By Carona H.B. No. 1212
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the creation of state limited banking associations.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Article 2, Chapter I, The Texas Banking Code
1-5 (Article 342-102, Vernon's Texas Civil Statutes), is amended by
1-6 amending Subsections (8), (10), and (24) and adding Subsections
1-7 (26) and (27) to read as follows:
1-8 (8) "State Bank"--Any banking association or limited
1-9 banking association <corporation hereafter> organized under this
1-10 Code, and any corporation heretofore organized under the laws of
1-11 the State of Texas, and which was, prior to the effective date of
1-12 this Act, subject to the provisions of Title 16 of the Revised
1-13 Civil Statutes of Texas, 1925, as amended, including banks, trust
1-14 companies, bank and trust companies, savings banks and corporations
1-15 subject to the provisions of Chapter 9, Title 16 of the Revised
1-16 Civil Statutes of Texas, 1925, as amended.
1-17 (10) "Board"--Board of directors or board of managers
1-18 of a state bank or a person or group of persons acting in a
1-19 comparable capacity for a private bank.
1-20 (24) "Control"--The ability or power to vote, directly
1-21 or indirectly, 25 percent or more of any class of voting securities
1-22 or the ability to control in any manner the election of a majority
1-23 of the board of directors or board of managers.
1-24 (26) "Banking Association"--A state bank that is
2-1 organized under Subchapter B, Chapter III, of this Code.
2-2 (27) "Limited Banking Association"--A state bank that
2-3 is organized under Subchapter C, Chapter III, of this Code.
2-4 SECTION 2. Section (a), Article 13, Chapter I, The Texas
2-5 Banking Code (Article 342-113, Vernon's Texas Civil Statutes), is
2-6 amended to read as follows:
2-7 (a) The Finance Commission, through resolution, may
2-8 promulgate general rules and regulations not inconsistent with the
2-9 Constitution and Statutes of this State, and from time to time
2-10 amend the same, which rules and regulations shall be applicable
2-11 alike to all state banks and, where indicated, to all private banks
2-12 to effect the following ends and purposes:
2-13 1. To prevent state banks, as determined by the
2-14 Finance Commission to be required to protect investors in state
2-15 banks, from concentrating an excessive or unreasonable portion of
2-16 their resources in any particular type or character of loan,
2-17 security, or investment and to otherwise establish standards for
2-18 investments by state banks.
2-19 2. To provide adequate fidelity coverage or insurance
2-20 on the officers and employees of state banks, and fire, burglary,
2-21 robbery and other casualty coverage for state banks, so as to
2-22 prevent loss through theft, defalcation or other casualty, and to
2-23 make certain that the insurer or surety is solvent and will be able
2-24 to pay losses sustained.
2-25 3. To provide for the preservation of the books and
2-26 records of the Banking Department and of state and private banks
2-27 during such time as said books and records are of value, and to
3-1 permit the destruction or other disposition of such books and
3-2 records after the same are no longer of any value.
3-3 4. To permit state banks to transact their affairs in
3-4 any manner or make any loan or investment which they could do under
3-5 existing or any future law, rule or regulation were they organized
3-6 and operating as a National bank under the laws of the United
3-7 States; but this authority does not abridge State laws or diminish
3-8 or limit any rights or powers specifically given to state banks by
3-9 such laws; and it is further provided that, any provision of this
3-10 Code to the contrary notwithstanding, the transaction of affairs
3-11 and making of loans or investments permitted by valid rules and
3-12 regulations shall not constitute a violation of any penal provision
3-13 of the statutes of this state.
3-14 5. From time to time upon request of the Banking
3-15 Commissioner, to define, identify and determine incidental powers
3-16 which a state or private bank may exercise as necessary to its
3-17 specific powers under Article 2 <1>, Chapter III of this Code.
3-18 SECTION 3. Chapter III, The Texas Banking Code (Article
3-19 342-301 et seq., Vernon's Texas Civil Statutes), is amended to read
3-20 as follows:
3-21 CHAPTER THREE--ORGANIZATION <INCORPORATION>, MERGER,
3-22 REORGANIZATION, PURCHASE OF ASSETS OF ANOTHER BANK, DISBURSING
3-23 AGENT<, AMENDMENT OF ARTICLES OF ASSOCIATION> OF STATE
3-24 BANKS; SPECIAL PROVISIONS FOR LIMITED BANKING ASSOCIATIONS;<,>
3-25 AND CONVERSION
3-26 SUBCHAPTER A. GENERAL PROVISIONS
3-27 Art. 1. ORGANIZATION OF STATE BANKS. Subject to the
4-1 provisions of this Code, a state bank may be organized as either a
4-2 banking association or as a limited banking association.
4-3 Art. 2. POWERS. Subject to the provisions of this Code,
4-4 five (5) or more persons, a majority of whom are residents of this
4-5 state, may form a banking association or a limited banking
4-6 association <incorporate a state bank>, with any one or more of all
4-7 the following powers:
4-8 (a) To receive time and demand deposits at interest or
4-9 without interest; to lend money with or without security at
4-10 interest; and to buy, sell and discount bonds, negotiable
4-11 instruments and other evidences of indebtedness;
4-12 (b) To act as fiscal agent or transfer agent and in
4-13 such capacity to receive and disburse money and to transfer
4-14 registered and countersigned certificates of stock, bonds or other
4-15 evidences of indebtedness;
4-16 (c) To act as trustee under any mortgage or bond issue
4-17 and to accept and execute any trust not inconsistent with the laws
4-18 of this state;
4-19 (d) To act under the order or appointment of any court
4-20 of record, without giving bond, as guardian, receiver, trustee,
4-21 executor, administrator and, although without general depository
4-22 powers, as depository for any moneys paid into court;
4-23 (e) To purchase, invest in, and sell bills of
4-24 exchange, bonds, mortgages and other evidences of indebtedness, and
4-25 to lend money and to charge and collect interest thereon in advance
4-26 or otherwise;
4-27 (f) To receive savings deposits with or without the
5-1 payment of interest;
5-2 (g) To receive time deposits with or without the
5-3 payment of interest;
5-4 (h) To issue, sell and negotiate notes, bonds and
5-5 other evidences of indebtedness, and, in addition, to issue and
5-6 sell, for cash or on an installment basis, investment certificates,
5-7 creating no relation of debtor and creditor between the bank and
5-8 the holder, to be retired solely out of specified surplus,
5-9 reserves, or special retirement account, and containing such
5-10 provisions relative to yield, retirement, penalties, withdrawal
5-11 values, and obligations of the issuing bank as may be approved by
5-12 the Banking Commissioner.
5-13 A state bank shall have all incidental powers necessary to
5-14 exercise its specific powers.
5-15 Art. 3 <2>. Legislative Control. The rights, privileges and
5-16 powers conferred by this Code are held subject to the right of the
5-17 Legislature to amend, alter or reform the same.
5-18 <Art. 4. ARTICLES OF ASSOCIATION. The articles of
5-19 association of a state bank shall be signed and acknowledged by
5-20 each incorporator and shall contain:>
5-21 <1. The name of the corporation.>
5-22 <2. The city or town and the county of its domicile.>
5-23 <3. Such of the powers listed in Article 1 of this
5-24 Chapter as it shall choose to exercise.>
5-25 <4. The capital and the denomination and number of
5-26 shares.>
5-27 <5. The preferred stock, if any, and the terms and
6-1 conditions of its issuance.>
6-2 <6. The number of directors.>
6-3 <7. The period of duration, which may be perpetual.>
6-4 <Art. 5. APPLICATION FOR AND GRANTING OF CHARTERS--APPROVAL.
6-5 A. Applications for a State bank charter shall be granted only
6-6 upon good and sufficient proof that all of the following conditions
6-7 presently exist:>
6-8 <(1) A public necessity exists for the proposed bank;>
6-9 <(2) The proposed capital structure is adequate;>
6-10 <(3) The proposed bank's anticipated volume of
6-11 business is such as to indicate profitable operation;>
6-12 <(4) The proposed officers and directors have
6-13 sufficient banking experience, ability and standing to render
6-14 success of the proposed bank probable; and>
6-15 <(5) The applicants are acting in good faith.>
6-16 <The burden to establish said conditions shall be upon the
6-17 applicants.>
6-18 <B. Applicants desiring to incorporate a State bank shall
6-19 file with the Banking Commissioner an application for charter upon
6-20 official forms prepared and prescribed by the Banking Commissioner.
