80R5869 DWS-F
 
  By: Orr H.B. No. 1962
 
 
 
   
 
 
A BILL TO BE ENTITLED
AN ACT
relating to the application of the Business Organizations Code to
certain financial institutions and the regulation of those
institutions by the Texas Department of Banking.
       BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
       SECTION 1.  Section 11.105, Finance Code, is amended to read
as follows:
       Sec. 11.105.  MATTER IN WHICH MEMBER HAS PERSONAL
INTEREST.  A member of the finance commission may not act or
participate in the portion of a commission meeting during which the
matter considered specifically relates to an entity:
             (1)  of which the member or the member's spouse is an
officer, director, stockholder, shareholder, [manager,
participant, participant-transferee,] or owner; or
             (2)  in which the member or the member's spouse has
another financial interest.
       SECTION 2.  Sections 31.002(a)(7), (9), (13), (29), (42),
(48), (49), (57), and (58), Finance Code, are amended to read as
follows:
             (7)  "Board" means the board of directors[, managers,
or managing participants] of, or a person or group of persons acting
in a comparable capacity for, a state bank or other entity. As the
context requires, the term includes the board of managers of a
limited banking association.
             (9)  "Capital" means:
                   (A)  the sum of:
                         (i)  the par value of all shares [or
participation shares] of the state bank having a par value that have
been issued;
                         (ii)  the consideration set by the board [in
the manner provided by the Texas Business Corporation Act] for all
shares [or participation shares] of the state bank without par
value that have been issued, except a part of that consideration
that:
                               (a)  has been actually received;
                               (b)  is less than all of that
consideration; and
                               (c)  the board, by resolution adopted
not later than the 60th day after the date of issuance of those
shares, has allocated to surplus with the prior approval of the
banking commissioner; and
                         (iii)  an amount not included in
Subparagraphs (i) and (ii) that has been transferred to capital of
the state bank, on the payment of a share dividend or on adoption by
the board of a resolution directing that all or part of surplus be
transferred to capital, minus each reduction made as permitted by
law; less
                   (B)  all amounts otherwise included in Paragraphs
(A)(i) and (ii) that are attributable to the issuance of securities
by the state bank and that the banking commissioner determines,
after notice and an opportunity for hearing, should be classified
as debt rather than equity securities.
             (13)  "Control" means:
                   (A)  the ownership of or ability or power to vote,
directly, acting through one or more other persons, or otherwise
indirectly, 25 percent or more of the outstanding shares of a class
of voting securities of a bank or other company;
                   (B)  the ability to control the election of a
majority of the board of a bank or other company;
                   (C)  the power to exercise, directly or
indirectly, a controlling influence over the management or policies
of the bank or other company as determined by the banking
commissioner after notice and an opportunity for hearing; or
                   (D)  the conditioning of the transfer of 25
percent or more of the outstanding shares [or participation shares]
of a class of voting securities of a bank or other company on the
transfer of 25 percent or more of the outstanding shares of a class
of voting securities of another bank or other company.
             (29)  "Hazardous condition" means:
                   (A)  a refusal by a state bank to permit
examination of its books, papers, accounts, records, or affairs by
the banking commissioner;
                   (B)  a circumstance or condition in which an
unreasonable risk of substantial loss is threatened to the
depositors, creditors, or shareholders[, or participants] of a
state bank, including a circumstance or condition in which a state
bank:
                         (i)  has inadequate equity capital, or the
adequacy of its equity capital is threatened;
                         (ii)  has concentrated an excessive or
unreasonable portion of its assets in a type or character of loan or
investment;
                         (iii)  violates or refuses to comply with
this subtitle, another statute or rule applicable to state banks,
or a final and enforceable order of the banking commissioner;
                         (iv)  is in a condition that renders the
continuation of a particular business practice hazardous to the
public or to its depositors and creditors;
                         (v)  conducts business in an unsafe and
unsound manner; or
                         (vi)  is insolvent; or
                   (C)  a violation by a state bank of a condition of
its chartering or an agreement entered into between the bank and the
banking commissioner or the department.
             (42)  "Participation agreement" means the instrument
stating the agreement among the participants of a limited banking
association relating to the rights and duties of the participants
[and participant-transferees], including:
                   (A)  allocations of income, loss, deduction,
credit, distributions, liquidation rights, redemption rights, and
liabilities of participants[, priority rights of
participant-transferees to transfer participation shares, and
rights of participants to purchase participation shares of
participant-transferees];
                   (B)  procedures for elections and voting by
participants; and
                   (C)  any other matter not prohibited by or
inconsistent with this subtitle.
             (48)  "Shareholder" means an owner of a share in a
banking association. As the context requires, the term includes a
participant.
             (49)  "Shares" means the units into which the
proprietary interests of a banking association are divided or
subdivided by means of classes, series, relative rights, or
preferences. As the context requires, the term includes
participation shares.
             (57)  "Undivided profits" means the part of equity
capital of a state bank equal to the balance of its net profits,
income, gains, and losses since the date of its formation, minus
subsequent distributions to shareholders [or participants] and
transfers to surplus or capital under share dividends or
appropriate board resolutions. The term includes amounts allocated
to undivided profits as a result of a merger.
             (58)  "Voting security" means a share[, participation
share,] or other evidence of proprietary interest in a state bank or
other company that has as an attribute the right to vote or
participate in the election of the board of the state bank or other
company, regardless of whether the right is limited to the election
of fewer than all of the board members. The term includes a
security that is convertible or exchangeable into a voting security
[and a nonvoting participation share of a managing participant].
       SECTION 3.  Sections 31.006(a), (b), and (c), Finance Code,
are amended to read as follows:
       (a)  The provisions of the [Texas] Business Organizations
Code [Corporation Act] regarding liability, defenses, and
indemnification of a director, officer, agent, or employee of a
corporation apply to a director, officer, agent, or employee of a
depository institution in this state. Except as limited by those
provisions, a disinterested director, [manager, managing
participant,] officer, or employee of a depository institution may
not be held personally liable in an action seeking monetary damages
arising from the conduct of the depository institution's affairs
unless the damages resulted from the gross negligence or wilful or
intentional misconduct of the person during the person's term of
office or service with the depository institution.
       (b)  A director, [manager, managing participant,] officer,
or employee of a depository institution is disinterested with
respect to a decision or transaction if:
             (1)  the person fully discloses any interest in the
decision or transaction and does not participate in the decision or
transaction; or
             (2)  the decision or transaction does not involve any
of the following:
                   (A)  personal profit for the person through
dealing with the depository institution or usurping an opportunity
of the depository institution;
                   (B)  buying or selling an asset of the depository
institution in a transaction in which the person has a direct or
indirect pecuniary interest;
                   (C)  dealing with another depository institution
or other person in which the person is a director, [manager,
managing participant,] officer, or employee or otherwise has a
significant direct or indirect financial interest; or
                   (D)  dealing with a family member of the person.
       (c)  A director[, manager, managing participant,] or officer
who, in performing the person's duties and functions, acts in good
faith and reasonably believes that reliance is warranted is
entitled to rely on information, including an opinion, report,
financial statement or other type of statement or financial data,
decision, judgment, or performance, prepared, presented, made, or
rendered by:
             (1)  one or more directors, [managers, managing
participants,] officers, or employees of the depository
institution, or of an entity under joint or common control with the
depository institution, who the director[, manager, managing
participant,] or officer reasonably believes merit confidence;
             (2)  legal counsel, a public accountant, or another
person who the director[, manager, managing participant,] or
officer reasonably believes merits confidence; or
             (3)  a committee of the board of which the director[,
manager, or managing participant] is not a member.
       SECTION 4.  Section 31.007(a), Finance Code, is amended to
read as follows:
       (a)  An officer, director, [manager, managing participant,]
or employee of a bank that has its main office or a branch located in
this state with fewer than 500 shareholders [or participants] or of
a bank holding company with fewer than 500 shareholders [or
participants] that controls a bank that has its main office or a
branch located in this state is exempt from the registration and
licensing provisions of The Securities Act (Article 581-1 et seq.,
Vernon's Texas Civil Statutes) with respect to that person's
participation in a transaction, including a sale, involving
securities issued by:
             (1)  the bank or bank holding company of which that
person is an officer, director, [manager, managing participant,] or
employee;
             (2)  a bank holding company that controls the bank of
which that person is an officer, director, [manager, managing
participant,] or employee; or
             (3)  a bank controlled by the bank holding company of
which that person is an officer, director, [manager, managing
participant,] or employee.
       SECTION 5.  Section 31.105(b), Finance Code, is amended to
read as follows:
       (b)  The banking commissioner may examine a state bank more
often than required by Subsection (a) as the commissioner considers
necessary to:
             (1)  safeguard the interests of depositors, creditors,
and shareholders[, participants, and participant-transferees]; and
             (2)  efficiently enforce applicable law.
       SECTION 6.  Section 31.301(a), Finance Code, is amended to
read as follows:
       (a)  Except as expressly provided otherwise by this
subtitle, Chapter 11 or 12, or a rule adopted under this subtitle,
the following are confidential and may not be disclosed by the
banking commissioner or an employee of the department:
             (1)  information directly or indirectly obtained by the
department in any manner, including an application or examination,
concerning the financial condition or business affairs of a
financial institution or a present, former, or prospective
shareholder, [participant,] officer, director, [manager,]
affiliate, or service provider of a financial institution, other
than information in a published statement or in the public portion
of a call report or profit and loss statement; and
             (2)  all related files and records of the department.
