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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