1-1 By: Carona (Senate Sponsor - Parker) H.B. No. 1212
1-2 (In the Senate - Received from the House May 13, 1993;
1-3 May 14, 1993, read first time and referred to Committee on Economic
1-4 Development; May 21, 1993, reported favorably by the following
1-5 vote: Yeas 10, Nays 0; May 21, 1993, sent to printer.)
1-6 COMMITTEE VOTE
1-7 Yea Nay PNV Absent
1-8 Parker x
1-9 Lucio x
1-10 Ellis x
1-11 Haley x
1-12 Harris of Dallas x
1-13 Harris of Tarrant x
1-14 Leedom x
1-15 Madla x
1-16 Rosson x
1-17 Shapiro x
1-18 Wentworth x
1-19 A BILL TO BE ENTITLED
1-20 AN ACT
1-21 relating to the creation of state limited banking associations.
1-22 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-23 SECTION 1. Article 2, Chapter I, The Texas Banking Code
1-24 (Article 342-102, Vernon's Texas Civil Statutes), is amended by
1-25 amending Subsections (8), (10), and (24) and adding Subsections
1-26 (26) and (27) to read as follows:
1-27 (8) "State Bank"--Any banking association or limited
1-28 banking association <corporation hereafter> organized under this
1-29 Code, and any corporation heretofore organized under the laws of
1-30 the State of Texas, and which was, prior to the effective date of
1-31 this Act, subject to the provisions of Title 16 of the Revised
1-32 Civil Statutes of Texas, 1925, as amended, including banks, trust
1-33 companies, bank and trust companies, savings banks and corporations
1-34 subject to the provisions of Chapter 9, Title 16 of the Revised
1-35 Civil Statutes of Texas, 1925, as amended.
1-36 (10) "Board"--Board of directors or board of managers
1-37 of a state bank or a person or group of persons acting in a
1-38 comparable capacity for a private bank.
1-39 (24) "Control"--The ability or power to vote, directly
1-40 or indirectly, 25 percent or more of any class of voting securities
1-41 or the ability to control in any manner the election of a majority
1-42 of the board of directors or board of managers.
1-43 (26) "Banking Association"--A state bank that is
1-44 organized under Subchapter B, Chapter III, of this Code.
1-45 (27) "Limited Banking Association"--A state bank that
1-46 is organized under Subchapter C, Chapter III, of this Code.
1-47 SECTION 2. Section (a), Article 13, Chapter I, The Texas
1-48 Banking Code (Article 342-113, Vernon's Texas Civil Statutes), is
1-49 amended to read as follows:
1-50 (a) The Finance Commission, through resolution, may
1-51 promulgate general rules and regulations not inconsistent with the
1-52 Constitution and Statutes of this State, and from time to time
1-53 amend the same, which rules and regulations shall be applicable
1-54 alike to all state banks and, where indicated, to all private banks
1-55 to effect the following ends and purposes:
1-56 1. To prevent state banks, as determined by the
1-57 Finance Commission to be required to protect investors in state
1-58 banks, from concentrating an excessive or unreasonable portion of
1-59 their resources in any particular type or character of loan,
1-60 security, or investment and to otherwise establish standards for
1-61 investments by state banks.
1-62 2. To provide adequate fidelity coverage or insurance
1-63 on the officers and employees of state banks, and fire, burglary,
1-64 robbery and other casualty coverage for state banks, so as to
1-65 prevent loss through theft, defalcation or other casualty, and to
1-66 make certain that the insurer or surety is solvent and will be able
1-67 to pay losses sustained.
1-68 3. To provide for the preservation of the books and
2-1 records of the Banking Department and of state and private banks
2-2 during such time as said books and records are of value, and to
2-3 permit the destruction or other disposition of such books and
2-4 records after the same are no longer of any value.
2-5 4. To permit state banks to transact their affairs in
2-6 any manner or make any loan or investment which they could do under
2-7 existing or any future law, rule or regulation were they organized
2-8 and operating as a National bank under the laws of the United
2-9 States; but this authority does not abridge State laws or diminish
2-10 or limit any rights or powers specifically given to state banks by
2-11 such laws; and it is further provided that, any provision of this
2-12 Code to the contrary notwithstanding, the transaction of affairs
2-13 and making of loans or investments permitted by valid rules and
2-14 regulations shall not constitute a violation of any penal provision
2-15 of the statutes of this state.
2-16 5. From time to time upon request of the Banking
2-17 Commissioner, to define, identify and determine incidental powers
2-18 which a state or private bank may exercise as necessary to its
2-19 specific powers under Article 2 <1>, Chapter III of this Code.
2-20 SECTION 3. Chapter III, The Texas Banking Code (Article
2-21 342-301 et seq., Vernon's Texas Civil Statutes), is amended to read
2-22 as follows:
2-23 CHAPTER THREE--ORGANIZATION <INCORPORATION>, MERGER,
2-24 REORGANIZATION, PURCHASE OF ASSETS OF ANOTHER BANK, DISBURSING
2-25 AGENT<, AMENDMENT OF ARTICLES OF ASSOCIATION> OF STATE
2-26 BANKS; SPECIAL PROVISIONS FOR LIMITED BANKING ASSOCIATIONS;<,>
2-27 AND CONVERSION
2-28 SUBCHAPTER A. GENERAL PROVISIONS
2-29 Art. 1. ORGANIZATION OF STATE BANKS. Subject to the
2-30 provisions of this Code, a state bank may be organized as either a
2-31 banking association or as a limited banking association.
2-32 Art. 2. POWERS. Subject to the provisions of this Code,
2-33 five (5) or more persons, a majority of whom are residents of this
2-34 state, may form a banking association or a limited banking
2-35 association <incorporate a state bank>, with any one or more of all
2-36 the following powers:
2-37 (a) To receive time and demand deposits at interest or
2-38 without interest; to lend money with or without security at
2-39 interest; and to buy, sell and discount bonds, negotiable
2-40 instruments and other evidences of indebtedness;
2-41 (b) To act as fiscal agent or transfer agent and in
2-42 such capacity to receive and disburse money and to transfer
2-43 registered and countersigned certificates of stock, bonds or other
2-44 evidences of indebtedness;
2-45 (c) To act as trustee under any mortgage or bond issue
2-46 and to accept and execute any trust not inconsistent with the laws
2-47 of this state;
2-48 (d) To act under the order or appointment of any court
2-49 of record, without giving bond, as guardian, receiver, trustee,
2-50 executor, administrator and, although without general depository
2-51 powers, as depository for any moneys paid into court;
2-52 (e) To purchase, invest in, and sell bills of
2-53 exchange, bonds, mortgages and other evidences of indebtedness, and
2-54 to lend money and to charge and collect interest thereon in advance
2-55 or otherwise;
2-56 (f) To receive savings deposits with or without the
2-57 payment of interest;
2-58 (g) To receive time deposits with or without the
2-59 payment of interest;
2-60 (h) To issue, sell and negotiate notes, bonds and
2-61 other evidences of indebtedness, and, in addition, to issue and
2-62 sell, for cash or on an installment basis, investment certificates,
2-63 creating no relation of debtor and creditor between the bank and
2-64 the holder, to be retired solely out of specified surplus,
2-65 reserves, or special retirement account, and containing such
2-66 provisions relative to yield, retirement, penalties, withdrawal
2-67 values, and obligations of the issuing bank as may be approved by
2-68 the Banking Commissioner.
2-69 A state bank shall have all incidental powers necessary to
2-70 exercise its specific powers.
3-1 Art. 3 <2>. Legislative Control. The rights, privileges and
3-2 powers conferred by this Code are held subject to the right of the
3-3 Legislature to amend, alter or reform the same.
3-4 <Art. 4. ARTICLES OF ASSOCIATION. The articles of
3-5 association of a state bank shall be signed and acknowledged by
3-6 each incorporator and shall contain:>
3-7 <1. The name of the corporation.>
3-8 <2. The city or town and the county of its domicile.>
3-9 <3. Such of the powers listed in Article 1 of this
3-10 Chapter as it shall choose to exercise.>
3-11 <4. The capital and the denomination and number of
3-12 shares.>
3-13 <5. The preferred stock, if any, and the terms and
3-14 conditions of its issuance.>
3-15 <6. The number of directors.>
3-16 <7. The period of duration, which may be perpetual.>
3-17 <Art. 5. APPLICATION FOR AND GRANTING OF CHARTERS--APPROVAL.
3-18 A. Applications for a State bank charter shall be granted only
3-19 upon good and sufficient proof that all of the following conditions
3-20 presently exist:>
3-21 <(1) A public necessity exists for the proposed bank;>
3-22 <(2) The proposed capital structure is adequate;>
3-23 <(3) The proposed bank's anticipated volume of
3-24 business is such as to indicate profitable operation;>
3-25 <(4) The proposed officers and directors have
3-26 sufficient banking experience, ability and standing to render
3-27 success of the proposed bank probable; and>
3-28 <(5) The applicants are acting in good faith.>
3-29 <The burden to establish said conditions shall be upon the
3-30 applicants.>
3-31 <B. Applicants desiring to incorporate a State bank shall
3-32 file with the Banking Commissioner an application for charter upon
3-33 official forms prepared and prescribed by the Banking Commissioner.
