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X-6375
(PRELIMINARY DfiJLFT - SUBJECT TO
CORRECTION AND REVISION)
DIGEST OF STATE LAWS
PROHIBITING- OR LIMITING THE OWNERSHIP OF STOCK
IN BANKING INSTITUTIONS BY HOLDING CORPORATIONS OR IMPOSING UPON THE STOCKHOLDERS OF
SUCH HOLDING CORPORATIONS A STOCKHOLDERS >
LIABILITY SIMILAR TO THAT IMPOSED BY
LAW UPON THE STOCKHOLDERS OF BANKING
INSTITUTIONS.
X-6375
•ALABAMA..
There are no laws in thiy State covering either of the
points raised.
ARIZONA..
There are no laws in this State hearing directly upon
either of the points.raised.
(Note:- Section 20, Chapter 31 of the 1922 Session
Laws of Arizona provides that a "bank, loan or trust
company or association" may purchase and hold stock of
"any other "bank, loan or trust company or association or
other corporation" if such purchase is authorized by the
executive committee or spjiroved by the board of directors
and if bank stock is purchased the approval of the superintendent of banks must also be obtained.^
ARKANSAS.
There are no statutes in this State covering either of the
points raised*
CALIFORNIA.
There are no laws in this State covering either of the
points raised.
COLORADO.
There are no laws in this State covering either of the
points raised.
CONNECTICUT.
There are no lasrs in this State covering either of the
points raised.
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DELAWARE.
There are no laws in this State covering either of the
points raised.
DISTRICT OF COLUMBIA.
There are no laws in the District of Columbia covering
either of the points raised.
FLORIDA.
There are no laws in this State covering either of the
points raised.
GEORGIA.
There are no laws in this State covering either of the
points raised.
IDAHO.
There are no laws in this State covering either of the
points raised.
ILLINOIS.
There are no laws in this State specifically covering
either of the points raised.
However, the Illinois General Corporation law provides
that corporations organized thereunder may "own, purchase or
otherwise acquire * * * stocks * * * of any corporation, domestic and foreign", hut it is doubtful whether this provision
applies to "bank stock. (See case of Central Life Securities
Conpary v. Smith, 236 Fed. 170. See also Section 6 of the Illinois Banking Act which, "by referring to stockholders of "banks
by the use of the pronouns "he" or "she" in imposing a liability
upon them, creates the implication that it was intended that the
stockholders in banks should bd natural and not artificial persons.
p: •
;v-"
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INMA.
There are no laws in this State covering either of the
points raised.
IOWA.
There are no laws in this State "bearing directly upon
either of the points raised.
(Note:- Section 7940 of the 1927 Iowa Code, which
authorizes corporations to hold stock in Railway Corporations, and Section 8434 of the 1927 Iowa Code,
which recognizes the right of holding corporations to
own stock in a public utility, are the only sections
of the Iowa laws relating to the ownership "by corporations of stock in other corporations. Section 9 of
Article VIII of the Iowa Constitution fixes the liability of stockholders of banks and rofors to such
stockholders by using the pronouns "he or she", implying that stockholders in basks mist be natural and
not artificial persons. In view of these provisions
it is doubtful whether holding corporations in this
State may hold or purchase stock in banking corporations. )
KANSAS.
There are no laws in this State covering either of the
points raised.
KENTUCKY.
There is no law in this State limiting the power of corporations to hold bank stock unless it be Section 567 of Carroll's
Kentucky statutes, which reads as follows:
"Nor shall any corporation directly or indirectly, engage in or carry on in any way the business of banking,
or insurance of any kind, unless it has become organized
under the laws relating to banking and insurance * * * 11.
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r>:?
rW
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(Kentucky continued.)
A double liability is imposed upon stockholders of "banks
for all contracts and liabilities of such "banks "by Section 595
of Carroll's Kentucky Statutes.
LOUISIANA.
There are no laws in this State "bearing directly upon either
of the points raised "but it is doubtful whether holding companies
may purchase or own stock in hanking institutions.
(Note:- Although subdivision 11(e) of Section 12,
(P. 417), Act No. 250 of the 1928 Acts of the Louisiana
Regular Session, permits corporations "to ac<juire * * *
and to hold, * * * shares * * * of any other corporation,
domestic or foreign, * * *" it is doubtful whether this
subdivision is an authorization to holding corporations
to acquire or hold Shares of "banking institutions in view
of certain other subdivisions of Section 12, namely, I and
II, and Sections 1 (P. 409) and 2 (P. 411) of the aforesaid 1928 Acts and Sections I (P. 1196) and 5 (P. 1203) of
Volume 2 of the 1920 Constitution and Statutes of Louisiana. )
MAINE.
