LIQUIDATION Increasing Capitalization of a National A national bank may, with the consent of the Comptroller of the Currency and by vote of the stockholders owning two-thirds of the shares, increase its capital stock to any sum approved by the Comptroller. Any bank contemplating such increase should advise with the Comptroller beforehand. The proposition must be formally submitted to the stockholders at a special meeting, at which shareholders who cannot attend may be represented by proxy provided that such proxy is not an officer, director, or employee of the bank. No increase of the capital stock is valid until the whole amount is paid in cash and the fact of payment certified to by the Comptroller, and until his certificate of ap proval is issued. Merely a portion of the increase will not be approved by him. If any assets of another bank are to be taken over in connection with the increase, an examination to deter mine their character and value is required, and no assets may be purchased that do not conform to law or that have unsatisfactory value.
By common law the holder of the original stock has the right to subscribe for and demand from the corporation such propor tion of the new stock issued as the number of shares already owned by him bears to the whole number of shares before the increase. This right must be exercised, however, within a reason able time. If the stock of the bank is worth more than par and the new stock is being issued at par, the shareholder who does not wish to use his right to subscribe to the new shares but wishes to protect his equity may sell to other parties his right to subscribe.
Stock dividends may not be declared, but the surplus above zo per cent of the capital and the undivided profits may be declared as dividends, and the shareholders may then use their dividend checks to buy extra shares. To facilitate these operations author ity may be obtained from the shareholders in advance of the issuance of the dividend checks to credit to the new stock the dividend upon subscriptions.
Reducing Capitalization of a National Bank A national bank may, with the consent of the Comptroller of the Currency and of the Federal Reserve Board, and on the favorable vote of shareholders owning not less than two-thirds of the shares, reduce its capitalization to any sum not below the minimum amount required by law. Any bank contemplating such reduction should correspond with the Comptroller and the federal reserve bank before it submits the question formally to the stockholders. The application to reduce the capital should be accompanied by a letter from the federal reserve bank giving its views relative to the proposed reduction. Before passing upon the request the Comptroller may order a special examination of the bank. If the bank has sustained any losses they must be charged off, and if it has any loans which are excessive or will become excessive by reason of the reduction of the capital, they must be reduced to conform with the limitations. If any other conditions should appear unsatisfactory, the Comptroller would require their correction.
If the Comptroller approves the application, a special meeting of the stockholders is held to vote upon the question. If the vote is favorable, the reduction becomes operative upon issuance of the Comptroller's approval. Prior to that time the circulation of the bank must be reduced if it exceeds the amount of capital after reduction; this is accomplished by depositing lawful money with the United States Treasury and withdrawing an equal amount of bonds. Each shareholder has the right to participate in the re duction in proportion to his holdings and to receive cash for the stock surrendered, unless it was understood that the reduction was to be used to charge off losses. No part of the capital set free can be carried to surplus or to undivided profits without the unan imous consent of the shareholders. New stock certificates are issued in exchange for the old.