Financial institutions code of Georgia as enacted by the 1974 General Assembly of Georgia and related amendments, laws, regulations and opinions, Department of Banking and Finance, State of Georgia, Atlanta

Financial Institutions Code of Georgia Received
DEC u1 1982
DOCUMENTS UGA LIBRARIES as enacted by the 1974 GE ERAL ASSEMBLY OF GEORGIA and related Amendments, Law, Regulations and Opinions
DEPARTME T OF BA KI GAD FI A CE STATE OF GEORGIA ATLA TA

FINANCIAL INSTITUTIONS CODE OF GEORGIA.

Chief Drafter and Reporter to the Committee: Honorable Julian B. McDonnell. . . . .. Professor, University of Georgia School of Law Athens, Georgia

visory Committee: Honorable A. W. Birdsong

. Attorney laGrange, Georgia

Honorable A. G. Cleveland, Jr.

. Attorney Atlanta, Georgia

Honorable John D. Comer

. Attorney Macon Georgia

Honorable E. D. Dunn

. Commissioner Department of Banking and Finance Atlanta, Georgia

Honorable William Eckhardt

. Attorney Albany, Georgia

Honorable Alan S. Gaynor

. Attorney Savannah, Georgia

Honorable Daniel B. Hodgson

. Attorney Atlanta, Georgia

Honorable Howell Hollis

Attorney Columbus, Georgia

Honorable W. Stell Huie

Attorney and General Counsel of the Georgia Bankers Association
Atlanta, Georgia

Honorable McChesney H. Jeffries .... Attorney Atlanta, Georgia

Honorable Larry V. McLeod

. Attorney Athens, Georgia

Honorable Robert M. Moler

. Deputy Commissioner Department of Banking and Finance Atlanta, Georgia

Honorable James M. Sibley

. Attorney Atlanta, Georgia

Honorable Virlyn Slaton

. Deputy Legislative Counsel Office of Legislative Counsel Atlanta, Georgia

Honorable Samuel C. Waller

. Attorney Augusta, Georgia

E. D .....JACK DUNN
CONN'SS'OHe:1It

Jlepartment of 'Ilanlting anb ~inance
~tah Df (eDrgta Atlanta :30:3:3)1.

RO_I:RT .... "'OLER
Oe:fOutT CO"'N'SS'O ... e:"

Tlus compilation of the laws and regulations governing the various segments of the financial industry in Georgia contains the first revision and recodification of the banking laws since 19 I 9 and further updates and modernizes all laws directly regulating financial institutions as embodied in the Financial Institutions Code of Georgia which was enacted by the 1974 General Assembly of Georgia. While this volume is not intended as an exhaustive treatment nor to contain all laws relating to financial institutions, it is felt that most of the important statutes have been brought together for ready reference by officials of financial institutions, attorneys, and other interested parties as a practical tool in administering or otherwise dealing in the affairs of financial institutions in this State.
The Financial Institutions Code itself represents the culmination of nearly three years of concentrated effort by the Department of Banking and Finance, attorneys, and officials of financial institutions throughout the State. The cooperation and assistance provided by the Georgia Bankers Association, underwriter for the study, Georgia Credit Union League, and Georgia Savings and Loan League was especially helpful in completing this modern, comprehensive Code. The attorneys serving on the drafting committee are to be commended for their time and effort devoted to drafting the Code which shall serve the citizens of Georgia for many years to come. Appreciation is also extended to the Honorable W. M. "Bill" Williams, Senator R. Eugene Holley, and their respective House and Senate Banking Committees for their study of the Code during the legislative process and assistance in having this important legislation enacted into law.
A special acknowledgment and thanks are extended to Professor lulian B. McDonnell of the University of Georgia, School of Law, for his work as principal draftsman and his many hours of research and compilation devoted to the Code. His efforts will serve greatly to improve the quality of supervision and promote a competitive, viable financial industry serving all of the needs of the citizens of Georgia.
Sincerely,
E. D. "lack" Dunn Commissioner

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EDITORIAL NOTE The Financial Institutions Code of Georgia which follows contains drafting comments under the heading "Comment" which are not part of the Code as enacted by the 1974 General Assembly. These comments are contained here to aid in the transition from the former laws to the new Code to indicate sources of legal language incorporated into the Code, and to provide some insight into the logic and rationale used by the drafters. Such comments are not to be construed in any way as constituting official opinions or interpretations of the various Code sections. The Commissioner may, however, use the comments as a basis for future opinions and interpretations as required.
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TABLE OF CONTENTS
PART I - PROVISIONS APPLICABLE TO DEPARTMENT OF BANKING AND FINANCE AND FINANCIAL INSTITUTIONS GENERALLY.

Section 41 A-I 01. Section 41 A-I 02. Section 41 A-I 03. Section 41 A-I04. Section 41A-I05. Section 41 A-106. Section 4IA-I07. Section 41 A-I 08. Scction 41 A-I 09. Section 41A-IIO.

Chapter 41A-1. Purposes and Preliminary Matters.
Short Title. Deflnition . Findings. Objective: Standards for Construction and Regulation. Rules of Construction. Caption.
otices. Publication. Supplementary Principles of Law. Reservation of Power.

Section 41 A-20J. Section 4IA-202. Section 41 A-203. Section 41 A-204. Section 41 A-205. Section 41 A-206.
Section 41 A-207. Section 41 A-208. Section 41 A-209. Section 41 A-21 O. Section 41 A-211. Section 41 A-212. Section 41 A-213.

Chapter 41 A-2. Organization and Personnel of Department of Banking and Finance.
Position and Term of Commissioner. Qualifications of Commissioner. Removal or Suspension of Commissioner. Vacancy in Office of Commissioner. Deputy Commi sioner, Examiners, Assistants. Oath and Bond of Commissioner, Deputy Commissioner and Examiners. Restrictions on Officials and Employees. Commissioner's Office. Seai of Department; Evidentiary Effect. Delegation of Authority. Disposition of Fees; Payment of Expen es from Appropriation. Fees to be Charged. Enforcement of Payment of Fees.

Section 41 A-30 1. Section 41 A-302. Section 41 A-303. Section 41 A-304. Section 41 A-305. Section 41 A-306. Section 41 A-30?
Section 41 A-308. Section 41 A-309. Section 41 A-31 O. Scction 41 A-311. Section 41 A-312. Section 41 A-313. Section 41 A-314. Section 41 A-315. Section 41A-316. Section 41 A-317.

Chapter 41A-3. Operations of Department of Banking and Finance.
General Scope of Supervi ion. Rules and Regulation. Accounting Procedures. Retention of Records. Department Examinations and Inve tigation . . Examinations and Investigations on Request. Method of Examination and Investigations: Special Examiners: Subpoenas. Report of Examinations. Reports to Department; Publication; Penalties. Retention of Reports. Disclosure of Information. Removal of Officers, Directors or Employees. Service Contracts. Affilia tes. Report of Departmcnt. Discretion of Department. Pre ervation of Juri diction; Withdrawal of Application and Requests.

Chapter 41 A-4. Proceeding Involving the Department of Banking and Finance.

Section 41 A-40 I. Section 41 A-402. Section 41 A-403.

Judicial Revic\ . Orders by Department; Enforcement. Forfeiture Proceedings.

Section 41 A404. Section 41 A-405. Section 41 A-406. Section 41 A-407. Section 41 A-408. Section 41 A-409.

Injunction Suits by Department. Evidential Value of Results of Examinations; Investigations. Admissibility of Certificates, Copies. Liability for onperformance of Duty. Co t of Suits By or Against Department. Department of Law to Advise Department.

Chapter 41 A-S. Emergencies and Voluntary Liquidations.

Section 41 A-SOl. Section 41 A-502. Section 41 A-503. Section 41 A-504. Section 41 A-505. Section 41 A-506.

Emergency Closings. Voluntary Dissolution Prior to Commencement of Business. Election for Voluntary Dissolution After Commencement of Business. Winding Up Voluntary Dissolution Proceedings. Articles of Di solution Where Bu iness Commenced. Certificate of Dissolution.

Section 41 A-60l. Section 41 A-602. Section 41 A-603. Section 41 A-{i04. Section 41 A-605.

Chapter 41 A-{i. ames, Registered Offices and Advertising.
Permi sible ames. Re ervation of ame. Registered Office. Prohibited Advertising. Additional Protection.

Section 41 A-70l. Section 41 A-702. Section 41 A-703. Section 41 A-704. Section 41 A-705. Section 41 A-706. Section 4IA-707. Section 41 A-708. Section 4IA-709. Section 41 A-71 O. Section 41 A-71 I. Section 41 A-71 2. Section 41 A-713. Section 41A-714. Section 41A-715. Section 41 A-716. Section 41 A-717. Section 41 A-718. Section 41 A-719. Section 41 A-720. Section 41A-721. Section 41 A-722. Section 41 A-723. Section 41 A-724. Section 41 A-725.

Chapter 41 A-7. ReceivershipsGeneral Powers and Procedures.
Taking of Po session by Department; Cumulative Remedie . Status a Receiver; Restrictions on Appointment. Taking of Pos e ion upon Request. Posting of otice of Posse ion. Certificates of Possession. Injunction to Restrain Department. Supervision by Court. General Powers. Appointment of Deputy Receivers, Counsel, and Other As istants. Suspen ion or Continuation of Business. Determination to Liquidate; i1ing of Supplemental Certificates. Powers and Duties Before and After Determination to Liquidate. Inventory and Appraisement.
otice to Holder of Asset ; Power of Court to Order Transfer. Power to Borrow Money. Surrender of Burdensome Assets. Compromise of Claims; Extension of Mortgages; otes. Payment of Mortgages and Liens; Protection of an Equity. Sales of Real Property. Lea es of Property. Sale or Exchange of Personal Property; Liens and Securities. Deposit of Moneys by Department. Property in Safe Deposit Vault or Held for Safekeeping. Actions and Suits. Surrender of Possession; Special Liquidations and Reorganizations.

Section 41 A-801. Section 41 A-802. Section 41 A-803. Section 41 A-804. Section 41 A-805. Section 41 A-806. Section 4IA-807. Section 41 A-808. Section 41 A-809. Section 41 A-81 O.

Chapter 41 A-8. Claims, Priorities and Accounting in Receiverships.
Preservation of Asset. Exclusivity of Claims Procedure.
otice to Depositors and Other Creditors. Proof of Claims of Depo itors. Proof of laims of Creditors. Allowance of Claims. Advance Payment of Dividends to Depositors. Expense of dministration. Partial or Final Account; Objections. Adjudication of Rejected Claims and Exceptions to Account.

Section 41 A-81 J. Section 41 A-812. Section 41 A-813. Section 41 A-814. Section 41 A-8IS. Section 41 -816.

Confirmation of Account; Distribution of Dividends. Unclaimed Dividends.
Distribution of Asset upon Insolvency; Secured Claim and Lien. Subrogation of Insurer. Liquidation of Ex ess Asset by Trustee. Destruction of Record.

Se tion41A-901. Section 41 A-902. Section 4IA-903. Section 41 A-904. Section 41 A-90S. Section 41 A-906.

Chapter 41A-9. Receivership Procedures Involving Trust or Pooled Assets.
Definitions and Applicability. Status in Relation to Trust and Pooled Assets. Jurisdiction of Court. Sub tituted Fiduciary or 1anager. Transfers Without Accounting. Transfers With Accounting; Deficiencies.

Chapter 41 A-IO. Reserved.

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TITLE 41A. FINANCIAL INSTITUTIO S.
PART I. PROVISIONS APPLICABLE TO DEPARTME TOFBA KI GA DFI A CEA 0
FI ANCIAL I STITUTIONS GENERALLY.
CHAPTER 41A-1. PURPOSES AND PRELIMI ARY MATTERS.
41A-IOl. Short Title. Thi Code shall be known and may be cited a the 'Financial In titutions Code of Georgia' (hereinafter called 'this Code').
Comment: This Code is premised on the recognition that all financial institutions serve as financial intermediaries in an interrelated environment and are subject to common regulation. Accordingly. the law governing these institutions should be revised and restated in a unified code, The number 41A is chosen in order that the Code will fall in proper alphabetical order among the Code titles. Reference in these comments to the "Banking Code" has reference to the former Banking Law of 1919 which is repealed by the enactment of this Code.
41A-I02. Definitions. Subject to additional definitions contained in the ubsequent provi ion of thi Code and unle the context otherwi e requires, in thi Code:
(a) 'Affiliate' mean any corporation busines trust, a ociation, or other similar organization:
(I) of which a financial institution, directly or indirectly, owns or controls either a majority of the voting share or more than 50 percent of the number of hares voted for the election of it director trustees, or other persons exercising similar function at the preceding election, or controls in any manner the election of a majority of its director tru tee or other person exercising similar functions' or
(2) of which control is held, directly or indirectly through stock ownership or in any other manner by the hareholders of a financial institution who own or control either a majority of the shares of such financial institution or more than 50 percent of the number of shares voted for the election of directors of such financial in ti tu tion at the preceding election, or by trustee for the'. benefit of the shareholders of any such financial institutions' or
(3) of which a majority of its directors, trustees, or other persons exercising similar functions are director of anyone financial institution; or
(4) which owns or controls, directly or indirectly either a majority of the share of a financial institution or more than 50 percent of the number of share of a financial in titution voted for the election of director of a financial in titution at the preceding
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election, or controls in any manner the election of a majority of the directors of a financial institution, or the benefit of whose shareholders or members all or substantially all the capital stock of a financial insti tu tion i held by trustees.
(b) 'Agreement for the payment of money' means a consensual monetary obligation not in the form of an evidence of indebtedness or an investment security and includes an account, contract right or general intangible as defined in Code Section 109A-9-106.
(c) 'Appropriated retained earnings' means that portion of the retained earnings of a bank or trust company set aside by resolution of the board of directors as unavailable for the payment of dividends or other distribution to shareholders.
Cd) 'Articles' means original or restated articles of incorporation, or articles of consolidation and.all the amendments thereto including articles of merger or conversion and also includes what heretofore have been designated by law as certificates of incorporation or charters, and, in case of foreign corporations, whatever documents are equivalent to 'articles' in their jurisdiction of incorporation. After an amendment restating articles in their entirety, the 'articles' shall not include any prior documents, and the certificate of amendment issued by the Secretary of State shall so state.
(e) 'Assets' means all the property and rights of every kind of a financial institu tion.
(f) 'Attorney' means an attorney-at-law who is regularly retained as counsel for a financial institution, or who is a partner or associate of a firm which is regularly retained as counsel for a financial institution.
(g) 'Bank' means a corporation existing under the laws of this State on April 1, 1975 (including a regulated certificated bank) or organized under this Code, and authorized to engage in the business of receiving deposits withdrawable on demand or deposits withdrawable after stated notice or lapse of time; and shall also include national banks located in this State for the purpose of Chapter 41A-16, relating to deposits, safe deposit agreements, and money received for transmission; provided, however, that 'bank' shall not include a credit union, a building and loan association, a savings and loan association or a licensee under Part IV of this Code. (This definition shall not be deemed to define the term 'banking companies' as used in Part III, Section IV, Paragraph XVII, of the Constitution of Georgia.
(h) 'Building and loan association' means such an association as defined in subsections (b), (c) and (d) of Section 41A-3501.
(i) 'Capital debt' means the sum of the face value of the subordinated securities of a financial institution issued pursuant to Section 4IA-1910.
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U) 'Capital stock' means the sum of the par value of the authorized shares which have been issued and remain outstanding of a bank or trust company.
(k) 'Certificate of reliance' means a written statement which: (l) is signed by an officer or authorized employee of a financial institution:
(2) states that the financial institution is relying primarily on the obligation of a person or corporation or on security in a transaction as to which such reliance has an effect on the application of a provision of this Code;
(3) states the facts which are the basis of such reliance; and (4) is retained in the financial institution's flies related to the transaction in connection with which statemen t is made. (1) 'Commercial bank' means a bank authorized to hold deposits subject to check.
(m) 'Commissioner' means the Commissioner of Banking and Finance, which office was created by the Executive Reorganization Act of 1972, approved April 6, 1972 (Ga. Laws 1972, p. 1015).
(n) 'Corporation' means a corporation, whether profit or nonprofit, and includes a professional corporation, or joint stock association, organized under the laws of this State, the United States, or any other state, territory, or dependency of the United States, or under the laws of a foreign country.
(0) 'Credit union' means a cooperative society incorporated under the laws of this State on April I, 1975, or organized under Part III of this Code and existing for the twofold purpose of promoting thrift among its members and creating a source of credit for them at reasonable rates.
(p) 'Department' means the Department of Banking and Finance created by the Executive Reorganization Act of 1972, approved April 6, 1972 (Ga. Laws 1972, p. 1015).
(q) 'Depositor' means any person or corporation who shall deposit money or items for the payment of money in any financial ins ti tution which funds are subsequently (allowing time for collections) withdrawable either on demand or after a stated notice or lapse of time, whether interest is allowed or not, and shall also include:
(1) holders of demand and time certificates of deposit; (2) owners of certified or cashiers' checks and checks purchased from a licensee under Part IV of this Code; and (3) shareholders in credit unions, federal credit unions, building and loan associations, and savings and loan associations to the extent that funds paid in by them are withdrawable within the terms of this definition. (r) 'Evidence of indebtedness' means a note, draft or similar negotiable or nonnegotiable instrument.

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(s) 'Federal credit union' means an association organized pursuant to the Federal Credit Union Act, 12 U.S.C. Secs. 1751-1790.
(t) 'Fiduciary' means an executor, administrator, guardian, receiver, trustee, assignee for benefit of creditors, or one acting in a similar capacity.
(u) 'Financial institution' means a: (1) bank; (2) trust company; (3) building and loan association; (4) credit union (5) corporation licensed to engage in the business of selling checks in this State on April I, 1975, or so licensed pursuant to Part IV of this Code; (6) business development corporations existing on April I, 1975, pursuant to the Georgia Business Development Corporation Act of 1972, approved April 3, 1972 (Ga. Laws 1972, p. 798), or organized pursuant to Part VI of this Code; or (7) an international bank agency doing business in this State on April I, 1975, pursuant to the International Bank Agency Act, approved April 6, 1972 (Ga. Laws 1972, p. 1140), or authorized to do business in this State pursuant to Part V of this Code; and, in addition, 'financial institution' shall also, as the context requires, include a national bank, savings and loan association, or federal credit union for the purpose of the following provisions: "Section 41 A-I 03 relating to fmdings of the General Assembly; Section 41 A-I 04 relating to objectives of this Code; Section 4lA-l09 relating to supplementary principles of law; Section 41 A-207 relating to restrictions on officials and personnel; Section 41A-311 relating to disclosure of information; Section 41A-40l relating to judicial review of Department action; Section 4lA-402(d) relating to orders to desist from conduct illegal under the laws and regulations of this State; Section 4lA-405 relating to the evidentiary results of examinations and investigations; Section 4lA-50l relating to emergency closings; Section 4lA-604 relating to prohibited advertising; Section 4lA-1805 (a) (3) relating to criteria to be considered in approving new banks; Section 4lA-990l relating to criminal prosecutions; Section 41 A-9902 relating to application of Criminal Code provisions; and Section 41 A-9904 relating to illegal gifts and interests. (v) 'Insolvency' means inability to meet liabilities as they become due in the regular course of business, or insufficiency in actual cash market value of assets to pay liabilities to depositors and other creditors.

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(w) 'National bank' means a national banking association organized pursuant to 12 U.S.C. Sec. 21-215b.
(x) 'Net assets' means the amount by which the total assets exceed the total debts of a financial institution. Total assets shall include but not be limited to both tangible and intangible assets (except goodwill), including prepaid expenses, including prepaid taxes, and accrued income using book values determined in accordance with generally accepted accounting principles applicable to financial institutions. Total debts shall include all liabilities, other than contingent liabilities, including accrued expenses, deferred or unearned income and valuation reserves and accounts or assets, all determined in accordance with generally accepted accounting principles applicable to financial institutions.
(y) 'Paid-in capital' means the sum of the considerations received in the sale or exchange of shares of a bank or trust company in excess of the amount of the capital stock and the expense fund required by Section 41 A-I 807, and includes the surplus, if any, created by or arising out of a reduction of the capital stock of such financial institution effected in a manner permitted by law and any amounts properly regarded as surplus of such financial institution on April 1, 1975, and any amounts transferred from the expense fund as permitted by Section 41A-1903.
(z) 'Person' means an individual, trust, general or limited partnership, unincorporated association (except a joint stock association) or any other form of unincorporated enterprise.
(aa) 'Principal court' means the Superior Court of the county where the registered office of a financial institution is located or, in the case of a proposed financial institution, will initially be located as shown in its articles or application for authority to commence business. Whenever under this Code the principal court is au thorized to take any action but lacks because of constitutional restrictions jurisdiction or venue over the person or corporation against which such action is to be taken or over the subject matter which is to be affected by its action, then such action may be taken by the Superior Court of this State in which jurisdiction and venue are proper, or, in the absence of any such court, by a court of another state, a federal court or a court of a foreign country in which jurisdiction and venue are proper.
(bb) 'Public body' means an agency, authority, board, commission, intrumentality, or similar entity which is part of or connected with the government or political subdivision referred to in the context.
(cc) 'Public sale' means a sale as defined in Code Section 109-1-201 (31A).
(dd) 'Retained earnings' means the balance of the net profits, income, gains and losses from the date of incorporation, or from the

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latest date when a deficit was la t eliminated, of a financial institution whose articles were granted by the Secretary of State and exclude subsequent distributions to shareholders and tran fers to appropriated retained earnings. Retained earnings hall al 0 include any portion of paid-in capital or appropriated retained earnings or, in the ca e of other organizations, equivalent funds, allocated to retained earning in merger, consolidations or acquisitions of all or substantially all of the property or a set of another such financial institution or other organization permitted by law.
(ee) 'Savings and loan association' means an as ociation created pursuant to the Home Owners' Loan Act of 1933, 12 V.S.c. Secs. 1461-1468.
(ff) 'Savings bank' means a bank which is not authorized to hold deposits subject to check.
(gg) 'Shareholder' mean the owner of shares in a financial institution.
(hh) 'Shares' means the units into which the proprietary intere t of the in titution is divided.
(ii) 'Statutory capital ba e' mean (I) the sum of the capital stock, the paid-in capital the appropriated retained earnings and the capital debt of a bank or tru t company or (2) the amount of the net a et of such financial in titution whichever i the lower amount.
Uj) 'Subject to check' include withdrawal or transfer by negotia-
ble or transferable order or authorization even though uch order or authorization does not con titute a check under Code Section 109A-3-104.
(kk) 'Sub idiary' mean a corporation controlled by a financial institution which owns at least a majority of it voting shares.
(11) 'Third party payment ervice' means any sy tern employing checks, drafts, computer transmis ions or other techniques by which a depositor may effect payment to third parties.
(mm) 'Trea ury hares' means shares of a financial institution which have been issued, have been ubsequently acquired by and belong tp the financial institution otherwi e than in a fiduciary capacity and have not been cancelled. Such shares hall be deemed to be 'i sued' but not outstanding shares.
(nn) 'Tru t company' means a corporation existing under the law of thi State on April 1, 1975, or organized under thi Code authorized by law to engage in the busine s of acting a a fiduciary but hall not include corporations exercising incidental trust power under Section 41 A-II 03(a)(3).
Comment: This Section states definitions applicable throughout this Code.
The definition of 'affiliate' is derived from 12 u.s. C. Sec. La. It
would replace the less specific definition of Ga. Laws 1973, pp. 526,
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527 which was phrased solely in terms of an undefined control. The purpose of the 1973 legislation was to give the Banking Department the same power over affiliates now exercised by federal regulators. The more specific federal definition is therefore appropriately employed. See Section 41A-314.
The definition of 'articles' is derived from the usage of the Business Corporation Code. Ga. Code A nn. Sec. 22-1 02(d).
The definition of 'bank' is a new formulation. Since the banking codification of 1919, Georgia statutes have contained a descriptive definition of banking embracing a triad of activities: receipt of deposits, making of loans and dealing in commercial paper. See Ga. Code Ann. Secs. 13-201 .. 13-2303. Though not inaccurate in practice, such descriptive language fails to focus on what is analytically unique to the banking business: the power to receive deposits. It also left to the courts the task of distinguishing between commercial and savings banks. The definitions of the terms 'bank', 'commercial bank' and a 'savings bank' in this provision seek to define precisely the legally unique aspects of these institutions in the modern context. Both institutions have the depository function, but only the commercial bank may offer demand deposits. The language 'third party payment services' is used in connection with the description of the powers of banks in Chapter 41 A-13. This new terminology covers new electronic means of transferring funds that do not require the use of instruments. The language is derived from The Report of the President's Commission on Financial Structure and Regulations (Wash. 1971, p. 23). However, the traditional Georgia restrictions on savings banks, credit unions and building and loan associations have been phrased in terms of inability to have deposits 'subject to check'. The traditional language is retained in describing the powers of these institutions in order to preserve the existing law. See Sections 41 A-1314, 41 A-31 01, 41 A-350J(b). The partial definition of 'subject to check' is added to assure that the traditional understanding of that term has not been changed by enactment of the Commerical Code. The term 'bank' includes a national bank only for specifically designated provisions. This approach follows that of the present Code except that State statutory provisions in regard to records would no longer be declared to be applicable to national banks. Cf Ga. Code Ann. Sec. 13-201.
The definition of 'building and loan association' carries forward the definition now contained in Ga. Code Ann. Secs. 16-402, 16-403 with modifications. See Section 41A-3501 and comment thereto.
The definitions of 'capital debt', 'capital stock', 'appropriated retained earnings', 'net assets', 'paid-in capital', 'statutory capital base', and 'retained earnings' are new formulations designed to express these financial terms as much as possible in terms of modern
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accounting practice given the particular requirements of financial institutions and statutory drafting.
The definitions of 'Commissioner' and 'Department' repeat provisions of the 1972 Reorganization Act.
The definition of 'credit union' is derived from the federal statute, 12 Us. C. Sec. 1752.
The definition of 'depositor' is a refinement of the Ga. Code Ann. Sec. 13-202. it is designed to focus on whether funds placed in the institution are withdrawable as of right, regardless of the label applied to arrangement.
The definitions of 'federal credit union', 'savings and loan associations', and 'national bank' are new as express statutory provisions but merely refer to institutions existing under specific federal statutes without changing the normal usage of these terms.
The definition of 'financial institution' is new. It lists the organizations subject to this Code and specifically details when federal institu tions are covered.
The definition of 'insolvency' tracks that of the former Code except that failure to restore reserves upon order of the Department is omitted as a ground of insolvency. Cf Ga. Code Ann. Sec. 13-205.
The definition of 'public sale' is that of the Georgia Uniform Commercial Code.
The other definitions are derived from Pa. Stat. Ann. Tit. 7, Sec. 102.
41A-I03. Findings. The General A embly hereby find and declares that the sound, efficient, and responsive operation of financial institutions is essential to the livelihood of the people of this State and to the stability and growth of the economy of thi State and region and vitally affect the public interest.
Comment: This Section codifies the principle recognized in cases such as Jack on v. Long, 225 Ga. 227, 167 s.E. 2d 583 (] 969). Because they serve as financial intermediaries which accumulate and disperse the money supply, the institutions governed by this Code are uniquely subject to State regulation. Under modern statutes this regulation extends not only to preservation of solvency but also to promotion of services needed by the public in an expanding economy.
41A-I04. Objectives: Standards for Construction and Regulation. (a) The underlying objectives of this Code are to provide for:
(1) safe and ound operation of financial institutions; (2) proper conservation of the assets of financial in titutions; (3) public confidence in financial institutions' (4) protection for the interests of the depositors, creditors, and hareholders of financial institution; (5) service by financial institutions responsive to the need and convenience of depo itors, borrowers, and other customers and
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conducive to economic progress, and to these ends opportunities to expand services and facilities;
(6) appropriate competition among financial institutions and between them and other financial organizations including those organized under the laws of the United States, other states, and foreign countries;
(7) delegation to the Departmel)t of rule-making power and administrative discretion in order that supervision of financial institutions may be flexible and responsive to changes in economic conditions and banking, fiduciary and other commercial practices;
(8) opportunity for management of financial institutions to exercise their business judgment;
(9) simplification and modernization of the law governing banking, trust and other financial institutions.
(b) This Code shall be construed and applied to promote the foregoing objectives, and they shall constitute standards to be observed by the Department in promulgating rules and regulations, issuing cease and desist orders, conducting examinations exercising discretionary powers and in connection with all other matters embraced by this Code.
(c) It is the intention of the General Assembly to leave intact the laws of the State of Georgia relating to branch banking and bank holding companies as uch laws existed prior to April 1 1975, and the Financial Institutions Code of Georgia shall not be construed to change such laws in any way.
Comment: This Section is derived with modifications from Pa. Stat. Ann. Tit. 7, Sec. 103. This provision was used as a model in the recent Tennessee banking law revision. Tenn. Code Ann. Sec. 45-102. It reflects a concern for both soundness and service. These objectives o/Jerate as guides in construction and help to satisfy constitutional requirements relating to delegation of regulatory authority. See Pearle Optical of Monroeville Inc. v. State Board, 219 Ga. 364, 133
s.E. 2d 374 (1963). Paragraph (c) is unique to this Code to carry out
the intentions of the drafters and assure against inadvertent change in the covered areas.
41A-I05. Rules of Construction. (a) The rules of statutory construction contained in Code Title 102 shall apply to provisions of this Code.
(b) Unless otherwi e specifically indicated and to the full extent permitted by the Constitution of this State any reference in this Code to an existing statute or regulation shall mean to such statute or regulation as has been or may in the future be amended or have material added to it. If in any case such construction is not constitutionally permissible, such reference shall mean to the statute or regulation as it exists on April I, 1975.
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(c) Any reference in this Code to an action by a superior court or other court shall authorize a judge of such court to take such action in ,term or in vacation, whether present in the county or absent from it.
Comment: This is a new Section. Subsection (a) makes the rules of statutory construction in Title 102 of the Georgia Code explicitly applicable to this Code. Subsection (b) eliminates the need to constantly refer to statutes and regulations 'as from time to time amended'. The reference to constitutional restrictions is to the Georgia case law which apparently bars prospective incorporation of federal statutes and regulations as an improper delegation of legislative power. The subsection is not intended, however, to express approval of the apparent doctrine of such cases. Subsection (c) allows judges to take action under this Code in vacation as well as in term.
41 A-I 06. Captions. Part, Chapter and Section captions are parts of this Code.
Comment: This is a new Section adopting the normal modern principles in regard to captions.
41 A-I 07. otices. Except as otherwise expressly provided: (a) Any notice required to be given under the provisions of this Code may be delivered personally, by first class mail, or by telegram, charges prepaid, to the last known address of the person or corporation, or to the registered office of the corporation. If the notice is sent by mail or by telegraph, it shall be deemed to have been given when deposited in the United States mail or with a telegraph office. If such notice is of a meeting, it shall specify the place, day, and hour of the meeting. Notice of a meeting of shareholders shall be given not less than ten nor more than fifty days before the meeting. Notice of a special meeting shall specify the general nature of the business to be transacted. (b) Any written notice required to be given under the provisions of this Code need not be given if there is a waiver thereof in writing signed by the person or on behalf of the corporation entitled to such notice or by their proxy, whether before or after the time when the notice would otherwise be required to be given, provided that no such waiver shall apply by its terms to more than one required notice. (c) Attendance of a person, either in person or by proxy, at any meeting shall constitute a waiver of notice of such meeting, except Where a person attends a meeting for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting was not lawfully called or convened. (d) If the language of a proposed resolution or a proposed plan requiring approval by shareholders is included in a written notice of a
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meeting of shareholders, the shareholders' meeting considering the resolution or plan may adopt it with such clarifying or other amendments as do not enlarge its original purpose without further notice to shareholders not pre ent in person or by proxy.
Comment: This Section introduces a general procedure for notices under this Code. The former banking law did not contain such a general procedure. In general, the procedures resemble those required for shareholders meeting under the Business Corporation Code, Ga. Code Ann. Sec. 22-604, but the alternative of notice by telegram is added here.
41 A-I 08. Publication. Except as otherwise expressly provided, any notice or advertisement required by this Code to be published in a newspaper shall be published once a week for four weeks in the newspaper which is on the date of the fir t such publication the official organ (as determined pursuant to Code Section 39-1103) of the county which is or is to be the location of the registered office of the financial institution. Whenever publication is required in connection with a proposed action which must be approved by the Department such publication shall commence not later than ten days after the filing, whether with the Department or the Secretary of State of the documents seeking sllch approval unles the Department for good call e hown allows such publication to commence at a later time.
Comment: The provision adopts the customary Georgia provision as to publication embodied in various provisions of the former banking laws and in the Business Corporation Code.
41 A-I 09. Supplementary Principles of Law. Unless expre ly or impliedly displaced by the provisions of this Code, general principles of common law shall apply to financial in titutions.
Comment: This Code is designed to cover the legally unique aspects of financial institutions as such; apart from such aspects, financial institutions are subject to normal common law legal principles.
41 A-II O. Reservation of Power. The General A sembly hall at all times have power to pre cribe such regulation, provision, and limitations as it may deem advisable, which regulations provi ions and limitations hall be binding upon financial in titutions that are ubject to this Code. The General Assembly shall have the power to amend, repeal, or modify thi Code at pleasure.
Comment: This Section, copied from Ga. Code Ann. Sec. 22-107, is designed to avoid the doctrine of Dartmouth College v. Woodward, 17 Us. (4 Wheat.) 518 (J819).
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CHAPTER 41A-2. ORGANIZATION AND PERSONNEL OF. DEPARTMENT OF BANKING AND FINANCE.
41 A-20t. Position and Term of Commissioner. (a) The head of the Department shall be the Commissioner who shall exercise supervision and control over all divisions and employees of the Department.
(b) The Commissioner shall be appointed by the Governor, by and with the advice and consent of the Senate, for a four-year term. The initial term of the Commissioner shall terminate on January 20, 1976. Each succeeding term of office shall be for four years, commencing on the expiration date of the previous term.
Comment: This Section restates terms of the Executive Reorganization Act of 1972, (Ga. Laws 1972, p. 1015), as amended by Acts, 1972, p. 1198. For the definition of the term 'head', see Section 1(c) of that Act.
41 A-202. Qualifications of Commissioner. The Commissioner shall be a man of good moral character, shall not have been convicted in any court of competent jurisdiction of any crime involving moral turpitude, shall have been a citizen of this State for not less than three years, and shall have attained the age of 30 years but be les than 70 years. In addition, the Commissioner shall have had at least five years' experience as an active officer of a bank or national bank or as an examiner or other officer in a federal or state agency supervising such institutions.
Comment: This Section generally carries forward the traditional qualifications on the Commissioner recently restated in the Executive Reorganization Act. It changes the minimum age of the Commissioner from 35 to 30 years of age. It also allows appointment of a Commissioner who gained his expertise with a bank supervisory authority at the federal level or in another state. Allowing appointment of an official who gained his experience in another state or at federal level is in accord with the current Alabama statute, Ala. Code Ann., Title 5, Sec. 40(4), from which the Georgia qualifications were originally derived. 0. Park, Banking Law of Georgia, p. 8 (1920J.
41 A-203. Removal or Suspension of Commissioner. The Commissioner may be suspended or removed by the Governor whenever the Governor has in his judgment trustworthy information that the Commissioner is insane or has absconded or grossly neglected his duties or is guilty of conduct plainly violative of his du ties or the restrictions of Section 41A-207.
Comment: This Section carries forward Section 13-307 alld. ill addition, explicitly provides for suspension or removal ill the el'ellt that the Commissioner violates restrictions on dealing with fillancial institutions.
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41A-204. Vacancy in Office of Commissioner. In the event there shall be a vacancy in the office caused by death, resignation, disability, disqualification, suspension or removal of the Commissioner, the Deputy Commissioner shall exercise the powers and perform the duties of the Commissioner until a successor is appointed and qualified. When the Deputy Commissioner shall act as Commissioner, he shall receive the same salary and give the same bond as provided herein for the Commissioner.
Comment: Section 13-303 of the former banking law provided in effect that the Deputy Commissioner shall automatically succeed to the Commissioner's powers when a vacancy occurs and the Senate is not in session. This provision displaces the Governor's normal power of interim appointment to vacant offices as set forth in Ga. Code Ann. Sec. 40-302. In the light of the important and continuing responsibilities of the Commissioner under this Code, it is essential that his duties be performed at all times. This Section accordingly extends the automatic succession to vacancies occurring while the Senate is in session. It would not change the Governor's duty under Section 40-302 to then seek approval for a permanent appointment from the Senate.
41A-205. Deputy Commissioner, Examiners, Assistants. The Commissioner shall appoint from time to time, with the right to discharge at will, a Deputy Commissioner who shall also be ex officio examiner, and such additional examiners and assistants as he may need to discharge in a proper manner the duties imposed upon him by law, subject to the rules and regulations of the State Merit System and within the limitations of the appropriation to the Department as hereinafter prescribed. Except as otherwise provided in this Code, the Deputy Commissioner, examiners and assistants shall be governed by such rules of position, classification appointment, promotion, demotion transfer, dismissal, qualification, compensation, eniority privileges, tenure and other employment standards of the State Merit System. As used herein, the term 'State Merit System' shall mean that system established pursuant to Chapter 22 of Title 40 of the Code of Georgia.
Comment: This provision carries forward provisions previously found in Sections 13-310 and 13-312 of the Banking Code.
41A-206. Oath and Bond of Commissioner, Deputy Commissioner and Examiners. (a) Before entering upon the duties of their offices, the Commissioner Deputy Commissioner and each examiner shall take an oath before the Governor or one of the justices of the Supreme Court to support the Constitution of the United States and the Constitution of the State of Georgia and to faithfully execute the duties of their respective offices, which oath shall be in writing and subscribed to by the Commissioner, Deputy Commissioner or examiner, as the case may be and fIled in the Governor's Office in
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the case of the Commissioner, and filed in the Commissioner's Office in the case of the Depu ty Commissioner and examiners. Each of them shall also give bond to the State of Georgia with security or securities approved by the Governor in the sum of fifty thousand dollars ($50,000.00) in the case of the Commissioner, and in the sum of ten thousand dollars ($10,000.00) in all other cases, conditioned
as follows: (I) that he will faithfully discharge, execute, and perform all and
singular the duties required of him, and which may be required by the Constitution and laws of the State of Georgia;
(2) that he will faithfully account for all moneys that may be received by him from time to time by virtue of his office; and
(3) that he will safely deliver to his successor all books, moneys, vouchers, accounts, and effects whatever belonging to said office.
(b) The surety on the bonds shall be a regular incorporated surety company or companies qualified to do business in the State of Georgia, and the premium on the bonds shall be paid as other expenses of the Department.
Comment: This Section restates provisions of Sections 13-306 and 13-311 of the Banking Code.
41 A-207. Restrictions on Commissioner, Officials and Examiners. (a) Except as provided in subsections (b) and (c) , neither the Commissioner nor any other official or examiner of the Department shall directly or indirectly:
(1) receive any money or property as a loan, gift, or otherwise from, or become indebted to, any financial institution or from or to any director, officer, agent, employee or attorney of a financial institu tion;
(2) own any share in or securities of a fmancial institution or otherwise have an ownership interest in a financial institution; or
(3) engage in the business of a fmancial institution. (b) The Commissioner and other officials and examiners of the Department may borrow money in ordinary course from any financial institution existing under the laws of the United States, provided said financial institution is not examined, regulated and/or controlled by the Department, or owned or controlled by another bank or corporation which is or may be examined, regulated and/or controlled by the Department. However, all such loans to the Commissioner, Deputy Commissioner and division directors shall be reported by the individual concerned to the Attorney General in writing within ten days after the loan agreement is executed. (c) The Commissioner may segregate examiners employed by the Department according to the class of financial institution each examiner regularly examines. Thereafter examiners may borrow in ordinary course from any class of financial institution not normally examined by the examiner receiving the credit. All borrowings from

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a financial institution by officials and examiners shall be reported by the borrower to the Commissioner immediately upon receipt of such credit. Nothing herein shall prohibit any official or employee of the Department from maintaining a deposit in any financial institution or owning a single share of a credit union.
(d) Except as hereinbefore provided, no director, officer, agent, employee, or attorney of a financial institution, individually or in his official capacity, shall knowingly participate in violations of this Section.
Comment: This Section generally carries forward restrictions against dealings between financial institutions and Department personnel contained in Sections 13-304 and 13-310 of the former Banking Code. It does, however, introduce authority for the Commissioner to divide examiners into two distinct groups: one charged with examination of credit unions and the other group charged with examination of other types of financial institutions. Each group would then be allowed to borrow from financial institutions not within their jurisdiction. This new feature seeks to relieve examiners from unnecessary hardship.
41A-208. Commissioner's Office. The Commissioner shall be provided with suitable offices and equipment, the expense of which shall be paid by the State in the same manner as the expenses of other offices of the State government are paid.
Comment: This Section restates the essentials of Section 13-308 of the former Banking Code. It does not, however, specify the locations or times of operation of the Commissioner's office; it is felt that these administrative details should not be frozen by statutory enactment.
41A-209. Seal of Department; Evidentiary Effect. The Department shall adopt an official seal. Any paper executed under the seal of the Department shall prima facie be deemed to have been executed by a duly authorized official of the Department.
Comment: This provision would authorize the Department itself to adopt a seal, rather than obtain one from the Secretary of State. Cf. Ga. Code Ann. Sec. 13-309. Together with Section 41A-406 it would treat documents sealed or certified by the Department in the same manner as sealed or certified documents are treated under the Corporation Code. Ga. Code Ann. Sees. 22-104; 22-106.
41A-210 Delegation of Authority. (a) Any authority, power or duty vested in the Commissioner or Department by a provision of this Code may be exercised, discharged or performed by a depu ty assistant, examiner or employee of the Department acting in the Commissioner's name and by his delegated authority. In the case of any matters involving the exercise of discretion, the delegation of authority shall be in writing. Any such delegation by the Commissioner may be revoked in the same manner in which it was granted.

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(b) The Commissioner shall be responsi1;>le for the official acts of such persons who act in his name and by his authority.
Comment: This Section generally carries forward the provision of delegation passed by the General Assembly in 1973. Ga. Laws 1973. pp. 526, 528. The effect of that change was to overturn cases such as Mobley v. Marlin, 166 Ga. 820, 144 s.E. 747 (J 928); Webb v. Hansard, 43 Ga. App. 246, 158 s.E. 452 (1931); and In re Giles, 21 F 2d 536 (N. D. Ga. 1927) to the extent that they hold that the Commissioner (then Superintendent) could delegate only ministerial tasks, not discretionary decisions. The provision is necessary because of statutory time limitations imposed on the Department. Other states have sought to handle this problem by provisions allowing the Deputy to act whenever the Commissioner is absent or unable to act; e.g., Mich. Compo L. Ann, Sec. 487, 313. Ark. Stat. Ann. Sec.
67-1 OMc). This Code, in the interest of certainty, allows the Deputy
to succeed to Commissioner's powers only when there is a vacancy in the office. By written authority under this provision, the Commissioner may arrange for the functions of his office to continue when he is not present. The Section is modeled after a current provision of the Georgia Insurance Code, Ga. Code Ann. Sec. 56-213, with the additional requirement that the delegation in regard to other than ministerial functions be in writing.
41 A-2II. Disposition of Fees: Payment of Expenses from Appropriations. Fees prescribed by this Code shall be collected by the Department and deposited with the Department of Administrative Services. All of the expenses incurred in connection with the conduct of the business of the Department shall be paid out of the appropriations of funds to the Department by the General Assembly. Such expenses shall include all expenses incurred as travel expenses by personnel of the Department when away from their official station as assigned by the Commissioner.
Comment:- This Section generally carries forward terms of Sections 13-305, 13-313 of the former law.
4IA-2I2. Fees to be Charged. The Department may, by regulation, prescribe annual examination fees, supervision fees and special investigation fees to be paid by all financial institutions subject to such examination and supervision. Such fees shall be set at levels necessary to defray costs and expenses incurred by the State in providing such examination and supervision and may vary by type of fmancial institution. Until such regulations are validly issued by the ~epartment, the examination fees and supervision fees in effect unmediately prior to April 1, 1975, shall remain effective. In addition, the Department may, by regulation, prescribe reasonable fees to defray costs of providing copies of any book, account, report, or other paper filed in its office, or for any certification thereof, or for processing any papers as required by this Code.