3-34 All persons subscribing to the capital stock of the proposed bank
3-35 shall sign and verify under oath a statement of such stock
3-36 subscribed, and which statement shall truly report the number of
3-37 shares and the amount to be paid in consideration; the names,
3-38 identity, title and address of any other persons who will be
3-39 beneficial owners of such stock or otherwise share an interest or
3-40 ownership in said stock, or who will pay any portion of the
3-41 consideration; whether said stock is to be pledged as security for
3-42 any loan; whether a loan has been committed or is intended for the
3-43 subscription and purchase of said stock, and if so, the name and
3-44 address of such person or corporation which is intended to loan
3-45 funds for said purchase; the names of any cosigners, guarantors,
3-46 partners or other persons liable for the repayment of any loan
3-47 financing the purchase of such stock. Provided, however, that the
3-48 verified statement of subscribers to stock shall be confidential
3-49 and privileged from public disclosure prior to the final
3-50 determination by the Board of the application for a charter, unless
3-51 the Board shall find that public disclosure prior to public hearing
3-52 and final determination of the charter application is necessary to
3-53 a full development of the factual record.>
3-54 <C. The Banking Commissioner shall require deposit of such
3-55 charter fees as are required by law and shall proceed to conduct a
3-56 thorough investigation of the application, the applicants and their
3-57 personnel, and the charter conditions alleged. The actual expense
3-58 of such investigation and report shall be paid by the applicants,
3-59 and the Banking Commissioner may require a deposit in an estimated
3-60 amount, the balance to be paid in full prior to hearing of the
3-61 application. A written report of the investigation shall be
3-62 furnished to the State Banking Board and shall be made available to
3-63 all interested parties at their request.>
3-64 <D. Upon filing of the application, the Banking Commissioner
3-65 shall promptly set the time and place for public hearing of the
3-66 application for charter, giving the applicants reasonable notice
3-67 thereof. Before the 10th day preceding the day on which the
3-68 hearing is held, the Banking Commissioner shall publish notice of
3-69 the hearing in a newspaper of general circulation in the county
3-70 where the proposed bank is to be located. If a protest of the
4-1 application is not filed, the Banking Commissioner may cancel the
4-2 hearing, and if the Banking Commissioner does so, the Board shall
4-3 vote to determine whether the necessary conditions set out in
4-4 Section A of this article have been established, based on the
4-5 application. If the Board votes to deny the application, the
4-6 Banking Commissioner shall notify the applicant and the applicant
4-7 may request a hearing on the application not later than the 30th
4-8 day after the date on which the notice is sent to the applicant.
4-9 After full and public hearing the Board shall vote and determine
4-10 whether the necessary conditions set out in Section A above have
4-11 been established. Should the Board, or a majority of the Board,
4-12 determine all of the said conditions affirmatively, then the
4-13 application shall be approved; if not, then the application shall
4-14 be denied. If approved, and when the Banking Commissioner receives
4-15 satisfactory evidence that the capital has been paid in full in
4-16 cash, the Banking Commissioner shall deliver to the incorporators a
4-17 certified copy of the Articles of Association, and the bank shall
4-18 come into corporate existence. Provided, however, that the State
4-19 Banking Board may make its approval of any application conditional,
4-20 and in such event shall set out such condition in the resolution
4-21 granting the charter, and the Banking Commissioner shall not
4-22 deliver the certified copy of the Articles of Association until
4-23 such condition has been met, after which the Banking Commissioner
4-24 shall in writing inform the State Banking Board as to compliance
4-25 with such condition and delivery of the Articles of Association.>
4-26 <E. The provisions of the Administrative Procedure and Texas
4-27 Register Act (Article 6252-13a, Vernon's Texas Civil Statutes)
4-28 governing contested cases do not apply to charter applications
4-29 filed for the purpose of assuming the assets and liabilities of any
4-30 bank deemed by the Banking Commissioner to be in an unsafe
4-31 condition.>
4-32 <F. The financial statement of a proposed officer or
4-33 director filed under this article is confidential and not subject
4-34 to public disclosure.>
4-35 Art. 4 <7>. Certificate Of Authority--Posting--Revocation Of
4-36 Charter. No state bank may do business until it receives a
4-37 certificate of authority from the Banking Commissioner, which shall
4-38 not be delivered until it has elected the officers and directors or
4-39 managers, as appropriate, named in the application for charter or
4-40 other officers and directors or managers approved by the Banking
4-41 Commissioner; shall have adopted by-laws approved by the Banking
4-42 Commissioner; and shall have complied with all the other
4-43 requirements of this Code relative to the incorporation of state
4-44 banks.
4-45 If any state bank does not open and actually engage in
4-46 business within three months after the granting of its charter, or
4-47 conditional approval of application for charter, the Banking
4-48 Commissioner may so inform the State Banking Board which may in its
4-49 discretion forfeit the charter or cancel its conditional approval
4-50 of application for charter, without any judicial action.
4-51 Each state bank shall keep its certificate of authority
4-52 posted in its lobby at a point accessible to the public.
4-53 Art. 5 <8>. Merger--Trust Powers. Any two or more state
4-54 banks, or if national banks are hereafter authorized by the laws of
4-55 the United States to participate in such a merger, any one or more
4-56 state banks and any one or more national banks domiciled in this
4-57 State may, with the approval of the Banking Commissioner and the
4-58 written consent of the owners of record of two-thirds of the
4-59 capital of each of said banks, be merged. Said merging banks shall
4-60 file with the Banking Commissioner:
4-61 (1) A statement of the plan of merger approved by the
4-62 board of directors or managers, as appropriate, of each merging
4-63 bank, by a majority vote of the qualified directors or managers.
4-64 (2) Certificate of merger stating the facts required
4-65 by Article 30 or Article 62, as appropriate, <4> of this chapter
4-66 and executed and acknowledged by a majority of the qualified
4-67 directors or managers of each merging bank.
4-68 The Banking Commissioner shall thereupon investigate the
4-69 condition of the merging banks and if he finds that the state bank
4-70 which will result from the merger (hereafter called the "resulting
5-1 bank") will be solvent and its capital unimpaired; that it will
5-2 have adequate capital structure; that such merger does not violate
5-3 the anti-trust laws of this state; and that the resulting bank has
5-4 in all respects complied with the laws of this State relative to
5-5 the incorporation of State banks, he may approve such merger, and,
5-6 if he so approves, he shall deliver to the resulting bank a
5-7 certified copy of the certificate of merger, which certificate
5-8 shall constitute the charter and articles of association of the
5-9 resulting bank. The resulting bank shall be deemed a continuation
5-10 in entity and identity of each of the banks involved in the merger;
5-11 shall be subject to all the liabilities, obligations, duties and
5-12 relations of each merging bank; and shall without the necessity of
5-13 any conveyance, assignment or transfer become the owner of all of
5-14 the assets of every kind and character formerly belonging to the
5-15 merging banks; further, provided, that if any merging bank shall at
5-16 the time of the merger be acting as trustee, guardian, executor,
5-17 administrator, or in any other fiduciary capacity, the resulting
5-18 bank shall, without the necessity of any judicial action or action
5-19 by the creator of such trust, continue such office, trust or
5-20 fiduciary relationship and shall perform all of the duties and
5-21 obligations and exercise all of the powers and authority connected
5-22 with or incidental to such fiduciary relationship in the same
5-23 manner as though the resulting bank had been originally named or
5-24 designated as such fiduciary.
5-25 The naming or designating by a testator, or the creator of a
5-26 living trust, of any one of the merging banks to act as trustee,
5-27 guardian, executor or in any other fiduciary capacity shall be
5-28 considered the naming or designating of the bank resulting from the
5-29 merger.
5-30 A stockholder may dissent from the merger by following the
5-31 procedure provided by Article 5.12, Texas Business Corporation Act.
5-32 That procedure applies to a merger under this article, as if the
5-33 state bank were a corporation organized under the Texas Business
5-34 Corporation Act.
5-35 Art. 6 <9>. Reorganization--Incorporation To Take Over
5-36 Business Of Other Banks--Trust Powers. A state bank may be
5-37 incorporated to take over the business of any incorporated bank or
5-38 banks, state or national, as a step in the reorganization of such
5-39 bank or banks, (which bank or banks, whether one or more, will be
5-40 hereafter referred to as the "reorganizing bank"), and shall,
5-41 subject to the provisions of this article, be authorized to
5-42 purchase assets from the reorganizing bank and as consideration
5-43 therefor, assume all liabilities, known or unknown, of the
5-44 reorganizing bank, other than its liability to stockholders as
5-45 such.
