Kentucky Statutes 251.365 – Evidence of financial responsibility to be filed by applicant or licensee — Security required
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(1) The department shall not issue or renew a grain dealer or grain warehouse operator license under this chapter until the applicant or licensee has filed with the department satisfactory evidence of financial responsibility.
(2) Evidence of financial responsibility shall: (a) Consist of:
1. A surety bond, executed by the applicant as principal, and issued by a corporate surety authorized to conduct business in this state;
2. A certificate of deposit issued by a federally insured financial institution in this state;
3. An irrevocable letter of credit issued by a federally insured financial institution in this state;
4. Other security, as deemed acceptable by the department; or
5. Any combination of subparagraphs 1. to 4. of this paragraph, so long as the aggregate value of the evidence meets the requirements of this section;
(b) Be made payable to the board;
(c) Be in an amount meeting the requirements of this section;
(d) In the case of a bond, be conditioned upon the faithful performance of:
1. All obligations of a licensee under the terms of this chapter and any administrative regulations promulgated under it, from the effective date of the bond until the license is revoked, denied, or suspended or the bond is canceled, whichever comes first; and
2. Any obligations the applicant or licensee may contract for with producers, depositors, or other persons placing grains in the applicant’s or licensee’s facilities, from the effective date of the bond and thereafter, regardless of whether or not the applicant’s or licensee’s facility remains the subject of a valid license;
(e) Be filed with and remain in possession of the department until it is released, canceled, or discharged as provided for by the terms of this chapter and any administrative regulations promulgated under it;
(f) Be kept in force at all times while the licensee is operating as a grain warehouse operator or grain dealer. Failure to keep the bond or other security in force shall be cause for revocation of the license, and shall subject the licensee to criminal penalties set forth in KRS § 251.990; and
(g) Contain a provision stating that it may not be canceled by any party, except upon ninety (90) days’ notice in writing to the department. A notice of cancellation shall not affect any liability accrued before the expiration of the notice period.
(3) Separate proof of financial responsibility shall be required for each facility that is
licensed by the department.
(4) For any security used as evidence under subsection (2) of this section that bears interest, the interest shall be made payable to the purchaser of the security.
(5) No person may release, cancel, or discharge security filed with the department under subsection (1) of this section without prior approval of the department and its approval of a substitute bond or other security.
(6) If the department questions a licensee’s ability to pay producers and depositors for grain, or if the department determines that the licensee does not have a sufficient net worth to meet the licensee’s financial obligations, the department shall require the licensee to file additional security with the department in an amount equal to the insufficiency. Failure to post the additional security shall constitute grounds for suspension or revocation of a license.
(7) The amount of the security required by subsection (1) of this section shall be in a principal amount, to the nearest one thousand dollars ($1,000), that is equal to ten percent (10%) of:
(a) For a licensed grain dealer, the aggregate dollar amount:
1. That was paid by the dealer for grain purchased in the dealer’s most recently completed fiscal year; or
2. That the department estimates will be paid by the grain dealer for grain purchased in the grain dealer’s current fiscal year, if records for the grain dealer’s most recently completed fiscal year do not exist or are not available; and
(b) For a licensed grain warehouse operator, the aggregate dollar value of:
1. The grain deposited in the grain warehouse operator’s most recently completed fiscal year; or
2. The grain the department estimates will be deposited in the operator’s warehouse during the current fiscal year, if records for the warehouse operator’s most recently completed fiscal year do not exist or are not available.
(8) In no event shall the required security for a licensee be less than twenty-five thousand dollars ($25,000) nor more than one million dollars ($1,000,000).
Effective: August 1, 2019
History: Created 2019 Ky. Acts ch. 88, sec. 9, effective August 1, 2019.
(2) Evidence of financial responsibility shall: (a) Consist of:
Terms Used In Kentucky Statutes 251.365
- Board: means the State Board of Agriculture. See Kentucky Statutes 251.010
- Contract: A legal written agreement that becomes binding when signed.
- Department: means the Kentucky Department of Agriculture. See Kentucky Statutes 251.010
- Evidence: Information presented in testimony or in documents that is used to persuade the fact finder (judge or jury) to decide the case for one side or the other.