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Comment: This Section replaces the detailed fee schedule contained in Ga. Code Ann. Sec. 13-405 and will avoid the procedure of constantly adjusting the fee schedule by legislative Act. Since the fees must be tied to cost of services rendered, they do not constitute taxes. See Gumby v. Yates, 214 Ga. 17,102 SE. 2d 548 (J958). The level of regulatory activity remains under control of the General Assembly since it must appropriate funds for operations under the preceding Section.
41A-213. Enforcement of Payment of Fees. In the event any financial institution shall fail or refuse t~ pay on demand the amount fixed as fees for examinations, the Department may proceed through the Attorney General to collect same by action at law.
Comment: This Section changes the method of collecting unpaid fees from direct execution to action at law. It is the position of this Code that summary seizures or executions are justified under modern constitutional precedents only where emergency conditions exist. Compare Fuentes v. Shavin, 407 U.S 67 (J 972) with Coffin Bros. v. Bennett, 277 U.S 29 (1928/

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CHAPTER 41A-3. OPERATIONS OF DEPARTMENT OF BANKING AND FINANCE.
41A-301. General Scope of Supervision. Except where otherwise specifically provided, the Department shall enforce and administer all laws of this State relating to financial institutions, and shall exercise general supervision over financial institutions in accord with the underlying objectives of this Code.
Comment: The Georgia Banking Code of 1919 recognized the need for a State department empowered to supervise State banks just as the Comptroller of Currency is authorized to supervise national banks. 0. Park Banking Law of Georgia, p. 6 (1920); Ga. Code Ann. Sec. 13-301. Over the years similar supervisory authority has been accorded to this State department with respect to other types of financial institutions; e.g., Ga. Code A nn. Sec. 16-408; Ga. Laws 1972, pp. 1128, 2000 (building and loan associations); Ga. Code Ann. Sec. 25-122 (credit unions); Ga. Code Ann. Sec. 109-503 (Supp. 1972) (trust companies); Ga. Code Ann. Sec. 13-2210-11 {licensees selling checksJ. This proposed Section gathers these scattered existing provisions and states the Department's authority as a general principle applicable to all financial institutions.
41 A-302. Rules and Regulations. The Department shall have the authority to promulgate rules and regulations to effectuate the objectives or provisions of this Code. Without limiting the generality of the foregoing the Department i hereby expre sly authorized to make rules and regulations, consistent with the provisions of this Code, relating to operations of financial institutions to enable fmancial institutions existing under the laws of this State to compete fairly with fmancial institutions existing under the laws of the United States and other states or to protect financial institution jeopardized by new economic or technological conditions. All rules and regulations shall be promulgated in accordance with the Georgia Administrative Procedure Act, including the requirements for hearing as stated in that Act. Regulations issued under this or other provisions of this Code may make appropriate distinctions between types of financial institution, and may be amended, modified or repealed from time to time.
Comment: This Code seeks to establish a comprehensive regulatory framework for all financial intermediaries in this State. It is impossible to foresee, however, all regulatory provisions which may be needed as conditions change. Accordingly, comprehensive rulemaking power is accorded to the Department to enable it to complete the details of the regulatory scheme. Former statutory provisions bestowed rule-making powers; e.g., Ga. Code Ann. Sec. 13-318. It is the purpose of this proposed provision to generalize and expand this power while remaining within established constitutional
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restrictions. The expansion consists in specifically recognizing the Department's power to act by regulation to protect institutions from new competitive and economic conditions.
41A-303. Accounting Procedures. The Department may promulgate regulation concerning the manner in which the books of financial institution will be maintained in order to assist the Department in it examinations and other supervisory activities provided that in all events:
(a) a financial institution shall enter on it books a complete and accurate account of all of it assets whether the assets are in its name or the name of others, at value which shall not, without the prior approval of the Department, exceed the actual cost of the assets to the financial institution; and
(b) a financial institution shall enter on its books a complete and accurate account of its liabilities, its borrowings, the security interests it has granted, and shall maintain additional accounts for losses and expenses.
Comment: The former banking law did not contain a provision on accounting procedures except for a criminal provision prohibiting false entries. Ga. Code Ann. Sec. 13-9910. This proposed provision would set basic requirements as to maintenance of books and allow the Department to impose others by regulations if necessary to facilitate examinations. It is derived with some changes from Pa. Stat. Ann. Tit. 7, Sec. 107.
41A-304. Retention of Records. (a) The Department shall issue regulations classifying records kept by financial institutions and prescribing the period, if any, for which records of each class shall be retained and the form in which such record shall be maintained. Such periods may be permanent or for a lesser term of years. In i suing such regulations, consideration shall be given to the objectives of thi Code and to:
(1) evidentiary effect in actions at law and administrative proceedings in which the production of records of financial institutions might be necessary or desirable'
(2) state and federal statutes of limitation applicable to such action or proceedings'
(3) availability of information contained in the records of the financial institution from other sources'
(4) requirements of electronic systems of transferring fund ; and (5) other pertinent matters so that financial insfitutions will be required to retain records for as short a period as is commensurate with interests of customers, shareholders and the people of this State. (b) The regulation of the Department shall not require financial institutions to maintain originals of checks or items for the payment of money or original computer tapes or original records with respect
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to accounts which have been inactive for a period of twelve successive months. Where a fInancial institution employs computers, its records may consist of legible products of computer operations.
(c) Any copy of a record or of a reproduction of a record stored in an electronic or photographic medium permitted to be kept in lieu of the original, under this provision or the regulations of the Department, including legible products of computer operations, shall be admissible in evidence as though it were the original.
Comment: Subsection (a) of this provision restates, with minor changes, Section 13-2054 of the Banking Code and makes the Section applicable to all financial institutions. Subsection (b) and (c) are new provisions designed to allow some flexibility in retention of records through modern copying systems, and to assure that recording requirements do not interfere with present or future systems of third party payment services.
41A-30S. Department Examinations and Investigations. (a) The Department shall examine all financial institutions at least once each year and may examine or investigate any financial institution more frequently at any time it deems such action necessary or desirable. At least once annually the examination shall consist of a comprehensive review of the accounts, records and affairs of the institution.
(b) In the case of a financial institution which is a member of the Federal Reserve System or whose deposits are insured by a public body of the United States, the Department may accept in lieu of any examination required by this Section examinations or reports thereof made pursuant to the Federal Reserve Act or statutes of the United States authorizing such insurance.
Comment: Subsection (a) restates the substance of Sections 13-401 and 13-402 of the Banking Code, and extends their application to all financial institutions. Subsection (b) allows the Department to relieve an institution of the often onerous burden of double examination in appropriate circumstances. See Wille, State Banking: A Study in Dual Regulation, 31 Law & Contem. Prob. 733, 735 (1966). In recent years the Department has been unable to examine every bank due to personnel restrictions. The few banks that are missed in a given year have been subject to federal examination and are covered by the Department early in the succeeding year. Nothing in this Section would preclude a continuation of this procedure. Both subsections are derived from the Pennsylvania statute, Pa. Stat. Ann. Tit. 7, Sec. 2002 (I 967).
41 A306. Examinations and Investigations on Request. When requested in writing by the board of directors or holders of a majority of the shares of a financial institution, the Department, at a time fIXed by it, shall examine or investigate the affairs and condition of the fmancial institution. However this provision shall not be construed to mean that such institution, directors, or shareholders shall

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have any greater right to require the Department to disclose the results of such examination or investigation than they have in case of any examination or investigation at the insistence of the'Department, nor shall the Department be required under this Section to make more than one examination per year of any financial institution.
Comment: This new provision would allow an institution to call for an examination in order to clear its name. It is derived from the Pennsylvania statute, Pa. Stat. Ann., Tit. 71, Sec. 733-40J(b) (J962).
41A-307. Method of Examination and Investigations; Special Examiners; Subpoenas. (a) Examinations and investigations shall be made by the Commissioner or by qualified examiners or employees empowered in writing by the Department to make examinations or investigations. The Department may, when the occasion requires, appoint special examiners and prescribe their duties and powers.
(b) Officials authorized to make examinations or investigations shall have the power. and authority to administer oaths and to examine under oath any person (including any officer, director, agent, attorney, member or employee of any financial institution) whose testimony may be relevant to the examination or investigation. Such officials shall have the authority and power to compel the appearance and attendance of any such person and the production by such person of pertinent books and papers including books and papers to which the person has access because of his position with a fmancial institution.
(c) If any person shall fail or refuse to appear or to testify or to produce books and papers after being ordered to do so pursuant to this Section, such failure or refusal may be reported in writing to the principal court, and said court shall thereupon cause a subpoena to be issued requiring such person to attend, testify and produce books and papers. For failure to obey such subpoena, the person may be adjudged in contempt and punished accordingly.
Comment: This provision clarifies material contained in Sections 13-402 and 13-403 of the Banking Code. It adds the requirement that examiners be empowered in writing.
41A-308. Reports of Examinations. Any official who shall make an examination pursuant to this Code shall reduce the result thereof to writing in such form as shall be prescribed by the Department. Such report shall contain a full, true and correct statement of the condition of the financial institution in the case of a comprehensive examination or of the matter subject to inquiry in the case of other examinations.
Comment: This provision carries forward Section 13-404 of the Banking Code with minor changes.
41A-309. Reports to Department; Publication; Penalties. (a) Every financial institution shall file with the Department at least twice a year, a complete report of its condition exhibiting in detail the resources and liabilities of the financial institution, and shall also
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submit to the Department at least once each year a complete report of its earnings setting forth in detail all items of income and expense. The Department may also require special reports on the condition of, or any particular facts concerning, any financial institution at any time the Department deems it necessary or advisable.
(b) The form of all reports, the information to be contained in them, and the date on which they shall be due shall be prescribed by the Department. The reports shall be verified by the oath or affirmation of the president, secretary, or other managing officer of
the institution. (c) Every financial institution shall publish annually abstract
summaries of two of its reports of condition designated for this purpose by the Department, and shall file proof of such publication with the Department. Such publication shall be made only once in a newspaper of general circulation in the county of the registered office of the institution.
(d) Any financial institution which fails to prepare or publish any reports, or to furnish any proof of publication, in accordance with the provisions of this Section, shall pay the Department a penalty of one hundred dollars ($100.00) for each day after the time fixed by the Department for filing such report, making such publication, or furnishing such proof of publication, but the Department may in its discretion, relieve any financial institution from the payment of such penalty, in whole or in part, if good cause be shown. If a financial institution fails to pay a penalty from which it has not been relieved, the Department may, through the Attorney General, maintain an action at law to recover it.
Comment: This provision is derived from Pa. Stat. Ann. Tit. 71, Sec. 733-403 (1962), but generally carries forward terms of Sections 13-501 and 13-502 of the Banking Code. A separate requirement of an earnings report is introduced, bu t in light of the restrictions imposed by Section 41A-2101 the requirement of a dividend report is eliminated. The penalty for violations is increased and the method of collecting is changed from direct execution to action at law. See comment to Section 41A-214.
41A-310. Retention of Reports. The reports of examinations and investigations made by the Department and reports made by fmancial institutions shall be preserved by the Department for a period of five years, after which they may be destroyed.
Comment: This provision restates Section 13-319 of the Banking Code.
41A-311. Disclosure of Information. (a) Except as provided in subsection (b), the Commissioner and all other officials and ~mployees of the Department shall not disclose facts and mformation obtained in the course of their duties, including information obtained from examinations, investigations and reports

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as herein required or authorized. (b) The restrictions of subsection (a) shall not apply to
disclosures: (l) within the Department or made to the Governor in the course
of official duties; (2) required by law, including disclosures required by subpoena or
other legal process of a court or administrative agency having competent jurisdiction;
(3) in prosecutions or other court actions to which the Department or the Commissioner is a party;
(4) made to federal bank supervisory agencies or to the Department of Justice (including the Federal Bureau of Investigation) or Treasury of the United States or to the Georgia Bureau oflnvestigation;
(5) made to any officer, attorney or director of the financial institution involved or with the written consent of said financial institution;
(6) made in a summary of condition of financial institutions published by the Department; and
(7) of general economic and similar data considered by the Department in regard to requests for new articles, new branches, changes in the location of facilities or similar matters, made to parties interested in the Department's action in regard thereto.
(c) Disclosures made under subsection (b) shall be made, where appropriate, under safeguards designed to prevent further dissemination of confidential data. Except for disclosures under subsection (b)(2), the Department shall not be required to make authorized disclosures where it deems such disclosures undesirable.
(d) Violation of this Section shall be grounds for removal from office.
Comment: This proposed Section is new. It attempts, through statement of detailed rules, to protect confidentiality of information obtained by the Department without impairing its necessary operations. It does not depart from the basic policy underlying Section 13-409 of the former Code relating to disclosure of information obtained in bank examinations.
41 A-312. Removal of Officers, Directors or Employees. (a) The Department shall have the right to require the immediate suspension from office of any director, officer, or employee of any financial institution who shall be found by it to be dishonest, incompetent, or reckless in the management of the affairs of the financial institution, or to have persistently violated the laws of this State or the lawful orders or regulations of the Department.
(b) Any person suspended under subsection (a) may request his reinstatement in writing delivered to the Department within ten days of his suspension. If such reinstatement is not requested, the

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director, officer, or employee shall be considered permanently
removed. (c) Upon request for reinstatement, the Department shall conduct
a hearing to determine if the reinstatement should be granted or the removal made permanent. The decision of the Department shall be conclusive, except as it may be subject to judicial review under Section 41 A-40 I.
Comment: Section 13-603 of the Banking Code allows the Department to remove summarily bank officials violating subsection (a) requirements. This provision recasts the power in terms of a right to suspend summarily, with the official then having an opportunity for hearing on whether his removal should be permanent.
41A-313. Service Contracts. (a) Where financial services are being performed by a person or corporation for a financial institution, such person or corporation shall be subject to:
(I) examination and investigation by the Department and (2) regulation by the Department in regard to such services to the same extent as if such services were being performed by the financial institution itself. (b) For purposes of this Section 'fmancial services' means clerical, bookkeeping, accounting, transfer, computer, statistical, investment or other functions performed for a financial institution which are normally performed by the fmancial institution for its own benefit. Comment: The 1973 General Assembly gave the Department power to examine those performing bank services for banks. Ga. Laws 1973, pp. 526, 528. This Section would expand this policy to cover all financial institutions, and, in the light of this expansion, would add investment services to the activities involved. The Section would also bestow regulatory power with respect to the services involved.
41A-314. Affiliates. The Department may examine or investigate any affiliate of a financial institution for the purpose of determining the condition of the financial institution to the same extent and in the same manner as it may examine or investigate the financial institution itself.
Comment: This Section would carry forward power to examine
u.s.c. affiliates similar to those possessed by federal supervisors, see 12 Sec. 481, bestowed on the Department in 1973. Ga. Laws 1973, pp. 526,528.
4IA-315. Report of Department. For each calendar year the Department shall compile and publish an annual report in such form and containing such information as it may determine necessary to reasonably summarize its operations. The report shall contain recommendations which the Department may have for changes in the laws governing fmancial institutions.

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Comment: This Section would continue the requirement of an annual Department report as set forth in Section 13.:.315 of the Banking Code. However, it removes the detailed specifications as to contents of the report expressed in Section 13-316 of the present law. Contents of the report would rest with the discretion of the Commissioner. The proposed Section is derived from the new Michigan statute. Mich. Compo L. Ann., Sec. 487.320.
41A-316. Discretion of Department. Whenever in this Code the Department is authorized but not required to take any action, the taking of such action shall be within the discretion of the Commissioner or his duly authorized deputy. The Department shall not be required to grant opportunity for hearing except where such hearing is specifically required by this Code or the Administrative Procedure Act. The Department shall maintain accurate memoranda or transcripts of all hearings conducted by the Department pursuant to this Section.
Comment: This new Section is derived from the New York law. N. Y. Banking Law, Sec. 12. It is designed, toge ther with subseque11l provisions of review by appropriate legal action, to establish clearly the scope of review of actions by the Department.
41A-317. Preservation of Jurisdiction; Withdrawal of Applications and Requests. (a) Failure of the Department to act within any of the time limits established by this Code or regulations issued pursuant thereto shall not deprive the Department of jurisdiction thereafter to act in regard to the matter involved without need for resubmittal of any application, request or similar action.
(b) Any action, application or request requiring Department approval under this Code may be withdrawn by the applicant prior to Department action thereon without prejudice to the applicant's right to resubmit such application at a later date. If such application has been forwarded to the Department through the Secretary of State, the Department shall notify the Secretary of State of any such withdrawal and that the application or request is no longer pending.
Comment: This is a new provision designed to assure that resubmittal is not required if the Department fails to act within designated time limits and to allow for voluntary withdrawal of applications.

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401 CHAPTER 41A-4. PROCEEDING INVOLVING THE
DEPARTMENT OF BANKING AND FINANCE

41A-401. Judicial Review. (a) Any final action of the Department, or refusal of the Department to act, may be subject to judicial review by any person or corporation affected by such action. Such action shall be brought as a special statutory proceeding in the county in which the affected person or corporation resides or is domiciled if within this. State (which in the case of a corporation shall be the county of its registered office if it has such an office) or in Fulton County if the affected person or corporation resides or is domiciled outside of this State within 12 months of the final action or refusal of action by the Department. The review shall be conducted by the court without a jury. The court shall not substitute its judgment for that of the Department but may:
(1) compel Department action unlawfully withheld; (2) hold unlawful and set aside Department action found to be (i) in violation of constitutional or statutory provision (ii) in excess of statutory authority; (iii) made upon unlawful procedure; (iv) arbitrary, capricious, or otherwise in abuse of discretion; provided that any action reviewable under the Administrative Procedure Act, or through the injunction procedure of Section 41A-706, shall be reviewed under that Act or Section, and not under this Section. (b) Appeals from all final orders and judgments entered by the superior court under this Section may be taken to the Court of Appeals or the Supreme Court in the same manner as in other cases. Comment: The former procedure for review of Department decisions is an action in the nature of a mandamus under Ga. Code Ann., Sec. 13-1701. This procedure was an archaic maze. This provision would change the review procedure to a special statutory review procedure similar to that now authorized in the case of contested cases under the Georgia Administrative Procedure Act. Additionally, the APA review is expanded to allow the court to order legally mandatory action. Apart from such cases of mandatory actions. administrative discretion is amply protected. 41A-402. Orders by Department; Enforcement. (a) Whenever it shall appear to the Department that the capital stock of a financial institution has been reduced below the minimum required by law or below the amount required by its articles or that its net assets are less than the amount of its capital stock, the Department may issue a written order directing such corporation to restore the deficiency Within such period as shall be specified in the order. (b) Whenever it shall appear to the Department that any financial institution is not keeping its books and accounts in such manner as to enable the Department, with reasonable facility, to ascertain the

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true condition of the financial institution, the Department may issue a written order, requiring such financial institution, within such period as shall be specified in the order, to open and keep such books
as the Department may, in its discretion, reasonably determine are essential for the purpose of keeping accurate and conv nient records of the transactions and accounts of such financial institution.
(c) Whenever any financial instituticn shall refuse to submit its records and affairs to a legally conducted examination or investigation by the Department, the Department may issue a written order requiring such fmancial institution to permit the Commissioner, or other duly authorized examiner, to make such examination or investigation, within such period as shall be specified in the order.
(d) Whenever it shall appear to the Department that any financial institution has violated its articles or any law of this State or any order or regulation of the Department, or that any financial institution is conducting business in an unsafe or unauthorized manner, the Department may issue a written order requiring the financial institution to cease and desist from such unsafe and unauthorized practices.
(e) Whenever a fmancial institution shall fail to comply with the terms of an order of the Department which has been properly issued under the circumstances, the Department, upon notice of three days to the financial institution, may, through the Attorney General, petition the principal court for an order directing the financial institution to obey the order of the Department within such period as shall be fixed by the court. Upon the filing of such petition, the court shall allow a rule to show cause why it should not be granted. Whenever, after a hearing upon the merits or after failure of the fmancial institution to appear when ordered, it shall appear that the order of the Department was properly issued, the court shall grant the petition of the Department.
Comment: This Section clarifies and expands the power of the Commissioner to issue cease and desist orders contained in Section 13-601 of the Banking Code. The Department is given the express power to order that proper accounting records be maintained. It adds a means of enforcement for these orders less drastic than a quo warranto proceeding now available, Ga. Code Ann., Sec. 13-1601.
41A-403. Forfeiture Proceedings. (a) Articles of financial institutions existing under the laws of this State are subject to forfeiture:
(1) in case of an institution subject to such requirements, for failure to file its annual report with the Secretary of State or its annual license or occupation tax return within the time required by law;
(2) for failure to maintain a registered office in this State as required by the provisions of Code Title 22, relating to corporations,

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or by Section 41 A-603 of this Code; (3) for having procured its articles through fraud; (4) for failure to organize and proceed to do business within a
period of twenty-four months from the date of the certificate of
incorporation. (5) for failure to obey a final court order issued pursuant to
subsection (a) of Section 41 A-402 within the time specified in such
order; or (6) where, because of violation of law or its articles or the unsafe
condition or manner of operation of the financial institution, its continued existence is likely to injure the public or the institution's creditors or depositors.
(b) Where such grounds exist, the Department, through the Attorney General and in the name of the State, is authorized to institute quo warranto or other appropriate proceedings in the principal court to vacate and forfeit the articles of any financial institution.
(c) Where the articles of any financial institution shall be forfeited, the Department shall, if it has not already done so, take charge of the business and assets of such institution and proceed to liquidate it in the same manner as is herein provided in cases where the Department takes possession of a financial institution directly.
(d) No suit to forfeit the articles of any financial institution shall be brought except as provided herein, but any person or corporation shall have the right to submit to the Department any facts which under the law would authorize the forfeiture of the articles of a fmancial institution.
(e) On and after April 1, 1975, the provisions of Code Title 22, relating to forfeiture, shall not be applicable to financial institutions.
Comment: The grounds for forfeiture of articles are not set forth in various provisions of Title 22, and in Chapter 16 of Title 13. The Title 22 provisions are specific, bu t allow the forfeiture to be declared by the Secretary of State, e.g., Ga. Code Ann. Sec. 22-4109. The provisions of Title 13 are vague, but require a quo warranto proceeding by the Department. The Title 13 provisions were not designed to operate in a system where the Department may seek court enforcement of cease and desist orders as under Section 41A-402. Accordingly, this provision attempts to consolidate and restate the grounds and procedures for forfeiture in a uniform manner, and to place the procedures under the control of the Department.
41A-404. Injunction Suits by Department. The Department may bring an appropriate civil action to enforce any provision of this Code or regulations issued hereunder whether by injunction or otherwise in the superior court of this State having jurisdiction over one or more of the defendants.

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404

Comment: Section 13-208 of the Banking Code gives this power to the Department in regard to violations of the b'ranching and holding company laws. This Section would extend the enforcement powers to all parts of this Code.
41A-405. Evidential Value of Results of Examinations; Investigations. (a) The record of any examination or investigation of a financial institution by the Department, or the report by the examiner or employee of the Department who conducted such examination or investigation, or a copy of either, when duly certified by the Department shall, in the absence of any applicable privilege, be admissible and constitute prima facie evidence of facts therein stated, but not of conclusions drawn by the examiner from such facts, in any action at law or equity in which one of the parties is the Department, or any officer or employee thereof, either in his official capacity or otherwise, or the financial institution subjected to examination or investigation.
(b) The Department, with the permission of the court, may edit out of any report to be admitted as evidence pursuant to subsection (a) any portion of the report which is not pertinent to the issue in question before the court or which would tend to unnecessarily affect adversely the public confidence in the financial institution.
Comment: This provision is derived from Pa. Stat. Ann. Tit. 71, Sec. 733-10. The former Georgia Code recognized admissibility of the reports and their prima facie status where a bank is a party, Sec. 13-320, and after the Commissioner is in possession, Sec. 13-410. This provision allows admission as prima faCie evidence whenever the Department or official thereof or the financial institution itself is involved in the suit. This provision would accordingly overrule the holding of Person v. Mashburn, 211 Ga. 477,86 S.E. 2d 319 (]955) barring an investigative report as hearsay where the Superintendent of Banks was sued by unsuccessful applicants for a bank charter. It is doubtful that the ruling was sound on its own ground since written statements of a pubic official in the course of his duties are normally admissible as exceptions to the hearsay rule. Green, The Georgia Law of Evidence Sec. 317 (1957). In any case, the Commissioner should be entitled to show the reports he acts upon and require his challenger to disprove their factual conclusions.
41 A-406. Admissibly of Certificates, Copies. When duly certified by the Department, a copy of any book, paper, or document on file with it or a certificate under its seal shall be prima facie evidence of the facts therein stated in any court of law or equity, or in any investigation or proceeding authorized by law, or for any other purpose, and shall be admissible without any additional authentication, but in any proceeding the court or public body having jurisdiction may, on cause shown, require production of the original.

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Comment: This Section, derived from Pa. Stat. Ann. Tit. 71, Sec. 733-9, is designed to enable the Department to retain originals of documents filed with it. Modifications are made to conform with rules of the Corporation Code. See Ga. Code Ann Sec. 22-106.

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407
41 A-407. Liability for Nonperformance of DlIty. The CommIsSIOner the Deputy Commi sioner, and the examiner shall be liable on their official bonds to any person or corporation injured on account of the failure of the Commissioner, the Deputy Commi ioner or any examiner to faithfully discharge the duties of his office. Suit may be brought thereon in any court of competent juri diction in the name of the State for the benefit of the injured party.
Comment: This Section carries forward Sec. 13-321 of the Banking Code.
41A-408. Costs of Suits By or Against Department. The costs of any uits or proceedings by or against the Department shall be taxed by the judge of the superior court in which uch uit is brought either against the oppo ite party to such suit, or against the financial institution concerning which the suit i orought, or against the Department, in which latter event uch cost hall be paid a other expenses of the Department are paid.
Comment: This Section carries forward Sec. 13-322 of the Banking Code.
41A-409. Department of Law to Advise Department. It shall be the duty of the Department of Law to advise the Department on any question of law ubmitted by it.
Comment: This Section carries forward Sec. 13-323 of the Banking Code.
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501
CHAPTER 41 A-5. EMERGENCIES AND VOLUNTARY LIQUIDATIONS.
41A-501. Emergency Closings. (a) Whenever it appears to the Governor that the welfare of the State or any region thereof, or the welfare and security of any financial institution or the lives of the employees of the financial institution, or the safety of the funds of depositors and property of the shareholders are endangered or placed in jeopardy by any impending or existing emergency or other catastrophe including but not limited to, economic cri e , hurricanes tornadoes, fire hazards or civil disorders, the Governor may proclaim that a financial emergency eXists, and that any financial institution or type of financial institution shall be subject to special regulation as herein provided until the Governor, by a like proclamation, declares the period of such emergency to have terminated. The Governor may declare such financial holidays as, in his judgment any such emergency may require.
(b) During the period of any financial emergency proclaimed by the Governor according to the provisions of subsection (a) of this Section:
(l) the Department, in addition to all the powers conferred upon it by law, shall have the authority to order anyone or more financial institutions to restrict all or any part of their business and to limit or postpone for any length of time the payment of any amount or proportion of the deposits in any of the departments thereof as it may deem nece sary or expedient and may further regulate payments therefrom as to time and amount, as in its opinion the interest of the public or of such financial institutions or the depositor thereof may require.
(2) no liability or loss of any rights of any kind shall be incurred by any financial institution during any emergency period so declared by the Governor, by reason of the delay in the payment of any item, or by the return or transmission of any item or document if such delay is cau ed by orders of the Governor or the Department, interruption of communication facilities, suspension of payments by another financial institution, war, or emergency conditions or other circumstance beyond the control of the financial institution if it exercises such diligence as the circumstance require.
Comment: This provision extends the Governor's power to declare banking emergencies embraced in Ga. Code Ann. Sec. 14-1811 to all financial institutions. The language of the former provision is employed except that economic crises are explicitly recognized as ground for emergency declarations and institutions are explicitly relieved of liability for delays caused by observance of orders of the Governor or the Department.
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502

41A-502. Voluntary Dissolution Prior to Commencement of Business. (a) A financial institution which has not transacted any business as a financial institution other than organizational business may propose to dissolve by the affirmative vote of shareholders entitled to cast at least two-thirds of the votes which all shareholders are entitled to cast on the plan, and by delivering to the Secretary of State articles of dissolution which shall be executed by two duly authorized officers or shareholders under the seal of the financial institution and which shall contain:
(1) the date of incorporation of the financial institution; (2) a statement that it has not transacted any business as a financial institution other than organizational business; (3) a statement that all liabilities of the financial institution have been paid or provided for; (4) a statement that all amounts received on account of capital stock, paid-in capital and expense fund, less amounts disbursed for expenses, have been returned to the persons entitled thereto; and (5) the number of shares entitled to vote on the dissolution and the number of shares voted for and against it, respectively. (b) The articles of dissolu tion shall be delivered in triplicate to the Secretary of State together with the filing fee required by Section 41A-3703. The Secretary of State shall transmit a copy of the articles to the Department. If the Department is satisfied that the fInancial institution has not conducted any business other than organizational business, and if it finds that the articles of dissolution satisfy the requirements of this Code, it shall deliver them with its written approval to the Secretary of State and notify the financial institution of its action. If the Department shall disapprove the articles of dissolution, it shall give written notice to the financial institution of its disapproval and a general statement of the reasons for its decision. The decision of the Department shall be conclusive, except as it may be subject to judicial review under Section 41 A-40 1. Comment: This Section recognizes that dissolu.tion of an institution which did not commence business is normally a simple matter not requiring elaborate provisions for protection of third-party interests. It is derived from Pa. Stat. Ann. Tit. 7, Sec. 1802 and has no counterpart in the former Banking or Trust Company Codes. 41 A-503. Election for Voluntary Dissolution After COmmencement of Business. (a) A financial institution which has commenced business may elect to dissolve voluntarily upon: (1) adoption by the vote required of its shareholders under subsection (b) of this Section of: (i) a plan of dissolution involving both a provision for assumption of its liabilities by another financial institution and a provision for continuance of its business if such assumption of its liabilities is not effected; or

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(ii) any other plan of dissolution providing for full payment of its liabilities; and
(2) approval by the Department of the plan of dissolution after application for approval thereof in a manner prescribed by the Department.
(c) Adoption of the plan by the shareholders of the financial institution shall require the afflnnative vote of the shareholders entitled to cast at least two-thirds of the votes which all shareholders are entitled to cast on the plan and, if any class of shareholders is entitled to vote on the plan as a class, of the holders of at least two-thirds of the outstanding shares of such class.
(c) Upon receipt of an application for approval of a plan of dissolution, the Department shall conduct such investigation as it may deem necessary to detennine whether:
(l) the plan satisfies the requiremen ts of this Code; (2) the plan adequately protects the interests of depositors other creditors and shareholders; and (3) if the plan involves an assumption of liabilities by another fmancial institution, such assumption would be consistent with adequate and sound banking and in the public interest on the basis of factors substantially similar to those set forth in Section 41A-2405 of this Code. Within ninety days after receipt of the application, the Department shall approve or disapprove the application on the basis of its investigation and shall immediately give to the financial institution written notice of its decision, and in the event of disapproval, a general statement of the reasons for its decision. The decision of the Department shall be conclusive, except as it may be subject to judicial review under Section 41 A-40 1. Comment: This provision establishes a method of voluntary liquidation for all financial institutions. It generally carries forward the basic principles recognized in Sections 13-1501 through 13-1512 of the former Code in regard to voluntary bank liquidations. Significant changes introduced by the provision include the following: (1) the institution is given the option of arranging for assumption by another financial institution of liabilities owing to depositors and creditors rather than being restricted to paying all such claims (2) factors to be considered by the Department in passing on the plan of liquidation are clarified; where assumption of liabilities is involved the factors governing mergers of institutions must be considered (3) a ninety-day time limit is set for consideration of plan (4) in case of credit unions. the procedure now set forth in Ga. Code Ann. Sec. 25-130 would be changed to allow approval of plan of liquidation by two-thirds rather than three-fourths of

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sharehoLders. The proposed Section is modeLed after Pa. Stat. Ann. Tit. 7, Sec. 1803.
41 A-S04. Winding Up Voluntary Dissolution Proceedings. (a) The board of directors shall have full power to wind up and settle the affairs of a financial institution in voluntary dissolution proceedings.
(b) Within thirty days after the Department' approval of voluntary liquidation and dissolution, the financial institution shall give notice of its dissolution:
(I) by mail to each depositor and creditor (except those as to whom the liability of the financial institution has been assumed by another financial institution pursuant to the plan) including a statement of the amount shown by the books of the financial institution to be due to such depositor or creditor and a demand that any claim for a greater amount be filed with the financial institution before a specified date at least sixty days after the date of the notice;
(2) by mail to each lessee of a safe deposit box and each customer for whom property is held in safe deposit (except those as to whom the liability of the financial institution has been assumed by another financial institution pursuant to the plan), including a demand that all property held in a safe depo it box or held in afe deposit by the financial institution be withdrawn by the person entitled thereto before a specified date at least sixty days after the date of the notice;
(3) by mail to each person interested in funds held in a fiduciary account or other representative capacity;
(4) by a conspicuous posting at each office of the financial institution; and
(5) by such publication as the Department may prescribe. (c) As soon as feasible after the Department's approval of voluntary liquidation and dissolution, the financial institution shall resign all of its fiduciary appointments and take such action as may be necessary to ettle its fiduciary accounts. (d) Except where liabilities are to be assumed by another financial institution: (I) All claims of depositors and creditors shall be paid promptly after the date specified in the notice given under subsection (b)(l) of this Section, and unearned portions of rentals for safe deposit boxes shall be rebated to the lessee thereof. (2) Safe deposit boxes whose contents have not been removed after the date specified in the notice given under subsection (b)(2) of this Section shall be opened under the supervision of the Department and the contents placed in sealed packages which, together with unclaimed property held by the financial institution in safe deposit, shall be transmitted to the Department to be held by it subject to the provisions of the Disposition of Unclaimed Property Act, provided that the Department while holding such property may take such
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504
actions as it deems appropriate to protect the interests of the owner including reducing such property to cash.
(3) After payment of amounts due to all known depositors and creditors, unclaimed amounts due to depositors and creditors shall be paid through the Department and held by it subject to the provisions of the Disposition of Unclaimed Property Act.
(4) Assets remaining after the performance of all obligations of the financial institution under subsections (c) and (d) of this Section shall be distributed to its shareholders according to their respective rights and preferences. Partial distributions to shareholders may be made prior to such time only if, and to the extent, approved by the Department.
(e) During the course of dissolution proceedings the financial institution shall make such reports as the Department may require and the financial institution shall continue to be subject to the provisions of this Code concerning examinations and investigations of financial institutions.
(f) If at any time during the course of dissolution proceedings the Department finds that the assets of the financial institution will not be sufficient to discharge its obligations, the Department may then or at any time thereafter take possession of the business and property of the financial institution and complete the dissolution in accordance with the provisions of this Code.
Comment: This provision would clarify procedures for winding up affairs of financial institutions after a plan of liqUidation has been approved. The Section is derived from Pa. Stat. Ann. Tit. 7, Sec. 1805. Significant changes in Georgia procedures include allowance of partial distributions with Department approval, and, in case of credit unions, abolishing the requirement of a liquidating committee.
41 A-50S. Articles of Dissolution Where Business Commenced. (a) When all the liabilities of the financial institution have been discharged and all of its remaining assets have been distributed to its shareholders pursuant to Section 4IA-504, or its liabilities have been assumed by another financial institution, the articles of dissolution shall be signed by two duly authorized officers of the financial institu tion under its seal and shall contain:
(I) the name of the financial institution and the post office address of its principal place of business;
(2) a statement that the Department has previously approved a plan to dissolve the institution and the date on which such approval was transmitted to the Secretary of State;
(3) a statement that all liabilities of the financial institution have been discharged and that the remaining assets of the financial institution have been distributed to its shareholders; or that its liabilities have been assumed as provided in this Code; and
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505
(4) a statement that there are no suits pending against the financial institution.
(b) The articles of dissolution shall be delivered to the Secretary of State in triplicate together with the filing fee required by Section 41 A-3703. The Secretary of State shall immediately transmit to the Department one copy of the articles of dissolution and if the Department finds that the articles satisfy the requirements of this Code, it shall deliver its written approval to the Secretary of State.
Comment: This Section is derived from Pa. Stat. Ann. Tit. 7, Sec. 1806. It makes only formal changes in the former law.
41A-S06. Certificate of Dissolution. If all applicable fees charges and taxes required by law have been paid upon the receipt of the Department's approval under Sections 41 A-S02 or 41 A-50S of the articles of dissolution, the Secretary of State shall immediately issue to the financial institution a certificate of dissolution with the approved articles of dissolution attached thereto and shall retain a copy of such certificate, the approval of the Department and the articles, and the existence of the financial institution shall cease.
Comment: This Section is derived from Pa. Stat. Ann. Tit. 7, Sec. 1807. It makes only formal changes in the former law.
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601
CHAPTER 41A-6. NAMES, REGISTERED OFFICES AND ADVERTISING.
41A-601. Permissible Names. (a) The name of a financial institution shall not contain the words 'Government', 'Official', 'Federal', ational', or 'United States' or any abbreviation of any uch words and shall not in the opinion of the Department:
(1) resemble the name of any other financial institution transacting business in the relevant financial market so closely as to cause detriment or disadvantage to the financial institution already transacting business;
(2) contain any word which may lead to the conclusion that the financial institution is authorized to perform any act or conduct any business which it is unauthorized or forbidden to perform by law its articles, or otherwise.
(b) A financial institution may, wi thou t regard to the provisions of subsection (a) of thi Section, u e:
(1) its name in use on April 1, 1975; or (2) a name in use on April 1, 1975 by another financial institution which is adopted by: (i) a financial institution which is the resulting institution in a plan of merger or consolidation to which the institution using the name is a party; or (ii) a financial institution which is incorporated under this Code in pursuance of a plan of segregating the banking business and the trust business of the institution using the name; (3) a name of another financial in titution or resembling that of another financial institution already transacting business with the consent of the latter institution. Comment: The Banking and Trust Company Codes did not contain express restrictions on names of such institutions. Chapter 22-42 of the Corporation Code which is applicable to 'Secretary of State corporations' does prohibit the use of existing names of 'any person, order, lodge, society, or corporation' without the consent of such person or entity, but does not deal with the problem of the confusingly similar name. This problem is complicated in the banking area since the industry has historically used similar names in different banking markets within the State. Accordingly, this Code would empower the Department to determine when a name may improperly resemble names already used in a given finanCial market, or when it deceptively indicates that the institutions perform functions which it cannot perform. Chapter 22-42 of the Code would not be repealed by this Code. 41A-602. Reservation of Name. (a) The exclusive right to use a name permitted to be used by a financial in titution may be reserved by a per on intending to incorporate such an institution or by a
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602

corporation intending to engage in business in this State as' a financial institution or by a financial institution intending to change its name, or by a national bank, a federal credit union or a savings and loan association intending to convert into a financial institution organized under the laws of this State.
(b) Such reservation may be made by filing with the Secretary of State an application in duplicate to reserve a specified name. The Secretary of State shall send a copy of the application to the Department. If the Department concludes that the use of the name complies with the requirements of Section 41 A-60 1 and is otherwise consistent with the purposes and provisions of this Code, it shall give its written assent to the Secretary of State who shall then reserve the name for the exclusive use of the applicant for a period of six months. An extension of this period may be granted by the Department for good cause shown. The Secretary of State shall be notified of such extension by the Department.
(c) The right to the exclusive use of a name reserved pursuant to this Section may be transferred to anyone who would be entitled to reserve such name under this Section except for such prior reservation by filing with the Secretary of State a notice of the transfer which shall be executed by the transferor who reserved the name and which shall set forth the name and address of the transferee. The Secretary of State shall send a copy of such notice to the Department.
(d) The Secretary of State may revoke any reservation at the request of the Department if, after hearing, the Department finds that the application therefor or any transfer was not made in good faith or otherwise not in conformity with law.
(e) On and after April 1, 1975, the provisions of Code Title 22, relating to reservation of names, shall no longer be used to reserve the name of a corporation which is or is proposed as a financial institution.
Comment: This new Section would allow for reservation of names of banks and trust companies in much the same manner as names may be reserved for business corporations under Ga. Code Ann. Sec. 22-302. Under this provision the reservation would require approval of both the Secretary of State and the Department of Banking. Thereafter, ex tension or revocation of the reservation would rest lVith the Department. The initial period of reservation would be six months rather than the four-month period allowed by the corporate code. Those financial institutions now subject to the corporate code 1V0uid hereafter lise the procedure of this Section.
41A-603. Registered Office. (a) Every financial institution shall continuously maintain a registered office. Such office shall be located in a county in this State where the financial institution is

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authorized to conduct its general busine s and in the case of financial institutions subject to the Georgia Bu iness Corporation Code or the Georgia onprofit Corporation Code, such' office shall be the same office as it registered office under those Codes.
(b) ot later than April 1, 1975, every financial insti hltion shall file with the Department a statement designating the place of its registered office by street, po t office address and county. In the event of the failure of an institution to file said statement, the registered office of the institution shall be as designated by the Department.
(c) A financial institution may change (and a new financial institution may e tabli h) the location of its r gistered office by filing a tatement with the Department designating the street, post office address and county of its new registered office, provided that no change in the registered office hall affect actions or proceedings commenced before the time of said change.
Comment: Formerly only financial institutions subject to the co/porate code were required to maintain a registered office. See Ga. Code Ann. Sees. 22-401, 22-2401. Under this provision the required filings with the Secretary of State for such corporations would be continued, but, in addition, all financial institutions must designate a registered office with the Department. In the case of corporations subject to both codes, the same office mllst be designated. The registered office must be in a county where the institution is authorized to conduct its general business.
41 A-604. Prohibited Advertising. (a) 0 person or corporation doing bu iness in this State shall advertise in or through any newspaper, radio, television, letters, circulars, billheads or in any way or through any medium seeking to induce any per on to purchase an instrument which is purported to be insured or guaranteed in a manner comparable to an insured deposit or share account in any financial institu tion au thorized to have such deposits or accoun ts when in fact such instrument does not possess comparable insurance coverage as determined by the Department. Whenever any person firm or corporation doing business in this State shall compare, in any such advertising media, an investment or a return on an investment except an investment or return on an investment in the form of a deposit or share account, to a deposit or share account or a return on a de po it or share account in an authorized financial institution, it shall be clearly stated in such advertising or olicitation that the inve tment is not a deposit insured by a public body of the United States or of thi State.
(b) 0 person or corporation shall use the terms 'savings' 'savings account' 'deposit' or 'withdrawal' or any equivalent thereof in any advertisement a above described in subsection (a) indicating

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604 reference to instrument issued by or to be issued by the person or corporation.
Comment: This provision restates restrictions on misleading adverti ing enacted by the General Assembly in 1973. Ga. Laws 1973, p. 534. It makes only technical changes in the 1973 law. The Department's power to enjoin violations of this provision is not repeated here in view of its power under 41A-404 to enjoin any violations of this Code.
41 A-60S. Additional Protection. othing in this Code shall abrogate or limit the law as to unfair competition or unfair trade practice, nor derogate from the common law or principles of equity or the statutes of this State or of the United States with respect to the right to acquire and protect trade names and trademarks.
Comment: This is a new provision, paralleling Section 22-30](3) of the Business Corporation Code.
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701
CHAPTER 41 A-7. RECEIVERSHIPSGENERAL POWERS AND PROCEDURES.
41 A-701. Taking of Possession by Department; Cumulative Remedies. (a) The Department may in its discretion take pos ession of the business and property of any financial institution whenever such financial institution:
(I) is insolvent or in an unsafe or unsound condition to tran act its business;
(2) has generally suspended payment of its obligations without authority of law;
(3) has violated any court order, statute, rule, or regulation or its articles; and the Department determines that it continued control of its own affairs threatens injury to the public the financial community, or its depositor and other creditors'
(4) requests the Department, by its board of directors, to take possession for the benefit of depositor, other creditors, and shareholders.
(b) The right of the Department to take possession of a financial institution shall be in addition to and cumulative with all other rights, remedies and powers of the Department. The Department may, in it discretion before or after taking posses ion, petition the principal court for appointment of a receiver pursuant to subsection (c) of Section 41A-702 of this Code.
Comment: This Section states conditions under which the Department may take possession of all types of financial institutions. The conditions were stated in more general terms in various Code Sections, e.g., Ga. Code Ann. Sees. 13-801,16-413, 25-122(g) and (h), 25-131. On their face these Sections authorize a receivership for what could be minor matters such as a technical violation of law or the articles. All, however, regard the receivership as the most extreme of remedies. Accordingly, the conditions are expressly restricted under this Section to grave conditions where regulatory seizure is appropriate. Insolvency itself is explicitly recognized as a ground for taking possession. The Banking Code defines the term insolvency but does not expressly relate it to bank receiverships. See Ga. Code Ann. Secs. 13-205, 13-801. Moreover, the present provisions involving receiverships of building and loan associations authorize only an action for the appointment of a receiver, rather than a direct seizure as is the case with banks. Compare Ga. Code Ann. Sec. 16-413 with Sec. 13-801. This Section brings treatment of such associations in line with the treatment of banks. /n the ligh.t of the urgency implicit in these situations and the delicate nature of the information in the h.ands of the Department, it is both permissible and desirable that it be able to act directly and without the strictures of a formal hearing process.
1-41

702
41 A-702. Status as Receiver; Restrictions on Appointment. (a) Upon taking possession of a financial institution, the Department shall automatically become the receiver of said institution with all rights, powers and duties conferred by this Code and, to the extent not in conflict with this Code, all rights powers and duties of a receiver appointed pursuant to Code Title 55, relating to injunctions and receivers.
(b) Except as provided in subsection (c) of this Section, no court shall appoint anyone but the Department as receiver of a financial institution. Whenever any court, at the instance of the Department, a depositor, shareholder or other person entitled by law to institute such proceedings shall determine that a receiver should be appointed, for any reason whatsoever, it shall appoint the Department as such receiver. When thus appointed receiver by a court, the Department shall serve in the same manner and with the same limitations, and it shall have the same rights, powers, and duties, as when it becomes receiver by operation of law and without appointment by any court. No court shall impose upon the Department as receiver any duties or restrictions in conflict with the provisions of this Code.
(c) In any proceeding for the appointment of a receiver of an institution whose deposits or shares are insured by a public body of the United States the court may upon the recommendation of the Department (whether or not the Department is a party) appoint said public body or its administrator as receiver. If said public body or its administrator accepts the appointment it or he shall have all the rights, powers and duties of the Department as receiver under this Code and other applicable law. The public body or its administrator may act as receiver without bond.
Comment: Subsection (aJ of this proposed provision codifies the construction of the 1919 Banking Code reached in cases such as Felton v. McArthur, 173 Ga. 465, 160 S.E. 419 (] 93]). The regulator in possession is automatically a statutory receiver. However, as with other powers under this Code, the Department rather than the Commissioner is designated the receiver. This designation continues the policy of the Governmental Reorganization Act of 1972, see Ga. Code Ann. Sec. 40-3598, see also Sec. 41A-210. It is necessary to provide for receivership powers and procedures in some detail in this Code because the portions of Titles 22 and 55 of the present Code dealing with receivers generally are not comprehensive statutes, nor has a significant body of recent case law developed under it. In part, the paucity of receivership proceedings is attributable to the preemptive effect of the federal bankruptcy statute. Most corporate liquidations and reorganizations occur under that federal statute. Banking institutions and building and loan associations are among the few entities specifically excluded from
1-42

