Where an increase in capital is provided in the consolidation agreement, or where there is in the agreement a provision requiring the paying in of cash in addition to the transfer of assets, to equalize the value of the capital stock, it is necessary to furnish to the Comptroller's office a sworn certificate, executed by the president or cashier of the consolidated bank, showing that such increase has been paid in cash. Following is a copy of the required certificate: THE THE CERTIFICATE OF PAYMENT OF CAPITAL IN CONNECTION WITH CONSOLIDATION OF NATIONAL BANK OF NATIONAL BANK OF Under the Act November 7, 1918. AND WHEREAS, said contract provides that the capital of the consolidated association AND WHEREAS, said contract further provides that in the event that there is not sufficient net assets in either associaion to make good its proportion of capital, surplus, and undivided profits of $.. the shareholders of the association not having sufficient assets to make good its proportion shall pay the difference in cash. Now, it is hereby certified that The National Bank ..... .has on hand net assets that are to be transferred to the consolidated bank above all liabilities amounting to $..... Bank's shareholders have paid in cash the sum of $ ...... and the equal to of the capital, surplus, and undivided profits of the consolidated National Bank liabilities amounting to $..... .... has on hand net assets that are to be transferred to the consolidated bank above all and the Bank's shareholders have paid in of the capital, surplus, and undivided profits of the consolidated bank. cash the sum of $.. equal to $.. Now, it is hereby certified that The ... Bank National has furnished net assets above all liabilities, amounting to $ $. and the Bank's shareholders have paid in cash the sum of equal to $...... of the capital, surplus, and undivided National profits of the consolidated bank; and that The has furnished assets, above all liabilities, amounting and the Bank's shareholders have paid in cash the sum of ... of the capital, surplus, and undivided equal to $.... Bonds (on deposit to secure circulation) held by either bank in excess of the capital of the consolidated bank, must be withdrawn before the consolidation is approved by the Comptroller's office. These bonds will be released upon the deposit of lawful money to retire outstanding surplus circulation, providing the usual technicalities are complied with. If bonds are to be transferred to the consolidated bank, it will be necessary only to furnish the Treasurer's receipts to the Comptroller. Under the Federal Reserve Act, shares of the capital stock of Federal Reserve Banks owned by member banks cannot be transferred or hypothecated. This provision prevents a transfer of Federal Reserve stock by purchase, but does not prevent a transfer by operation of law. Thus, when two or more national banks consolidate, the consolidated bank continues the corporate identity of one of the consolidating banks, and the consolidated bank becomes owner of the Federal Reserve stock of the other consolidating banks as soon as the consolidation takes effect. In the event that the consolidation results in a change of title, the certificates of stock issued in the names of the consolidating banks should be surrendered and cancelled, and a new certificate will be issued. 2. Consolidation with one bank liquidating-Where the capital of the absorbing bank is not to be increased by consolidation, the directors of that bank may enter into a contract with the directors or agents of the liquidating bank to purchase its assets, assume its liabilities, and to pay the value of assets purchased in excess of liabilities to depositors and other creditors, minus any expense incident to liquidation. If the capital stock of the absorbing bank is to be increased by an amount equal to the stock of the liquidating bank, the additional shares may be sold to the stockholders of the liquidating bank, with the consent of the shareholders of the absorbing bank. Providing thus for the shareholders of the liquidating bank, the directors of the continuing bank contract to take over the assets and liabilities of the liquidating bank. The Federal law is construed as requiring payment of national bank capital, either original or on account of increase, in cash. Hence, in the case under discussion, the right of the continuing bank to accept stock or assets representing stock of the liquidating bank, and to issue therefor certificates of stock in the continuing bank, is not recognized. Since it is illegal for a bank to transfer or hypothecate its Federal Reserve Bank shares, the liquidating bank which figures in a consolidation must surrender its Federal Reserve stock and the bank resulting from the merger must apply for new stock. As to the allotment of stock when a national bank increases its capital, Federal law makes no provision. An analysis of the common law covering such cases is given under "Capital," page 44. 3. Consolidation with both banks liquidating-Both banks party to a proposed consolidation may be placed in voluntary liquidation, then organize anew under a different corporate title and the new bank acquire, in the manner outlined previously in this chapter, the assets and liabilities of the liquidating banks. This method enables the incorporators to place the stock as they desire. A contract covering the taking over of the liquidating banks' assets and liabilities must be made, and an examination of the assets to be purchased will be made by a national bank examiner at the expense of the new bank. A bank which is in good faith closing its affairs for the purpose of consolidating with another national bank, is not required to deposit lawful money for its outstanding circulation, providing transfer of the securing bonds is properly authorized, and the circulation liability assumed.. T CORPORATE EXISTENCE HE National Banking Law of 1863 provided that national banks should have a corporate existence for the period named in the articles of association, but not to exceed twenty years. In the revision and re-enactment of the law in 1864, the corporate existence was fixed at twenty years from the date of organization. By the Act of June 12, 1882, the associations were authorized to extend their corporate existence for an additional period of twenty years, and by the Act of April 12, 1902, for a further period of twenty years. In 1922, a number of banks organized in 1863 reached the end of their corporate existence. In anticipation of this condition the Comptroller, in his Annual Report to Congress in 1921, submitted two bills; First, for a third extension of charters for a period of twenty years, to be effected as had been the prior extensions, and the other to grant to national banking associations perpetual succession. The latter bill received favorable consideration by the Committee on Banking and Currency of the House of Representatives, and was passed by the House. The bill had the unanimously favorable consideration of the Senate Committee on Banking and Currency, but when reported to the Senate was amended, fixing ninetynine years as the period of succession. This amendment being agreed to in conference and the House accepting the report of the conferees, the bill as submitted was passed, and received Presidential approval on July 1, 1922. The Act repealed all laws or parts of laws relating to extension for twenty years, and amended the second section of 5136 U. S. R. S. read as follows: SEC. 2. That all Acts or parts of Acts providing for the extension of the period of succession of national banking associations for twenty years are hereby repealed and the provisions of paragraph second of Sec. 5136 of the Revised Statutes as herein amended shall apply to all national banking associations now organized and operating under any law of the United States. This legislation automatically extended for ninety-nine years the period of succession of all banks organized and operating on July 1, 1922, and granted to all banks organized after that date, succession for ninety-nine years from the date or organization. As evidence of the effect of this legislation upon national banking associations "organized and operating under any law of the United States on July 1, 1922" the Comptroller of the Currency issued to each association a certificate of which the following is a copy: TREASURY DEPARTMENT OFFICE OF COMPTROLLER OF THE CURRENCY Washington, D. C., .... WHEREAS, the Act of Congress of the United States, entitled, "An Act to amend section 5136, Revised Statutes of the United States, relating to corporate powers of associations, so as to provide succession therof for a period of ninety-nine years or until dissolved, and to apply said section as so amended to all national banking associations," approved by the President on July 1, 1922, provided that all national banking associations organized and operating under any law of the United States on July 1, 1922, should have succession until ninety-nine years from that date, unless such association should be sooner dissolved by the act of its shareholders owning two-thirds of its stock, or unless its franchise should become forfeited by reason of violation of law, or unless it should be terminated by an Act of Congress hereinafter enacted; Comptroller of the Currency, do hereby certify that... and State of was organized and operating under the laws of the United States on July 1, 1922, and that its corporate existence was extended for the period of ninety-nine years from that date in accordance with and subject to the condition in the Act of Congress hereinbefore recited. IN TESTIMONY WHEREOF, witness my hand and Seal of |