Where an increase in capital is provided in the consolidation agreement, or where there is in the agreement a provision requiring the paying in of cash in addition to the transfer of assets, to equalize the value of the capital stock, it is necessary to furnish to the Comptroller's office a sworn certificate, executed by the president or cashier of the consolidated bank, showing that such increase has been paid in cash.

Bonds (on deposit to secure circulation) held by either bank in excess of the capital of the consolidated bank, must be withdrawn before the consolidation is approved by the Comptroller's office. These bonds will be released upon the deposit of lawful money to retire outstanding surplus circulation, providing the usual technicalities are complied with. If bonds are to be transferred to the consolidated bank, it will be necessary to furnish the Treasurer's receipts to the Comptroller.

Under the Federal Reserve Act, shares of the capital stock of Federal Reserve Banks owned by member banks cannot be transferred or hypothecated. This provision prevents a transfer of Federal Reserve stock by purchase, but does not prevent a transfer by operation of law. Thus, when two or more national banks consolidate and the consolidated bank continues the corporate identity of one of the consolidating banks, the consolidated bank becomes owner of the Federal Reserve stock of the other consolidating banks as soon as the consolidation takes effect. In the event that the consolidation results in a change of title, the certificates of stock issued in the names of the consolidating banks should be surrendered and cancelled, and a new certificate issued.

2. Consolidation with one bank liquidating-Where the capital of the absorbing bank is not to be increased by consolidation, the directors of that bank may enter into a contract with the directors or agents of the liquidating bank to purchase its assets, assume its liabilities, and to pay the value of assets purchased in excess of liabilities to depositors and other creditors, minus any expense incident to liquidation.

If the capital stock of the absorbing bank is to be increased by an amount equal to the stock of the liquidating bank, the

additional shares may be sold to the stockholders of the liquidating bank, with the consent of the shareholders of the absorbing bank. Providing thus for the shareholders of the liquidating bank, the directors of the continuing bank contract to take over the assets and liabilities of the liquidating bank.

The Federal law is construed as requiring payment of national bank capital, either original or on account of increase, in cash. Hence, in the case under discussion, the right of the continuing bank to accept stock or assets representing stock of the liquidating bank, and to issue therefor certificates of stock in the continuing bank, is not recognized.

Since it is illegal for a bank to transfer or hypothecate its Federal Reserve Bank shares, the liquidating bank which figures in a consolidation must surrender its Federal Reserve stock and the bank resulting from the merger must apply for new stock. As to the allotment of stock when a national bank increases its capital, Federal law makes no provision. An analysis of the common law covering such cases is given under "Capital," page 45.

3. Consolidation with both banks liquidating-Both banks party to a proposed consolidation may be placed in voluntary liquidation, then organize anew under a different corporate title and the new bank acquire, in the manner outlined previously in this chapter, the assets and liabilities of the liquidating banks. This method enables the incorporators to place the stock as they desire. A contract covering the taking over of the liquidating banks' assets and liabilities must be made, and an examination of the assets to be purchased will be made by a national bank examiner at the expense of the new bank.

A bank which is in good faith closing its affairs for the purpose of consolidating with another national bank, is not required to deposit lawful money for its outstanding circulation, providing transfer of the securing bonds is properly authorized, and the circulation liability assumed.

TH

CORPORATE EXISTENCE

HE corporate existence of a national banking association expires twenty years from the date of execution of the Organization Certificate, but may be extended for a period of twenty years, and re-extended for a further twenty-year period. Officers of a national bank can, therefore, ascertain the date upon which the institution's corporate existence expires by reference to the bank's Organization Certificate, or if this document is unavailable the information may be had from the Comptroller.

In extending the corporate existence of a national bank the technical procedure is through the adoption of an amendment to the bank's Articles of Association. While no meeting of shareholders to pass upon this amendment to the Articles is necessary, the law requires the signatures of the owners of two-thirds of the bank's stock to the amendment. A copy of this amendment, properly signed, accompanied by a certificate from the bank's president or cashier, stating that the shareholders have agreed to the extension, is forwarded to the Comptroller. These documents should be transmitted to the Comptroller at least three months in advance of the expiration of the bank's corporate existence.

Upon receipt of these papers, the Comptroller will order, as required by law, a special examination, the expenses of which are borne by the bank. If the condition of the bank is satisfactory, the Comptroller will issue the Certificate of Extension, simultaneously with the expiration of the prior charter.

Circulating notes issued by a bank which extends its existence must be of a design different from that borne by the notes. previously circulated. This necessitates new plates, which are prepared at the expense of the bank. (The cost is $130 per plate.) A blank for order of new currency is furnished, and the requisition should be transmitted with the amendment.

The law (Act of July 12, 1882) makes special provision for

the bank to purchase the shares of any stockholder who dis sents to the extension of corporate existence.

Re-extension of a national bank's corporate existence is permissible under the Act of April 12, 1902; the technical procedure is the same as in the case of the first extension.

NAME AND LOCATION

ITH the consent of the Comptroller, and by the vote of

WITH consent

the shareholders owning two-thirds of the stock, a national bank may change its name or may change its location to any other locality in the same state not more than thirty miles distant.

Due notice of the meeting at which the proposal to change a bank's name or location is to come up, must be given to the stockholders. The resolution adopting the proposal by a twothirds vote and authorizing the Treasurer of the United States to assign to the bank under its new title any bonds held to secure circulation, must be sent to the Comptroller. An order for plates and circulation to conform to the new title should, of course, be submitted at the same time. (See "Corporate Existence," page 54.)

No change of name or location is valid until the Comptroller's certificate of approval is issued, and a change of name does not in any way affect the liabilities or rights of the bank as they existed under the old name.