702
the coverage of the Bankruptcy Act. 11 USc. Sec. 22. Accordingly, the most important function of the receivership provisions proposed here is to provide for orderly liquidation or reorganization of financial institutions of these types. However, receiverships might be appropriate under the preceding Section of this proposed Code in circumstances which do not involve financial distress or bankruptcy involvement. Even in the case of financial institutions subject to the Bankruptcy Act, the receivership mechanism provided here would allow the Department or a court to stabilize temporarily the legal position of a financial institution in trouble to allow for study of the most appropriate procedure for its relief For these reasons the procedure proposed is available, at least at the outset, for all financial institutions.
Subsection (b) of this provision bars as a general rule appointment of anyone other than the Department as receiver of a financial institution. However, the subsection would abolish the present doctrine applicable to banks that receiverships can be established only at the initiative of the Department whether directly or by proceeding. Cf. Ga. Code Sec. 13-1604; Fite v. Henson, 157 Ga. 679, 122 SE. 412 (j 923). The change allows those seeking a receivership a day in court, but would not Significantly impair the Department's position.
Subsection (c) recognizes that the deposits or shares of a financial institution may be insured by one of three federal agencies: the Federal Deposit Insurance Corporation (FDIC), in the case of banks, the Federal Savings and Loan Insurance Corporation (FSLIC), in the case of savings and loan associations, and the National Credit Union Administration ( CUA), in the case of credit unions. These institutions frequently have the maximum exposure when an institution is subject to a receivership, and have expertise in dealing with failed institutions. The FDIC and the FSLIC are directly authorized where State law permits to act as receiver of closed insured State institutions within their jurisdiction. 12 USc. Sees. 1729(c)( I) and 1821(eJ. The Administrator of the CUA is similarly empowered. 12 US C. Sec. 1787(b). The Department should have the alternative of stepping aside in favor of these federal agencies in appropriate cases.
41 A-703. Taking of Possession upon Request. 0 financial institution shall make a general assignment of its busine sand property for the benefit of its creditors by the appointment of an assignee or a trustee, or otherwise. In lieu of the power to make an assignment for the benefit of creditors, a financial institution may request the Department to take po session as herein provided. In such cases the Department shall take such possession and become receiver in the same manner and subject to the same provisions of
1-43

703

this Code as when it takes possession of the business and property of a financial insti tu tion wi thou t the request of such financial
in titution. Comment: This Section carries fOl1vard the essential terms of
Section 13-804 of the Banking Code. 41A-704. Posting of Notice of Po session. The Department, upon
taking possession of the business and property of a financial in titution as receiver shall post notice of such fact on the front door of all offices of the institution open to the public for the transaction of business in per on.
Comment: Under Section 13-802 of the Banking Code the posting of a public notice of the receivership is required only where the bank voluntarily places itself in the hands of the Department. This Code would require such a posting on the case of all receiverships.
41A-70S. Certificates of Possession. The Department shall immediately after taking possession file with the principal court a certificate to be known a the certificate of posse ion, setting forth the facts on the basis of which it has taken po se sion. The certificate hall tate the name of the deputy receiver, if any, whom the Department, pur uant to the provision of this Code appoints to take charge of the affairs of the financial institution, together wi th the duties of uch deputy receiver. If the Department does not appoint a deputy receiver prior to the date of the filing of the certificat of poss ssion, or if it appoints a n w deputy receiver or an additional one, or if it adds to the duties of the deputy receiver, it shall file a supplement to the certificate of possession setting forth such acts. The certificate of po ession and any supplement thereto shall be listed in the judgment index in the name of the financial in titution a defendent and of the Department as plaintiff.
Comment: Section 13-805 of the Banking Code provides for filing of a certificate of possession in the county of the principal place of business and in other counties where branches are located. This Section limits the filing to the county of the registered office of the institution since it is the superior court of this county that will supervise the receivership. See Section 41 A-I 02. The con ten ts of the certificate are elaborated. and the use of supplemental certificates is specified.
. 41A-706. Injunction to Restrain Department. Any financial In titu tion of whose business or property the Department has taken po e sion as receiver may at any time within ten days after the Department has become receiver, apply to the principal court for an order requiring the Department to show cause why it should not be enjoined from continuing as receiver. Service may be made in such a~tion by rving the Commissioner per onally or by leaving a copy With the deputy in charge of his office in the Department, or by erving the deputy receiver appointed by the Department to manage

May, 1975

1-44

706

the affair of such financial institution. The court shall, after a hearing upon the merit either di miss the application or order the Department to surrender to the financial institution po ses ion of its business and property, bu t no such injunction shall issue where the Department has been appoin ted receiver by action of a court of competent jurisdiction, or by action of the financial institution itself in accordance with th provisions of this Code. Such application for injunction may in the discretion of the court be heard at any time after service as provided herein with the right to either party by appeal, as in other cases of applications for temporary injunction, to carry said case to the Supreme Court for review.
Comment: This provision carries forward the procedure contained in Section 13-810 of Banking Code.
41 A-707. Supervision by Court. (a) Except as otherwise provided in this Code, the Department, when it has taken possession of a financial institution, shall be responsible to the principal court and not to any other court. All suits against the Department or any official of it involving a financial institution which is or has been in the Department's possession shall be brought in the principal court.
(b) The principal court shall sit as a court of equity. It shall have the power, upon petition of the Department to make and enforce any appropriate order to enable it with the utmost di patch, to discharge its duties in connection with the busines and property of any financial institution of which it has taken possession.
(c) Th court shall grant to any party against whom an order is sought the right to appear, within ten days after notice is given, to show cause why the order should not be made. The court shall have the power, at the end of the ten-day period, ex parte if the other party does appear to show cause or upon the merits, if the party does not appear to issue the aforementioned order.
(d) Whenever this Code empowers the Department as receiver to take any action with the leave of court, the Department shall give the fmancial institu tion and its creditors, depositors and shareholders ten days'- notice of its proposed action before seeking the approval of the court, provided that the court may upon cause shown, shorten the time or dispense with such notice or direct that it be sent to only pecified parties. In determining what if any, notice shall be provided, the court may consider, amont other factors, the necessity for immediate action in the interest of the financial institution as a whole and whether the interests of potential addresses are actually at stake. Where parties object to the proposed action of the Department the court shall allow them an opportunity to present their views appropriate to the nature of the case.
Comment: This new Section is designed to clarify the relationship between the Department and the supervising cOllrt. Subsection (a) recognizes that orderly liquidation or rehabilitation is possible ollly

May, 1975

1-45

707
where the receiver is answerable to one tribunal. This principle is recognized in Section 13-8090f the Banking Code restricting venue of suits against the Commissioner arising out of bank liquidation to the county of the bank's principal place of business. Subsection (b) empowers the supervising court to issue orders needed by the Department. Subsections (c) and (d) establish procedures by which interested parties may be heard on receivership matters. The flexible procedures in regard to notice set forth in subsection (d) would replace mandatory notice to the financial institution alone wIder Section 13-807 of the Banking Code before sales or compromises may be made by the Department. After receivership proceedings are started, notice to the institution itself may be a mere formalit)' of little value to creditors and shareholders who may be the real parties in interest. Subsection (d) allows the court to shape the notice and the opportunity to be heard to the particular case. It is similar in this regard to notices before sales under Section 58 of the Bankruptcy
Act, 12 u.s. C. Sec. 94. The other portions of the provisions are
derived from Pa. Stat. Anll. Tit. 71, Secs. 733-701,733-709. 41 A-708. General Power. (a) The Department in possession shall
be vested with all the rights powers and duties of such financial in titution with the title or the right to possession of all property to which the financial institution has title or the right to possession including debts due and liens and other security therefor; and with the financial institution's rights of action or redemption. This shall be so whether such property and debts due, such liens or other ecurity therefor, or such rights of action or redemption are held in the name of such financial institution, or in the name of some other corporation or person.
(b) The Department shall be the representative of the creditors of the financial institution and shall be entitled a such, to have vacated and set aside for the benefit of the creditor any judgment, execution attachment, sequestration payment, ecurity intere t, assignment, tran fer conveyance, or encumbrance, which could have been avoided by any of the creditors, or by which one creditor i given a preference over another. As used herein the term preference' hall mean all transfers of the assets of a financial institution made or uffered, either after or in contemplation of insolvency. for the purpose of allowing a creditor to gain more than his ratable share of the assets of the in titution as determined by Section 41 A-8l3.
(c) The Department is authorized to collect all moneys due to the financial institution and to do such other acts as are necessary to conserve its assets and business. In exercising its power as receiver. the Department shall give first consideration to the interest of depositor and other creditor a a whole, and hall give con ideration to the interests of shareholder and oth r owner only when
1-46

708
depositors and other creditors have received or are assured of full payment of their claims.
Cd) The Department as receiver shall have the power to execute in its name or in the name of the financial institution any instrument necessary or proper to effectuate its powers or perform its duties as receiver. Any instrument executed in the name of the institution pursuant to the authority hereby given shall be valid and effectual for all purposes as though executed by proper officers of the institution by authority of its board of directors or other governing body.
Comment: Subsections (a) and (b) articulate principles implicit in the former banking statute. The Department as receiver is automatically vested with title to the assets of the institution just as a bankruptcy trustee automatically gains title to the assets of the bankrupt. Moreover, the Department acts as a representative of creditors. However, this Section would modify the definition of a preference contained in Section 13-2046 of the Banking Code. That Section limited preference to transfers within three months of the bank's failure that are made with a view to' avoidance of the specified distribution scheme. This Section would remove the three-month limitation, but requires that the transfer be 'for the purpose of' avoidance of the distribution scheme to constitute a preference.
41A-709. Appointment of Deputy Receivers, Coun el, and Other Assistants. The Department may appoint one or more official agents, to be known as deputy receiver, to assist it in the management, reorganization, consolidation liquidation or di tribution of the assets and affairs of any financial institution of which it has taken possession as receiver. The Department may delegate to each deputy receiver any duty imposed upon, or any right or power granted to, it as receiver. The Department may also employ such other assistants as it deems necessary including such attorneys general or other attorneys as may be appointed by the Attorney General or independently retained by the Department in connection with the receivership. The Department may also retain, to assist it in the management, reorganization, consolidation, liquidation, or distribution any officer or other employee of the financial institution of which it has taken possession.
Comment: This Section reaffirms and clarifies the Department's power to appoint expert assistants. See Ga. Code A nn. Sec. 13-812.
41 A-71 O. Suspension or Continuation of Business. The Department is authorized, upon taking possession of the business and property of a financial institution as receiver, to continue or to suspend the business for such period as it may deem necessary to enable it to determine whether to surrender such pos ession to the financial institution, to authorize a merger or consolidation, to liquidate the affairs of uch financial institution or to take such oth~r action as is authorized by law.
1-47

710
Comment: The Banking Code presupposed that the financial institutions would be closed when the Department takes possession, and allowed them only two alternatives: liquidation or permitting resumption of business. Ga. Code Ann. Secs. 13- 01,13-814. This Code seeks to accord the Department greater flexibility, in particular, by opening the option of reorganization or other rehabilitative actioll. While studying to determine which course is most appropriate, the Department needs to be able to preserve the status quo including ongoing business operations.
41A-711. Determination to Liquidate: Filing of Supplemental Certificates. The Department shall, within six months after the date on which it takes possession of any financial institution as receiver, determine whether or not to liquidate the business and property and di tribute the assets of the financial institution. If it shall determine to liquidate, it shall forthwith file with the principal court a upplement to the certificate of possession, setting forth this determination. The Department shall then proceed to liquidate the affairs of the financial institution with as much dispatch as shall appear to be expedient under the circumstances.
Comment: This new Section formalizing the procedure for determinations to liquidate is derived from Pa. Stat. A nn. Tit. 71, Sec. 733-705.
41 -712. Powers and Dutie Before and After Determination to Liquidate. Except where otherwi e specifically provided, all powers and duties granted by this Code to the Department in possession of the bu ines and property of a financial institution as receiver may be exerci ed by it both before and after its formal determination pursuant to the provisions of this Code, to liquidate the affairs of such financial institu tion.
Comment: This new Section clarifying provisions is derived from Po. Stat. Ann. Tit. 71, Sec. 733-704.
41A-713. Inventory and Appraisement. (a) When the Department has taken possession of the business and property of a financial institution as receiver, it shall forthwith prepare a complete and detailed inventory of the assets of such financial institution. The inventory shall be verified by oath or affirmation of the Commisioner or other person making it.
(b) As soon as expedient after taking possession, the Department hall cause a complete appraisement of the assets of the financial institution to be made, in duplicate, under oath or affirmation, by not less than two nor more than three disinterested appraisers elected by it. Such appraisement shall be included upon the same document or documents as the inventory. The value of the assets hall be computed in such appraisement as of the date on which the Department took possession.
1-48

713
(c) The original and duplicate of the inventory and appraisement shall be filed in the office of the Commissioner. However, if the Commi sioner hall determine in accordance with the provisions of this Code, to liquidate the affairs of the financial institution, he shall immediately, after uch determination to liquidate, file the duplicate inventory and appraisement with the principal court.
Comment: Section 13-814 of the Banking Code requires an inventory of assets to be made by the Commissioner on taking possession of a bank. The explicit requirement of an appraisement is new. The proposed Section is derived from Pa. Stat. Ann. Tit. 71, Sec. 733-707.
41A-714. Notice to Holders of Assets; Power of Court to Order Transfer. (a) Upon becoming receiver, the Department hall forthwith give notice in writing of such fact to all corporations and person having custody or possession of any assets or other property of the financial institution in receivership or any other property with respect to which such in titution has a right to po session or custody for any purpose whatsoever.
(b) The principal court shall have the power except in cases where a jury trial is requested, upon petition of the Department, to order any corporation or per on which has custody or possession of as et or other property to which uch financial in titution shall have the right of cu tody or pos ession for any rea on whatsoever, to tran fer or convey uch property to the Department and to execute and deliver any in trument neces ary to accompli h that purpose.
(c) Any per on aggrieved by an order of the court may request a jury trial to determine the validity of his claim.
Comment: This Section would expressly establish a procedure for turnover orders similar to that existing under the bankruptcy statute. See 2 Collier, Bankruptcy Sec. 23.10. The Banking Code states the Department's right to pos ession and requires notice to those physically in custody of bank assets, but does not articulate a procedure for recovery by the Department when its claim is resisted. See Ga. Code Ann. Sees. 13-803, 13-805.
41A-71S. Power to Borrow Money. The Department may, without leave of court, borrow money from any federal or tate public body or from any person or corporation and grant as ecurity therefor any real or per onal property of the financial institu tion for the purpose of facilitating the liquidation, reorganization or rehabilitation of the financial institution. The repayment of money borrowed under this Section and interest thereon shall be con idered an expen e of admini tration under Sections 41A-808 and 41 A-813.
Comment: The authority of the Department to borrow on the security of assets of the financial institution has been recognized by Georgia courts as implied in its power to conserve assets of the institution. Touch tone v. Gormley, 178 Ga. 130, 172 S.E. 335
1-49

715
(1933). The power is stated here in broad terms which would allow the Department to borrow from public or private sources for any aut!zorized receivership purpose.
41 A-716. Surrender of Burdensome Assets. The Departmen t may, with leave of court, surrender to the financial institution real or personal property which it finds to be burdensome and of no advantage to the depositors or other creditors of the institution. It may likewise, with leave of court, convey title to any holder of a mortgage, security deed, security interest or a lien against property in its possession, where it shall appear that to continue to hold such property is burdensome and of no advantage to the financial institution, its depositors or other creditors.
Comment: This is a new provision designed to allow expeditious surrender of burdensome property. The provision is derived with significant changes from Pa. Stat. Ann. Tit. 77, Sec. 733-715.
41A-717. Compromise of Claims; Extension of Mortgages; Notes. (a) The Department may, with leave of court, compound or compromise any debt, claim, or judgment due to the financial institution in receivership and discontinue any action or other proceeding pending therefor.
(b) The Department may, without leave of court, enter into an agreement in writing upon such terms as shall seem reasonable to it to extend, for a period not to exceed three years, the maturity of any mortgage or security deed obligation in its possession. However, the Department shall not enter into any agreement extending any such obligation which shall have been pledged by the financial institution of which it is in possession as receiver, unless it shall first obtain the written consent of the pledgee of such mortgage to such extension. The Department may likewise renew or extend, for limited perio Is, other notes and drafts held by the financial institution.
Comment: This Section is derived in the main from Pa. Stat. Ann. Tit. 71, Sec. 733-716. The power to compromise claims is similar to that contained in Section 13-807 of the Bank.ing Code. The provision relating to extension of mortgage obligations has no counterpart in the present Code. The last sentence of subsection (b), relating to other notes and drafts, carries forward a power stated in Section 13-808 of the Banking Code.
41 A-718. Paymen t of Mortgages and Liens; Pro tection of an Equity. The Department may, with leave of court, payoff all mortgages, security deeds, ecurity agreement and liens of or upon ~ny real or personal property which belong to the financial Institution. It may without leave of court, purChase, at a judicial sale or at any sale authorized by an order of a court of competent jurisdiction, any real or personal property in order to protect any
I-50

718
equity which such financial institution has in such real or personal property.
Comment: The Department had similar powers under Section 13-803 of the Banking Code. This provision would, however, introduce a requirement of court approval before the Department pays off secured obligations or liens, and would trigger the notice requirements of Section 41 A -607(d).
41A-719. Sales of Real Property. The Department may, with leave of and upon the term and conditions prescribed by the court, sell any real property of the financial institution of which it i in possession as receiver. The order of the court authorizing such sale shall state whether the sale shall be entirely for cash or partly for ca h and partly for evidences of indebtedne s, and whether it shall be public or private. Each such sale of real property hall be confirmed by the court, if all the term and conditions of its order authorizing uch sale have been complied with. If the real property is located in this State, but in a county other than the county of the principal court the Department shall file a certified copy of all orders relating to the property in the office of the clerk of the superior court of the county where the real property is located.
Comment: Section 13-807 of the Banking Code establishes a power to sell real property of the financial institution on court approval. This Section restates this power and clarifies the procedures to be used in executing the sale.
41A-720. Lease of Property. The Department may, without leave of court, enter into lease of real or personal property belonging to the financial institution in receiver hip for a period not to exceed one year. It may, with leave of court, enter into such leases for a period not to exceed ten years, upon the terms and under the condition prescribed by the order of the court.
Comment: This new provision is derived from Pa. Stat. Ann. Tit. 71, Sec. 733-720.
41A-721. Sale or Exchange of Personal Property; Liens and Securities. (a) The Department may, without leave of court, sell on any tock exchange or otherwise, at such times and in such manner as it may deem advisable, listed or unlisted securities which belong to the financial institution in receivership.
(h~ The Department may, without leave of court, exchange listed or unlisted ecuritie for other securities of the corporation i suing the securitie or of a corporation which has merged or consolidated with or has taken over such corporation.
(c) The Department may without leave of court, sell any mortgage or other lien upon real property or any judgment, at uch times and in such manner a it shall deem to be advisable.
(d) Except as otherwise specifically provided by this Code the Department may, without leave of court sell (I) at public sale or
I-51

721
(2) at private ale, for a net consideration not below the amount at which such per onal property has been valued in the appraisement required by this Code, any per onal property which belongs to the financial in titution in receivership, or which uch financial institution has the power to ell. It may, with leave of court, sell such per onal property at private sale upon such terms and under such condition as the court shall prescribe to be commercially reasonable.
Comment: This new Section, derived from Pa. Stat. Ann. Tit. 71, Sec. 733-721, is designed to allow for flexibility in disposing of personal property and liens held by the financial institution. Section 13-807 of the Banking Code simply allows for sales of personal property under order of the court.
41A-722. Deposit of Moneys by Department. All money received by the Department as receiver of a financial institu tion except tho e money nece ary to admini ter the liquidation hall be deposited by it in interest bearing accounts with one or more institution authorized by law to receive depo its and subject to the supervision of either federal or state regulatory authoritie . It shall require of such depository security therefor, in such amount and of such nature as the Department shall deem adequate.
Comment: This Section is similar to Section 13-824 of the Banking Code except that under the proposed Section the Department would not be restricted to demand deposits alone.
41 A-723. Property in Safe Deposit Vault or Held for Safekeeping. (a) The Department may any time after taking possession of a financial in titu tion as receiver, give written notice to anyone claiming or appearing on the books of such financial in titu tion to be the owner or to be entitled to the possession of any personal property left with such financial in titu tion as bailee for safekeeping or depo itory for hire, and to anyone appearing on the books of the financial in titution to be the les ee of any safe vault or safe deposit box, notifying such bailor depositor, or lessee, re pectively to remove all such personal property within the period fixed by the notice, provided that such period shall in no case be less than ixty day after the date of the notice.
(b) At the expiration of such period, if the lessee of a afe, vault, or safe deposit box has not removed the contents thereof, the Department may open such safe vault or safe deposit box in the pre ence of a notary public not an officer or employee of the financial in titution or of the Department. The contents, if any of such safe, vault or safe deposit box hall then be sealed and marked by uch notary with the name and addre s of the Ie see in who e name uch safe, vault, or safe deposit box appeared on the books of the financial institution and with a list and description of the property therein. The Department shall hold such property until it is delivered to the owner, or tho e claiming through him, or i di posed
I-52

723
of under the Disposition of Unclaimed Property Act, and while holding such property may take such action a it deems appropriate to protect the interest of the owner therein, including reducing the property to ca h.
(c) The Department shall follow the same procedure and have the same powers with regard to the property left with the financial institution as bailee for safekeeping or depo itory for lure and not called for within the period specified by the notice.
(d) The contract of bailment, deposit, or lease, if any, shall be considered at an end upon the date designated by the Commissioner for the removal of the property therein. The amount of unearned rent or charges, if any, paid by the bailor, depositor, or les ee, shall become a debt of the financial in titution.
Comment: This new provision, derived from Pa. Stat. Ann. Tit. 71, Sec. 733-724, is designed to establish detailed rules concerning property in safe deposit boxes or held under similar arrangements by institutions subject to receivership proceedings.
41 A-724. Actions and Suits. For the purpo e of executing any of the powers and performing any of the duties respectively conferred or imposed upon it a receiver, by this Code the Department may, in its name as receiver of such financial in tHution, prosecute any action at law or in equity in any court of this State or of any other state, or in any federal court, whether or not such action is pending on behalf of the financial in titution at the time it takes possession. It may likewise imilarly defend any action at law or in equity pending against the financial institution at the time it takes pos e ion. The Department may, in its name as receiver of a corporation, institute and maintain any action which any director officer corporation, or any shareholder or creditor thereof, could have instituted or maintained.
Comment: The powers explicitly recognized here are similar to those contained in Section 13-808 of the Banking Code. Tile provision is derived from Pa. Stat. Ann. Tit. 71, Sec. 733-713(A).
41A-725. Surrender of Possession; Special Liquidations and Reorganizations. (a) The Department may, upon conditions approved by it, surrender po session of a financial in titution in receivership at any time prior to final liquidation and distribution under the following circumstance:
(l) It may surrender posses ion to the financial institution itself when it finds the institution to be in a safe and sound condition to resume its business
(2) It may surrender to the financial institution itself, or to any other corporation or person po session of all or part of the business, property moneys, credit or other assets of the financial in titution in receivership, to permit to be carried into effect a special plan of
I-53

725

liquidation, reorganization, or rehabilitation under the requirements

of this Section.

.

(b) Before the Department may surrender possession of any of

the assets of a financial in titu tion pursuant to a special plan of

liquidation, such plan shall have been approved by the principal

court and a majority of creditors (including depositors) of the

institution, both as to number of creditors and as to the amount of

claims.

(c) Before the Department may surrender possession of any of the

asset of a financial institution pursuant to a special plan of

reorganization or rehabilitation, such plan shall have the same

approval as required under subsection (b) and, in addition, shall be

approved by the affirmative vote of the holders of a majority of

shares entitled to vote thereon.

(d) Whenever the Department shall surrender possession under the

provisions of this Section, it shall forthwith file with the principal

court a supplement to the certificate of possession, setting forth in

detail all the conditions and purposes of such surrender. This

upplement shall be indexed in a manner which will, insofar as

necessary, satisfy the prior record of the certificate of po se sion.

(e) Whenever -the Department shall, under the provisions of this

Section, surrender po session of the entire business and property of a

financial institution in receivership it shall file in the principal court

an account, which shall correspond to any other final account under

thi Code. Such account shall be subject to exceptions by share-

holders or depositors, or other creditors, and to confirmation by the

court, in the same manner as is provided by this Code for any

account filed by the Department a receiver.

Comment: The Banking Code restricts the Department, as receiver

of a financial institution, to two alternatives: permitting resumption

of business under approved conditions or liquidating the enterprise.

Ga. Code Ann. Sees. 13-801, 13-806. This provision will continue to

allow return of the enterprise when it is in a safe and sound

condition to operate. Additionally, it explicitly allows for surrender

of the business incident to a special plan of reorganization,

rehabilitation or liquidation approved by the Department, the court,

creditors, and (except in the case of a liquidation) shareholders. The

provision is derived from Pa. Stat. Ann. Tit. 71, Sec. 733-608.

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801
CHAPTER 4t A-8. CLAIMS, PRIORITIES AND ACCOUNTING IN RECEIVERSHIPS.
4t A-80t. Preservation of Assets. (a) The tatu of all parties shall become fixed on the date the Department takes possession of a financial in titution. TO corporation or person shall thereafter acquire any lien or charge again t the financial institution for 0 long as it remain in receivership, provided that nothing in this Section or elsewhere in this Code hall be con trued to impair any preferred claim arising pursuant to Code Section 109A-4-214.
(b) No execution, attachment or repossession (whether by action or otherwi e) hall i sue or be proceeded with against any assets owned by or in the cu tody or possession of a financial institu tion in receiver hip. In lieu of the right to is ue an attachment or execution against assets of, or lawfully in the possession or custody of, the financial institution, a plaintiff may proceed by giving written notice of his claim to the Department or to the deputy receiver of such financial institution, and he hall thereafter prove hi Claim in the regular manner prescribed by thi Code. If in filing its account, the Department rejects the claimed right to execution or attachment, the court shall adjudicate the matter a in the ca e of other di puted claims.
Comment: This provision seeks to prevent the dismantling of a financial institution in receivership through random attacllhmellts and execution by its creditors. Section 13-803 of the Banking Code expresses similar doctrine. The proviso is added to protect. the priority claim ofan owner of a check under the Uniform Commercial Code who loses his rights against the drawer because of a final payment of the item, but does not himself receive remittance of funds because of a bank closing. The Section is derived, with changes, from Pa. Stat. Ann. Tit. 77, Sec. 713-712(0/
4 I A-802. Exclusivity of Claims Procedure. All claim again t the financial in titution, suit upon which has not been commenced prior to the time the Department took possession, shall be presented in the regular manner provided by this Code for the presentation of claims.
either a depo itor or other creditor of the financial in titution, nor any other claimant, may maintain any action at law or in equity upon such claim, except by regular method provided by this Code for exceptions to the accounting of the Department as receiver. However, an action for the return of specific property, or property with respect to which the plaintiff holds a perfected security interest or security title which could have been recovered by the plaintiff from the financial institution in receivership, may be maintained in the principal court against the Department in its name as receiver of the financial in titution. All actions pending against the financial institution when the Department takes possession shall be
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802
automatically stayed during the receivership, provided that all such action except tho e specified in sub ection (b) of Section 4IA-801, may proceed with prior approval of the principal court.
Comment: The Banking Code clearly contemplates that general creditors must use the claims procedure of the statute to establish their right to recovery. Ga. Code Ann. Secs. 13-803, 817, 820; Nesbit
v. Gormley, 189 Ga. 275, 5 s.E. 2d 47 (J 939). Although the
language of the statute does not place creditors with claims against specific property in a different status, there is some indication that direct recovery of such property is permitted. See Ga. Code Ann. Sec. 13-821. This proposed Section would expressly codify these rules forcing the general creditor to prove his claim but allow the secured creditor all action to reclaim his speCific property interest. The provision is derived from Pa. Stat. Ann. Tit. 71, Sec. 733-713(BJ.
41A-803. Notice to Depositors and Other Creditors. (a) After filing a supplement to the certificate of posse sion setting forth its determination to liquidate the affair of a financial institution in receivership, the Department shall forthwith give notice of such determination to all corporations or person who appear upon the books of the financial institution as depositors or other creditors, or who are otherwi e known to the Department to be or claim to be depo itors or other creditors or who have given notice to the Department claiming a right of execution or attachment against any as ets owned by, or legally in the custody or pos e sion of, the financial institu tion.
(b) The notice to depositor hall state the amount which the books or other records of the financial institution show to be due to uch depositor. It shall also state that unle s such depositor shall, within a specified time, pre ent to the Department his bank tatement or pas book or other evidence of his account, showing a different amount to be due, or unless uch depo itor hall, within a pecified time from the date of uch notice, otherwise prove in the manner provided by this Code that a different amount i due, the amount shown to be due by the book of the financial institution will be conclusively pre umed to be correct unless the court, pur uant to the provision of this Code, grants him an extension of time.
(c) The notice to each creditor, other than a depositor, shall inform uch creditor that he must pre ent hi claim in the manner provided by this Code within a specified time from the date of uch notice, or else be permanently barred from sharing in any di tribution of the assets of the financial institution unles the court, pur uant to the provisions of thi Code, grants him an extension of time.
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803
(d) The Department shall also advertise, in the manner pre cribed by this Code, its determination to liquidate the financial institution. Such advertisement shall state that the Department has filed an inventory and appraisement of the as ets of the in titution and shall designate the superior court with which uch documents have been filed and hall describe the legal consequences to depositors and other creditors of failure to prove tho e claims within the time et in the notice. For purpo es of this advertisement and other notices or advertisements required hereunder, the Department may, to the extent it deem appropriate, describe hareholders of building and loan associations and credit union a uch not by u e of the defined term 'depo itors' used in this Code.
(e) The Department shall specify as the last clay upon which depo itor and other creditor can pro e their claims a date at least thirty days after the date of the ending of uch notice to depo itors and creditor. However, claims based upon deficiencies in, or surcharges with re pect to as ets which such financial in titution held in a fiduciary capacity may be proved at any time within six month after the appointment of a sub tituted fiduciary of the estate of which such assets were a part and the adjudication of the account of such e tate by the competent court.
Comment: Section 13-815 of the Banking Code contemplates a similar notice and advertisement procedure. This Section would, however, allow the Department more flexibility in establishing the last date for presentation of claims. The proposed provision also varies the present law in that depositors who are content with amounts shown to be due Oil bank records need not file a proof of claim. The provision is derived, with changes, from Pa. Stat. Ann. Tit. 71, Sec. 733-1001.
41 A-804. Proof of Claims of Depositors. (a) Any depo itor who di agree with the amount shown by the books or other record of the financial institution to be due to him shall prove his claims by presenting his bank tatement or passbook, or other documentary indication of indebtednes , to the Department within the time and in the manner designated by the Department pursuant to the provi ions of this Code. Any such depositor who shall not have received or hall have lost hi bank statement or pa sbook or other documentary evidence or who shall believe that the amount hown to be due him by uch bank statement or passbook or other documentary evidence is incorrect shall, within the time designated by the Department, present his claim to the Department by whatever method including affidavits, the Department hall de ignate.
(b). Any depositor who hall not pre ent his claim within the designated time and in the manner provided by thi Section shall be bound by the amount appearing to be due to him upon the books or records of the financial in titution, or where the name of such
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804
depositor does not appear at all upon the books or records of the financial institution, or appears on such books or records but with no balance appearing to be due to him by the financial institution shall be permanently barred from sharing in any distribution of the assets of the financial institution. However, the principal court may, upon petition and adequate cause shown, permit any depositor to file his claim at a later date, but no claim shall in any event be allowed to be filed after the last day for the filing of exceptions to the first account of the Department.
(c) This Section shall not, however, be construed to deprive any such depositor of any right of action at law or in equity which he may have against an officer or employee or former officer or employee of the financial institution, or upon the bond of such officer or employee or former officer or employee, for any act committed by such officer or employee which resulted in such depositor's name not appearing upon the books of the financial institution, or appearing upon them but being credited with an amount below that actually due.
(d) The Department shall prescribe the form for the proof of claim of all depositors, and for an affidavit as to the truth of statements therein to be included with the claim. Whenever requested by any such depositor to prepare such proof of claim or to take the affidavit thereto, the Department may do so without any charge to such depositor if the Department concludes that it would be burdensome or difficult for the depositor to prepare the proof.
Comment: This Section would provide detail lacking in the former statute as to the manner in which claim of depositors are to be proved. It departs from current law by eliminating the need for a depositor who is satisfied with amounts shown as due on the institution's records to file a proof of claim. The provision would also completely bar recoveries under late proofs filed after the last day for the filing of exceptions to the Department's first account. This limitation would replace the rule of Section 13-820 of the Banking Code which allows sharing in available assets under late proofs filed within one year of the deadline set in the Department's notice. The duty of preparing the claim when it would be burdensome for the depositor to do so is also new. The Section is derived, with changes, from Pa. Stat. Ann. Tit. 71, Sec. 733-1002.
41 A-80S. Proof of Claims of Creditors. Creditors other than depositors shall not share in any distribution of the assets of the financial institution unless the creditor, or his designated representative, shall, within the time and in the manner specified by the Department pursuant to the provisions of this Code, present to the Department a statement of his claim, together with a copy of any book entries pertaining thereto, any evidence of indebtedness or other instrument received as evidence thereof, the details with
I-58

805
respect to any collateral or agreement of pledge received in connection therewith, and a description of any insurance pertaining thereto. The Department shall prescribe the form for the proof of claim of creditors and for affidavit as to the truth of statement therein to be included with the claim. However, the court may upon petition and adequate cause shown permit any creditor to file hi claim upon a later date, but no claim shall in any event be allowed to be filed after the last day for the filing of exceptions to the first account of the Department.
Comment: This provision establishes the necessity for filing of proofs of claims by creditors other than depositors. It changes the rule contained in Section 13-820 of the Banking Code as to the right of late claims to share in available assets. See the comment to Section 41A-804.
41A-806. Allowance of Claims. For the purpo e of the accounting provided for in this Code, the Department shall allow the claims of depositors for the amounts shown to be due to them upon the books or other records of the financial institution (unle it determine such books or records to be in error), or for uch other amounts as they shall, within the time and in the manner provided by this Code prove to the satisfaction of the Department are due to them. It shall likewi e allow the claims of all other creditors when presented within the time and in the manner provided by thi Code, if it hall be satisfied that the amounts claimed are rightfully due. In allowing claims, the Department may change their rank to that which it determine to be proper and may reduce them by exercise of the financial institution' right of set-off against the claimant. It shall reject all other claims of depo itors and other creditors.
Comment: This provision expressly provides for allowance of acceptable claims - a process implicit in the Banking Code. The Department had similar express powers to change the rank of or reject claims. See Ga. Code Ann. Sec. 13-817.
41 A-807. Advance Payments of Dividends to Depositors. (a) After filing a supplement to the certificate of posse ion setting forth its determination to liquidate the affairs of the financial institution, the Department may, without leave of court and without filing an account, make an advance payment of a dividend to all depositors the amounts of who e claims, as they appear upon the book or other record of the financial in titution, are undisputed. The dividend shall be calculated as if the claims of all other depo itor , as they appear upon the book or other records of the financial institution, and the claims of all creditors or other corporations or per on who assert priority over, or parity with, depositors in the order of distribution of the a set, were valid and uncontested.
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807
(b) However, the Department shall not make such an advance payment of a dividend to any depositor until it shall have set aside an amount sufficient to pay in full the claims of all creditors or other corporation or persons a erting or entitled to priority over depo itors in the order of di tribution, and to pay the proportionate dividend on the amounts claimed by the other depositors and by any creditor or other corporations or persons who are entitled to or who claim parity with depo itors in the order of distribution provided for by law. The Department shall likewise set aside, before making such advance payment, such amount as it shall deem necessary for the expenses of administration of the receiver hip.
Comment: This Section would allow the Department to make a partial distribution to depositors as soon as possible in the liquidation process. Section 13-823 of the Banking Code gives the Department a similar power. The Section differs from Section 13-823 in that the distribution is in the discretion of the Department rather than, as is now the case, mandatory whenel er funds are available sufficient to pay ten percent (10%) of the claims entitled to share in the distributioll. Moreover, this proposed provision is confined to undisputed claims of depositors shown on the records of the institution while Section 13- 23 is available to depositor and other creditors generally. To make partial distribution to those /lot covered by this Section, the Department would be required to first file a partial account under Section 41A-809.
41 A-808. Expenses of Administration. Any reasonable expenditure made by the Department as receiver of a financial institution, including any expense incurred in the management, reorganization con olidation liquidation or distribution of the assets and affair of the financial in titution any payment of a loan or intere t thereon under Section 41 A-715 and any compensation paid to the deputy receiver attorneys or any other person employed to a i t the Department in such management, reorganization consolidation, liquidation or distribution shall be paid out of the a set of the financial in titution provided it is included in any partial or final account filed by the Department, pursuant to the provi ion of this Code, and is approved by the principal court in which uch account i filed. Where such expenses are incurred, or such compensation is paid, for the benefit of the e tate of more than one financial in titution in the possession of the Department as receiver an equitable portion of such expen e or compensation hall be paid out of the as et of each financial institution on who e behalf such expenditure were incurred or paid.
Comment: This provision would carry forward the essential terms of Section 13-825 of the Banking Code.
41A-809. Partial or Final Account; Objection. (a) At any time after the expiration of the period fixed by the Department for the
1-60

809
presentation of claims, it may fIle a partial account of its administration of the business and property of the financial institution, duly verified under oath or affirmation, with the principal court. If the Department does not file its first account within one year after it takes possession of a financial institution, any depositor, other creditor or shareholder of such financial institution may petition the court to order the Department to file an account. The court may, in its discretion, grant or refuse the petition. Whenever it become economically advisable to wind up fmally the affairs of a fmancial institution in liquidation, the Department shall file with the principal court its final account, duly verified under oath or affirmation. The clerk of the principal court shall not be under any duty to recopy or otherwi e record any account, and shall make no charge except the regular fee for filing such or similar papers.
(b) The account shall present the Department' administration of the estate, including a statement of all receipts or expenditures a list of all claims which have been allowed and a separate list of claims which have been objected to or are disputed, howing as to all depositors and other creditor, their names and addre ses, the amounts due or claimed to be due to them and any priorities in the order of distribution granted to or claimed by them. A final account need not present matter previously settled incident to partial account.
(c) The Department hall forthwith given written or printed notice of such filing of an account to all corporations or persons whom it knows to be, or to claim to be, depositors or other creditors or who have given to it notice claiming a right of attachment or execution. Such notice shall also state that unless an exception to the account or to any item therein is filed with the principal court within thirty days from the date of the filing thereof, it will be confirmed absolutely. The Department shall also advertise uch notice in a newspaper or newspapers as provided in this Code tating the date upon which it has fIled its partial or final account and that all exceptions to the account must be filed within thirty days from the date of the fIling of such account. The Department shall forthwith file with the court, under oath or affirmation, a statement that it has, in the manner provided by this Code, sent both the notice of its determination to liquidate and the notice of its filing of an account to all corporations or persons entitled thereto. The Department shall also file the proofs of publication of the advertisements required by this Section.
(d) Any corporation or person who is or who claims to be a depo itor, other creditor or shareholder of a financial institution or who has given to the Department notice of his claim to the right of execution or attachment, or who asserts any other type of claim
1-61

809
against a financial institution may, within thirty days after the filing of an account by the Department, file in the principal court specific exceptions in writing, under oath or affirmation, to such account or to any item therein. Notice of any exception to an individual item in an account shall forthwith be personally served upon or sent by registered mail to the corporation or person whose claim is thus objected to, or his coun el, and also the Department or the deputy receiver managing the affairs of the particular financial institu tion, or the counsel of either. Affidavit of the serving or sending of such notice shall forthwith be filed with the court.
(e) Whenever an exception is filed to any expenditure made by the Department a an expense of administration, the Department hall keep an accurate record of the salarie and other expenses properly incurred by it in the contesting of such exception. If the exception is overruled and the expenditure is sustained, the court may, in its discretion, assess such expenses and salaries, together with the regular costs provided by law, upon the depositor other creditor or shareholder filing uch exception.
Comment: The Banking Code does not expressly pro! ide for a formal account by the Department as receiver. Instead, it contemplates ad IIOC adjudications of disputed matters by suit agaillSt the failed bank where the Department rejects a claim or by hearings before the court where objection is made by other parties. Ga. Code All1/. Sees. 13-817, 13-818. This provision allows partial or final accoullts to be filed by the Department, tlnls presenting its administration of the liquidation process as a whole to the supervising court and allowing all challenges to its actions to be resolved incident to the accounting procedure. The Section is derived from Pa. Stat. Alln. Tit. 71, Sees. 73-1007 and 1008.
41A-810. Adjudication of Rejected Claims and Exceptions to ccount. (a) Jf any claim has been rejected by the Department or any exception has been filed to the account or to any item thereof, the principal court shall, as soon as expedient after the expiration of the period for the filing of exceptions to the account, fix a date for hearing in court arguments on all rejected claims and all exceptions to the account or to any item thereof. The Department shall give notice of such hearing to all corporation or persons whose claims have been rejected by the Department or objected to in the manner provided by this Code. It shall likewise give notice to all corporations or per on who have filed exceptions to the account or to any item thereof. Such notice shall et forth, insofar as pas ible, the reasons ~or the rejection of the claim or the nature of the exception to the Item of the account and shall state that all partie who e claims are rejected or objected to must appear in the principal court upon the date fixed by the court to prove their claim, or they will be bound by the ex parte deci ion of the court.
1-62

