GENERAL STATUTES

APPLICABLE TO

BANKING CORPORATIONS,

ORGANIZED UNDER THE

General Banking Law.

REVISED STATUTES.

CHAP. XVIII. PART I. TITLE II. (1 R. S. 588.) ENACTED IN DEC., 1827: TOOK EFFECT JAN. 1, 1828.

(2 R. S. Appendix, p. 775-776, § 5.)

TITLE II.

OF MONEYED CORPORATIONS. (1 R. S. 588.) ART. I.-REGULATIONS TO PREVENT THE INSOLVENCY OF MONEYED CORPORATIONS, AND TO SECURE THE RIGHTS OF THEIR CREDITORS AND STOCKHOLDERS.

ART. II.-REGULATIONS CONCERNING THE ELECTION OF DIRECTORS OF MONEYED CORPORATIONS.

ART. III.-OF THE CONSTRUCTION OF THIS TITLE.

ARTICLE FIRST.

Regulations to prevent the Insolvency of Moneyed Corporations, and to secure the Rights of their Creditors and Stockholders.

SEC. 1. Restrictions and prohibitions upon moneyed corporations.

2. Unpaid interest due, not to be calculated as profits for purpose of a dividend.

3. How surplus profits to be ascertained, from which dividend is to be

made.

4. Amount of losses exceeding undivided profits, to be charged to capital, &c.

5. When loans exceed three times amount of capital, excess to be

called in.

6. In what cases stock pledged to be sold and charged as reduction of

capital.

6 571,

1. To make dividends, except from the surplus profits, Hill, il arising from the business of the corporation :

2. To divide, withdraw, or in any manner pay to the stockholders, or any of them, any part of the capital stock of the corporation; or to reduce such capital stock without the consent of the legislature :

3. To discount or receive any note or other evidence of debt, in payment of any installment actually called in

ing law, are moneyed corporations, and as such, are within the statute "to prevent the insolvency of moneyed corporations, and to secure the rights of their creditors and stockholders."

"In the third place," says GARDINER, J., in Talmage v. Pell, “this assoeiation, as a banking corporation, was subject to all general laws relating to that class of corporations, except in so far as those laws, or some of their particular provisions, have been modified or superseded by the Act of 1838, under which this institution was organized, and by subsequent statutes. This proposition is the necessary result of the decision in The Supervisors of Niagara v. The People, 7 Hill, 504, and Gillet v. Moody, in this Court. If banks organized under this law are subject to taxation, and to the act to prevent the insolvency of moneyed corporations, as settled by these adjudications, no reason is perceived why they are not bound by all general laws relating to moneyed corporations, not in conflict with the one under which they are created." * “If the legislature intended to authorize the

creation of banking corporations, we cannot suppose that they designed to provide for a privileged class, by exempting them from restrictions imposed upon all others, and deemed necessary to protect the public and stockholders against the fraud or improvidence of the agents who controlled them." (3 Selden, 328, 340, 341, 347.) See 1 R. S., 588 & 599, § 52, and the amendatory Act of April 2d, 1829. (Laws 1829, § 1 & § 35.)

In Gaffney v. Colville (6 Hill, 567-580), the Supreme Court held,—that where a stockholder of a bank sues for a violation of the first section of the above Title 2, he need not join all the directors who participated in the act charged, but may proceed against them separately; and it was also held, that a stockholder may sue for making a dividend out of the capital stock, instead of the surplus profits, though he has received a share of the dividend, provided he did so without knowledge of the facts rendering it illegal; and also that the act complained of on the part of the directors, should be alleged to have been done by them,-that an allegation that they caused and proeured it to be done, or that they authorized and permitted the cashier to do it, is not sufficient.

241.

8 Comst, 479.

and required to be paid, or with the intent of providing the means of making such payment:

4. To receive or discount any note or other evidence of debt, with the intent of enabling any stockholder to withdraw any part of the money paid in by him, on his stock:

5. To apply any portion of the funds of their corporation, except surplus profits, directly or indirectly, to the purchase of shares of its own stock:

6. To receive any such shares in payment or satisfaction of any debt due to their corporation, except as hereinafter provided:

7. To receive from any other stock corporation, in exchange for the shares, notes, bonds, or other evidences of debt of their own company, shares of the capital stock of such other corporation, or notes, bonds, or other evidences of debt, issued by such other corporation :

S. To make any loans. or discounts, if the corporation have banking powers, by which the whole amount of the loans and discounts of the company shall be made to exceed three times its capital stock, then paid in, and actually possessed :( 3 )

9. To make any loans or discounts to the directors of such corporation, or upon paper upon which such direct

(3) The legislature, by an act passed April 2d, 1829 (Laws 1829, p. 167, 172), entitled "An Act to create a fund for the benefit of the creditors of certain moneyed corporations, and for other purposes," modified this provision as to "moneyed corporations having banking powers" thereafter created in this State, as follows:

"§ 27. It shall not be lawful for any such moneyed corporation to issue, or have outstanding or in circulation, at any time, an amount of notes and bills loaned, or put in circulation as money, exceeding twice its capital stock then paid in and actually possessed; nor shall its loans and discounts at any time exceed twice and a half of the amount of its capital stock so paid in and possessed." See § 1 of the Act of April 2d, 1829.

ors, or any of them, shall be responsible, to an amount exceeding in the aggregate, one-third of the capital stock of such corporation, actually paid in and possessed; but no securities taken for any such loan or discount, shall be held invalid.

calculated.

§ 2. In the calculation of the profits of any moneyed Profits how corporation previous to a dividend, interest then unpaid, although due or accrued, on debts owing to the company, shall not be included.

fits.

§ 3. In order to ascertain the surplus profits, from Surplus prowhich alone a dividend can be made, there shall be charged in the account of profit and loss, and deducted from the actual profits,—

1. All the expenses paid or incurred, both ordinary and extraordinary, attending the management of the af fairs, and the transaction of the business of the company:

2. The interest paid, or then due, or accrued, on debts owing by the company :

3. All losses sustained by the company; and in the computation of such losses, all debts owing to the company shall be included, which shall have remained due without prosecution, and no interest having been paid thereon, for more than one year; or, on which judgments shall, have been recovered, that shall have remained for more. than two years unsatisfied, and on which no interest shall have been paid during that period.

to be charged.

4. When any losses shall be sustained by any such Losses how corporation, that shall exceed its undivided profits then realized and possessed, they shall be charged as a reduction of the capital stock of the company; and no dividends shall thereafter be made on the shares of such stock, until