CHANGES IN CAPITAL
I. Increase of Capital—A bank contemplating increase of its capital,
whether by the sale of shares or the declaration of a stock dividend,
should, before submitting the question to the shareholders, first com-
municate with the Comptroller, since that official’s approval is neces-
sary. Accompanying the notification that his consent to the increase
has been given, the Comptroller will send the proper forms and
instructions.
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The affirmative vote of the owners of two-thirds the bank’s capital
stock is necessary, and the shareholders must be given notice (usually
30 days in advance) of the meeting at which the proposition is to be
submitted, as required by the bank’s Articles of Association. Share-
holders unable to be present at the meeting may be represented by
proxy. (See “Proxy,” pages 57-58).
No increase is valid until the whole amount is paid in (in the case of
increase by sale of new shares), certified to the Comptroller, and his
certificate of approval is issued.
Increase of Capital by Stock Dividend—Prior to the passage of the
McFadden Act in February, 1927 the declaration of a stock dividend
by a national bank was permitted under a ruling by the Comptroller
of the Currency. Recognizing the authority of national banks to
distribute as divdends accumulated profits in excess of required
surplus, and the shareholders’ right to apply these dividends to the
purchase of new issues of shares, the Comptroller, by his ruling, held
that such application might be made directly. A section of the
McFadden bill legalizes this ruling, and stipulates that a national
bank may, with the approval of the Comptroller and by vote of
shareholders owning two thirds of the capital stock, increase its
capital stock by the declaration of a stock dividend, provided the
bank’s surplus after approval of the increase, shall be at least equal to
20 percent of the amount of its capital stock as increased. In event that
the net undivided profits are not sufficient such an amount as may be
necessary may be transferred, by authority of the directors, from
surplus to the undivided profit account, provided that the surplus is
not reduced below twenty per cent of the capital as increased.
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