6-21 All persons subscribing to the capital stock of the proposed bank
6-22 shall sign and verify under oath a statement of such stock
6-23 subscribed, and which statement shall truly report the number of
6-24 shares and the amount to be paid in consideration; the names,
6-25 identity, title and address of any other persons who will be
6-26 beneficial owners of such stock or otherwise share an interest or
6-27 ownership in said stock, or who will pay any portion of the
7-1 consideration; whether said stock is to be pledged as security for
7-2 any loan; whether a loan has been committed or is intended for the
7-3 subscription and purchase of said stock, and if so, the name and
7-4 address of such person or corporation which is intended to loan
7-5 funds for said purchase; the names of any cosigners, guarantors,
7-6 partners or other persons liable for the repayment of any loan
7-7 financing the purchase of such stock. Provided, however, that the
7-8 verified statement of subscribers to stock shall be confidential
7-9 and privileged from public disclosure prior to the final
7-10 determination by the Board of the application for a charter, unless
7-11 the Board shall find that public disclosure prior to public hearing
7-12 and final determination of the charter application is necessary to
7-13 a full development of the factual record.>
7-14 <C. The Banking Commissioner shall require deposit of such
7-15 charter fees as are required by law and shall proceed to conduct a
7-16 thorough investigation of the application, the applicants and their
7-17 personnel, and the charter conditions alleged. The actual expense
7-18 of such investigation and report shall be paid by the applicants,
7-19 and the Banking Commissioner may require a deposit in an estimated
7-20 amount, the balance to be paid in full prior to hearing of the
7-21 application. A written report of the investigation shall be
7-22 furnished to the State Banking Board and shall be made available to
7-23 all interested parties at their request.>
7-24 <D. Upon filing of the application, the Banking Commissioner
7-25 shall promptly set the time and place for public hearing of the
7-26 application for charter, giving the applicants reasonable notice
7-27 thereof. Before the 10th day preceding the day on which the
8-1 hearing is held, the Banking Commissioner shall publish notice of
8-2 the hearing in a newspaper of general circulation in the county
8-3 where the proposed bank is to be located. If a protest of the
8-4 application is not filed, the Banking Commissioner may cancel the
8-5 hearing, and if the Banking Commissioner does so, the Board shall
8-6 vote to determine whether the necessary conditions set out in
8-7 Section A of this article have been established, based on the
8-8 application. If the Board votes to deny the application, the
8-9 Banking Commissioner shall notify the applicant and the applicant
8-10 may request a hearing on the application not later than the 30th
8-11 day after the date on which the notice is sent to the applicant.
8-12 After full and public hearing the Board shall vote and determine
8-13 whether the necessary conditions set out in Section A above have
8-14 been established. Should the Board, or a majority of the Board,
8-15 determine all of the said conditions affirmatively, then the
8-16 application shall be approved; if not, then the application shall
8-17 be denied. If approved, and when the Banking Commissioner receives
8-18 satisfactory evidence that the capital has been paid in full in
8-19 cash, the Banking Commissioner shall deliver to the incorporators a
8-20 certified copy of the Articles of Association, and the bank shall
8-21 come into corporate existence. Provided, however, that the State
8-22 Banking Board may make its approval of any application conditional,
8-23 and in such event shall set out such condition in the resolution
8-24 granting the charter, and the Banking Commissioner shall not
8-25 deliver the certified copy of the Articles of Association until
8-26 such condition has been met, after which the Banking Commissioner
8-27 shall in writing inform the State Banking Board as to compliance
9-1 with such condition and delivery of the Articles of Association.>
9-2 <E. The provisions of the Administrative Procedure and Texas
9-3 Register Act (Article 6252-13a, Vernon's Texas Civil Statutes)
9-4 governing contested cases do not apply to charter applications
9-5 filed for the purpose of assuming the assets and liabilities of any
9-6 bank deemed by the Banking Commissioner to be in an unsafe
9-7 condition.>
9-8 <F. The financial statement of a proposed officer or
9-9 director filed under this article is confidential and not subject
9-10 to public disclosure.>
9-11 Art. 4 <7>. Certificate Of Authority--Posting--Revocation Of
9-12 Charter. No state bank may do business until it receives a
9-13 certificate of authority from the Banking Commissioner, which shall
9-14 not be delivered until it has elected the officers and directors or
9-15 managers, as appropriate, named in the application for charter or
9-16 other officers and directors or managers approved by the Banking
9-17 Commissioner; shall have adopted by-laws approved by the Banking
9-18 Commissioner; and shall have complied with all the other
9-19 requirements of this Code relative to the incorporation of state
9-20 banks.
9-21 If any state bank does not open and actually engage in
9-22 business within three months after the granting of its charter, or
9-23 conditional approval of application for charter, the Banking
9-24 Commissioner may so inform the State Banking Board which may in its
9-25 discretion forfeit the charter or cancel its conditional approval
9-26 of application for charter, without any judicial action.
9-27 Each state bank shall keep its certificate of authority
10-1 posted in its lobby at a point accessible to the public.
10-2 Art. 5 <8>. Merger--Trust Powers. Any two or more state
10-3 banks, or if national banks are hereafter authorized by the laws of
10-4 the United States to participate in such a merger, any one or more
10-5 state banks and any one or more national banks domiciled in this
10-6 State may, with the approval of the Banking Commissioner and the
10-7 written consent of the owners of record of two-thirds of the
10-8 capital of each of said banks, be merged. Said merging banks shall
10-9 file with the Banking Commissioner:
10-10 (1) A statement of the plan of merger approved by the
10-11 board of directors or managers, as appropriate, of each merging
10-12 bank, by a majority vote of the qualified directors or managers.
10-13 (2) Certificate of merger stating the facts required
10-14 by Article 30 or Article 62, as appropriate, <4> of this chapter
10-15 and executed and acknowledged by a majority of the qualified
10-16 directors or managers of each merging bank.
10-17 The Banking Commissioner shall thereupon investigate the
10-18 condition of the merging banks and if he finds that the state bank
10-19 which will result from the merger (hereafter called the "resulting
10-20 bank") will be solvent and its capital unimpaired; that it will
10-21 have adequate capital structure; that such merger does not violate
10-22 the anti-trust laws of this state; and that the resulting bank has
10-23 in all respects complied with the laws of this State relative to
10-24 the incorporation of State banks, he may approve such merger, and,
10-25 if he so approves, he shall deliver to the resulting bank a
10-26 certified copy of the certificate of merger, which certificate
10-27 shall constitute the charter and articles of association of the
11-1 resulting bank. The resulting bank shall be deemed a continuation
11-2 in entity and identity of each of the banks involved in the merger;
11-3 shall be subject to all the liabilities, obligations, duties and
11-4 relations of each merging bank; and shall without the necessity of
11-5 any conveyance, assignment or transfer become the owner of all of
11-6 the assets of every kind and character formerly belonging to the
11-7 merging banks; further, provided, that if any merging bank shall at
11-8 the time of the merger be acting as trustee, guardian, executor,
11-9 administrator, or in any other fiduciary capacity, the resulting
11-10 bank shall, without the necessity of any judicial action or action
11-11 by the creator of such trust, continue such office, trust or
11-12 fiduciary relationship and shall perform all of the duties and
11-13 obligations and exercise all of the powers and authority connected
11-14 with or incidental to such fiduciary relationship in the same
11-15 manner as though the resulting bank had been originally named or
11-16 designated as such fiduciary.
11-17 The naming or designating by a testator, or the creator of a
11-18 living trust, of any one of the merging banks to act as trustee,
11-19 guardian, executor or in any other fiduciary capacity shall be
11-20 considered the naming or designating of the bank resulting from the
11-21 merger.
11-22 A stockholder may dissent from the merger by following the
11-23 procedure provided by Article 5.12, Texas Business Corporation Act.
11-24 That procedure applies to a merger under this article, as if the
11-25 state bank were a corporation organized under the Texas Business
11-26 Corporation Act.
11-27 Art. 6 <9>. Reorganization--Incorporation To Take Over
12-1 Business Of Other Banks--Trust Powers. A state bank may be
12-2 incorporated to take over the business of any incorporated bank or
12-3 banks, state or national, as a step in the reorganization of such
12-4 bank or banks, (which bank or banks, whether one or more, will be
12-5 hereafter referred to as the "reorganizing bank"), and shall,
12-6 subject to the provisions of this article, be authorized to
12-7 purchase assets from the reorganizing bank and as consideration
12-8 therefor, assume all liabilities, known or unknown, of the
12-9 reorganizing bank, other than its liability to stockholders as
12-10 such.
12-11 Persons desiring to incorporate a state bank under the
12-12 provisions of this article shall proceed in the manner provided in
12-13 Article 31 and Article 63 <5> of this Chapter, and in addition,
12-14 shall file with the Banking Commissioner:
12-15 (1) The proposed contract whereby the state bank is to
12-16 purchase the assets from and assume the liabilities of the
12-17 reorganizing bank, as above mentioned.