5-46 Persons desiring to incorporate a state bank under the
5-47 provisions of this article shall proceed in the manner provided in
5-48 Article 31 and Article 63 <5> of this Chapter, and in addition,
5-49 shall file with the Banking Commissioner:
5-50 (1) The proposed contract whereby the state bank is to
5-51 purchase the assets from and assume the liabilities of the
5-52 reorganizing bank, as above mentioned.
5-53 (2) Contracts, if any, whereby the proposed state bank
5-54 is to purchase for cash the whole or any part of the right of any
5-55 or all of the stockholders of the reorganizing bank to receive
5-56 liquidating dividends upon liquidation of the reorganizing bank,
5-57 which contracts shall expressly provide that they shall be binding
5-58 and effective only in event the reorganizing bank is placed in
5-59 voluntary liquidation within ten (10) days of the granting of the
5-60 application for the charter applied for. Such contracts shall be
5-61 executed on behalf of the proposed bank by the persons applying for
5-62 the charter.
5-63 If the Banking Commissioner, after investigation, determines
5-64 that the proposed bank, if incorporated, will, after its capital
5-65 has been paid in full and all contracts above mentioned finally
5-66 consummated, be solvent, its capital adequate and unimpaired, that
5-67 such reorganization is to the best interest of the reorganizing
5-68 bank, its depositors, creditors and stockholders and the public in
5-69 general, and that upon incorporation such bank will have in all
5-70 other respects complied with the law, he shall recommend to the
6-1 State Banking Board that the charter be granted.
6-2 If the State Banking Board concurs in the findings of the
6-3 Banking Commissioner, it shall grant the application, and the
6-4 Banking Commissioner shall deliver a certified copy of the articles
6-5 of association in the manner provided in Article 31 and Article 63
6-6 <5> of this chapter. Provided, however, that the Banking
6-7 Commissioner shall not deliver a certificate of authority until the
6-8 contracts above mentioned have been fully consummated, and the
6-9 requirements of Article 4 <7> of this chapter have been met. The
6-10 state bank so incorporated shall be deemed a reorganization of the
6-11 reorganizing bank, and a continuation of such bank in entity and
6-12 identity, subject to all of its liabilities, obligations, duties
6-13 and relations, save and except its liability to stockholders as
6-14 such, and shall pay and perform each and every obligation, duty and
6-15 liability of the reorganizing bank in exactly the same manner as
6-16 the reorganizing bank was obligated to do; further provided that if
6-17 the reorganizing bank was at the time of incorporation of the new
6-18 state bank, named or acting as guardian, trustee, executor,
6-19 administrator or in any other fiduciary capacity, such state bank
6-20 shall, without the necessity of any judicial action, or action by
6-21 the creator of such trust, continue the trusteeship or other
6-22 fiduciary relation and perform all of the duties and obligations of
6-23 the reorganizing bank and exercise all the powers and authority
6-24 relative thereto; and neither the reorganization of such bank, nor
6-25 any liquidation of such bank in connection therewith, shall be
6-26 deemed a resignation or refusal to act. The naming or designating
6-27 by a testator or the creator of a living trust of the reorganizing
6-28 bank to act as trustee, guardian, executor, or in any other
6-29 fiduciary capacity shall be considered the naming or designating of
6-30 the bank resulting from the reorganization.
6-31 The new state bank shall give notice of its assumption of the
6-32 liabilities of the reorganizing bank by publishing notice thereof
6-33 once each week for a period of two (2) weeks in some newspaper of
6-34 general circulation published in the county of its domicile, or in
6-35 event no such newspaper is published in said county, then in a
6-36 newspaper of general circulation published in an adjacent county.
6-37 The first notice shall be published within ten (10) days after the
6-38 delivery of the certificate of authority to such bank.
6-39 Art. 7 <10>. Purchase Of Assets Of Another Bank--Disbursing
6-40 Agent. Any state bank may, with the consent of the Banking
6-41 Commissioner, purchase the whole or any part of the assets of any
6-42 other state bank or of any national bank domiciled in this State,
6-43 and may hold the purchase price and any additional funds delivered
6-44 to it by the selling bank in trust for or as a deposit to the
6-45 credit of the selling bank. The purchasing bank may act as agent
6-46 of the selling bank in disbursing the funds so held in trust or on
6-47 deposit by paying the depositors and creditors of the selling bank,
6-48 provided that if the purchasing bank acts under written contract of
6-49 agency which specifically names each depositor and creditor and the
6-50 amount to be paid each, and if such agency is confined to the
6-51 purely ministerial act of paying such depositors and creditors the
6-52 amounts due them as determined by the selling bank and reflected in
6-53 the contract of agency and involves no discretionary duties or
6-54 authority other than the identification of the depositors and
6-55 creditors named, and if such contract is approved by the Banking
6-56 Commissioner, then the purchasing bank may rely upon such contract
6-57 of agency and the instructions included therein, and shall not be
6-58 in any way liable or responsible for any error made by the selling
6-59 bank in determining its liabilities, the depositors and creditors
6-60 to whom such liabilities are due, or the amounts due such
6-61 depositors and creditors; nor liable or in any way responsible for
6-62 any preference which may result from the payments made pursuant to
6-63 such contract of agency and the instructions included therein.
6-64 Further provided that, in event the selling bank should, at any
6-65 time after such sale of assets, be closed and come into the hands
6-66 of the Banking Commissioner or, if a national bank into the hands
6-67 of a receiver, then the purchasing bank shall pay to the Banking
6-68 Commissioner as statutory liquidator or to the receiver of such
6-69 national bank the balance of the funds held by it in trust or on
6-70 deposit for the selling bank, not theretofore paid to the
7-1 depositors and creditors of the selling bank, and shall thereupon
7-2 stand discharged of any and all liabilities, obligations or
7-3 responsibilities to the selling bank, its receiver, the Banking
7-4 Commissioner as its statutory liquidator, or to the depositors,
7-5 creditors or stockholders thereof. Provided further that payment
7-6 to any depositor or creditor of the selling bank of the amount to
7-7 be paid him under the terms of the contract of agency may be
7-8 effected by the purchasing bank opening an account in the name of
7-9 such depositor or creditor, crediting such account with the amount
7-10 to be paid the depositor or creditor under the terms of such agency
7-11 contract, and mailing a duplicate deposit ticket evidencing such
7-12 credit to such depositor or creditor at his address as reflected by
7-13 the records of the selling bank, or delivering it to him
7-14 personally, and the relation of debtor to creditor shall thereupon
7-15 arise between the purchasing bank and such depositors and creditors
7-16 to the extent and only to the extent of the credit reflected by
7-17 such deposit tickets. Further provided, that if any such depositor
7-18 or creditor checks upon the credit so created, or if he does not
7-19 within sixty (60) days of the mailing or the personal delivery of
7-20 such deposit ticket protest the transaction and demand payment from
7-21 the selling bank, he shall be deemed to have ratified the
7-22 transaction and to the extent of the credit so created to have
7-23 accepted the obligation of the purchasing bank as reflected by said
7-24 deposit ticket in satisfaction of the obligation of the selling
7-25 bank, and the obligation of the selling bank to the extent of such
7-26 credit shall be deemed paid and satisfied within the meaning of
7-27 this article.
7-28 Art. 8 <11>. Existing Corporations--Powers Retained. All
7-29 corporations which on the effective date of this Act were subject
7-30 to the provisions of Title 16 of the Revised Civil Statutes of
7-31 Texas, 1925, as amended, or any chapter thereof, shall retain the
7-32 powers provided in their charters.
7-33 <Art. 12. AMENDMENT OF ARTICLES OF ASSOCIATION--RIGHTS OF
7-34 STOCKHOLDERS UPON INCREASE IN CAPITAL--STOCK OPTION PLANS. Subject
7-35 to the provisions of this Code, any state bank may amend its
7-36 articles of association for any lawful purpose.>
7-37 <If the owners of record of two-thirds of the capital stock,
7-38 at any regular meeting of stockholders, or any special meeting
7-39 called for that purpose, vote to amend the charter, the board of
7-40 directors shall prepare, execute in the manner provided for the
7-41 execution of articles of association, and file with the Banking
7-42 Commissioner an amendment to the articles of association. If the
7-43 Banking Commissioner finds that the amendment is not violative of
7-44 law and does not prejudice the interest of depositors and creditors
7-45 or the public, he shall approve such amendment and deliver to the
7-46 bank a certified copy thereof, and said amendment shall thereupon
7-47 become effective; provided, however, that if a state bank does not
7-48 have the power to receive demand deposits, no amendments of its
7-49 articles of association adopting any power provided under
7-50 Subsection (a), (b), (c), (d), or (f) of Article 1 of this Chapter
7-51 and no amendment changing the domicile of any state bank shall be
7-52 effective until approved by the State Banking Board in the manner
7-53 provided for the approval of an original application for charter.