810
(b) The principal court in which the account is filed shall itself hear arguments upon any rejected claim or upon any exception to an account, or to any item thereof upon the date fixed by it for this purpose. The court shall itself decide, withou t delay, all matters in controversy. If any party does not appear in court on the day fixed the court shall conduct the hearing ex parte and shall render its decision upon the merits as they appear after such hearing.
Comment: This provision derived from Pa. Stat. Ann. Tit. 71, Sec. 73-1009, establishes a procedure for hearings on disputes arising incident to account.
41A-811. Confirmation of Account; Distribution of Dividends. (a) If the Department has approved all depositors' claim, as proved by them pursuant to the provi ions of this Code or if not proved, as they appear upon the books or other records of the financial institution, and if no exception has been filed to an account or to any item thereof within thirty day after the filing of such account by the Department, the principal court hall confirm the account absolutely. If any funds are available for distribution, the Department hall then declare and payout of such fund a partial or a final dividend, according to the prioritie establi hed by law. If the Department has rejected any uch depo it or claim, or if any such exception ha been filed, the court shall confirm the account a to all other matters and claim. The Department may then declare and pay out of the funds available for distribution, if any, a dividend, according to the priorities establi hed by law. The dividend hall be calculated as if all depo it and other claims were valid and approved. The Department, before paying any such dividend, shall et apart funds or a ets sufficient to pay required distribution on any claim still being asserted which has been rejected or reduced in priority, by the Department, or to which an exception ha been filed, if the amount and the priority claimed were ustained by the court. If any such claim shall be determined by the court to be valid the Department shall pay to the corporation or p r on entitled thereto the dividend which ha been set apart in the manner provided by thi Section. If any such claim shall be determined by the court to be invalid, the dividend which has been set apart in the manner provided by this Section hall be distributed in the order of the priorities established by law, to those who e claims have been approved by the court; provided, however, that any final determination as to disputed claims may be appealed as provided by law and payment may be withheld pending the result of the appeal.
(b) The confirmation of any account after the adjudication of all claims therein which have been rejected or reduced in priority by the Department, or to which exception have been filed, and of all other exceptions to such account, hall be conclu ive as to all matters therein. Except as otherwise provided in thi Code, no claim of any
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811
depo itor or other creditor, shall be valid if not listed and approved in th fir t account which has been filed. The confirmation of the final account and distribution thereunder shall discharge the Department, the Commissioner, the deputy receiver, any other employee and the legal co un el, a well as the urety for any of them, from all further civil liability for any act done in an official capacity with re pect to the receivership.
(c) Upon confirmation of the final account the Department may impound the balance of the a et, including real property remaining in it hand and shall not be obligated to ell such as et or actively to collect on the impounded assets. With regard to said as et including real estate and including after-discovered as ets, it shall, however retain all of its powers to receive payment for them or, with leave of court, to adjust or compromise them. After its final accounting and discharge, the Department shall have power to make further distribution to the creditors, depositor and hareholders when, in its opinion, ufficient fund are realized to ju tify uch di tribution after deducting reasonable costs for collection, pre ervation and distribution. If the Department is of the opinion that the funds collected or probably to be collected will be insufficient to make a di tribution practicable and that all intere ted claimant will not in the future have their claims satisfied, it hall after deducting rea onable co t for collection and pre ervation, hold the remainder of uch property ubject to the provisions of the Disposition of Unclaimed Property Act.
Comment: This Section introduces tile account confirmation procedure by which the Department may be finally acquitted of its respOIl ibilities as receiver. The final accounting may occur even though unproductive and unmarketable assets remain in the hands of the Department. The Section also provides for payment of dividends in a lnanner not materially different from that of Section 13-823 of the former Code except that the payments are made after confirmatiOIl of all account, and the Department has no duty to pay partial diVidends when funds adequate to pay ten percent (10%) of claims are available. The provision is derived, with changes, from Pa. Stat. Alln. Tit. 71, Sees. 733-721.1 and 1010.
4t A-8t2. Unclaimed Dividends. Whenever a dividend remain unclaimed ix month after it has been declared, and the Department i unable to locate the depo itor or other claimant to whom aid dividend was payable, the dividend shall become a part of the general a et of the financial institution and be distributed as other assets.
Comment: This provision carries forward the ntle as to unclaimed dil idends stated in Sectioll 13-826 of the Banking Code.
4t A-813. Distribution of Assets upon Insolvency; Secured Claims and Liens. (a) In the di tribution of the asset of a financial in titution which i liquidated or dis olved whether under this ode
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813
or by any other method, the order of payment of liabilities of the financial institution in the event that its assets are insufficient to pay in full all its liabilities for which claims are duly made shall be:
(1) first, the payment of co ts and expen e of administration of the liquidation or dissolution;
(2) second, the payment of debts due depositors (3) third the payment of all State taxe . (4) fourth,judgments (5) fifth, contractual obligations (6) sixth, unliquidated claims for damages and the like; (7) eventh, capital securities. (b) othing in thi Code hall impair the validity or the priority otherwi e accorded by law to any ecurity intere t, ecurity title, preferred claim ari ing under Section I09A-4-214 of the Code of Georgia or any lien arising by force of law, provided any of the foregoing may be delayed in payment by the principal court until costs of administration including loans or interest payments under Section 41A-7l5 or the costs of selling or otherwi e dispo ing of as ets under thi Code have been met in any ca e where the principal court determines that the claimant of the security interest security title preferred claim or lien has expressly or impliedly con ented to the administrative activitie involved or ha benefited from uch activities. Comment: This provision would retain the basic order of distribution contemplated for banks under Ga. Code Ann. Secs. 13-821 and 109A-4-214. The distinctive feature of this scheme allows depositors to claim before other creditors including governmental tax claimants. 1t is recognized that where deposits are insured the chief beneficiary of this priority will be the insurer under its subrogation rights. Nevertheless, tlie priority is retained because not all financial institutions are required to have insurance and because federal deposit insurers which serve a cn/cial role in maintaining the stability of the system of financial intermediaries are entitled to have their exposure reduced in this manner. This provision would change existing Georgia law by according this same priority to shareholders of credit unions and sal1ings and loan associations to the ex tent that they are properly regarded as depositors. See Section 41 A-1 05(J) of this Code. Limited Georgia precedents currently treat these parties as general creditors rather than shareholders. See Granade v. Augusta Fire Dept. Credit Union, 118 Ga. App. 157, 162 S.E. 2d870 U968J. Where funds paid into credit unions alld savings alld loan associations are subject to withdrawal, they are functionally equivalent to deposits in other financial institutions and should be treated as such in law. Subsection (b) introduces a new procedure similar to that available in bankruptcy proceedings whereby secured and preferred claims and
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813
lien may be delayed in payment until certain administrative expenses are met.
41 -814. Subrogation of Insurer. Where the deposits or shares of a financial in titution are in ured by a federal public body or otherwi e, the claims of depositors shall be subrogated in favor of aid insurer to the extent that it pays or makes available for payment claim of such depositors against the financial institution provided that the rights of such depositors to receive dividend or other di tribution upon that portion of their claims not made available for payment hall not be affected by such subrogation.
Comment: This provision establishes the insurer's right of subroga-
/ioll. The FDIC is not permitted under 12 u.s. C. Sec. 182](g) to
make payments to depositors of State banks unless it has the right of ubrogation by State statute or the equivalent thereof by assignment of the depositors' rights.
41 A-8IS. Liquidation of Excess Assets by Trustees. If any unliquidated asset remain in the Department' possession after the filing and confirmation of its final account the payment in full of the claim of all depo itors creditors, an I other claimants which have been approved by the court, and the di tribution to shareholders of any cash balance remaining thereafter, it shall call a meeting of all the shareholders of the financial in titution by giving them written notice of at least thirty day before the day fixed for the meeting. At such meeting, the shareholder shall elect by ballot a tru tee or tru tees who shall complete the liquidation. A majority of the hares present in person or by proxy shall be necessary to elect uch trustee or trustee. The Department shall file a certified copy of the minutes of said meeting with the principal court. If no tru tee is elected in thi manner on the day designated the Department hall petition the principal court for the appointment of a trustee or tru tees. The trustee or trustee who are thu elected by the shareholders or appointed by the court shall give bond to the State in uch amount with uch urety and under such condition as the court may direct. The Department shall then tran fer to uch trustee or tru tees all the a et of the financial in titution which are still in its posses ion. After such transfer by the Department to a trustee or tru tees for the benefit of the shareholders, the financial institution shall have no corporate power or privileges whatsoever except that its shareholder may elect a succe or trustee or tru tees upon death, removal or inability of first tru tee or trustees to act. The trustee or tru tees shall not ucceed to any of their powers or privileges except SUch as shall be neces ary to the liquidation of the remaining assets which have been transferred to such tru tee or tru tee by the Department.
Comment: Section 41A-811 provides a means of terminating the receivership when assets are inadequate to pay all depositors and
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815 creditors. This prOVlSLOn provides a method of termination where assets are sufficient. It is similar to Sections 13-827 and 13-829 of the Banking Code except that this prol ision removes the possibility of t!le Department serving as trustee or agent of the sharehoLders.
41 A-816. Destruction of Records. The Department is au thorized to de troy all records of the financial institu tion of which it was in possession as receiver, and all records of such receivership, at the expiration of six years from the date of the absolu te confirmation of its final account, except where any provision of this Code expre sly provides a different method for the dispo ition of the record or a longer period for their preservation.
Comment: Thi new provision is derived from Pa. Stat. Ann. Tit. 73, Sec. 733-1014.
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901
CHAPTER 41A-9. RECEIVERSHIP PROCEDURES I VOLVI G TRUST OR POOLED ASSETS.
41 A-901. Definitions and Applicability. (a) As used in thi Chapter, the term
( I) 'Tru t as ets' mean all assets held by financial in ti tu tion as tru tee admini trator executor, guardian or in a similar fiduciary capacity but shall not include a et held by the commercial department of the financial in titution or 'pooled assets' a defined herein.
(_) 'Pooled assets' mean mortgages ecuritie or other assets comprising any mortgage or securities pool operated by uch financial institution (whether said a ets are held in the name of the in titution or a nominee therefor) or with respect to which undivided intere ts have been created, regardles of whether or not the financial in titution is technically a trustee and regardle s of whether or not certificates of participation have been issued with re pect thereto.
(b) In the event of conflict, the provisions of this Chapter and not other Chapters of this Code shall control a to the trust assets and the pooled a ets-of any financial in titu tion in receivership.
Comment: The provisions of this Chapter are designed to allow for orderLy administration of trust or pooLed assets heLd by a financiaL institution subject to a receivership. They represent a conden ed and simplified version of Pa. Stat. Ann. Tit. 71, Sees. 733-801 through 733-906. The former Georgia Code does not have comparable Sections.
41 -902. Status in Relation to Trust and Pooled As ets. (a) Upon taking po e sion of a financial in titution the Department hallilold tru t and pooled a ets separate from the as ets of the financial in titution it elf. Trust and pooled a et shall not be available for Ji tribution to depositors other creditor or hareholder .
(0) The Department as receiver hall have all right, power and dutie of the financial in titution in regard to trust and pooled a et induding title to the assets and the right to administer them.
Comment: This Section would overturn the ruling in City Bank & Tru t Co. v. Graf, 175 Ga. 340, 165 SE. 238 (J932) that the state receiver does not automatically succeed to the financial institution's position as fiduciary. The Department has under this Code six mollths in which to determine whether to Liquidate an institution. It may continue in posse sion for longer periods seeking to reorganize ~r otherwise rehabilitate the institution. In Light of the time intervals Involved it is essential that the Department be automatically and fuLL)' empowered to protect the interests of benefiCiaries under trust or pooLed asset arrangements. othing herein precludes such beneficiaries from duLy designating or seeking appointment of a substituted trustee pursuant to the trust instrument (Jr applicable law.
1-68

903
41 A-903. Jurisdiction of Court. The principal court shall have exclusive jurisdiction over all matters concerning tru t and pooled assets during the period that such assets are held by the Department as receiver.
Comment: 1/1 the light of the need for receivership matters to be centralized in one supervising court, the principal court would have jurisdiction over trust and pooled assets while they are in the possession of the Department. Only that court is in a position to provide complete relief See Ray v. Beneventi, 229 Ga. 209 190 s.E. 2d 314 (J972).
41A-904. Substituted Fiduciary or Manager. (a) Upon determining to liquidate a financial institution or if it otherwise deems it advi aole, the Department hall:
( I) with leave of court transfer all of the tru t asset or all of the pooled a sets or all of both types of a et to another financial institution which shall a sume the responsibilities of the institution in receivership in regard to such assets and act as sub tituted trustee or manager; or
(2) give written notice, in ofar as the giving of such notice is practicable to all parties intere ted in trust or pooled asset that they must within thirty day after the giving of notice apply for the appointment of a uo tituted tru tee or manager to take over the trust or pooled a et. In the event that no such application is made with respect to particular trust a sets or pooled a et the Department shall itself apply for appointment of a substituted trustee or manager. Upon application by an interested party or parties or by the Department, the court hall appoint as successor trustee or manager that per on or corporation best able, in its judgment, to protect the intere t of tho e interested in particular tru t or pooled assets. The succes or trustee or managers hall have all rights powers and dutie of the financial institution in regard to the trust or pooled a ets committed to them except as these relationships may be modified by the court in accordance with law.
(b) othing in this Section or Section 903 hall be con trued to impair any right of the grantor or beneficiaries of tru t or pooled asset under applicable instruments or otherwise to ecure or provide for the appointment of a substituted trustee or manager.
Comment: This new provision would allow the Department to remove the trust or pooled assets from the receivership by arranging for appointment of a substituted trustee or manager.
41 A-90S. Transfers Without Accounting. In the event that the Department and a ubstituted tru tee or manager agree as to the identity and amount of the trust or pooled a sets to be paid to the substituted tru tee or manager and the substituted trustee or manager waives in writing the right to an accounting, then the Department may transfer the tru t or pooled assets to the ubstituted
1-69

905
tru tee or manager and will thereupon (together with the financial in titution) be di charged from all liability or re ponsibility in connection with the trust or pooled asset.
Comment: This provision allows for a simplified transfer of trust or pooled assets where there are no disputes concerning them.
41 A-906. Transfers With Accounting; Deficiencies. Except a authorized by the preceding Section the Department shall upon appointment of a substituted trustee or manager file a full account with the appropriate court etting forth its administration of the trust or pooled a ets and shall upon the order of the court, tran fer the tru t or pooled a ets to the ub tituted trustee or manager. Whenever the court shall determine that there is a deficiency in regard to the trust or pooled as ets, or that the financial institu tion is liable for a subcharge in connection therewith the amount thereof hall constitute a claim against the financial institution. Such claim hall be filed in the manner of other claims with the principal court within thirty days of a final adjudication with respect to the amount thereof.
Comment: This provision sets up the mechanism by which transfers of trust and pooled assets may be made with an accounting.
1-70

Re erved
CHAPTER 41A-IO. RESERVED. Comment: This Chapter is reserved for future enactments pertaining to the Banking Department or to financial instilL! liolls generally which would be appropriately codified in a separate Chapter.
1-71/1-72

=

-

B KS A D TRUST COMPANIES B KS (Plea e note: the double-starred items refer also to trust companies)

SECTIO

cceptances Obligations with re pect to, exempted from loan limit of one person or
corporation

.1305 .1306

ccounlants: audit by .................................................2208

cquisi lions Of capital tock

1309,

1202

Of investment ecurities

1308,

1202

Of property generally. See Property

To avoid 10 ........................................................ .1204

ctions at law Action against director
For declaration of unauthorized dividend For failure to make dissent known For premature distribution of a ets during voluntary liquidation For sale or disposition of assets not ubject to preemptive rights Action again t director and officer For acquisition of a et through neglect, etc For appropriation of bank' bu ine opportunitie For neglect of duty For unlawful conveyance, assignmen t, or transfer of corporate as ets Actions against shareholders Directors' right to contribution when hareholders knowingly receive
unlawful dividend or distribution Liability limited to payment for hare Actions by banks, their succe sors and a ignees, or by receivers Against director and officers
To enforce liability to depositors and other creditors for premature busines
To enforce payment for shares Actions by customers for recovery of money received for transmis ion Actions by shareholders
Apply to superior court to order substitute meeting of shareholder Derivative actions
Again t directors and officers
Compromising of
Generally Restrictions on To enforce liability to depo itors and other creditors for premature
business To enforce payment for shares For recovery of dividends and distributions Obtain show cause order from uperior court permitting in pection of books and records Relating to sale and disposition of shares not ubject to preemptive right

2215 2215 2215 2002
2214 2214 2214 2214
2015 2001
2214, 2215
.1809 2001 1607
2003
2214, 2215 2001, 2012 2011 2012
.1809 2001 2101
2010
2002

Banks-Continued

SECTIO

Right of di enting shareholders.

To dissent from certain ales or dispositions of bank's as ets

2603

To di ent from mergers or consolidation of Sta te banks

2408,

2402

To dissent from National to State conver ions, mergers, or consolidations

(applies to shareholders of the ational bank)

2501

Adverse claims to deposit

, 1606

Adverse claims to property held in safe depo it

.1606

Certificate of amendment of article does not affect exi ting action at

law

2307

Claims of beneficial intere t in fiduciary depo its

1605,

1606

Judicial review of decision of Department approving or di approving:

Amendment of articles

2305

Articles of incorpora tion

.1805

Merger or consolidation of State banks

2405

ational to State conver ions, mergers, or consolidations

2504

Liability of bank

For deposits of decea ed depo itor

1610

For depo its of joint depo itors

.1603

Merger or consolidation of State banks doe not affect actions at law or

liabilities of director, shareholders, or officers

2407

ationalto State conver ions, mergers, or consolidations do not affect

actions at law or liabilities of director, hareholder ,or officers of

the ational bank

2506

Power of bank to:

Indemnify and reimburse litigation expen e of and maintain liability

insurance for directors, officers, and employee .......................... .1201

Secure bond and to give ame in court proceedings

.1202

Sue and be sued, complain and defend in it corporate name

1201

Procedure on dea th of sa fe deposi tor

.1609

Advertisement Of articles of amendment Proof of publication required
Of articles of incorporation Proof of publication required
See also Publication

2304 2303, 2306 .1803 1806

Affidavit Of agent or correspondent concerning money delivered for lIan mi ion Of agent or publisher as proof of publication of article of incorporation Of incorporators verifying expenses of incorporation
Of officers and directors prior to is uance of permit to begin business Of pre ident or ecretary certifying full payment before delivery of share
certifica tes Of publi her as proof of publication in connection with mergers or consolidation
of State bank Of publi her as proof of publication in connection with ational to State
conversions Of publisher as proof of publication in connection with ational to State
merger or consolidations
Of shareholders de iring to in pect records

.1607 .1806 1802, 1804 1807
.1907
2404
2503
2503, 2404 2010

2

Banks-Continued
Alents gent of banks Affidavit of agent concerning money delivered for transmis ion ., Employment of power of banks to elect or appoint and remove, and to define duties and fi;\ compensation Prepare voting list of shareholders
Banks as agents Power of banks to act as agents of U. S. for sale or i sue of obligations of or guaranteed by U. S. and to grant security intere ts in a ets for faithful performance Power of bank to act as collection agents

SECTIO
.1607 2209 1201 2005
.1202 1301

peements for the payment of money Discounts of, limited while reserve fund deficient Power of banks to discount or purchase and to take ecurity title to or
security interest in real or per onal property as collateral Limits on obligations of one per on or corporation Purchase or discount regarded as indirect loan Power of banks to hold property to avoid 10 on
Power of banks to purchase and ell participations in

.1702
1301 1306 1306 1202, 1204 .1304

AsriculturaJ credi t corpora tions Banks may inve t in capital tock of

.1309

Amendment of articles

Advertisemtnt of article of amendment or statement

2304

Proof of publication required

2303,

2306

Amendments

Authorized types of

2301,

2302

2305

Do not affect action at taw

2307

Proposal and adoption of

Director' resolution of approval

2302

Shareholders adopt

2302

Take effect upon is uance of certificate of amendment

2307

Application for amendment of articles: what constitute

2303

Articles of amendment

Advertisement of .....................................................2304

Content

2303

Filed in triplicate with Secretary of State

2303

Signed by olJicers

2303

Certificate of amendment

Effect of i uance of
~~a~~~c:n~~ 'p'r~~~~;e~'

2307 2306

Investigation and decision within 90 days of receipt of articles Criteria for decision In case of approval
otifies Secretary of State and bank In case of disapproval
olifies Secretary of State and bank; gives bank reason
Receives article from Secretary of State

2305 2305
2305
2305 2304, 2305

3

Banks-Continued
Directors' resolution of approval of amendment Fee of amendment
Judicial review of decision of Department Meeting of shareholders to adopt amendment
Directors' resolution is part of required notice Officers sign articles of amendment Reservation of name where appropriate Secretary of State: procedures
Articles of amendment filed with Fee of amendment paid to
Is notified of disapproval of Department Issues certificate of amendment after receipt of Department's approval
and proof of publication; retains documents Proof of publication filed with
Reserves name where applicable Returns one copy of articles to bank; forwards one copy to Department Shareholders adopt amendment
Application of law to banks that are also trust companies'" Power of and re trictions on the institution with regard to: General corporate matters Its banking activities Its trust activities
Appropriated retained earnings Aggregate amount of outstanding liabilities of a bank for money borrowed figured in relation to Distribution upon reduction of capital stock or paid-in capital: maintenance of appropriated retained earnings during** Dividends declared in unissued shares: maintenance of appropriated retained earnings after payment** Earnings transferred to appropriated retained earning until 20% margin obtained** Losse in excess of retained earnings may be charged to** Maximum amount of obligations in the form of subordinated securities figured in relation to paid-in capital, capital tock, and appropriated retained earning ** Preferred share acquisitions: relation of appropriated retained earnings to ** When appropriated retained earnings and paid-in capital together do not equal 20% of capital tock, no dividends paid**
Articles of amendment. See Amendment of articles**
Articles of conversion merger, or consolidation, National to State. See Conversions, mergers, and consolidations involving ational banks**
Articles of incorporation. See Incorporation**
Articles of merger or consolidation of State banks. See Merger or consolidation of State banks**
Assets Acquisition, conveyance, assignment, or transfer by officers or directors subject to actions at law** Directors liable for premature distribution during voluntary Iiquidation**

SECTIO
2303 2303, 3703 2305 2302 2302 2303 2303 2303 2303, 3703 2305 2306 2303, 2306 2303 2304 2302 1101
1101 .11 01 ll 01
.1312 2102 2101
.1 902 .J 902
.1910 21 04 .I 902
2214 2215

4

Banks-Continued
Investment decisions concerning, may be delegated to correspondent banks Liabilities for premature business shall be deemed assets of bank Permissible sales, leases, exchanges, or dispositions of
Sales, secured transactions, leases, exchanges, or dispositions not requiring shareholder approval
Sales, leases, exchanges, or dispositions requiring shareholder approval Procedures Shareholders' right to dis en t
Power of banks to dispose of Power of banks to grant security interests in assets as qualification
for membership in 'clearinghouse Power of banks to grant security interests in assets for Code-Quthorized
borrowings Power of banks to grant security interests in assets for faithful
performance as agent of U. S. Power of banks to grant security interests in assets to secure certain
deposits Purchase or sale by directors, officers, or employees prohibited;
exceptions Sale or d ispositio n of
Restrictions on powers of bank as surety or guarantor do not prohibit a bank from giving guaranties or warranties in connection with
Those that are part of reserve fund are owned absolutely by bank; not pledged or subject to set-off
Total permissible investment by banks in certain capital stocks figured in relation to
Unclaimed dividends, distributions, etc., becoming assets"

Audit by directors or accountants" Internal audit control system as substitute Procedures Reports

"Bank" defmed

Bank service corporation Banks may invest in capital stock of

Banking business: restrictions on engaging in .,

Exceptions and exemptions

.. . . . . . . . . . . . . . . . . . . . . . . . . .. .

Banking depositories For reserve funds

Banking institutions primarily engaged in foreign or international banking, etc.
Banks may acquire and hold capital stock of

Banking nomenclature: restrictions on the use of Exceptions and exemptions

Banks for cooperatives A portion of a bank's reserve funds may be kept in obligations of

Board of directors. See Directors
Bond
Of banks

SECTION
2211 1810
2601
2602 2603 1202 1301 .1202 1202 1310 2213
1311 1702 .1309 2102
2208 2208 2208
102
1309 .1102 .1102 .1701 .1702
.1309 .1104 .1104
1702

5

Banks-Continued
Power of banks to secure bond and to give same in court proceedings Of directors Of employees Of officers

SECTION
1202 2210 2210 2210

Bonds, debentures, or other debt securities issued by banks Validity of facsimiles of seals and signatures on

1908

Bonds, notes, or debentures Power of banks to acquire and hold investment securities in the form of

1308, 1202

Bonds, notes, or other obligations of or guaranteed by the U. S." Power of banks to act as agents for sale or issue of

1202

Books and records" Rights of shareholders to inspect Types kept

2010 2010

Borrowings by banks Power of banks to grant security intere ts in assets for Code-authorized
borrowings

1312 1202

Building and loan associations May engage in banking business

1102

Bullion, exchanse, and coin Power of banks to buy and seD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. .1301

Business Development Corporations Banks may invest in capital stock of . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 1309

Bylaws" Alternative method of determining quorum of directors may be stated in Alternative method of determining quorum of hareholders may be stated in Adopted at directors' organizational meeting Adoption, amendment, and repeal of Changes, additions, and amendments filed with Department Power of directors or shareholders to adopt, amend, or repeal Compensation of directors may be fixed in Duties and authority of officers stated in Filed with Departmen t prior to issuance of permit to begin business May be adopted at optional shareholders' organizational meeting May provide for alternative method of electing officers, flXing their compensation, and filling vacancies May state limitations on loans to directors and officers May state that shares not represented by share certificates umber of directors stated in Power of banks to adopt, alter, and repeal Time of directors' meetings fixed in

2204 2006 1808
2202 2202 2203 2209 .1807 .1808
2209 2212 1908 2203 1201 2204

Capital stock Aggregate amount of outstanding liabilities of a bank for money borrowed figured in relation to Amounts transferred to capital stock incident to conversion of shares" Decrease of, may be effected by amendment of articles"
Deficiencies in capital stock occasioned by retirement or payment of subordinated securities; restoration required"

.1312 1906 2302, 2305
.1910

6

SECfION

Banks-Continued

Distribution upon reduction of capital stock or paid-in capital

2102

Dividends declared in unissued stock: transfers to capital stock upon

payment.......................................................... 2101

Inaease of, may be effected by amendment of articles

2302

Maximum amount of obligations in the form of subordinated securities

figured in relation to paid-in capital, appropriated retained earnings,

and capital stock

.1910

Minimum capital stock

.1901

Banks operating under pre-April I, 1975 minimum not required to

inaease

1901

Must be fully paid in and in no event Les than required minimum before

permit to begin business issued

1807

Shares Reduction of, upon exchange or conversion of shares
See also

1906

Clpitliitock and capital securities Bank's own capital stock may not be held as coLLateral for loans Held to avoid loss
List of capital stocks that may be acquired and held for bank's own account Permissible transactions Power of banks to acquire and hold capital stock

1309 1204, 1202 1309 1309 1309, 1202

Certificatel Of amendment of articles Effect of issuance of Issuance of Of approval of State to ational conversions, mergers, or consolidations issued by the ComptroLLer of the Currency Of incorporation Effect of issuance: corporate existence dates from Issuance Of merger or consolidation of State banks
Of ational to State conversions, mergers, or consolidations Effect of is uance of Issuance of
Of reliance Of reservation of name in connection with incorporation Of reservation of name in connection with merger or consolidation of State
banks
Of reservation of name in connection with National to State consolidations or mergers
Of reservation of name in connection with National to State conversions Share certificates. See Shares

2307 2306
2507
1807 1806 2406, 2407
2506 2505 1307 1804
2404
2503, 2404 2503

Charitable contributions

Power of banks to make

1201

Checb. See CoUections

Clearinpouse
Power of banks to become members of

.1301

Coin, bullion, and exchange

Power of banks to buy and seLL

1301

7

Banks-Con tinued

SECTION

Collatera!

Limits on secured obligations of one per on or corporation

.I 306

Pledge or security interest in capital stock and capital securities

- except its own - as collateral

1309

Power of banks to take security title to or security interests in real or

personal property to secure loans or discounts or purchases of evidences

of indebtedness or agreements for the payment of money

.I 301

Real estate loans ...................................................... .I 307

Collections Collection charge for special collection items Power of banks to act as collection agent Remission at par Restrictions on powers of bank as surety or guarantor do not prohibit bank from giving guaranties or warranties in connection with handling items for collection

.I 703 1301 .I 703
.I 311

Comptroller of the Currency" Approves State to National conversions, mergers, or consolidations

2507

Congress: certain corporations created pursuant to Acts of Banks may acquire and hold capital stock of

1309

Contracts Power of banks to make

.I 201

"Control" defmed

2013

Conversions, mergers and consolidations involving ational banks Mergers or consolidations of non-bank entities into national banks: authority and procedures ational to State Conversions, mergers, or consolidations Affidavit Of publisher as proof of publication in connection with consolidations or mergers
Of publisher as proof of publication in connection with conversions Articles of conversion, merger, or consolidation
Contents Filed in triplicate with the Secretary of State Signed by officers Authority for conversions, mergers, or consolidations Procedures Who may merge Certifica te Of conversion, merger, or consolidation
Effect of issuance on liens on National bank property, liabilities, actions, etc. .
Issuance of Of reservation of name
In consolidations or mergers
In conversions Department: procedures
Filings with Department In cases of consolidation or merger, filings required by Section 2404

2508
2503, 2404 2503
2502 2502 2502
2501 2501
2506 2505
, .. 2503, 2404 2503
2503, 2404

8

Banks-Continued In cases of conversion Affidavit as proof of publica tion Articles of conversion Certificate of reservation of name Fee of investigation Information requested by Department in specified form
Investigation and decision within 90 days of receipt of filings Criteria for decision In ca e of approval May await Federal approval otifies Secretary of State and parties in writing In case of disapproval otifies Secretary of State and parties in writing; states reasons
Directors Of both institutions approve plan of conversion, merger, or consolidation
Of national bank: liabilities not affected by conversions, mergers, or consolidations
Fee Of conversion, merger, or consolidation Of investiga tion In consolidations or mergers
In conversions Judicial review of decision by Department Officers of the national bank
Liabilitie not affected by conversions, mergers, or consolidations Sign articles of conversion, merger, or consolidation Plan of conversion, merger, or consolidation Approved by directors and shareholders
Publication Of articles of proposed consolidation or merger
Affidavit of publisher as proof of publication
Of articles of proposed conversion Affidavit of publisher as proof of publication
Secretary of State: procedures Articles of conversion, merger, or consolidation ftIed with Conversion, merger, or consolidation fee paid to
Forwards one copy of articles to Department Is notified of Department's disapproval Issues certificate of conversion, merger, or consolidation; keeps
documents Issues certificate of reservation of name
Shareh olders Of both institu tions approve plan of conversion, merger, or consolidation
Of national bank; liabilities not affected by conversions, mergers, or consolidations

SECTION
2503 2503 2503 2503 2503 2504 2504
2504 2504
2504
2501, 2502
2506
2502
2503, 2404 2503 2504
2506 2502
2501, 2502
2503, 2404 2503, 2404 2503 2503
2502 2502, 3703 2502 2504
2505 2503, 2404
2501, 2502
2506

9

Banks-Continued

State to National conversions, mergers, or consolidations: authority and

procedures

:

SECTION 2507

Corporations created pursuant to Acts of Congress Banks may acquire and hold capital stock of

1309

Corporations created pursuant to Tide Xl of the HUD Act of 1968 Banks may acquire and hold capital stock of

.1309

Corporations existing pursuan t to Section 25(a) of the Federal Reserve Act Banks may acquire and hold capital stock of

1309

Correspondent banks Banks may delegate investment decisions to Correspondent's affidavit concerning money delivered for transmission

2211 1607

Credit unions May engage in banking business

1102

Data procesSing facilities Power of banks to acquire real estate to provide

1203

Death Of depositor: order of payment of deposit Of safe depositor: procedures
Debentures, bonds, or notes Power of banks to acquire and hold investment securities which are in the form of debentures, bonds, or notes

1610 .1609
1308, 1202

Debentures, notes, and other obligations issued by banks as subordinated securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1910

Debt securities Issued by banks to evidence borrowings Validity of facsimiles of eals and signa tures on

1312 .1908

Deeds of trust To secure real estate loans

1307

Definitions "Bank "Control". "Demand deposits" "Leasehold" "Reserve agent"

102 2013 .1702 .1307 1702

"Demand deposits" defmed ............................................... .1702

Department: investigations Prior to approval of amendment of articles Prior to approval of articles of incorporation Prior to approval of mergers or consolidations of State banks Prior to approval of ational to State conversions, mergers, or consolidations

2305 1805 2405
2504

Department: procedures Acceptances Approves in advance the acceptance by banks of drafts drawn by banking institutions or bankers in foreign countries, etc

.1305

10

BaIIks-Continued
Pennits in advance the acceptances Ii ted in Section 1305(a) to equal 100% of the statutory capital base of the bank
Acquisitions of capital stock Approves in advance the acquisition of capital stock of bank service corporations Approves in advance the acquisition of capital stock 01 banking institutions principally engaged in foreign or international banking Approves in advance the acquisition of capital stock of certain corporations created by Congre s after determining that investments in such stock are in the public intere t Approves in advance the acquisition of capital stock of subsidiary corporations engaged in banking functions or activities Enter into agreements with banks, before they may purchase a majority interest in banking institutions principally engaged in foreign or interna tional banking, that they limit their opera tions in such manner as the Department may prescribe. If agreement not lived up to, Department may order disposition of the capital stock
Amendment of articles For procedures concerning amendment of articles, see Amendment of
article Banking depositories and reserves
Approves in advance a deposit by a bank in any given depository at any given time which is in excess of 10% of the statutory capital base of the bank
Approves reserve agent I notified of deficiency in reserve fund May take posses ion of banks for failwe to restore reserve funds Penalty paid to Department by banks for failwe to give notice of
deficiency in reserve fund; Department may relieve bank of penalty Borrowings by banks
ay pennit borrowings by banks without regard to the restrictions of Section 1312 for emergency purposes, and may prohibit or place additional restrictions upon further borrowings which would, in the judgment of the Department, constitute an unsound or unsafe practice in view of the condition and circumstances of the bank Capital stock held as colla teral
May specify that two or more corporations are so interrelated that their capital stock shall be regarded as the capital stock of one COrporation for the purpose of determining the total amount of such stock a bank may hold as collateral for loans
Deposit insurance
Approves the inswance that uninsured banks allowed to go on accepting deposits eventually have to obtain
Detennines that deposit insurance is adequate May allow banks that have had their deposit inswance withdrawn or
cancelled to continue to accept depo its May extend the time limitation in which uninsured banks allowed to go on
..accepting deposits must obtain deposit insurance Dividends and preferred share acquisitions
Approves in advance the acquisition of preferred shares; approves the
reissue of preferred shares acquired Approves in advance the payment of dividends that exceed specified F"~.,.~..9CuJanlsItsruacstfwIXeedby regulations of the Department Approves in advance the issuance of subordinated securities

SECTION 1305 1309 1309 .1309 .1309
1309
.1701 1702 .1702 .1702 1702
1312
1309 1105 .1105 1105 1105 2104 2101 .1910

11

Banks-Continued

SECTIo

Approves in writing the converting of preferred shares to common shares and of subordinated securities to common shares

.1905

Approves the issuance of common and preferred shares by directors; receives affidavit of president or secretary that full consideration

paid before certificates are delivered .................................... .1907

Is notified in advance of payment or retirement of subordinated securities when such payment or retirement will lead to deficiencies in

capital stock; may order restoration or take other measures

.1910

Incorvoration For procedures concerning incorporation of banks, see Incorporation

Management Approves in advance the delegation of investment decisions to

correspondent banks

2211

Approves share plans for officers, employees, et al Copies of all resolu tions by directors selecting new directors to fill

2209

vacancies filed with Is informed in writing of names of officers elected or removed Is notified of changes, additions, or amendments to bylaws

2206 2209 2202

May require directors' audit to include specified matters; reports of audits or of internal audit conuol system filed with

2208

Oaths of directors filed with

2205

Mergers or con olidations of State banks

For procedures concerning mergers or consolidations of State banks, see

Mergers or consolidations of State banks National to State conversions, mergers, or consolidations
For procedures concerning ational to State conversions, mergers, or

consolidations, see Conversions, mergers, or consolidations involving

ational banks

Ownership of real property

Approves in advance the estimates of costs of any building proposed to

be erected on real property owned or leased by the bank

1203

Approves the amount of total investment by a bank in real property when

such investment exceeds 60% of the statutory capital base of the bank

1203

Participations May prohibit sale of any type of participation to the public or otherwise
not in the usual course of banking business Powers

.1304

Commissioner of the Department approves exercise of incidental powers necessary to carrying on banking business

.1202

Property held to avoid loss Approves in advance the reten tion for more than 5 years of property (except capital stock of banks or trust companies) held to avoid loss Approves the retention for more than 6 months of capital stock of banks or trust companies held to avoid loss
Real estate loans Determines types of loans or portions thereof that may be safely excluded from certain limitations applied to real estate loans
Sale or disposition of assets Approves those sales or dispositions of a bank's assets requiring shareholder approval after application is made in a form specified by the
Department
Savings banks becoming banks
May approve a savings bank's becoming a commercial bank

.1204 1204 1307
2602 .1312

Shareholders Is notified of changes of ownership or right to vote shares that will lead to changes in control of banks

2013

12

Banks-Continued

Receives copy of shareholders' agreement

State to ational conversions, mergers, or consolidations"

I notified of proposed State to ational conversion, mergers, or

consolidations; may request additional information; is notified of

disapproval or abandonment of plan; certificate of approval of conversion,

merger, or consolidation filed with

'

SECTIO 2009
2507

Department: rules and regulations
cceptances To impose additional restrictions on the acceptance of drafts drawn
upon banks by bankers or banking institutions in foreign countrie ,etc Acquisitions of capital stock
To prescribe the manner in which banks limit their operations when they purchase a majority intere t in banking institutions principaUy engaged in foreign or international banking
Banking depo itorie and reserves To approve by regulation marketable securities in which reserve funds of bank may be kept To fix the amount of the reserve fund of banks not member of the Federal Reserve System To fix the biweekly or horter periods the averaging of daily depo its covering which shaU determine the amount of required reserve for each day To fix the portion of re erve fund of banks that hall con i t of . S. money To prescribe the manner for the nolice of deficiencies in reserve funds bank are required to give to the Department
Borrowings by banks To define liabilities of banks which do not re ult from borrowing of money
Capital stock held as coUateral To specify that two or more corporations are so interrelated that their capital tock shaU be regarded as the capital stock of one corporation for the purpose of determining the total amount of uch stock that may be held a coUateral for loans
Dormant account
To prescribe limitations on tIle service charge a bank may charge a dormant account
Divide :l **
To fl>. amounts of dividends (which cannot be exceeded without prior approval of the Department) to assure that banks or tru t companie maintain an adequate capital structure
Inv tment securities
To determine the exten t to which a bank may purchase, eU, underwrite, and hold investment securities which are obligations in the form of bond, note, or debentures
Incorporation**
To e tabli h a fee to defray the co t of investiga lion of a proposed bank To specify the form in which information requested by the Department to
evaluate a proposed new bank shaU be made available l oan linlit
T prescribe defmitions of and requirements for transactions included in or excluded from indebtedne to which the provisions of Section 1306
TapPly : o p~ ~Ibe restrictions on the non-applicability of limit on secured obligations of one person or corporation to obligations arising from

1305
.1309 .1702 .1702 1702 .1702 .1702 .1312
.1309 .1611
2101
1308 .1804 .1804
1306

13

Banks-Continued
the bona fide purchase of commercial or bu ine s paper with recourse against a merchant who takes such paper in sale or service transactions incident to his busines , wher~ the party to whom he provides the goods i obligated on the paper To specify that liabilities of a group of one or more persons or corporations or both shall be considered as owed by one person or corporation for the purpose of defining the limits on obligations of one person or corporation Management To e tablish minimum standards for directors' audits and reports Mergers or consolidations of State banks To establish fees to defray the expense of investigation of mergers or con olidation of State banks To pecify the form in which information reque ted by the Department to evaluate mergers or consolidation of State banks shall be made available ational to State conver ion, mergers, or con olidations" To establi h fees to defray the expense of investigation of ational to State consolidations or mergers
To establi~ fees to defray the expense of investigation of National to State conversions
To specify the form in which information requested by the Department to evaluate ational to State consolidations or merger shall be made available
To specify the form in which information requested by the Department to evaluate ational to State conver ions hall be made available
Owner hip and direct lea ing of personal property To regulate the owning and leasing by banks of personal property acquired for use of a customer
Participations To regulate the purchase and sale of participations in evidences of indebtedness or agreements for the payment of money To regulate the purchase and sale of participations in pools of evidences of indebtedness or agreements for the payment of money
Powers as surety or guarantor To establish criteria to distinguish letters of credit and guaranties
Real estate loans To pre cribe requirements as to duration, amortization, appraisal, insurance, and documentation of real estate loans To pre cribe types of security for real estate loans
Sale or disposition of assets To specify form for application for Departmental approval of those sales or dispositions of a bank's a ets requiring shareholder approval
Deposit insurance Notice mandatory when insurance inadequate Requirements to obtain and maintain
Depositories for bank funds. . . . . . . . . . . . . . . . . . .. . For reserve funds
Deposits By banks Deposit of reserve funds In banks Adverse claims to deposits

SECfIO
.1306
.1306 2208
2404 2404
2503, 2404 2503
2503 2404 2503
.1303
1304 .1304 .1311
.1307 1307
2602 .1105 J 105 .1701 .1702 .1701 .1702 1606

14

SECTION

BanIc -Continued

Aggregate amount of certain loans by banks figured in relation to total

time and savings deposits

.1307

Amount of required reserve fund of banks not members of the Federal

Reserve Sy tern figured in relation to demand deposits and other deposits

1702

Deposit insurance

11 05

Dormant accounts

."

.1611

Fiduciaries' deposit . .............................................. .1605

Joint deposits

1603

Minor' deposits

1602

Of deceased depositors: order of payment

1610

Power of bank to grant security interests in assets to secure certain

deposits

.1310

Special case for banks that are also trust companies

1310

Power of banks to receive money or commercial paper for deposit and to

provide for terms of withdrawal thereof and interest thereon

1301

Records of, not subject to inspection by shareholder, et al

2010

Regulated certificated banks may continue to accept

1105

Rules governing deposits: notice required

1601

Segregated deposits to cover bank's liability as surety or guarantor

.1311

Tentative trusts

.1604

Dired leasing of personal property

1303

DirectoR

Actions at law against director

For acquisition of assets through neglect, etc

2214

For actions Li ted in Section 2215

2214,

2215

For appropriation of bank's business opportunities

2214

For neglect of duty

2214

For sale or disposition of shares or securities not subject to

preemptive rights

2002

For unlawful conveyance, assignment, or transfer of corporate assets

2214

udit by directors or accountants

2208

Bond of directors

2210

Code does not affect continuous service of director legally qualified to

serve on April 1, 1975

2201

Compensation of directors: fIXed by board

2203

Country and state of citizenship of directors

2201

Diligent discharge of duties by director required

2211

Directors approve amendment of article ...................................2302

Authorized amendments include increase or decrease of capital stock

2301,

2302,

2305

Directors approve and establish share plans for officers, employees,

et al

2209

Directors approve in advance each loan, discount, or purchase transaction

in excess of the 10% limit on unsecured obligation of one person

or corporation

1306

15

SECTIO

Banks-Continued

Directors approve ationalto State conver ions, mergers, or consolidations

2501,

2502 Directors approve plan of merger or con olidation of State bank ................2402

Directors approve State to ational conver ions, mergers, or

consolida tions" Directors approve the converting of preferred hares to common hare and
of subordinated securitie to common shares"

2507 .1905

Directors approve the issuance of common or preferred shares

1907

Directors as salaried officers"

2203

Directors authorize distribution upon reduction of capital stock or paid-in capital

2102

nlawful distributions prohibited"

2103

Directors authorize issuance of fractional shares or scrip Directors authorize issuance of subordinated ecurities"

1909 1910

Directors close tran fer book or otherwi e fix record da te of

shareholders

2004

Directors' commissions on loans or investments prohibited"

2213

Directors declare dividend ..............................................210 I

Unlawful dividends prohibited"

2103

Directors delegate investment decisions to correspondent banks Director elect, remove, and fix compensation and duties of officers" Directors elected at annual meeting of shareholder"

2211 2209 2003

Directors elected by shareholders"

2203

Directors in charge of administration and affair generally" Directors may call meeting of shareholders"

2201 2003

Directors' purchase of bank's obligation at di count prohibited"

_

2213

Directors re olve to redeem or otherwi e acquire preferred shares

2104

Director select banking depository; director with interest in

depository don't vote

.1701

Director sign affidavit prior to i suance of permit to begin bu ine .. .

1807

Directors vote at least once per year on advisability of retaining property held to avoid loss

.1204

Executive committee and other committees of directors"

2204

Records of meeting of" ..............................................2010

Good-faith reliance by directors on fmancial information

2215, 2211

Honorary director, director emeritu, and members of advisory committees"

Appointed by directors Compensation

2207 2207

Liabilities of directors" Certain liabilities of Section 2215 do not apply in cases of good-faith

reliance of financial information

2215

Directors' right to contribution in certain cases of declaration of unauthorized dividends or payment of unauthorized distributions

2215

Liabilities of directors not affected by mergers or consolidations of

State banks

2407

Liability for declaration of unauthorized dividends or payment of

unauthorized distributions Liability for failure to make dissent known

2215 2215

Liability for premature distribution of assets during voluntary

liquidation

Loans to directors: board must approve"

_

Meetings of directors"

Action taken without meetings

2215 2212
2204

16

SECTIO

Banks-Continued

How meetings called

2204

How often meetings held

2204

Organizational meeting

1808

Bylaw adopted

1808

otice required .....................................................1808

Officers elected

.1808

Quorum of directors

2204

Record of meetings: keeping of record, inspection by hareholders

2010

ames and addresse of fust directors of resulting bank given in articles

of conversion, merger, or con olidation, National to State

2502

ames, occupations, citizenship, places of re idence, and post office addresses of fust directors given in articles of incorporation"

.1803

ames of directors of merged or consolidated bank given in plan of merger

or consolidation of State banks"

2402

umber of directors

Board may make yearly increases or decrea es in
umber of, as fixed in articles of incorporation or bylaws umber of first directors fixed in articles of incorporation Oath of directors
Director must take oath before permit to begin bu iness issued Permissible sales, leases, exchanges, or dispo itions of bank's assets by
directors Sales, etc., not requiring shareholder approval

2203 2203 .1803 2205 1807
2601

Sale, etc., requiring hareholder approval Procedures

2602

Shareholders' right to dissent Power of banks to indemnify and reimburse litigation e pense of and
maintain liability in urance for directors Power of banks to insure life of directors
Power of directors to adopt, amend, or repeal bylaws" Department notified

2603
1201 1201 2202 2202

Re trictions Purchase or sale of assets by directors re tricted; board approves

2202

exceptions Removal of director ..

2213

By board

2206

By shareholders

2206

Right of directors to compromise claims arising out of subscription for

shares

2001

Term of directors

2203

Vacancies: how fiUed

2206

Discount or purchase of evidence of indebtedness or agreements for
the payment of money. See Evidences of indebtedness or Agreements lor the payment of money.