12-18 (2) Contracts, if any, whereby the proposed state bank
12-19 is to purchase for cash the whole or any part of the right of any
12-20 or all of the stockholders of the reorganizing bank to receive
12-21 liquidating dividends upon liquidation of the reorganizing bank,
12-22 which contracts shall expressly provide that they shall be binding
12-23 and effective only in event the reorganizing bank is placed in
12-24 voluntary liquidation within ten (10) days of the granting of the
12-25 application for the charter applied for. Such contracts shall be
12-26 executed on behalf of the proposed bank by the persons applying for
12-27 the charter.
13-1 If the Banking Commissioner, after investigation, determines
13-2 that the proposed bank, if incorporated, will, after its capital
13-3 has been paid in full and all contracts above mentioned finally
13-4 consummated, be solvent, its capital adequate and unimpaired, that
13-5 such reorganization is to the best interest of the reorganizing
13-6 bank, its depositors, creditors and stockholders and the public in
13-7 general, and that upon incorporation such bank will have in all
13-8 other respects complied with the law, he shall recommend to the
13-9 State Banking Board that the charter be granted.
13-10 If the State Banking Board concurs in the findings of the
13-11 Banking Commissioner, it shall grant the application, and the
13-12 Banking Commissioner shall deliver a certified copy of the articles
13-13 of association in the manner provided in Article 31 and Article 63
13-14 <5> of this chapter. Provided, however, that the Banking
13-15 Commissioner shall not deliver a certificate of authority until the
13-16 contracts above mentioned have been fully consummated, and the
13-17 requirements of Article 4 <7> of this chapter have been met. The
13-18 state bank so incorporated shall be deemed a reorganization of the
13-19 reorganizing bank, and a continuation of such bank in entity and
13-20 identity, subject to all of its liabilities, obligations, duties
13-21 and relations, save and except its liability to stockholders as
13-22 such, and shall pay and perform each and every obligation, duty and
13-23 liability of the reorganizing bank in exactly the same manner as
13-24 the reorganizing bank was obligated to do; further provided that if
13-25 the reorganizing bank was at the time of incorporation of the new
13-26 state bank, named or acting as guardian, trustee, executor,
13-27 administrator or in any other fiduciary capacity, such state bank
14-1 shall, without the necessity of any judicial action, or action by
14-2 the creator of such trust, continue the trusteeship or other
14-3 fiduciary relation and perform all of the duties and obligations of
14-4 the reorganizing bank and exercise all the powers and authority
14-5 relative thereto; and neither the reorganization of such bank, nor
14-6 any liquidation of such bank in connection therewith, shall be
14-7 deemed a resignation or refusal to act. The naming or designating
14-8 by a testator or the creator of a living trust of the reorganizing
14-9 bank to act as trustee, guardian, executor, or in any other
14-10 fiduciary capacity shall be considered the naming or designating of
14-11 the bank resulting from the reorganization.
14-12 The new state bank shall give notice of its assumption of the
14-13 liabilities of the reorganizing bank by publishing notice thereof
14-14 once each week for a period of two (2) weeks in some newspaper of
14-15 general circulation published in the county of its domicile, or in
14-16 event no such newspaper is published in said county, then in a
14-17 newspaper of general circulation published in an adjacent county.
14-18 The first notice shall be published within ten (10) days after the
14-19 delivery of the certificate of authority to such bank.
14-20 Art. 7 <10>. Purchase Of Assets Of Another Bank--Disbursing
14-21 Agent. Any state bank may, with the consent of the Banking
14-22 Commissioner, purchase the whole or any part of the assets of any
14-23 other state bank or of any national bank domiciled in this State,
14-24 and may hold the purchase price and any additional funds delivered
14-25 to it by the selling bank in trust for or as a deposit to the
14-26 credit of the selling bank. The purchasing bank may act as agent
14-27 of the selling bank in disbursing the funds so held in trust or on
15-1 deposit by paying the depositors and creditors of the selling bank,
15-2 provided that if the purchasing bank acts under written contract of
15-3 agency which specifically names each depositor and creditor and the
15-4 amount to be paid each, and if such agency is confined to the
15-5 purely ministerial act of paying such depositors and creditors the
15-6 amounts due them as determined by the selling bank and reflected in
15-7 the contract of agency and involves no discretionary duties or
15-8 authority other than the identification of the depositors and
15-9 creditors named, and if such contract is approved by the Banking
15-10 Commissioner, then the purchasing bank may rely upon such contract
15-11 of agency and the instructions included therein, and shall not be
15-12 in any way liable or responsible for any error made by the selling
15-13 bank in determining its liabilities, the depositors and creditors
15-14 to whom such liabilities are due, or the amounts due such
15-15 depositors and creditors; nor liable or in any way responsible for
15-16 any preference which may result from the payments made pursuant to
15-17 such contract of agency and the instructions included therein.
15-18 Further provided that, in event the selling bank should, at any
15-19 time after such sale of assets, be closed and come into the hands
15-20 of the Banking Commissioner or, if a national bank into the hands
15-21 of a receiver, then the purchasing bank shall pay to the Banking
15-22 Commissioner as statutory liquidator or to the receiver of such
15-23 national bank the balance of the funds held by it in trust or on
15-24 deposit for the selling bank, not theretofore paid to the
15-25 depositors and creditors of the selling bank, and shall thereupon
15-26 stand discharged of any and all liabilities, obligations or
15-27 responsibilities to the selling bank, its receiver, the Banking
16-1 Commissioner as its statutory liquidator, or to the depositors,
16-2 creditors or stockholders thereof. Provided further that payment
16-3 to any depositor or creditor of the selling bank of the amount to
16-4 be paid him under the terms of the contract of agency may be
16-5 effected by the purchasing bank opening an account in the name of
16-6 such depositor or creditor, crediting such account with the amount
16-7 to be paid the depositor or creditor under the terms of such agency
16-8 contract, and mailing a duplicate deposit ticket evidencing such
16-9 credit to such depositor or creditor at his address as reflected by
16-10 the records of the selling bank, or delivering it to him
16-11 personally, and the relation of debtor to creditor shall thereupon
16-12 arise between the purchasing bank and such depositors and creditors
16-13 to the extent and only to the extent of the credit reflected by
16-14 such deposit tickets. Further provided, that if any such depositor
16-15 or creditor checks upon the credit so created, or if he does not
16-16 within sixty (60) days of the mailing or the personal delivery of
16-17 such deposit ticket protest the transaction and demand payment from
16-18 the selling bank, he shall be deemed to have ratified the
16-19 transaction and to the extent of the credit so created to have
16-20 accepted the obligation of the purchasing bank as reflected by said
16-21 deposit ticket in satisfaction of the obligation of the selling
16-22 bank, and the obligation of the selling bank to the extent of such
16-23 credit shall be deemed paid and satisfied within the meaning of
16-24 this article.
16-25 Art. 8 <11>. Existing Corporations--Powers Retained. All
16-26 corporations which on the effective date of this Act were subject
16-27 to the provisions of Title 16 of the Revised Civil Statutes of
17-1 Texas, 1925, as amended, or any chapter thereof, shall retain the
17-2 powers provided in their charters.
17-3 <Art. 12. AMENDMENT OF ARTICLES OF ASSOCIATION--RIGHTS OF
17-4 STOCKHOLDERS UPON INCREASE IN CAPITAL--STOCK OPTION PLANS. Subject
17-5 to the provisions of this Code, any state bank may amend its
17-6 articles of association for any lawful purpose.>
17-7 <If the owners of record of two-thirds of the capital stock,
17-8 at any regular meeting of stockholders, or any special meeting
17-9 called for that purpose, vote to amend the charter, the board of
17-10 directors shall prepare, execute in the manner provided for the
17-11 execution of articles of association, and file with the Banking
17-12 Commissioner an amendment to the articles of association. If the
17-13 Banking Commissioner finds that the amendment is not violative of
17-14 law and does not prejudice the interest of depositors and creditors
17-15 or the public, he shall approve such amendment and deliver to the
17-16 bank a certified copy thereof, and said amendment shall thereupon
17-17 become effective; provided, however, that if a state bank does not
17-18 have the power to receive demand deposits, no amendments of its
17-19 articles of association adopting any power provided under
17-20 Subsection (a), (b), (c), (d), or (f) of Article 1 of this Chapter
17-21 and no amendment changing the domicile of any state bank shall be
17-22 effective until approved by the State Banking Board in the manner
17-23 provided for the approval of an original application for charter.
