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About IFC > Articles of Agreement 

ARTICLE III  - Operations 


(as amended through June 27, 2012)

 


Section 1.       Financing Operations

The Corporation may make investments of its funds in productive private enterprises in the territories of its members. The existence of a government or other public interest in such an enterprise shall not necessarily preclude the Corporation from making an investment therein.

 


Section 2.       Forms of Financing [3]               

The Corporation may make investments of its funds in such form or forms as it may deem appropriate in the circumstances.


[3] Amended September 21, 1961. Original Text: (a) The Corporation’s financing shall not take the form of investments in capital stock. Subject to the foregoing, the Corporation may make investments of its funds in such form or forms as it may deem appropriate in the circumstances, including (but without limitation) investments according to the holder thereof the right to participate in earnings and the right to subscribe to, or to convert the investment into, capital stock.
(b)The Corporation shall not itself exercise any right to subscribe to, or to convert any investment into, capital stock.

 

Section 3.       Operational Principles

The operations of the Corporation shall be conducted in accordance with the following principles:

(i) the Corporation shall not undertake any financing for which in its opinion sufficient private capital could be obtained on reasonable terms;

(ii) the Corporation shall not finance an enterprise in the territories of any member if the member objects to such financing;

(iii)the Corporation shall impose no conditions that the proceeds of any financing by it shall be spent in the territories of any particular country;

(iv)    the Corporation shall not assume responsibility for managing any enterprise in which it has invested and shall not exercise voting rights for such purpose or for any other purpose which, in its opinion, properly is within the scope of managerial control [4];

(v)     the Corporation shall undertake its financing on terms and conditions which it considers appropriate, taking into account the requirements of the enterprise, the risks being undertaken by the Corporation and the terms and conditions normally obtained by private investors for similar financing;

(vi)    the Corporation shall seek to revolve its funds by selling its investments to private investors whenever it can appropriately do so on satisfactory terms;

(vii)   the Corporation shall seek to maintain a reasonable diversification in its investments.
 


[4] Amended September 21, 1961. Original Text: (iv) The Corporation shall not assume responsibility for managing any enterprise in which it has invested;

 

section 4.       Protection of Interests

      Nothing in this Agreement shall prevent the Corporation, in the event of actual or threatened default on any of its investments, actual or threatened insolvency of the enterprise in which such investment shall have been made, or other situations which, in the opinion of the Corporation, threaten to jeopardize such investment, from taking such action and exercising such rights as it may deem necessary for the protection of its interests.
 

Section 5.       Applicability of Certain Foreign Exchange Restrictions

      Funds received by or payable to the Corporation in respect of an investment of the Corporation made in any member's territories pursuant to Section 1 of this Article shall not be free, solely by reason of any provision of this Agreement, from generally applicable foreign exchange restrictions, regulations and controls in force in the territories of that member.

 

Section 6.       Miscellaneous Operations

 

In addition to the operations specified elsewhere in this Agreement, the Corporation shall have the power to:

 

(i)      borrow funds, and in that connection to furnish such collateral or other security therefor as it shall determine; provided, however, that before making a public sale of its obligations in the markets of a member, the Corporation shall have obtained the approval of that member and of the member in whose currency the obligations are to be denominated; if and so long as the Corporation shall be indebted on loans from or guaranteed by the Bank, the total amount outstanding of borrowings incurred or guarantees given by the Corporation shall not be increased if, at the time or as a result thereof, the aggregate amount of debt (including the guarantee of any debt) incurred by the Corporation from any source and then outstanding shall exceed an amount equal to four times its unimpaired subscribed capital and surplus [5];
 

(ii)     invest funds not needed in its financing operations in such obligations as it may determine and invest funds held by it for pension or similar purposes in any marketable securities, all without being subject to the restrictions imposed by other sections of this Article;
 

(iii)    guarantee securities in which it has invested in order to facilitate their sale;
 

(iv)    buy and sell securities it has issued or guaranteed or in which it has invested;
 

(v)     exercise such other powers incidental to its business as shall be necessary or desirable in furtherance of its purposes.


[5] Last clause added by amendment effective September 1, 1965.

 

Section 7.       Valuation of Currencies

      Whenever it shall become necessary under this Agreement to value any currency in terms of the value of another currency, such valuation shall be as reasonably determined by the Corporation after consultation with the International Monetary Fund.

 

Section 8.       Warning to be Placed on Securities

      Every security issued or guaranteed by the Corporation shall bear on its face a conspicuous statement to the effect that it is not an obligation of the Bank or, unless expressly stated on the security, of any government.

 

Section 9.       Political Activity Prohibited

The Corporation and its officers shall not interfere in the political affairs of any member; nor shall they be influenced in their decisions by the political character of the member or members concerned. Only economic considerations shall be relevant to their decisions, and these considerations shall be weighed impartially in order to achieve the purposes stated in this Agreement.


 

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