per cent., must pay it, and payment can doubtless be compelled by legal proceedings. The section under consideration does not refer to this first installment, but to the subsequent installments, the dates of payment of which were fixed by the preceding section. The whole tenor of Section 5141 implies a previous payment of fifty per cent., which is in the nature of a forfeit, if the stock has to be sold on account of failure to meet the subsequent installments. A new association would, strictly, under this section have the following time to make good its capital before a receiver could be appointed: First, the time until the installment became due; then three weeks for notice by publication; then six months from forfeiture to cancellation; and, finally, thirty days longer in which to bring up capital to required amount. How capital is to be made good in such case is not distinctly stated, but probably by assessment on remaining stockholders. (See Section 5205, par. 83, post.) 21. Comptroller to Determine if Association is entitled to Commence Business. SECTION 5168.-Whenever a certificate is transmitted to the Comptroller of the Currency, as provided in this Title, and the association transmitting the same notifies the Comptroller that at least fifty per centum of its capital stock has been duly paid in, and that such association has complied with all the provisions of this Title required to be complied with before an association shall be authorized to commence the business of banking, the Comptroller shall examine into the condition of such association, ascertain especially the amount of money paid in on account of its capital, the name and place of residence of each of its directors, and the amount of the capital stock of which each is the owner in good faith, and generally whether such association has complied with all the provisions of this Title required to entitle it to engage in the business of banking; and shall cause to be made and attested by the oaths of a majority of the directors, and by the president or cashier of the association, a statement of all the facts necessary to enable the Comptroller to determine whether the association is lawfully entitled to commence the business of banking. The certificate described in this section is that known in the Comptroller's office as "Certificate of Officers and Directors." The certificate contains the notification and statements mentioned in the section. The Comptroller has under this and the subsequent section the right to send an examiner before granting certificate of authority to commence business, but usually the deposit of bonds and the certificate of officers and directors, in proper form, are deemed sufficient proof by him. 22. Certificates of Authority to Commence Business. SECTION 5169.—If, upon a careful examination of the facts so reported, and of any other facts which may come to the knowledge of the Comptroller, whether by means of a special commission appointed by him for the purpose of inquiring into the condition of such association, or otherwise, it appears that such association is lawfully entitled to commence the business of banking, the Comptroller shall give to such association a certificate, under his hand and official seal, that such association has complied with all the provisions required to be complied with before commencing the business of banking, and that such association is authorized to commence such business. But the Comptroller may withhold from an association his certificate authorizing the commencement of business, whenever he has reason to suppose that the shareholders have formed the same for any other than the legitimate objects contemplated by this Title. See remarks on preceding section. 23. Publication of Certificate. SECTION 5170.-The association shall cause the certificate issued under the preceding section to be published in some newspaper printed in the city or county where the association is located, for at least sixty days next after the issuing thereof; or if no newspaper is published in such city or county, then in the newspaper published nearest thereto. This refers to the publication of the Comptroller's certificate of authority to commence business. The Comptroller's office requires that a copy of the paper containing this notice be sent to that office for filling. SECTION 5142.-Any association formed under this Title may, by its articles of association, provide for an increase of its capital from time to time, as may be deemed expedient, subject to the limitations of this Title. But the maximum of such increase to be provided in the articles of association shall be determined by the Comptroller of the Currency; and no increase of capital shall be valid until the whole amount of such increase is paid in, and notice thereof has been transmitted to the Comptroller of the Currency, and his certificate obtained specifying the amount of such increase of capital stock, with his approval thereof, and that it has been duly paid in as part of the capital of such association. It is usual for the associates to state in the articles of association that the paidin capital shall be a specified sum, with the power of increasing to a specified max *See Act May 1, 1886, page 115 B. imum sum. This maximum is agreed to and determined by the Comptroller when he accepts the articles as sent to him. This maximum, once so fixed, cannot afterwards be changed, as has been decided by the Attorney-General, except by Act of Congress.* It is therefore important that in preparing the articles of association the maximum of increase should be fixed at a sum sufficiently large to meet the future needs of the business of the bank. In the articles of association it is customary to grant to the directors full power to decide when an increase of capital is to be made, and how much it shall be; but they must offer this increased stock pro rata to the existing stockholders, and not until it has been declined by them can the new stock be offered to outsiders. The proper course for an increase of stock is for the directors to pass a resolution at a regular meeting, and then notify each shareholder that he has the option to subscribe for a certain portion. As subscriptions are paid they are placed to the credit of the subscriber on account of new stock. When a sufficient sum has been paid in, the directors should cause notice of such payment to be sent to the Comptroller, who will then issue his certificate of approval, if the amount is within the limit prescribed by the articles of association. Some have attempted to hold that the directors must specify the amount of the increase, and that the whole amount so specified must be paid in before the Comptroller's approval can be given; but the better view is, and it has been sustained in the courts, that although the directors may specify a definite sum, yet if, for any reason, they may fail to secure subscriptions for and payment of the whole, they may certify to the Comptroller such portion as is actually paid, and the Comptroller may legally give his approval of such increase. In other words, the law simply means that the increase notified to the Comptroller must have been paid in. This view of the case enables directors and stockholders of National banks to receive subscriptions from time to time on stock in small amounts, which can be kept in a new stock account until a sufficient aggregate has accumulated, when the whole can be notified to the Comptroller, and on his approval it becomes valid stock. Scrip may be issued to such subscribers, but until the Comptroller's certificate of approval is received no certificates of stock should be given to the subscribers; nor should it be carried on the balance-sheet of the bank as capital stock paid in, but simply as subscriptions to new stock. Until the Comptroller's approval is obtained the legal status of such a subscriber is that of a depositor for a special purpose. Proper forms of blanks for notifying the Comptroller can be obtained at his office. Stockholders need not delegate the power of increase to directors in their articles of association, but can provide therein that the question of increase be referred to the stockholders. 