Shareholders may transfer their shares to competent parties, and they have the right to demand that the bank execute the transfer on its books and issue to them the proper stock certificate. Refusal to do so gives the purchaser the right of action for dam ages. The state laws differ somewhat as to how and where trans fers may be made.
Election of Board of Directors Among the most important powers of the shareholders is the election of the board of directors who manage the affairs of the bank. These are elected annually at what is commonly called the " annual - meeting. The annual meeting of national banks must be held on some day in January, but the Comptroller favors the second Tuesday. At this meeting no other business but the election of directors may be transacted without clue notice having been given that other business will be transacted. If the bank fails to effect an election at the time appointed, an election may be held on any subsequent day, 3o days' notice having been given in the local newspaper. The date of election is fixed in the charter, or by the directors in the by-laws or otherwise, or by two-thirds of the shareholders. The directors cannot, therefore, continue themselves in office by failing to hold an election, for the share holders can get together and fix an election date. Ultimate control of the management of the bank is thus vested in the stockholders. Unless two-thirds of them were dissatisfied with the incumbent board, the directors might retain office indefinitely by mere default of the shareholders to force an election.
The shareholders have a right by statute or common law to sue directors for malfeasance in office. Errors of judgment, un less so gross as to resemble fraud, do not give a right of action. Really fraudulent acts or breaches of statutory or charter provi sions, entailing loss on the bank, give a right to the shareholders severally to recover the loss or damage sustained by them. The action is against the directors as private individuals and not as officials. The suit could not be brought by the bank corporation. The receiver of an insolvent bank has the same rights to recover from directors who waste the bank's property or let it be wasted; but if the receiver himself is one of the faulty directors, the suit may be brought by one or more shareholders.
The affairs of a bank are managed by a board of directors. The national banks are required to have a board of not less than five members, but no maximum number is fixed; banks, especially the ones in larger cities, have many more than five, the purpose being to get a more representative board and secure a larger good-will in the community. The directors are elected at the
annual meeting for a term of one year and until their successors are elected and have qualified.
Legal Qualifications of Directors—Clayton Act Every director of a national bank must, during his whole term of office, be a citizen of the United States, and at least three fourths of the directors must have resided in the state, territory, or district in which the bank is situated, or within fifty miles of the location of the bank, for at least one year immediately pre ceding their election, and must be residents of such state, territory, or district during their continuance in office. These residence and citizenship requirements give local control to the bank, assure a better adaptation of policy and conduct to the needs of the com munity, and guard against adverse interests. Every director must own, in his own right, at least io shares of stock of the bank, unless the capital of the bank does not exceed $25,000, in which case he must own 5 shares. Any director who ceases to be the owner of the required shares, or who becomes in any other man ner disqualified, vacates his directorship thereby. No person who holds stock in a merely representative capacity, as trustee, execu tor, administrator, or guardian, can he a director. These property requirements aim at giving the directors a personal interest in the successful conduct of the bank.
The Clayton Act provides that no person shall at the same time be a director or other officer or employee of more than one bank, banking association, or trust company organized or operat ing under the laws of the United States, either of which has de posits, capital, surplus, and undivided profits aggregating more than $5,000,000; and no private banker or person who is a direc tor in any bank or trust company organized and operating under the laws of a state, having deposits, capital, surplus, and un divided profits aggregating more than $3,000,000 is eligible to be a director in any bank or banking association organized or operat ing under the laws of the United States. A state bank or trust company which has become a member of the federal reserve sys tem is considered as "organized and operating under the laws of the United States" within the intent and meaning of the Clay ton Act.