Page images

nothing therein should "impair or annul any vested rights, privileges or powers heretofore obtained and used under authority" of the acts repealed, and that "all corporations which have heretofore availed themselves of the provisions of said acts may continue to enjoy the rights and advantages which they now enjoy and exercise by virtue thereof."

The Commission endeavored to incorporate in both the banking and the trust company acts all modern safeguards relative to banking.

The attention of officers of state banks is specifically called to the following sections of the Banking Act:

Section 9, which provides a uniform date for the annual election of officers of banks, viz., the second Tuesday of January.

Section 10, which provides for the creation and preservation of a permanent surplus.

Section 12, which places certain restrictions on loans to officers and directors.

Section 15, which settles the question in this State as to the power of a bank to loan on, or purchase its own shares, providing that banks shall not loan or discount on the security of their own stock, nor purchase such shares, unless necessary to prevent loss on a debt previously contracted.

Section 18, which limits the amount of direct loans to any one individual, expressly excepting double named commercial paper and loans on collateral security.

On the other hand directors and officers of trust companies will find of interest similar restrictive provisions in Sections 7, 12, 13, 15, 18 and 20 of the Trust Company Act.

The question of taxation involved more difficulty. As the stock of state banks was scattered quite generally throughout the State, the law with respect to this, as provided in Section 34, contains no substantial change from the previous law, which provided for a tax on the stock to be assessed upon the owner where he resided, except in the

case of non-residents, when the bank was required to pay the tax.

Beyond this the property, real and personal, of banks is exempt from taxation.

In the case of trust companies the situation seemed to be different. The majority of trust companies desired that their stock in the hands of the stockholders should be free from taxation and desired themselves to pay the tax. Therefore, in accordance with what seemed to be the prevailing sentiment among the officers of the trust companies, provision was made that trust companies should be taxed upon the amount of capital stock issued and outstanding, and that beyond this the capital stock, property and franchises of the trust companies should be exempt.

The original provision for the taxation of surplus of trust companies was stricken out of the bill as being too great a tax, and the exemption from franchise tax was to do away with the tax heretofore required to be paid by trust companies by the State Board of Assessors of onetenth of one per cent. per annum on the capital stock issued and outstanding.

The changes in the method of organizing financial institutions, as provided in the revision, explain themselves. The approval of the Commissioner of Banking and Insurance is required to be endorsed upon the certificate of incorporation before it can be recorded and filed, and thereafter, upon the payment of the capital stock in full, the Commissioner is required to issue a final certificate of authority, which the bank in turn is required to publish.

While trust companies are forbidden to discount commercial paper (Section 7, p. 36), nevertheless, they have the express right to purchase, invest in and sell stocks, promissory notes and bills of exchange (Section 6, Subdiv. 10, p. 34). They have the express right to make loans upon notes issued by municipalities of this State (Section 7) and to make loans upon notes secured by marketable collateral.

As to safe deposit corporations a separate act is added for the organization and regulation of such companies. The power, however, to carry on a safe deposit business is expressly given to both banks and trust companies, provided such institutions hereafter organized shall specify in the certificate of incorporation their intention to carry on that business.

For the purpose of making clear the changes made in and the addition to the provisions of the former acts the report of the Commissioners is included in this compilation, together with a schedule showing to a degree the derivation of each section of the Revision.

EAST ORANGE, April 7, 1899.




Pursuant to Chapter 3 of the Laws of 1898, the Governor appointed the undersigned a commission to revise the laws relating to banks, banking, safe deposit, trust, guarantee and surety companies, and the taxation thereof, excepting therefrom, the laws relating to savings banks.

The Commissioners having met and organized, as required by law, entered upon the discharge of their duties.

They have had before them and examined with care the laws relating to kindred subjects in each of the other States.

They have also considered the recommendations which have from time to time been made by the Department of Banking and Insurance of this State, and as well the suggestions made by the Comptroller of Currency of the United States, with reference to banks and banking.

The laws relating to Bank, Safe Deposit and Trust Companies were not entirely clear, connected or systematic, some acts being under titles tending to confusion; the statute giving the banks the right to transact a safe deposit business being entitled "An Act Concerning Bailments" (P. L. 1893, p. 81).

The Commissioners have endeavored not to interfere with the corporations organized under special charters, or with the powers and rights of any of the companies embraced within this act established at the present time.

The confusion existing at the present time between banks, trust companies and safe deposit companies have, it is thought, been removed by providing three separate acts, viz.:

1. An Act Relating to Banks and Banking, with the right on the part of the state banks to do also a safe deposit business under the provisions of the statute.

2. An Act Relating to Trust Companies, with the right on the part of the trust companies to do also a safe deposit business under the provisions of the statute.

3. An Act Relating to Safe Deposit Companies, without banking powers; such safe deposit companies acting as bailee only.

These acts contain the substance of the present law relating to these companies. The additions to the law consist almost wholly in the enactment of such safeguards and restrictions as the public require from corporations transacting the business of banking, and are strictly limited to such as are regarded as necessarily incident to modern banking legislation. Care has been taken, however, in all such cases to adopt the language of existing statutes, either from the National Banking Act or from the laws of other States which have been subjected to the interpretation of the Courts, the purpose of the Commissioners being to present in this revision little, if any, undeveloped law.

Both bank and trust companies are permitted under the provisions of the proposed acts to exercise the powers of safe deposit companies.

Certain statutes have been left unrepealed, viz.:

The Act to establish a Department of Banking and
Insurance (P. L. 1891, p. 3).

The Act in relation to Individual or Private Bankers,
&c. (P. L. 1895, p. 743).

The Act entitled "An Act Relating to Banking, Sav

ings, Trust, Guarantee, Safe Deposit, Indemnity, Mortgage, Investment, Loan and Building Corporations" (P. L. 1890, p. 427).

« PreviousContinue »