7-54 Any state bank may amend its articles of association to extend its
7-55 corporate existence for a perpetual period or for any period of
7-56 years.>
7-57 <Each stockholder of a state bank shall be entitled to his
7-58 proportionate part of any increase of stock effected out of surplus
7-59 funds or undivided profits, and shall be entitled to subscribe for
7-60 his proportionate share of any capital increase to be paid in cash;
7-61 provided, however, the bank may arrange for the disposition of
7-62 fractional shares by those entitled thereto or pay in cash the fair
7-63 value of fractions of a share as of the time when those entitled to
7-64 receive such fractions are determined. Each stockholder or his
7-65 assignee, in event he elects to assign such rights of subscription,
7-66 shall subscribe for and pay the amount of such subscription to the
7-67 corporation within ten (10) days after the stockholders have
7-68 adopted such amendment, otherwise the board of directors may
7-69 allocate the unsubscribed or unpaid portion of the increase among
7-70 the other stockholders or otherwise as they deem to the best
8-1 interest of the bank.>
8-2 <With prior approval of the owners of record of two-thirds of
8-3 the capital stock, shares of stock in a bank, which are created by
8-4 a capital increase, may be allocated to and purchased by the bank
8-5 out of its surplus which is not certified or out of its undivided
8-6 profits to be held by the bank for fulfilling the requirements of
8-7 an officer or employee stock option or bonus plan, whereby officers
8-8 or employees, or both, of the bank are given options to purchase or
8-9 a bonus of shares of the bank's capital stock at a specified price,
8-10 subject to the following requirements and restrictions:>
8-11 <The number of shares so held shall not, at any time, exceed
8-12 five percent (5%) of the total number of shares outstanding in the
8-13 hands of other stockholders. Employee benefit plans, including
8-14 employee stock option plans, stock bonus plans, restricted stock
8-15 option or bonus plans, or any other plans, the sole purpose of
8-16 which is to compensate employees of the bank for services rendered
8-17 to the bank, authorized under this Article, may not extend beyond a
8-18 period of ten years from the date of issuance. No officer or
8-19 employee who owns or controls more than five percent (5%) of the
8-20 bank's capital stock shall be eligible to participate or to
8-21 continue participation in a stock option plan authorized by this
8-22 Article.>
8-23 Art. 9 <13>. Conversion Of State Bank Into National Bank.
8-24 The owners of record of two-thirds of the capital of any solvent
8-25 state bank may, by vote or written consent, authorize its officers
8-26 and directors or managers, as appropriate, to take such action as
8-27 may be necessary under the laws of the United States to convert it
8-28 into a national bank, provided, however, that the state bank shall
8-29 not cease to be a state bank subject to the supervision of the
8-30 Banking Commissioner until (1) the Banking Commissioner has been
8-31 given written notice of the intention to convert for at least
8-32 thirty (30) days, (2) such bank has published notice thereof at
8-33 least once a week for four (4) weeks in a newspaper of general
8-34 circulation published in the county of its domicile, or, if no such
8-35 newspaper is published in the county, in an adjacent county, (3)
8-36 the bank has filed with the Banking Commissioner a transcript of
8-37 the conversion proceedings, sworn to by a majority of the qualified
8-38 directors or managers and a publisher's certificate showing
8-39 publication of the notice above provided, and (4) such bank has
8-40 received a certificate of authority to do business as a national
8-41 bank.
8-42 Art. 10 <13a>. Conversion Of National Bank Into State Bank.
8-43 A national bank or association located in this state which follows
8-44 the procedures prescribed by the laws of the United States to
8-45 convert into a state bank, shall be granted a certificate of
8-46 incorporation in the state when the State Banking Board finds that
8-47 the bank meets the standards as to location of office, capital
8-48 structure and business experience of officers and directors or
8-49 managers, as appropriate, for the incorporation of a state bank.
8-50 In considering the application for conversion from a national bank
8-51 into a state bank the Board shall consider and determine that the
8-52 new bank meets with all the requirements of a new state bank
8-53 applicant. Included also in the application for conversion and to
8-54 be considered along with the other information submitted shall be
8-55 the terms of the transition from a national bank into a state bank
8-56 which shall also show that the provisions of Public Law 706 of the
8-57 81st Congress of the United States have been fully satisfied. Such
8-58 conversion shall be governed by the provisions of this Article and
8-59 shall not be governed by Article 6 <(9)>, now codified as Article
8-60 342-306 <342-309>, Vernon's Texas Civil Statutes.
8-61 Art. 11 <14>. CHANGE OF DOMICILE. (a) A state bank or
8-62 trust company may change its domicile to one of its previously
8-63 established branch locations on prior written approval of the
8-64 Banking Commissioner. A state bank or trust company may change its
8-65 domicile to any other location on prior approval of the State
8-66 Banking Board.
8-67 (b) Applications for a change of domicile subject to
8-68 approval of the State Banking Board shall be granted by the State
8-69 Banking Board only upon good and sufficient proof that all the
8-70 following conditions exist:
9-1 (1) a public necessity exists for the bank at the
9-2 proposed location;
9-3 (2) proposed capital structure is adequate;
9-4 (3) volume of business in the community where the bank
9-5 is to be located is such as to indicate profitable operation of the
9-6 bank at that location;
9-7 (4) the proposed officers and directors or managers,
9-8 as appropriate, have sufficient banking experience, ability, and
9-9 standing to render success of the bank probable; and
9-10 (5) the applicants are acting in good faith.
9-11 (c) If the proposed relocation of the bank would effect an
9-12 abandonment of all or part of the community presently served by the
9-13 bank, the bank must establish that the abandonment is consistent
9-14 with the original determination of public necessity for the
9-15 establishment of a bank at that location.
9-16 SUBCHAPTER B. ORGANIZATION OF STATE BANKING ASSOCIATIONS
9-17 Art. 30. ARTICLES OF ASSOCIATION. The articles of
9-18 association of a state banking association shall be signed and
9-19 acknowledged by each incorporator and shall contain:
9-20 (1) the name of the association;
9-21 (2) the city or town and the county of its domicile;
9-22 (3) such of the powers listed in Article 2 of this
9-23 chapter as it shall choose to exercise;
9-24 (4) the capital and the denomination and number of
9-25 shares;
9-26 (5) the preferred stock, if any, and the terms and
9-27 conditions of its issuance;
9-28 (6) the number of directors; and
9-29 (7) the period of duration, which may be perpetual.
9-30 Art. 31. APPLICATION FOR AND GRANTING OF CHARTERS--APPROVAL.
9-31 (a) Applications for a charter for a state banking association
9-32 shall be granted only upon good and sufficient proof that all of
9-33 the following conditions presently exist:
9-34 (1) a public necessity exists for the proposed bank;
9-35 (2) the proposed capital structure is adequate;
9-36 (3) the proposed bank's anticipated volume of business
9-37 is such as to indicate profitable operation;
9-38 (4) the proposed officers and directors have
9-39 sufficient banking experience, ability, and standing to render
9-40 success of the proposed bank probable; and
9-41 (5) the applicants are acting in good faith.
9-42 The burden to establish said conditions shall be upon the
9-43 applicants.
9-44 (b) Applicants desiring to incorporate a state banking
9-45 association shall file with the Banking Commissioner an application
9-46 for charter upon official forms prepared and prescribed by the
9-47 Banking Commissioner. All persons subscribing to the capital stock
9-48 of the proposed bank shall sign and verify under oath a statement
9-49 of such stock subscribed, and the statement shall truly report the
9-50 number of shares and the amount to be paid in consideration; the
9-51 names, identity, title, and address of any other persons who will
9-52 be beneficial owners of such stock or otherwise share an interest
9-53 or ownership in said stock, or who will pay any portion of the
9-54 consideration; whether said stock is to be pledged as security for
9-55 any loan; whether a loan has been committed or is intended for the
9-56 subscription and purchase of said stock, and if so, the name and
9-57 address of such person or corporation that is intended to loan
9-58 funds for said purchase; the names of any cosigners, guarantors,
9-59 partners or other persons liable for the repayment of any loan
9-60 financing the purchase of such stock. Provided, however, that the
9-61 verified statement of subscribers to stock shall be confidential
9-62 and privileged from public disclosure prior to the final
9-63 determination by the Board of the application for a charter, unless
9-64 the Board shall find that public disclosure prior to public hearing
9-65 and final determination of the charter application is necessary to
9-66 a full development of the factual record.
9-67 (c) The Banking Commissioner shall require deposit of such
9-68 charter fees as are required by law and shall proceed to conduct a
9-69 thorough investigation of the application, the applicants and their
9-70 personnel, and the charter conditions alleged. The actual expense
10-1 of such investigation and report shall be paid by the applicants,
10-2 and the Banking Commissioner may require a deposit in an estimated
10-3 amount, the balance to be paid in full prior to hearing of the
10-4 application. A written report of the investigation shall be
10-5 furnished to the State Banking Board and shall be made available to
10-6 all interested parties at their request.
