80R13869 DWS-F

By: Anchia, Solomons, Orr, McCall H.B. No. 2754

Substitute the following for H.B. No. 2754:

By: Anchia C.S.H.B. No. 2754

A BILL TO BE ENTITLED

AN ACT

relating to the regulation of state banks and state trust companies.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. 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 have been irrevocably [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; or

(B) the statement described by Subsection (d).

SECTION 2. Sections 32.004(b) and (c), Finance Code, are amended to read as follows:

(b) At the expense of the organizers, the banking commissioner shall thoroughly investigate the application. The banking commissioner shall prepare a written report of the investigation[, and any person, other than a person protesting under Section 32.005, may request a copy of the nonconfidential portions of the application and written report as provided by Chapter 552, Government Code].

(c) Rules adopted under this subtitle may specify the confidential or nonconfidential character of information obtained or prepared by the department under this chapter. Except as provided by Subchapter D, Chapter 31, or in rules regarding confidential information, the business plan of the applicant and the financial statement of a proposed officer, director, manager, or managing participant are [is] confidential and not subject to public disclosure.

SECTION 3. Sections 32.005(a) through (d), Finance Code, are amended to read as follows:

(a) A protest of a charter application must be received by the department before the 15th day after the date the organizers publish notice under Section 32.004(a) and must be accompanied by the fees and deposits required by law. If the protest is untimely, the department shall return all submitted fees and deposits to the protesting party. If the protest is timely, the department shall notify the applicant of the protest and mail or deliver a complete copy of the nonconfidential sections of the charter application to the protesting party before the 15th day after the later of the date of receipt of the protest or receipt of the charter application [Any person may file a protest of an application].

(b) A protesting party must file a detailed protest responding to each contested statement contained in the nonconfidential portion of the application not later than the 20th day after the date the protesting party receives the application from the department, and relate each statement and response to the standards for approval set forth in Section 32.003(b). The applicant must file a written reply to the protesting party's detailed response on or before the 10th day after the date the response is filed. The protesting party's response and the applicant's reply must be verified by affidavit and must certify that a copy was served on the opposing party. If applicable, statements in the response and in the reply may be supported by references to data available in sources of which official notice may properly be taken. Any comment received by the department and any reply of the applicant to the comment shall be made available to the protesting party [If a protest of the application is not filed before the 15th day after the date the organizers publish notice under Section 32.004(a), the banking commissioner may immediately determine whether the necessary conditions set forth in Section 32.003(b) have been established, based on the application and investigation. The banking commissioner shall approve the charter application or set the charter application for hearing].

(c) The banking commissioner may not be compelled to hold a hearing before granting or denying the charter application. In the exercise of discretion, the banking commissioner may consider granting a hearing on a charter application at the request of the applicant or a protesting party. The banking commissioner may order a hearing regardless of whether a hearing has been requested by a party. A party requesting a hearing must indicate with specificity the issues involved that cannot be determined on the basis of the record compiled under Subsection (b) and why the issues cannot be determined. A request for hearing and the banking commissioner's decision with regard to granting a hearing shall be made a part of the record. If [a protest of the application is timely filed, accompanied by the fees and deposits required by law, or if] the banking commissioner sets a hearing, the banking commissioner shall conduct a public hearing and one or more prehearing conferences and opportunities for discovery as the banking commissioner considers advisable and consistent with the applicable law, except that the banking commissioner may not permit discovery of confidential information in the charter application or the investigation report. [A person protesting the application is entitled to the confidential portion of the application, subject to a protective order that restricts the use of confidential information to the charter proceedings.]

(d) Based on the record [of the hearing], the banking commissioner shall determine whether the application meets the requirements of Section 32.003(b) and shall enter an order granting or denying the charter.

SECTION 4. Sections 32.103(b) and (c), Finance Code, are amended to read as follows:

(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, or a cash contribution to surplus by shareholders that does not result in issuance of additional common stock or other securities;

(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.

(c) Prior approval is not required for:

(1) a decrease in capital or surplus caused by losses in excess of undivided profits; or

(2) a change in capital and surplus resulting from accounting adjustments required by a transaction approved by the banking commissioner if the accounting adjustments are reasonably disclosed in the submitted application.