       SECTION 7.  Section 31.308, Finance Code, is amended to read
as follows:
       Sec. 31.308.  SHAREHOLDER INSPECTION RIGHTS.  (a)  
Notwithstanding Section 21.218 or 101.502, Business Organizations
Code [Article 2.44, Texas Business Corporation Act], a shareholder
[or participant] of a state bank may not examine:
             (1)  a report of examination or other confidential
property of the department that is in the possession of the state
bank; or
             (2)  a book or record of the state bank that directly or
indirectly pertains to financial or other information maintained by
the bank on behalf of its customers, including a specific item in
the minutes of the board or a committee of the board regarding loan
review and approval or a loan delinquency report that would tend to
identify the bank's customer.
       (b)  This section does not affect a right of a shareholder
[or participant] of a state bank acting in another capacity.
       SECTION 8.  Section 32.002(a), Finance Code, is amended to
read as follows:
       (a)  The articles of association of a state bank must be
signed and acknowledged by each organizer and must contain:
             (1)  the name of the bank, subject to Subsection (b);
             (2)  the period of the bank's duration, which may be
perpetual, subject to Subsection (c);
             (3)  the powers of the bank, which may be stated as:
                   (A)  all powers granted by law to a state bank; or
                   (B)  a list of the specific powers under Section
32.001 that the bank chooses to exercise;
             (4)  the aggregate number of shares [or participation
shares] that the bank will be authorized to issue and the number of
classes of shares [or participation shares], which may be one or
more;
             (5)  if the shares [or participation shares] are to be
divided into classes:
                   (A)  the designation of each class and statement
of the preferences, limitations, and relative rights of the shares
[or participation shares] of each class, which in the case of a
limited banking association may be more fully set forth in the
participation agreement;
                   (B)  the number of shares [or participation
shares] of each class; and
                   (C)  a statement of the par value of the shares [or
participation shares] of each class or that the shares [or
participation shares] are to be without par value;
             (6)  any provision limiting or denying to shareholders
[or participants] the preemptive right to acquire additional or
treasury shares [or participation shares] of the bank;
             (7)  any provision granting the right of shareholders
[or participants] to cumulative voting in the election of directors
[or managers];
             (8)  the aggregate amount of consideration to be
received for all shares [or participation shares] initially issued
by the bank and a statement that:
                   (A)  all authorized shares [or participation
shares] have been subscribed; and
                   (B)  all subscriptions received provide for the
consideration to be fully paid in cash before issuance of the
charter;
             (9)  any provision [consistent with law that the
organizers elect to set forth in the articles of association for the
regulation of the internal affairs of the bank or] that is otherwise
required by this subtitle to be set forth in the articles of
association;
             (10)  the street address of the bank's initial home
office; [and]
             (11)  [either:
                   [(A)]  the number of directors [or managers]
constituting the initial board and the names and street addresses
of the persons who are to serve as directors [or managers] until the
first annual meeting of shareholders [or participants] or until
successor directors [or managers] have been elected and qualified;
and
             (12)  subject to Section 32.008, any provision
consistent with law that the organizers elect to set forth in the
articles of association for the regulation of the internal affairs
of the bank, including provisions permissible under the Business
Organizations Code for:
                   (A)  a for-profit corporation, in the case of a
proposed banking association; or
                   (B)  a limited liability company, in the case of a
proposed limited banking association [or
                   [(B)the statement described by Subsection (d)].
       SECTION 9.  Section 32.003, Finance Code, is amended to read
as follows:
       Sec. 32.003.  APPLICATION FOR STATE BANK CHARTER; STANDARDS
FOR APPROVAL.  (a) An application for a state bank charter must be
made under oath and in the form required by the banking
commissioner, who shall inquire fully into the identity and
character of each proposed director, [manager,] officer, [managing
participant,] and principal shareholder [or participant]. The
application must be accompanied by all charter fees and deposits
required by law.
       (b)  The banking commissioner shall grant a state bank
charter only if the commissioner determines that the organizers
have established that public convenience and advantage will be
promoted by the establishment of the state bank. In determining
whether public convenience and advantage will be promoted, the
banking commissioner shall consider the convenience of the public
to be served and whether:
             (1)  the organizational and capital structure and
amount of initial capitalization is adequate for the business plan;
             (2)  the anticipated volume and nature of business
indicates a reasonable probability of success and profitability
based on the market sought to be served;
             (3)  the officers and[,] directors[, managers, and
managing participants] as a group have sufficient banking
experience, ability, standing, competence, trustworthiness, and
integrity to justify a belief that the bank will operate in
compliance with law and that success of the bank is probable;
             (4)  each principal shareholder [or participant] has
sufficient experience, ability, standing, competence,
trustworthiness, and integrity to justify a belief that the bank
will be free from improper or unlawful influence or interference
with respect to the bank's operation in compliance with law; and
             (5)  the organizers are acting in good faith.
       SECTION 10.  Section 32.004(c), Finance Code, is amended to
read as follows:
       (c)  Rules adopted under this subtitle may specify the
confidential or nonconfidential character of information obtained
by the department under this chapter. Except as provided by
Subchapter D, Chapter 31, or in rules regarding confidential
information, the financial statement of a proposed officer or[,]
director[, manager, or managing participant] is confidential and
not subject to public disclosure.
       SECTION 11.  Section 32.006, Finance Code, is amended to
read as follows:
       Sec. 32.006.  ISSUANCE OF CERTIFICATE OF AUTHORITY.  A state
bank may not engage in the business of banking until it receives a
certificate of authority from the banking commissioner. The
banking commissioner may not deliver the certificate of authority
until the bank has:
             (1)  received cash for the issuance of all authorized
shares [or participation shares] in the full amount subscribed;
             (2)  elected or qualified the initial officers and
directors [or managers, as appropriate,] named in the application
for charter or other officers and directors [or managers] approved
by the banking commissioner; and
             (3)  complied with all the other requirements of this
subtitle relating to the organization of state banks.
       SECTION 12.  Section 32.008, Finance Code, is amended to
read as follows:
       Sec. 32.008.  APPLICATION OF GENERAL CORPORATE LAW.  (a) The
[Texas] Business Organizations Code applies [Corporation Act and
the Texas Miscellaneous Corporation Laws Act (Article 1302-1.01 et
seq., Vernon's Texas Civil Statutes) apply] to a banking
association as if it were a for-profit corporation, and [the Texas
Limited Liability Company Act (Article 1528n, Vernon's Texas Civil
Statutes) applies] to a limited banking association as if it were a
limited liability company, to the extent not inconsistent with this
subtitle or the proper business of a state bank, except that:
             (1)  a reference in the Business Organizations Code
[those Acts] to the secretary of state means the banking
commissioner unless the context requires otherwise; and
             (2)  the right of shareholders [or participants] to
cumulative voting in the election of directors [or managers] exists
only if granted by the bank's articles of association.
       (b)  The finance commission may adopt rules to limit or
refine the applicability of the laws listed by Subsection (a) or (d)
to a state bank or to alter or supplement the procedures and
requirements of those laws applicable to an action taken under this
chapter.
       (c)  Unless expressly authorized by this subtitle or a rule
adopted under this subtitle, a state bank may not take an action
authorized by a law listed by Subsection (a) or (d) regarding its
corporate status, its capital structure, or a matter of corporate
governance, of the type for which those laws would require a filing
with the secretary of state if the bank were a business corporation,
without submitting the filing to the banking commissioner and
obtaining the banking commissioner's prior written approval of the
action.
       (d)  Notwithstanding Subsection (a), this subsection
establishes governing law with respect to a state bank organized
before January 1, 2006:
             (1)  to the extent not inconsistent with this subtitle
or the proper business of a state bank:
                   (A)  the Texas Business Corporation Act, the Texas
Miscellaneous Corporation Laws Act (Article 1302-1.01 et seq.,
Vernon's Texas Civil Statutes), and any other law relating to
general business corporations apply to a state banking association,
and a reference in this subtitle to the Business Organizations Code
is considered a reference to the prior law; and
                   (B)  the Texas Limited Liability Company Act
(Article 1528n, Vernon's Texas Civil Statutes) and any other law
relating to a limited liability company organized in Texas apply to
a limited banking association, and a reference in this subtitle to
the Business Organizations Code is considered a reference to the
prior law;
             (2)  the finance commission may establish rules
permitting a state bank to elect to be governed by the provisions of
the Business Organizations Code to the extent not inconsistent with
this subtitle or the proper business of a state bank; and
             (3)  this subsection expires January 1, 2010.
       SECTION 13.  Sections 32.101(c) and (d), Finance Code, are
amended to read as follows:
       (c)  [A limited banking association may not amend its
articles of association to extend its period of existence for a
perpetual period or for any period of years, unless the period of
existence is expressly contingent on the events resulting in
dissolution of the limited banking association under Section
33.208.