17-24 Any state bank may amend its articles of association to extend its
17-25 corporate existence for a perpetual period or for any period of
17-26 years.>
17-27 <Each stockholder of a state bank shall be entitled to his
18-1 proportionate part of any increase of stock effected out of surplus
18-2 funds or undivided profits, and shall be entitled to subscribe for
18-3 his proportionate share of any capital increase to be paid in cash;
18-4 provided, however, the bank may arrange for the disposition of
18-5 fractional shares by those entitled thereto or pay in cash the fair
18-6 value of fractions of a share as of the time when those entitled to
18-7 receive such fractions are determined. Each stockholder or his
18-8 assignee, in event he elects to assign such rights of subscription,
18-9 shall subscribe for and pay the amount of such subscription to the
18-10 corporation within ten (10) days after the stockholders have
18-11 adopted such amendment, otherwise the board of directors may
18-12 allocate the unsubscribed or unpaid portion of the increase among
18-13 the other stockholders or otherwise as they deem to the best
18-14 interest of the bank.>
18-15 <With prior approval of the owners of record of two-thirds of
18-16 the capital stock, shares of stock in a bank, which are created by
18-17 a capital increase, may be allocated to and purchased by the bank
18-18 out of its surplus which is not certified or out of its undivided
18-19 profits to be held by the bank for fulfilling the requirements of
18-20 an officer or employee stock option or bonus plan, whereby officers
18-21 or employees, or both, of the bank are given options to purchase or
18-22 a bonus of shares of the bank's capital stock at a specified price,
18-23 subject to the following requirements and restrictions:>
18-24 <The number of shares so held shall not, at any time, exceed
18-25 five percent (5%) of the total number of shares outstanding in the
18-26 hands of other stockholders. Employee benefit plans, including
18-27 employee stock option plans, stock bonus plans, restricted stock
19-1 option or bonus plans, or any other plans, the sole purpose of
19-2 which is to compensate employees of the bank for services rendered
19-3 to the bank, authorized under this Article, may not extend beyond a
19-4 period of ten years from the date of issuance. No officer or
19-5 employee who owns or controls more than five percent (5%) of the
19-6 bank's capital stock shall be eligible to participate or to
19-7 continue participation in a stock option plan authorized by this
19-8 Article.>
19-9 Art. 9 <13>. Conversion Of State Bank Into National Bank.
19-10 The owners of record of two-thirds of the capital of any solvent
19-11 state bank may, by vote or written consent, authorize its officers
19-12 and directors or managers, as appropriate, to take such action as
19-13 may be necessary under the laws of the United States to convert it
19-14 into a national bank, provided, however, that the state bank shall
19-15 not cease to be a state bank subject to the supervision of the
19-16 Banking Commissioner until (1) the Banking Commissioner has been
19-17 given written notice of the intention to convert for at least
19-18 thirty (30) days, (2) such bank has published notice thereof at
19-19 least once a week for four (4) weeks in a newspaper of general
19-20 circulation published in the county of its domicile, or, if no such
19-21 newspaper is published in the county, in an adjacent county, (3)
19-22 the bank has filed with the Banking Commissioner a transcript of
19-23 the conversion proceedings, sworn to by a majority of the qualified
19-24 directors or managers and a publisher's certificate showing
19-25 publication of the notice above provided, and (4) such bank has
19-26 received a certificate of authority to do business as a national
19-27 bank.
20-1 Art. 10 <13a>. Conversion Of National Bank Into State Bank.
20-2 A national bank or association located in this state which follows
20-3 the procedures prescribed by the laws of the United States to
20-4 convert into a state bank, shall be granted a certificate of
20-5 incorporation in the state when the State Banking Board finds that
20-6 the bank meets the standards as to location of office, capital
20-7 structure and business experience of officers and directors or
20-8 managers, as appropriate, for the incorporation of a state bank.
20-9 In considering the application for conversion from a national bank
20-10 into a state bank the Board shall consider and determine that the
20-11 new bank meets with all the requirements of a new state bank
20-12 applicant. Included also in the application for conversion and to
20-13 be considered along with the other information submitted shall be
20-14 the terms of the transition from a national bank into a state bank
20-15 which shall also show that the provisions of Public Law 706 of the
20-16 81st Congress of the United States have been fully satisfied. Such
20-17 conversion shall be governed by the provisions of this Article and
20-18 shall not be governed by Article 6 <(9)>, now codified as Article
20-19 342-306 <342-309>, Vernon's Texas Civil Statutes.
20-20 Art. 11 <14>. CHANGE OF DOMICILE. (a) A state bank or
20-21 trust company may change its domicile to one of its previously
20-22 established branch locations on prior written approval of the
20-23 Banking Commissioner. A state bank or trust company may change its
20-24 domicile to any other location on prior approval of the State
20-25 Banking Board.
20-26 (b) Applications for a change of domicile subject to
20-27 approval of the State Banking Board shall be granted by the State
21-1 Banking Board only upon good and sufficient proof that all the
21-2 following conditions exist:
21-3 (1) a public necessity exists for the bank at the
21-4 proposed location;
21-5 (2) proposed capital structure is adequate;
21-6 (3) volume of business in the community where the bank
21-7 is to be located is such as to indicate profitable operation of the
21-8 bank at that location;
21-9 (4) the proposed officers and directors or managers,
21-10 as appropriate, have sufficient banking experience, ability, and
21-11 standing to render success of the bank probable; and
21-12 (5) the applicants are acting in good faith.
21-13 (c) If the proposed relocation of the bank would effect an
21-14 abandonment of all or part of the community presently served by the
21-15 bank, the bank must establish that the abandonment is consistent
21-16 with the original determination of public necessity for the
21-17 establishment of a bank at that location.
21-18 SUBCHAPTER B. ORGANIZATION OF STATE BANKING ASSOCIATIONS
21-19 Art. 30. ARTICLES OF ASSOCIATION. The articles of
21-20 association of a state banking association shall be signed and
21-21 acknowledged by each incorporator and shall contain:
21-22 (1) the name of the association;
21-23 (2) the city or town and the county of its domicile;
21-24 (3) such of the powers listed in Article 2 of this
21-25 chapter as it shall choose to exercise;
21-26 (4) the capital and the denomination and number of
21-27 shares;
22-1 (5) the preferred stock, if any, and the terms and
22-2 conditions of its issuance;
22-3 (6) the number of directors; and
22-4 (7) the period of duration, which may be perpetual.
22-5 Art. 31. APPLICATION FOR AND GRANTING OF CHARTERS--APPROVAL.
22-6 (a) Applications for a charter for a state banking association
22-7 shall be granted only upon good and sufficient proof that all of
22-8 the following conditions presently exist:
22-9 (1) a public necessity exists for the proposed bank;
22-10 (2) the proposed capital structure is adequate;
22-11 (3) the proposed bank's anticipated volume of business
22-12 is such as to indicate profitable operation;
22-13 (4) the proposed officers and directors have
22-14 sufficient banking experience, ability, and standing to render
22-15 success of the proposed bank probable; and
22-16 (5) the applicants are acting in good faith.
22-17 The burden to establish said conditions shall be upon the
22-18 applicants.
22-19 (b) Applicants desiring to incorporate a state banking
22-20 association shall file with the Banking Commissioner an application
22-21 for charter upon official forms prepared and prescribed by the
22-22 Banking Commissioner. All persons subscribing to the capital stock
22-23 of the proposed bank shall sign and verify under oath a statement
22-24 of such stock subscribed, and the statement shall truly report the
22-25 number of shares and the amount to be paid in consideration; the
22-26 names, identity, title, and address of any other persons who will
22-27 be beneficial owners of such stock or otherwise share an interest
23-1 or ownership in said stock, or who will pay any portion of the
23-2 consideration; whether said stock is to be pledged as security for
23-3 any loan; whether a loan has been committed or is intended for the
23-4 subscription and purchase of said stock, and if so, the name and
23-5 address of such person or corporation that is intended to loan
23-6 funds for said purchase; the names of any cosigners, guarantors,
23-7 partners or other persons liable for the repayment of any loan
23-8 financing the purchase of such stock. Provided, however, that the
23-9 verified statement of subscribers to stock shall be confidential
23-10 and privileged from public disclosure prior to the final
23-11 determination by the Board of the application for a charter, unless
23-12 the Board shall find that public disclosure prior to public hearing
23-13 and final determination of the charter application is necessary to
23-14 a full development of the factual record.
23-15 (c) The Banking Commissioner shall require deposit of such
23-16 charter fees as are required by law and shall proceed to conduct a
23-17 thorough investigation of the application, the applicants and their
23-18 personnel, and the charter conditions alleged. The actual expense
23-19 of such investigation and report shall be paid by the applicants,
23-20 and the Banking Commissioner may require a deposit in an estimated
23-21 amount, the balance to be paid in full prior to hearing of the
23-22 application. A written report of the investigation shall be
23-23 furnished to the State Banking Board and shall be made available to
23-24 all interested parties at their request.