There are no laws in this State "bearing upon either of the
points raised.
MARYLAND.
There are no statutes in this State covering either of the
points raised.
MASSACHUSETTS.
There are po laws in this State covering either of the
points raised.
MICHIGAN.
There are no laws in this State covering specifically either
of the points raised.
F' 94
X-6375
(Michigan eontiftucd.)
(Note:- The Session Laws of 1925 of Michigan, Ho.
363, p. 692, authorize corporations organized for pecuniary profit to purchase and hold shares of stock in
other corporations organized for purposes similar to
those of such corporations and this might he held to
affect the right of holding corporations to own stock
in banks, depending upon whether or not banks are organized for "similar purposes,")
MINNESOTA.
There are no laws in this State specifically covering
either of the points raised.
(Note:- Under Section 3, Article 10 of the Minnesota
Constitution each stockholders in any corporation organized under the laws of Minnesota, except those organized
for the purpose of carrying on a manufacturing or mechanical business, is liable to the amount of the Stock held or
owned by him.)
MISSISSIPPI.
There are no laws in this State covering either of the points
raised.
MISSOURI.
There are no laws in this State specifically covering either
of the points raised.
(Note:- Trust companies may purchase or hold stock i&
other banks or trust companies. Paragraph 9, Section 11807
of the 1919 Revised Statutes of Missouri.)
MONTANA..
There are no laws in this State covering either of the points
raised.
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NEBRASKA.
There are no laws in this State covering either of the
points raised.
NEVADA..
There are no laws in this State covering either of the
points raised.
Him HAMPSHIRE.
There are no laws in this State covering either of the
points raised.
NEW JERSEY.
While there does not appear to "be any statute in this Stat?
prohibiting absolutely the ownership of tank stock "by holding
corporations, there is a statute known as Chapter 273, 1928 Laws
of New Jorsey, Section 3 of which prohibits corporations that own
more than ten per cent of the stock of any "bank or trust company
in the State of New Jersey from purchasing after the date the
statute "became effective more than ten per cent of the stock of
any other bank or trust company doing business in the State of
New Jersey. This statute does not require corporations to dispose of any bank stock that thoy may havo ownod boforo tho law
became effective and certain institutions (enumerated in Section
14 of the laws above referred to) are specifically exempted by
Section 3 from its provisions. Section 3 reads as follows:
"3. Any corporation, other than corporations
specifically exempted from the provisions of this
act, which now or hereafter owns more than ten per
centum of the number of shares of the capital stock
now or hereafter at any time issued and outstanding
of any bank or trust company or national bank, now
or hereafter doing business in this State, shall not
purchase more than ten per centum of the number of
shares of capital stock at any time issued and outstanding of any other bank or trust company or national
bank, now or hereafter doing business in this State."
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(New Jersey continued.)
Section 14, which enumerates the specifically exempted
institutions referred to in Section 3, reads as follows:
"14. The provisions of this Act and the penalties
thereof shall not apply to the following corporations,
viz.: Banks and trust companies organized under the
laws of this State and national hanks doing "business in
this State, nor to such "banks, trust companies and
national "banks while acting in a fiduciary capacity
representing any individual or individuals or the estate of any individual; nor to any other corporation
the entire capital stock of which is owned "by or held
in trust for the shareholders of any "bank or trust
company organized under the laws of this State or any
national "bank doing "business in this State, in the same
relative proportion as the stock held in said hank,
trust company or national hank."
(Note;- On March 11, 1929, a bill was introduced in
the Hew Jersey Legislature to repeal Sections
4, 5 and 6 of the laws above referred to. These
sections require hanks and trust companies whose
stock is owned "by corporations to obtain statements from such corporations as to thoir bank
stock holdings as a condition precedent to the
voting or transfer of and the payment of dividends on, thoir holdings of bank stock. It is
interesting to note that the repeal of these
sections was sought by tho banks and trust.
companies themselves because it was folt that
tho requirements contained therein wore cumbersome, interfered with the free sale of their
stock and imposed an unnecessary burden upon
them, but the bill failed of enactment.)
There does not appear to be any legislation in this State
imposing upon the stockholders of holding corporations a stockholders' liability similar to that imposed upon holders of bank
stock.
'
m r MEXICO.