       [(d)]  Amendment or restatement of the articles of
association of a state bank and approval of the bank's board and
shareholders [or participants] must be made or obtained as provided
by the [Texas] Business Organizations Code [Corporation Act] for
the amendment or restatement of a certificate of formation by a
for-profit corporation [articles of incorporation] except as
otherwise provided by this subtitle or rules adopted under this
subtitle. The original and one copy of the articles of amendment or
restated articles of association must be filed with the banking
commissioner for approval. Unless the submission presents novel or
unusual questions, the banking commissioner shall approve or reject
the amendment or restatement not later than the 31st day after the
date the banking commissioner considers the submission
informationally complete and accepted for filing. The banking
commissioner may require the submission of additional information
as considered necessary to an informed decision to approve or
reject any amendment or restatement of articles of association
under this section. If the banking commissioner finds that the
amendment or restatement conforms to law and any conditions imposed
by the banking commissioner, and any required filing fee has been
paid, the banking commissioner shall:
             (1)  endorse the face of the original and copy of the
amendment or restatement with the date of approval and the word
"Approved";
             (2)  file the original of the amendment or restatement
in the department's records; and
             (3)  deliver a certified copy of the amendment or
restatement to the bank.
       SECTION 14.  The heading to Section 32.102, Finance Code, is
amended to read as follows:
       Sec. 32.102.  ESTABLISHING SERIES OF SHARES [OR
PARTICIPATION SHARES].  
       SECTION 15.  Sections 32.102(a) and (b), Finance Code, are
amended to read as follows:
       (a)  If the articles of association expressly give the board
of a state bank authority to establish shares [or participation
shares] in series and determine the preferences, limitations, and
relative rights of each series, the board may do so only in
compliance with this section and any rules adopted under this
subtitle.
       (b)  A series of shares [or participation shares] may be
established in the manner provided by the [Texas] Business
Organizations Code [Corporation Act] as if the state bank were a
domestic entity [corporation], but the shares [or participation
shares] of the series may not be issued and sold without the prior
written approval of the banking commissioner under Section 32.103.
The bank shall file the original and one copy of the statement of
action required by the [Texas] Business Organizations Code
[Corporation Act] with the banking commissioner.
       SECTION 16.  Sections 32.103(a) and (b), Finance Code, are
amended to read as follows:
       (a)  A state bank may not reduce or increase its outstanding
capital and surplus through dividend, redemption, issuance of
shares [or participation shares], or otherwise, without the prior
written approval of the banking commissioner, except as permitted
by this section or rules adopted under this subtitle.
       (b)  Unless restricted by rule, prior written approval is not
required for an increase in capital and surplus accomplished
through:
             (1)  issuance of shares of common stock [or their
equivalent in participation shares] for cash;
             (2)  declaration and payment of pro rata share
dividends as defined by the [Texas] Business Organizations Code
[Corporation Act]; or
             (3)  adoption by the board of a resolution directing
that all or part of undivided profits be transferred to capital or
surplus.
       SECTION 17.  Sections 32.104(a) and (b), Finance Code, are
amended to read as follows:
       (a)  With the prior written approval of the banking
commissioner, a state bank may at any time, through action of its
board and without requiring action of its shareholders [or
participants], issue and sell its capital notes or debentures. The
capital notes or debentures must be subordinate to the claims of
depositors and may be subordinate to other claims, including the
claims of other creditors or the shareholders [or participants].
       (b)  Capital notes or debentures may be convertible into
shares [or participation shares] of any class or series. The
issuance and sale of convertible capital notes or debentures are
subject to satisfaction of preemptive rights, if any, to the extent
provided by law.
       SECTION 18.  Sections 32.301(b) and (c), Finance Code, are
amended to read as follows:
       (b)  Implementation of the merger by the parties and approval
of the board, shareholders, [participants,] or owners of the
parties must be made or obtained in accordance with the [Texas]
Business Organizations Code [Corporation Act] as if the state bank
were a domestic entity [corporation] and all other parties to the
merger were foreign [corporations and other] entities, except as
may be otherwise provided by applicable rules.
       (c)  A consummated merger has the effect provided by the
[Texas] Business Organizations Code [Corporation Act]. A separate
application is not required to relocate the home office of a
surviving state bank or to grant authority to a surviving bank to
operate new branch offices that previously existed as part of a
merging financial institution if the intent of the surviving bank
is clearly stated as part of the plan of merger.
       SECTION 19.  Section 32.303, Finance Code, is amended to
read as follows:
       Sec. 32.303.  RIGHTS OF DISSENTERS FROM MERGER.  A
shareholder[, participant, or participant-transferee] may dissent
from the merger to the extent, and by following the procedure
provided, by the [Texas] Business Organizations Code [Corporation
Act] or any rules adopted under this subtitle.
       SECTION 20.  Section 32.403, Finance Code, is amended to
read as follows:
       Sec. 32.403.  LIQUIDATION OF SELLING INSTITUTION.  If the
selling financial institution is at any time after the sale of
assets voluntarily or involuntarily closed for liquidation by a
state or federal regulatory agency, the purchasing bank shall pay
to the receiver of the selling institution the balance of the money
held by it in trust or on deposit for the selling institution and
not yet paid to the depositors and creditors of the selling
institution. Without further action the purchasing bank is
discharged from all responsibilities to the selling institution and
to [or] the selling institution's receiver, depositors, creditors,
and shareholders[, participants, or participant-transferees].
       SECTION 21.  Sections 32.405(a) and (c), Finance Code, are
amended to read as follows:
       (a)  The board of a state bank, with the prior written
approval of the banking commissioner, may cause the bank to sell all
or substantially all of its assets without shareholder [or
participant] approval if:
             (1)  the banking commissioner finds the interests of
depositors and creditors are jeopardized because of insolvency or
imminent insolvency and that the sale is in their best interest; and
             (2)  the Federal Deposit Insurance Corporation or its
successor approves the transaction and agrees to provide assistance
to the prospective buyer under 12 U.S.C. Section 1823(c) or a
comparable law unless the deposits of the bank are not insured.
       (c)  This section does not affect the banking commissioner's
right to take action under another law. The sale by a state bank of
all or substantially all of its assets with shareholder [or
participant] approval is considered a voluntary dissolution and
liquidation and is governed by Subchapter B, Chapter 36.
       SECTION 22.  Sections 32.501(b) and (c), Finance Code, are
amended to read as follows:
       (b)  The merger or conversion by the state bank must be made
and approval of its board and[,] shareholders[, or participants]
must be obtained in accordance with the [Texas] Business
Organizations Code [Corporation Act] as if the state bank were a
domestic entity [corporation] and all other parties to the
transaction, if any, were foreign [corporations and other]
entities, except as provided by rule. For purposes of this
subsection, a conversion is considered a merger into the successor
form of financial institution.
       (c)  The state bank does not cease to be a state bank subject
to the supervision of the banking commissioner unless:
             (1)  the banking commissioner has been given written
notice of the intention to merge or convert before the 31st day
before the date of the proposed transaction;
             (2)  the bank has published notice of the transaction,
in the form and frequency specified by the banking commissioner,
in:
                   (A)  a newspaper of general circulation published
in the county of its home office or, if such a newspaper is not
published in the county, in an adjacent county; and
                   (B)  other locations that the banking
commissioner considers appropriate;
             (3)  the bank has filed with the banking commissioner:
                   (A)  a copy of the application filed with the
successor regulatory authority, including a copy of each contract
evidencing or implementing the merger or conversion, or other
documents sufficient to show compliance with applicable law;
                   (B)  a certified copy of all minutes of board
meetings and shareholder [or participant] meetings at which action
was taken regarding the merger or conversion; and
                   (C)  a publisher's certificate showing
publication of the required notice;
             (4)  the banking commissioner determines that:
                   (A)  all deposit and other liabilities of the
state bank are fully discharged, assumed, or otherwise retained by
the successor form of financial institution;
                   (B)  any conditions imposed by the banking
commissioner for the protection of depositors and creditors have
been met or otherwise resolved; and
                   (C)  any required filing fees have been paid; and
             (5)  the bank has received a certificate of authority
to do business as the successor financial institution.
       SECTION 23.  Section 32.502(b), Finance Code, is amended to
read as follows:
       (b)  A financial institution applying to convert into a state
bank may receive a certificate of authority to do business as a
state bank if the banking commissioner finds that:
             (1)  the financial institution is not engaging in a
pattern or practice of unsafe and unsound banking practices;
             (2)  the financial institution has adequate
capitalization for a state bank to engage in business at the same
locations as the financial institution is engaged in business
before the conversion;
             (3)  the financial institution can be expected to
operate profitably after the conversion;
             (4)  the officers and[,] directors[, managers, and
managing participants] of the financial institution as a group have
sufficient banking experience, ability, standing, competence,
trustworthiness, and integrity to justify a belief that the
financial institution will operate as a state bank in compliance
with law;
             (5)  each principal shareholder [or participant] has
sufficient experience, ability, standing, competence,
trustworthiness, and integrity to justify a belief that the
financial institution will be free from improper or unlawful
influence or interference with respect to the financial
institution's operation as a state bank in compliance with law; and
             (6)  if the converting financial institution did not
have general depository powers and the state bank will have those
powers, the factors set forth in Section 32.003(b) are satisfied.