23-25 (d) Upon filing of the application, the Banking Commissioner
23-26 shall promptly set the time and place for public hearing of the
23-27 application for charter, giving the applicants reasonable notice
24-1 thereof. Before the 10th day preceding the day on which the
24-2 hearing is held, the Banking Commissioner shall publish notice of
24-3 the hearing in a newspaper of general circulation in the county
24-4 where the proposed bank is to be located. If a protest of the
24-5 application is not filed, the Banking Commissioner may cancel the
24-6 hearing, and if the Banking Commissioner does so, the Board shall
24-7 vote to determine whether the necessary conditions set out in
24-8 Section (a) of this article have been established, based on the
24-9 application. If the Board votes to deny the application, the
24-10 Banking Commissioner shall notify the applicant and the applicant
24-11 may request a hearing on the application not later than the 30th
24-12 day after the date on which the notice is sent to the applicant.
24-13 After full and public hearing the Board shall vote and determine
24-14 whether the necessary conditions set out in Section (a) above have
24-15 been established. Should the Board, or a majority of the Board,
24-16 determine all of the said conditions affirmatively, the application
24-17 shall be approved; if not, the application shall be denied. If
24-18 approved, and when the Banking Commissioner receives satisfactory
24-19 evidence that the capital has been paid in full in cash, the
24-20 Banking Commissioner shall deliver to the incorporators a certified
24-21 copy of the articles of association, and the bank shall come into
24-22 corporate existence. Provided, however, that the State Banking
24-23 Board may make its approval of any application conditional, and in
24-24 such event shall set out such condition in the resolution granting
24-25 the charter, and the Banking Commissioner shall not deliver the
24-26 certified copy of the articles of association until such condition
24-27 has been met, after which the Banking Commissioner shall in writing
25-1 inform the State Banking Board as to compliance with such condition
25-2 and delivery of the articles of association.
25-3 (e) The provisions of the Administrative Procedure and Texas
25-4 Register Act (Article 6252-13a, Vernon's Texas Civil Statutes)
25-5 governing contested cases do not apply to charter applications
25-6 filed for the purpose of assuming the assets and liabilities of any
25-7 bank deemed by the Banking Commissioner to be in an unsafe
25-8 condition.
25-9 (f) The financial statement of a proposed officer or
25-10 director filed under this article is confidential and not subject
25-11 to public disclosure.
25-12 Art. 32. AMENDMENT OF ARTICLES OF ASSOCIATION--RIGHTS OF
25-13 STOCKHOLDERS UPON INCREASE IN CAPITAL--STOCK OPTION PLANS. Subject
25-14 to the provisions of this code, any state banking association may
25-15 amend its articles of association for any lawful purpose.
25-16 If the owners of record of two-thirds of the capital stock,
25-17 at any regular meeting of stockholders, or any special meeting
25-18 called for that purpose, vote to amend the charter, the board of
25-19 directors shall prepare, execute in the manner provided for the
25-20 execution of articles of association, and file with the Banking
25-21 Commissioner an amendment to the articles of association. If the
25-22 Banking Commissioner finds that the amendment is not violative of
25-23 law and does not prejudice the interest of depositors and creditors
25-24 or the public, he shall approve such amendment and deliver to the
25-25 bank a certified copy thereof, and said amendment shall thereupon
25-26 become effective; provided, however, that if a state bank does not
25-27 have the power to receive demand deposits, no amendments of its
26-1 articles of association adopting any power provided under Section
26-2 (a), (b), (c), (d), or (f) of Article 2 of this chapter and no
26-3 amendment changing the domicile of any state bank organized as a
26-4 banking association shall be effective until approved by the State
26-5 Banking Board in the manner provided for the approval of an
26-6 original application for charter. Any state bank organized as a
26-7 banking association may amend its articles of association to extend
26-8 its corporate existence for a perpetual period or for any period of
26-9 years.
26-10 Each stockholder of a state banking association shall be
26-11 entitled to his proportionate part of any increase of stock
26-12 effected out of surplus funds or undivided profits, and shall be
26-13 entitled to subscribe for his proportionate share of any capital
26-14 increase to be paid in cash; provided, however, the bank may
26-15 arrange for the disposition of fractional shares by those entitled
26-16 thereto or pay in cash the fair value of fractions of a share as of
26-17 the time when those entitled to receive such fractions are
26-18 determined. Each stockholder or his assignee, in the event he
26-19 elects to assign such rights of subscription, shall subscribe for
26-20 and pay the amount of such subscription to the corporation within
26-21 ten (10) days after the stockholders have adopted such amendment,
26-22 otherwise the board of directors may allocate the unsubscribed or
26-23 unpaid portion of the increase among the other stockholders or
26-24 otherwise as they deem to the best interest of the bank.
26-25 With prior approval of the owners of record of two-thirds of
26-26 the capital stock, shares of stock in a bank, which are created by
26-27 a capital increase, may be allocated to and purchased by the bank
27-1 out of its surplus which is not certified or out of its undivided
27-2 profits to be held by the bank for fulfilling the requirements of
27-3 an officer or employee stock option or bonus plan, whereby officers
27-4 or employees, or both, of the bank are given options to purchase or
27-5 a bonus of shares of the bank's capital stock at a specified price,
27-6 subject to the following requirements and restrictions:
27-7 The number of shares so held shall not, at any time, exceed
27-8 five percent (5%) of the total number of shares outstanding in the
27-9 hands of other stockholders. Employee benefit plans, including
27-10 employee stock option plans, stock bonus plans, restricted stock
27-11 option or bonus plans, or any other plans, the sole purpose of
27-12 which is to compensate employees of the bank for services rendered
27-13 to the bank, authorized under this article, may not extend beyond a
27-14 period of ten (10) years from the date of issuance. No officer or
27-15 employee who owns or controls more than five percent (5%) of the
27-16 bank's capital stock shall be eligible to participate or to
27-17 continue participation in a stock option plan authorized by this
27-18 article.
27-19 SUBCHAPTER C. ORGANIZATION OF AND SPECIAL PROVISIONS
27-20 FOR LIMITED BANKING ASSOCIATIONS
27-21 Art. 60. DEFINITIONS. In this subchapter:
27-22 (1) "Full Liability Participant" means a participant
27-23 that agrees under the terms of the participation agreement to be
27-24 liable under any judgment, decree, or order of court, for the
27-25 entire amount of any debt, obligation, or liability of the limited
27-26 banking association.
27-27 (2) "Manager" means a person elected to the board of
28-1 managers of a limited banking association. For purposes of
28-2 franchise taxes, "manager" shall be equivalent to "director."
28-3 (3) "Participant" means the owner of a share in a
28-4 limited banking association entitled to participate in the
28-5 management of the limited banking association, or entitled to
28-6 participate in the election of the board of managers of the limited
28-7 banking association.
28-8 (4) "Participation Agreement" means the instrument
28-9 stating the agreement among the participants of a limited banking
28-10 association relating to the rights and duties of the participants
28-11 and participant-transferees including allocations of income, loss,
28-12 deduction, credit, distributions, liquidation rights, redemption
28-13 rights, liabilities of participants, priority rights of
28-14 participant-transferees to transfer ownership shares, rights of
28-15 participants to purchase ownership shares of
28-16 participant-transferees, the procedures for elections and voting by
28-17 participants, and any other matter not prohibited by or
28-18 inconsistent with this code.
28-19 (5) "Participant-Transferee" means a person holding an
28-20 ownership share in a limited banking association who has not
28-21 received the unanimous consent of all participants of the limited
28-22 banking association to be a participant of the association or who
28-23 otherwise becomes a participant-transferee under this subchapter.
28-24 Art. 61. FILING NOTICE OF FULL LIABILITY. A copy of the
28-25 provisions of a participation agreement by which a participant of
28-26 the limited banking association agrees to become a full liability
28-27 participant shall be filed with the Banking Commissioner with the
29-1 name and address of each full liability participant. The filed
29-2 copy shall be available for public inspection.
29-3 Art. 62. LIMITED BANKING ASSOCIATION ARTICLES OF ASSOCIATION
29-4 AND REGULATIONS. (a) The articles of association of a limited
29-5 banking association must be signed and acknowledged by each
29-6 organizer and must contain:
29-7 (1) the name of the limited banking association;
29-8 (2) the city or town and the county of the limited
29-9 banking association's domicile;
29-10 (3) the powers listed in Article 2 of this chapter
29-11 that the limited banking association chooses to exercise;
29-12 (4) the capital, denomination, and number of
29-13 participation shares;
29-14 (5) the number of managers; and
29-15 (6) the period of duration.
