The articles of agreement must set forth all the important facts of the organization and administration of the bank and the methods of managing it, besides showing the choice made among any alternative forms or features al lowed by the law. The delimitation of area, qualifications as to membership and special tering for admission and expulsion are optional. Many a bank restricts its area, makes residence within that area, or some particular occupation, race or religion a condition of membership, and exacts fees on entrance and fines for with drawals, defaults or derelictions. If shares are issued, only one kind is permitted and 10 per cent or so must be paid upon subscription. The articles must prescribe the par value and the manner of payment and the number of shares that may be held by one member, and the vote required for a decision on questions determined by more or by less than a majority. Plural voting may be allowed in a bank with shares, but in a bank without shares a member never has more than one vote. The member's liability must also be defined. This lasts for two years or more after retirernent, and tnay be any one of three Icinds.
In a bank without shares the liability may be unlimited, i.e., its creditor may hold members personally liable and sue all or any of them; or it may be contributory, i.e., the bank or its receivers may levy equal assessnsents against all members and repeat the process down to the last one financially responsible, until all the bank's debts have been paid. A tnember who pays more than his equitable portion has the right of recovery against other members. In a bank with shares the liability may also be unlimited or contributory, but usually it is limited and runs in favor, not of its creditors, but only of the bank or its receivers; they may call imme diately all what yet remains unpaid on the share or assess any member on his share up to a specified multiple of its face value. In prac tice, the assessments are rarely made except equally against all. A member of an unlimited liability bank is forbidden to belong to ani other bank. A ratio must be fixed at which assets, together with members' liabilities, shall be maintained to the bank's outstanding debts. If assets fall below this ratio, bankruptcy pro ceedings must be instituted. The articles must specify the percentage of the profits to be annu ally set aside for a reserve, and what shall be done with the reserve upon dissolution.
Administration,— The administration is composed entirely of members elected or sub ject to removal by members at a meeting regu larly held or for that purpose specially called. It consists of a board of directors, which selects the officers, usually from their number, and of a committee of supervisors, with power to set aside any act of the board and to suspend any director, officer or member. The size for these bodies varies under the different laws. No per son may serve on both the board and the com mittee at the same time. Nor may credit be
extended to any director, supervisor or officer, or upon his endorsement, without the consent of the members. A bank may have a finance committee. Officers are selected for one year. Directors and supervisors may be elected for three years, but then it is so arranged that the tenns of one-third of the board and of the committee expire annually. They may be re-elected. Salanes or compensation may or may not be allowed. Official inspection and a periodical malting and publishing of reports are required. The business may be simply that of a loan and savings society or extend to commer cial banking. It may include collective buying and selling for members. Loans must be amply secured, the endorsement of one or more mem bers being the usual security. Real estate mort gages are rarely taken, except to protect en dangered claims. Rebates or dividends may be distributed, but at least a portion of the annual profits must be placed in the reserve. This' fund is indivisible and, in the event of dissolu tion, passes to the government or trustees to be held for some new bank in the same locality or for use in some public object of benefit to such locality. In a banlc without shares, all the profits are turned over to the reserve.
Chief Purpose.— The chief purpose of co operative banking is the organization of credit. This distinguishes it from the operations of loan and savings societies, the object of which is mainly to encourage thrift. Co-operative banlcs flourish only where their members are able to utilize in their own individual businesses the money and credit made available; and they succeed best when each business has a produc tive or creative character. In the cities the members are tradespeople, owners of shops and stores, grocerymen, butchers, tailors, shoe makers, fishermen with their own outfits, arti sans and the like, together with skilled work men and frugal and industrious persons seeking to save money or to strengthen their financial standing with a view to setting themselves up in business. They invariably adopt the share issuing, dividend-paying, limited-liability form, of which there are two major types. The first is the Schulze-Delitssch bank, in which the shares are large — sometimes even $1,000 apiece — and a member is allowed only one vote. Officers are paid for their service. The other is the Luszatti bank, in which the shares are small —$10 or under—and plural voting is allowed with a maximum usually of 10 votes for a member. Service of officers is gratuitous. Both have all ordinary banking powers and are called gpeople's banks.) Many have become large and a few have acquired numerous mem bers and enormous assets. Urban people's banks not infrequently belong to leagues for promoting and safeguarding their general in terests, but they rarely combine for mutual financial assistance.