There are no laws in this
of the points raised but there
Hew Mexico which might be held
chase or hold stock in bgmking
State specifically covering either
are certain sections of the laws of
to authorize corporations to. purinstitutions.
X-6375
(Ner/ Mexico continued.)
(Note:-
Section 1019 of the 1915 Annotated Statutes of
New Mexico authorize corporations unrestrictedly to "purchase, hold, * * * the capital
stock of, * * * any other corporation or corporations, of this or any other territory or
state, * * *" and no limitation is placed
upon the amount of such stock that may "be so
purchased or held.
Section 395 of the Statutes above referred to
prohibits "banks from purchasing or holding the
capital stock of "any other incorporated company" unless the acquisition of such stock is
necessary to prevent loss upon a do"bt previously contracted and stock so acquired must "be
disposed of within six months if possible.
In viow of tho fact that the only specific prohibition in tho New Mexico laws against the
purchasing or holding of stock in other corporations is that as contained in Section 395, which
restricts Banks only, and that corporations unrestrictedly aro given tho broad power, under
Section 1019, to purchase and hold stock of "any
othor corporation or corporations", it might bo
held that banks are included within the phrase
"any other corporation or corporations" and that,
therefore, corporations may purchase stock in
banking institutions.)
NEW YORK.
There are no laws in this State covering either of the points
raised.
NORTH CAROLINA.
There are no laws in this State covering either of the points
raised.
NORTH DAKOTA
There are no laws in this State covering either of the points
raised.
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OHIO.
There are no laws in this State specifically covering either
of the points raised. Stockholders in "banking corporations are
subjected to double liability for debts of the bank (General Code
of Ohio, Section 710-75).
OKLAHOMA. •
There are no laws in this State bearing directly upon either
of the points raised but it is possible that it might be held that
corporations may purchase and hold stock in banking institutions.
(Hote:~ Section 5301 of the 1921 Compiled Statutes of
Oklahoma provides that "All corporations organized for any
of the purposes authorized by this section shall have th?
power to own and hold stock of other corporations, except
as prohibited by the Constitution of this State".
Section 41, Article 9 of the Constitution
of Oklahoma, forbids corporations to own or hold stock
in other competitive corporations engaged in the same
kind of business and banks or trust companies to own or
hold stock in other banks or trust companies, except in
those cases where such corporations or banks or trust
companies have acquired such stock to secure or satisfy
a bona fide indebtedness, and in such cases the stock mupt
be disposed of within twolve months*
Section 11029 of the 1921 Compiled Statutep
makes it unlawful for corporations to combine to place
the control of these corporations in the hands of a trustee
or a holding corporation if the intent and purpose of such
combination is to restrict or restrain trade.
In view of the fact that the provisions of
Section 5301 of the 1921 Compiled Statutes granting to
corporations the power to hold or own stock in other corr
porations seem rather broad, and that neither the prohibitions of the Constitution referred to therein and upon
which such power is dependent, nor the provisions of Section 11029 of the 1921 Compiled Statutes appear to bo
specifically applicable, in that Article 9 of the Constitution prohibits only banks or trust companios from owning
or holding stock in othor banks or trust companios and dpos
not purport to prohibit corporations from owning or holding
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£*6375
('•Oklahoma continued.)
stock in other corporations if the latter are not engaged in the same kind of "business as, and do not
compete with, the purchasing corporations, and Section
11029 of the Compiled Statutes only affects combinations in restraint of trade, it is possible that it
might he held that corporations may purchase and hold
stock in hanking institutions.
OREGON.
In this State corporations may purchase and hold stock of
banks, corporations or associations but when they do so they
are required to comply with certain conditions and restrictions.
(Page 671, Chapter 444 of the 1929 General Laws of Oregon). However, no limitation as to the amount of stock which may be owned
or held by such holding corporations is imposed nor is any stockholders liability imposed upon the individual stockholders of such
holding corporations.
PENNSYLVANIA.
There are no statutes in this State that expressly forbid
corporations to purchase or hold stock in banking institutions
but in view of the fact that this right is not included in the
exhaustive list of purposes for which corporations may be formed
(Section 5598 of the Pennsylvania Statutes), none of which are
general in terms, it is doubtful whether a corporation may be
formed for the purpose of holding stock in banking institutions.
Section 1184 of the Pennsylvania Statutes imposes a double
liability upon stockholders of banking institutions.
BH0HE ISLAND.
There are no laws in this State covering either of the points
raised#
SOUTH CAROLINA.
There are no laws in this State covering either of the points
raised.
-Id.