29-16 (b) The articles of association may contain a provision
29-17 that, on the death, expulsion, bankruptcy, or dissolution of a
29-18 participant of the limited banking association or the occurrence of
29-19 any other event that terminates participation in the association,
29-20 grants to the remaining participants the right on unanimous consent
29-21 to continue the business of the association.
29-22 (c) The name of every limited banking association must
29-23 include the words "Limited Banking Association" or the letters
29-24 "LBA." The name of a limited banking association may not:
29-25 (1) contain a word or phrase that indicates or implies
29-26 that it is organized for a purpose other than banking;
29-27 (2) be the same as, or deceptively similar to, the
30-1 name of a state bank, corporation, or limited partnership or a
30-2 foreign corporation or limited partnership authorized to transact
30-3 business in this state.
30-4 (d) The participants of a limited banking association shall
30-5 adopt regulations that may be amended at any regular annual meeting
30-6 of the participants, or, if the purpose of the meeting is stated in
30-7 the notice, at any special meeting of the participants called for
30-8 that purpose. Neither the regulations nor any amendment to the
30-9 regulations may be effective until filed with the Banking
30-10 Commissioner and approved by the Banking Commissioner. The
30-11 regulations do not need to contain all of the provisions of the
30-12 participation agreement or address each subject matter of the
30-13 participation agreement, but in the event of a conflict between a
30-14 provision of the regulations and the participation agreement, the
30-15 regulation provision prevails. The participants may delegate to
30-16 the board of managers the power to alter, amend, or repeal the
30-17 regulations or to adopt new regulations, and the participants may
30-18 rescind a board action with regard to the regulations at a meeting
30-19 at which the amendment of regulations is permitted under this
30-20 article. The regulations may contain any provision for the
30-21 regulation and management of the affairs of the bank not
30-22 inconsistent with law or the articles of association.
30-23 Art. 63. APPLICATION FOR AND GRANTING OF LIMITED BANKING
30-24 ASSOCIATION CHARTERS--APPROVAL. (a) Applications for a charter
30-25 for a limited banking association shall be granted only on good and
30-26 sufficient proof that all of the following conditions presently
30-27 exist:
31-1 (1) a public necessity exists for the proposed bank;
31-2 (2) the proposed capital structure is adequate;
31-3 (3) the proposed bank's anticipated volume of business
31-4 is such as to indicate profitable operation;
31-5 (4) the proposed officers and managers have sufficient
31-6 banking experience, ability, and standing to render success of the
31-7 proposed bank probable; and
31-8 (5) the applicants are acting in good faith.
31-9 The burden to establish those conditions shall be on the
31-10 applicants.
31-11 (b) Applicants desiring to organize a limited banking
31-12 association shall file with the Banking Commissioner an application
31-13 for charter on official forms prepared and prescribed by the
31-14 Banking Commissioner. All persons subscribing to the participation
31-15 shares of the limited banking association shall sign and verify
31-16 under oath a statement of the participation shares subscribed,
31-17 which statement shall truly report the number of shares and the
31-18 amount to be paid in consideration; the names, identity, title, and
31-19 address of any other persons who will be beneficial owners of the
31-20 participation shares or otherwise share an interest or ownership in
31-21 the participation shares, or who will pay any portion of the
31-22 consideration; whether the participation shares are to be pledged
31-23 as security for any loan; whether a loan has been committed or is
31-24 intended for the subscription and purchase of the participation
31-25 shares, and if so, the name and address of the person or
31-26 corporation that is intended to loan funds for the purchase; and
31-27 the names of any cosigners, guarantors, partners or other persons
32-1 liable for the repayment of any loan financing the purchase of the
32-2 participation shares. Provided, however, that the verified
32-3 statement of the participants is confidential and privileged from
32-4 public disclosure prior to the final determination by the Board of
32-5 the application for a charter, unless the Board shall find that
32-6 public disclosure prior to the public hearing and final
32-7 determination of the charter application is necessary to a full
32-8 development of the factual records.
32-9 (c) The Banking Commissioner shall require deposit of the
32-10 charter fees required by law and shall proceed to conduct a
32-11 thorough investigation of the application, the applicants and their
32-12 personnel, and the charter conditions alleged. The actual expense
32-13 of the investigation and report shall be paid by the applicants,
32-14 and the Banking Commissioner may require a deposit in an estimated
32-15 amount, the balance to be paid in full prior to hearing of the
32-16 application. A written report of the investigation shall be
32-17 furnished to the State Banking Board and shall be made available to
32-18 all interested parties at their request.
32-19 (d) On filing of the application, the Banking Commissioner
32-20 shall promptly set the time and place for public hearing of the
32-21 application for charter, giving the applicants reasonable notice
32-22 thereof. Before the 10th day preceding the day on which the
32-23 hearing is held, the Banking Commissioner shall publish notice of
32-24 the hearing in a newspaper of general circulation in the county
32-25 where the proposed bank is to be located. If a protest of the
32-26 application is not filed, the Banking Commissioner may cancel the
32-27 hearing, and if the Banking Commissioner does so, the Board shall
33-1 vote to determine whether the necessary conditions set out in
33-2 Section (a) of this article have been established, based on the
33-3 application. If the Board votes to deny the application, the
33-4 Banking Commissioner shall notify the applicant and the applicant
33-5 may request a hearing on the application not later than the 30th
33-6 day after the date on which the notice is sent to the applicant.
33-7 After full and public hearing the Board shall vote and determine
33-8 whether the necessary conditions set out in Section (a) above have
33-9 been established. Should the Board, or a majority of the Board,
33-10 determine all of the conditions affirmatively, the application
33-11 shall be approved; if not, the application shall be denied. If
33-12 approved, and when the Banking Commissioner received satisfactory
33-13 evidence that the capital has been paid in full in cash, the
33-14 Banking Commissioner shall deliver to the organizers a certified
33-15 copy of the articles of association, and the limited banking
33-16 association shall come into existence. Provided, however, that the
33-17 State Banking Board may make its approval of any application
33-18 conditional, and if so shall set out the condition in the
33-19 resolution granting the charter, and the Banking Commissioner shall
33-20 not deliver the certified copy of the articles of association until
33-21 the condition has been met, after which the Banking Commissioner
33-22 shall in writing inform the State Banking Board as to compliance
33-23 with the condition and delivery of the articles of association.
33-24 (e) The provisions of the Administrative Procedure and Texas
33-25 Register Act (Article 6252-13a, Vernon's Texas Civil Statutes)
33-26 governing contested cases do not apply to charter applications
33-27 filed for the purpose of assuming the assets and liabilities of any
34-1 bank deemed by the Banking Commissioner to be in an unsafe
34-2 condition.
34-3 (f) The financial statement of a proposed officer or manager
34-4 filed under this article is confidential and not subject to public
34-5 disclosure.
34-6 Art. 64. LIABILITY OF PARTICIPANTS AND MANAGERS. (a)
34-7 Except as provided by Section (b) of this article, the
34-8 participants, participant-transferees, and managers of a limited
34-9 banking association may not be held liable for any debt,
34-10 obligation, or liability of the limited banking association or
34-11 under any judgment, decree, or order of court, for a debt,
34-12 obligation, or liability of the limited banking association. A
34-13 participant, other than a full liability participant, or a manager
34-14 of a limited banking association is not a proper party to
34-15 proceedings by or against a limited banking association, unless the
34-16 object of the proceeding is to enforce a participant's or manager's
34-17 right against or liability to a limited banking association.
34-18 (b) A full liability participant of a limited banking
34-19 association is liable under a judgment, decree, or order of court,
34-20 for a debt, obligation, or liability of the limited banking
34-21 association that accrued during the participation of the full
34-22 liability participant in the limited banking association and until
34-23 the full liability participant or a successor in interest files a
34-24 notice of withdrawal as a full liability participant from the
34-25 limited banking association with the Banking Commissioner. The
34-26 filed notice of withdrawal shall be available for public
34-27 inspection.
35-1 Art. 65. CONTRACTING DEBTS AND OBLIGATIONS. Except as
35-2 provided by this article or the articles of association or
35-3 regulations of the limited banking association, debts, liabilities,
35-4 and other obligations may be contracted for or incurred on behalf
35-5 of a limited banking association by:
35-6 (1) a majority of the managers, if management of the
35-7 limited banking association has been vested in a board of managers;
35-8 (2) a majority of the participants, if management of
35-9 the limited banking association is retained by the participants; or
35-10 (3) any officer or other agent vested with actual or
35-11 apparent authority.