       SECTION 24.  Section 33.001(b), Finance Code, is amended to
read as follows:
       (b)  For purposes of this subchapter and except as otherwise
provided by rules adopted under this subtitle, the principal
shareholder [or principal participant] of a state bank that
directly or indirectly owns or has the power to vote a greater
percentage of voting securities of the bank than any other
shareholder [or participant] is considered to control the bank.
       SECTION 25.  Section 33.101(a), Finance Code, is amended to
read as follows:
       (a)  Voting securities of a state bank held by the bank in a
fiduciary capacity under a will or trust, whether registered in the
bank's name or in the name of its nominee, may not be voted in the
election of directors [or managers] or on a matter affecting the
compensation of directors, [managers,] officers, or employees of
the bank in that capacity unless:
             (1)  under the terms of the will or trust, the manner in
which the voting securities are to be voted may be determined by a
donor or beneficiary of the will or trust and the donor or
beneficiary makes the determination in the matter at issue;
             (2)  the terms of the will or trust expressly direct the
manner in which the securities must be voted so that discretion is
not vested in the bank as fiduciary; or
             (3)  the securities are voted solely by a cofiduciary
that is not an affiliate of the bank, as if the cofiduciary were the
sole fiduciary.
       SECTION 26.  Section 33.102, Finance Code, is amended to
read as follows:
       Sec. 33.102.  BYLAWS. Each [Except as provided by Section
33.207, each] state bank shall adopt bylaws and may amend its bylaws
for the purposes and according to the procedures provided by the
[Texas] Business Organizations Code [Corporation Act].
       SECTION 27.  Section 33.103, Finance Code, is amended to
read as follows:
       Sec. 33.103.  BOARD OF DIRECTORS[, MANAGERS, OR MANAGING
PARTICIPANTS].  (a)  The board of a state bank must consist of not
fewer than five but not more than 25 directors, [managers, or
managing participants,] a majority of whom are residents of this
state. The [Except for a limited banking association in which
management has been retained by its participants, the] principal
executive officer of the bank is a member of the board. The
principal executive officer acting in the capacity of a board
member is the board's presiding officer unless the board elects a
different presiding officer to perform the duties as designated by
the board.
       (b)  Unless the banking commissioner consents otherwise in
writing, a person may not serve as director[, manager, or managing
participant] of a state bank if:
             (1)  the bank incurs an unreimbursed loss attributable
to a charged-off obligation of or holds a judgment against:
                   (A)  the person; or
                   (B)  an entity that was controlled by the person
at the time of funding and at the time of default on the loan that
gave rise to the judgment or charged-off obligation;
             (2)  the person is the subject of an order described by
Section 35.007(a); or
             (3)  the person has been convicted of a felony.
       (c)  If a state bank [other than a limited banking
association operated by managing participants] does not elect
directors [or managers] before the 61st day after the date of its
regular annual meeting, the banking commissioner may appoint a
conservator under Chapter 35 to operate the bank and elect
directors [or managers], as appropriate. If the conservator is
unable to locate or elect persons willing and able to serve as
directors [or managers], the banking commissioner may close the
bank for liquidation.
       (d)  A vacancy on the board that reduces the number of
directors[, managers, or managing participants] to fewer than five
must be filled not later than the 30th day after the date the
vacancy occurs. [A limited banking association with fewer than
five managing participants shall add one or more new participants
or elect a board of managers of not fewer than five persons to
resolve the vacancy.] If the vacancy is not timely filled, the
banking commissioner may appoint a conservator under Chapter 35 to
operate the bank and elect a board of not fewer than five persons to
resolve the vacancy. If the conservator is unable to locate or
elect five persons willing and able to serve as directors [or
managers], the banking commissioner may close the bank for
liquidation.
       (e)  Before each term to which a person is elected to serve as
a director [or manager] of a state bank, [or annually for a person
who is a managing participant,] the person shall submit an
affidavit for filing in the minutes of the bank stating that the
person, to the extent applicable:
             (1)  accepts the position and is not disqualified from
serving in the position;
             (2)  will not violate or knowingly permit an officer,
director, [manager, managing participant,] or employee of the bank
to violate any law applicable to the conduct of business of the
bank; and
             (3)  will diligently perform the duties of the
position.
       (f)  The banking commissioner in the exercise of discretion
may waive or reduce the residency requirements for directors set
forth in Subsection (a).
       SECTION 28.  Section 33.104, Finance Code, is amended to
read as follows:
       Sec. 33.104.  ADVISORY DIRECTOR [OR ADVISORY MANAGER].  An
advisory director [or advisory manager] is not considered a
director [or manager] if the advisory director [or advisory
manager]:
             (1)  is not elected by the shareholders [or
participants] of the bank;
             (2)  does not vote on matters before the board or a
committee of the board;
             (3)  is not counted for purposes of determining a
quorum of the board or committee; and
             (4)  provides solely general policy advice to the
board.
       SECTION 29.  Sections 33.108(a) and (b), Finance Code, are
amended to read as follows:
       (a)  An officer, director, [manager, managing participant,]
employee, or shareholder[, or participant] of a state bank commits
an offense if the person knowingly:
             (1)  conceals information or a fact, or removes,
destroys, or conceals a book or record of the bank for the purpose
of concealing information or a fact, from the banking commissioner
or an agent of the banking commissioner; or
             (2)  removes, destroys, or conceals any book or record
of the bank that is material to a pending or anticipated legal or
administrative proceeding.
       (b)  An officer, director, [manager, managing participant,]
or employee of a state bank commits an offense if the person:
             (1)  knowingly makes a false entry in a book, record,
report, or statement of the bank; or
             (2)  violates or knowingly participates in a violation
of, or permits another of the bank's officers, directors,
[managers, managing participants,] or employees to violate, the
prohibition on lending trust funds under Section 113.052, Property
Code.
       SECTION 30.  Section 33.109, Finance Code, is amended to
read as follows:
       Sec. 33.109.  TRANSACTIONS WITH MANAGEMENT AND AFFILIATES.  
(a)  Without the prior approval of a disinterested majority of the
board recorded in the minutes or, if a disinterested majority
cannot be obtained, the prior written approval of the banking
commissioner, a state bank may not directly or indirectly:
             (1)  sell or lease an asset of the bank to an officer,
director, [manager, managing participant,] or principal
shareholder [or participant] of the bank or of an affiliate of the
bank; or
             (2)  purchase or lease an asset in which an officer,
director, [manager, managing participant,] or principal
shareholder [or participant] of the bank or of an affiliate of the
bank has an interest.
       (b)  An officer or[,] director[, manager, or managing
participant] of the bank who knowingly participates in or permits a
violation of this section commits an offense. An offense under this
subsection is a felony of the third degree.
       SECTION 31.  Section 33.201(a), Finance Code, is amended to
read as follows:
       (a)  A [Except as provided by Subsection (b), a]
participant[, participant-transferee,] or manager of a limited
banking association is not liable for a debt, obligation, or
liability of the limited banking association, including a debt,
obligation, or liability under a judgment, decree, or order of
court. A participant[, other than a full liability participant,]
or a manager of a limited banking association is not a proper party
to a proceeding by or against a limited banking association unless
the object of the proceeding is to enforce a participant's or
manager's right against or liability to a limited banking
association.
       SECTION 32.  Sections 33.204(a) and (b), Finance Code, are
amended to read as follows:
       (a)  Management of a limited banking association is vested in
[the participants in proportion to each participant's contribution
to capital, as adjusted periodically to properly reflect any
additional contribution. The articles of association may provide
that management of a limited banking association is vested in] a
board of managers [to be] elected [annually] by the participants as
prescribed by the bylaws.
       (b)  A board of managers operates in substantially the same
manner as, and has substantially the same rights, powers,
privileges, duties, and responsibilities, as a board of directors
of a banking association, and a manager must meet the
qualifications for a director under Section 33.103. [Participants
of a limited banking association may not retain management and must
elect a board of managers if:
             [(1)  any participant is disqualified from serving as a
managing participant under Section 33.103;
             [(2)  the limited banking association has fewer than
five or more than 25 participants; or
             [(3)  any participant has been removed by the banking
commissioner under Subchapter A, Chapter 35.]
       SECTION 33.  Section 33.206, Finance Code, is amended to
read as follows:
       Sec. 33.206.  INTEREST IN LIMITED BANKING ASSOCIATION;
TRANSFERABILITY OF INTEREST.  (a) The interest of a participant [or
participant-transferee] in a limited banking association is the
personal property of the participant [or the
participant-transferee] and may be transferred as provided by the
bylaws or the participation agreement.
       (b)  The bylaws or the participation agreement may not
require the consent of any other participant in order for a
participant to transfer participation shares, including voting
rights. [A transferee of a participant's interest has the status of
a participant-transferee and does not by the transfer become a
participant or obtain a right to participate in the management of
the limited banking association.
       [(c)  A participant-transferee is entitled to receive only
the share of profits, return of contribution, or other distributive
benefit in respect to the interest transferred to which the
participant who transferred the interest would have been entitled.
       [(d)  A participant-transferee may become a participant only
as provided by the bylaws or the participation agreement.
