Requirements as to Capital Stock Subscriptions After the election of officers, the board should call in the sub scriptions to the capital stock. The law requires that so per cent of the capital stock of a national bank shall be paid in cash and permits the payment of the other so per cent in 5 equal monthly instalments. The subscription contract entered into by the prospective shareholders, however, may provide that at the call of the directors payment shall be made of the entire amount due on each share.
The Comptroller requires that every share be issued to bona fide subscribers and be placed when the organization certificate is executed. If the subscriptions are to be paid in instalments, temporary stock certificates are used and the amount of each payment entered thereon; these are exchangeable for permanent certificates when all instalments are paid.
The Comptroller urges the advisability of selling the shares at a premium of ro per cent or more for the purpose of creating a surplus out of which the organization expenses and the salaries of the officers for the first year or two may be paid. The amount of money expended in a bank building should also be restricted to prudent and economical limits. If the shares are not sold at a premium no dividends should be paid until a substantial surplus is accumulated out of earnings. If the shares are sold at a pre mium of 20 per cent or more, dividends distributing the whole net earnings may be declared from the first; otherwise a portion of the net earnings must be carried to surplus.
The payments of subscriptions must be certified to the Comp troller by the president or cashier and a majority of the directors. Should a subscriber to stock or his assignee fail to pay any instal ment on the stock, the directors of the bank must sell the stock at public auction, after giving three weeks' notice of such sale in a newspaper published in the town or city where the bank is located.
The bank is required to make a subscription to the stock of the federal reserve bank of its district equal to 6 per cent of its own capital and surplus. The basis of payment for the federal reserve bank stock is par value plus T z per cent a month from the time of the last dividend payment.
Upon receipt by the Comptroller of the certificate of these capital payments, the Comptroller issues to the bank its "charter," a certificate which gives the bank authority to do business for a period of 20 years. This certificate authorizing the bank to com
mence business must be published in the city in which the bank is located, or, if no newspaper is published in the city, then in a county paper or near-by city paper, and this publication must be certified to the Comptroller.
Requirements as to Circulation Prior to the passage of the Federal Reserve Act, an applicant bank before being permitted to do business was required to de posit with the Treasurer of the United States what were known as "charter bonds." The Federal Reserve Act repealed this re quirement, so that now it is not necessary for the bank to pur chase and deposit bonds unless it desires to take out circulating notes. To take out circulation, the bank must send to the Comp troller United States registered interest-bearing bonds, having the circulation privilege, to the amount provided by the National Bank Act, and these bonds in turn are transferred to, and de posited with, the Treasurer of the United States in trust for the sending bank.
Reorganization of a Bank into a National Bank Occasionally it is deemed advisable by the directors and other shareholders of a state or private bank to enter the national banking system by reorganization rather than conversion. The controlling motive for so doing is generally the desire to effect such distribution of stock as will promote the best interests of the bank, but sometimes it is owing to the specific desire to provide for a more satisfactory investment of capital and other loanable funds.
In order to reorganize a state or private bank into a na tional bank it is necessary to close the old bank's affairs in con formity with the laws of the state in which the bank conducts its business, and then effect a new organization in accordance with the requirements of national bank laws. The procedure as to the execution of corporate papers and the subscriptions and payment of capital is the same as if the new bank were not to succeed an old one. A resolution is passed by the shareholders, or other le gal action taken, whereby the interests of the stockholders of the old bank are conserved in the new. It is assumed that the own ers of a private bank may as individuals terminate their business and sell or transfer the assets to the succeeding national bank.