SECTION 5. Section 32.401, Finance Code, is amended to read as follows:

Sec. 32.401. AUTHORITY TO PURCHASE ASSETS [OF ANOTHER FINANCIAL INSTITUTION]. (a) A state bank [with the prior written approval of the banking commissioner] may purchase [all or substantially all of the] assets from [of] another financial institution or other seller, except that the prior written approval of the banking commissioner is required if the purchase price exceeds an amount equal to three times the bank's unimpaired capital and surplus. The finance commission by rule may require a state bank to obtain the prior written approval of the banking commissioner for a transaction not otherwise subject to approval that involves potentially substantial risks to the safety and soundness of the purchasing bank.

(b) Except as otherwise expressly provided by another statute, the purchase of all or part of the assets of the selling entity [institution] does not make the purchasing bank responsible for any liability or obligation of the selling entity [institution] that the purchasing bank does not expressly assume.

[(c) Except as otherwise provided by this subtitle, this subchapter does not govern or prohibit the purchase by a state bank of all or part of the assets of a corporation or other entity that is not a financial institution.]

SECTION 6. Section 32.405, Finance Code, is amended to read as follows:

Sec. 32.405. SALE OF ASSETS. (a) A state bank may sell a portion of its assets to another financial institution or other buyer, except that the prior written approval of the banking commissioner is required if the sales price exceeds an amount equal to three times the bank's unimpaired capital and surplus. The finance commission by rule may require a state bank to obtain the prior written approval of the banking commissioner for a transaction not otherwise subject to approval that involves potentially substantial risks to the safety and soundness of the selling bank.

(b) If the prior approval of the banking commissioner for a sale of assets is not required under Subsection (a) and the sale involves the disposition of a branch office or another established location of the state bank, the state bank must provide written notice of the transaction to the banking commissioner at least 30 days before the expected closing date of the transaction.

(c) 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.

(d) [(b)] A sale under Subsection (c) [this section] must include an assumption and promise by the buyer to pay or otherwise discharge:

(1) all of the bank's liabilities to depositors;

(2) all of the bank's liabilities for salaries of the bank's employees incurred before the date of the sale;

(3) obligations incurred by the banking commissioner arising out of the supervision or sale of the bank; and

(4) fees and assessments due the department.

(e) [(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 7. Section 32.501(c), Finance Code, is amended to read as follows:

(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; and

(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;]

(3) [(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

(4) [(5)] the bank has received a certificate of authority to do business as the successor financial institution.

SECTION 8. Section 33.002(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 banking commissioner under this section. In the absence of rules, information [Information] obtained by the banking commissioner under this section is confidential and may not be disclosed by the banking commissioner or any employee of the department except as provided by Subchapter D, Chapter 31.

SECTION 9. 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 10. Section 182.002(a), Finance Code, is amended to read as follows:

(a) The articles of association of a state trust company must be signed and acknowledged by each organizer and must contain:

(1) the name of the state trust company, subject to Subsection (b);

(2) the period of the state trust company's duration, which may be perpetual;

(3) the powers of the state trust company, which may be stated as:

(A) all powers granted to a state trust company in this state; or

(B) a list of the specific powers that the state trust company chooses and is authorized to exercise;

(4) the aggregate number of shares, or participation shares in the case of a limited trust association, that the state trust company 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 trust 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 state trust company;

(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 state trust company and a statement that:

(A) all authorized shares or participation shares have been subscribed; and

(B) all subscriptions received have been irrevocably [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 state trust company or that is otherwise required by this subtitle to be set forth in the articles of association;

(10) the street address of the state trust company's 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; or

(B) the statement described by Subsection (c).

SECTION 11. Sections 182.004(b) and (c), Finance Code, are amended to read as follows:

(b) At the expense of the organizers, the banking commissioner shall thoroughly investigate the application and inquire fully into the identity and character of each proposed director, manager, officer, managing participant, and principal shareholder or participant. The banking commissioner shall prepare a written report of the investigation[, and any person, other than a person protesting under Section 182.005, may request a copy of the nonconfidential portions of the application and written report as provided by Chapter 552, Government Code].

(c) Rules adopted under this subtitle may specify the confidential or nonconfidential character of information obtained or prepared by the department under this section. Except as provided by Subchapter D, Chapter 181, or in rules regarding confidential information, the business plan of the applicant and the financial statement of a proposed officer, director, manager, or managing participant are [is] confidential and not subject to public disclosure.

SECTION 12. Sections 182.005(a) through (d), Finance Code, are amended to read as follows:

(a) A protest of a charter application must be received by the department before the 15th day after the date the organizers publish notice under Section 182.004(a) and must be accompanied by the fees and deposits required by law. If the protest is untimely, the department shall return all submitted fees and deposits to the protesting party. If the protest is timely, the department shall notify the applicant of the protest and mail or deliver a complete copy of the nonconfidential sections of the charter application to the protesting party before the 15th day after the later of the date of receipt of the protest or receipt of the charter application [Any person may file a protest of an application with the banking commissioner].