10-7 (d) Upon filing of the application, the Banking Commissioner
10-8 shall promptly set the time and place for public hearing of the
10-9 application for charter, giving the applicants reasonable notice
10-10 thereof. Before the 10th day preceding the day on which the
10-11 hearing is held, the Banking Commissioner shall publish notice of
10-12 the hearing in a newspaper of general circulation in the county
10-13 where the proposed bank is to be located. If a protest of the
10-14 application is not filed, the Banking Commissioner may cancel the
10-15 hearing, and if the Banking Commissioner does so, the Board shall
10-16 vote to determine whether the necessary conditions set out in
10-17 Section (a) of this article have been established, based on the
10-18 application. If the Board votes to deny the application, the
10-19 Banking Commissioner shall notify the applicant and the applicant
10-20 may request a hearing on the application not later than the 30th
10-21 day after the date on which the notice is sent to the applicant.
10-22 After full and public hearing the Board shall vote and determine
10-23 whether the necessary conditions set out in Section (a) above have
10-24 been established. Should the Board, or a majority of the Board,
10-25 determine all of the said conditions affirmatively, the application
10-26 shall be approved; if not, the application shall be denied. If
10-27 approved, and when the Banking Commissioner receives satisfactory
10-28 evidence that the capital has been paid in full in cash, the
10-29 Banking Commissioner shall deliver to the incorporators a certified
10-30 copy of the articles of association, and the bank shall come into
10-31 corporate existence. Provided, however, that the State Banking
10-32 Board may make its approval of any application conditional, and in
10-33 such event shall set out such condition in the resolution granting
10-34 the charter, and the Banking Commissioner shall not deliver the
10-35 certified copy of the articles of association until such condition
10-36 has been met, after which the Banking Commissioner shall in writing
10-37 inform the State Banking Board as to compliance with such condition
10-38 and delivery of the articles of association.
10-39 (e) The provisions of the Administrative Procedure and Texas
10-40 Register Act (Article 6252-13a, Vernon's Texas Civil Statutes)
10-41 governing contested cases do not apply to charter applications
10-42 filed for the purpose of assuming the assets and liabilities of any
10-43 bank deemed by the Banking Commissioner to be in an unsafe
10-44 condition.
10-45 (f) The financial statement of a proposed officer or
10-46 director filed under this article is confidential and not subject
10-47 to public disclosure.
10-48 Art. 32. AMENDMENT OF ARTICLES OF ASSOCIATION--RIGHTS OF
10-49 STOCKHOLDERS UPON INCREASE IN CAPITAL--STOCK OPTION PLANS. Subject
10-50 to the provisions of this code, any state banking association may
10-51 amend its articles of association for any lawful purpose.
10-52 If the owners of record of two-thirds of the capital stock,
10-53 at any regular meeting of stockholders, or any special meeting
10-54 called for that purpose, vote to amend the charter, the board of
10-55 directors shall prepare, execute in the manner provided for the
10-56 execution of articles of association, and file with the Banking
10-57 Commissioner an amendment to the articles of association. If the
10-58 Banking Commissioner finds that the amendment is not violative of
10-59 law and does not prejudice the interest of depositors and creditors
10-60 or the public, he shall approve such amendment and deliver to the
10-61 bank a certified copy thereof, and said amendment shall thereupon
10-62 become effective; provided, however, that if a state bank does not
10-63 have the power to receive demand deposits, no amendments of its
10-64 articles of association adopting any power provided under Section
10-65 (a), (b), (c), (d), or (f) of Article 2 of this chapter and no
10-66 amendment changing the domicile of any state bank organized as a
10-67 banking association shall be effective until approved by the State
10-68 Banking Board in the manner provided for the approval of an
10-69 original application for charter. Any state bank organized as a
10-70 banking association may amend its articles of association to extend
11-1 its corporate existence for a perpetual period or for any period of
11-2 years.
11-3 Each stockholder of a state banking association shall be
11-4 entitled to his proportionate part of any increase of stock
11-5 effected out of surplus funds or undivided profits, and shall be
11-6 entitled to subscribe for his proportionate share of any capital
11-7 increase to be paid in cash; provided, however, the bank may
11-8 arrange for the disposition of fractional shares by those entitled
11-9 thereto or pay in cash the fair value of fractions of a share as of
11-10 the time when those entitled to receive such fractions are
11-11 determined. Each stockholder or his assignee, in the event he
11-12 elects to assign such rights of subscription, shall subscribe for
11-13 and pay the amount of such subscription to the corporation within
11-14 ten (10) days after the stockholders have adopted such amendment,
11-15 otherwise the board of directors may allocate the unsubscribed or
11-16 unpaid portion of the increase among the other stockholders or
11-17 otherwise as they deem to the best interest of the bank.
11-18 With prior approval of the owners of record of two-thirds of
11-19 the capital stock, shares of stock in a bank, which are created by
11-20 a capital increase, may be allocated to and purchased by the bank
11-21 out of its surplus which is not certified or out of its undivided
11-22 profits to be held by the bank for fulfilling the requirements of
11-23 an officer or employee stock option or bonus plan, whereby officers
11-24 or employees, or both, of the bank are given options to purchase or
11-25 a bonus of shares of the bank's capital stock at a specified price,
11-26 subject to the following requirements and restrictions:
11-27 The number of shares so held shall not, at any time, exceed
11-28 five percent (5%) of the total number of shares outstanding in the
11-29 hands of other stockholders. Employee benefit plans, including
11-30 employee stock option plans, stock bonus plans, restricted stock
11-31 option or bonus plans, or any other plans, the sole purpose of
11-32 which is to compensate employees of the bank for services rendered
11-33 to the bank, authorized under this article, may not extend beyond a
11-34 period of ten (10) years from the date of issuance. No officer or
11-35 employee who owns or controls more than five percent (5%) of the
11-36 bank's capital stock shall be eligible to participate or to
11-37 continue participation in a stock option plan authorized by this
11-38 article.
11-39 SUBCHAPTER C. ORGANIZATION OF AND SPECIAL PROVISIONS
11-40 FOR LIMITED BANKING ASSOCIATIONS
11-41 Art. 60. DEFINITIONS. In this subchapter:
11-42 (1) "Full Liability Participant" means a participant
11-43 that agrees under the terms of the participation agreement to be
11-44 liable under any judgment, decree, or order of court, for the
11-45 entire amount of any debt, obligation, or liability of the limited
11-46 banking association.
11-47 (2) "Manager" means a person elected to the board of
11-48 managers of a limited banking association. For purposes of
11-49 franchise taxes, "manager" shall be equivalent to "director."
11-50 (3) "Participant" means the owner of a share in a
11-51 limited banking association entitled to participate in the
11-52 management of the limited banking association, or entitled to
11-53 participate in the election of the board of managers of the limited
11-54 banking association.
11-55 (4) "Participation Agreement" means the instrument
11-56 stating the agreement among the participants of a limited banking
11-57 association relating to the rights and duties of the participants
11-58 and participant-transferees including allocations of income, loss,
11-59 deduction, credit, distributions, liquidation rights, redemption
11-60 rights, liabilities of participants, priority rights of
11-61 participant-transferees to transfer ownership shares, rights of
11-62 participants to purchase ownership shares of
11-63 participant-transferees, the procedures for elections and voting by
11-64 participants, and any other matter not prohibited by or
11-65 inconsistent with this code.
11-66 (5) "Participant-Transferee" means a person holding an
11-67 ownership share in a limited banking association who has not
11-68 received the unanimous consent of all participants of the limited
11-69 banking association to be a participant of the association or who
11-70 otherwise becomes a participant-transferee under this subchapter.
12-1 Art. 61. FILING NOTICE OF FULL LIABILITY. A copy of the
12-2 provisions of a participation agreement by which a participant of
12-3 the limited banking association agrees to become a full liability
12-4 participant shall be filed with the Banking Commissioner with the
12-5 name and address of each full liability participant. The filed
12-6 copy shall be available for public inspection.
12-7 Art. 62. LIMITED BANKING ASSOCIATION ARTICLES OF ASSOCIATION
12-8 AND REGULATIONS. (a) The articles of association of a limited
12-9 banking association must be signed and acknowledged by each
12-10 organizer and must contain:
12-11 (1) the name of the limited banking association;
12-12 (2) the city or town and the county of the limited
12-13 banking association's domicile;
12-14 (3) the powers listed in Article 2 of this chapter
12-15 that the limited banking association chooses to exercise;
12-16 (4) the capital, denomination, and number of
12-17 participation shares;
12-18 (5) the number of managers; and
12-19 (6) the period of duration.
12-20 (b) The articles of association may contain a provision
12-21 that, on the death, expulsion, bankruptcy, or dissolution of a
12-22 participant of the limited banking association or the occurrence of
12-23 any other event that terminates participation in the association,
12-24 grants to the remaining participants the right on unanimous consent
12-25 to continue the business of the association.