DIsposition of bank's assets. See Assets

Distributions upon reduction of capital stock or paid-in capital" Procedures Recovery of distributions by shareholders UnlawfUl di tributions prohibited

2102 2101 2103

Diriclends
Actions for recovery of dividend Directors close transfer books or otherwise fix record date in order to
determine shareholders entitled to dividends Distributions upon reduction of capital stock or paid-in capital"

2101
2004 2102

17

SECTIO

Banks-Continued

Dividends declared by directors: procedures generally**

2101

Dividends shall not be declared while reserve fund deficient

.1702

Dividends shall not be paid when appropriated retained earnings and

paid-in capital together do not equal 20% of capital stock**

.1902

Share split without increasing capital stock is not a dividend**

2101

Unclaimed dividends**

2101

Unlawful dividends**

Directors' right to contribution when shareholders knowingly receive

unlawful dividends or distributions

2215

Liability of directors for

2215

Prohibited ..........................................................2103

Dormant accounts

1611

Employees** Bond of Commissions on loans or investments prohibited Employment of Power of banks to indemnify and reimburse litigation expenses of and maintain liability insurance for Power of banks to insure life of
Purchase of bank's obligations at discount prohibited

2210 2213 2209
.1201 .1201 2213

Purchase or sale of bank's assets prohibited; exceptions Share plans for '

2213 2209

Evidences of indebtedness

Discounts of, limited while reserve fund deficient

Power of banks to discount or purchase, and to take security title to or

security interests in real or personal property as collateral

,

Limits on obligations of one person or corporation

Purchases or discounts regarded as indirect loans to person or

corporation receiving proceeds

Power of banks to hold property to avoid loss on**

Power of banks to purchase and sell participation in

1702
1301 .1306
1306 1202, 1204 .1304

Exchange, coin, and bullion

Power of banks to buy and sell

1301

Exchange of bank's assets. See Assets**

Executive committee and other committees of directors Records of meetings of**

2204 2010

Expense fund** Amount charged for hares determined by requirements for expense fund Created out of amounts paid for common shares May be credited to paid-in capital after one year Must be pai in to a certain amount before permit to begin business issued; Department fixes amount

.1906 1903 .1903
.1807

Federal Deposit lnsurll{lce Corporation Necessity of deposit insurance to meet standards of Power of banks to become insured by

1105 1302

Federal home loan banks: obligations of A portion of a bank's reserve funds may be kept in
Federal Housing Administration Loans insured by the Administrator exempted from certain restrictions on real estate loans

1702 .1307

18

Bank -Continued
Federal intermediate credit banks: obligations of portion of a bank' reserve fund may be kept in

SECTION 1702

Federal land banks: obligations of A portion of a bank's reserve funds may be kept in

1702

Federal ational Mortgages Association A portion of a bank's reserve funds may be kept in obligations of '"
Banks may invest in capital stock of

1702 1309

Federal Reserve Act: corporations created pursuant to Section 25(a) of Banks may acquire and hold capital stock of

.1309

Federal reserve banks Banks may invest in capital stock of Certain liabilities of banks to federal banks are not figured in the aggregate amount of out tanding liabilities of a bank for money borrowed Power of banks to become members of

1309
1312 1302

Federal Reserve System Power of banks to become members of Reserve requirements of member banks

1302 1702

Fees

Fee of amendment of articles

2303,

3703

Fee of incorporation ................................................. 1803,

3703

Fee of merger or consolidation of State banks

2403,

2406,

3703

Fee of ational to State conver ion, mergers, or consolidations

2502,

3703

Fees charged by banks on loans

1313

Investigation fee, Incorporation

.1804

Investigation fee, merger or consolidation of State banks

2404

Inve tigation fee, ational to State conversions

2503

Inve tigation fee, ational to State mergers or consolidations

2503,

2404

Promoter' fees in connection with incorporation prohibited

1802

Fiduciaries' deposits

.1605

Fonip or international banking, etc.: banking institutions primarily engaged in Banks may acquire and hold capital stock of
Fractional shares. See Shares

1309

Houaing and Urban Development Act of 1968: corporations created pursuant to Title XI of
Banks may acquire and hold capital stock of

.1309

Incompetence of safe depositor: procedures ............................... ".1609

InCOrporators. See Incorporation

Iacorporation
Actffitise!llent of articles of incorporation or statement ldaVlt of agent or published as proof of publication

.1803 1806

19

Banks-Continued

SECTION

Affidavit Of agent or publisher as proof of publication Of incorporators verifying expenses of incorporation

1806 1802,

Of officers and directors prior to issuance of permit to begin business

1804 .1807

Aticles of incorporation Advertisement of articles Article~ filed if'! triplicate with the Secretary of State Articles signed by incorporators Contents of articles County of location Information on rust directors Information on incorporators Information on shares Location of initial registered office Name of bank Other provisions incorporators desire to include Statement of purpose Term of duration Reference to articles in Code Alternative method of determining quorum of directors may be stated in Alternative method of determining quorum of shareholders may be stated in Alternative method of voting shares may be stated in Compensation of directors may be fixed in Data on shares May place restrictions on distributions upon reduction of capital

1803 1803 1803 1803 1803 1803 1803 1803 .1803 1803 .1803 1803 1803
2204
2006 2007 2203 1904

stock or paidin capital May prohibit share plans
May provide for alternative method of electing officers, fixing their compensation, and filling vacancies
May provide for alternative method of redeeming preferred shares May provide limitations on loans to directors and officers
May restrict preemptive rights of shareholders May state that shares not equal May state that shares not represented by signed certificates
More restrictive method of issuing shares may be stated in
Number of directors stated in Restrictions on preferred share acquisitions may be stated in Bylaws
Adopted at directors' organizational meeting Filed with Department prior to issuance of permit to begin business May be adopted at optional shareholders' organizational meeting Certifica tes Of incorporation

2102 2209
2209 .1905 2212 2002 1907 1908 .1907 2203 2104
.1808 .1807 .1808

Effect of issuance: corporate existence dates from Issuance of Of reservation of name Department: procedures

1807 1806 1804

Filings with Department
Affidavit of incorporators verifying expenses of administration ................ 1802, 1804

Certificate of reservation of name Information requested by the Department in a specified form

.1804 1804

20

Bank -Continued
Investigation fee One copy of articles of incorporation Inve tigation and decision within 90 l1ays of receipt of filings Criteria for decision
Failure to comply with Section 1802 may leaq to disapproval In case of approval
May impose extra conditions May wait on decision of Federal agency
otifies Secretary of State and incorporators in writing In case of disapproval
otifies Secretary of State and incorporators in writing Permit to begin business is ued by Department
Affidavit of officer and directors that conditions for beginning business have been met is filed with Department
Bylaws filed with Department Criteria to be met to receive permit generally Department fixe amount of expense fund Directors Directors sign affidavit prior to issuance of permit to begin busine s Information on first directors contained in articles of incorporation umber of first directors pecified in articles of incorporation Oath: must be taken before permit to begin business i sued Organizational meeting of directors; notice required Bylaws adopted Officers elected Fees Fee of incorporation paid to Secretary of State
Investigation fee paid to Department Promoters' fees prohibited Incorporators Incorporators file affidavit of expen es of organization, etc., with Department
Incorporators file articles of incorporation in triplicate with the Secretary of State
Incorporators publish article of incorporation or statement Information on incorporators contained in articles of incorporation
umber and age of Judicial review of decision by Department
eetings
Directors' organizational meeting otice required
Shareholders' optional organizational meeting otice required
Officers
Elected at directors' organizational meeting Permit to begin business
Business permitted prior to issuance Criteria for issuance I ued by Department Liability for premature business President
Signs affidavit prior to issuance of permit to begin business Secretary
Signs affidavit prior to issuance of permit to begin business Secretary of State: procedures

SECTION
1804 1803
1805 .1802
1805 .1805 1805
1805 1807
1807 .1807 1807 .1807
1807 .1803 .1803 .1807 .1808 .1808 1808
1803, 3703 1804 .1802
1802, 1804
.1803 1803 1803 1801 .1805
1808 1808 .1808 1808
1808
.1807 1807 1807 1809
.1807
1807

21

SECTIO

Banks-Continued

Articles of incorporation filed mtriplicate with; Secretary of State

transmits one copy to Department and returns one copy to

incorporators

1803

Is notified of Department's disapproval

.1805

Issues certificate of incorporation after receipt of Department's

approval, etc.; keeps documents on file ..................................1806

Issues certificate of reservation of name

.1804

Shareholders

Optional organizational meeting; notice required

.1808

Subscribers to shares prior to filing of articles of incorporation

become shareholders upon issuance of certificate of incorporation

1807

Insurance Deposit insurance Power of banks to become insured by the F.D.I.C Requirements to obtain and maintain insurance Insurance on loans Departmellt prescribes requirements as to insurance on real estate loans Power of banks to have loans insured pursuant to national hou ing legislation Liability insurance** Power of banks to indemnify and reimburse litigation expen es and maintain liability insurance for directors, officers, and employees Life insurance Power of banks to insure life of directors, officers, employees, et al

1302 1105 1307 .1302
.1201 .1201

Interest paid on deposits

Power of banks to provide terms of interest on deposits

1301

In terest rates on loans

.1313

International banking agencies May engage in banking business

.1102

Investrnen t securities

Exempted from limitations on real estate loans

.1307

Held to avoid 10 .................................................... 1204, 1202

Obligations in the form of or secured by investment securities exempted

from limits on obligations of one person or corporation

1306

Power of banks to purchase, sell, underwrite, and hold

1308,

1202

Types of

1308

Joint deposits

.1603

"Leasehold" defined

1307

Leases Of bank's assets. See Assets Of personal property acquired for use of a cu tomer Of real estate

.1303 .1203

Letters of credit

Power of banks to issue, advise, and confum

1301

Restrictions on powers of banks as surety or guarantor do not prohibit

banks from giving warranties or guaranties in connection with issuing

letters of credit; Department distinguishes letters of credit and

guaranties

1311

22

Banks-Continued
Liabilities Of banks For borrowed money For payment of deposit of deceased depositor For payment of deposit of joint depositors With respect to property of deceased safe depositor" Of directors Of directors, shareholders, or officers of ational banks not affected by ational to State conversions, mergers, or consolidations" Of directors, shareholders, or officers not affected by mergers or consolidations of State banks" Of shareholders and subscribers To depositors and other creditors for premature business

Liability insurance Power of banks to indemnify and reimburse litigation expenses of and
maintain liability insurance for directors, officers, and employees

Uc:enees enp,ed in selling checks

.

May engage in banking business

ute insurance
Power of banks to insure life of directors, officers, employees, et al

Limib on obliptions of one person or corporation. See Loans

LoUIs Insurance on loans Department prescribes requirements as to insurance on real estate loans Power of banks to have loans insured pursuant to national housing legISlation Interest and fees on loans Loan limits of one person or corporation List of obligations to which limits on secured loans do not apply Personal property acquired and leased for use of a customer exempted Loans to directors and officers" ew loans shall not be made while reserve fund deficient Pledge or security interest in capital stock or capital securities - except a bank's own - as collateral Power of banks to make loans and to take security title to or security interests in real or personal property as collateral Power of banks to service loans Real estate loans: procedures and restrictions Certificate of reliance "Leasehold" defmed Records of loans, not subject to inspection by shareholders, et al"
Lo.es
Losses in excess of retained earnings charged to paid-in capital or appropriated retained earnings
tinp" Of directors
Directors' organizational meeting: notice required Regular meetings
Actions without meetings How meetings called How often meetings held

SECTION
.1312 1610 .1603 1609 2215 2506 2407 2001 1809
1201
1102
1201
1307 .I 302 1313 1306 .1303 2212 .1702 1307 1301 1301 1307 .1307 .1307 2010
1902
.1808 2204 2204 2204

23

Banks-Continued
Quorum of directors Of shareholders
Actions taken without meetings: effect of consent Adjourned meetings: notice required Annual meeting: notice required
Directors elected When and where meeting held Clo ing of transfer books or other fIXing of record date Meeting to adopt amendment of article: directors' resolution is part of required notice Meeting to approve certain sale or dispositions of bank's assets: notice required Meeting to approve mergers or consolidations of State banks: notice required Meeting to approve alional to State conversions, mergers, or consolidations: notice required
Meeting to approve State to ational conversions, mergers, or consolidations: notice required
Proxies
Quorum of shareholders Shareholders' agreements Shareholders' organizational meeting (optional):
notice required Special meetings or special meetings called in lieu of annual meeting:
notice required Who calls Substitute annual meeting ordered by superior court: notice required Voting list Voting of shares

SECTION
2204
2003 2003 2003 2003 2003 2004
2303
2602
2402
2501, 2502, 2402
2507 2008, 2007 2006 2009
1808
2003 2003 2003 2005 2007

Mergers or consolidations of State banks

Affidavit of publisher as proof of publication

2404

Articles of merger or consolidation of State banks

Amendments: how prepared

2403

Articles drawn up after approval of plan of merger of consolidation

2403

Articles filed in duplicate with the Secretary of State

2403

Articles signed by officers

2403

Contents

2403

Authority to merge or consolidate: who may do so

,2401

Certifica te

Of merger or consolidation

Effect of issuance on actions at law, liabilities, etc. .

2407

Filed with superior court where applicable ................................2406

Issuance of

2406

Of reservation of name

2404

Department: procedures

Filings with Department

Affidavit as proof of publication

2404

Articles of merger or consolidation

2403

Certificate of reservation of name

2404

Desired information in a form specified by the Department

2404

Investigation fee

2404

24

SECTIO

Bank Continued

Inve tigation and decision within 90 days of receipt of filings

2405

Criteria for deci ion

2405

In ca e of approval Department may wait for decision by Federal authority

2406

Written notice given to Secretary of State and parties

2405

In case of disapproval

Written notice given to Secretary of State and partie; Department

give rea ons to partie

2405

Director pprove plan of merger or consolida tion

2402

Liabilitie of director not affected by merger or consolidation

2407

ames of director of merged or con olidated bank given in plan of

merger or con olidation .............................................2402

Fee Of inve tigation Ot merger or con olidation

2404 2403,

2406,

3703

Judicial review of decision by Department approving or disapproving merger

or con olidation

2405

Meeting of shareholder to approve plan of merger or consolidation:

content of required notice

2402

Officer

Liabilities of, not affected by merger or con olidation

2407

Sign article of merger or consolidation

2403

Plan of merger or con olidation

Adopted by directors

2402

Adopted by parties to merger or consolidation

2402

Adopted by hareholder

2402

Content of

2402

Modification of

2402

Publication of notice of propo ed merger or consolidation

2404

Affidavit of publi her as proof of publication

2404

Secretary of State: procedure

Amendment of article of merger or con olidation filed with Articles of merger or consolidation filed in duplicate ~ ith

2403 2403

Fee of merger or con olidation paid to

2403,

2406

Is notified of Department' disapproval

3703 2405

I ues certificate of merger or con olidation after approval by

Department; retain do uments

2406

I ue certificate of reservation of name where applicable

2404

Refer one copy of article of merger or con olidation to Department ............2403 Shareholders

Approve plan of merger or consolidation

2402

Liabilitie of, not affected by merger or con oLidation

2407

Right of dis enting hareholder

2408

Statement of right and remedie of dissenting shareholders

included in notice of hareholder ' meeting Share..' urren der 0 f certl'f'lca te Supenor court: procedure

2402 .2408

In case of merger or consolidation \ ith a corporation whose article were granted by a superior court, merged or con olidated bank file copy of certificate of merger or con olidation with the uperior
Court

2406

2S

Banks-Continued Minors' deposits and safe deposit rentals* *

SECTIO 0............... .1602

Money received for deposit. See Deposits

Money received for transmission

Power of bank to receive money for tran mi sion 0

0

Procedures**

0

Who may not engage in business of receiving money for transmis ion

0 000. 0.130 I 0.... 0 1607
1I 02

Mortgage of bank's assets. See Assets **

Mortgages to secure real estate loans

1307 0 0

National banks

Conversions, mergers, and consolidation involving. See Conversions,

mergers, and consolidations involving ational banks**

Directors of ational banks"

Approve ational to State conversions, merger, and consolidation

0

2501,

2502

Liabilitie of, not affected by ational to State conver ion, mergers,

or consolidations

0

0. . . . . . . . 2506

ational banks exempted from restrictions on use of banking nomenclature

1104

a tional banks may engage in banking bu iness

0.. 0.. 0

1102

Officers of ational banks**

Liabilities of, not affected by National to State conver ions, merger,

or con olidations

0

2506

Sign articles of ational to State conversion, merger, or consolidation

2502

Shareholders of ational banks"

Approve ational to State conver ion, mergers, or con olidations

0

02501, 2502

Liabilities of not affected by ational to State conver ions, mergers,

or con olidations

0. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2506

Rights of dissenting shareholder in ational to State conversion,

mergers, or con oLidations

00

0 2501

Tho e ational banks exerci ing fiduciary powers defined as "trust

institutions" or "foreign trust institutions" and as uch, may invest in

fiduciary investment companie **

0................ oj 501

Tho e National bank exercising fidu iary power may cstabli h, maintain,

and participate in collective investment trusts**

0 0. 0....... 0.. 1404

Those ational banks lawfully authorized to exercise trust power exempted

from restriction on use of tru t nomenclature* *

0.. 0

1104

Tho e ational bank located in the State and authorized by U. S. law to

act as fiduciaries may act as fiducaries under powers of Code**

.1 J03

National emergencies** Power of banks during

0

.J 201 o

ational housing legislation

Obligations guaranteed by certain loan agreements pursuant to, exempted from

limits on obligations of one person or corporation

.J 306 0

Power of bank to have loans in ured pursuant to

.J 302 0

omenclature Restrictions on use of banking nomenclature
Exceptions and exemptions

.L 104 .1104

otes, bonds, or other obligations of or guaranteed by the U. S."

Power of banks to act a agent for sale or issue of

;

.L 202

26

Bank Continued
oles, debenture, and other obligations i ued by banks as subordinated securitie

SECTIO 1910

oles, deben tures, or bonds power of banks to acquire and hold inve tment securities w:'ich are in the
form of note, debenture, or bond

1308, 1202

oles. debentures, or other obligations i sued by banks to evidence borrowings

I 31 2

otice

Of deficiencies in re rve fund required to be given to Department

1702

Of director' organizational meeting"

1808

Of prop sed merger or consolidation of State banks"

2404

Of proposed ational to State merger or con olidations

2503

Of rule governing de po .ts

.1601

Of sale or di po ition of all or ub tantially all of a bank's asset .................2602

Of hareholder's agreement given to transferee of hares

2009

Of hareholders' meetings generally

2003

Determination of who gets notice

2004

Of hareholders' meeting to adopt amendment of articles

2302

Of hareholder ' meeting to approve certain sale or di po ition of bank'

a et

2602

Of shareholders' meeting to approve plan of merger or consolida tion of

State banks"

2402

Of shareholder' meeting to approve State to ational conver ion, mergers,

or con olidation ....................................................2507

Of shareholders' organizational meeting .. ,

1808

Of term of safe deposit agreement

.1608

Of time, term, and conditions for hareholder' exercise of preemptive

rights to share ......................................................2002

Required when depo it insuran e inadequate

1105

Oath of directors Director mu t take oath before permit to begin busine s issued

1807

Obliptions

Obligation exempted from limit on ecured obligations of one per on or

corporation ........................................................ .1 306

Obligations in which a portion of a bank' re erve fund hall be kept

1702

Obligation is ued by bank a ubordinated ecurities

1910

Obligations i ued by banks to evidence borrowings

1312

Obligation of or guaranteed by the U. S.

Power of banks to act as agent for sale or i ue of

1202

Obligation \ hich banks arc empowered to acquire and hold a investment

securities

1308,

1202

Officers. See al 0 pecific officers and ational banks clion at la\ again t officers For acqui ition of a sets through neglect, etc For appropriation of bank's busine s opportunities For neglect of duty For unlawful conveyance, assignment, or transfer of corporate as et
Authority and duties of officers
Bond of officer

2214 2214 2214 2214 2209 2210

27

Bank -Continued

SECTIO

Compensation of officer

2209

Diligent discharge of dutie by officers required; officers may place

good-faith reliance on financial information

2211

Elertion of officers

2209

Election of officers at directors' organizational meeting

1808

Liabilitie of officers not affected by merget or con olidation of State

bank

2407

Loan to officer

2212

umber of officers; required officer .......................................2209

Officers' commis ion on loan or investments prohibited

2213

Officers prepare voting Ii t of hareholder

2005

Officer' purchase of bank' obligation at di count prohibited

2213

Officer' purchase or sale of bank' a et prohibited; exception

2213

Officers report to Department changes in ownership or right to vote hares

leading to change in control of bank

2013

Officer ign:

Article of amendment

2303

Article of merger or con olidation of State bank

2403

Articles of ational to State conver ion, merger, or con olidation

2502

Shares or debt securities; validity of fac imile

.1908

Power of bank to elect or appoint, to remove, and to define duties and

fi compensation of officer

1201

Power of banks to indemnify and reimbur e litigation e pense of and

maintain liability in urance for officer

120 I

Power of bank to insure life of officer

.1201

Removal of officer

2209

Share plans for officer

2209

Vacancies: how filled

2209

Offices"

Amendment of article may provide for change in offices

2301

Location of initial regi tered office given in article of incorporation

.1803

Location of initial regi tered office given in article of ational to

State conver ion, merger, or con olidation .................................2502

Location of office given in article of merger or con olidation of State

banks

2403

Meetings of shareholder held at registered office

2003

Power of banks to acquire and hold real e tate to provide offices

.1203

Paid-in capiUl

Aggregate amount of out tanding liabilitie of a bank for money borrowed

figured in relation to paid-in capital

.1312

Amount charged for hares determined by requirements for paid-in capital"

1906

Amounts by which capital tock is reduced upon exchange or conversion of

shares are tran ferred to paid-in capital"

.1906

Di tribution upon reduction of capital stock or paid-in capital

2102

Dividends declared in unis ued hare: maintenance of capital tock upon

payment

2101

Expense fund may be credited to paid-in capital after one year

.1903

Los e in exce of retained earnings may be charged to paid-in capital ........... .1902

Maximum amount of obligation in the form of ubordinated securitie is

figured in relation to appropriated retained earnings, capital tock,

and paid-in capital

.1910

Paid-in capital must be paid in to a certain amount before permit to begin

busine s i is ued

1807

Preferred share acqui itions: relation of paid-in capital to ......................2104

28

Banks-Continued When paid-in capital and appropriated retained earnings together do not equal 20% of capital stock, no dividends paid
,.kin. facilities Power of banks to acquire real estate to provide
Puticipations
....ty for failure to notify Department of deficiency in reserve fund
PIriod of duration Perpetual unless articles of incorporation or amendments flX a shorter duration
PenoaaI property. See Property
PledF Of bank's assets. See Assets Power of banks to receive pledge or security interest in capital stock or capital securities - except its own - as collateral for loans
POIIIIIion by Department for failure to restore reserve fund
Powers Additional operational powers To acquire and hold capital stocks and investment ecurities
To acquire and hold personal property necessary to exercise of Code-conferred powers
To acquire and hold property to avoid loss
To acquire and hold real property
To act as agent of the U.S. for sale or issue of obligations and to grant security interests in assets for faithful performance
To exercise all incidental powers when approved by Commissioner of Department
To grant security interests in assets for Code-authorized borrowings To hold property lawfully held on April 1, 1975 To rent safe deposit boxes for deposit of personal property or to
receive same for safekeeping To secure bond and to give bond in court proceedings General corporate powers To a~opt, alter, and repeal bylaws To aid national effort in time of war or other national emergency; at
request of U. S. government, to transact lawful business to aid such national effort To elect or appoint and to remove officers and agents, and to defme duties and fix compensation of same To have, alter, and use corporate seal To have perpetual duration To insure life of directors, officers, employees, principal obligors, et al To make charitable contribution and donations To make contracts To reimburse and indemnify litigation expenses of directors, officers, and employees and to purchase and maintain liability insurance for their benefit

SECTION
1902
1203 1304 .1702
1201, 1803, 2301
1309 1702
1202, 1308, 1309 1202 1202, 1204 1202, 1203 1202 1202 .1202 1202 1202 1202 1201
.1201
1201 .1201 1201
1201 .1201 1201
.1201

29

Banks-Continued

SECTION

To sue and be sued, comp~ and defend in corporate name

1201

Major banking powers

To act as collection agent for items of commercial paper and in so doing

to become member of clearinghouse and grant security interests in

assets for qualification therein ........................................ .1301

To buy and sell exchange, coin, and bullion

.1301

To issue, advise, and conf"Irm letters of credit

1301

To lend money and to discount or purchase evidences of indebtedness and

agreements for the payment of money, and to take security title to or

security interests in real or personal property as collateral

1301

Limits on obligations of one person or corporation

1306

Power to.take, receive, reserve, and charge interest and fees on

loans at rates not to exceed a specilled maximum

1313

Restrictions on real estate loans

1307

To provide third party payment services

1301

To receive money for transmission

.1301

To rec~jve money or commercial paper for deposit and to fix terms for

withdrawal thereof and interest thereon

.1301

To service loans

1301

Other powers

To accept drafts To be treated as a savings bank; savings banks may become banks To become a surety or guarantor in certain cases To borrow money To own and lease personal property acquired for use of a customer To participate in Federal programs
To apply for and maintain insurance on loans pursuant to national housing legislation
To become insured by the F.D.LC To become members of the Federal Reserve System To pledge or grant security interests in assets to secure certain deposits To purchase and sell participations in evidences of indebtedness or agreements for the payment of money or pools of either

.1305 1314 1311 1312 .1302
.1302 .1302 .1302
1310
1304

Preferred share acquisitions

2104

President. See also Officers" Executes affidavit that full consideration for shares paid before certificates delivered Reports to Department changes in ownership or right to vote shares leading to change in control of bank Signs: Affidavit prior to issuance of permit to begin business Shares or debt securities; validity of facsimiles

1907
2013
1807 1908

Property Personal property Power of banks to acquire and hold personal property necessary to exercise of Code-conferred powers Power of banks to acquire and lease personal property for use of a customer Power of banks to receive personal property for safekeeping or safe deposit." See also Safe deposit" Power of banks to use personal property as collateral for loans Property generally Power of banks to acquire and hold property to avoid loss

1202
1303
.1202 1301
1202, 1204

30

Banks-Continued

SECTION

power of banks to hold property lawfully held on April 1, 1975" Real property
power of banks to acquire and hold real property
Leasing after acquisition Procedures generally power of banks to use real property as collateral for loans Real estate loans
Proxies of shareholders
Publication. ** See also Advertisement" Of notice of National to State conversions Proof of publication required Of notice of National to State mergers or consolidations
Proof of publication required
Of notice of proposed merger or consolidation of State banks Proof of publication required
Purchase or discount of evidences of indebtedness or agreements for the payment of money. See Evidences of indebtedness or Agreements for the payment of money
Quorum Of directors Of shareholders
Real estate. See Property**
Real property. See Property
Receivers Actions at law by receivers" Actions against directors and officers
Action to enforce liability for premature business Action to enforce obligation to pay for shares Banks may grant security interests in assets to secure deposit of funds held by Department as receiver Receivers' shares: how voted
Rec:orda. See Books and records"
ReauJated certificated banks
Change to bank may be effected by amendment of articles" Those in existence and accepting deposits on April I, 1975, may continue
to accept deposits
Remission at par
Repurchase agreements L~bilities of a bank on account of repurchase agreements are not figured In the aggregate amount of outstanding liabilities of a bank for borrowed money
Relerve .nt" defined

1202
1202, 1203 1203 1203 1301 1307 2008
2503 2503 2503, 2404 2503, 2404 2404 2404
2204 2006
2214, 2215 1809 2001 1310 2007
2301
1201 .1703
1312 1702, 1701

31

Banks-Continued
Reserve assets Investment decisions concerning reserve assets may be delega ted to correspondent banks

SECTION 221I

Reserve balances Liabilities on account of acquisition of reserve balances at a federal reserve bank, etc., are not figured in the aggregate amount of outstanding liabilities of a bank for borrowed money

.1312

Reserve requirements

Assets that are part of reserve fund owned absolutely by bank

1702

Deficiencies in reserve fund; notice required; penalty for failure to give

notice; how deficiency corrected; consequences of failure to restore

.1702

"Demand deposits" defined

.1702

"Reserve agent" dermed ................................................ 1702,

1701

Reserve requirements for banks and savings banks not members of the

Federal Reserve System

1702

Reserve requirements for banks that are members of the Federal Reserve

System

1702

What reserve fund of commercial and savings banks consists of

.1702

Retained earnings Aggregate amount of outstanding liabilities of banks for borrowed money figured in relation to retained earnings Losses in excess of, charged to paid-in capital or appropriated retained earnings* *

1312 .1902

Retained earnings, appropriated. See Appropriated retained earnings**

Safe deposit or safekeeping** Adverse claims to property held Minors' safe deposit rentals Power of banks to receive personal property for safe deposit Safe deposit agreements: notice of terms required Safe depositor: procedures on death or incompetence of

1606 1602 .1202 1608 .1609

Sales of bank's assets. See Assets**

Savings and loan associations May engage in banking business

1102

Savings and time deposits. See Deposits

Savings banks Amount of required reserve fund figured in relation to deposits; reserve requirements generally Banks desiring to be treated as savings banks Exemption of savings banks from restrictions of certain Code sections Powers of savings banks Savings banks becoming commercial banks

.1702 1314 1314 1314 1314

Scrip. See Shares**

Seal** On shares and other debt securities; validity of facsimiles Power of banks to have, alter, and use

1908 1201

Secretary.** See also Officers** Executes affidavit that full consideration for shares paid before
certificates delivered

.1907

32

Banks-Continued

SECTION

SigAnfsf:idavit pn. or to'Issuance 0 fper'mit to beg'm busm. ess Shares or debt securities; validity of fascimiles
SecretarY of State: procedures** Certificate of approval of State to National conVersions, mergers, or consolidations filed with Secretary of State For procedures concerning amendment of articles, see Amendment of articles For procedures concerning incorporation, see Incorporation For procedures concerning mergers or consolidations of State banks, see Mergers or consolidations of State banks For procedures concerning National to State conversions, mergers, or consolidations, see Conversions, mergers, and consolidations involving ational banks
Securities. See also Capital stock and capital securities, Debt securities, Investment securities, and Subordinated securities** Restrictions on powers of bank as surety or guarantor do not prohibit banks from giving warranties or guaranties in connection with transferring, exchanging, or collecting securities
Securities in which a portion of a bank's reserve fund shall be kept

.1807 1908 2507
.1311 .1702

Security deed to secure real estate loan .......................................1307

Security interests Authorized transactions in which a bank may grant security interests in assets** Power of banks to grant security interests in assets as qualification for membership in clearinghouse Power of banks to grant security intere ts in assets for Code-authorized borrowings* * Power of banks to grant security interests in assets for faithful performance as agent of the U. S. ** Power of banks to grant security interests in assets to secure certain deposits Power of banks to receive pledge or security interest in capital stock or capital securities - except its own - as colla teral for loans Power of banks to take security title to or security interests in real or personal property as collateral for loans or for evidences of indebtedness or agreements for the payment of money discounted or purchased
Security title Authorized transactions in which a bank may grant security title to its assets** Power of banks to take security title to or security intere~ts in real or personal property as collateral for loans or for evidences of R mdebtedness or agreements for the payment of money discounted or purchased eal estate loans secured by security litles
Set-off Assets that are part of bank's reserve fund not subject to set-off
Share certificates. See Shares**
Shareholders* * etions at law against shareholders Directors' right to contribution when shareholders knowingly receive
Liuanblialiwtiefuslod/;"~da~~hd~I~~rdsl~~b~~~~~~ib~;s'li~;ted' to' ~~ia"r~~~~~t ~'f'
payment for shares

2601 1301 1202 .1202 .1 310 .1309
.1301
2601 .1301 .1307 .1702
2215 . 2001

33

Banks-Continued

SECTION

Liabilities of shareholders not affected by mergers or consolidations

of State banks

'

Actions at law by shareholders

Actions for recovery of dividends and distributions

Applying to superior court to order substitute meeting of shareholders

2401
2101 2003

Derivative actions

Against directors and officers

'.'

2214,

Compromising of

2215 2001,

2012

Generally

20 II

Restrictions on

2012

To enforce liability to depositors and other creditors for

premature business

.1809

To enforce obligation to pay for shares

2001

Obtaining show cause orders from superior court permitting inspection

of books and records

"

2010

Relating to sale or disposition of shares not subject to preemptive

rights ."

2002

Rights of dissenting sharehholders

Right to dissent from certain sales or dispositions of bank's assets

2603

Right to dissent from mergers or consolidations of State banks

2408,

2402

Distributions to shareholders upon reduction of capital stock or paid-in

capital

2102

Unlawful distributions prohibited

" ..2103

Dividends paid to shareholders

2101

Unlawful dividends prohibited

2103

Meetings of hareholders

Actions taken without meetings: effect of consent

2003

Adjourned meetings: notice required

2003

Annual meeting: notice required

2003

Directors elected

"

2003

When and where meeting held

2003

Meeting to adopt amendment of article: directors' re olution is part

of required notice

, 2303

Meeting to approve certain sales or dispositions of bank's assets:

notice req uired

2602

Meeting to approve mergers or con olidations of State banks: notice

required

2402

Meeting to approve ational to State conversion, mergers, or

consolidations: notice required ........................................ 2501,

2502,

2402

Meeting to approve State to ationa! conversions, mergers, or

consolidations: notice required

Records of shareholders' meeting

.

Shareholders' organizational meetings (Optional) notice required "

2501 2010 1808

Special meetings or special meetings called in lieu of annual meeting:

notice required .....................................................2003

'Vilo calls

2003

Sub titute annual meeting ordered by superior court: notice required

"

2003

Power of shareholders to adopt, amend, or repeal bylaws

2202

Preemptive right of shareholder; hareholders may vote to waive .......... ".. " 2002

Removal of directors by shareholders ....................................... 2206

34

SECTIO

Banks-Continued

Righ t of shareholders to inspect books and record of bank

20 10

Shareholders approve certain sales or di positions of bank's assets

2602,

2603

Shareholders approve share plans for officers, employees, et aI

2209

Shareholders approve the converting of preferred hares to common shares

and of subordinated securities to common shares

1905

Shareholders au thorize issuance of subordinated securities

1910

Shareholders elect directors

2203

Shareholders elect directors at annual meeting. . . . . . . .. .

2003

Subscribers to shares prior to filing of articles of incorporation

become shareholders upon issuance of certificate of incorporation

1807

Voting by shareholders

Closing of transfer books or other fixing of record date

2004

Proxies of shareholders

2008,

2007

Quorum of shareholders ...............................................2006

Shareholders' agreements

2009

Voting lists of shareholders

2005

Voting of shares

2007

Corporation's shares

2007

Joint shares

2007

Pledged shares ......................................................2007

Receivers' shares

2007

Redeemed shares

2007

Shares held by trustee or administrator

2007

Subscribed shares

2007

Treasury shares

2007

Shale plans for officers, employees, et a1**

2209

SIwes. See also Capital stock and capital securities

Changes in ownership or right to vote shares leading to changes in control

of bank reported to Department

2013

Classes of common and preferred shares

.1904

Equality of shares

1904

Minimum par value

1904

Rights, privileges, limitations, etc

1904

Common shares: expense fund created out of amount paid for

.1903

Consideration for shares

.1906

Information on shares given in articles of incorporation. See Incorporation

Issuance of fractional shares or scrip; cash payment of fair value of

fractional shares

1909

Method of issuance of shares

1907

Preemptive righ ts of shareholders

2002

Preferred share acquisitions

2104

Redemption and convertibility of preferred shares

1905

Share certificates

Certificates not used when articles or bylaw 0 state

.1908

Information contained on certificates

1908

otice about shareholders' agreements placed on certificates binds

transferee

2009

Surrender of certificates upon merger or consolidation of State banks

2408

Validity of facsimile of seals and signature on certificates ..................... 1908

When certificate delivered

J 907,

1908

Share plans for officers, employee, et aI ................................ .2209

Option of hare

2209

Sale of shares

2209

3S

Bank -Continued

SECfIO

Shares as dividends; dividends on shares Shares in mergers or consolidations of State banks
Shares in ational to State conver ions, merger, or consolidations
Split of shares without increase in capital stock is no dividend Status of shares may be changed by amendment of articles
Subordinated securities ........................................... '" Convertibility of subordinated securities
Treasury hares As dividend ot voted at meetings nor counted in determining outstanding number of shares

2101 2402, 2403, 1803 2501, 2502, 2402, 1803 2101 2301, 2302, 2305 1910 .J 905
2101
2007

Unis ued shares: dividends payable in Voting of share

2101 2007

Signatures of officers on shares or other debt securities: validity of

facsimiles**

1908

Small business investment companies Banks may invest in the capital stock of

.J 309

State of Georgia: obligations of

A portion of a bank's reserve funds may be kept in

1702

State of Georgia, other states, and public bodies of either: obligations

of or guaranteed by

Exempted from limits on secured obligations of one person or corporation

1306

States: general obligations of Power of banks to hold as investment securities

1308, 1202

Statutory capital base
Aggregate amount of acceptance figured in relation to statutory capital base
Aggregate amount of certain real estate loans by a bank figured in
relation to statutory capital base Aggregate value of personal property leased to one person or corporation
figured in relation to statutory capital base
Loan limits of one person or corporation figured in relation to statutory capital base
Maximum permissible investment in real properly figured in relation to statutory capital base**
Total investment by banks in certain capital stocks figured in relation to statu tory capi tal base
Total amount of deposits by bank in anyone depository at a given time figured in relation to statutory capital base
Total amount that a bank may lend on pledge of capital stock or capital securitie figured in relation to statutory capital base

1305 1307 1303 1306 .\203 1309 1701 1309

Stock. See Capital stock and Shares**

Stockholders. See Shareholders**

36

SECfION

Bank -Continued

Subordinated securities Convertibility of su bordinated securities .................................. 1905

Deficiencies in capital stock upon payment or retirement of subordinated
securities General criteria for issuance and payment of subord~atedsecurities"
liabilities of banks in the form of subordinated securities are not

1910 1910

figured in the aggregate amount of outstanding liabilities of a bank for borrowed money
Maximum aggregate amount of obligations in the form of subordinated securities"

1312 1910

on-consideration of subordinated securities in determining ad valorem

taxes

1910

Proceeds of certain subordinated securities must be paid in before permit to begin business issued

1807

Subscribers. See Shareholders

Subsidiary corporations engaged in banking functions or activities Banks may invest in capital stock of

1309

Suits**

Power of banks to sue and be sued, to complain and defend in corporate

name

1201

Superior court: procedures For procedures concerning mergers or consolidations of State banks, see Mergers or consolidations of State banks May grant show cause order permitting inspection of books and records by shareholders May order substitute annual meeting of shareholders after notice Procedures in derivative suits by shareholders

2010 2003 2012

Surety or guanntor: banks as Power of bank as surety or guarantor Power of bank to reimburse and indemnify Litigation expenses of directors, officers, and employees and to maintain Liability insurance for their benefit Power of bank to secure bond and to give bond in court proceedings Power of bank to insure life of principal obligor pursuant to a contract obligating bank as surety or guarantor"
Taxes on-con ideration of subordinated securities in determining ad valorem taxes

1311
1201 1202 1201
1910

Tentative trusts '"
1bird party payment services Power of banks to provide

.1604 1301

Tune and savings deposits. See Deposits**

Treuurer. See Officers**

Treasury shares. See Shares. Trust companies
Banks may become through amendment of articles" UnissUed shares. See Shares **

2301

37

Banks-Continued
United States: obligations of A portion of a bank's reserve fund may be kept in
United States: obligations of or guaranteed by Exempted from limits on secured obligations of o.ne person or corporation Power of banks to acquire and hold as investment securities
Power of banks to act as agent for sale or issue of*
Veterans Administration Loans guaranteed by the Administrator exempted from c~rtain restrictions on real estate loans Loand guaranteed pursuant to Veterans' Benefit Act meet requirements for loans to directors and officers"
Vice president." See also Officers" Signs shares or debt securities; validity of facsimiles of signatures
Voting By directors. See Directors" By shareholders. See Shareholders"
Wars or other national emergencies Powers of banks during

SECTION
1702 1306 1308, 1202 1202
1307 2212 1908
1201

38

TRUST COMPANIES (Please note: the double starred items under BANKS also refer to Trust Companies)

SECTION

.uquisitions Of capital stock
Of investment securities
Of its own capital stock To avoid loss

1202,
1403 1202, 1403 1403
1202,
1204

Affidavit Power of trust companies to furnish required affidavits through officers

1402

Alent

Power of trust companies to act as

1401

Allets Power of trust companies that are also banks to grant security interests in assets for fiduciary funds deposited in its own commercial department Power of trust companies to grant security interests in assets for faithful performance

1310 1402

Attorney-in-fact Power of trust companies to act as ......................................... 1401

Banks Trust companies may become banks through amendment of articles

2301

Beneficial owner Fir t lien on security for deposits of fiduciary investment funds awaiting investment or distribution

1402

Bond Power of trust companies to give bond for faithful performance as fiduciary
Capital stock Capital stock held to avoid loss
Power of trust companies to acquire and hold
Restrictions on acquiring its own capital stock

1402
1204, 1202 1202, 1403 1403, 1204

"Collective investment fund" defmed

1404

CoDective investment funds Agreements for compensation Eligible property Mistakes in good faith no violation Participations: specifications Who may participate

1404 1404 1404 1404 1404

Common trust fund as a form of collective investment fund Depanment regulates maximum amount or percentage an estate, trust, or fund may invest in common trust funds
~Wnion~, mergers, and consolidations involving National banks. See BANKS -
Conversions, mergers, and consolidations involving National banks"
Custodian of property
POwer of trust companies to act as

1404 1504
1401

39

Trust Companies-Continued
Defmitions "Collective investmen t fund" "Trust company"

SECTIO
1404 102

Department: procedures

Approves a corporation's acting in a limited fiduciary capacity incidental

to marketing or selling securities on behalf of a religious, philanthropic,

or charitable organization

11 03

For procedures concerning fiduciary investment companies, see Fiduciary

Investment Company Act

Department: rules and regulations

For rules and regulations concerning fiduciary investment companies, see

Fiduciary Investment Company Act

To determine the maximum amount or percentage that may be inve ted by an

estate, trust, or fund in any common trust fund

J 504

To fix the extent to which a corporation may act in a limited fiduciary

capacity incidental to marketing or selling securities on behalf of a

religious, philanthropic, or charitable organization

1103

To regulate the establishment, operation, and maintenance of collective

investment funds

1404

Fiduciary Power of trust companies to act as
Trust company operations as fiduciary Who may/may not act as fiduciary

1103, 1401 1404 1103

Fiduciary deposits Deposits by fiduciary Deposits of funds awaiting investment or distribu tion
First lien of beneficial owner on security
Security required when deposit insurance inadequate
Power of trust companies that are also banks to grant security interests in assets to secure fiduciary funds deposited in its own commercial
department

1605 1402 1402 1402
1310

Fiduciary Investment Company Act

Annual or periodic fmancial reports ....................................... 1507

Articles of incorporation

Contents

1503

Powers and limitations on powers fIXed in articles

1505

Bylaws

Powers and limitations on powers fixed in bylaws

1505

Capital stock of fiduciary investmen t companies

Amount originally subscribed by each incorporator given in articles of

incorporation

1503

Fiduciary investment companies may acquire, purchase, or redeem, but

may not vote redeemed shares

.1505

How owned and held Ownership by trust institutions or foreign trust institutions:

.1505

limitation on amount

1504

Registration in name of nominee Transfer or assignment: limitations on

1505 1505

Vote of majority of outstanding securities approves and may terminate

contract or investment adviser

1508

40

Trust Companies-Continued

Comptroller of the Currency Examinations of fiduciary investment companies mean no examinations by Department Rules and regulations supersede rules and regulations of the Department
Corporate powers of fiduciary investment companies: limitations and restrictions
Definition "Fiduciary investment company" "Foreign trust institution" "Investment adviser" "Trust institution"
Department: procedures Approves fiduciary investment company before business begins Shall not examine fiduciary investment companies subject to regular examinations by the Comptroller of the Currency or the Federal Reserve System, but otherwise has full power to examine fiduciary inve tment companies and to enforce laws concerning them as though they were financial institutions
Department: rules and regulations To adopt and issue reasonable rules and regulations to govern conduct and management of fiduciary investment companies (This and other rules and regulations of the Department superseded by rules and regulations issued by the Comptroller of the Currency - Section 1505) To determine the maximum amount or percentage that may be invested by an estate, trust, or fund in any common trust fund (This regulation determines permissible maximum investment in fiduciary investment companies) To permit trust institutions or foreign trust institutions holding stock in fiduciary investment companies to adverti e participation Directors
Of fiduciary investment companies

May terminate contract of investment adviser

umber and qualifications

Of foreign trust institutions

As directors of fiduciary investment companies

Of trust institutions

As directors of fiduciary investment companies

As incorporators

Examinations of fiduciary investment companies Federal Reserve Sy tern

Examinations of fiduciary investment companies mean no examinations by

Department ::Fidu~iary investment company" defined

Foreign trust institution" defined

Foreign trust institutions

Adve.rtisement or publicizing of participation prohibited; exceptions

FUrnJsh annual or periodic fmancial reports of fiduciary investment

I companies to persons wi th a beneficial in terest

;vestment in fiduciary investment companies' limitations

Ge~ragyJ.aowBnusim.netessreCstoirnponroatmioonreCtohdaen 7 fiduciary investment companies

I

F!duc~ary Flducl~

~vestment mvestment

companies companies

incorporated under and subject to have corporate powers granted by

IncorporatIOn of fiduciary investment companies: procedures ,,~corporators of fiduciary investment companies
nvestment adviser" defmed

SECTION
1506 1505 1505 1501 1501 1501 1501 1502

1506

1506

1504 1507

1508 1505
1505
1505 1503 1506

1506 1501 1501

1507

1507 1504 1502

1503

1505

1503

'

1503

1501

41

Trust Companies-Continued

Investment advisers

May be chosen before business begins

Written contract of

Approval of contract

Compensation described in

How continues in effect

How terminated

,

Investments

Liability for improper investments by fiduciary

Permissible investments generally

Prohibited investments and activities enumerated

Officers

Of foreign trust institutions

As directors of fiduciary investment companies

Of trust institutions

As directors of fiduciary investment companies

As incorporators

Organization of fiduciary investment companies

Activity permitted before business begins

Approval'by Department before business begins

Procedures generally

Participation

Advertising or publicizing prohibited; exceptions

Prohibitions on refusing

Prudent management of fiduciary investment companies required

"Trust institution" defmed

Trust institu tions

Advertisement or publicizing participation prohibited; exceptions

Furnish annual or periodic fmancial reports of fiduciary investment

companies to persons with beneficial interest

Investment in fiduciary investment companies; limitation on amount

May organize and incorporate fiduciary investment companies

May own interest in no more than 7 fiduciary investment companies

Fiduciary property Deposit of fiduciary funds awaiting investment or distribution Holding in a legal form Investment in accordance with terms of receipt Investment in coUective investment funds Investment in fiduciary investment companies Keeping and segregation of records of Segregation of

Fiscal agen t Power of trust companies to act as . . . . . . . . . . . . . . . . . . . . . . .. .

