SB-0899, As Passed Senate, May 24, 2016

SENATE BILL No. 899

April 19, 2016, Introduced by Senators STAMAS, HUNE, BRANDENBURG, HORN, HANSEN and SCHMIDT and referred to the Committee on Commerce.

A bill to amend 1939 PA 141, entitled

"Grain dealers act,"

by amending sections 3 and 9 (MCL 285.63 and 285.69), as amended by

2002 PA 80, and by adding section 26a; and to repeal acts and parts

of acts.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

Sec. 3. (1) A person shall not act or offer to act as a grain

dealer in this state without a license from the department issued

under this act.

(2) A grain dealer shall not process or store farm produce,

issue a warehouse receipt, charge or collect a fee for storage of

farm produce, issue a price later agreement, or issue an

acknowledgment of receipt for delivery of farm produce except in

compliance with this act.

(3) Subject to subsection (4), the department may refuse to

issue or renew a license to a grain dealer unless the grain dealer

meets at least 1 of the following at the time the grain dealer

submits the application:

~~(a) Has allowable net assets of more than $1,000,000.00.~~

(a) ~~(b)~~ Has allowable net assets of $50,000.00 or more and

handled 500,000 or fewer bushels of farm produce in the grain

dealer's most recent fiscal year.

(b) ~~(c)~~ Has allowable net assets of $50,000.00 or more, and

the allowable net assets equal or exceed the product of 10 cents

multiplied by the number of bushels of farm produce handled by the

grain dealer in the grain dealer's most recent completed fiscal

year.

(4) If a grain dealer fails to meet any of the allowable net

asset requirements under subsection (3), the department may issue

or renew the license if the grain dealer provides the department

with a negotiable bond issued by a surety authorized to conduct

business in this state, or proof of establishment of a restricted

account in a financial institution that conducts business in this

state, acceptable to the department and of which the department is

the sole beneficiary, that is in an amount equal to the amount by

which the grain dealer's allowable net assets failed to meet the

allowable net asset requirement applicable under subsection (3).

(5) A person ~~who~~ that acts or offers to act as a grain dealer

without a license is guilty of a misdemeanor. Each day that the

person acts or offers to act as a grain dealer without a license is

a separate misdemeanor.

(6) If the director has probable cause to believe that a

person is acting or offering to act as a grain dealer without a

license, the director may review the books and records relating to

the operations of the person.

(7) ~~Upon~~ On the application of the department, a court in this

state shall issue a temporary or permanent injunction ~~enjoining~~

that enjoins a person from acting as a grain dealer without a

license, issuing a warehouse receipt or price later agreement

without a license, or interfering with an employee of the

department or a receiver appointed under this act that is

performing his or her duties under this act.

Sec. 9. (1) A grain dealer shall include with an application

for a license or renewal a financial statement for the grain

dealer's most recent completed fiscal year. The financial statement

shall be a reviewed or audited financial statement, prepared by a

certified public accountant in accordance with generally accepted

accounting principles. The end of the grain dealer's most recent

completed fiscal year shall be within 6 months of the expiration

date of the grain dealer's current license. The financial statement

shall include at least all of the following:

(a) An accountant's report, a balance sheet, an income

statement, and notes and disclosures.

(b) A statement of the grain dealer's allowable net assets for

purposes of section 3.

or she acknowledges that the department is relying on the financial

statement in determining whether the grain dealer meets the

allowable net asset requirement under section 3(3).

(2) If a financial statement described in subsection (1)

discloses that the grain dealer during the preceding fiscal year

had a current asset to current liability ratio of less than 1 to 1,

the licensee shall include with the application a plan and

timetable to increase the current asset to current liability ratio

to 1 to 1 or more.

(3) If a financial statement described in subsection (1) is a

financial statement of the licensee's parent corporation or a

consolidated financial statement of the licensee and its parent

corporation, the application shall include a declaration of

liability signed by an authorized representative of the parent

corporation, by which the parent corporation assumes all financial

obligations incurred by the licensee during the term of the

license.

