NATIONAL BANK ORGANIZATION HE detailed steps in the organization of a national bank are as follows: THE 1-Determination of amount of bank's capital. 2-Organization application. 3-Disposal of capital stock. 4-Execution of Articles of Association. 5-Execution of Organization Certificate. 6-Election of directors. 7-Appointment of officers. 8-Initial payment of capital. 9-Beginning business. 10-Subscription to stock in Federal Reserve Bank. 1. Amount of capital-Since it is necessary to state the amount of any proposed national bank's capital in the first formal communication to the Comptroller of the Currency, the determination of the amount of this capital may properly be said to be the first preliminary step in national bank organization. The capital necessary for the organization of a national bank is: Where a national bank is organized in a suburban district included within the political boundaries of a city, the bank must have a capitalization equivalent to the amount of capital required of a bank located in the city in question. 2. Organization Application-Preliminary to the formal application to organize a national bank it is customary for those interested in the prospective financial institution to write the Comptroller of the Currency at Washington, requesting reservation of the title under which the bank is to be known, and stating the location and proposed capital. The title asked for will be reserved for fifteen days, before the expiration of which time it is expected that formal application to organize will be filed with the Comptroller. Forms for the application to organize a national bank are furnished by the Comptroller of the Currency-and minute care should be exercised in filling out these papers. All of the information requested should be given, the instructions contained in the forms should be carefully followed and the application signed by at least five prospective shareholders of the association. Exclusion of any professional promoters from the organization will be required. No commissions paid for the sale of stock or promotion fees should be included in the bank's organization expenses, but only such legitimate other expenses as are incident to the actual organization of the bank. If any agreement exists to use subsequently any part of the capital stock, surplus or undivided profits, to pay promoters' expenses, favorable consideration will not be given to the application. Letterheads bearing the bank's name which are in use before the bank is given permission to begin business should indicate that the bank is organizing, or bear the heading "Organization Committee." Accompanying the application to organize a national bank should be a draft for $100 payable to the order of the Comptroller. This sum is to cover expenses incurred in investigating the proposed bank. A bank examiner will be sent to the town in which the bank is to be located, and he will give consideration to the general character and experience of those who are to conduct the bank's affairs; to the question of whether there is need for additional banking facilities in the community; to the community's prospect for future development; to the methods and banking practices of existing banks; to prospects of success for the proposed banks under efficient management. The Comptroller also obtains reports on the situation from the Federal Reserve Bank of the district, from the State Banking Department, and from other sources. Upon the approval by the Comptroller of the organization of the proposed bank, all the necessary blanks for use in connection with the organization will be furnished, with instructions for their proper execution. The title applied for will be reserved for sixty days more, during which period it is expected the organization of the bank will be completed. 3. Disposition of capital stock-After the bank has received permission to organize, subscription contracts, to be signed by the prospective shareholders, are usually drawn up. Forms for such contracts are NOT furnished by the Comptroller, but it will be found serviceable if each subscriber is required to give not only his signature, but his address, occupation, statement of his net financial worth, and the number of shares to which he subscribes. The stock of a national bank must be divided into shares of $100 each, and the Comptroller recommends that all organizing national banks sell their stock at a premium, thereby creating a surplus from which to pay organization expenses, which, with salaries, frequently prove a drain upon capital during the early months of the bank's existence. Where no surplus is created through premium, the Comptroller recommends that no dividend be paid until a substantial surplus has been created by earnings. Payment of the capital stock is treated in Paragraphs 8 and 10 of this chapter. 4. Articles of Association-At least five persons, the majority of whom are subscribers to stock of the proposed bank, must sign the institution's Articles of Association, which are drawn up and executed in duplicate. One copy is retained by the bank, and another is filed in the Comptroller's office. The persons uniting to organize a national bank must be individuals who can hold and control property in their individual right—not corporations, firms, or associations of any character. A form for typical Articles of Association is given at the end of this chapter. (Page 30.) 5. Organization Certificate-At the same time that the Articles of Association are executed, or AFTER that date, the bank's Organization Certificate (form furnished by the Comptroller) must be executed. One copy of the Organization Certificate is filed with the Comptroller; one copy is retained by the bank. (See page 29.) The bank will have succession for ninety-nine years from the date upon which the Organization Certificate is executed, and NOT from the date of the certificate from the Comptroller authorizing the bank to begin business. (See "Corporate Existence," page 55.) CORPORATE POWERS UPON the date of the filing of its organization certificate, a national bank becomes a body corporate, and has the following powers: (a) To adopt and use a corporate seal. (b) To have succession for a period of ninety-nine years from its organization, unless it is sooner dissolved according to the provisions of its Articles of Association, or by the act of its shareholders owning two-thirds of its stock, or unless its franchise becomes forfeited by some violation of law. (c) To make contracts. (d) To sue and be sued, complain and defend, in any court of law and equity, as fully as natural persons. (e) To elect or appoint directors, and by its board of directors to appoint a president, vice-president, cashier, and other officers, define their duties, require bonds of them and fix the penalty thereof, dismiss such officers or any of them at pleasure, and appoint others to fill their places. (f) To prescribe, by its board of directors, by-laws not inconsistent with law, regulating the manner in which its stock shall be transferred, its directors elected or appointed, its officers appointed, its property transferred, its general business conducted, and the privileges granted to it by law exercised and enjoyed. (g) To exercise by its board of directors, or duly authorized officers or agents, subject to law, all such incidental powers as shall be necessary to carry on the business of banking; by discounting and negotiating promissory notes, drafts, bills of exchange, and other evidences of debt; by receiving deposits; by buying and selling exchange, coin, and bullion; by loaning money; and by obtaining, issuing, and circulating notes according to the provisions of this Title. But no association shall transact any business except such as is incidental and necessarily preliminary to its organization, until it |