12 U.S.C. § 55 — Enforcing payment of deficiency in capital stock; assessments; liquidation; receivership

submitted 150 years ago by Congress to r/title-12-BANKS-AND-BANKING · 283 words · no verdicts yet

in plain englishAI-generated · not legal advice

This law makes national banks fix a shortfall in their capital stock. If a bank's capital stock is unpaid or reduced by losses, shareholders must pay an assessment. If they don't pay within three months, regulators can force a stock sale or appoint a receiver.

This section explains what happens when a national bank's capital stock is deficient, meaning underpaid, or reduced by losses. Every bank association that has failed to fully pay up its capital stock, as the law requires, and every association whose capital stock has been impaired (reduced) by losses or other causes, must fix the problem. Within three months of getting notice from the Comptroller of the Currency, the association must pay the deficiency. It does this by assessing (charging) each shareholder their pro-rata share, based on how much capital stock they hold. Meanwhile, the Treasurer of the United States must withhold interest on any bonds held in trust for that association, once notified by the Comptroller, until told otherwise. If the association fails to pay up its capital stock and also refuses to go into liquidation (wind down) as the law allows, then three months after the Comptroller's notice, a receiver can be appointed. The receiver's job is to close up the association's business, following the rules in section 192 of this title. There's also a rule for individual shareholders who won't pay. If, after three months' notice, a shareholder neglects or refuses to pay the assessment described above, the bank's board of directors must sell enough of that shareholder's stock at public auction to cover the shortfall. Before the sale, the bank must give 30 days' notice, by posting the notice at the bank's office and publishing it in a nearby newspaper. Any money left over after covering the deficiency goes back to the shareholder whose stock was sold.

the actual law source: uscode.house.gov ↗public domain

Every association which shall have failed to pay up its capital stock, as required by law, and every association whose capital stock shall have become impaired by losses or otherwise, shall, within three months after receiving notice thereof from the Comptroller of the Currency, pay the deficiency in the capital stock, by assessment upon the shareholders pro rata for the amount of capital stock held by each; and the Treasurer of the United States shall withhold the interest upon all bonds held by him in trust for any such association, upon notification from the Comptroller of the Currency, until otherwise notified by him. If any such association shall fail to pay up its capital stock, and shall refuse to go into liquidation, as provided by law, for three months after receiving notice from the comptroller, a receiver may be appointed to close up the business of the association, according to the provisions of section 192 of this title. And provided, That if any shareholder or shareholders of such bank shall neglect or refuse, after three months’ notice, to pay the assessment, as provided in this section, it shall be the duty of the board of directors to cause a sufficient amount of the capital stock of such shareholder or shareholders to be sold at public auction (after thirty days’ notice shall be given by posting such notice of sale in the office of the bank, and by publishing such notice in a newspaper of the city or town in which the bank is located, or in a newspaper published nearest thereto,) 1 to make good the deficiency, and the balance, if any, shall be returned to such delinquent shareholder or shareholders.

Source credit: (R.S. § 5205; June 30, 1876, ch. 156, § 4, 19 Stat. 64.)

history & why it existsrecord from the source credit

1876Enacted · Act of June 30, 1876, ch. 156 · 19 Stat. 64

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