Investment adviser Power of trust companies to act as

Investmen t securities Power of trust companie to acquire and hold

Power of trust companies to hold property to avoid loss on

Mergers or consolidations of State banks and/or trust companies. See Banks "Merger or consolidation of State banks"

SECTION
1502
1508 1508 1508 1508
1505 1505 1505
1505
1505 1503
1502 1502 1502
1507 1508 1505 1501
1507
1507 1504 1502 1502
1402 1402 1404 1404 1504 1402 1402
140 I
1401
1202, 1403 1202, 1403

42

Trust Companies-Continued
Nomenclature Who may/may not use trust nomenclature

SECTION 1104

Non.fiduciary investments Capital stock
Investment securities

1403 1403

Oath Power of trust companies to furnish required oaths or affmnations through officers

1402

Obliptions that can serve as security f!>r deposit of fiduciary funds awaiting investment or distribution

1402

Officen May furnish oaths, affmnations, or affidavits required of trust company

1402

Powen
Additional operational powers To acquire and hold capital stocks and investment securities
To acquire and hold personal property necessary to exercise of Code-eonferred powers
To acquire and hold property to avoid loss

1202, 1403
1202 i202,

To acquire and hold real property

1204 1202,

1203

To act as agen t of the U. S. for sale or issue of obligations of the

U. S. and to grant security interests in assets for faithful

perfonnance ....................................................... 1202

To exercise all incidental powers when approved by Commissioner of

Department

1202

To grant security interests in assets for Code-authorized borrowings

1202

To hold property lawfully held on April 1, 1975

1202

To rent safe deposit boxes for deposit of personal property or to

receive same for safekeeping

1202

To secure bond and to give bond in court proceedings

1202

Powers as fiduciary or representative

Pursuant to acting as fiduciary or representative, to invest property collectively in accordance wi th specific terms of receipt, wi thou t regard to restrictions on collective investment funds
To act as agent or attorney-in-fact

1404, 1401 1401

To act as custodian of property To act as fiduciary to act as fiscal agent of the U. S., et al To act as investment adviser To act as registrar or transfer agent of securities To act as treasurer of a public body or nonprofit corporation To have, pursuant to powers as fiduciary or representative, all rights
and duties which a person has in such capacity under applicable laws Power to establish and maintain collective investment funds

1401 1401 1401 1401 1401 1401

1401

,

1404

Reaistru or transfer agent of securities

POwer of trust companies to act as

1401

Security for deposits of fiduciary funds awaiting investment or distribution

1402

43

Trust Companies-Continued Security interests
Power of trust companies that are also banks to grant security interests in assets for fiduciary funds deposited in its own commercial department
Power of trust companies to grant security interests in assets for faithful performance as fiduciary
Shareholder Liability of fiduciary as shareholder
Shares Voting uf fiduciaries' shares
Treasurer Power of trust companie to act as
"Trust company" defined
Trust nomenclature Who may Imay not use

SECTIo
1310 1402 200 I 2007 1401 1404 1104

44

TABLE OF CONTENTS
n - PART BANKS AND TRUST COMPANIES.

Section 41 A-Jl 01. Section 41 A-II 02. Section 41 A-II 03. Section 41 A-II 04. Section 41 A-II 05.

Chapter 41A-11. General Matters.
Application. Restrictions on Engaging in Banking Business. Restrictions o.n Corporate Fiduciaries. Restrictions on Banldng and Trust omenclature. Requirements of Deposit Insurance; Notice.

Chapter 41 A-l2. General Powers of Banks and Trust Companies.
Section 41 A-1201. General Corporate Powers. Section 41 A-1202. Additional Operational Powers. Section 41 A-1203. Power to Hold Real Estate. Section 41 A-1204. Property Held to Avoid Loss.

Section 41 A-1301. Section 41 A-1302. Section 41 A-1303. Section 41 A-1304. Section 41 A-J305. Section 41 A-I 306. Section 41 A-1307. Section 41 A-130B. Section 41A-1309. Section 41 A-131 O. Section 41 A-J31 1. Section 41 A-131 2. Section 41 A-J3J3. Section 41 A-1 314.

Chapter 41A-13. Powers of Banks.
Major Banldng Powers. Participation in Federal Programs. Direct Leasing of Personal Property. Participations. Acceptances.
Limits on Obligations of One Person or Corporation. Real Estate Loans. Investment Securities. Corporate Stock and Securities. Security for Deposits. Powers as Surety or Guarantor. Borrowings. Interest and Fees. Savings Bank Powers and Exemptions.

Section 41 A-I 401. Section 41 A-1402. Section 41 A-1403. Section 41 A-1404.

Chapter 41A-14. Powers of Trust Companies.
Powers to Act as Fiduciary and in Other Representative Capacities. Operations as a Fiduciary.
on-fiduciary Investments. Collective Investment Funds.

Chapter 41A-15. Fiduciary Investment Company Act.
Section 41A-1501. Definition.
Sc tion 41 A-1502. Organization; Approval by Department. Section 41 A-1503. Incorporation. Section 41 A-1504. Limitations on Investments. Section 41 A-1505. Corporate Powers; Limitations and Restrictions. Section 41 A-1 506. Rules and Regulations; Examinations. Section 41 A-1507. Advertisement of Participation; Financial Reports. Section 41A-150B. Investment Advisers. Section 41A-1509. Prohibition on Refusing Participation.

Chapter 41A-16. Deposits, Safe Deposit Agreements and Money Received for Transmission.
Se tion 41 -1601. Rules Governing Deposits.
Section 41 -1602. Minors' Deposits and Safe Deposit Agreements. Section 41 A-1603. Joint Deposits. Section 41 A-1604. Tentative Trusts.
Section 41 A-1605. Deposit by Agent, Trustee or Other Fiduciary. Section 41 A-1606. Adverse Claims to Deposits and Property Held in Safe Deposit. Section 41 A-1607. Money Received for Transmission. Section 41 A-160B. Agreements Concerning Safe Deposit. Section 4 I A-1609. Procedures on Death of Safe Depositor.

Section 41 A-161 O. Payment of Deposit of Deceased Depositor. Section4IA-161l. Dormant Account.

Chapter 41 A-17. Banking Depositories, Reserves, Remissions.
Section 41 A-1701. Deposits by Banks. Section 41 A-1702. Legal Re erve Requirements; Notice; Penalty. Section 41 A-1703. Remission at Par.

Chapter 41 A-lB. Incorporation of Banks and Trust Companies.

Section 41 A-180l. Section 41 A-1802. Section 4IA-1803. Section 41 A-I 804. Section 41 A-180S. Section 41 A-1806. Section 41 A-I 807. Section 41 A-1808. Section 41 A-I 809.

Incorporator. Prohibition of Promoters' Fees. Articles of Incorporation; Advertisement. Filing with Department; Fees. Investigation; Approval by Department. Issuance of Certificate of Incorporation. Effect of Certificate of Incorporation; Permit to Begin Business. Organizational Meetings. Liability for Premature Business.

Section 41 A-190l. Section 41 A-1902. Section 41 A-1903. Section 41 A-1904. Section 41 A-190S. Section 41 A-1906. Section 41 A-1907. Section 41 A-1908. Section 41 A-1909. Section 41 A-191 O.

Chapter 41A-19. Financial Structure.
Minimum Capital. Paid-in Capital and Appropriated Retained Earnings. Expense Fund. Classes of Shares. Redemption and Convertibility. Consideration for Shares. Method of Issuance. Share Certificates. Is uance of Fractional Shares or Scrip. Subordinated Securities.

Section 41 A-200!. Section 41 A-2002. Section 41 A-2003. Section 41 A-2004. Section 41 A-200S. Section 41 A-2006. Section 41 A-2007. Section 41 A-2008. Section 41 A-2009. Section 41 A-20 10. Section 41 A-2011. Section 41 A-2012. Section 41 A-20 13.

Chapter 41 A-20. Shareholders.
Liability of Subscribers and Shareholders. Preemptive Rights. Meetings of Shareholders. Closing of Transfer Books and Fixing Record Date. Voting Lists. Quorum of Shareholders. Voting of Shares. Proxies. Shareholder Agreements. Books and Records. Derivative Actions by Shareholders. Restrictions on Derivative Actions. Report of Change in Control.

Chapter 41 A-21. Dividends, Distributions, and Preferred Share Acquisitions.

Section 41 A-21 0 l. Section 41 A-21 02. Section 41 A-21 03. Section 41 A-21 04.

Dividends; Limitations. Distribution pon Reduction of Capital Stock or Paid-in Capital.
nlawful Dividend and Distributions. Preferred Share Acquisitions.

Section 41 A-220 I. Section 41 A-2202. Section 41 A-2203. Section 41 A-2204. Section 41 A-220S. Section 41 A-2206. Section 41 A-2207. Section 41 A-2208.

Chapter 41 A-22. Management.
Board of Directors. By-laws.
umber, Term and Compensation of Directors. Action by Board; ommittee. Oath of Directors. Removal of Directors; Vacancies. Honorary and Advisory Po it ions. Audit.

Section 41 A-2209. Section 41 A-221 O. Section 41 A-2211.
Section 41 A-22I 2. Section 41 A-2213. Section 41 A-2214. Section 4IA-2215.

Officers, Agents, Share Plans. Bonds. Responsibility of Directors and Officers; Delegation of Investment Decisions. Financing Involving Directors or Officers. Prohibitions Applicable to Directors, Officers, Employees. Actions Again t Directors and Officers. Liability of Directors in Certain Cases.

Section 41 A-2301. Section 41 A-2302. Section 41 A-2303. Section 41 A-2304. Section 41 A-2305. Section 41 A-2306. Section 41 A-2307.

Chapter 4IA-23. Amendment of Articles.
Authorized Amendments. Proposal and Adoption of Amendments. Articles of Amendment. Advertisement; Referral to Department. Approval of Articles of Amendment. Issuance of Certificate of Amendment. Effect of Certificate of Amendment.

Chapter 4IA-24. Merger and Consolidation of State Banks.

Section 41A-2401. Section 41 A-2402. Section 41 A-2403. Section 4IA-2404. Section 41 A-2405. Section 41 A-2406.
Section 41 A-2407. Section 41 A-2408.

Authority to Merge or Consolidate. Requirements for Merger or Consolidation PLan. Articles of Merger or Consolidation. Filings with Department; PubLication of Notice. Approval by Department. Procedure after Approval by the Department; Issuance of Certificate of Merger or Consolidation. Effect of Merger or Consolidation. Rights of Dissenting Shareholders; Surrender of Certificate.

Chapter 41 A-25. Conversions, Mergers, and Consolidations Involving National Banks.

Section 41 A-2501.
Section 41 A-2502. Section 41 A-2503. Section 41 A-2504. Section 41 A-2505. Section 41 A-2506. Section 41 A-2507. Section 41 A-2508.

Aut hority for National to State Conversions, Mergers and Consolidations. Articles of Conversion, Merger or Consolidation. Filings with Department; Publication of Notice. Approval by Department. Issuance of Certificate. Effect of Issuance of Certificate. Authority for State to ational Conversions, Mergers or Consolidation. Authority for Merger or Consolidation of Non-Bank Entities into
ational Banks.

Chapter 4IA-26. Sales and Other Disposition of Assets.

Section 41 A-2601. Section 41 A-2602. Section 41 A-2603.

Secured Transactions and Other Dispositions of Assets Not Requiring Shareholder Approval. Sale, Lease, Exchange or Other Disposition of Assets Requiring Shareholder Approval. Right of Dissent.

Chapters 27 through 29. Reserved.

1101
PART II. BANKS AND TRUST COMPANIES.
CHAPTER 41 A-II. GENERAL MATIERS.
4IA-IIOl. Application. Any financial institution authorized by law to act both as a bank and a trust company shall enjoy and be subject to the powers and restrictions of a bank of its type in regard to its banking activities and in like manner shall enjoy and be subject to the powers and restrictions of a trust company in regard to its trust activity. With respect to general corporate matters not identified with either qanking or trust functions it shall have the privileges and restrictions of a bank of its type.
Co~ment: This new provision continues what is implicit in the former banking and trust company statutes. A trust company doing business as a bank is subject to regulation as such. Ga. Code Ann. Sees. 13-201 and 109-505. Likewise, a bank obtaining fiduciary authority is subject to trust company restrictions: Ga. Code Ann. Sec. 109-401.
41 A-II 02. Restrictions on Engaging in Banking Business. (a) 0 person or corporation may lawfully engage in this State in the business of banking or receiving money for deposit or transmission, or lawfully establish in this State a place of business for such purpose, except a bank, a national bank, a credit union to the extent provided in Part III of this Code, a licensee engaged in selling checks to the extent permitted by Part IV of this Code, an international banking agency to the extent provided in Part VII of this Code, or a building and loan association to the extent provided in Part VII of this Code, or a savings and loan association to the extent provided by the laws of the United States.
(b) None of the following shall be deemed to be engaged in the business of receiving money for deposit or transmission within the meaning of subsection (a) of this Section:
(1) a club or hotel to the extent it receives money from members or guests for temporary safekeeping;
(2) an express, steamship or telegraph company to the extent it receives money for transmission;
(3) an attorney-at-law, real estate agent, fiscal agent, insurance company, utility company, or any other person or corporation to the extent he or it receives and transmits money solely as an incident to a business or profession not governed by this Code.
Comment: This Section is derived from Pa. Stat. Ann. Tit. 7, Sec. 105. The provision is similar in purpose and effect to Section 13-204 of the Banking Code but with clarifying exceptions.
11-1

1103
41 A-II 03. Restriction on Corporate Fiduciaries. (a) 0 corporation existing under the laws of this State or national bank located in this State may lawfully act as a fiduciary except:
(1) a trust company; (2) a national bank located in this State authorized to act as a fiduciary under the laws of the United States; or (3) any corporation acting in a limited fiduciary capacity incidental to the marketing or sale of securities on behalf of a religious, philanthropic or charitable organization, but only upon the approval of the Department and to the extent permitted by regulations issued by the Department. (b) othing in this Code shall be construed to repeal or to change the provisions of Code Chapter 108-7, dealing with foreign trustees, or Code Chapter 108-8, dealing with certain foreign corporations acting as fiduciaries, or any other statutes or rules of law on such ubjects. Comment: This new provision is derived from Pa. Stat. Ann. Tit. 7, Sec. 106(a). Its base point is the long recognized doctrine, never expressly codified in Georgia, that a corporation may act as a fiduciary only where it has been expressly authorized to do so. In addition to trust institutions the proposed Section would, in a maImer similar to 1973 legislation, allow other corporations to act as fiduciaries in certain limited circumstances connected with the sale of securities for religious, philanthropic or charitable organizations, subject to Department regulation. othing in this Code would disturb existing rules as to foreign fiduciaries. 41 A-II 04. Restrictions on Banking and Trust Nomenclature. la) Except as provided in subsection (c), no per on or corporation cept a bank a national bank or a corporation lawfully owning the majority of the voting stock of a bank or national bank hall use the word 'bank' 'banker', 'banking company', banking hou e', or any other similar name indicating that the business done i that of a bank Upon any sign at its place of busines or elsewhere, or upon any of its letterheads, billheads, blank checks, blank notes, receipts, certificates, circulars advertisements or any other written or printed matter.
(b) Except as provided in subsection (c), no person or corporation xcept a trust company or a national bank lawfully authorized to exercise trust powers, or a corporation lawfully owning the majority of the voting stock of any such tru t company or national bank shall use the words 'trust company' or any similar name indicating that the bu ine s done is that of a trust company upon any sign at it p~ace of business or elsewhere, or upon any of it letterheads, billhead blank checks, blank notes receipts certificates, circular, adverti ements or any other written or printed matter.
1I-2

1104
(c) Nothing in this Section shall be construed to: (1) prevent the use of the words 'banks', 'banker', 'banking', or 'banker's' or any similar word in a context clearly not purporting to refer to a general banking business (2) prohibit advertisement in media distributed in or transmitted into this State by persons or corporations lawfully engaged in the banking or trust business outside of this State or (3) prevent any person or corporation from continuing to u e its name legally in use on April 1, 1975. Comment: This is a new provision designed to assure that unauthorized persons or corporations do not hold themselves out to be banks or trust companies. 41 A-II 05. Requirements of Deposit Insurance; Notice. (a) Every bank shall obtain and maintain deposit insurance satisfactory to the Department except that: (1) banks in existence and accepting deposits on April 1, 1975, pursuant to the provisions of The Regulated Certificated Bank Act may continue to accept deposits pursuant to the provisions of such Act notwithstanding any repeal of such Act by the pa sage of this Code; and (2) banks which have had their deposit insurance coverage withdrawn or cancelled may in the discretion of the Department continue to accept deposits; but in either of the cases set forth above, within six months after April 1 1975 in the case of banks excepted under subsection (a)(1) and within six months after withdrawal or cancellation of insurance in the case of banks excepted in ubsection (a)(2) uch banks shall obtain deposit insurance written by an insurance company authorized to transact bu iness in thi State (which insurance shall be satisfactory to the Department) or by the Federal Deposit Insurance Corporation. The Department may in its discretion for cause shown extend the time limitation in which deposit insurance must be obtained. (b) Deposit insurance required to be obtained in sub ection (a) need not be in excess of amounts insured by the Federal Deposit Insurance Corporation at the time the insurance is obtained, but wherever the insurance coverage is, in the opinion of the Department, less than amounts insured by the Federal Deposit Insurance Corporation, the bank shall be required to post a sign in boldface print, in letters at least four inches high, at a conspicuous place near the entrance of such bank, which states 'Deposits ot Insured' or 'Deposits Insured Up To (insert amount of deposit insurance)'. Such wording shall also follow the name of the bank wherever it is written or printed and shall be posted in writing which is easily legible in letters at least one inch high at each window or desk receiving deposits.
II-3

1105 Comment: Under the former Georgia law only regulated
certificated banks were required to obtain deposit insurance and then only when the Department determined that they could qualify and only up to $2,000. This provision makes deposit insurance mandatory in realistic amounts for all banks.
1I-4

1201
CHAPTER 41 A-12. GENERAL POWERS OF BANKS AND TRUST COMPANIES.
41A-1201. General Corporate Powers. Subject to re trictions contained in this Code or in its articles, a bank or trust company shall have the power:
(a) to have perpetual duration unless a limited period of duration is stated in its articles. Each bank or trust company existing on April 1, 1975, shall have perpetual duration unless its articles are amended under this Code to provide for a limited period of duration;
(b) to sue and be sued, complain and defend in its corporate name;
(c) to have a corporate seal which may be altered at pleasure and to use the same by causing it or a facsimile thereof to be impressed or affixed or in any manner reproduced;
(d) to adopt, alter, and repeal bylaws pursuant to the procedures of Section 4lA-2202 containing provisions for the regulation and management of affairs of the institution not inconsistent with law or its articles;
(e) to elect or appoint and remove officers and agents of the institution and to define their duties and fix their compensation;
(f) to make contracts; (g) to make, irrespective of corporate benefit, contributions and donations for the public welfare or for religious, charitable, scientific, educational hospital civic or similar purposes and in time of war or other national emergency in aid of the national effort with respect thereto; (h) at the request or direction of the United States Government or any public body thereof to transact lawful business in time of war or national emergency in aid of the national effort in connection therewith; (i) to procure, for its benefit, insurance on the life of any of its directors, officers or employees, or any other person, whose death might cause financial loss to the bank or trust company; or pursuant to any contract lawfully obligating the bank or trust company a guarantor or surety, on the life of the principal obligor; and U) to reimburse and indemnify litigation expenses of directors officers, and employees pursuant to agreements with them or otherwise and to purchase and maintain liability insurance for their benefit to the same extent as a business corporation may do so pursuant to Code Section 22-717, relating to indemnification of officers, directors, employees and agents. Comment: This Section states basic corporate powers of banking and trust institutions. The powers recognized are similar to powers contained in Ga. Code Ann. Sees. 13-1801, 13-1802, 22-4103, 22-4107 and 109-201. However, this Section would depart frol11
II-S

1201

former law by automatically conferring perpefUal duration of these institutions in the same manner that such duration is now enjoyed by general business corporations. Ga. Code Ann. Sec. 22-202(2). Historically, banks have been limited to a thirty-year duration with right of renewal. Ga. Code Ann. Sec. 13-}801.1. But this limitation may have been impliedly repealed by Section 22-4108 of the new Corporate Code to the extent that it allows 'Secretary of State corporations' to have 'continuous succession during the time limited by their charters . . . . ' But see Ga. Code Ann. Sec. 22-4801 (this portion of the Corporate Code is intended as recompilation of existing statutes). The resulting ambiguity is resolved in favor of perpetual duration because this right is enjoyed by national banks,
12 u.s. C. Sec. 24 2d, and there is no reason to put State banks and
tnlst companies to the burden of seeking charter renewal. These institutions, in allY case, normally contemplate and enjoy a longer life than other types of corporate entities. Moreover, subsections (h) through (j) have no express counterpart in the former banking or tnlst company laws. They are derived from the Business Corporation Code. Ga. Code Ann. Sec. 22-202.
41 A-1202. Additional Operational Powers.' Banks and tmst companies shall, in addition, have the power:
(a) to act as agent of the United States or any public body thereof for the sale or issue of bonds, notes or other obligations of the United States, or those for which the full faith and credit of the United States is pledged, and to grant security interests in its assets for the faithful performance of its duties as agent;
(b) to receive for safekeeping or to rent out receptacles or safe deposit boxes for the deposit of papers and other personal property;
(c) to grant security interests in their assets for borrowings uthorized by this Code and to dispose of their assets in the same manner as corporations generally;
(d) to give bond in any preceeding in any court in which they are a party or upon any appeal in any such proceeding and to secure such bond;
(e) to acquire and hold real property to the extent permitted by Section 41A-1203
(f) to acquire a~d hold stocks and investment securities subject, in
the case of banks, to the restrictions of Sections 41 A-1308 and 4IA-1309, and, in the case of tmst institutions, to the restrictions of
ection 41 A-1403
(g) to acquire' and hold personal property necessary in the exercise of powers conferred by this Code;
.(h) to acquire and hold any property in order to avoid loss on an eVidence of indebtedness, agreement for the payment of money, or an inve trnent security previously acquired lawfully and in good faith ubject to the restrictions of Section 41A-1204;

....Y.1975

11-6

1202

(i) to hold property lawfully held on April 1, 1975, irrespective of any restriction or limitation in this Code, subject to the inclusion of any such property in any computation of limitation on the acquisition of property of like character under this Code; and
U) to exercise all incidental powers as shall be necessary to carry on the banking or trust business, as the cause may be, when approved by the Commissioner of Banking and Finance.
Comment: The new Section is designed to provide a summary listing of the powers shared by both banking and trust institutions. The various authorizations to hold property are cumulative. The proposed Section would depart from former law in that the incidental powers clause contained in subsection (j) would not be restricted by an express proviso declaring that the power conferred is limited to that available to national banks. In view of the Georgia rule against prospective incorporation of federal statutes or regulations, such as proviso deprives the clause of much of its efficacy. It would appear to freeze the incidental powers available to those existing under federal regulations at the time of enactment of the statute, whereas one of the purposes of this clause is to allow State institutions to remain competitive when additional aut/writ) is recognized by the Comptroller of the Currency.
41A-1203. Power to Hold Real Estate. A bank or trust company may solely or jointly with other person or corporations acquire and hold such real property as it:
(a) occupies or intends to occupy for the transaction of it business or recreational use of its employees or partly so occupie and partly leases'
(b) acquires for the purpose of providing parking facilitie for the use of its tenants, customers officers and employees: or
(c) acquires with others for the purpo e of providing data processing facilities for the bank or trust company or for the bank or trust company and others; subject to the limitation that the investment of the bank or trust company in all such real property, in all furniture fixtures and equipment acquired in connection with any real property owned or
leased by the bank or trust company, of all alterations of building on real property owned or leased by the bank or trust company in all shares of corporations holding real estate in the categories described above, and in obligations of or for the benefit of such corporations or loans upon the security of the hares of such corporations hall not exceed sixty percent of the tatutory capital bas of the bank or trust company, or such larger amount as may be approved by the Department.
Comment: This provision is similar to authority granted to banks by Ga. Code Ann. Sec. 13-2024. It is, however, more explicit in tllat it defines the categories in which real estate is necessary for tile convenient operation of stich institutions and precludes in the statute

May, 1975

11-7

1203
itself al'oidance of limits on real estate investments through use of subsidiaries. This last problem has been dealt with by regulation. See Rules of the Department of Banking and Finance. Sec. 80-1-10.01.
41A-1204. Property Held to Avoid Loss. A bank or trust company may acquire and hold property for the purpose of avoiding 10 as specified in su bsection (h) of Section 41 A-1202 subject to:
(a) a determination by a majority vote of its directors at least once each year as to the advisability of retaining any such property, provided no such property may be held for more than five year without the prior written approval of the Department and
(b) disposition within a period of six months after the date of acqui ition or such longer period as the Department may approve in writing of shares of its own stock so acquired and of shares of stock of any bank or trust company held after such acquisition.
Comment: This Section would change the time limits on retention of stocks acquired as a protection against loss. The former statute permits banks to hold real estate so acquired for up to five years, but limits the holding period on such stock to six months subject in both cases to extension by the Department for good calise. Ga. Code Ann. Secs. 13-2023; 13-2024. This Section would retain a six-month limit for stocks of any bank or trust company, bllt would allow other assets taken in a salvage operation to be retained for up to five years, subject to an annual approval of the retention by the illstitu tion 's directors. The change is derived from Pa. Stat. A nn. Tit. 7. Sec. 202.

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CHAPTER 41A-13. POWERS OF BANKS.
41A-1301. Major Banking Powers. Subject to restrictions contained in this Code or in its articles, a bank shall have the power:
(a) to receive money or commercial paper for deposit, and provide by its rules or by agreement for the terms of withdrawal and interest thereon;
(b) to act as an agent to collect checks, drafts and other items of commercial paper, and in exercising this power to become a member of a clearinghouse and grant security interests in its assets for its qualification therein;
(c) to lend money and discount or purchase evidence of indebtedness and agreements for the payment of money, and to take security title or security interests in real or personal property to secure obliga tions owing thereunder
(d) to service loans made by it or by others whether or not held by the bank;
(e) to issue, advise and confirm letters of credit authorizing the beneficiaries thereof to draw upon the bank or its correspondents;
(f) to receive money for transmission; (g) to buy and sell exchange, coin and bullion; and (h) to provide third party payments services. Comment: This Section is designed to provide a summary, listing in modern terms, of most of the major powers of banking institutions. The powers recognized in subsections (a) and (c) are expressly authorized in Section 13-1807 of the Banking Code. The remaining powers are implicitly recognized. 41A-1302. Participation in Federal Programs. Any bank may; (a) become a member of the Federal Reserve System and conform to the rules and regulations of that system and the federal reserve bank of which it is a member; (b) become an insured bank pursuant to the Federal Deposit Insurance Act and take all action necessary to the maintenance of insured statutes thereunder; (c) apply for and obtain insurance on loans pursuant to national housing legisla tion. Comment: This provision is designed to assure protection to institutions acting pursuant to federal requirements. Subsection (a) is similar to Section 13-2038 of the former Code. Subsections (b) and (c) do not have an express counterpart in the former Code. The provision is derived from Pa. Stat. Ann. Tit. 7, Sec. 203. 41A-1303. Direct Leasing of Personal Property. Subject to such regulations as the Department may prescribe, a bank may become the owner and lessor of personal property acquired upon the specific request and for the use of a customer and may incur such additional obligations as may be incident to becoming an owner and lessor of

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uch property. At the end of any leases, the bank shall within six months, enter into a new lea e with respect to the property or dispose of it. The leasing shall not constitute an indebtedness under Section 4IA-1306, but the aggregate value of the property at any time leased to anyone person or corporation shall not exceed twenty percent of the statutory capital base of the banle
Comment: This provision would continue the direct leasing authority contained in Section 13-2023 of the Banking Code. It would, however, remove from the statute itself a requirement of insurance or indemnity against tort or warranty obligations and a prohibition on any service or repair obligations on the part of the bank. These deletions are made in order to place Georgia banks in a statutory position equivalent to that enjoyed by national banks and State banks in other jurisdictions. Direct leasing is a relatively new practice which may evolve into new forms. To the extent necessary, restrictions pertaining to insurance or service obligations or other matters may be imposed by the Department by regulation without attendant statutory rigidity.
41A-1304. Participations. (a) A bank may purchase and may sell participations in:
(I) one or more evidences of indebtedness or agreements for the payment of money, subject to regulations by the Department; or
(2) pools of evidences of indebtedness or agreements for the payment of money, subject to regulations by the Department.
(b) The Department may prohibit the sale of any type of participation to the public or otherwise not in the usual course of banking business except as permitted by other provisions of this Code.
Comment: This new provision would give express recognition to the widespread use of participations by bankers and subject it to regulations by the Department. The Section is derived from Pa. Stat. Ann. Tit. 7, Sec. 305.
41 A-130S. Acceptances. (a) A bank may accept drafts drawn upon it having not more than six months sight to run arising out of transactions involving:
(I) the import or export of goods; (2) the domestic shipment of goods, if secured by documents of title covering such goods; or (3) the storage of readily marketable staples, if secured by documents of title covering such staples. (b) The aggregate amount of acceptances under subsection (a) of this Section shall not at any time exceed: ( I) for all such acceptances on behalf of one customer ten percent of the statutory capital base of the bank exclusive of any acceptance secured by documents of title or other security growing out of the same transaction as the acceptance; and
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(2) for all such acceptances: (i) fifty percent of the statutory capital base of the bank; (ii) with the prior approval of the Department, one hundred percent of the tatutory capital base so long as acceptances growing out of domestic transactions do not exceed fifty percent of the statutory capital ba e. (c) In addition, a bank may, with the prior approval of the Department, accept drafts having not more than three month sight to run drawn upon it by banking institutions or bankers in foreign countries or in dependencies or insular possessions of the United States, for the purpose of creating dollar exchange as required by the usages of trade where the drafts are drawn in an aggregate amount which shall not at any time exceed: (1) for all such acceptances on behalf of a single banking institution or banker, ten percent of the statutory capital ba e; (2) for all such acceptances, fifty percent of the statutory capital base, provided that the Department may, by regulation, impose additional restrictions on the acceptance of drafts under this ubsection. Comment: This provision carries forward authority contained in Section 13-2020 of the Banking Code with two significant changes. First, with Department approval. the aggregate of all acceptances incident to commercial transactions may go to 100% of the capital base. A t present, federal reserve banks, upon approval of the Federal Reserve Board, have the capacity of accepting up to 100% of capital and surplus. Second, subsection (c) would introduce new authority to accept banker's drafts designed to generate foreign exchange, which would be in addition to the power in subsection (a). This
authority is- now held by federal reserve banks under 12 u.s. C. Sec.
373. The provision would retain the current Georgia practice of including capital securities in calculating the allowable limits. Compare Ga. Code Ann. Sec. 20-2025.1 with 12 C.P.R. Sec. 250.161 (capital securities excluded by Federal Reserve). This retention is predicated on the view that subordinated debt instruments contribute to the capital structure of an institution in a manner similar to traditional equity instruments.
41 A-1306. Limits on Obligations of One Person or Corporation. (a) A bank shall not at any time:
( 1) make loan to anyone person or corporation, or (2) have obligations owing to it from anyone per on or corporation as a result of purchasing or discounting evidences of indebtedne s or agreement for the payment of money, where the aggregate of aid loans and obligations together exceeds ten percent of the statutory capital base of the bank unless each loan, discount or purchase transaction in excess of said ten percent
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limit i approved in advance by the board of director or a committee authorized to act for it.
(b) Except a provided in subsection (c), a bank shall not directly or indirectly make loans to anyone person or corporation which in aggregate exceed ten percent of the statutory capital base of the bank unles the entire amount of such loans is secured by good collateral or other ample ecurity, and does not exceed twenty percent of the statutory capital base. Except as otherwi e indicated in subsection (c), the purchase or discount of agreements for the payment of money or evidences of indebtedness shall be regarded as indirect loans to the person or corporation receiving the proceeds of such transactions. In estimating loans to any individual person, all amounts loaned to firms and partnerships of which he i a member hall be included.
(c) The limitations of subsection (b) hall not apply to: (1) obligations arising from the purchase or discount of drafts drawn in good faith against actually existing values or commercial or business paper actually owned by the per on negotiating the paper to the extent of twenty percent of the statutory capital base of the bank; (2) obligations ansmg from the bona fide purchase of commercial or business paper without recourse against the transferor thereof or, subject to restrictions which the Department may impose by regulation, with recourse again t a merchant who takes such paper in sale or service transactions incident to his business where the party to whom he provides the goods or ervices is obligated on the paper; (3) obligations in the form of bona fide loans upon the ecurity of agricultural, manufactured or industrial products or livestock (or document of title covering such property) for which there is a ready sale in open market, provided no more than eighty percent of the market value of such products is loaned or advanced thereon the bank has the right to demand additional collateral to maintain this ratio and does so maintain it, and the bank's interest in such collaterai i fully protected by insurance again t loss by fire and other standard hazard and further provided that uch obligations haJJ qualify for exemption for not more than ten months if ecured by nonperi hable staples and for not more than six month if ecured by frozen or refrigerated staple; (4) obligations of and obligations guaranteed by: (i) the United States' (ii) the State of Georgia or a public body thereof authorized to levy taxes; or (iii) any state of the United States or any public body thereof if the obligation or guarantee are general obligations; (5) obligations to the extent secured by:
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(i) obligations specified in subparagraph (6) of this subsection (li) obligations which the bank would be authorized to acquire without limit as investment securities pursuant to Section 41A-1308 (ill) obligations fully guaranteed by the United States; (iv) guaranties or commitments or agreements to take over or purchase made by any public body of the United States or any corporation owned directly or indirectly by the United States; or (v) loan agreements between a local public agency or a public housing agency and an instrumentality of the United States pursuant to national housing legislation under which funds will be provided for payment of the obligations secured by such loan agreements; (6) obligations in the form of investment securities acquired pursuant to Section 41A-1308; (7) obligations with respect to acceptances under Section 41A-1305; and (8) obligations with respect to the sale of federal or correspondent funds to qualified depositories. (d) The Department may by regulation not inconsistent with the provisions of this Section, prescribe definitions of and requirement for transactions included in or excluded from the indebtedness to which the provisions of this Section apply. In add ition the Department may, by regulation or otherwise specify that the liabilities of a group of one or more per ons or corporations or both shall be considered as owed by one person or corporation for the purposes of this Section because the group relies sub tantially on a common our e for the payment of its obligations or make common use of funds received by it. Comment: This provision would retain the basic approach of Section 13-2013 of the Banking Code with some clarifications and adjustments. All loans and discounts in excess of 10% of a bank's capital base would require director or committee approval in advance. But the substantive 20% limitation is relaxed to allow the bank to take a merchant's paper on a recourse basis. The current statute encourages nonrecourse transactions when the limit is reached. Moreover, the exemption for governmental obligations is generalized to embrace obligations backed by the taxing power. T1ze Department is given power to determine when liabilities of different persons or corporations should be aggregated. 41A-1307. Real Estate Loans. (a) Except as provided in subsection (b), a bank shall make a loan secured by improved or unimproved real estate (including a leasehold) only where such loan is: (l) secured by a mortgage, deed of trust, security deed or similar instrument providing a first lien or a first security title, or is otherwise secured in accordance with regulations prescribed by the Department
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(2) for not more than seventy-five percent of the fair market value of the real estate in the case of single maturity 10(1.n, -or for not more than ninety percent of the fair market value of the real estate in the case of loans that must be regularly amortized, provided, however, that these limitations shall not apply to:
(i) any loan secured by real estate made to finance construction
of an improvement or development, in which case the amount of the
loan shall not exceed one hundred percent of the estimated completed value of the improvements;
(ii) any loan which the Federal Housing Administrator insures or makes a commitment to insure;
(iii) any loan which the Administrator of Veteran's Affairs guarantees or makes a commitment to guarantee; or
(iv) any other type of loan or a portion thereof with respect to which the Department determines that banks may safely extend loans in excess of the foregoing limitations;
(3) conforms with requirements as to duration, amortization appraisal, insurance, and documentation, as may be prescribed by regulation of the Department.
(b) The limitations of subsection (a) shall not apply to: (I) an investment security acquired pursuant to Section 4IA-1308; (2) a loan in connection with which the bank takes a real estate lien as security in the exercise of banking prudence but as to which it is relying for repayment on: (i) the general credit of the obligor or of an installment buyer or of a lessee of the real estate; (ii) collateral other than the real estate lien; (iii) a guaranty, or an agreement to take over or purchase the loan in the event of default, by a financially responsible person other than a person engaged in the business of guaranteeing real estate loans; or (iv) an agreement by a financially responsible person to take over or purchase the loan or to provide funds for payment thereof, within a period of two years from the date of the loan and there is a certificate of reliance setting forth the applicable facts. . (c) For the purpose of this Section, a 'leasehold' shall mean the interest, which is security for a loan, of a lessee of real estate under a lease which on the date of the loan has an unexpired term extending at least ten years beyond the maturity of the loan, or contains a right of renewal, which may be exercised by the bank, extending at least ten years beyond the maturity of the loan. (d) The aggregate amount of all loans by a bank subject to the requirements of subsection (a) shall not at any time exceed the greater of:
(1) the statutory capital base of the bank; or (2) the total time and savings deposits of the bank.

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Comment: This Section would generally carry forward the limitations of Section 13-2015 of the Georgia Code. It would, however, introduce some new flexibility into this regulatory area. The test for a real estate loan under former law is whether the loan proceeds are being used to finance acquisitions or improvement of the land. Under this Section this test is changed to whether the bank is primarily relying on the real estate as security. The use of the funds may be of evidentiary significance in this regard but is not controlling. This change comports with the federal practice. Additionally, the Department is given express power by regulation to exempt specified types of loans from the restrictions relating to fair market value. This addition recognizes current Georgia practice, and assures that changes at the State level may be made in response to federal revisions.
41A-1308. Investment Securities. A bank may purchase, sell, underwrite and hold investment securities which are obligations in the form of bonds, notes, or debentures to the extent and under such regulations as may be promulgated by the Department, provided that a bank may hold without limit such investment securities which are obligations of the United States, or obligations which are guaranteed fully as to principal and interest by the United States, or general obligations of any State.
Comment: The new provision would give full regulatory power to the Department to define permissible bank investment securities acquisitions. The Georgia law on this subject, codified in Section 13-202 of the Banking Code, is Widely regarded as confusing. Other jurisdictions have specifically incorporated federal statutes and regulations on the subject into their state enactments, e.g., Pa. Stat. Ann. Tit. 7, Sec. 307. However, this approach does not seem appropriate in Georgia because of state constitutional preclusions against prospective incorporation by reference of federal law. Attempt to adopt federal rules on the subject would arguably limit Georgia banks to investments permitted to national banks at the time of adoption of the statute. But the federal authorities periodically expand their list of expressly sanctioned investments. AccordinglJ, the best approach appears to be to give the state regulator a free hand to clarify and modernize this technical area of law. Cf. Miclz. Public Act of 1969, No. 319, Sec. 487.454 (Commissioner given
u.s. rule-making power within limits set by law).
41A-1309. Corporate Stock and Securities. (a) Except as provided in subsections (b) and (c) of this Section and in Section 4IA-1202, a bank may not engage in any transaction with respect to shares of stock or other capital securities of any corporation.
(b) A bank may: (I) engage in transactions with respect to issuance and transfer of shares of its own stock and capital securities and in other

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transactions with respect to such stock and capital securities authorized by this Code;
(2) purchase and sell shares of stock and capital securities upon the order of and for the account of a customer without recourse
against it; (3) receive a pledge or other security interest in stock or capital curities in order to secure loans made in good faith except that it
may not receive such interests in its own stock or capital securities, or lend in one or more transactions, involving one or more borrowers, more than thirty percent of its statutory capital base on the stock or capital securities of any corporation (including therein loans made directly to the corporation without ample security). The Department may, by regulation or otherwise, specify that two or more corporations are so interrelated that their stock shall be regarded as the stock of one corporation for the purposes of this subsection.
(c) A bank may acquire and hold for its own account: ( 1) shares of stock of a federal reserve bank, withou t limi ta tion of amount (2) shares of stock of: (i) the Federal National Mortgage Association and a corporation authorized to be created pursuant to Title Xl of the Housing and Urban Development Act of 1968; (ij) a business development corporation authorized under Part VI of this Code;
(iii) an agriculaural credit corporation duly organized under the laws of this State having au thority to make loans to farmers of this State for agricultural purposes and to discount the same with the Intermediate Credit Bank of Columbia;
(iv) a bank service corporation solely owned by one or more banks and created to provide check and deposit sorting and posting; computation and posting of interest and other credits and charges' preparation and mailing of checks, statements, notices and similar items, or any other clerical, clearing, bookkeeping, accounting, tatistical or similar services for one or more banks;
(v) a banking institution principally engaged in foreign or international banking, or banking in a dependency or insular possession of the United States either directly or through the agency, ownership or control of local institutions in foreign countries or in such dependencies or insular possessions, including the stock of one or more Corporations existing pursuant to Section 25(a) of the Federal ~eserve Act provided that before a bank may purchase a majority mterest in any such banking institution it shall enter into an agreement with the Department to restrict its operations in such !1lanner as the Department may prescribe, and provided, further that If the Department determines that said restrictions have not been

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complied with, it may order the disposition of said stock upon reasonable notice;
(vi) a subsidiary corporation engaged in functions or activities
that the bank is authorized to carryon including conducting a safe deposit business, holding real estate that may be held by the bank or exercising powers incidental to the banking business as provided in subsection U) of Section 4IA-1202' and
(vii) other corporations created pursuant to Act of Congress for the purpose of meeting the agricultural, housing, health, transit, educational, environmental or similar needs of the nation where the Department determines that investment therein by banks is in the public interest; provided, that the bank's investment in any such category of stock under this subsection (c)(2) shall not exceed ten percent of its statutory capital base, except that in the case of stock acquired under subsection (c)(2)(vi), such investment shall not exceed the lesser of ten percent of the total assets of the bank or one hundred percent of the statutory capital base of the bank; and provided, further, that no acquisitions may be made pursuant to subsection (c)(2)(iv) through (~)(2)(vii) without the prior approval of the Department; and
(3) shares of stock of small business investment companies organized under Acts of Congres and doing business in this State, provided that the aggregate investment by the bank in such shares shall not exceed five percent of its statutory capital base.
Comment: This nE;W provision summarizes the stock acquisition powers of banks. It would carry forward law as found in Ga. Code Ann. Sections 13-2017, 13-2023, 13-2023.1 and 84-6407 with the following changes;
I) ew authority is introduced to allow investment in stock of the Federal alional Mortgage Association and in corporations organized under Title XI of the Housing and Urban Development Act
of 1968. This authority is now held by national banks. 12 u.s. C.
Sections 24, 1718. 2) In order to avoid constant amendments in this area, the
Commissioner is authorized to approve limited investment in other federally created corporations of a similar nature.
3) The requirement of Department approval before investing in agricultural credit corporations is removed.
4) Authority is added for investment in operations subsidiaries which may exercise either express banking functions or powers incidental to banking. The former statute specifically authorizes such

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subsidiaries only to hold bank premises or to exercise incidental powers. Ga. Code Ann., Sections 13-2023(h) and 13-2066.
5) A statutory limit is established for investment in such
ell operations subsidiaries. It is set ~he lesser of ten percent of total
assets or one hundred percent of the capital base. 6) The requirements for investment in bank service corporations
are adjusted to parallel the federal requirements. See 12 U. S. c.,
Sections 1861-1865. 41 A-l31 O. Security for Deposits. (a) A bank may pledge or
otherwise grant security interests in its assets to secure deposits of: (1) public fund.s: (2) funds of a pension fund for employees of a public body of the
State; (3) funds for which a public body of the State or an officer or
employee thereof or any court of law is the custodian or trustee pursuant to statute;
(4) funds held by the Department as receiver; (5) funds which are required to be secured by law or by an order of a court; and (6) in the case of a bank which is also a trust company, funds held in a fiduciary capacity and deposited in its commercial department pursuant to Section 41A-1402 of this Code. (b) A bank may not pledge or otherwise grant security interests in its assets as security for deposits other than those covered by subsection (a) of this Section. Comment: This provision carries forward 1973 legislation. Ga. Laws 1973, pp. 526,532. 41A-l311. Powers as Surety or Guarantor. (a) Except as authorized in subsection (b) and in Sections 41A-1201U) and 41A-1202(d) a bank shall not lend its credit, bind itself as a surety to indemnify another, or otherwise become a guarantor. (b) A bank may act as a surety or guarantor if it has a substantial interest in the performance of the transaction involved or has a segregated deposit sufficient in amount to cover the institution's potential liability.
(c) Nothing herein shall be construed to prohibit banks from: (l) giving warranties or guaranties in connection with the handling of items for collection, the transfer, exchange or collection of securities, or the sale or disposition of its assets; (2) issuing letters of credit, provided that the Department shall by regulation establish criteria distinguishing letters of credit and guaran ties.
Comment: The Banking Code does not define when a bank may act as a guarantor or surety. However, Georgia courts have long held that such institutions may not act as guarantors in transactions where they have no direct interest. First Nat'!. Bank v. Monroe, 135 Ga.