12-26 (c) The name of every limited banking association must
12-27 include the words "Limited Banking Association" or the letters
12-28 "LBA." The name of a limited banking association may not:
12-29 (1) contain a word or phrase that indicates or implies
12-30 that it is organized for a purpose other than banking;
12-31 (2) be the same as, or deceptively similar to, the
12-32 name of a state bank, corporation, or limited partnership or a
12-33 foreign corporation or limited partnership authorized to transact
12-34 business in this state.
12-35 (d) The participants of a limited banking association shall
12-36 adopt regulations that may be amended at any regular annual meeting
12-37 of the participants, or, if the purpose of the meeting is stated in
12-38 the notice, at any special meeting of the participants called for
12-39 that purpose. Neither the regulations nor any amendment to the
12-40 regulations may be effective until filed with the Banking
12-41 Commissioner and approved by the Banking Commissioner. The
12-42 regulations do not need to contain all of the provisions of the
12-43 participation agreement or address each subject matter of the
12-44 participation agreement, but in the event of a conflict between a
12-45 provision of the regulations and the participation agreement, the
12-46 regulation provision prevails. The participants may delegate to
12-47 the board of managers the power to alter, amend, or repeal the
12-48 regulations or to adopt new regulations, and the participants may
12-49 rescind a board action with regard to the regulations at a meeting
12-50 at which the amendment of regulations is permitted under this
12-51 article. The regulations may contain any provision for the
12-52 regulation and management of the affairs of the bank not
12-53 inconsistent with law or the articles of association.
12-54 Art. 63. APPLICATION FOR AND GRANTING OF LIMITED BANKING
12-55 ASSOCIATION CHARTERS--APPROVAL. (a) Applications for a charter
12-56 for a limited banking association shall be granted only on good and
12-57 sufficient proof that all of the following conditions presently
12-58 exist:
12-59 (1) a public necessity exists for the proposed bank;
12-60 (2) the proposed capital structure is adequate;
12-61 (3) the proposed bank's anticipated volume of business
12-62 is such as to indicate profitable operation;
12-63 (4) the proposed officers and managers have sufficient
12-64 banking experience, ability, and standing to render success of the
12-65 proposed bank probable; and
12-66 (5) the applicants are acting in good faith.
12-67 The burden to establish those conditions shall be on the
12-68 applicants.
12-69 (b) Applicants desiring to organize a limited banking
12-70 association shall file with the Banking Commissioner an application
13-1 for charter on official forms prepared and prescribed by the
13-2 Banking Commissioner. All persons subscribing to the participation
13-3 shares of the limited banking association shall sign and verify
13-4 under oath a statement of the participation shares subscribed,
13-5 which statement shall truly report the number of shares and the
13-6 amount to be paid in consideration; the names, identity, title, and
13-7 address of any other persons who will be beneficial owners of the
13-8 participation shares or otherwise share an interest or ownership in
13-9 the participation shares, or who will pay any portion of the
13-10 consideration; whether the participation shares are to be pledged
13-11 as security for any loan; whether a loan has been committed or is
13-12 intended for the subscription and purchase of the participation
13-13 shares, and if so, the name and address of the person or
13-14 corporation that is intended to loan funds for the purchase; and
13-15 the names of any cosigners, guarantors, partners or other persons
13-16 liable for the repayment of any loan financing the purchase of the
13-17 participation shares. Provided, however, that the verified
13-18 statement of the participants is confidential and privileged from
13-19 public disclosure prior to the final determination by the Board of
13-20 the application for a charter, unless the Board shall find that
13-21 public disclosure prior to the public hearing and final
13-22 determination of the charter application is necessary to a full
13-23 development of the factual records.
13-24 (c) The Banking Commissioner shall require deposit of the
13-25 charter fees required by law and shall proceed to conduct a
13-26 thorough investigation of the application, the applicants and their
13-27 personnel, and the charter conditions alleged. The actual expense
13-28 of the investigation and report shall be paid by the applicants,
13-29 and the Banking Commissioner may require a deposit in an estimated
13-30 amount, the balance to be paid in full prior to hearing of the
13-31 application. A written report of the investigation shall be
13-32 furnished to the State Banking Board and shall be made available to
13-33 all interested parties at their request.
13-34 (d) On filing of the application, the Banking Commissioner
13-35 shall promptly set the time and place for public hearing of the
13-36 application for charter, giving the applicants reasonable notice
13-37 thereof. Before the 10th day preceding the day on which the
13-38 hearing is held, the Banking Commissioner shall publish notice of
13-39 the hearing in a newspaper of general circulation in the county
13-40 where the proposed bank is to be located. If a protest of the
13-41 application is not filed, the Banking Commissioner may cancel the
13-42 hearing, and if the Banking Commissioner does so, the Board shall
13-43 vote to determine whether the necessary conditions set out in
13-44 Section (a) of this article have been established, based on the
13-45 application. If the Board votes to deny the application, the
13-46 Banking Commissioner shall notify the applicant and the applicant
13-47 may request a hearing on the application not later than the 30th
13-48 day after the date on which the notice is sent to the applicant.
13-49 After full and public hearing the Board shall vote and determine
13-50 whether the necessary conditions set out in Section (a) above have
13-51 been established. Should the Board, or a majority of the Board,
13-52 determine all of the conditions affirmatively, the application
13-53 shall be approved; if not, the application shall be denied. If
13-54 approved, and when the Banking Commissioner received satisfactory
13-55 evidence that the capital has been paid in full in cash, the
13-56 Banking Commissioner shall deliver to the organizers a certified
13-57 copy of the articles of association, and the limited banking
13-58 association shall come into existence. Provided, however, that the
13-59 State Banking Board may make its approval of any application
13-60 conditional, and if so shall set out the condition in the
13-61 resolution granting the charter, and the Banking Commissioner shall
13-62 not deliver the certified copy of the articles of association until
13-63 the condition has been met, after which the Banking Commissioner
13-64 shall in writing inform the State Banking Board as to compliance
13-65 with the condition and delivery of the articles of association.
13-66 (e) The provisions of the Administrative Procedure and Texas
13-67 Register Act (Article 6252-13a, Vernon's Texas Civil Statutes)
13-68 governing contested cases do not apply to charter applications
13-69 filed for the purpose of assuming the assets and liabilities of any
13-70 bank deemed by the Banking Commissioner to be in an unsafe
14-1 condition.
14-2 (f) The financial statement of a proposed officer or manager
14-3 filed under this article is confidential and not subject to public
14-4 disclosure.
14-5 Art. 64. LIABILITY OF PARTICIPANTS AND MANAGERS.
14-6 (a) Except as provided by Section (b) of this article, the
14-7 participants, participant-transferees, and managers of a limited
14-8 banking association may not be held liable for any debt,
14-9 obligation, or liability of the limited banking association or
14-10 under any judgment, decree, or order of court, for a debt,
14-11 obligation, or liability of the limited banking association. A
14-12 participant, other than a full liability participant, or a manager
14-13 of a limited banking association is not a proper party to
14-14 proceedings by or against a limited banking association, unless the
14-15 object of the proceeding is to enforce a participant's or manager's
14-16 right against or liability to a limited banking association.
14-17 (b) A full liability participant of a limited banking
14-18 association is liable under a judgment, decree, or order of court,
14-19 for a debt, obligation, or liability of the limited banking
14-20 association that accrued during the participation of the full
14-21 liability participant in the limited banking association and until
14-22 the full liability participant or a successor in interest files a
14-23 notice of withdrawal as a full liability participant from the
14-24 limited banking association with the Banking Commissioner. The
14-25 filed notice of withdrawal shall be available for public
14-26 inspection.
14-27 Art. 65. CONTRACTING DEBTS AND OBLIGATIONS. Except as
14-28 provided by this article or the articles of association or
14-29 regulations of the limited banking association, debts, liabilities,
14-30 and other obligations may be contracted for or incurred on behalf
14-31 of a limited banking association by:
14-32 (1) a majority of the managers, if management of the
14-33 limited banking association has been vested in a board of managers;
14-34 (2) a majority of the participants, if management of
14-35 the limited banking association is retained by the participants; or
14-36 (3) any officer or other agent vested with actual or
14-37 apparent authority.
14-38 Art. 66. CONTRIBUTION OF CAPITAL. Contributions of capital
14-39 by a participant of a limited banking association shall consist of
14-40 cash.
14-41 Art. 67. MANAGEMENT OF LIMITED BANKING ASSOCIATION.
