44 MARCH / APRIL 2021 Greyson E. Tuck Attorney and Consultant Gerrish Smith Tuck PC gtuck@gerrish.com The fundamental duty of community bank directors and executive officers is to enhance shareholder value. One of the key tenets of enhancing shareholder value is providing actual common stock liquidity. In this regard, liquidity is defined as the ability of shareholders to convert their shares to cash at a fair price in a timely manner. Unfortunately, many community bank stocks do not enjoy market liquidity. A community bank shareholder’s inability to convert shares to cash at a fair price in a timely manner represents one of the biggest threats to the ability to maintain long-term community bank and holding company independence. If your community bank has adopted a strategy of long-term independence and your stock does not enjoy market liquidity, the following should be considered to provide for liquidity in the common stock. Walk-in stock repurchase program. This program offers share liquidity by authorizing a representative of the holding company, typically the president or CEO, to repurchase on behalf of the holding company shares of holding company common stock within certain boardestablished parameters. To implement a walk-in stock repurchase program, the board passes a resolution that: (1) allocates a specific amount of corporate cash to the program; (2) establishes the per-share price at which the authorized representative may repurchase shares; and (3) establishes any other terms or conditions appropriate DIRECTORS / SENIOR MANAGEMENT Liquidity Strategies For illiquid community bank stocks for the program, such as a maximum number of shares to be repurchased from a selling shareholder. Following approval of the board resolution, the authorized company representative is free to act upon any shareholder request for liquidity that fits within the established program terms. This provides the shareholders a ready, willing and able purchaser that can quickly react to shareholder liquidity needs. Voluntary stock repurchase program. This is a formal program memorialized in a written document distributed to the shareholders that describes the terms and conditions of an offered share repurchase as approved by the board. In this type of program, the board allocates a specific amount of corporate cash to the purchase of holding company common stock at a specified price per share. Similar to a walk-in stock repurchase program, the board may incorporate any other program terms determined appropriate, such as minimum share repurchase requirements, or a requirement that a shareholder owning less than a specified number of shares sell all of their shares to participate in the program. Once the voluntary stock repurchase program document is drafted and approved by the board, the documentation is distributed to shareholders for their consideration. Any shareholders wishing to sell shares back to the holding company may then respond in accordance with the terms of the program. A walk-in stock repurchase program is a reactive solution to shareholder liquidity, whereas a voluntary
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