---
kind: "section"
citation: "7 C.F.R. § 4290.850"
title: "7"
number: "4290.850"
heading: "Restrictions on redemption of Equity Securities."
url: "https://uscodex.org/cfr/7/4290.850"
---

# §4290.850. Restrictions on redemption of Equity Securities.

- (a) **Restriction on redemption.** A Portfolio Concern cannot be required to redeem Equity Securities earlier than one year from the date of the first closing unless:
  - (1) The Portfolio Concern makes a public offering, or has a change of management or control, or files for protection under the provisions of the Bankruptcy Code, or materially breaches your Financing agreement; or
  - (2) You make a follow-on Financing, in which case the new securities may be redeemed in less than one year, but no earlier than the redemption date associated with your earliest Financing of the Portfolio Concern.
- (b) **Redemption price.** The redemption price must be either:
  - (1) A fixed amount that is no higher than the price you paid for the securities; or
  - (2) **An amount that cannot be fixed or determined before the time of the redemption.** In this case, the redemption price must be based on:
    - (i) A reasonable formula that reflects the performance of the Portfolio Concern (such as one based on earnings or book value); or
    - (ii) The fair market value of the Portfolio Concern at the time of redemption, as determined by a professional appraisal performed under an agreement acceptable to both parties.
- (c) **Method.** Any method for determining the redemption price must be agreed upon no later than the date of the first (or only) closing of the Financing.

## Notes

### Authority

Authority: 7 U.S.C. 1989 and 2009cc et seq.

### Source

Source: 69 FR 32204, June 8, 2004, unless otherwise noted.