Sec. 26a. (1) Each of the following has a lien on all of the

farm produce assets of a grain dealer:

(a) A lender or other claimant that possesses a warehouse

receipt that covers farm produce owned or stored by the grain

dealer.

(b) A claimant that possesses a written acknowledgement or

other written evidence of ownership of farm produce, other than a

warehouse receipt, that establishes that the grain dealer has a

storage obligation for the farm produce.

a farm produce sales transaction, if the claimant was not paid in

full for the farm produce and the grain dealer failed within 21

days after the surrender of the warehouse receipt.

(d) A claimant that possesses any other written evidence of

the sale of farm produce to the grain dealer for which the claimant

was not paid in full.

(2) All of the following apply to a lien that exists under

subsection (1):

(a) The lien secures all claims described in subsection (3)

and attaches to the farm produce assets of the grain dealer.

(b) The lien takes effect at the time the farm produce is

delivered to the grain dealer for sale or storage under a bailment

agreement or at the time money is advanced by the lender.

dealer to the claimant is discharged. However, the priority of each

lien among the respective claimants does not relate to the date the

claim arises but is subject to the priorities described in

subsection (3).

(d) In the event of a failure of a grain dealer, the lien

claims of all claimants of that grain dealer are considered

assigned by operation of this section to the department, and in the

event of a failure and subsequent liquidation, the lien attaches to

assets or proceeds of assets that are either received or liquidated

by the department.

(3) Except as provided in subsection (4), and subject to

subsection (6), in the event of a failure of a grain dealer, the

director shall enforce the claims of each lienholder under this

section against the farm produce assets of the grain dealer and

allocate the proceeds as follows:

(a) The director shall give first priority to allocating the

proceeds equally to claimants described in subsection (1)(a), (b),

and (c).

(b) If any proceeds remain after satisfying the claims

described in subdivision (a), the director shall give second

priority to allocating the remaining proceeds first to claimants

that possess secured price later agreements and then to all

remaining claimants that possess price later agreements.

described in subdivisions (a) and (b), the director shall give

third priority to allocating the remaining proceeds to claimants

that possess acknowledgment forms, similar farm produce delivery

contracts, or other written evidence of the sale of farm produce

and that completed delivery and pricing of the farm produce in the

30-day period preceding the date of the failure of the grain

dealer.

(d) If any proceeds remain after satisfying the claims

described in subdivisions (a) to (c), the director shall give

fourth priority to allocating the remaining proceeds on a pro rata

basis to all other claimants that possess written evidence of the

sale of farm produce to the grain dealer.

(e) If any proceeds remain after satisfying the claims

described in subdivisions (a) to (d), the director shall distribute

those proceeds to the grain dealer.

(4) In the event that an adversary proceeding is commenced to

recover farm produce assets on which a lien described in this

section is attached and the department declines to enter the

proceeding, the director, if he or she receives an application from

a claimant that holds a lien under this section, shall assign to

the claimant the applicable lien to permit the claimant to pursue

the claimant's lien in the adversary proceeding, to the extent that

assignment will not delay the resolution of the proceeding, the

prompt liquidation of the assets, or the ultimate distribution of

the assets of all claimants.

(5) In the event of the failure of a grain dealer, the

department shall liquidate the farm produce assets of the grain

dealer to satisfy valid claims of claimants described in subsection

(3) by taking possession of all farm produce in the grain dealer

facility, distributing or selling the farm produce, and

distributing the proceeds under subsection (3). If a shortage

exists, the department shall distribute the commodities or the

proceeds from the sale of the farm produce on a prorated basis to

the depositors.

(6) The director may reduce the amount of a claim described in

this section to reflect the liabilities owed to the grain dealer by

the claimant.

Enacting section 1. Section 26 of the grain dealers act, 1939

PA 141, MCL 285.86, is repealed.

Enacting section 2. This amendatory act takes effect 90 days

after the date it is enacted into law.