25. Reduction of Capital Stock. SECTION 5143.-Any association formed under this Title may, by the vote of shareholders owning two-thirds of its capital stock, reduce its capital to any sum not below the amount required by this Title to authorize the formation of associations; but no such reduction shall be allowable which will reduce the capital of the association below the amount required for its outstanding circulation, nor shall any such reduction *See Act May 1, 1886, page 115 B. be made until the amount of the proposed reduction has been reported to the Comptroller of the Currency and his approval thereof obtained. A reduction of stock can only be effected by the consenting vote of two-thirds of such stock. A bank in a place where a minimum of $50,000 capital is required cannot reduce below that sum. Nor could a bank which might otherwise legally reduce to $50,000, reduce to that sum until it had reduced its circulation to $45,000, or 90 per cent. of the proposed reduction. The method of retiring circulation will be found elsewhere, in remarks on Section 5167, par. 49; Section 5184, par. 63; Section 5222, par. 101; Section 5224, par. 103; Section 5232, par. 111; Sections 3 and 4, Act of June 20th, 1874, under which this subject is exhaustively treated. The proper course, after a reduction has been determined on as necessary by the managers of the bank, is to call a meeting of the shareholders. This meeting may be called by publication, or by due notification of each stockholder by mail; registered mail is perhaps best. If by publication, the publication should doubtless be for such time previous to the date of the meeting as constitutes legal notice of publication by the laws of the State where the bank is located. Legally, a stockholder who has been duly notified of a meeting, and who does not attend, gives his assent by implication; but, as the law requires a vote, the reduction should be agreed to by the votes cast, either by proxy or in person, of two-thirds of the stock. The Comptroller's office furnishes the proper blanks upon which to certify to that office the result of such vote. When the Comptroller's approval is obtained the reduction can be completed by the return of money to stockholders and calling-in of certificates. Each stockholder has a legal right to demand the payment to him of his pro rata share of such reduction. If, however, the capital of the bank is impaired, sufficient of the reduction must be applied to make good such impairment by charging to it the bad assets which have caused the deficiency. The remainder must go pro rata to stockholders. Individual stockholders may agree to permit their portion of the reduction to remain in the bank to be placed to surplus or undivided profits, but a majority of stockholders cannot compel a minority to do this. In making a reduction the old certificates of shares should be called in and new ones issued. If the capital is reduced one-third, or any other proportion, there will necessarily be fractions of shares in some of the new certificates. Fractions of shares are not forbidden by law; they can be voted pro tanto the same as whole shares. 26. Rights of Shareholders at Elections. SECTION 5144.—In all elections of directors, and in deciding all questions at meetings of shareholders, each shareholder shall be entitled to one vote on each share of stock held by him. Shareholders may vote by proxies duly authorized in writing; but no officer, clerk, teller, or book-keeper of such association shall act as proxy; and no shareholder whose liability is past due and unpaid shall be allowed to vote. A form of proxy will be found on page 122, this work. A director is, perhaps, not an officer in the sense mentioned in this section, but, to be on the safe side, it will be better to select as proxies parties who are outside of the management of the bank, either as directors, officers, &c. The provision as to shareholders whose liabilities are past due and unpaid, is perhaps too laxly observed at meetings for the election of directors. Its observance should be insisted upon, not only as to voters but as to candidates for the directory. 27. Election of Directors. SECTION 5145.-The affairs of each association shall be managed by not less than five directors, who shall be elected by the shareholders at a meeting to be held at any time before the association is authorized by the Comptroller of the Currency to commence the business of banking; and afterward at meetings to be held on such day in January of each year as is specified therefor in the articles of association. The directors shall hold office for one year, and until their successors are elected and have qualified. The minimum number of directors agrees with the minimum number of natural persons required to start a bank. The first election of directors is to be held after the bank becomes a body corporate, (see Section 5136, par. 15,) but before it is authorized to commence business. The number must be fixed in the articles of association, and can be changed only by amendment of such articles. The articles must also specify the day of annual election, which must be some day in January of each year. The directors hold office until their successors are elected and have qualified, and it is therefore better at elections always to specify to what retiring director each candidate is to be elected the successor, as in the event of failure to qualify on the part of a newly-elected director, the particular predecessor would hold over. 28. Qualifications of Directors. SECTION 5146.—Every director must, during his whole term of service, be a citizen of the United States, and at least threefourths of the directors must have resided in the State, Territory, or District in which the association is located, for at least one year immediately preceding their election, and must be residents therein during their continuance in office. Every director must own, in his own right, at least ten shares of the capital stock of the association of which he is a director. Any director who ceases to be the owner of ten shares of the stock, or who becomes in any other manner disqualified, shall thereby vacate his place. This section is very plain. No one unless he is a citizen of the United States can be a director. It is therefore a question whether a woman can be a director, as the term citizen implies full power to partake in the Government by voting. Women have, however, acted as directors of National banks and the Comptroller's office has not objected. It is perhaps a matter that more properly belongs to the courts, and |