       [(e)  A limited banking association may add additional
participants in the same manner as participant-transferees after
payment in full of the capital contributions to the limited banking
association payable for the issuance of additional participation
interests.]
       SECTION 34.  Section 33.208, Finance Code, is amended to
read as follows:
       Sec. 33.208.  DISSOLUTION.  The bylaws or the participation
agreement may not require automatic termination, dissolution, or
suspension of the limited banking association on the death,
disability, bankruptcy, expulsion, or withdrawal of a participant,
or on the happening of any other event other than the passage of
time. [(a) A limited banking association organized under this
chapter is dissolved on:
             [(1)  the expiration of the period fixed for the
duration of the limited banking association;
             [(2)  a vote to dissolve or the execution of a written
consent to dissolve by all full liability participants, if any, and
a sufficient number of other participants that, combined with all
full liability participants, hold at least two-thirds of the
participation shares in each class in the association, or a greater
fraction as provided by the articles of association;
             [(3)  except as provided by the articles of
association, the death, insanity, expulsion, bankruptcy,
retirement, or resignation of a participant unless a majority in
interest of all remaining participants elect in writing not later
than the 90th day after the date of the event to continue the
business of the association; or
             [(4)  the occurrence of an event of dissolution
specified in the articles of association.
       [(b)  A dissolution under this section is considered to be
the initiation of a voluntary liquidation under Subchapter B,
Chapter 36.
       [(c)  An event of dissolution described by Subsection (a)(3)
does not cancel or revoke a contract to which the bank is a party,
including a trust indenture or agreement or voluntary dissolution
under Subchapter B, Chapter 36, until the period for the remaining
participants to continue the business of the bank has expired
without the remaining participants having completed the necessary
action to continue the business of the bank.]
       SECTION 35.  Section 33.211, Finance Code, is amended to
read as follows:
       Sec. 33.211.  APPLICATION OF OTHER PROVISIONS TO LIMITED
BANKING ASSOCIATIONS.  For purposes of the provisions of Subtitle A
and this subtitle other than this subchapter, as the context
requires:
             (1)  a manager is considered to be a director and the
board of managers is considered to be the board of directors;
             (2)  [if there is not a board of managers, a participant
is considered to be a director and all of the participants are
considered to be the board of directors;
             [(3)]  a participant [or participant-transferee] is
considered to be a shareholder;
             (3) [(4)]  a participation share is considered to be a
share [of stock]; and
             (4) [(5)]  a distribution is considered to be a
dividend.
       SECTION 36.  Section 34.102, Finance Code, is amended to
read as follows:
       Sec. 34.102.  TRANSACTION IN BANK SHARES [OR PARTICIPATION
SHARES].  (a) A state bank may not acquire a lien by pledge or
otherwise on its own shares [or participation shares], or otherwise
purchase or acquire title to its own shares [or participation
shares], except:
             (1)  as necessary to avoid or minimize a loss on a loan
or investment previously made in good faith; or
             (2)  as provided by Subsection (b).
       (b)  With the prior written approval of the banking
commissioner or as permitted by rules adopted under this subtitle,
a state bank may acquire title to its own shares [or participation
shares] and hold those shares [or participation shares] as treasury
stock. Treasury stock acquired under this subsection is not
considered an equity investment.
       (c)  If a state bank acquires a lien on or title to its own
shares [or participation shares] under this section, the lien may
not by its original terms extend for more than two years. Except
with the prior written approval of the banking commissioner, the
bank may not hold title to its own shares [or participation shares]
for more than one year.
       (d)  A state bank may make loans on the collateral security
of securities issued by an affiliate, if the loan is subject to and
in compliance with the provisions of Sections 23A and 23B, Federal
Reserve Act (12 U.S.C. Sections 371c and 371c-1), as amended,
applicable to nonmember insured state banks by virtue of Section
18(j)(1), Federal Deposit Insurance Act (12 U.S.C. Section
1828(j)(1)), as amended.
       SECTION 37.  Sections 34.104(b) and (c), Finance Code, are
amended to read as follows:
       (b)  If the portfolio of an investment company described by
Subsection (a) consists wholly of investments in which the bank
could invest directly without limitation [under Section
34.101(e)], the bank may invest in the investment company without
limitation.
       (c)  The bank may invest not more than an amount equal to 15
percent of the bank's capital and certified surplus in an
investment company described by Subsection (a) the portfolio of
which contains an investment or obligation in which the bank could
not invest directly without limitation under this chapter [that is
subject to the limitations of Section 34.101(d) or 34.201(a)].
       SECTION 38.  Section 34.105(c)(2), Finance Code, is amended
to read as follows:
             (2)  "Banker's bank" means a bank insured by the Federal
Deposit Insurance Corporation or a bank holding company that owns
or controls such an insured bank if:
                   (A)  all equity securities of the bank or bank
holding company, other than director's qualifying shares or shares
issued under an employee compensation plan, are owned by depository
institutions or depository institution holding companies; and
                   (B)  the bank or bank holding company and all its
subsidiaries are engaged exclusively in providing:
                         (i)  services to or for other depository
institutions, depository institution holding companies, and the
directors, [managers, managing participants,] officers, and
employees of other depository institutions and depository
institution holding companies; and
                         (ii)  correspondent banking services at the
request of other depository institutions, depository institution
holding companies, or their subsidiaries.
       SECTION 39.  Sections 34.202(a) and (d), Finance Code, are
amended to read as follows:
       (a)  An officer, director, [manager, managing participant,]
or employee of a state bank who approves or participates in the
approval of a loan with actual knowledge that the loan violates
Section 34.201 is jointly and severally liable to the bank for the
lesser of the amount by which the loan exceeded applicable lending
limits or the bank's actual loss. The person remains liable for
that amount until the loan and all prior indebtedness of the
borrower to the bank have been fully repaid.
       (d)  For purposes of this section, an officer, director,
[manager, managing participant,] or employee of a state bank is
presumed to know the amount of the bank's lending limit under
Section 34.201(a) and the amount of the borrower's aggregate
outstanding indebtedness to the bank immediately before a new loan
or extension of credit to that borrower.
       SECTION 40.  Section 34.203(b), Finance Code, is amended to
read as follows:
       (b)  This section does not authorize the bank to charge its
borrower for payment of fees and expenses to an officer or[,]
director[, manager, or managing participant] of the bank for
services rendered in the person's capacity as an officer or[,]
director[, manager, or managing participant].
       SECTION 41.  Sections 35.002(a) and (b), Finance Code, are
amended to read as follows:
       (a)  The banking commissioner has grounds to issue a cease
and desist order to an officer, employee, or director[, manager, or
managing participant] of a state bank, or the bank itself acting
through an authorized person, if the banking commissioner
determines from examination or other credible evidence that the
bank or person directly or indirectly has:
             (1)  violated this subtitle or another applicable law;
             (2)  engaged in a breach of trust or other fiduciary
duty;
             (3)  refused to submit to examination or examination
under oath;
             (4)  conducted business in an unsafe or unsound manner;
or
             (5)  violated a condition of the bank's charter or an
agreement between the bank or the person and the banking
commissioner or the department.
       (b)  If the banking commissioner has grounds for action under
Subsection (a) and finds that an order to cease and desist from a
violation appears to be necessary and in the best interest of the
bank involved and its depositors, creditors, and shareholders [or
participants], the banking commissioner may serve a proposed cease
and desist order on the bank and each person who committed or
participated in the action. The proposed order must:
             (1)  be delivered by personal delivery or by registered
or certified mail, return receipt requested;
             (2)  state with reasonable certainty the grounds for
the proposed order; and
             (3)  state the effective date of the order, which may
not be before the 21st day after the date the proposed order is
delivered or mailed.
       SECTION 42.  Sections 35.003(a) and (b), Finance Code, are
amended to read as follows:
       (a)  The banking commissioner has grounds to remove a present
or former officer, director, [manager, managing participant,] or
employee of a state bank from office or employment in, or prohibit a
controlling shareholder [or participant] or other person
participating in the affairs of a state bank from further
participation in the affairs of, a state bank if the banking
commissioner determines from examination or other credible
evidence that:
             (1)  the person:
                   (A)  intentionally committed or participated in
commission of an act described by Section 35.002(a) with regard to
the affairs of the bank; or
                   (B)  violated a final cease and desist order
issued in response to the same or a similar act;
             (2)  because of this action by the person:
                   (A)  the bank has suffered or will probably suffer
financial loss or other damage;
                   (B)  the interests of the bank's depositors have
been or could be prejudiced; or
                   (C)  the person has received financial gain or
other benefit by reason of the action; and
             (3)  the action:
                   (A)  involves personal dishonesty on the part of
the person; or
                   (B)  demonstrates wilful or continuing disregard
for the safety or soundness of the bank.
       (b)  If the banking commissioner has grounds for action under
Subsection (a) and finds that a removal or prohibition order
appears to be necessary and in the best interest of the bank
involved and its depositors, creditors, and shareholders [or
participants], the banking commissioner may serve a proposed
removal or prohibition order, as appropriate, on a person alleged
to have committed or participated in the action. The proposed order
must:
             (1)  be delivered by personal delivery or by registered
or certified mail, return receipt requested;
             (2)  state with reasonable certainty the grounds for
removal or prohibition; and
             (3)  state the effective date of the order, which may
not be before the 21st day after the date the proposed order is
delivered or mailed.