14-42 (a) Management of a limited banking association is vested in the
14-43 participants in proportion to each participant's contribution to
14-44 capital as adjusted from time to time to properly reflect any
14-45 additional contribution. The articles of association may provide
14-46 that management of a limited banking association is vested in a
14-47 board of managers elected by the participants as prescribed by the
14-48 regulations. If management is by a board of managers, the
14-49 participants shall elect the managers annually as provided in the
14-50 regulations. If there are fewer than five (5), or more than
14-51 twenty-five (25) participants, management of the limited banking
14-52 association is vested in a board of managers consisting of not
14-53 fewer than five (5), nor more than twenty-five (25), managers. A
14-54 majority of managers must be residents of the state, or if
14-55 management is vested in the participants, a majority of the
14-56 participants must be residents of the state.
14-57 (b) The articles of association, regulations, and
14-58 participation agreement of a limited banking association may use
14-59 the terms "Director" and "Board" instead of "Manager" and "Board of
14-60 Managers," respectively.
14-61 Art. 68. AMENDMENT OF LIMITED BANKING ASSOCIATION ARTICLES
14-62 OF ASSOCIATION--RIGHTS OF PARTICIPANTS ON INCREASE IN CAPITAL.
14-63 (a) Subject to this code, a limited banking association may amend
14-64 its articles of association for any lawful purpose.
14-65 (b) If the participants of the association holding
14-66 two-thirds of the participation shares, at any regular meeting of
14-67 participants, or any special meeting of participants called for
14-68 that purpose, vote to amend the charter, the board shall prepare,
14-69 execute in the manner provided for the execution of articles of
14-70 association, and file with the Banking Commissioner an amendment to
15-1 the articles of association. If the Banking Commissioner finds
15-2 that the amendment is not violative of law and does not prejudice
15-3 the interest of depositors and creditors or the public, the Banking
15-4 Commissioner shall approve the amendment and deliver to the bank a
15-5 certified copy of the amendment, and the amendment is then
15-6 effective; provided, however, that if a limited banking association
15-7 does not have the power to receive demand deposits, no amendments
15-8 of its articles of association adopting any power under Section
15-9 (a), (b), (c), (d), or (f) of Article 2 of this chapter and no
15-10 amendment changing the domicile of any limited banking association
15-11 shall be effective until approved by the State Banking Board in the
15-12 manner provided for the approval of an original application for
15-13 charter. No limited banking association may amend its articles of
15-14 association to extend its period of existence for a perpetual
15-15 period or for any period of years unless the period of existence is
15-16 expressly contingent on those events resulting in dissolution of
15-17 the limited banking association provided for in Article 71 of this
15-18 chapter.
15-19 (c) Each participant or participant-transferee of a limited
15-20 banking association is entitled to the participant's or
15-21 participant-transferee's proportionate part of any increase in
15-22 participation share effected out of surplus funds or undivided
15-23 profits, and is entitled to subscribe to the participant's or
15-24 participant-transferee's proportionate share of any capital
15-25 increase to be paid in cash; provided, however, the bank may
15-26 arrange for the disposition of fractional shares by those entitled
15-27 to them or pay in cash the fair value of fractions of a share as of
15-28 the time when those entitled to receive the fractions are
15-29 determined. Each participant or participant-transferee must
15-30 subscribe for and pay the amount of the subscription within ten
15-31 (10) days after the participants have adopted the amendment,
15-32 otherwise the board may allocate the unsubscribed or unpaid portion
15-33 of the increase among the participants or otherwise as the board
15-34 deems to be in the best interest of the bank.
15-35 Art. 69. WITHDRAWAL OR REDUCTION OF PARTICIPANT'S
15-36 CONTRIBUTION TO CAPITAL. (a) Subject to Article 1, Chapter VI, of
15-37 this code a participant may not receive from a limited banking
15-38 association any part of the participant's contribution to capital
15-39 until:
15-40 (1) all liabilities of the bank, except liabilities to
15-41 participants on account of contribution to capital, have been paid
15-42 or, if after the withdrawal or reduction, sufficient property of
15-43 the bank will remain to pay those liabilities;
15-44 (2) all participants consent, unless the return of the
15-45 contribution to capital may be demanded as provided in this
15-46 chapter; or
15-47 (3) the articles of association are canceled or
15-48 amended to set out the withdrawal or reduction.
15-49 (b) A participant may demand the return of the participant's
15-50 contribution to capital on the dissolution of the association and
15-51 the failure by the participants to exercise the right for the
15-52 business of the limited banking association to be carried on by the
15-53 remaining participants as provided by Article 71 of this chapter.
15-54 (c) Unless allowed by the articles of association or by the
15-55 unanimous consent of all participants of the limited banking
15-56 association, a participant may demand the return of the
15-57 participant's contribution to capital only in cash.
15-58 Art. 70. INTEREST IN LIMITED BANKING ASSOCIATION;
15-59 TRANSFERABILITY OF INTEREST. (a) The interest of all participants
15-60 or participant-transferees in a limited banking association is the
15-61 personal estate of the participant or the participant-transferee
15-62 and may be transferred or assigned as provided by the regulations
15-63 or the participation agreement. A transferee of a participant's
15-64 interest has the status of a participant-transferee and does not by
15-65 the transfer become a participant or obtain any right to
15-66 participate in the management of the limited banking association.
15-67 A participant-transferee is entitled to receive only a share of
15-68 profits, return of contribution, or other distributive benefit in
15-69 respect to the interest transferred to which the participant who
15-70 transferred or assigned the interest would otherwise be entitled.
16-1 A participant-transferee may become a participant only if:
16-2 (1) all of the participants of the limited banking
16-3 association approve the acceptance of the participant-transferee as
16-4 a participant by unanimous written consent; or
16-5 (2) specifically authorized in the articles of
16-6 association, the regulations, or the participation agreement and
16-7 all of the full liability participants of the limited banking
16-8 association approve the acceptance of the participant-transferee as
16-9 a participant by unanimous written consent.
16-10 (b) Additional participants may be added by a limited
16-11 banking association in the same manner as participant-transferees
16-12 after payment in full in cash of the capital contribution to the
16-13 limited banking association payable in respect to the issuance of
16-14 additional participation interests.
16-15 Art. 71. DISSOLUTION. A limited banking association
16-16 organized under this chapter is dissolved on:
16-17 (1) the expiration of the period fixed for the
16-18 duration of the limited banking association;
16-19 (2) a vote to dissolve or the execution of a written
16-20 consent to dissolve by all full liability participants, if any, and
16-21 a sufficient number of other participants that combined with all
16-22 full liability participants hold at least two-thirds of the
16-23 participation interest in the association, or a greater fraction as
16-24 provided by the articles of association, and that include all full
16-25 liability participants; or
16-26 (3) except as provided by the articles of association,
16-27 the death, insanity, expulsion, bankruptcy, retirement, or
16-28 resignation of a full liability participant, if the limited banking
16-29 association has a full liability participant, unless:
16-30 (A) at least one full liability participant
16-31 remains in the association after the occurrence of the event; or
16-32 (B) all remaining participants elect in writing
16-33 not later than the 90th day after the occurrence of the event to
16-34 continue the business of the association.
16-35 Art. 72. OTHER PROVISIONS RELATED TO LIMITED BANKING
16-36 ASSOCIATIONS. A limited banking association is subject to this
16-37 code. For purposes of the provisions of this code other than this
16-38 subchapter:
16-39 (1) a manager and the board of managers are considered
16-40 to be a director and the board of directors, respectively;
16-41 (2) if there is not a board of managers, a participant
16-42 is considered to be a director and all of the participants are
16-43 considered to be the board of directors;
16-44 (3) a participant or participant-transferee is
16-45 considered to be a stockholder;
16-46 (4) a participation share is considered to be a share
16-47 of stock; and
16-48 (5) regulations are considered to be bylaws of the
16-49 association.
16-50 SECTION 4. Section F, Article 1a, Chapter IV, The Texas
16-51 Banking Code (Article 342-401a, Vernon's Texas Civil Statutes), is
16-52 amended to read as follows:
16-53 F. This Article does not apply to:
16-54 (1) the acquisition of securities in connection with
16-55 the exercise of a security interest or otherwise by way of
16-56 foreclosure on default in the payment of a debt previously
16-57 contracted for in good faith, provided that the person acquiring
16-58 such securities does not vote the securities so acquired without
16-59 having given written notice of such foreclosure to the Banking
16-60 Commissioner;
16-61 (2) transactions governed by Article 5, 6, or 7 <8, 9,
16-62 or 10> of Chapter III of this Code;
16-63 (3) transactions requiring the prior approval of the
16-64 Board of Governors of the Federal Reserve System under the Bank
16-65 Holding Company Act of 1956 (12 U.S.C.A. Sec. 1841, et seq., and 26
16-66 U.S.C.A., Sec. 1101, et seq.);
16-67 (4) acquisitions by the owner of more than fifty per
16-68 cent (50%) of the voting securities of the bank; or acquisitions of
16-69 less than ten per cent (10%) of the voting securities of the bank
16-70 in any one (1) year by the owner of twenty-five per cent (25%) or
17-1 more, but not more than fifty per cent (50%), of those voting
17-2 securities, provided that such acquisition does not result in the
17-3 owner of twenty-five per cent (25%) or more acquiring fifty per
17-4 cent (50%) or more of the voting securities;
17-5 (5) acquisitions or transfers by operation of law or
17-6 by will or intestate succession, provided that the person acquiring
17-7 such securities does not vote the securities so acquired without
17-8 having given written notice of acquisition to the Banking
17-9 Commissioner; or
17-10 (6) any transaction which the Banking Commissioner by
17-11 rule or order may exempt as not being contemplated by the purposes
17-12 of this Article or the regulation of which is not necessary or
17-13 appropriate to achieve the objectives of this Article.