35-12 Art. 66. CONTRIBUTION OF CAPITAL. Contributions of capital
35-13 by a participant of a limited banking association shall consist of
35-14 cash.
35-15 Art. 67. MANAGEMENT OF LIMITED BANKING ASSOCIATION. (a)
35-16 Management of a limited banking association is vested in the
35-17 participants in proportion to each participant's contribution to
35-18 capital as adjusted from time to time to properly reflect any
35-19 additional contribution. The articles of association may provide
35-20 that management of a limited banking association is vested in a
35-21 board of managers elected by the participants as prescribed by the
35-22 regulations. If management is by a board of managers, the
35-23 participants shall elect the managers annually as provided in the
35-24 regulations. If there are fewer than five (5), or more than
35-25 twenty-five (25) participants, management of the limited banking
35-26 association is vested in a board of managers consisting of not
35-27 fewer than five (5), nor more than twenty-five (25), managers. A
36-1 majority of managers must be residents of the state, or if
36-2 management is vested in the participants, a majority of the
36-3 participants must be residents of the state.
36-4 (b) The articles of association, regulations, and
36-5 participation agreement of a limited banking association may use
36-6 the terms "Director" and "Board" instead of "Manager" and "Board of
36-7 Managers," respectively.
36-8 Art. 68. AMENDMENT OF LIMITED BANKING ASSOCIATION ARTICLES
36-9 OF ASSOCIATION--RIGHTS OF PARTICIPANTS ON INCREASE IN CAPITAL. (a)
36-10 Subject to this code, a limited banking association may amend its
36-11 articles of association for any lawful purpose.
36-12 (b) If the participants of the association holding
36-13 two-thirds of the participation shares, at any regular meeting of
36-14 participants, or any special meeting of participants called for
36-15 that purpose, vote to amend the charter, the board shall prepare,
36-16 execute in the manner provided for the execution of articles of
36-17 association, and file with the Banking Commissioner an amendment to
36-18 the articles of association. If the Banking Commissioner finds
36-19 that the amendment is not violative of law and does not prejudice
36-20 the interest of depositors and creditors or the public, the Banking
36-21 Commissioner shall approve the amendment and deliver to the bank a
36-22 certified copy of the amendment, and the amendment is then
36-23 effective; provided, however, that if a limited banking association
36-24 does not have the power to receive demand deposits, no amendments
36-25 of its articles of association adopting any power under Section
36-26 (a), (b), (c), (d), or (f) of Article 2 of this chapter and no
36-27 amendment changing the domicile of any limited banking association
37-1 shall be effective until approved by the State Banking Board in the
37-2 manner provided for the approval of an original application for
37-3 charter. No limited banking association may amend its articles of
37-4 association to extend its period of existence for a perpetual
37-5 period or for any period of years unless the period of existence is
37-6 expressly contingent on those events resulting in dissolution of
37-7 the limited banking association provided for in Article 71 of this
37-8 chapter.
37-9 (c) Each participant or participant-transferee of a limited
37-10 banking association is entitled to the participant's or
37-11 participant-transferee's proportionate part of any increase in
37-12 participation share effected out of surplus funds or undivided
37-13 profits, and is entitled to subscribe to the participant's or
37-14 participant-transferee's proportionate share of any capital
37-15 increase to be paid in cash; provided, however, the bank may
37-16 arrange for the disposition of fractional shares by those entitled
37-17 to them or pay in cash the fair value of fractions of a share as of
37-18 the time when those entitled to receive the fractions are
37-19 determined. Each participant or participant-transferee must
37-20 subscribe for and pay the amount of the subscription within ten
37-21 (10) days after the participants have adopted the amendment,
37-22 otherwise the board may allocate the unsubscribed or unpaid portion
37-23 of the increase among the participants or otherwise as the board
37-24 deems to be in the best interest of the bank.
37-25 Art. 69. WITHDRAWAL OR REDUCTION OF PARTICIPANT'S
37-26 CONTRIBUTION TO CAPITAL. (a) Subject to Article 1, Chapter VI, of
37-27 this code a participant may not receive from a limited banking
38-1 association any part of the participant's contribution to capital
38-2 until:
38-3 (1) all liabilities of the bank, except liabilities to
38-4 participants on account of contribution to capital, have been paid
38-5 or, if after the withdrawal or reduction, sufficient property of
38-6 the bank will remain to pay those liabilities;
38-7 (2) all participants consent, unless the return of the
38-8 contribution to capital may be demanded as provided in this
38-9 chapter; or
38-10 (3) the articles of association are canceled or
38-11 amended to set out the withdrawal or reduction.
38-12 (b) A participant may demand the return of the participant's
38-13 contribution to capital on the dissolution of the association and
38-14 the failure by the participants to exercise the right for the
38-15 business of the limited banking association to be carried on by the
38-16 remaining participants as provided by Article 71 of this chapter.
38-17 (c) Unless allowed by the articles of association or by the
38-18 unanimous consent of all participants of the limited banking
38-19 association, a participant may demand the return of the
38-20 participant's contribution to capital only in cash.
38-21 Art. 70. INTEREST IN LIMITED BANKING ASSOCIATION;
38-22 TRANSFERABILITY OF INTEREST. (a) The interest of all participants
38-23 or participant-transferees in a limited banking association is the
38-24 personal estate of the participant or the participant-transferee
38-25 and may be transferred or assigned as provided by the regulations
38-26 or the participation agreement. A transferee of a participant's
38-27 interest has the status of a participant-transferee and does not by
39-1 the transfer become a participant or obtain any right to
39-2 participate in the management of the limited banking association.
39-3 A participant-transferee is entitled to receive only a share of
39-4 profits, return of contribution, or other distributive benefit in
39-5 respect to the interest transferred to which the participant who
39-6 transferred or assigned the interest would otherwise be entitled.
39-7 A participant-transferee may become a participant only if:
39-8 (1) all of the participants of the limited banking
39-9 association approve the acceptance of the participant-transferee as
39-10 a participant by unanimous written consent; or
39-11 (2) specifically authorized in the articles of
39-12 association, the regulations, or the participation agreement and
39-13 all of the full liability participants of the limited banking
39-14 association approve the acceptance of the participant-transferee as
39-15 a participant by unanimous written consent.
39-16 (b) Additional participants may be added by a limited
39-17 banking association in the same manner as participant-transferees
39-18 after payment in full in cash of the capital contribution to the
39-19 limited banking association payable in respect to the issuance of
39-20 additional participation interests.
39-21 Art. 71. DISSOLUTION. A limited banking association
39-22 organized under this chapter is dissolved on:
39-23 (1) the expiration of the period fixed for the
39-24 duration of the limited banking association;
39-25 (2) a vote to dissolve or the execution of a written
39-26 consent to dissolve by all full liability participants, if any, and
39-27 a sufficient number of other participants that combined with all
40-1 full liability participants hold at least two-thirds of the
40-2 participation interest in the association, or a greater fraction as
40-3 provided by the articles of association, and that include all full
40-4 liability participants; or
40-5 (3) except as provided by the articles of association,
40-6 the death, insanity, expulsion, bankruptcy, retirement, or
40-7 resignation of a full liability participant, if the limited banking
40-8 association has a full liability participant, unless:
40-9 (A) at least one full liability participant
40-10 remains in the association after the occurrence of the event; or
40-11 (B) all remaining participants elect in writing
40-12 not later than the 90th day after the occurrence of the event to
40-13 continue the business of the association.
40-14 Art. 72. OTHER PROVISIONS RELATED TO LIMITED BANKING
40-15 ASSOCIATIONS. A limited banking association is subject to this
40-16 code. For purposes of the provisions of this code other than this
40-17 subchapter:
40-18 (1) a manager and the board of managers are considered
40-19 to be a director and the board of directors, respectively;
40-20 (2) if there is not a board of managers, a participant
40-21 is considered to be a director and all of the participants are
40-22 considered to be the board of directors;
40-23 (3) a participant or participant-transferee is
40-24 considered to be a stockholder;
40-25 (4) a participation share is considered to be a share
40-26 of stock; and
40-27 (5) regulations are considered to be bylaws of the
41-1 association.