       SECTION 43.  Section 35.005(a), Finance Code, is amended to
read as follows:
       (a)  If the banking commissioner believes that immediate
action is necessary to prevent immediate and irreparable harm to
the bank and its depositors, creditors, and shareholders [or
participants], the banking commissioner may issue one or more cease
and desist, removal, or prohibition orders as emergency orders to
become effective immediately on service without prior notice or
hearing. Service must be by personal delivery or by registered or
certified mail, return receipt requested.
       SECTION 44.  Section 35.006, Finance Code, is amended to
read as follows:
       Sec. 35.006.  COPY OF LETTER OR ORDER IN BANK RECORDS.  A
copy of a determination letter, proposed order, emergency order, or
final order issued by the banking commissioner under this
subchapter shall be immediately brought to the attention of the
board of the affected bank, regardless of whether the bank is a
party, and filed in the minutes of the board. Each director[,
manager, or managing participant] shall immediately certify to the
banking commissioner in writing that the certifying person has read
and understood the determination letter, proposed order, emergency
order, or final order. The required certification may not be
considered an admission of a person in a subsequent legal or
administrative proceeding.
       SECTION 45.  Section 35.101(a), Finance Code, is amended to
read as follows:
       (a)  The banking commissioner by order may appoint a
supervisor over a state bank if the banking commissioner determines
from examination or other credible evidence that the bank is in
hazardous condition and that an order of supervision appears to be
necessary and in the best interest of the bank and its depositors,
creditors, and shareholders [or participants], or the public.
       SECTION 46.  Section 35.102(a), Finance Code, is amended to
read as follows:
       (a)  The banking commissioner by order may appoint a
conservator for a state bank if the banking commissioner determines
from examination or other credible evidence that the bank is in
hazardous condition and immediate and irreparable harm is
threatened to the bank, its depositors, creditors, or shareholders
[or participants], or the public.
       SECTION 47.  Section 35.106, Finance Code, is amended to
read as follows:
       Sec. 35.106.  AUTHORITY OF SUPERVISOR.  During a period of
supervision, a bank, without the prior approval of the banking
commissioner or the supervisor or as otherwise permitted or
restricted by the order of supervision, may not:
             (1)  dispose of, sell, transfer, convey, or encumber
the bank's assets;
             (2)  lend or invest the bank's money;
             (3)  incur a debt, obligation, or liability; or
             (4)  pay a cash dividend to the bank's shareholders [or
participants].
       SECTION 48.  Section 35.107(b), Finance Code, is amended to
read as follows:
       (b)  Subject to any limitation in the order of appointment or
other direction of the banking commissioner, the conservator has
all the powers of the directors, [managers, managing participants,]
officers, and shareholders [or participants] of the bank and shall
conduct the business of the bank and take all steps the conservator
considers appropriate to remove the conditions causing the
conservatorship. During the conservatorship, the board may not
direct or participate in the affairs of the bank.
       SECTION 49.  Section 36.101, Finance Code, is amended to
read as follows:
       Sec. 36.101.  INITIATING VOLUNTARY DISSOLUTION.  (a)  A
state bank may initiate voluntary dissolution and surrender its
charter as provided by this subchapter:
             (1)  with the approval of the banking commissioner;
             (2)  after complying with the provisions of the [Texas]
Business Organizations Code [Corporation Act] regarding board and
shareholder approval for voluntary dissolution; and
             (3)  by filing the documents as provided by Section
36.102.
       (b)  The shareholders [or participants] of a state bank
initiating voluntary dissolution by resolution shall appoint one or
more persons to act as the liquidating agent or committee. The
liquidating agent or committee shall conduct the liquidation as
provided by law and under the supervision of the bank's board. The
board, in consultation with the banking commissioner, shall require
the liquidating agent or committee to give a suitable bond.
       SECTION 50.  Section 36.102, Finance Code, is amended to
read as follows:
       Sec. 36.102.  FILING RESOLUTIONS WITH BANKING
COMMISSIONER.  After resolutions to dissolve and liquidate a state
bank have been adopted by the bank's board and shareholders [or
participants], a majority of the directors[, managers, or managing
participants] shall verify and file with the banking commissioner
duplicate certified copies of:
             (1)  the resolutions of the shareholders [or
participants] that:
                   (A)  are adopted at a meeting for which proper
notice was given or by unanimous written consent; and
                   (B)  approve the dissolution and liquidation of
the bank;
             (2)  the resolutions of the board approving the
dissolution and liquidation of the bank [if the bank is operated by
a board of directors or managers]; and
             (3)  a copy of the notice to the shareholders [or
participants] informing them of the meeting.
       SECTION 51.  Sections 36.108(a), (c), and (d), Finance Code,
are amended to read as follows:
       (a)  After the bank has taken all of the actions specified by
Sections 36.102, 36.105, and 36.107, paid all its debts and
obligations, and transferred all property for which a legal
claimant has been found after the time for presentation of claims
has expired, the bank shall make a list from its books of the names
of each depositor, creditor, owner of personal property in the
bank's possession or custody, or lessee of any safe, vault, or box,
who has not claimed or has not received a deposit, debt, dividend,
interest, balance, or other amount or property due to the person.
The list must be sworn to or affirmed by a majority of the bank's
board [or managing participants].
       (c)  After the banking commissioner has reviewed the list and
has reconciled the unclaimed cash and property with the amounts of
money and property reported and transferred to the comptroller, the
banking commissioner shall allow the bank to distribute the bank's
remaining assets, if any, among its shareholders[, participants, or
participant-transferees] as their ownership interests appear.
       (d)  After distribution of all remaining assets under
Subsection (c), the bank shall file with the department:
             (1)  an affidavit and schedules, sworn to or affirmed
by a majority of the bank's board [or managing participants],
showing the distribution to each shareholder[, participant, or
participant-transferee];
             (2)  all copies of reports of examination of the bank in
its possession; and
             (3)  its original charter or an affidavit stating that
the original charter is lost.
       SECTION 52.  Section 36.201(b), Finance Code, is amended to
read as follows:
       (b)  A majority of the bank's directors[, managers, or
managing participants] may voluntarily close the bank and place it
with the banking commissioner for liquidation.
       SECTION 53.  Section 36.203(c), Finance Code, is amended to
read as follows:
       (c)  The receiver has all the powers of the directors,
[managers, managing participants,] officers, and shareholders [or
participants] of the bank as necessary to support an action taken on
behalf of the bank.
       SECTION 54.  Section 36.204(a), Finance Code, is amended to
read as follows:
       (a)  A state bank, acting through a majority of its
directors, [managers, or managing participants,] may intervene in
an action filed by the banking commissioner closing a state bank to
challenge the banking commissioner's closing of the bank and to
enjoin the banking commissioner or other receiver from liquidating
its assets. The bank must file the intervention not later than the
second business day after the closing of the bank, excluding legal
holidays. The court may issue an ex parte order restraining the
receiver from liquidating bank assets pending a hearing on the
injunction. The receiver shall comply with the restraining order
but may petition the court for permission to liquidate an asset as
necessary to prevent its loss or diminution pending the outcome of
the injunction.
       SECTION 55.  Section 36.208, Finance Code, is amended to
read as follows:
       Sec. 36.208.  RIGHTS FIXED.  The rights and liabilities of
the bank in liquidation and of a depositor, creditor, officer,
director, [manager, managing participant,] employee, shareholder,
[participant, participant-transferee,] agent, or other person
interested in the bank's estate are fixed on the date of closing of
the bank for liquidation except as otherwise directed by the court
or as expressly provided otherwise by this subchapter or Subchapter
D.
       SECTION 56.  Section 36.212(a), Finance Code, is amended to
read as follows:
       (a)  Each bank affiliate, officer, director, [manager,
managing participant,] shareholder, [participant,
participant-transferee,] trustee, agent, servant, employee,
attorney, attorney-in-fact, or correspondent shall immediately
deliver to the receiver, without cost to the receiver, any record or
other property of the bank or that relates to the business of the
bank.
       SECTION 57.  Section 36.213(a), Finance Code, is amended to
read as follows:
       (a)  On application by the receiver, the court with or
without notice may issue an injunction:
             (1)  restraining a bank officer, director, [manager,
managing participant,] shareholder, [participant,
participant-transferee,] trustee, agent, servant, employee,
attorney, attorney-in-fact, correspondent, or other person from
transacting the bank's business or wasting or disposing of its
property; or
             (2)  requiring the delivery of the bank's property or
assets to the receiver subject to the further order of the court.
       SECTION 58.  Section 36.216, Finance Code, is amended to
read as follows:
       Sec. 36.216.  PREFERENCES.  (a)  A transfer of or lien on the
property or assets of a state bank is voidable by the receiver if
the transfer or lien:
             (1)  was made or created less than:
                   (A)  four months before the date the bank is
closed for liquidation; or
                   (B)  one year before the date the bank is closed
for liquidation if the receiving creditor was at the time an
affiliate, officer, director, or [manager, managing participant,]
principal shareholder[, or participant] of the bank or an affiliate
of the bank;
             (2)  was made or created with the intent of giving to a
creditor or depositor, or enabling a creditor or depositor to
obtain, a greater percentage of the claimant's debt than is given or
obtained by another claimant of the same class; and
             (3)  is accepted by a creditor or depositor having
reasonable cause to believe that a preference will occur.
