Existence of a Common Enterprise
(1)When the expected source of repayment for each obligation is the same for each borrower and neither borrower has another source of income from which the obligation (together with the borrower’s other obligations) may be fully repaid. An employer will not be treated as a source of repayment under this paragraph because of wages and salaries paid to an employee, unless the standards of section (2) of this rule are met;
(2)When obligations are incurred:
(a)By borrowers who are related directly or indirectly through common control, including where one borrower is directly or indirectly controlled by another borrower; and
(b)Substantial financial interdependence exists between or among the borrowers. “Substantial financial interdependence” exists when 50 percent or more of one borrower’s gross receipts or gross expenditures on an annual basis are derived from transactions with the other borrower. Gross receipts and expenditures include gross revenues/expenses, inter-company loans, dividends, capital contributions, and similar receipts or payments;
(3)When separate persons borrow from a bank to acquire a business enterprise of which those borrowers will own more than 50 percent of the voting securities or voting interests, in which case a common enterprise is deemed to exist between the borrowers for purposes of combining the acquisition loans; or
(4)When the Director determines, based upon an evaluation of the facts and circumstances of particular transactions, that a common enterprise exists.
Rule 441-505-3080 — Existence of a Common Enterprise,