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614 (J911); Brown v. Bank of Covington, 24 Ga. App. 511 (J919J. And the authorities are divided as to such power in circumstances where the bank itself has financial involvement. Compare Central Railroad & Banking Co. v. Farmer Loan & Trust Co., 114 Fed. 263 (5th Cir. 1902) with Walton County Bank v. Stanton, 38 Ga. App. 591, affd 169 Ga. 40 (J928). The proposed section would resolve the conflict by following the approach taken by the Comptroller of Currency for national banks, 12 CF.R., Sec. 7.7010. It retains as a recognized exception the ability to issue letters of credit, which, though analytically similar to guaranties, are an established banking practice. See Bank of Lumpkin v. Peoples Bank of Athens, 27 Ga. App. 459 (192JJ. Use of letters of credit is currently expanding into new areas. Accordingly, establishment of rules distinguishing between permissible letters of credit and prohibited guaranties is appropriately left to the regulator.
41 A-1312. Borrowings. (a) Subject to the restrictions of subsection (b), a bank may borrow money and issue notes, debentures or other obligations to evidence such borrowings.
(b) The aggregate amount of outstanding liabilities of a bank for money borrowed exclusive of:
(I) liabilities to a federal reserve bank on account of money borrowed or rediscounts;
(2) liabilities on account of the acquisition of reserve balances at a federal reserve bank or other reserve agent from a member or a nonmember bank;
(3) liabilities on account of agreements to repurchase securities sold by the bank (commonly known as 'repurchase agreements'); and
(4) liabilities in the form of subordinated securities under Section 4IA-1910;
(5) liabilities which do not constitute or result from the borrowing of money under definitions prescribed by regulation of the Department, shall not at any time exceed the aggregate of the amount of twice its unimparied capital stock plus the amount of its unimpaired paid-in capital, appropriated retained earnings and retained earnings provided that the Department may in the case of an individual bank permit borrowings without regard to the restrictions of this Section for emergency purposes, and prohibit or place additional restrictions upon further borrowings which would, in the judgment of the Department, constitute an unsound or unsafe practice in view of the condition and circumstances of the bank.
Comment: This provision would carry forward 1973 legislation. Ga. Laws 1973, pp. 526, 529.
41A-1313. Interest and Fees. Any bank may take receive, reserve and charge interest and fees on any loan, advance of money or forbearance to enforce the collection of money at rates not

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exceeding the limits set by the laws of this State. Whenever such laws authorize a special interest or fee rate with respect to a designated type of loan then a bank may charge that special interest or fee on loan of that type made by it. Whenever such laws authorize a person or a corporation other than a bank to charge a special interest or fee rate with respect to a designated type of loan, then a bank may charge such rate or fee on loans made by it which would qualify as the designated type of loan if made by the person or corporation so authorized without any requirement for the bank to obtain any licen e quaUfication or permit.
Comment: Section 13-2019 of the present Banking Code states that banks may charge interest 'not exceeding eight percent per annum'. This provision is an incomplete statement of the law and must be read together with other usury and related statutes codified in Title 57 of the Code of Georgia and elsewhere. This Code does not attempt to specify rates that banks may charge, allowing them to be fixed by other Georgia laws. It would, however, authorize banks to charge rates permitted to other lenders with respect to designated types of loans. For example, small loans may be made at a special rate under the Industrial Loan Act, Ga. Code Ann., Chapter 25-3.
ational banks already enjoy the right to charge a similar rate on
such loans under the construction which has been given to 12 u.s. C.
5. Lane v. Hackley Union ational Bank, 334 P-Supp. 723 (D.C. Mich. 197JJ. This provision would restore competitive equality to State banks on this question.
41 A-1314. Savings Bank Powers and Exemptions. (a) A bank de iring to be accorded treatment under this Code a a savings bank hall tate in its articles that it does not have the power to hold deposit subject to check, provided that banks in exi tence on April I, 1975 which did not then hold deposits subject to check shall be deemed to qualify as a savings bank without amendment of their articles so long as they do not hold deposits ubject to check after April I 1975.
(b) A avings bank may apply to the Department for permission to reUnquish its status as a savings bank and become a commercial bank. The Department may exercise its discretion in determining whether to approve such a change and shall consider in connection therewith the criteria enumerated in Section 41 A-1805.
(c) Savings banks shall be exempt from restriction impo ed by the following Sections of this Code:
(I) Section 41 A-1202(g) pertaining to ownership of personal property;
(2) Section 41 A-1203 pertaining to ownership of real e tate: (3) Section 41 A-1303 pertaining to direct leasing of personal property;
(4) Section 41 A-1307 pertaining to real e tate loan;
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1314 (5) Section 41A-1308 pertaining to investment securities; (6) Section 41 A-1309 pertaining to corporate stock and secu ri ties. Comment: This new provision defines the powers and restrictions of savings banks. It follows former Georgia law except that specific authority is added which would permit conversion of savings banks to commercial banks, and savings banks are exempted from restrictions relating to real estate loans. The latter exemption was the Georgia law prior to a 1972 amendment to Section 13-2015 of the present Banking Code.
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CHAPTER 4IA-14. POWERS OF TRUST COMPANIES.
41 A-140 I. Powers to Act as Fiduciary and in Other Represen tative Capacities. (a) A tru t company may act, alone or with other, as:
(I) fiduciary; (2) investment advisor; (3) cu todian of property; (4) agent or attorney-in-fact (5) registrar or transfer agent of securities' (6) fiscal agent of the United States, a state, or a public body thereof, a corporation or a person; and (7) treasurer of a public body or of a nonprofit corporation. (b) A trust company shall have, in respect to any capacity in which it may act pursuant to a power under subsection (a) of this Section, all the rights and duties which a person has in such capacity under applicable laws and under the terms upon which the trust company is designated to act in such capacity. Comment: This provision summarizes the major powers of trust institutions. The powers recognized here are expressly or impliedly recognized under former Georgia statute. See Ga. Code Ann. Sec. 109-201. The intent is that trust institutions be able to act in these categories to the same extent as an individual under applicable laws and trust documents. The Section would depart from former law in omitting authority to engage in the mortgage guaranty business or to write title insurance. 41 A-I 402. Operations as a Fiduciary. A trust company in its capacity as fiduciary shall: (a) segregate all property (other than items in the course of collection) h Id as a fiduciary from its non-fiduciary a sets and keep parate records of aU such fiduciary property for each account for which such property is held; (b) hold property held as fiduciary in a form complying with applicable law; (c) keep fiduciary funds awaiting investment or distribution in depo its in an authorized financial institution (including, in the case of a trust company which is also a bank, its own commercial department) which are insured or to the extent of any deficiencies in in urance coverage fully ecured by a pledge or a signment of bond or obligations of the United States, thi State or public body of either or other obligations guaranteed as to principal and intere t by the United States or thi State or public body of either, or real e tate loan ecured by a first lien or security title to improved realty and insured pursuant to any title of the ational Housing Act. The
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beneficial owners of such uninvested funds hall have a first and prior lien on such security;
(d) not be required to execute a bond or give any security required by the law of fiduciaries but may give its own bond and pledge or otherwi e grant ecurity interests in its asset a security for the faithful performance of its duties as fiduciary or as surety for such faithful performance by any co-fiduciary where uch is req uested or otherwise required; and
(e) provide any' oath or affirmation or any affidavit required of the trust company through an officer thereof acting on behalf of the trust company.
Comment: Although subsections (a), (b) and (e) have no express counterpart in the former Trust Company Code, they represent codification of established doctrine concerning fiduciaries. Subsection (c) carries forward the substance of Sections 109-510 through 109-512 of the former law. Subsection (d) would relieve a trust company of any bonding requirement arising by force of law; a trust instrument could itself still impose such an obligation.
41A-1403. on-fiduciary Investments. A trust company which is not a bank may, apart from its fiduciary activi ties, invest in tock and inve tment securities except that it may not acquire or hold its own stock otherwise than pursuant to subsections (h) and (i) of Section 41A-1202.
Comment: The status of pure trust companies in regard to non-fiduciary activities is obscure under former law. Section 109-201 of the Trust Company Code speaks in terms of the 'powers and functions of corporations generally', but Section 109-503 subjects these institutions to the same control and supervision as banks. This provision would allow a pure trust company to have stock acquisitions with its non-fiduciary assets. Otherwise, these institutions are generally subject to bank restrictions under this Code.
41A-1404. Collective Investment Funds. (a) A trust company may establish and maintain collective investment funds for the investment or reinvestment of property which:
(1) is contributed by the trust company in a capacity in which it is authorized to act pursuant to Section 41 A-140 I; and
(2) is eligible for contribution to a collective investment fund under provisions of this Section. As used in this Section the term 'collective investment fund' shall include a common trust fund and any other ty.pe of collective investment fund.
(b) Property shall be eligible for contribution whenever the instrument, judgment, decree or order under which the trust company holds the property does not prohibit investment in the type of collective investment fund involved provided that if the trust company holds the property under circumstances limiting it to
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investing the property in legal investment for fiduciaries, then it may invest the property only in a collective investment fund limited to assets authorized as legal investments for a fiduciary.
(c) The Department shall regulate the establishment, operation and maintenance of collective investment funds. Such regulations of the Department shall comply with the general standards for exercise of the regulatory power of the Department under this Code and, in addition shall be designed to assure:
(1) ratably equal treatment of the participants in a fund by imposing minimum requirements for the method and frequency of valuation of participations in the fund, for the time and method of admission or withdrawals of participations in the fund and for the determination of.interests of participants in the assets and income of the fund; and
(2) the competitive equality between trust companies and national banks exercising fiduciary powers with respect to the authority to establish and maintain collective investment funds to the extent compatible with the general purposes of this Code.
(d) 0 mistake made in good faith and in the exerci e of due care in connection with the administration of a collective investment fund hall be deemed a violation of thi Section or of any other duty of the trust company if promptly after discovery of the mi take, the tru t company takes whatever action may be practicable in the circumstances to remedy the mi take.
(e) Any other trust company or national bank with trust powers which is a member of an affiliated group (as defined in Section 1504 of the Internal Revenue Code of 1954) with a trust company maintaining collective inve tment funds may participate in one or more uch funds as though they were maintained by the participating tru t company. Such participation may be made pursuant to agreement providing for rea onable compensation for the trust company maintaining the fund or fund .
(0 A trust company may, in any capacity in which it may act
under Section 41A-1401, invest property collectively in accordance with the specific terms upon which it receives such property without regard to the restrictions of this Section.
Comment: This provision carries forward authority contained in Chapter 109-6 of the Trust Company Code for trust or agency ;nvestmel t funds, but deletes much of the detail contained in the statutes in regard to such funds. As a practical matter, the feasibility of such funds is dependent upon their qualification as tax exempt under the Internal Revenue Code. Presently, the IRC makes such exemption dependent on conformity with the regulations of the Comptroller of Currency relating to the maintenance of such funds by .national banks. Much of the detail in the former Code was deSigned to conform to the Comptroller's regulations at the time it
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was enacted. Since the crucial factor is content of federal regulations, the restrictions on such funds are appropriately left to prescription by regulation on the State level.
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CHAPTER 4IA-IS. FIDUCIARY INVESTMENT COMPANY ACT.
41 A-ISOI. Definitions. As used in this Chapter the following term hall be construed to have the meaning et forth by thi Section, unle s a contrary meaning clearly appear from the context:
(a) The term investment adviser' of a fiduciary investment company means:
(I) any trust institution which pursuant to contract with a fiduciary investment company possessing the qualification provided by thi Chapter, regularly furnishes advice to uch investment company with respect to the desirability of investing in purchasing or selling securities or other property or is empowered to determine what ecurities or other property shall be purchased or old by such inve tment company; and
(2) any person or corporation other than a trust institution who, pursuant to contract with such trust institution, regularly performs ubstantially all of such duties undertaken by such tru t institution.
(b) The term 'fiduciary investment company' means a corporation which is an investment company as defined by the Act of Congress ntitled 'Investment Company Act of 1940' and is incorporated in accordance with Chapters 22-1 through 22-20 of the Georgia Bu iness Corporation Code so as to constitute a medium for the investment of funds held by trust institutions and foreign trust in titutions in a fiduciary capacity either alone or with one or more co-fid uciaries.
(c) The term 'foreign trust institution' means any State banking i "titution or trust company organized under the law of any state other than Georgia or any national banking association incorporated under the laws of the United States and having its principal office in orne state other than Georgia which has trust powers and is authorized to act in a fiduciary capacity under the law under which it wa incorporated.
(d) The term 'trust institution' mean any tru t company or any national bank with it principal office located in this State authorized to act as a fiduciary.
Comment: This provision, along with the remainder of this Chapter, is designed to carry forward the Fiduciary Investment Company Act formerly codified as Chapter 109-9 of the Trust Cumpany Code.
41 A-IS02. Organization; Approval by Department. Anyone or more tru t institutions may cause a fiduciary investment company or companies to be organized and incorporated, but no trust institution or foreign trust institution may own an interest in more than seven fiduciary investment companies. A fiduciary investment company
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shall not begin business except to select an investment adviser until it is approved by the Department.
Comment: This provision restates the substance of Ga. Code Ann. Sec. 109-903, as amended by Ga. Laws 1973, p. 549.
41 A-IS03. Incorporation. Any such fiduciary investment company hall be incorporated under and subject to the provision of the Georgia Business Corporation Code. The incorporators shall be persons who are officers or directors of the trust institution or institutions causing such fiduciary investment company to be incorporated, and the articles of incorporation shall set forth the name of each trust institution participating in such incorporation and the amount of stock originally subscribed for by each, together with such other facts as are required by the Georgia Business Corporation Code.
Comment: This provision restates Ga. Code Ann. Sec. 109-904. 41 A-IS04. Limitations on Investments. Trust institutions and foreign trust institutions, as defined by this Chapter, acting in a fiduciary capacity and for fiduciary purposes, may, if exercising due care as a prudent investor, and with the consent of any co-fiduciary invest and reinvest funds held in such fiduciary capacity in the shares of stock of one or more fiduciary investment companies, except where the will, trust indenture or other instrument under which such trust institution or foreign trust institution acts, prohibits such investment; provided the fiduciary investment company shall by its articles of incorporation issued and granted in conformity with the Georgia Business Corporation Code have and possess the corporate powers required by this Chapter and be subject to the limitation set forth by this Chapter provided, further, that no such trust institution or foreign trust institution shall invest in the stock of a fiduciary investment company on behalf of any estate, trust or fund administered by such trust institution or foreign trust institution a sum or amount which would result in such estate, trust or fund having a total investment in such stock in excess of the maximum amount or percentage that might be invested by such estate, trust or fund, under the regulations of the Department in effect at the time of such investment, in any common trust fund having total assets equal to the total assets of the fiduciary investment company as increased by the proposed investment, and no trust institution or foreign trust institution shall invest in the stock of a fiduciary investment company if, immediately after such investment and as a consequence thereof, it would own more than twenty-five percent of the voting securities of such fiduciary investment company which would then be outstanding. Comment: This provision restates Ga. Code Ann. Sec. 109-905, as amended by Ga. Laws 1973, pp. 549,550.
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4IA-1505. Corporate Powers; Limitations and Restrictions. Every fiduciary investment company in which a trust in titution or foreign trust institution is authorized by this Chapter to own and hold corporate stock or shares, in order to qualify for such investments, shall have such corporate powers as may be granted by the Georgia Busine s Corporation Code by virtue of its incorporation under that law and shall in addition have the following corporate powers under its articles of incorporation and, by its articles of incorporation or its by-laws, be subject to the limitations and restrictions hereinafter set forth, to-wit:
(a) The stock of any such fiduciary investment company shall be owned and held only by trust institutions and foreign trust institutions acting as fiduciaries or co-fiduciaries but may be registered in the name of the nominee or nominees of any such trust institution or foreign trust institution. Such stock shall not be subject to transfer or assignment except to the trust institution or foreign trust institution on whose behalf the stock is held by any such nominee or nominees, or to a fiduciary or co-fiduciary which becomes successor to the shareholder and which is also a trust institution or foreign trust institution qualified to hold such stock.
(b) A fiduciary investment company hall have no less than five directors who need not be shareholders but shall be officers or directors of trust institutions or foreign trust institutions holding tock in such fiduciary investment company; provided, however, no more than two directors shall be officers or directors of anyone trust institution or foreign trust institution if the fiduciary investment company has been organized and incorporated by three or more trust institu tions.
(c) In acquiring investing, reinvesting, exchanging, selling and man ring its assets, every fiduciary investment company shall exercise the judgment and care under the circumstances then existing which men of prudence discretion and intelligence exercise in the management of their own affair, not in regard to speculation but in regard to the permanent disposition of their funds, considering the probable income as well as the safety of their capital. Within the foregoing limitations, a fiduciary investment company may acquire and retain every kind of investment, specifically including (but not by way of limitation) bonds, debentures and other corporate obligations, corporate stocks preferred or common, which men of prudence, discretion and intelligence acquire or retain for their own account, provided a fiduciary investment company shall not at any time:
(I) invest in real estate, commodities or commodity contracts; (2) participate on a joint or joint and several basis in any securities trading account;
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(3) invest in companies for the purpose of exercising control or management;
(4) make loans to any person or persons, except that the purchase of a portion of an issue of debt securities, convertible debt securities, debt securities with warrants, rights or options attached or other similar securities when originally issued or thereafter of a character commonly distributed publicly shall not be considered the making of a loan;
(5) purchase or retain the securities of any issuer if immediately after such acquisition and as a result thereof the following requirements would not be met: at least seventy-five percent of the total assets in the fiduciary investment company taken at market value are represented by cash and cash items securitie issued or guaranteed by the United States or an instrumentality thereof and other securities which, as to anyone issuer, do not represent more than ten percent of the value of the total assets of the fiduciary investment company;
(6) purchase or otherwise acquire the securities of any other investment company as that term is defined in the Act of Congress entitled 'Investment Company Act of 1940';
(7) act as underwriter of the securities of other issuer; (8) borrow money; or (9) engage in margin transactions or short sales, or write, put or call options for the purchase or sale of securities. (d) A fiduciary investment company may acquire, purchase or redeem its own stock and shall, by means of contract or by it bylaws bind itself to acquire, purchase or redeem its own stock, but it shall not vote shares of its own stock theretofore redeemed. (e) A fiduciary investment company shall not be responsible for a certaining the investment powers of any fiduciary who may purchase its stock and shall not be liable for accepting funds from a fiduciary in violation of restrictions of the will, trust indenture or other instrument under which such fiduciary is acting in absence of actual knowledge of such violation, and shall be accountable only to the Department and the fiduciaries who are the owners of its tock. (f) Every fiduciary investment company subject to the supervision and regulation of the Comptroller of the Currency of the United States shall comply with all applicable rules and regulations of that agency to the extent that such rules and regulations are in addition to or in conflict with rules and regulations promulgated by the Department. Comment: This provision restates Ga. Code Ann. Sec. 109-906, as amended by Ga. Laws 1973, pp. 549, 551. 41A-1506. Rules and Regulations; Examinations. Without limitation on the authority conferred by Part I of this Code, the Department shall have authority to adopt and issue reasonable and
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uniform rules and regulations to govern the conduct and management of all fiduciary investment companies. The Department hall not examine fiduciary investment companies subject to regular examination by the Comptroller of the Currency of the United States or the Board of Governors of the Federal Reserve System, but hall otherwise have full power to examine fiduciary investment companies and enforce laws concerning them as though they were financial institu tions.
Comment: This provision restates a portion of Ga. Code Ann. Sec. 109-907, as amended by Ga. Laws 1973, pp. 549, 551. In the light of Part I it is unnecessary to repeat here other material referring to examinations and enforcement powers. See Secs. 41A-305, 41A-307 and 41 A-404.
41A-1507. Advertisement of Participation; Financial Reports. . Except as may be specifically authorized by rule or regulation of the
Department, no trust institution or foreign trust institution holding tock in a fiduciary investment company may advertise or publicize it participation in such fiduciary investment company; provided that any trust institution or foreign trust institution holding stock in a fiduciary investment company shall furnish the annual or periodic financial reports of such fiduciary investment company, on request, to any person having a beneficial interest therein, and the fact of the availability of such material may be given publicity in connection with the promotion of the fiduciary services of such trust institution or foreign trust institution.
Comment: This provision restates Ga. Code Ann. Sec. 109-908. 41 A-1508. Investment Advisers. 0 person shall serve or act as investment adviser of a fiduciary investment company except pursuant to a written contract, which contract has been approved by th vote of a majority of the outstanding voting securities of such fiduciary investment company and (a) precisely describes all compensation to be paid thereunder; (b) shall continue in effect for a period more than two years from the date of its execution, only so long as such continuance is pecifically approved at least annually by the board of directors or by vote of a majority of the outstanding voting securities of such company;
(c) provides, in substance, that it may be terminated at any time, wthout the payment of any penalty, by the board of directors of uch company or by vote of a majority of the outstanding voting
curities of such company on not more than sixty days' written notice to the investment adviser- and
(d) provides, in substance, for its automatic termination in the event of its assignment by the investment adviser.
Comment: This provision restates Ga. Code Ann. Sec. 109-909.
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1509 41 A-1509. Prohibition on Refusing Participation. 0 fiduciary investment company shall refuse participation to any trust institution or foreign trust institution as defined in this Chapter, which is otherwise qualified to engage in a fiduciary investment program. Comment: This provision restates Ga. Code Ann. Sec. 109-910.
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CHAPTER 4IA-16. DEPOSITS, SAFE DEPOSIT AGREEMENTS AND MONEY RECEIVED FOR TRANSMISSION.
41A-1601. Rules Governing Deposits. A bank which has adopted rules governing deposits or withdrawal of deposits shall give notice of the rules and all changes therein to each customer whose deposits are affected by such rules, either by delivery of a copy to such customer or by posting them in a conspicuous area in the main office and all branch offices of the bank. If such rules are stated on a signature card or other contract signed by the customer, the bank shall be deemed to have given notice of the rules for purposes of this provision even if such signature card or contract is returned to the bank.
Comment: The Banking Code requires that rules relating to savings deposits appear on passbooks or other evidences of indebtedness furnished to the customer. Ga. Code Ann. Sec. 13-2047. The proposed Section would broaden the notice requirement to embrace all types of deposits but allow it to be satisfied by either giving the customer a copy of the rules or posting them in a public location. More restrictive notice requirements are inconsistent with modern techniques for receiving and evidencing of deposits.
41 A-I 602. Minors' Deposits and Safe Deposit Agreements. (a) A bank may receive deposits from:
(I) a minor; (2) a minor jointly with one or more adults or other minors, with the same effect as a joint deposit under Section 41 A-1603; or (3) a minor as trustee, or a mjnor and one or more adults or other minors as trustees with a designated beneficiary said deposit to have the same effect as a deposit in trust under Section 41 A-1604. (b) A bank or trust company may rent a safe deposit box or other receptacle for safe deposit of property to, and receive property for safe deposit from, a minor individually or jointly with one or more adults or other minors. (c) A bank or trust company may deal with a minor with respect to a deposit accqunt or safe deposit agreement covered by subsections (a) or (b) of this Section without the consent of a parent r guardian and with the same effect as though the minor were an adult. A parent or guardian shall not have any right in that capacity to interfere with any such transaction. Any action of the minor with respect to such deposit account or safe deposit agreement shall be binding on the minor with the same effect as though the minor were an adult.
.Comment: This provision \-vould expand authority for dealings with minors contained in Section 13-2041 of the Banking Code to embrace safe deposit arrangements as well as mOlley accounts. It
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specifically authorizes joint or trustee accounts with minors and removes any implication that financial institutions are obligated to deal with minors in circumstances where they feel it inappropriate.
41A-1603. Joint Deposits. When a deposit has been made or hereafter shall be made in a bank in the names of two person , payable to either, or to either or the survivor such deposit or any part thereof, and interest or dividend thereon may be paid to either of said persons or to their order, and the receipt or order of the party so paid shall be a valid and sufficient release to discharge the bank from liability for payment. The foregoing right to pay either party hall not be terminated by the death or incompetency of the other party.
Comment: This provision would retain the shield provided by Section 13-2039 of the Banking Code where a bank pays to one of two joint depositors. The protection would be extended to cases where one of the named depositors is incompetent. This provision is not addressed to the question of the ultimate ownership of the funds involved. That question is left to the agreement of the parties and other applicable provisions of law.
41A-1604. Tentative Trusts. A bank may receive deposits in an account in the name of one person as trustee for another without any further notice of the existence or the terms of the trust and may, in the event of the death of the trustee, pay the balance of the account or any part thereof and interest or dividend thereon to the beneficiary .
Comment: This provision retains the rule of Section 13-2043 of the Banking Code.
41 A-160S. Deposit by Agent, Trustee, or Other Fiduciary. (a) Whenever any agent, administrator, executor, guardian trustee either express or implied, or other fiduciary whether bona fide or mala fide shall deposit any money in any bank to his credit as an individual or as such agent, trustee, or other fiduciary, whether the name of the person or corporation for whom he is acting or purporting to act be given or not, such bank shall be authorized to pay the amount of such deposit or any part thereof upon the order of such agent, administrator, executor, guardian, trustee or other fiduciary, signed with the name in which such deposit was entered, without being accountable in any way to the principal, cestui que trust, or other per on or corporation who may be entitled to or interested in the amount 0 deposited.
(b) othing herein contained shall prevent the person or corporation claiming the beneficial interest in or to any deposit in any bank from resorting to the courts to claim such deposit, provided such action is brought and served before uch deposit is paid out, and in accordance with the requirements of the next Section of thi Code.
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Comment: This provision restates Section 13-2042 of the Banking Code except that challenges to the alleged fiduciary authority may be made under the next Section by offering indemnity as well as by naming the banking institution as a defendant.
41 A-1606. Adverse Claims to Deposits and Property Held in Safe Deposit. (a) Except as provided in subsections (b) and (c), a bank or trust company hall not be required to deny control over or acces to a deposit account or property held in safe deposit (whether by the bank or trust company or in a safe deposit box or other receptacle leased to a customer) to:
(I) the customer in whose name the account or property i held by the bank or trust company (including one of two depositors or lessees entitled to such control or access by virtue of their contract with the bank or trust company)'
(2) a person or group of persons who are authorized to draw on or control the account or property pursuant to a certified corporate resolution or other written arrangement with the customer currently on file with the bank or trust company.
(b) A bank shall be entitled to act and rely upon: (I) a court order, distraint, levy or other effective legal process' (2) an agreement of the parties concerning an adverse claim; (3) a claim of the type described in subsection (a) accompanied by a bond or other indemnity adequate to protect the bank or trust company from loss as a consequence of recognizing an adverse claim. (c) othing in this Section shall impair the effect of a discharge which a bank or trust company would be entitled to under Code Section 109A-3-603. Comment: The former statutes have two provisions dealing with adverse claims. Section 13-2042 of the Banking Code requires that a bank be joined by a party challenging the authority of an agent or other fiduciary in regard to a deposit account. Section 109A-3-603 of the Commercial Code recognizes a general right to pay holders of commercial paper despite adverse claims in the absence of protective procedures. The provision would not repeal the Commercial Code provision but would provide a general adverse claim statute embracing accounts and property in safekeeping. 41A-1607. Money Received for Transmission. (a) A bank or trust company which receives money for transmission shall give the customer a receipt setting forth: (I) the date of receipt of the money; (2) the amount of the money in dollars and cents' and (3) if the money is to be transmitted to a foreign country in the currency of such country, the amount of the money in such currency.
(b) In an action by a customer against a bank or trust company for recovery of money delivered for transmission. the burden of
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proof of delivery of the money in accordance with the instructions of the customer shall be on the bank or trust company, but an affidavit by an agent or correspondent of the bank or trust company that the money was delivered in accordance with the customer's instructions shall be prima facie evidence of the delivery of the money in accordance with the customer's instructions.
Comment: This is a new provision derived from Pa. Stat. Ann. Tit. 7, Sec. 607.
41 A-1608. Agreements Concerning Safe Deposit. A bank or trust company may receive property for safe deposit and rent out receptacles and safe deposit boxes on the terms and conditions prescribed by it, but such terms and conditions shall not bind any customer to whom the bank or trust company does not give notice thereof either by delivery of a copy or by posting in its offices where such receptacles or safe deposit boxes are located, or who does not otherwise agree to such terms and conditions.
Comment: This is a new provision derived from Pa. Stat. Ann. Tit. 7, Sec. 608. It parallels the rule as to rules for deposit accounts in Section 41A-160J.
41A-1609. Procedures on Death of Safe Depositor. (a) Any financial institution contracting with a person for the use of a safe deposit box or receiving property from a person for safekeeping, upon presentation of satisfactory proof of the death or legal incompetence of such person, shall permit any person named in an order granted by the court of ordinary having jurisdiction of such person's estate to open and examine the contents of any safe deposit box leased by the decedent or legally incompetent person or to examine the property left by such person for safekeeping in the presence of an officer of the financial institution. The financial institution, if so requested by such person, shall deliver:
(I) any writing purporting to be a will of the decedent to the court of ordinary having jurisdiction of the decedent's estate;
(2) any writing purporting to be a deed to a burial plot or to give burial instructions to the person named in such order;
(3) any document purporting to be an insurance policy on the life of the deceden t to the beneficiary named therein; but no other contents shall be removed pursuant to this Section.
(b) The financial institution shall permit the person named in such order to inventory the contents of any safe deposit box leased or rented to the decedent or legally incompetent person or the property left by such person for safekeeping within five banking days after the order of the court is presented to the financial institution. The inventory shall be conducted in the presence of an officer or employee of the financial institution by the person named in such order. The inventory shall be signed by such persons, and a copy
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thereof shall be retained by the financial institution and may be filed with the court of ordinary.
(c) The order of the court of ordinary shall operate as a complete acquittance and discharge to the financial institution from all liability with respect to any action, suit, claim or demand of whatever nature asserted by any heir, legatee, distributee, creditor, administrator, executor, guardian, trustee or other fiduciary or by any other person whomsoever.
(d) Upon presentation of a certified copy of his letters of authority, the financial institution shall grant the personal representative access to any safe deposit box or property in safekeeping in the sole name of a decendent or legally incompetent person to pennit him to remove from such box or place of safekeeping any part or all of the property therein without liability.
Comment: This provision restates Ga. Code Ann. Sees. 13-2068 - 13-2071 with modifications. The rules are made expressly applicable to property left in safekeeping without any box rental. Moreover, the requirement that the arrangement be solely with the decedent or incompetent is removed from subsections (a) and (b).
41A-1610. Payment of Deposit of Deceased Depositor. (a) Whenever any person dies intestate having a deposit of not more than $2,500.00 in a bank, such bank shall be authorized to pay the proceeds of such deposit directly to the following persons:
(I) to the surviving spouse; (2) if no surviving spouse, to the children pro rata; (3) if no children or surviving spouse, to the father and mother pro rata;
(4) if none of the above, then to the brothers and sisters of the decedent pro rata.
(b) The payment to the surviving spouse or certain other family members shall operate as a complete acquittal and discharge to the bank of liability from any suit, claim or demand of whatever nature by any heir, distributee, creditor of the decedent or any other person. Such payment is hereby authorized to be made as provided herein, without the necessity of administration of the estate of the decedent or without the necessity of obtaining an order that no administration is necessary.
(c) In any case in which a deceased depositor has more than $2,500.00 on deposit in a bank, such bank shall be authorized to pay any amount up to $2,500.00 to any of the persons authorized by this Section to receive said deposit. The payment shall only act as a full and final acquittance of liability up to the amount paid by the bank and shall not act as a full and final acquittance to the bank of all liability.
Comment: This provision restates Ga. Code Ann. Sec. 13-2048 except that it raises the maximum payment that may be made to
2,500.00. The former $1,000.00 ceiling was set in 1952.

Y.1975

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41A-1611. Dormant Accounts. A bank may, in accordance with and subject to the limitation of such regulations as the Department may prescribe, from time to time charge a dormant account a reasonable service charge.
Comment: This provision restates Ga. Code Ann. Sec. 13-2067.

May, 1975

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CHAPTER 4IA-17. BANKING DEPOSITORIESS,
RESERVES AND REMISSIONS.
41A-1701. Deposits by Banks. (a) Subject to the restrictions of subsections (b) and (c) of this Section and of Section 41 A-1702 in regard to reseIVe funds, a bank may deposit its funds in any depository which is:
(I) selected by, or in manner authorized by its directors; (2) authorized by law to receive deposits' and (3) in the case of a depository located in the United States, has deposit insurance issued by or equivalent to deposit insurance provided by a federal public body to depositories of the type involved. (b) If a director of the bank has a relationship to a depository as either: (I) an officer or director, or (2) an owner of five percent or more of the shares of the depository , the depository shall be approved by a majority of the directors other than the director who has such relationship. (c) A bank shall not have on deposit in a single depository at any time an amount which is in excess of ten percent of the statutory capital base of the depositing bank without first obtaining the approval of the depository for that purpose by the Department. Comment: Although Section 13-2027 of the Banking Code expressly requires regulatory approval of depositories only where reserve funds are involved, the practice has developed of the Department approving all banks in which deposits are made. This Section would clearly establish that nonreserve deposits may be de in insured institutions without regulatory clearance, provided that deposits in any single institution do not exceed 10 percent of the depositor's capital base. Above this limit, Department approval of the depository would still be required. 4IA-1702. Legal Reserve Requirements; Notice; Penalty. (a) For the purposes of the reseIVe requirement imposed by subsection (b) and the composition of the required reseIVe fund under subsection (d), the terms:
(I) 'demand deposits' shall mean the aggregate of deposits which an be required to be paid on demand or within less than thirty days after demand'
(2) 're eIV~ agen t' shall mean a depository of a bank selected as
provided in Section 41A-1701 and approved by the Department for the deposit of funds included in the required reseIVe fund.
(b) A bank which is not a member of the Federal Reserve System all maintain at all times a reserve fund in an amount fixed by 8UI.ation of the Department but in no case shall such reseIVe be required in excess of:
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(1) in the case of a savings bank, five percent of total deposits, and
(2) in the case of a commercial bank, the aggregate of fifteen percent of demand deposits and five percent of other deposits. The amount of the required reserve for each day shall be computed on the basis of average daily deposits covering such biweekly or shorter periods as shall be fixed by regulation of the Department.
(c) A bank which is a member of the Federal Reserve System shall maintain at all times a reserve fund in accordance with the requirements applicable to a member bank under the laws of the United States.
(d) In the case of a commercial bank, such portion of the reserve fund against deposits as shall be fixed by regulation of the Department shall consist of United States coin and currency on hand or on deposit, subject to call without notice, in a reserve agent. The balance of such reserve fund shall be kept in obligations of:
(1) the United States, the Federal National Mortgage Association, a federal land bank, a federal home loan bank, a bank for cooperatives, a federal intermediate credit bank, or the State of Georgia; or
(2) other issuers whose obligations are marketable and approved by regulation of the Department for the purpose of this Section.
(e) In the case of a savings bank, the reserve fund shall consist of: (1) United States coin and currency on hand or on deposit, subject to call without notice, in a reserve agent, in a total amount not less than one percent of the deposits of the savings bank; and (2) securities permitted under subsection (d) of this Section. (0 All assets which are part of the reserve fund shall be owned absolutely by the bank and shall not be pledged, assigned or hypothecated in any manner or subject to set-off. The value of all securities which constitute a part of a bank's reserve fund shall be computed as the current market value thereof. (g) A bank shall give written notice to the Department, in the manner prescribed by the Department for such notice, of any deficiency in the amount or form of the reserve fund required by this Section within three business days after the close of any scheduled averaging period during which such deficiency occurs. A bank shall pay to the Department a penalty of $50.00 for each day after the time fixed for the giving of notice in which it fails to give such notice; provided that the Department may relieve a bank of this penalty for good cause shown. (h) Immediately following the closing of any scheduled averaging period during which a deficiency in the required reserve occurs, the bank will take immediate action to restore the defIciency and until such deficiency is restored, the bank shall not make any new loans or discounts other than by discounting or

May, 1975

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1702
purchasing bills of exchange at sight, nor shall any dividend be declared out of the profits of such bank. Any bank failing to restore its reserve to the required amount within thirty days after the closing of the averaging period in which the deficiency occurs may have its bu iness and assets taken over by the Department as provided in Chapter 41 A-7 of this Code.
Comment: This Section carries forward the new Georgia law on banking reserves as enacted by the 1973 Session of the General Assembly. Ga. Laws 1973, pp. 526, 530. The provision would introduce an express requirement that reserve deposits not be subject to set-off and a penalty for failure to report reserve deficiencies; otherwise, it would make only technical changes in the 1973 law. The new system allows the regulator to control the form and, within statutory maximums, the level of required banking reserves. This flexibility is needed at the State level in order to respond to changes from time to time of federal reserve rules.
41 A-1703. Remission at Par. A commercial bank shall pay all checks drawn on it at par and shall make no charge for the payment of such checks; however it may deduct a reasonable collection charge covering its actual expenses from the remittance for any check forwarded to it for collection and remittance a a special collection item.
Comment: This provision would retain the par banking rule codified as Section 13-2028 of the Banking Code as a result of 1973 action by the Ge'neral Assembly. Ga. Laws 1973, p, 532,
11-40

1801
CHAPTER 4IA-18. I CORPORATIO OF BA KS AND TRUST COMPANIES.
41 A-I 80 1. Incorporators. One or more natural persons eighteen years of age or over may act a incorporators of a bank or trust company.
Comment: Both the Banking and Trust Company Codes require five 'persons' as incorporators. The position of incorporator has no continuing significance for the institution. Accordingly, this Section would require only one or more natural persons of at least 18 years of age to act as incorporators. This approach follows Section 22-801 of the Business Corporation Code, as amended by Ga. Code Ann Sec. 74-104.1 (age of majority reduced to 18). The Section \Vould, however, depart from the Corporation Code in that it \Vould continue to require a natural person rather than a corporation or association as incorporator.
41 A-I 802. Prohibition of Promoters' Fees. (a) A bank or trust company hall not pay any fee, compensation or commission for promotion in connection with its organization or apply any money received on account of share or ub criptions, selling shares or other services in connection with its organization, except legal fees and other usual and ordinary expen es necessary for its organization.
(b) A majority of incorporators shall file with the Department at the time of filing of the articles an affidavit:
(I) setting forth all expenses incurred or to be incurred in connection with the organization of the bank or trust company, sub cription for its shares and sale of its shares; and
(2) stating that no fee, com pen ation or commission prohibited by subsection (a) of this Section has been paid or incurred.
(c) In the event of a violation of this Section the Department may disapprove the articles on account of such violation.
Comment: This new provision would introduce a prohibition against promoters' fees incident to organization of banks and tn/st companies. It is deril ed from Pa. Stat. Ann. Tit. 7, Sec. 1003.
4IA-I803. Articles of Incorporation; Advertisement. (a) The articles of incorporation shall be signed by each of the incorporator and shall set forth in the English language:
(I) the name of the bank or trust company' (2) the county in which it will be located; (3) the location where its initial registered office will be located; (4) a brief statement of the purpose or purposes for which it i incorporated, that it is incorporated under the provision of thi Code, and whether it shall be solely a bank, olely a trust company or both a bank and trust company; (5) the term for which it is to exist, which shall be perpetual unless otherwise limited;
1141

1803

(6) the aggregate number of shares which the bank or trust

company shall have authority to issue, and

(i) if the shares are to consist of one class only, the par value of

each of the shares, or (ii) if the shares are to be divided into classes, the number of

shares of each class the par value of each share of each class, a

description of each class and a statement of the preferences,

redemption provisions, qualifications, limitations, restrictions and

the special or relative rights granted to or imposed upon the shares of

each class; (7) the name, place or residence and post office address of each

incorporator;

(8) the name, occupation, citizenship, place of residence and post

office address of each of the first directors, which number shall not

be less than five; and

(9) any provision not inconsistent with law which the incorpo-

rators may choose to insert for the regulation of the internal affairs

and business of the bank or trust company.

(b) It shall not be necessary to set forth in the articles any of the

corporate or operational powers set forth in this Code.

(c) The incorporators shall file with the Office of the Secretary of

State in triplicate, the articles, together with the fee required by

Section 4IA-3703. Such filing shall constitute an application for a

certificate of incorporation. Immediately upon the filing of the

articles the Secretary of State hall transmit one copy thereof to the

Department and shall certify one copy thereof and return it to the

applicants, who shall, in conformity with Section 41 A-I 08, cause to

be published a copy of the articles or in lieu thereof, a statement in

ub tantially the following form:

An application for a certificate of incorporation of a (bank,

trust company or bank and trust company) to be known as the

----

and to be located in

County Georgia has

been made to the Secretary of State of Georgia by (names and

addresses of incorporators) in accordance with the applicable

provision of the Georgia Financial Institutions Code. A copy of

the articles of incorporation of said proposed (bank, trust

company or bank and trust company) has been filed with the

Secretary of State of Georgia, and the application has been

referred to the Department of Banking and Finance for

inve tigation. The following persons have been proposed as the

initial directors (names and addresses of proposed directors).

Comment: This Section deals with the form, content and effect of

the articles and the publicity to be given to them. The articles would

serpe the same function as the application for a charter under the

Banking Code and the declaration under the Trust Company Code.

II42

1803
Ga. Code Ann. Secs. 13-901,109-101. Treating the filed articles as the application for corporate existence comports with the procedure of the Business Corporate Code and avoids any question of constitutional impropriety. The articles under this Section would contain additional information as to the incorporators and first directors now separately furnished to the Department. The proposed provision also requires more detailed information in regard to authorized shares. A summary publication procedure similar to that of the Corporate Code is added. See Ga. Code Ann. Sec. 22-803(dJ.
41 A-1804. Filings With Department; Fees. The incorporators shall also file with the Department:
(a) information desired by the Department in order to evaluate the proposed institution which shall be made available in the form specified by the Department;
(b) the affidavit required by Section 4IA-1802; (c) a certificate of the Secretary of State showing that the proposed name of the bank or trust company has been reserved pursuant to Section 41 A-602; and (d) applicable fees established by regulation of the Department to defray the expense of the investigation required by Section 4IA-180S. Comment: This Section would retain the procedure established in Ga. Code Ann. Sec. 13-904 under which additional information may be provided directly to the Department. The incorporators would, in addition, be required to reserve the proposed name of the bank or trust company. Cf. Ga. Code Ann. Sec. 22-803. 41A-1805. Investigation; Approval by Department. (a) Upon receipt of the articles from the Secretary of State and the filings and fees from the incorporators as required by the preceding Section, the Department shall conduct such investigation as it may deem necessary to ascertain whether it should approve the proposed bank or trust company. The Department shall approve the bank or trust company if and only if it determines in its discretion that: (1) the articles and supporting items satisfy the requirements of this Code; (2) the convenience and needs of the public will be served by the proposed bank or trust company; (3) there is a reasonable promise of adequate support for the bank or trust company in the light of: (i) the competition offered by existing banks and trust companies and other financial institu tions (ii) the previous financial history of the community as to banks, trust companies and other financial institutions; (iii) as to banks, the opportunities for profitable employment of bank funds as indicated by the average demand for credit, the number of potential depositors, the volume of bank transactions, and
II-43

1805
the businesses and industries of the community with particular regard to their stability diversification and size;
(iv) as to trust companies, the opportunities for profitable employment of fiduciary or other representative services;
(4) the character and fitness of the incorporators, of the directors and of the proposed officers are such as to command the confidence of the community and to warrant the belief that the busines of the proposed bank or trust company will be honestly and efficiently conducted;
(5) there has not been any material violation of Section 4lA-1802 so that approving the articles would in the opinion of the Department, impair the policy manife ted by that provision;
(6) the capital structure of the proposed bank or trust company is adequate in relation to the amount and character of the anticipated business of the bank or trust company and the safety of prospective depositors; and
(7) in the case of trust companies, the proposed company will have sufficient personnel with adequate knowledge and experience to administer fiduciary account.
(b) Within ninety days after receipt of the articles from the Secretary of State and the filing and fees from the incorporators as required by Section 41 A-I 804, the Department shall approve or disapprove the proposed bank or trust company. In giving approval, the Department may impose condition to be sati fied prior to the issuance of a permit to do business under Section 41 A-180? If the Department in its discretion, shall approve the proposed bank or tro t company with or without condition, it shall deliver its written approval of the articles to the Secretary of State and notify the incorporators of its action' provided, that if the approval of a federal public body is also required with respect to the bank or trust company, then the Department may, at it option, withhold its written approval from the Secretary of State until such approval is given, and may at its option, withdraw its approval if the federal public body refuse to grant its approval to the bank or trust company. If the Department, in its discretion, shall disapprove the proposed bank or trust company, it shall give written notice to the Secretary of State and notify the incorporators of its disapproval and tate generally the unfavorable factor influencing its deci ion. The deci ion of the Department shall be conclu ive, except that it may be ubject to jud icial review as provided in Section 41 A-40 I .
Comment: Thi provision would simplify the wording but would not change the substance of the criteria to be used in determining whether a new bank or trust company should be approved. See Ga. Code Ann. Sec. 13-1905.
11-44

1806
4 t A- t 806. Issuance of Certifica te of Incorporation. If the
Secretary of State hall receive, with respect to the proposed bank or tru t company:
(a) the written approval of the Department; (b) an affidavit executed by the duly authorized agent or publisher of the new paper in which publication of the article or a ummary statement relating thereto is required by Sections41A-108 and 41 A-I 803 stating that the articles or the summary statement have been published as required by those Sections; (c) all fees and charges required by law and if, in addition the name of the proposed bank or trust company continues to be reserved or is available, the Secretary of State shall immediately i sue to the incorporators a certificate of incorporation. The Secretary of State shall retain on file in his office a copy of the certificate, the articles, the Department's approval and the publisher's certificate. Comment: This provision would retain the procedure of Sections 13-906 and 13-907 of the Banking Code, except that the certificate of publication is to be made by the newspaper publisher or agent rather than the ordinary of the county.
4 t A- t 807. Effect of Certificate of Incorpora tion; Permit to Begin
Bu iness. (a) A of the i suance of the certificate of incorporation by the Secretary of State, the corporate exi tence of the bank or trust company shall begin and those person who ubscribed for hare prior to filing of the article, or their assignees, shall be hareholders in the bank or trust company.
(b) The certificate of incorporation shall be conclusive evidence of the fact that the bank or trust company has been incorporated, but proceeding may be in tituted by the State to di solve, wind up and terminate a bank or trust company in accordance with Section 41 A-403 and other applicable provisions of this Code.
(c) Until receipt of a permit to begin busine s is ued by the Department, a bank or tru t company hall not transact any bu ine except uch busine s as is incident to its organization or to the obtaining of subscriptions and payment for its shares and other securi ties.
(d) The Department shall issue to a bank or trust company a permit to begin business when:
(1) capital stock of the bank or trust company shall have been fully paid in, in cash and in no event in an amount les than the minimum capital stock for banks or trust companies under the provi ion of Section 41A-1901 and, in addition, there shall have been paid in:
(i) paid-in capital in an amount not less than twenty percent of the capital stock
(ij) an expense fund in an amount fixed by the Department which shall not be less than five percent of the capital stock; and
II-4S

1807

(iii) the proceeds of subordinated securities, if any, which were considered part of the capital structure of the bank or trust company by the Department under Section 41 A-19l 0 in giving its approval of the proposed institution;
(2) all of the directors have taken the oath or affmnation required
by Section 41A-2205; (3) the bylaws of the bank or trust company have been filed with
the Departmen t; (4) the bank or trust company has designated its registered office
pursuant to Section 41 A-603; (5) the bank or trust company has been organized and is ready to
begin the business for which it was incorporated' (6) all conditions imposed by the Department in giving its
approval of the proposed bank or trust company under Section 41A-1805 have been satisfied; and
(7) the Department has received an affidavit signed by the president or secretary and by at least a majority of the directors of the bank or trust company to the effect that all of the fo'regoing requirements of this subsection have been satisfied.
Comment: This Section embodies provisions similar to Section 13-909 of the Banking Law. The express requirement of an expense fund is a new feature. Moreover, the Department would not be required to examine an institution before issuing a permit to do business as is the case in the current law.
41 A-1808. Organizational Meetings. (a) After the issuance of the certificate of incorpora tion by the Secretary of State, a fIrst meeting of the shareholders may be held within this State at the call of the hareholders who were the incorporators, or a majority of them for the purpose of adopting bylaws or for such other purposes as shall be tate in the notice of the meeting.
(b) After the issuance of the certificate of incorporation by the cretary of State, an organizational meeting of the board of directors named in the articles shall be held within this State at the call of a majority of the directors for the purpose of adopting bylaws, of electing officers and for transaction of such other business a may come before the meeting. The directors who call the meeting hall give to each director named in the articles at least three days' Written notice of the meeting. C mment: This is a new provision. The requirement of a shareholders' organizational meeting would be optional (except where the articles require the shareholders to adopt the bylaws. See Sections 41A-1807(d)(3) and 41A-2202). The directors meeting would be mandatory. The provision is derived from Pa. Stat. Ann. Tit. 7, Sec. 1011.
41A-1809. Liability for Premature Business. Incorporators and other persons who organize a bank or trust company which transacts

Y.1975

11-46

1809
business before its capital stock, paid-in capital and expense fund as required by Section 41 A-1807 have been paid in shall be jointly and severally liable to depositors and other creditors to make good the amounts not paid in by subscribers or otherwise deficient. Such liability shall be deemed as an asset of the bank or trust company and may be enforced by it, its successors or assignees, or by a shareholder suing derivatively, or by a receiver appointed under this Code.
Comment: This provision would provide for liability similar to that under Section 13-1906 of the Banking Code. That Section makes organizers responsible for capital deficiencies when business commences before minimum capital stock has been subscribed for and before a permit to begin business has been issued. This Code requires that the capital stock be fully paid in rather than merely subscribed for, and specifies that a designated paid-in capital and expense fund must also be paid in. Violation of these requirements would become the predicate on which liability is premised. This provision is not intended to restrict any recognized liability of directors or officers for misconduct.