       (b)  Each bank officer, director, [manager, managing
participant,] shareholder, [participant, participant-transferee,]
trustee, agent, servant, employee, attorney-in-fact, or
correspondent, or other person acting on behalf of the bank, who has
participated in implementing a voidable transfer or lien, and each
person receiving property or the benefit of property of the bank as
a result of the voidable transfer or lien, are personally liable for
the property or benefit received and shall account to the receiver
for the benefit of the depositors and creditors of the bank.
       (c)  The receiver may avoid a transfer of or lien on the
property or assets of a bank that a depositor, creditor, or
shareholder[, participant, or participant-transferee] of the bank
could have avoided and may recover the property transferred or its
value from the person to whom it was transferred or from a person
who has received it unless the transferee or recipient was a bona
fide holder for value before the date the bank was closed for
liquidation.
       SECTION 59.  Section 36.301(a), Finance Code, is amended to
read as follows:
       (a)  This section applies only to a claim by a person, other
than a shareholder[, participant, or participant-transferee]
acting in that capacity, who has a claim against a state bank in
liquidation, including a claimant with a secured claim and a
claimant under a fiduciary relationship who has been ordered by the
receiver to file a proof of claim under Section 36.223.
       SECTION 60.  Section 36.308, Finance Code, is amended to
read as follows:
       Sec. 36.308.  OBJECTION TO APPROVED CLAIM.  The receiver
with court approval shall set a date for objection to an approved
claim. On or before that date a depositor, creditor, other
claimant, or shareholder[, participant, or participant-transferee]
of the bank may file an objection to an approved claim. The
objection shall be heard and determined by the court. If the
objection is sustained, the court shall direct an appropriate
modification of the schedule of claims.
       SECTION 61.  Section 36.310(c), Finance Code, is amended to
read as follows:
       (c)  As soon as practicable after the determination of all
objections, appeals, and claims based on previously unliquidated or
undetermined demands governed by Section 36.305, the receiver shall
distribute the assets of the bank in satisfaction of approved
claims other than claims asserted in a person's capacity as a
shareholder[, participant, or participant-transferee].
       SECTION 62.  Section 36.312(b), Finance Code, is amended to
read as follows:
       (b)  Assets shall be distributed in the following order of
priority:
             (1)  administrative expenses;
             (2)  approved claims of secured creditors to the extent
of the value of the security as provided by Section 36.304;
             (3)  approved claims of beneficiaries of insufficient
commingled fiduciary money or missing fiduciary property and
approved claims of depositors of the bank;
             (4)  other approved claims of general creditors not
falling within a higher priority under this section, including
unsecured claims for taxes and debts due the federal government or a
state or local government;
             (5)  approved claims of a type described by
Subdivisions (1)-(4) that were not filed within the period
prescribed by this subchapter; and
             (6)  claims of capital note or debenture holders or
holders of similar obligations and proprietary claims of
shareholders[, participants, participant-transferees,] or other
owners according to the terms established by issue, class, or
series.
       SECTION 63.  Sections 36.313(a), (b), (c), and (d), Finance
Code, are amended to read as follows:
       (a)  If bank assets remain after the receiver has provided
for unclaimed distributions and all of the liabilities of the bank
in liquidation, the receiver shall distribute the remaining assets
to the shareholders [or participants] of the bank.
       (b)  If the remaining assets are not liquid or if they
otherwise require continuing administration, the receiver may call
a meeting of the shareholders [or participants and
participant-transferees] of the bank. The receiver shall give
notice of the meeting:
             (1)  in a newspaper of general circulation in the
county where the home office of the bank was located; and
             (2)  by written notice to the shareholders [or
participants and participant-transferees] of record at their last
known addresses.
       (c)  At the meeting, the shareholders [or participants]
shall appoint one or more agents to take over the affairs to
continue the liquidation for the benefit of the shareholders [or
participants and participant-transferees]. Voting privileges are
governed by the bank's bylaws and articles of association. If a
quorum cannot be obtained at the meeting, the banking commissioner
shall appoint an agent. An agent appointed under this subsection
shall execute and file with the court a bond approved by the court,
conditioned on the faithful performance of all the duties of the
trust.
       (d)  Under order of the court the receiver shall transfer and
deliver to the agent or agents for continued liquidation under the
court's supervision all assets of the bank remaining in the
receiver's hands. The court shall discharge the receiver from
further liability to the bank and its depositors, creditors, and
shareholders[, participants, and participant-transferees].
       SECTION 64.  Section 37.004(b), Finance Code, is amended to
read as follows:
       (b)  A bank or a director, [manager, managing participant,]
officer, or employee of a bank does not incur liability or loss of
rights because of a closing authorized by this chapter.
       SECTION 65.  Section 181.002(a)(7), Finance Code, is amended
to read as follows:
             (7)  "Capital" means:
                   (A)  the sum of:
                         (i)  the par value of all shares or
participation shares of a state trust company having a par value
that have been issued;
                         (ii)  the consideration set by the board [in
the manner provided by the Texas Business Corporation Act] for all
shares or participation shares of the state trust company without
par value that have been issued, except the part of that
consideration that:
                               (a)  has been actually received;
                               (b)  is less than all of that
consideration; and
                               (c)  the board, by resolution adopted
not later than the 60th day after the date of issuance of those
shares, has allocated to surplus with the prior approval of the
banking commissioner; and
                         (iii)  an amount not included in
Subparagraphs (i) and (ii) that has been transferred to capital of
the state trust company, on the payment of a share dividend or on
adoption by the board of a resolution directing that all or part of
surplus be transferred to capital, minus each reduction made as
permitted by law; less
                   (B)  all amounts otherwise included in Paragraphs
(A)(i) and (ii) that are attributable to the issuance of securities
by the state trust company and that the banking commissioner
determines, after notice and an opportunity for hearing, should be
classified as debt rather than equity securities.
       SECTION 66.  Section 181.005(a), Finance Code, is amended to
read as follows:
       (a)  The provisions of the [Texas] Business Organizations
Code [Corporation Act] regarding liability, defenses, and
indemnification of a director, officer, agent, or employee apply to
a director, officer, agent, or employee of a state trust company in
this state. Except as limited by those provisions, a disinterested
director, manager, managing participant, officer, or employee of a
state trust company may not be held personally liable in an action
seeking monetary damages arising from the conduct of the state
trust company's affairs unless the damages resulted from the gross
negligence or wilful or intentional misconduct of the person during
the person's term of office or service with the state trust company.
       SECTION 67.  Section 181.308(a), Finance Code, is amended to
read as follows:
       (a)  Notwithstanding Section 21.218 or 101.502, [Article
2.44, Texas] Business Organizations Code [Corporation Act], a
shareholder or participant of a state trust company may not
examine:
             (1)  a report of examination or other confidential
property of the department that is in the possession of the state
trust company; or
             (2)  a book or record of the state trust company that
directly or indirectly pertains to financial or other information
maintained by the state trust company on behalf of its clients,
including a specific item in the minutes of the board or a committee
of the board regarding client account review and approval or any
report that would tend to identify the state trust company's
client.
       SECTION 68.  Section 182.009, Finance Code, is amended to
read as follows:
       Sec. 182.009.  APPLICATION OF GENERAL CORPORATE LAW. (a)  
The [Texas] Business Organizations Code applies [Corporation Act
and the Texas Miscellaneous Corporation Laws Act (Article 1302-1.01
et seq., Vernon's Texas Civil Statutes) are incorporated into this
chapter and apply] to a trust association as if it were a for-profit
corporation, and [the Texas Limited Liability Company Act (Article
1528n, Vernon's Texas Civil Statutes) applies] to a limited trust
association as if it were a limited liability company, [as if they
were part of this subtitle] to the extent not inconsistent with this
subtitle or the proper business of a state trust company, except
that:
             (1)  a reference to the secretary of state means the
banking commissioner unless the context requires otherwise; and
             (2)  the right of shareholders or participants to
cumulative voting in the election of directors or managers exists
only if granted by the state trust company's articles of
association.
       (b)  Unless expressly authorized by this subtitle or a rule
of the finance commission, a state trust company may not take an
action authorized by a law listed under Subsection (a) or (d)
regarding its corporate status, capital structure, or a matter of
corporate governance, of the type for which a law listed under
Subsection (a) would require a filing with the secretary of state if
the state trust company were a business corporation or a limited
liability company, without submitting the filing to the banking
commissioner for prior written approval of the action.
       (c)  The finance commission may adopt rules to alter or
supplement the procedures and requirements of the laws listed by
Subsection (a) or (d) applicable to an action taken under this
chapter by a state trust company.