(b) A protesting party must file a detailed protest responding to each contested statement contained in the nonconfidential portion of the application not later than the 20th day after the date the protesting party receives the application from the department, and relate each statement and response to the standards for approval set forth in Section 182.003(b). The applicant must file a written reply to the protesting party's detailed response on or before the 10th day after the date the response is filed. The protesting party's response and the applicant's reply must be verified by affidavit and must certify that a copy was served on the opposing party. If applicable, statements in the response and in the reply may be supported by references to data available in sources of which official notice may properly be taken. Any comment received by the department and any reply of the applicant to the comment shall be made available to the protesting party [If a protest of the application is not filed on or before the 15th day after the last date the notice was published under Section 182.004, the banking commissioner may immediately determine whether all of the necessary conditions set forth in Section 182.003(b) have been established, based on the application and investigation. The banking commissioner shall approve the application for charter or set the charter application for hearing].

(c) The banking commissioner may not be compelled to hold a hearing before granting or denying the charter application. In the exercise of discretion, the banking commissioner may consider granting a hearing on a charter application at the request of the applicant or a protesting party. The banking commissioner may order a hearing regardless of whether a hearing has been requested by a party. A party requesting a hearing must indicate with specificity the issues involved that cannot be determined on the basis of the record compiled under Subsection (b) and why the issues cannot be determined. A request for hearing and the banking commissioner's decision with regard to granting a hearing shall be made a part of the record. If [a protest of the application is timely filed, accompanied by the fees and deposits required by statute or rule, or if] the banking commissioner sets a hearing, the banking commissioner shall conduct a public hearing and as many prehearing conferences and opportunities for discovery as the banking commissioner considers advisable and consistent with governing statutes and rules, except that the banking commissioner may not permit discovery of confidential information in the charter application or the investigation report. [A person protesting the application is entitled to the confidential portions of the application under a protective order that restricts the use of confidential information to the charter proceedings.]

(d) Based on the record [of the hearing], the banking commissioner shall determine whether all of the necessary conditions set forth in Section 182.003(b) have been established and shall enter an order granting or denying the charter.

SECTION 13. Sections 182.103(b) and (c), Finance Code, are amended to read as follows:

(b) Unless otherwise restricted by rules, prior approval is not required for an increase in restricted capital accomplished through:

(1) issuance of shares of common stock or their equivalent in participation shares for cash, or a cash contribution to surplus by shareholders or participants that does not result in issuance of additional common stock or other securities;

(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 restricted capital.

(c) Prior approval is not required for:

(1) a decrease in restricted capital caused by [incurred] losses in excess of undivided profits; or

(2) a change in restricted capital resulting from accounting adjustments required by a transaction approved by the banking commissioner if the accounting adjustments are reasonably disclosed in the submitted application.

SECTION 14. Section 182.401, Finance Code, is amended to read as follows:

Sec. 182.401. AUTHORITY TO PURCHASE ASSETS [OF ANOTHER TRUST INSTITUTION]. (a) A state trust company [with the prior written approval of the banking commissioner] may purchase [all or substantially all of the] assets from [of] another trust institution, including the right to control accounts established with the trust institution, or assets from another seller, except that the prior written approval of the banking commissioner is required if the purchase price exceeds an amount equal to three times the sum of the trust company's equity capital less intangible assets. The finance commission by rule may require a state trust company to obtain the prior written approval of the banking commissioner for a transaction not otherwise subject to approval that involves potentially substantial risks to the safety and soundness of the purchasing trust company.

(b) Except as otherwise expressly provided by this section or another statute, the purchase of all or part of the assets of the selling entity [trust institution] does not make the purchasing state trust company responsible for any liability or obligation of the selling entity [trust institution] that the purchasing state trust company does not expressly assume.

(c) If prior approval of the banking commissioner is required [Except as otherwise provided by this subtitle, this subchapter does not govern or prohibit the purchase by a state trust company of all or part of the assets of a corporation or other entity that is not a trust institution.

[(d)To make a purchase] under this section, an application in the form required by the banking commissioner must be filed with the banking commissioner. The banking commissioner shall investigate the condition of the purchaser and seller and may require the submission of additional information as considered necessary to make an informed decision.