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SOUTH DAKOTA.
There are no laws in this State covering either of the points
raised.
TENNESSEE.
There are no laws in this State covering either of the points
raised.
TEXAS.
There are no statutes in this State "bearing directly upon
either of the points raised "but it is questionable whether holding
companies may purchase and hold stock in "banking institutions*
(Note:- Article 513 of the 1935 Revised Statute^
forbids "banks or trust companies "to own more than
ten per cent of the capital stock of any other "banking corporation, * * * " unless the ownership of
such excess stock 11 shall "be necessary to prevent
loss upon a debt previously contracted in good
faith; * * * '*, and in such cases the stock must
not be owned for a longer period than six months.
Article 1302 of the 1925 Revised Statute^
permits private corporations to "purchase, * * *
hold, own, * * * shares of capital stock, * * * pf
foreign or domestic corporations not competing with
each other in the same line of "business; provided
the powers and authority * * * conferred shall in
no way affect any provision of the anti-trust laws
of this State."
Article 7436 of the 1935 Revised Statutes
defines a trust to "be "a combination of capital,
* * * "by two or more persons, firms, corporation^,
* * *: (l) To create, or which may tend to create
or carry out restrictions in trade or commerce *j *
or to create or carry out restrictions in the free
pursuit of any "business authorized or permitted "by
laws of this State" or "(3) to prevent or lessen
competition in aids to commerce, * * *•"
•11~
101
X-6375
(Texas continued.)
Article 7437 of the 1925 Revised Statutes
states that a monopoly exists when two or more
corporations combine or consolidate to "bring
the " direction of the affairs" of such corporations "under the same management or control for
the purpose of producing, or where such common
management or control tends to create a trust",
or where "any corporation acquires the shares
* * * of stock * * * of any other corporation
or corporations, for the purpose of preventing
or lessening, or where the effect of such acquisition tends to affect or lessen competition, whether such "acquisition is accomplished
directly or through the instrumentality of trustees or otherwise."
In view of the foregoing it is questionable whether holding
corporations may purchase or hold stock in hanking institutions.
UTAH.
There are no laws in this State covering either of the points
raised*
VERMONT
There are no laws in this State expressly prohibiting the
ownership by holding companies of the stock of "banks "but there is
a provision prohibiting holding companies from holding or acquiring
stock in other corporations. Section 4925 of the 1917 General Laws
of Vermont contains this prohibition and reads as follows:
"The corporation shall not be permitted to acquire or
hold stock in other corporations to such an extent that
its primary business is the holding of such stock. A
violation of this provision shall be cause for the dissolution of the corporation under the provisions of
Section 4944."
(Note:- The above provision applies to the
stock of " corporations" generally but it
would seem that it is broad enough in its
terms to prohibit also the ownership of
bank stock by holding companies).
;
10%:
X-6375
(Vermont continued.)
There axe no laws in this State imposing upon stockholders
of holding companies a stockholder's liability similar to that
imposed upon holders of hank stock.
VIRGINIA.
There are no laws in this State covering either of the
points raised.
WASHINGTON.
There are no laws in this State covering either of the
points raised.
(Note:- Daring the 1929 Regular Session of the
legislature of this State a hill kitown as "Substitute House Bill No. 72" was introduced to
restrict the ownership of bank or trust company
stock by corporations, to 20$ of the capital
stock of such bank or trust company,^bat this
bill did not pass.)
WEST VIRGINIA.
There are no laws- in this State expressly limiting the power
of corporations to hold stock in banks and such practice might be
permissible under Section 2, Chapter 54 of the Vest Virginia Statutes, which, after enumerating certain purposes for which corporations may be formed, reads as follows:
"For any other purpose or business useful to the public
for which a firm or co-partnership may be lawfully formed
in this State".
Section 78 A, Chapter 54 of the West Virginia Statutes imposes
a double liability upon stockholders of banking institutions.
WISCONSIN.
A statute was recently enacted in Wisconsin providing that no
corporation may acquire more than 10$6 of the capital stock of any
1&.
X-6375
(Wisconsin continued.)
State "bank or trust company unless 75$ of the capital stock of
both corporations shall vote in favor of it. No foreign corporations under the new law, nay purchase stock in a State
"bank or trust company unless it shall have obtained authority
to do lysiness in Wisconsin. (This information was obtained
from the American Banker for Sept. 10, 1929, p. 1. The text
of the Statute is not available.)
WYOMING.
There are no laws in this State covering either of the
points raised#
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@FedFRASER