured petroleum underground storage tank or UST system or petroleum site are not held primarily to protect the security interest, unless the holder is required, in order to avoid liability under federal or state law, to make a higher bid, to obtain a higher offer or to seek or obtain an offer in a different manner; (ii) "Fair consideration," in the case of a holder maintaining indicia of ownership primarily to protect a senior security interest in the petroleum underground storage tank or UST system or petroleum site, is the value of the security interest as defined in this section. The value of the security interest includes all debt and costs incurred by the security interest holder, and is calculated as an amount equal to or in excess of the sum of the outstanding principal (or comparable amount in the case of a lease that constitutes a security interest) owed to the holder immediately preceding the acquisition of full title (or possession in the case of a lease financing transaction) pursuant to foreclosure, plus any unpaid interest, rent or penalties (whether arising before or after foreclosure). The value of the security interest also includes all reasonable and necessary costs, fees or other charges incurred by the holder incident to work out, foreclosure, retention, preserving, protecting and preparing, prior to sale, the petroleum underground storage tank or UST system or petroleum site, re-lease, pursuant to a lease financing transaction (whether by a new lease financing transaction or substitution of the lessee), of a petroleum underground storage tank or UST system or petroleum site, or other disposition. The value of the security interest also includes environmental investigation costs (which could include a site assessment, inspection and/or audit of the petroleum underground storage tank or UST system or petroleum site), and corrective action costs incurred under applicable petroleum underground storage tank requirements or any other costs incurred as a result of reasonable efforts to comply with any other applicable federal, state or local law or regulation; less any amounts received by the holder in connection with any partial disposition of the property and any amounts paid by the borrower (if not already applied to the borrower's obligations) subsequent to the acquisition of full title (or possession in the case of a lease financing transaction) pursuant to foreclosure. In the case of a holder maintaining indicia of ownership primarily to protect a junior security interest, fair consideration is the value of all outstanding higher priority security interests, plus the value of the security interest held by the junior holder, each calculated as set forth in this section; (iii) "Outbids, rejects, or fails to act upon an offer of fair consideration" means that the holder outbids, rejects or fails to act upon, within ninety (90) days of receipt, a written, bona fide, firm offer of fair consideration for the petroleum underground storage tank or UST system or petroleum site received at any time after six (6) months following foreclosure, as defined in this part. "Written, bona fide, firm offer" means a legally enforceable, commercially reasonable, cash offer solely for the foreclosed petroleum underground storage tank or UST system or petroleum site, including all material terms of the transaction, from a ready, willing and able purchaser who demonstrates to the holder's satisfaction the ability to perform. For purposes of this provision, the six-month period begins to run from April 12, 1996, or from the date that the foreclosure or its equivalent occur and the holder has obtained access to the petroleum underground storage tank or UST system or petroleum site, whichever is later; provided, that the holder acts diligently in foreclosing and in obtaining access to the petroleum underground storage tank or UST system or petroleum site. If the holder fails to act diligently in foreclosing or obtaining access to the petroleum underground storage tank or UST system or petroleum site, the six-month period begins to run from the later of either April 12, 1996, or from the date on which the holder forecloses; and (3) Actions that are not participation in management post-foreclosure. A holder is not considered to be participating in the management of a petroleum underground storage tank or UST system or petroleum site when undertaking action to comply with petroleum underground storage tank requirements; provided, that the holder does not otherwise participate in the management or daily operation of the petroleum underground storage tank or UST system as provided in this part. Such allowable actions include, but are not limited to, release detection and release reporting, release response and corrective action (through use of petroleum underground storage tank fund for an eligible release or other means), temporary or permanent closure of a petroleum underground storage tank or UST system, UST upgrading or replacement, and maintenance of corrosion protection. A holder who undertakes these actions must do so in compliance with the applicable petroleum underground storage tank requirements. A holder may directly oversee these environmental compliance actions and voluntary environmental actions, and directly hire contractors to perform the work, and is not by such action considered to be participating in the management of the petroleum underground storage tank or UST system.

Legislative History

Acts 1996, ch. 733, § 5.