       (d)  Notwithstanding Subsection (a), this subsection
establishes governing law with respect to a state trust company
organized before January 1, 2006:
             (1)  to the extent not inconsistent with this subtitle
or the proper business of a state trust company:
                   (A)  the Texas Business Corporation Act, the Texas
Miscellaneous Corporation Laws Act (Article 1302-1.01 et seq.,
Vernon's Texas Civil Statutes), and any other law relating to
general business corporations apply to a state trust company, and a
reference in this subtitle to the Business Organizations Code is
considered a reference to the prior law; and
                   (B)  the Texas Limited Liability Company Act
(Article 1528n, Vernon's Texas Civil Statutes) and any other law
relating to a limited liability company organized in Texas apply to
a limited trust association, and a reference in this subtitle to the
Business Organizations Code is considered a reference to the prior
law;
             (2)  the finance commission may establish rules
permitting a state trust company to elect to be governed by the
provisions of the Business Organizations Code to the extent not
inconsistent with this subtitle or the proper business of a state
trust company; and
             (3)  this subsection expires January 1, 2010.
       SECTION 69.  Section 182.021, Finance Code, is amended to
read as follows:
       Sec. 182.021.  ACTIVITIES NOT REQUIRING CHARTER. Subject to
Subchapter C, Chapter 187, a company does not engage in the trust
business in a manner requiring a state charter by:
             (1)  acting in a manner authorized by law and in the
scope of authority as an agent of a trust institution;
             (2)  rendering a service customarily performed as an
attorney in a manner approved and authorized by the Supreme Court of
Texas or State Bar of Texas;
             (3)  acting as trustee under a deed of trust made only
as security for the payment of money or for the performance of
another act;
             (4)  conducting business as a trust institution if the
exercise of fiduciary powers in this state by the trust institution
is not otherwise prohibited by law;
             (5)  engaging in a business regulated by the Office of
Consumer Credit Commissioner, except as limited by rules adopted by
the finance commission;
             (6)  receiving and distributing rents and proceeds of
sale as a licensed real estate broker on behalf of a principal in a
manner authorized by the Texas Real Estate Commission;
             (7)  engaging in a securities transaction or providing
an investment advisory service as a licensed and registered dealer,
salesman, or advisor to the extent that the activity is regulated by
the State Securities Board or the Securities and Exchange
Commission;
             (8)  engaging in the sale and administration of an
insurance product by an insurance company or agent authorized or
licensed by the Texas Department of Insurance to the extent that the
activity is regulated by the Texas Department of Insurance;
             (9)  engaging in the lawful sale of prepaid funeral
benefits under a permit issued by the banking commissioner under
Chapter 154;
             (10)  engaging in the lawful business of a perpetual
care cemetery corporation under Chapter 712, Health and Safety
Code;
             (11)  engaging as a principal in the money services
business [or agent in the lawful sale of checks] under a license
issued by the banking commissioner under Chapter 151 [152];
             (12)  acting as trustee under a voting trust as
provided by Section 6.251, Business Organizations Code [Article
2.30, Texas Business Corporation Act];
             (13)  acting as trustee by a public, private, or
independent institution of higher education or a university system,
as defined by Section 61.003, Education Code, including an
affiliated foundation or corporation of such an institution or
system acting as trustee as provided by the Education Code;
             (14)  engaging in another activity expressly excluded
from the application of this subtitle by rule of the finance
commission;
             (15)  rendering services customarily performed by a
certified accountant in a manner authorized by the Texas State
Board of Public Accountancy;
             (16)  serving as trustee of a charitable trust as
provided by Section 2.106, Business Organizations Code [Article
2.31, Texas Non-Profit Corporation Act (Article 1396-2.31,
Vernon's Texas Civil Statutes)];
             (17)  performing escrow or settlement services if
licensed or authorized under Title 11, Insurance Code;
             (18)  acting as a qualified intermediary in a tax
deferred exchange under Section 1031, Internal Revenue Code of
1986, and applicable regulations; or
             (19)  providing permitted services at a trust
representative office established in this state pursuant to
Subchapter C, Chapter 187.
       SECTION  70.  Section 182.101(d), Finance Code, is amended
to read as follows:
       (d)  Amendment or restatement of the articles of association
of a state trust company and approval of the board and shareholders
or participants must be made or obtained in accordance with the
[Texas] Business Organizations Code [Corporation Act] for the
amendment or restatement of a certificate of formation by a
for-profit corporation [articles of incorporation], except as
otherwise provided by this subtitle or rules adopted under this
subtitle. The original and one copy of the articles of amendment or
restated articles of association must be filed with the banking
commissioner for approval. Unless the submission presents novel or
unusual questions, the banking commissioner shall approve or reject
the amendment or restatement not later than the 31st day after the
date the banking commissioner considers the submission
informationally complete and accepted for filing. The banking
commissioner may require the submission of additional information
as considered necessary to an informed decision to approve or
reject any amendment or restatement of articles of association
under this section.
       SECTION  71.  Section 182.102(b), Finance Code, is amended
to read as follows:
       (b)  A series of shares or participation shares may be
established in the manner provided by the [Texas] Business
Organizations Code [Corporation Act] as if a state trust company
were a domestic corporation, but the shares or participation shares
of the series may not be issued and sold except on compliance with
Section 182.103. The state trust company shall file the original
and one copy of the statement of action required by the [Texas]
Business Organizations Code [Corporation Act] with the banking
commissioner.
       SECTION  72.  Section 182.301, Finance Code, is amended to
read as follows:
       Sec. 182.301.  MERGER AUTHORITY. (a)  Subject to this
subchapter and with the prior written approval of the banking
commissioner, a state trust company may merge with another person
to the same extent as a for-profit [business] corporation under the
[Texas] Business Organizations Code [Corporation Act].
       (b)  Implementation of the plan of merger by the parties and
approval of the board, shareholders, participants, or owners of the
parties must be made or obtained as provided by the [Texas] Business
Organizations Code [Corporation Act] as if the state trust company
were a domestic corporation and all other parties to the merger were
foreign corporations and other entities, except as otherwise
provided by rules adopted under this chapter.
       SECTION  73.  Section 182.304, Finance Code, is amended to
read as follows:
       Sec. 182.304.  RIGHTS OF DISSENTERS TO MERGER. A
shareholder, participant, or participant-transferee may dissent
from the merger to the extent and by following the procedure
provided by the [Texas] Business Organizations Code [Corporation
Act] or rules adopted under this subtitle.
       SECTION  74.  Section 182.501(b), Finance Code, is amended
to read as follows:
       (b)  The merger or conversion must be made and approval of
the state trust company's board, shareholders, or participants must
be obtained in accordance with the [Texas] Business Organizations
Code [Corporation Act] as if the state trust company were a domestic
corporation and all other parties to the transaction, if any, were
foreign corporations or other entities, except as may be otherwise
provided by rule. For purposes of this subsection, a conversion is
considered a merger into the successor trust institution.
       SECTION  75.  Section 183.102, Finance Code, is amended to
read as follows:
       Sec. 183.102.  BYLAWS. Except as provided by Section
183.207, each state trust company shall adopt bylaws and may amend
its bylaws from time to time for the purposes and in accordance with
the procedures set forth in the [Texas] Business Organizations Code
[Corporation Act].
       SECTION  76.  Section 186.101(a), Finance Code, is amended
to read as follows:
       (a)  A state trust company may initiate voluntary
dissolution and surrender its charter as provided by this
subchapter:
             (1)  with the approval of the banking commissioner;
             (2)  after complying with the provisions of the [Texas]
Business Organizations Code [Corporation Act] regarding board and
shareholder approval for voluntary dissolution; and
             (3)  by filing the notice of dissolution as provided by
Section 186.102.
       SECTION 77.  Section 202.005(a), Finance Code, is amended to
read as follows:
       (a)  The commissioner may:
             (1)  examine a bank holding company that controls a
Texas bank to the same extent as if the bank holding company were a
Texas state bank; and
             (2)  bring an enforcement proceeding under Chapter 35
against a bank holding company that violates or participates in a
violation of Subtitle A [this subtitle], an agreement filed with
the commissioner under this chapter, or a rule adopted by the
finance commission or order issued by the commissioner under
Subtitle A [this subtitle], as if the bank holding company were a
Texas state bank.
       SECTION 78.  Section 274.001(1), Finance Code, is amended to
read as follows:
             (1)  "Bank" has the meaning assigned by Section
31.002(a)(2) [2(c), Bank Holding Company Act of 1956 (12 U.S.C.
Section 1841(c)) as amended], excluding a bank that does not have
its main office or a branch located in this state.
       SECTION 79.  Section 274.003, Finance Code, is amended to
read as follows:
       Sec. 274.003.  SUBSIDIARY TRUST COMPANY.  An entity is a
subsidiary trust company of a bank holding company if:
             (1)  the entity is a:
                   (A)  trust company organized [corporation
incorporated] under Subchapter A, Chapter 182; or
                   (B)  bank that is organized to conduct a trust
business and any incidental business or to exercise trust powers;
and
             (2)  more than 50 percent of the voting stock of the
entity is directly or indirectly owned by the bank holding company.
       SECTION 80.  Sections 31.002(a)(28), (36), and (41),
32.002(d), 33.201(b), 33.202, 33.203, 33.205, 33.207, and
35.007(d), Finance Code, are repealed.
       SECTION 81.  This Act takes effect September 1, 2007.