17-14 No provision of this Section shall excuse or diminish the
17-15 notice requirements provided elsewhere in this Code.
17-16 SECTION 5. Article 6, Chapter V, The Texas Banking Code
17-17 (Article 342-506, Vernon's Texas Civil Statutes), is amended to
17-18 read as follows:
17-19 Art. 6. Own Stock--Security--Acquisition--Disposition--
17-20 Investment Certificates--Maturity. No state bank shall acquire a
17-21 lien by pledge or otherwise on its shares of stock nor purchase or
17-22 acquire title to such stock, except to prevent loss upon a loan or
17-23 investment previously made in good faith. Provided, however, that
17-24 with the approval of the owners of record of two-thirds of the
17-25 capital stock, a bank may purchase and carry as treasury stock its
17-26 own shares for the purpose of fulfilling the requirements of an
17-27 officer or employee stock option or bonus plan authorized by
17-28 Article 32 or 68 <12>, Chapter III of this code.
17-29 The number of shares so held shall not, at any time, exceed
17-30 five per cent (5%) of the total number of shares outstanding in the
17-31 hands of the other stockholders.
17-32 If a state bank acquires a lien upon or title to its stock
17-33 under the exception first provided for in this Article, it shall
17-34 not permit such lien to continue for more than two (2) years, nor
17-35 shall it hold title to such stock for more than one (1) year.
17-36 Provided that the stock on which the bank has a lien plus the stock
17-37 held by it as owner shall not exceed, in par value, the aggregate
17-38 of all surplus accounts and undivided profits of said bank;
17-39 provided, however, that any provision of this Code to the contrary
17-40 notwithstanding, a state bank may make loans, charge or collect in
17-41 advance interest thereon at a rate not exceeding that permitted by
17-42 law, together with other charges permitted by this Code, and take
17-43 as collateral thereof its investment certificates, issued
17-44 simultaneously with the granting of the loans or otherwise,
17-45 requiring weekly, semi-monthly, monthly or other regular periodic
17-46 installments to be paid upon such certificates; such loans, subject
17-47 to acceleration for specified causes, shall mature when the
17-48 withdrawal value of the investment certificate or certificates
17-49 securing the same equals the face amount of the note evidencing the
17-50 loans, and shall be comparable in form and principle of operation
17-51 to sinking-fund loans which building and loan associations are now
17-52 authorized to make under the laws of this State.
17-53 SECTION 6. Article 2, Chapter VII, The Texas Banking Code
17-54 (Article 342-702, Vernon's Texas Civil Statutes), is amended to
17-55 read as follows:
17-56 Art. 2. BROKERED FUNDS DEFINED--REPORTING--BANKING
17-57 COMMISSIONER'S AUTHORITY. For the purpose of this article,
17-58 "brokered funds" are funds accepted by a bank on which a fee in
17-59 money is paid or agreed to be paid, directly or indirectly, either
17-60 to the depositor of such funds or a third party by such bank or a
17-61 third party, in addition to any interest to be paid under the
17-62 contract of repayment.
17-63 In the event that any bank shall accept brokered funds as
17-64 defined herein, it shall forthwith notify the Banking Commissioner
17-65 in writing of the acceptance of such funds, the depositor and his
17-66 address, any loans, if any, made in consideration of or conditioned
17-67 upon said deposit, and listing the borrower, his address, and any
17-68 collateral securing said loan, and such other information
17-69 concerning said deposit and loan as the Banking Commissioner may
17-70 require and on such forms as may be prescribed by the Banking
18-1 Commissioner. The Banking Commissioner may further require any
18-2 bank to report such brokered funds and loans as above described, if
18-3 any, which have been accepted or made previous to the effective
18-4 date of this Act.
18-5 Provided, however, should the Banking Commissioner find from
18-6 examination or other evidence that a bank is being operated in an
18-7 unsafe manner, or insolvency of the bank is threatened, or the
18-8 continued acceptance of brokered funds will threaten the liquidity
18-9 of the bank, then the Banking Commissioner shall have the authority
18-10 to act as follows:
18-11 (a) to issue an order to cease and desist from further
18-12 accepting any brokered funds, or otherwise to regulate the amount
18-13 of such funds which may be accepted or the rate of interest to be
18-14 paid, and
18-15 (b) to issue a written order stating that after the
18-16 effective date thereof all brokered funds accepted by said bank
18-17 shall be and are hereby classified as the issuance, sale and
18-18 negotiation of "notes, bonds, and other evidence of indebtedness"
18-19 by the bank as provided in Paragraph (h), Article 2 <1>, Chapter
18-20 III of such Code, and not as deposits received by the bank as
18-21 provided in Paragraph (a), Article 2 <1>, Chapter III of the
18-22 Banking Code of 1943 as amended. In the event that brokered funds
18-23 are accepted after issuance of such order, it shall be the duty of
18-24 said bank to state in the contract of repayment that in the event
18-25 of liquidation of the issuing bank, the owner and holder of such
18-26 contract of repayment shall be considered and treated as a common
18-27 creditor and not as a depositor of the bank, and a cash reserve of
18-28 ten percent (10%) of the total outstanding brokered funds shall be
18-29 maintained against such funds, in the same manner as cash reserves
18-30 are maintained against demand deposits and time deposits.
18-31 Provided further, that the Banking Commissioner may exercise
18-32 any or all of the powers above provided, which shall be cumulative
18-33 of any other powers and remedies provided elsewhere in this Code.
18-34 SECTION 7. Section 171.001(b), Tax Code, is amended to read
18-35 as follows:
18-36 (b) In this chapter:
18-37 (1) "Banking corporation" means each state, national,
18-38 domestic, or foreign bank, including a limited banking association
18-39 organized under Subchapter C, Chapter III, The Texas Banking Code
18-40 (Article 342-360 et seq., Vernon's Texas Civil Statutes), and each
18-41 bank organized under Section 25(a), Federal Reserve Act (12 U.S.C.
18-42 Secs. 611-631) (edge corporations), but does not include a bank
18-43 holding company as that term is defined by Section 2, Bank Holding
18-44 Company Act of 1956 (12 U.S.C. Sec. 1841).
18-45 (2) "Corporation" includes:
18-46 (A) a limited liability company, as defined
18-47 under the Texas Limited Liability Company Act; and
18-48 (B) a state or federal savings and loan
18-49 association.
18-50 (3) "Charter" includes a limited liability company's
18-51 certificate of organization.
18-52 (4) "Internal Revenue Code" means the Internal Revenue
18-53 Code of 1986 in effect for the federal tax year beginning on or
18-54 after January 1, 1990, and before January 1, 1991, and any
18-55 regulations adopted under that code applicable to that period.
18-56 (5) "Officer" and "director" include a limited
18-57 liability company's directors and managers and a limited banking
18-58 association's directors and managers and participants if there are
18-59 no directors or managers.
18-60 (6) "Savings and loan association" includes a state or
18-61 federal savings bank.
18-62 (7) "Shareholder" includes a limited liability
18-63 company's member and a limited banking association's participant.
18-64 SECTION 8. The importance of this legislation and the
18-65 crowded condition of the calendars in both houses create an
18-66 emergency and an imperative public necessity that the
18-67 constitutional rule requiring bills to be read on three several
18-68 days in each house be suspended, and this rule is hereby suspended.
18-69 * * * * *
18-70 Austin,
19-1 Texas
19-2 May 21, 1993
19-3 Hon. Bob Bullock
19-4 President of the Senate
19-5 Sir:
19-6 We, your Committee on Economic Development to which was referred
19-7 H.B. No. 1212, have had the same under consideration, and I am
19-8 instructed to report it back to the Senate with the recommendation
19-9 that it do pass and be printed.
19-10 Parker,
19-11 Chairman
19-12 * * * * *
19-13 WITNESSES
19-14 FOR AGAINST ON
19-15 ___________________________________________________________________
19-16 Name: Al Jones x
19-17 Representing: Independent Bankers Assn
19-18 City: Corpus Christi
19-19 -------------------------------------------------------------------
19-20 Name: Kenton McDonald x
19-21 Representing: IBAT
19-22 City: Corpus Christi
19-23 -------------------------------------------------------------------
19-24 Name: Laura Smreker x
19-25 Representing: Texas Bankers Association
19-26 City: Austin
19-27 -------------------------------------------------------------------