CHANGES IN CAPITAL
The initial proceedings in a stock dividend increase are the same
as in an ordinary increase of capital, that is, the submission to the
Comptroller of a formal application from the Board and report of
the vote of the shareholders authorizing the capital increase.
In addition there is required a report of the dividend and cer-
tification by the president, vice-president or cashier of the payment
of the increase. The increase in capital is not effective until it has been
certified to the Comptroller, and until his certificate has been obtained
specifying the amount of his increase and stating his approval. It is
permissible to effect an increase of capital in whole or in part by means
of a stock dividend.
When any bank that is a member of the Federal Reserve System
increases its capital and surplus, it is obliged to file with its Federal
Reserve Bank an application (form furnished by Federal Reserve
Bank) for an additional amount of capital stock of the Federal
Reserve Bank of its district equal to 6%, of such increase. Upon
approval of the application by the Federal Reserve Agent, and the
Federal Reserve Board, the applying bank pays to its Federal Re-
serve Bank one-half the amount of its additional subscription; the
remaining half is subject to call when deemed necessary by the
Federal Reserve Board.
Federal law makes no provision governing the distribution of
new national bank stock when the capital is increased, but under the
common law, (where not modified by statute) the shareholders of
a corporation have the right to participate in the increase in capital
proportionately to the number of shares held by each. Waiver of
that right should be obtained before allotting any of the shares to
others. The right of a shareholder to subscribe to new stock, how-
ever, must be exercised within a fixed or reasonable period of time.
2. Reduction of Capital—Approval of the Comptroller and also of
the Federal Reserve Board must be obtained before a national bank
may reduce its capital stock. A bank contemplating such action
should advise the Comptroller, giving the reasons for the proposed
reduction, and should similarly advise the Federal Reserve Bank of
its district.
On receipt of the application, the Comptroller will advise the bank
what conditions must be met before approval may be given, viz.:
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