- Facility: means a single location with one (1) or more structures used for the storage or handling of grain. See Kentucky Statutes 251.010
- Failure: means the occurrence of one (1) or more of the following events:
(a) A licensee's inability to pay for storage obligations in accordance with requirements set forth in statute, administrative regulation, or contract. See Kentucky Statutes 251.010 - Fiscal year: The fiscal year is the accounting period for the government. For the federal government, this begins on October 1 and ends on September 30. The fiscal year is designated by the calendar year in which it ends; for example, fiscal year 2006 begins on October 1, 2005 and ends on September 30, 2006.
- Grain: means corn, wheat, soybeans, rye, barley, oats, grain sorghums, or popcorn. See Kentucky Statutes 251.010
- Grain dealer: means any person engaged in the business of buying grain from
producers for resale, milling, or processing. See Kentucky Statutes 251.010 - Person: means any individual, partnership, firm, corporation, limited liability company, or other corporate entity created under the laws of the Commonwealth or any other jurisdiction. See Kentucky Statutes 251.010
- State: when applied to a part of the United States, includes territories, outlying possessions, and the District of Columbia. See Kentucky Statutes 446.010
- Warehouse: means any building, structure, or other protected enclosure, permanent or temporary, used or useable for the storage or conditioning of grain. See Kentucky Statutes 251.010
- Year: means calendar year. See Kentucky Statutes 446.010
1. A surety bond, executed by the applicant as principal, and issued by a corporate surety authorized to conduct business in this state;
2. A certificate of deposit issued by a federally insured financial institution in this state;
3. An irrevocable letter of credit issued by a federally insured financial institution in this state;
4. Other security, as deemed acceptable by the department; or
5. Any combination of subparagraphs 1. to 4. of this paragraph, so long as the aggregate value of the evidence meets the requirements of this section;
(b) Be made payable to the board;
(c) Be in an amount meeting the requirements of this section;
(d) In the case of a bond, be conditioned upon the faithful performance of:
1. All obligations of a licensee under the terms of this chapter and any administrative regulations promulgated under it, from the effective date of the bond until the license is revoked, denied, or suspended or the bond is canceled, whichever comes first; and
2. Any obligations the applicant or licensee may contract for with producers, depositors, or other persons placing grains in the applicant’s or licensee’s facilities, from the effective date of the bond and thereafter, regardless of whether or not the applicant’s or licensee’s facility remains the subject of a valid license;
(e) Be filed with and remain in possession of the department until it is released, canceled, or discharged as provided for by the terms of this chapter and any administrative regulations promulgated under it;
(f) Be kept in force at all times while the licensee is operating as a grain warehouse operator or grain dealer. Failure to keep the bond or other security in force shall be cause for revocation of the license, and shall subject the licensee to criminal penalties set forth in KRS § 251.990; and
(g) Contain a provision stating that it may not be canceled by any party, except upon ninety (90) days’ notice in writing to the department. A notice of cancellation shall not affect any liability accrued before the expiration of the notice period.
(3) Separate proof of financial responsibility shall be required for each facility that is
licensed by the department.
(4) For any security used as evidence under subsection (2) of this section that bears interest, the interest shall be made payable to the purchaser of the security.
(5) No person may release, cancel, or discharge security filed with the department under subsection (1) of this section without prior approval of the department and its approval of a substitute bond or other security.
(6) If the department questions a licensee’s ability to pay producers and depositors for grain, or if the department determines that the licensee does not have a sufficient net worth to meet the licensee’s financial obligations, the department shall require the licensee to file additional security with the department in an amount equal to the insufficiency. Failure to post the additional security shall constitute grounds for suspension or revocation of a license.
(7) The amount of the security required by subsection (1) of this section shall be in a principal amount, to the nearest one thousand dollars ($1,000), that is equal to ten percent (10%) of:
(a) For a licensed grain dealer, the aggregate dollar amount:
1. That was paid by the dealer for grain purchased in the dealer’s most recently completed fiscal year; or
2. That the department estimates will be paid by the grain dealer for grain purchased in the grain dealer’s current fiscal year, if records for the grain dealer’s most recently completed fiscal year do not exist or are not available; and
(b) For a licensed grain warehouse operator, the aggregate dollar value of:
1. The grain deposited in the grain warehouse operator’s most recently completed fiscal year; or
2. The grain the department estimates will be deposited in the operator’s warehouse during the current fiscal year, if records for the warehouse operator’s most recently completed fiscal year do not exist or are not available.
(8) In no event shall the required security for a licensee be less than twenty-five thousand dollars ($25,000) nor more than one million dollars ($1,000,000).
Effective: August 1, 2019
History: Created 2019 Ky. Acts ch. 88, sec. 9, effective August 1, 2019.