(d) [(e)] The banking commissioner shall approve the application to purchase if:

(1) the purchasing state trust company:

(A) has complied with all applicable statutes and rules; and

(B) will be solvent and have sufficient capitalization for its business and location;

(2) all fiduciary obligations and liabilities of each trust institution that is a party to the purchase or sale of assets have been properly discharged or otherwise lawfully assumed or retained by a trust institution or other fiduciary;

(3) all conditions imposed by the banking commissioner have been satisfied or otherwise resolved; and

(4) all fees and costs have been paid.

(e) [(f)] A purchase subject to prior approval is effective on the date of approval unless the purchase agreement provides for and the banking commissioner consents to a different effective date.

(f) If the purchase transaction includes all or substantially all of the assets of another trust institution or other fiduciary, the [(g) The] acquiring state trust company shall succeed by operation of law to all of the rights, privileges, and fiduciary obligations of the selling trust institution or other fiduciary under each account included in the assets acquired.

SECTION 15. Section 182.405, Finance Code, is amended to read as follows:

Sec. 182.405. SALE OF ASSETS. (a) A state trust company may sell all or any portion of its assets to another trust institution or other buyer, except that the prior written approval of the banking commissioner is required if the sales price exceeds an amount equal to three times the sum of the trust company's equity capital less intangible assets. The finance commission by rule may require a state trust company to obtain the prior written approval of the banking commissioner for a transaction not otherwise subject to approval that involves potentially substantial risks to the safety and soundness of the selling trust company.

(b) If the prior approval of the banking commissioner for a sale of assets is not required under Subsection (a) and the sale involves the disposition of an established location of the state trust company, the state trust company must provide written notice of the transaction to the banking commissioner at least 30 days before the expected closing date of the transaction.

(c) The board of a state trust company, with the banking commissioner's approval, may cause the state trust company to sell all or substantially all of its assets, including the right to control accounts established with the state trust company, without shareholder or participant approval if:

(1) the banking commissioner finds that the interests of the state trust company's clients, depositors, and creditors are jeopardized because of the hazardous condition of the state trust company and that the sale is in their best interest; and

(2) the Federal Deposit Insurance Corporation or its successor approves the transaction, if the deposits of the state trust company are insured.

(d) [(b)] A sale under Subsection (c) [this section] must include an assumption and promise by the buyer to pay or otherwise discharge:

(1) all of a state trust company's liabilities to clients and depositors;

(2) all of the state trust company's liabilities for salaries of the state trust company's employees incurred before the date of the sale;

(3) obligations incurred by the banking commissioner arising out of the supervision or sale of the state trust company; and

(4) fees and assessments due the department.

(e) [(c) This section does not limit the incidental power of a state trust company to buy and sell assets in the ordinary course of business.

[(d)] This section does not affect the banking commissioner's right to take action under another law. The sale by a state trust company 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 186.

(f) Each buyer in a transaction described by Subsection (c) that is a [(e) The acquiring] trust institution or other fiduciary shall succeed by operation of law to all of the rights, privileges, and fiduciary obligations of the selling state trust company under each account included in the assets acquired.

SECTION 16. Section 182.501(c), Finance Code, is amended to read as follows:

(c) The state trust company does not cease to be a state trust company 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 state trust company 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 state trust company 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; and

(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;]

(3) [(4)] the banking commissioner determines that:

(A) all accounts and liabilities of the state trust company are fully discharged, assumed, or otherwise retained by the successor trust institution;

(B) any conditions imposed by the banking commissioner for the protection of clients and creditors have been met or otherwise resolved; and

(C) any required filing fees have been paid; and

(4) [(5)] the state trust company has received a certificate of authority to do business as the successor trust institution.

SECTION 17. Section 183.002(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 banking commissioner under this section. In the absence of rules, information [Information] obtained by the banking commissioner under this section is confidential and may not be disclosed by the banking commissioner or any employee of the department except as provided by Subchapter D, Chapter 181.

SECTION 18. Section 186.102, Finance Code, is amended to read as follows:

Sec. 186.102. FILING RESOLUTIONS WITH BANKING COMMISSIONER. After resolutions to dissolve and liquidate a state trust company have been adopted by the 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 state trust company;

(2) the resolutions of the board approving the dissolution and liquidation of the state trust company if the trust company is operated by a board of directors or managers;

(3) [a copy of] the notice to the shareholders or participants informing them of the meeting described by Subdivision (1)(A); and

(4) a plan of liquidation.

SECTION 19. This Act takes effect September 1, 2007.