41-2 SECTION 4. Section F, Article 1a, Chapter IV, The Texas
41-3 Banking Code (Article 342-401a, Vernon's Texas Civil Statutes), is
41-4 amended to read as follows:
41-5 F. This Article does not apply to:
41-6 (1) the acquisition of securities in connection with
41-7 the exercise of a security interest or otherwise by way of
41-8 foreclosure on default in the payment of a debt previously
41-9 contracted for in good faith, provided that the person acquiring
41-10 such securities does not vote the securities so acquired without
41-11 having given written notice of such foreclosure to the Banking
41-12 Commissioner;
41-13 (2) transactions governed by Article 5, 6, or 7 <8, 9,
41-14 or 10> of Chapter III of this Code;
41-15 (3) transactions requiring the prior approval of the
41-16 Board of Governors of the Federal Reserve System under the Bank
41-17 Holding Company Act of 1956 (12 U.S.C.A. Sec. 1841, et seq., and 26
41-18 U.S.C.A., Sec. 1101, et seq.);
41-19 (4) acquisitions by the owner of more than fifty per
41-20 cent (50%) of the voting securities of the bank; or acquisitions of
41-21 less than ten per cent (10%) of the voting securities of the bank
41-22 in any one (1) year by the owner of twenty-five per cent (25%) or
41-23 more, but not more than fifty per cent (50%), of those voting
41-24 securities, provided that such acquisition does not result in the
41-25 owner of twenty-five per cent (25%) or more acquiring fifty per
41-26 cent (50%) or more of the voting securities;
41-27 (5) acquisitions or transfers by operation of law or
42-1 by will or intestate succession, provided that the person acquiring
42-2 such securities does not vote the securities so acquired without
42-3 having given written notice of acquisition to the Banking
42-4 Commissioner; or
42-5 (6) any transaction which the Banking Commissioner by
42-6 rule or order may exempt as not being contemplated by the purposes
42-7 of this Article or the regulation of which is not necessary or
42-8 appropriate to achieve the objectives of this Article.
42-9 No provision of this Section shall excuse or diminish the
42-10 notice requirements provided elsewhere in this Code.
42-11 SECTION 5. Article 6, Chapter V, The Texas Banking Code
42-12 (Article 342-506, Vernon's Texas Civil Statutes), is amended to
42-13 read as follows:
42-14 Art. 6. Own Stock--Security--Acquisition--Disposition--
42-15 Investment Certificates--Maturity. No state bank shall acquire a
42-16 lien by pledge or otherwise on its shares of stock nor purchase or
42-17 acquire title to such stock, except to prevent loss upon a loan or
42-18 investment previously made in good faith. Provided, however, that
42-19 with the approval of the owners of record of two-thirds of the
42-20 capital stock, a bank may purchase and carry as treasury stock its
42-21 own shares for the purpose of fulfilling the requirements of an
42-22 officer or employee stock option or bonus plan authorized by
42-23 Article 32 or 68 <12>, Chapter III of this code.
42-24 The number of shares so held shall not, at any time, exceed
42-25 five per cent (5%) of the total number of shares outstanding in the
42-26 hands of the other stockholders.
42-27 If a state bank acquires a lien upon or title to its stock
43-1 under the exception first provided for in this Article, it shall
43-2 not permit such lien to continue for more than two (2) years, nor
43-3 shall it hold title to such stock for more than one (1) year.
43-4 Provided that the stock on which the bank has a lien plus the stock
43-5 held by it as owner shall not exceed, in par value, the aggregate
43-6 of all surplus accounts and undivided profits of said bank;
43-7 provided, however, that any provision of this Code to the contrary
43-8 notwithstanding, a state bank may make loans, charge or collect in
43-9 advance interest thereon at a rate not exceeding that permitted by
43-10 law, together with other charges permitted by this Code, and take
43-11 as collateral thereof its investment certificates, issued
43-12 simultaneously with the granting of the loans or otherwise,
43-13 requiring weekly, semi-monthly, monthly or other regular periodic
43-14 installments to be paid upon such certificates; such loans, subject
43-15 to acceleration for specified causes, shall mature when the
43-16 withdrawal value of the investment certificate or certificates
43-17 securing the same equals the face amount of the note evidencing the
43-18 loans, and shall be comparable in form and principle of operation
43-19 to sinking-fund loans which building and loan associations are now
43-20 authorized to make under the laws of this State.
43-21 SECTION 6. Article 2, Chapter VII, The Texas Banking Code
43-22 (Article 342-702, Vernon's Texas Civil Statutes), is amended to
43-23 read as follows:
43-24 Art. 2. BROKERED FUNDS DEFINED--REPORTING--BANKING
43-25 COMMISSIONER'S AUTHORITY. For the purpose of this article,
43-26 "brokered funds" are funds accepted by a bank on which a fee in
43-27 money is paid or agreed to be paid, directly or indirectly, either
44-1 to the depositor of such funds or a third party by such bank or a
44-2 third party, in addition to any interest to be paid under the
44-3 contract of repayment.
44-4 In the event that any bank shall accept brokered funds as
44-5 defined herein, it shall forthwith notify the Banking Commissioner
44-6 in writing of the acceptance of such funds, the depositor and his
44-7 address, any loans, if any, made in consideration of or conditioned
44-8 upon said deposit, and listing the borrower, his address, and any
44-9 collateral securing said loan, and such other information
44-10 concerning said deposit and loan as the Banking Commissioner may
44-11 require and on such forms as may be prescribed by the Banking
44-12 Commissioner. The Banking Commissioner may further require any
44-13 bank to report such brokered funds and loans as above described, if
44-14 any, which have been accepted or made previous to the effective
44-15 date of this Act.
44-16 Provided, however, should the Banking Commissioner find from
44-17 examination or other evidence that a bank is being operated in an
44-18 unsafe manner, or insolvency of the bank is threatened, or the
44-19 continued acceptance of brokered funds will threaten the liquidity
44-20 of the bank, then the Banking Commissioner shall have the authority
44-21 to act as follows:
44-22 (a) to issue an order to cease and desist from further
44-23 accepting any brokered funds, or otherwise to regulate the amount
44-24 of such funds which may be accepted or the rate of interest to be
44-25 paid, and
44-26 (b) to issue a written order stating that after the
44-27 effective date thereof all brokered funds accepted by said bank
45-1 shall be and are hereby classified as the issuance, sale and
45-2 negotiation of "notes, bonds, and other evidence of indebtedness"
45-3 by the bank as provided in Paragraph (h), Article 2 <1>, Chapter
45-4 III of such Code, and not as deposits received by the bank as
45-5 provided in Paragraph (a), Article 2 <1>, Chapter III of the
45-6 Banking Code of 1943 as amended. In the event that brokered funds
45-7 are accepted after issuance of such order, it shall be the duty of
45-8 said bank to state in the contract of repayment that in the event
45-9 of liquidation of the issuing bank, the owner and holder of such
45-10 contract of repayment shall be considered and treated as a common
45-11 creditor and not as a depositor of the bank, and a cash reserve of
45-12 ten percent (10%) of the total outstanding brokered funds shall be
45-13 maintained against such funds, in the same manner as cash reserves
45-14 are maintained against demand deposits and time deposits.
45-15 Provided further, that the Banking Commissioner may exercise
45-16 any or all of the powers above provided, which shall be cumulative
45-17 of any other powers and remedies provided elsewhere in this Code.
45-18 SECTION 7. Section 171.001(b), Tax Code, is amended to read
45-19 as follows:
45-20 (b) In this chapter:
45-21 (1) "Banking corporation" means each state, national,
45-22 domestic, or foreign bank, including a limited banking association
45-23 organized under Subchapter C, Chapter III, The Texas Banking Code
45-24 (Article 342-360 et seq., Vernon's Texas Civil Statutes), and each
45-25 bank organized under Section 25(a), Federal Reserve Act (12 U.S.C.
45-26 Secs. 611-631) (edge corporations), but does not include a bank
45-27 holding company as that term is defined by Section 2, Bank Holding
46-1 Company Act of 1956 (12 U.S.C. Sec. 1841).
46-2 (2) "Corporation" includes:
46-3 (A) a limited liability company, as defined
46-4 under the Texas Limited Liability Company Act; and
46-5 (B) a state or federal savings and loan
46-6 association.
46-7 (3) "Charter" includes a limited liability company's
46-8 certificate of organization.
46-9 (4) "Internal Revenue Code" means the Internal Revenue
46-10 Code of 1986 in effect for the federal tax year beginning on or
46-11 after January 1, 1990, and before January 1, 1991, and any
46-12 regulations adopted under that code applicable to that period.
46-13 (5) "Officer" and "director" include a limited
46-14 liability company's directors and managers and a limited banking
46-15 association's directors and managers and participants if there are
46-16 no directors or managers.
46-17 (6) "Savings and loan association" includes a state or
46-18 federal savings bank.
46-19 (7) "Shareholder" includes a limited liability
46-20 company's member and a limited banking association's participant.
46-21 SECTION 8. The importance of this legislation and the
46-22 crowded condition of the calendars in both houses create an
46-23 emergency and an imperative public necessity that the
46-24 constitutional rule requiring bills to be read on three several
46-25 days in each house be suspended, and this rule is hereby suspended.