The law requires that the capital stock of a national bank be paid in cash; it is therefore necessary for the old bank to liquidate enough of its assets to enable the shareholders to pay their sub scriptions in cash. If it is impossible to liquidate in a short time enough assets to pay these subscriptions, the old bank may loan to the stockholders. The directors of the new bank then contract with the liquidating agent of the old bank to assume the liabilities to depositors and other creditors of the old bank if the old bank transfers an equivalent amount of assets of a character which can be held by a national bank. Some of the capital paid in may at once be reinvested in the assets of the state bank. The directors of the new bank certify to the Comptroller that the bank will not acquire any of the old bank's assets the holding of which contravenes the provisions of the national bank laws. If it is proposed to buy the old bank's building and equipment the Comptroller requires a detailed statement as to the cost, rent, and expense for taxes, repairs, and insurance. The purchase of these and other assets is covered by a specific contract, legally made only after the charter is granted. The transition from the old to the new bank may be made without a halt in business.
Conversion of a State Bank into a National Bank A bank incorporated in a state under a special charter or general statute may be converted into a national bank unless such conversion is forbidden by the laws of the state. A trust com pany organized under state law may be permitted to convert it self into a national bank provided it complies with all the condi tions of the law, and divests itself of all its trust company business except such as the Federal Reserve Board may specifically author ize it to retain as provided by the Federal Reserve Act. In the conversion of a state bank there is not a dissolution of the state corporation, but merely a change of title and governmental super vision; the bank is still liable for all obligations and may enforce all contracts made with it as a state corporation. The conversion must be approved by the Comptroller of the Currency.
For conversion into a national bank the law requires that the shareholders owning not less than 5i per cent of the capital stock grant by vote to the directors authority to execute the articles of association and organization certificate and to convert the bank into a national bank, and these and all other papers in connection with the conversion must be executed by a majority of the direc tors. The minimum number of directors by which the affairs of a national bank can be directed is five; if the state bank has less than that number of directors an increase should be effected under the state law, prior to the execution of any conversion papers other than the application.
The state bank converting must have capital paid in and unimpaired equal to the amount required of a national bank. If it must increase its amount of capital in order to convert, the increase may be made under the state law and the bank may then convert, or the state bank may go into liquidation and reorganize, the deciding factor as to which course to pursue being the requirements of the laws of the state in which the bank is located. Should the bank increase its capital before conversion, the Comptroller of the Currency requires that this increase be certified to him by the state bank commissioner or superintend ent of banks.
A state bank converting into a national bank is not required to issue new certificates of stock; the old certificates may simply be stamped to show the new corporate title and the date of change, but it is better to issue new certificates. Owing to the fact that the old certificates may be retained, it happens that a few na tional banks have shares of more or less than $ioo. Whenever the capitalization is increased or decreased the $ioo denomina tion is introduced.
Before a charter is granted to a state bank applying to convert, an examination of its assets is made by the bank examiner in that district and his report is forwarded to the Comptroller. The converting bank must contribute $ioo for the expense of this investigation, which is conducted in the same manner and to the same purpose as in the case of the organization of a new national bank.
Certain classes of assets permissible to state banks are for bidden to national banks, and at conversion into a national bank a state bank must liquidate such assets and cease acquiring them in the future. Moreover, the directors must certify to the Comp troller that the converted bank will purchase no prohibited assets, in accordance with the restrictions governing excessive loans, loans secured by real estate, stocks of other corporations, and the like.
Under the Federal Reserve Act a state bank converting into a national bank is permitted to keep any branch or branches which it may have at time of conversion.
Organization of a State Requirements In 1914 the state of New York revised its banking laws in conformity with the recommendations of the Van Tuyl-Hepburn Banking Commission. As these are therefore comparatively modern, and as the New York laws govern so many large banks in that state, and as furthermore they are used as a model in the aration of similar laws in a majority of the states of the Union, it is deemed well to detail the organization of a New York state bank.