May, 1975

11-47

CHAPTER 4IA-19. FINANCIAL STRUCTURE.
41 A-1901. Minimum Capital. (a) Except as provided in ubsections (b) and (c) the minimum capital stock of a bank or trust company shall be $500,000.
(b) A bank or tru t company whose registered office is located in a county with a population of less than 10,000, according to the last official United States census shall have a minimum capital stock of
250,000. (c) A bank or trust company existing on April I, 1975, with a
capital stock of less than that required by subsections (a) and (b) hall not be required to increase its capital stock above the minimum required by law prior to April I, 1975.
Comment: This provi ion would retain the minimum capital requirements of Section 13-901 of the Banking Code and make them applicable to trust companies. The minimum capital for new trust companies would accordingly be raised from $100,000 to $500,000 or 250,000 depending upon the population of the county of its location. See Ga. Code Ann. Sec. 109-101. Subsection (c) protects existing institutions including regulated certificated banks from any increase in capital required under present law.
41 A-I 902. Paid-in Capital and Appropria ted Retained Earnings. Lo es sustajned by a bank or trust company in excess of retained earning may be charged to paid-in capital or to appropriated retained earnings, provided that a bank or trust company shall not pay any dividends so long as its paid-in capital and appropriated retained earnings do not, in combination, equal at least twenty percent of its capital stock. Earnings hall, not later than the end of ach fiscal year, be transferred to appropriated retained earnings until such required twenty percent margin is obtained.
Comment: The Banking Code allows a new bank to establish gradually its surplus by setting aside 25% of net earnings until the surplus equals 20% of capital. Ga. Code Ann. Sec. 13-2029. Tlzis Code requires the equivalent of such a surplus in the form of paid-in capital, but specifies that such fund must be present before business is commenced. See Sec. 41A-1807. Thereafter, the equivalent of the pre ent surplus fund should be maintained in the form of paid-in capital or appropriated retained earnings. If such fund is not maintained because of losses, dividends cannot be paid, and earnings must be transferred to appropriated retained earnings until the reqUired twenty percent margin is obtained.
4IA-1903. Expense Fund. The expense fund required under Section 41 A-1807 shall be created out of amounts paid for shares of common stock which is in excess of one hundred and twenty percent of the par value of such shares. Such expense fund may be charged for expenses incurred by the bank or trust company in connection
11-48

1903
with its incorporation and operation, and any balance in su-ch fund at any time after the expiration of one year from the issuance of a permit to begin business may be credited to paid-in capital.
Comment: This provision describes the usage of the expense fund introduced by Section 41 A -180 7. The provision is derived from Pa. Stat. Ann. Tit. 7, Sec. 1104.
41 A-1904. Classes of Shares. A bank or trust company may have one or more clas es of common or preferred shares, all of which shall be shares with par value of not less than one dollar and any or all of which may, subject to the restrictions of this Code, consist of shares with full, limited, multiple, fractional or no voting rights and such designations, preferences, qualifications, privileges, limitations redemption provisions (in the case of preferred shares), options, conversion rights and other special rights as shall be stated in the articles. Except as otherwise stated in the articles, this Code, or other applicable laws, each share shall be equal in all respects to every other share.
Comment: This provision carries forward Georgia law as stated in Sections 13-901 and 13-912 of the Banking Code. / t would, however, remove the present statutory limit of 6% per annum on preferred stock dividends, and would expressly allow for shares to be issued in designated classes. The approach is derived from Pa. Stat. Ann. Tit. 7, Sec. 1202.
41 A-190S. Redemption and Convertibility. (a) Any preferred shares subject to redemption shall be redeemable only pro rata or by lot or by such other equitable method as is selected by the board of directors except as otherwise provided in the articles.
(b) With the written approval of the Department and the votes of directors and shareholders required to authorize an increase in the capital stock of the institution under Section 4IA-2302:
(l) preferred stock may be convertible to common stock; and (2) subordinated securities may be convertible to common stock. Comment: Subsection (aJ is a new provision derived from Pa. Stat. Ann. Tit. 7, Sec. 1202, designed to assure that redemption of redeemable preferred shares is accomplished equitably. Subsection (bJ retains convertibility provisions found in Section 13-912(c) of the Banking Code. 41 A-1906. Consideration for Shares. (a) Except as provided in subsection (b) and in the case of a distribution of shares under Section 4IA-2209(e) or incident to a merger, consolidation or other corporate reorganization or rehabilitation authorized by this Code, shares of a bank or trust company may be issued only for cash in an amount which shall be at least the aggregate par value of the share plus such amounts, if any, necessary to assu.e that after issuance of the shares the bank or trust company will have the paid-in capital
Il-49

1906
required by Section 41 A-1902 and, in the case of a new bank or trust company, the expense fund required by Section 41 A-180?
(b) Where a bank or trust company issues shares in exchange for or in order to convert other share or obligations which have been i ued by it, the consideration for such shares shall be:
(I) the cash originally received for the shares or obligations urrendered or converted'
(2) the additional cash received incident to the exchange or conversion;
(3) the other amounts, if any transferred to capital stock incident to the exchange or conversion.
In any such case the consideration shall be not less than the minimum amount specified in subsection (a). Any amount by which capital stock may be reduced upon an exchange or conversion shall be transferred to paid-in capital.
Comment: This Section would generally carry forward rules concerning common and preferred shares. See Ga. Code Ann. Secs. 13-908, 13-91 2(bJ, It does, however, recognize that shares may appropriately be issued on other than a strict cash basis incident to conversions and other approved corporate reorganizations.
41A-1907. Method of Issuance. (a) Subject to subsection (b) and unless more restrictive procedures are stated in the articles, the board of directors may, by resolution duly adopted, issue from time to time in whole or in part, common or preferred shares authorized by the articles ubject to the approval of the Department.
(b) Prior to the delivery of any common or preferred share certificates the bank or trust company shall file with the Department an affidavit executed by its president or secretary certifying
1at the full consideration required by Section 41A-1906 has been paid to the bank or trust company.
Comment: The Banking Code requires regulatory approval before any preferred or common shares are issued. Ga. Code Ann. Sec. 13-912(bJ,
41 A-1908. Share Certificates. (a) A bank or trust company shall not deliver any share certificate until the share or shares represented thereby ar fully paid. Each subscriber, upon payment in full for his hare, shall be entitled to a certificate or certificates certifying the
umber of shares owned by him in the bank or trust company. (b) Unless otherwise provided in the articles or the bylaws, the ~are of a bank or trust company shall be represented by certificates Ig~ed by the president or a vice president and the secretary or an a . 1 tant ecretary of the bank or trust company, and may be sealed With the seal of the bank or trust company or a facsimile thereof. The ignatures of such officer upon a certificate may be facsimiles if ~hecertificate is countersigned by a transfer agent, or registered by a egJ trar other than the bank or trust company itself or any mployee of the bank or trust company.
II-50

1908
(c) Each certificate representing shares shall set forth upon the face thereof:
(1) the name of the bank or trust company; (2) that the bank or trust company is organized under the laws of this State; (3) the name or names of the person or persons to whom issued' (4) the number and class of shares such certificate represents' (5) the par value of each share represented by such certificate' (6) if the shares represented thereby are nonvoting shares a statement or notation to that effect; and (7) if the shares represented thereby are subordinate to shares of any other class with respect to dividends or amounts payable on liquidation, a brief statement to that effect. (d) Each certificate representing shares issued by a bank or trust company which is authorized to issue shares of more than one class shall set forth or fairly summarize upon the face or back of the certificate, or shall state that the bank or trust company will furnish to any shareholder upon request and without charge, a full statement of the designations, preferences, limitations, and relative rights of the shares of each class authorized to be issued. (e) In the event of a change in the capital structure of a corporation, it shall not be necessary to recall any previously issued share certificate for either the addition or deletion of the statement required by paragraph (7) of subsection (c) to be set forth upon the face of such certificate or for revision of the information placed upon the face or back of the certificate pursuant to subsection (d). (f) The signatures of the officers of a bank or trust company and the seal of the bank or trust company upon any bond, debenture or other debt security issued by the bank or trust company may be facsimiles if the instrument is authenticated or countersigned by a trustee or transfer agent, or registered by a registrar, other than the bank or trust company itself or any employee of the bank or trust company. (g) In case any officer who has signed or whose facsimile signature has been placed upon a share certificate or upon a bond, debenture or other debt security as provided in this Section shall have ceased for any reason to be such officer before such certificate or instrument is issued, it may be issued by the bank or trust company with the same effect as if he were such officer at the date of its issue. (h) Nothing in this Section shall be construed to invalidate any share certificate validly issued and outstanding on April 1, 1975. Comment: This is a new provision, patterned after the Business Corporation Code, which would establish standards for bank and trust company stock certificates. See Ga. Code Ann., Sec. 22-508. 41 A-1909. Issuance of Fractional Shares or Scrip. (a) A bank or trust company may, but shall not be obliged to, issue certificates for
II-51

1909
fractional shares in order to effect share transfers, share distributions or reclassifications, mergers, consolidations or reorganizations, which shall entitle the holder, in proportion to his fractional holdings, to exercise voting rights, to receive dividends thereon, and to participate in any of the assets of the bank or trust company in the event of liquidation.
(b) As an alternative, a bank or trust company may pay in cash the fair value of fractional shares as determined by the board of directors as of a time fixed by the board. In the absence of bad faith, all acts of the board pursuant to this subsection shall be conclusive.
(c) As an alternative, the board of directors may issue scrip in registered or bearer form over the manual or facsimile signature of an officer of the bank or trust company or of its agent, exchangeable as therein provided for full shares, but such scrip shall not entitle the holder to any rights of a shareholder except as therein provided. The board of directors may cause such scrip to be issued subject to the condition that it shall become void if not exchanged for certificates representing full shares before a specified date, or subject to the condition that the shares for which such scrip is exchangeable may be sold by the bank or trust company and the proceeds thereof distributed to the holders of such scrip, or subject to any other conditions which the board of directors may deem advisable. If a bank or trust company issues scrip, it shall provide reasonable opportunity for persons entitled thereto to sell such scrip or to purchase such additional scrip as may be needed to acquire a full share.
(d) A corporation may provide reasonable opportunity for persons entitled to fractional shares to sell such fractional shares or to purchase such additional fractional shares as may be needed to acquire a full share, or may sell fractional shares or scrip for the account of such persons.
Comment: This is a new provision, patterned after the Business Corporation Code, which would authorize the use of scrip or, in lieu thereof, payment of the fair value of fractional shares: See Ga. Code Ann. Sec. 22-509.
41A-1910. Subordinated Securities. (a) A bank or trust company may issue notes, debentures or other obligations in the form of ubordinated securities' provided that they: . (I) are subordinated in right of payment, in the event of Insolvency or liquidation of the bank or trust company, to the prior paYment of all deposits of the bank or trust company and of all claims of other creditors of the bank or trust company except the holders of securities on a parity therewith and the holders of
curities expressly subordinated thereto;
II-52

1910
(2) are authorized by the same votes of directors and shareholders as those required for authorization of an increase in capital stock of the bank or trust company under Section 41A-2302;
(3) contain provisions for amortization, serial maturities, transfers to a sinking fund, allocation of reserves or other provisions sufficient to payor to have paid at maturity all amounts due thereon' and
(4) are approved by the Department prior to the issue thereof. (b) The aggregate amount of the obligations of a bank or trust company in the form of subordinated securities shall at no time exceed fifty percent of the sum of the unimpaired capital stock, ~nimpaired paid-in capital, and appropriated retained earnings of the bank or the trust company. (c) If at or after the payment or retirement of the subordinated securities of a bank or trust company there is or would be a deficiency in the capital stock of the bank or trust company, such fact shall be reported to the Department in advance of the payment or retirement. The Department may, upon receipt of such report, order a restoration of capital stock or take other appropriate remedial measures under this Code. (d) Subordinated securities shall not be considered in determining the amount of ad valorem taxes payable by the bank or trust company; provided, that nothing herein shall prevent an Act relating to the taxation of national banks and banking associations, federal savings and loan associations and building and loan associations in the same manner and to the same extent as banks organized and chartered under the laws of Georgia, approved April 17, 1973 (Ga. Laws 1973, p. 924), from becoming effective in accordance with its terms. Comment: This provision retains the capacity of banking and trust institutions to issue subordinated securities in note, debenture or similar form, and treat such securities as part of their capital structure. This capacity is recognized in Section 13-2025.1 of the Banking Code. The Section would depart from the provisions of Section 13-2025.1 in the following ways: ( 1) T!ze specific requirement that capital securities be issued for cash is removed from the statute. (2) The requirement of approval by two-thirds of outstanding shares is removed; issuance of these securities is treated as an increase in capital requiring majority approval of the shareholders voting by class. See Section 41A-2302. (3) Specific authority is added for the use of sinking funds and similar devices. (4) An outright prohibition on paying or retiring capital securities at a time of capital deficiency is removed. Instead an advance report of the deficiency to the Department is required. The Department may t!zen take remedial action.
II-53

2001
CHAPTER 41 A-20. SHAREHOLDERS.
41 A-2001. Liability of Subscribers and Shareholders. (a) Except as otherwise provided in this Section, a holder of or subscriber to hares of a bank or trust company shall be under no obligation to the bank or trust company or its creditors with respect to such shares or ubscription other than the obligation to pay the full consideration remaining due to the company upon such shares or subscription. Such obligation may be enforced by the bank or trust company and its successors or assigns, or by a shareholder suing derivatively, or by a receiver appointed under this Code.
(b) Every subscriber for shares not fully paid and every original holder of shares not fully paid which were issued con trary to the provision of Section 41 A-1908, and every tran feree or assignee of a ubscription for shares or of shares with knowledge or notice that the shares are not fully paid and were issued contrary to the provisions of Section 41 A-1908, shall continue per onally liable thereon as provided in subsection (a) of tills Section, notwithstanding any transfer or assignment of such shares or subscription for such shares.
(c) Any person becoming a transferee or assignee of shares or of a ubscription for shares in good faith and without knowledge or notice that the full consideration therefor has not been paid shall not be personally liable thereon for any unpaid portion of such consideration.
(d) An executor, administrator, conservator, guardian, trustee, assignee for the benefit of creditors, receiver, or other fiduciary shall not be personally liable to the bank or trust corppany or its creditors as holder of or subscriber for its shares, but the estate and funds in his hands or under ills control shall be so liable. Nothing in the foregoing shall relieve any fiduciary from liability for a breach of trust.
(e) 0 bailee or nominee and no pledgee or other holder of shares as collateral security shall be personally liable as a shareholder, but the bailor or real party in interest or pledgor or other person transferring such shares as collateral shall be considered the holder thereof for purposes of liability under this Section.
(f) No liability under this Section shall be asserted against a ubscriber or shareholder more than six years after the date on willch the shares for willch payment is sought were to have been fully paid pursuant to the contract of sale or subscription agreement or, if no uch date is provided for in the contract of sale pr subscription agreement, more than six years from the date of the contract of sale or subscription agreement, whether or not such contract or agreemeilt is under seal.
(g) The subscription agreement or contract of sale may prescribe other penalties for failure to make payments when due, but no
II-54

2001
penalty working a forfeiture of a subscription, or of the amounts paid thereon, shall be declared as against any subscriber unless the amount due thereon shall remain unpaid for a period of 20 days after written demand has been made therefor. The delinquent subscriber or his legal representative shall be entitled to be paid the excess of the sale proceeds realized from the sale by the bank or trust company of such subscribed shares over the sum of:
(I) the amount due and unpaid on the subscription; and (2) the reasonable expenses incurred in selling the shares, but in no event shall the delinquent subscriber or his legal representative be entitled to be paid an amount greater than the amount paid by said subscriber on his subscription. (h) The board of directors shall have power to compromise, on such terms and conditions as the board may prescribe, any claim, dispute or action arising out of a subscription for shares when in the judgment of the board it is in the best interests of the bank or trust company to do so. Comment: The Banking Code has confusing and contradictory provisions on the extent of shareholder liability. Compare Ga. Code Ann. Sec. 13-1901 with Ga. Code Ann. Sees. 13-701 and 13-1904. The 1919 Banking Code imposed a double liability on shareholders. There were liable not only to the extent of their subscription but, over and above this, also liable to depositors to the face value of their respective shares. Ga. Laws 1919, pp. 135, 189. Subsequent amendments sought to eliminate this second measure of liability declaring stockholders liable only for balance unpaid on their shares. It was not clear whether this change repealed shareholders' responsibility for capital impairments in the case of failed banks. See Editorial Note to Ga. Code Ann. Sec. 13-1901. This provision would resolve the confusion by fully restoring the basic corporate principle that shareholders in their capacity as such are liable only under the terms of their subscriptions. Thus, bank shareholders would not be assessable to cover capital impairments. The Section is patterned after provisions of the Business Corporation Code. See Ga. Code Ann. Sees. 22-504; 22-601. This provision would also replace the antiquated procedures of Sections 13-822 and 13-910 of the Banking Code which allow for summary executions and default sales when share subscriptions are not paid. The procedures allowing for enforcement of written share subscriptions by action as contained in the Business Corporation Code would be substituted. Where the share subscription so provides, the defaulting shareholder may forfeit his interest but only after written demand for payment. The provision would also accord normal protection to an innocent purchaser for value of improperly issued stock. Compare Section 22-60J(b) of the Business Corporation Code with Section 13-911 of the Banking Code.
II-55

2002
41 A-2002. Preemptive Rights. (a) Except as provided in subsection (b) or in the articles, a bank or trust company shall issue hares, option rights or securities having conversion or option rights by first offering them to shareholders of the same class in proportion to their holdings of shares of such class.
(b) Except as provided in the articles, there shall be no preemptive right to:
( I) shares issued as a share dividend; (2) fractional shares; (3) shares issued pursuant to share plans authorized by subsection (e) of Section 41A-2209 (4) shares issued pursuant to acquisition of substantially all of the assets of another bank or trust company; (5) shares released by waiver from their preemptive right by the affirmative vote or written consent of the holders of two-thirds of the shares of the class to be issued. Any such vote or consent shall be binding on all shareholders and their transferees for the time pecified in such vote or consent up to but not exceeding one year from the date thereof, and shall protect the bank or trust company, it management, and all persons who may within such time acquire the hares so released; (6) shares which have been offered to shareholders to satisfy their preemptive right but not purchased by them within the prescribed time and which are thereafter issued or sold to any other person or persons at a price not less than the price at which they were offered to such shareholders. (c) Unless otherwise provided in the articles, no holder of shares of any class shall have any preemptive right with respect to shares of any other class which may be issued or sold by the bank or trust company. (d) othing in this Section shall impair any cause of action or remedy which any shareholder may have for a breach of duty by the board of directors relating to the sale or other disposition by the bank or trust company of shares or securities not subject to the preemptive rights under this Section or under the articles. (e) The holders of shares entitled to the preemptive rights shall be given prompt notice setting forth the time within which and the terms and conditions upon which such shareholders may exercise th~~ preemptive rights. Such notice shall be given at least thirty days pnor to the expiration of the period during which the rights may be exercised.
Comment: This provision would carry forward the shareholders' pr~emptive rights protected by Section 13-1009 of the Banking Code with the following changes:
1) Preemptive rights are extended to option rights and convertible securities.
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2002
2) Explicit exceptions are recognized for share dividends, fractional shares, and employee share plans.
3) Both the preemptive rights and exceptions thereto are made subject to contrary provisions of the articles.
4) Material is added from Sec. 22-602 of the Corporation Code specifying that shareholders must be given at least 30 days' notice of their preemptive rights, and expressly preserving other shareholder rights in regard to shares not subject to preemptive rights.
41 A-2003. Meetings of Shareholders. (a) Meetings of the shareholders of a bank or trust company sha:1l be held at such place within or without the State as shall be fixed by the bylaws or by the board of directors pursuant to the bylaws or, if not so fixed, at the registered office of the bank or trust company.
(b) There shall be at least one meeting of the shareholders in each calendar year for the election of directors. In addition, any matter relating to the bank or trust company, whether or not sta ted in the notice of meeting, may be brought up for action, except matters which this Code requires to be stated in the notice of meeting. The time of such annual meeting shall be fixed by the bylaws or by the board of directors pursuant to the bylaws. If the annual meeting shall not be called and held during any calendar year, the principal court may, after notice to the bank or trust company order a substitute annual meeting to be held upon the application of any shareholder. The principal court may issue such orders as may be appropriate, including, without limitation, orders designating the time and place of such meeting, the record date for determination of shareholders entitled to vote, and the form of notice of such meeting.
(c) Special meetings of the shareholders or a special meeting in lieu of the annual meeting of the shareholders may be called by the president, the chairman of the board of directors, the board of directors, or such other officers or persons as may be provided in the articles or bylaws, or in the event there are no officers or directors, then by any shareholder. Special meetings of the shareholders or a special meeting in lieu of the annual meeting of the shareholders shall be called by the bank or trust company upon the written request of the holders of not less than twenty-five percent of the outstanding shares of the bank or trust company entitled to vote in an election of directors.
(d) otice of annual and special meetings shall be given to shareholders of record pursuant to Section 4IA-I07. But when a meeting is adjourned to another time or place, it shall not be necessary, unless the bylaws require otherwise, to give any notice of the adjourned meeting if the time and place to which the meeting is adjourned are announced at the meeting at which the adjournment is taken, and at the adjourned meeting any business may be transacted
II-57

that might have been transacted on the original date of the meeting. If, however, after the adjournment, the board fixes a new record date for the adjourned meeting, a notice of the adjourned meeting shall be given each shareholder of record on the new record date entitled to vote at such meeting.
(e) Any action required by this Code to be taken at a meeting of the shareholders of a bank or trust company, or any action which may be taken at a meeting of the shareholders, may be taken without a meeting if written consent, setting forth the action so taken, shall be signed by all the shareholders entitled to vote with respect to the subject matter thereof. Such consent shall have the same force and effect as a unanimous vote of shareholders and may be stated as such in any articles or document filed with the Secretary of State or the Department under this Code.
Comment: The Banking Code presupposes that there shall be an annual meeting of shareholders and that there may be special meetings, Ga. Code Ann. Sec. 13-2001, but does not give detail as to the time. place or manner in which such meetings may be called. This provision, which is similar to Sections 22-603 and 22-604 of the Corporation Code, would supply this detail.
4IA-2004. Closing of Transfer Books and Fixing Record Date. (a) For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purpose, the board of directors of a bank or trust company may provide that the stock transfer books shall be closed for a stated period but not to exceed, in any case, fifty days. If the stock transfer books shall be closed for the purpose of determining shareholders e itled to notice of or to vote at a meeting of shareholders, such books shall be closed for at least ten days immediately preceding such meeting.
(b) In lieu of closing the stock transfer books, the bylaws, or in the absence of an applicable bylaw the board of directors, may fix in advance a date as the record date for any such determination of shareholders, such date in any case to be not more than fifty days and, in case of a meeting of shareholders, not less than ten days prior to the date on which the particular action, requiring such determination of shareholders, is to be taken.
(c) If the stock transfer books are not closed and no record date is fixed for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders, or shareholders entitled to receive payment of a dividend, the date on which notice of the meeting is mailed, or the date on which the resolution of the board of directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of shareholders.
II-58

2004
(d) When a determination of shareholders entitled to vote at any meeting of shareholders has been made, as provided in this Section, such determination shall apply to any adjournment thereof, unless the board of directors fixes a new record date under this Section for the adjourned meeting.
Comment: This new provision, copied from Section 22-605 of the Corporation Code, specifies how shareholders of record are to be determined.
41A-2005. Voting List. (a) The officer or agent having charge of the stock transfer books for shares of a bank or trust company shall make a complete list of the shareholders entitled to vote at a meeting of shareholders or any adjournment thereof, arranged in alphabetical order, with the address of, and the number and class, if any, of shares held by each. Such list shall be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting for the purposes thereof. Such list shall be prima facie evidence of who is a shareholder of record, but in the event of challenge, the record of shareholders required by Section 41 A-2009 shall control.
(b) If the requirements of this Section have not been substantially complied with, the meeting shall, on the demand of any shareholder in person or by proxy, be adjourned until the requirements are complied with.
(c) If no such demand is made, failure to comply with the requirements of this Section shall not affect the validity of any action taken at such meeting.
(d) otwithstanding the foregoing provisions of this Section, it shall not be necessary to prepare or produce a list of shareholders in any case where the record of shareholders is presented and readily shows, in alphabetical order or by alphabetical index, and by classes, if any, the names of the shareholders entitled to vote, with the address of and the number of shares held by eqch.
Comment: This is a new provision copied from Section 22-606 of the Corporation Code providing for a shareholder's list to be used in connection with shareholders' meetings. Section 13-2045 of the present Banking Code requires that a permanent list of shareholders be maintained and forwarded to the Department annually. A shareholder's record will serve a similar function under Section 41A-2009 of this Code.
41A-2006. Quorum of Shareholders. (a) Except as provided in subsection (d) or the articles, or in bylaws adopted by the shareholders, a majority of the shares entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of shareholders.
(b) If a quorum is present, the affirmative vote of the majority of the shares represented at the meeting and entitled to vote on the
II-59

ubject matter shall be the act of the shareholders, unless the vote of a greater number, or voting by classes, is required by this Code, or the articles, or bylaws.
(c) When a quorum is once present to organize a meeting, the hareholders present may continue to do business at the meeting or at any adjournment thereof notwithstanding the withdrawal of enough shareholders to leave less than a quorum.
(d) If a meeting cannot be organized for lack of a quorum, those present may adjourn the meeting to such time and place as they may determine. In the case of a meeting for the election of directors which is twice adjourned for lack of a quorum, those present at the second of such adjourned meetings, of which notice has been given in writing to shareholders pursuant to Section 41A-I07, shall constitute a quorum for the election of directors without regard to the other quorum requirements of this Section, the articles or bylaws.
Comment: This is a new provision which would specify requirements for a quorum and action at a shareholders meeting. Subsections (a)-( c) are patterned after Section 22-067 of the CorporatiOIl Code. Subsection (d) is derived from Pa. Stat. Ann. Tit. 7, Sec. 1211.
4IA-2007. Voting of Shares. (a) Unless otherwise provided in the articles, each outstanding share entitled to vote, regardless of class, hall be entitled to one vote on each matter submitted to a vote at a meeting of shareholders. A subscriber shall not be entitled to vote the hares subscribed for until such shares have been fully paid.
(b) Treasury shares shall not be voted at any meeting nor counted in determining the total number of outstanding shares at any given time.
(c) The chairman of the board, president, any vice president, the euetary or the treasurer of a corporation which is the holder of record of shares of a bank or trust company shall be deemed by the bank or trust company to have authority to vote such shares and to execute proxies and written waivers and consents in relation thereto, whether such shares are held in a fiduciary capacity or otherwise, unles , before a vote is taken or a waiver of consent is acted upon, it i made to appear by a certified copy of the bylaws or resolution of the board of directors or executive committee of the corporation holding such shares that such authority does not exist or is vested in
me other officer or person. In the absence of such certification, a p~rson executing any such proxies, waivers or consents or presenting himself at a meeting as one of such officers of a corporate hareholder shall, for the purposes of this Section, be prima facie deemed to be duly elected, qualified and acting as such officer and to be fully authorized, and in case of conflicting representation, the corporate shareholder shall be deemed to be represented by its senior officer in the order first stated in this subsection.
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2007
(d) Shares held by an administrator, executor, guardian or conservator may be voted by him, either in person or by proxy, without a transfer of such shares into his name. Shares tanding in the name of a trustee may be voted by him, either in person or by proxy, but no trustee shall be entitled to vote shares held by him without a transfer of such shares into his name or the name of his nominee. Shares standing in the name of a person as life tenant may be voted by him, either in person or by proxy, unless the record of shareholders shows that he is not entitled to vote such shares.
(e) Shares standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without a transfer thereof into his name if authority to do so be contained in an order of the court by which such receiver was appointed.
(f) If a share or shares stand of record in the names of two or more persons, whether fiduciaries, joint tenants, tenants in common, tenants in partnership, or otherwise, or if two or more persons have the same fiduciary relationship respecting the same share or shares, then unless the instrument or order appointing them or creating the tenancy otherwise directs and it or a copy thereof is filed with the secretary of the bank or trust company, their acts with respect to voting shall have the following effect:
(I) if only one votes, in person or by proxy, his act binds all; (2) if more than one votes in person or by proxy, the act of the majority so voting binds all; (3) if more than one votes in person or by proxy but the votes are evenly split on any particular matter, each faction is entitled to vote the share or shares in question proportionally; (4) if the instrument or order so filed shows that any such tenancy i held in unequal interest, a majority or even-split for purposes of this subsection hall be a majority or even-split in interest; (5) the principles of this subsection shall apply, insofar as possible, to execution of proxies, waivers, consents or objection and for the purpose of ascertaining the presence of a quorum. (g) A shareholder whose shares are pledged hall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, or a nominee of the pledgee, and thereafter the pledgee or his nominee shall be entitled to vote the shares so transferred. (h) otwithstanding the foregoing subsections, a corporation hall be protected in treating the persons in whose names shares stand on the record of shareholders as the owners thereof for all purpo e . 0) When notice of redemption of redeemable share has been mailed to the holders thereof and a sum ufficient to redeem uch shares has been set aside to pay the redemption price to shareholders,
II-6l

2007

uch shares shall not be entitled to vote in any manner and shall not be deemed to be ou tstanding shares.
Comment: This is a new Section paralleling Section 22-608 of the Corporate Code.
41 A-2008. Proxies. (a) Unless otherwise unlawful, a person or corporation who is entitled to attend a shareholders' meeting, to vote thzreat, or to execute consents, waivers or releases, may be represented at such meeting or vote thereat, and execute consents, waivers and releases, and exercise any of his other rights, by one or more agents, who may be either an individual or individuals or any domestic or foreign corporation, authorized by a written proxy executed by such person or by his attorney-in-fact.
(b) 0 proxy shall be valid after the expiration of eleven months from the date thereof unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the person executing it, except as otherwise provided in this Section.
(c) Subject to the limitation of subsection (b) of this Section, any proxy duly executed is not revoked, and continues in full force and effect, until an instrument revoking it, or a duly executed proxy bearing a later date, is received by the secretary of the bank or trust company. A proxy is not revoked by the death or incapacity of the maker unless, before the vote is counted or the authority is exercised, written notice of such death or incapacity is received by the secretary of the bank or trust company. Notwithstanding that a valid proxy is outstanding, the powers of the proxy holder are su pended, except in the case of a valid proxy which is by law irrevocable and which states on its face that it is "irrevocable, if the maker is present at the meeting and elects to vote in person.
(d) If a proxy for the same shares confers authority upon two or ore persons and does not otherwise provide, a majority of them present at the meeting, or if only one is present, then that one may exercise all the powers conferred by the proxy but if the proxy holders present at the meeting are divided as to the righ t and manner of voting in any particular case and there is no majority, the voting of said shares shall be prorated. (e) If a proxy expressly provides, any proxy holder may, unless otherwise unlawful, appoint in writing a substitute to act in his place. (f) A shareholder shall not sell his vote or issue a proxy to vote to any person for any sum of money or anything of value, except as permitted in this Section and in Section 41 A-2009 relating to shareholders' agreements.
(g) To be irrevocable, a proxy must be entitled 'IRREVOCABLE PROXY', must state that it is irrevocable, must not otherwise be unlaWful, and must be held by any of the following or a nominee of any of the following:
(I) a pledgee or other person holding a security interest in the shares.

Y.1975

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2008

(2) a person who has purchased or agr~ed to purchase the shares. (3) a creditor or creditors of the bank or tru'st company who extend or continue credit to the bank or trust company in considera.: tion of the proxy if the proxy states that it was given in consideration of such extension or continuation of credit, the amounts thereof, and the name of the person extending or continuing credit. (4) a person who has contract"ed to perform services as an officer of the bank or trust company, if a proxy is required by the contract of employment, and if the proxy states that it was given in consideration of such contract of employment, the name of the employee and the period of employment contracted for. (5) a person designated by or under an agreement under the provisions of Section 41 A-2009 relating to shareholders' agreements. (h) otwithstanding a provision in a proxy stating that it is irrevocable, the proxy becomes revocable after the pledge or security interest is redeemed, or the debt of the bank or trust company is paid, or the period of employment provided for in the contract of employment has terminated, or the agreement under the provisions of Section 41A-2009 relating to shareholders' agreements has terminated; and, in a case provided for in paragraph (3) or (4) of subsection (g) of this Section, becomes revocable three years after the date of the proxy or at the end of th period, if any, specified therein, whichever period is less unle s the period of irrevocability is renewed from time to time by the execu tion of a new irrevocable proxy as provided in this Section. This su bsection does not affect the duration of a proxy under subsection (b) of this Section. (i) A proxy may be revoked, notwithstanding a provision making it irrevocable, by a purchaser of shares without knowledge of the existence of the provision unless the existence of the proxy and its irrevocability are noted conspicuously on the face or back of the certificate representing such shares. Comment: This is a new provision which would make Section 22-6J0 of the Corporate Code pertaining to proxies applicable to banks and trust companies. The Corporate Code rules would apply 'unless otherwise unlawful', thus assuring that existing bank holding company restrictions would not be changed. 41 A-2009. Shareholders' Agreements. (a) Unless otherwise unlawful, an agreement between two or more shareholders, if in writing and signed by the partie thereto and if a copy thereof is deliver d to the Department and approved by the Department when, in its discretion, such agreement is in the best interest of the bank and the public, may provide that in exerci ing any voting rights, the shares held by them shall be voted as therein provided, or a th Y may agree, or as determin d in accordance with a procedure agr ed upon by them. othing herein shall impair th right of the bank or trust company to treat the shareholders of record as entitled to vote

MaY,1975

11-63

2009

the shares standing in their names. (b) The duration of any agreement permitted by subsection (a)
shall not exceed twenty years. Failure to state a period of duration or stating a period of duration in excess of twenty years shall not invalidate the agreement, but in either such case the period of duration of the agreement shall be twenty years. Any such agreement shall be renewable at any time before the expiration of such twentyyear period by agreement of all the shareholders bound thereby at the date of renewal.
(c) A transferee of shares in a bank or trust company whose shareholders have entered into an agreement authorized by subsection (a) shall be bound by such agreement or any renewal of such agreement authorized by subs.ection (b) if he takes the shares with notice thereof. A transferee shall be deemed to have notice of any such agreement or any such renewal if the existence thereof is noted on the face or back of the certificate or certificates representing such hares.
Comment: This is a new provision which would make portions of Section 22-611 relating to shareholders' agreements on the voting of shares applicable to banks and trust companies 'unless otherwise unlawful.' See the comment to Section 41A-2008. Portions of Section 22-611 allowing shareholders' agreements to restrict the responsibility of the board of directors are omitted as inappropriate in the case of banks and trust companies. A requirement that a copy of the agreement be delivered to the Department is introduced.
4t A-20t O. Books and Records. (a) Each bank and trust company shall keep correct and complete books and records of account and shall keep minutes of the proceedings of its shareholders, board of directors, and committees of directors; and shall keep at its registered office or principal place of business, or at the office of its transfer agent or r gistrar, a record of its shareholders, giving the names and addre ses of all shareholders, and the number class and series, if any, of the shares held by each.
(b) The Department may, by regulation, prescribe the minimum di closure of corporate records and reports which must be made by the bank or trust company to its shareholders at each annual meeting. In issuing such regulations the Department shall consider the legitimate rights of a shareholder to sufficient information to evaluate the management and use of his investment and to elect qualified directors for the bank or trust company and the\rights of customers of the bank or trust company to maintain the confidentiality of their business affairs.
(c) othing herein contained shall impair the power of any court of competent jurisdiction, upon proof by a shareholder of proper purpose, irrespective of the period of time during which such shareholder hall have been a shareholder of record, and irrespective of the number of shares held by him, to compel the production or examina-

Y.1975

11-64

2010

tion by such shareholder of the books and records of account minutes and record of shareholders of a bank or tru t company:
41 A-20ll. Derivative Actions by Shareholders. A derivative action may be brought by a shareholder in the right of bank or trust company to procure a judgment in its favor against dir ctors officers, or other representatives of the bank or trust company or shareholders or third parties, or any combination thereof, whenever the bank or trust company has a claim or cause of action which the representatives of the bank or trust company, in violation of their duties, have failed to enforce, including a claim or cause of action against such representatives for their failure in this respect.
Comment: This new Section would make the Corporate Code provision contained in Ga. Code Ann. Sec. 22-614 dealing with the scope of derivative suits applicable to banks and trust companies.
41 A-20 12. Restrictions on Derivative Actions. (a) In a derivative action brought by one or more shareholders of a bank or trust company to procure a judgment in its favor, the representatives of the bank or trust company wrongfully having failed to enforce a right which may properly be asserted by it, the complaint shall be verified and shall allege that the plaintiff is a shareholder of record at the time of bringing the action. It shall further allege:
(1) that the plaintiff had purchased his shares or was a shareholder of record at the time of the transaction of which he complains or that his shares thereafter devolved on him through one of several transfers by operation of law from one who was a holder of record or member at such time or
(2) that the plaintiff is the holder of record of shares which at-the time of the transaction of which he complains were held of record by a trustee of a trust in which the plaintiff held a beneficial interest or in which a beneficial interest was held by one from whom the shares have developed upon the plaintiff through one of several transfers by operation of law.
(b) In any such action, the complaint shall also allege with particularity the efforts of the plaintiff to secure the initiation of such action by the board of directors or comparable authority, or the reasons for not making such effort.
(c) Such action shall not be discontinued, compromised or settled without the approval of the court having jurisdiction of the action. If the court shall determine that the interests of the members or.of the shareholders of any class or classes will be substantially affected by such discontinuance, compromise, or settlement, the court shall direct that notice, by publication or otherwise, of the action and the proposed discontinuance, compromise, or settlement thereof be given to the members or to the shareholders of the class or c1asse whose interests it determines will be so affected if notice is so directed to be given, the court may determine which one or more of

May. 1975

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2012
the parties to the action shall bear the expense of giving the same, in such amount as the court shall determine and find to be reasonable in the circumstances.
(d) If such action be successful, in whole or in part, or if anything be received by the plaintiff or plaintiffs as the result of the judgment, compromise or settlement thereof, the court may award the plaintiff or plaintiffs reasonable expenses, including reasonable fees of attorneys, and shall direct him or them to account to the bank or trust company for the remainder of the proceeds so received by him or them.
(e) In any such action hereafter instituted, the court having jurisdiction, upon final judgment and a finding that the action was brought without reasonable cause, may require the plaintiff or plaintiffs to pay to the parties named as defendant the reasonable expenses, including fees of attorneys, incurred by them in the defense of such action and such damages as the court may assess shall be paid over to the bank or trust company for damages such bank or trust company may have sustained due to adverse pu blicity brought about as a result of action brought without reasonable cause.
Comment: This Section would make the procedural restrictions on derivative suits contained in Section 22-615 of the Corporate Code applicable to banks and trust companies.
41A2013. Report of Change in Control. Whenever a change occurs in the ownership or right to vote, the outstanding shares of any bank or trust company which will result in the control or a change in the control of the bank or trust company, the president or other officer of such bank or trust company shall, within ten days after knowledge thereof, report such facts to the Department. As used in this Section, the term 'control' means the power to, directly or indirectly, direct or cause the direction of the managemen t or policies of the institution. If there is any doubt as to whether a change in the ownership or voting rights of such shares is sufficient to result in control thereof or to effect a change in the control thereof, such doubt shall be resolved in favor of reporting the facts to the Department.
Comment: This provision would carry forward Section 13-2006 of the Banking Code.

May, 1975

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May. 1975

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2101
CHAPTER 41 A-21. DIVIDENDS, DISTRIBUTIO S A D PREFERRED SHARE ACQUISITION.
41 A-21 01. Dividend; Limitations. (a) The board of directors of a bank or tru t company may, from time to time declare and the bank or tru t company thereupon hall pay dividends on its out tanding hares in cash, property, or its own shares, except when the bank or tru t company is insolvent or when the payment thereof would render the bank or trust company insolvent or when the declaration or payment thereof would be contrary to any restriction contained in the articles and subject to the following provisions:
(I) dividends may be declared and paid in cash or property only out of th retained earning of the bank or trust company
(2) dividends may not be declared or paid at any time that the bank or trust company does not have the paid-in capital and/or appropriated retained ea mings req uired by Section 41 A-1902;
(3) dividends may not be paid without the prior approval of the Department in excess of specified amounts as may be fixed by regulation of the Department to assure that banks and trust companie maintain an adequate capital structure
(4) dividends may be declared and paid in lawfully held treasury hare or in authorized but uni ued hares, provided that, in the ca e of a dividend of authorized but previously unissued hare, there hall be transferred to capital stock an amount equal to the aggregate par value of the hares di tributed and, after payment of the dividend, the bank or tru t company continue to maintain the paid-in capital and/or appropriated retained earnings required by Section 4IA-1902; and
(5) no dividends payable in share of any c1as hall b paid in > pect to hares of any other class unless the articles 0 provide or uch payment is authorized by the affirmative vote or the written con ent of the holder of a majority of the outstanding share of the cia in which the payment is to be made.
(b) A plit or division of the issued shares of any class into a greater number of shares of the same class without increasing the capital tock of the bank or trust company shall not be construed to be a hare dividend within the meaning of this Section.
(c) If a bank or trust company has declared a cash dividend on any hare, or any other di tribution payable in cash, or has sold fractional hares or scrip for the account of a shareholder and has mailed to a hareholder at his address appearing on the records of the bank or tru t company a valid check in the amount of the dividend or other distribution or the proceeds of such ale to which such hareholder is entitled, and such check would have been honored if dUly presented to the bank on which it is drawn, no action for the recovery of such dividend or other distribution or for the amount
11-68

2101
thereof shall be brought by the shareholder or other per on entitled thereto more than seven year after the date of mailing the check.
(d) If a bank or trust company has declared a dividend payable in its own hares or any other distribution payable in its own shares or in other than cash, and has mailed to a shareholder at his address appearing on the record of the bank or trust company a certificate representing uch shares or a notice setting forth the time and manner in which a distribution in other than its own shares or cash shall be paid, no action for the recovery of such dividends or other distribution or for the amount thereof shall be brought by the shareholder or other per on entitled thereto more than even years after the mailing of the share certificate or certificates or, in the case of a distribution in other than the share of the bank or trust company, or cash, the time specified in the notice for the payment thereof.
(e) When the tatute of limitations provided for in this Section has run with respect to any unclaimed dividend or other unclaimed distribution, or unclaimed proceed of the sale of fractional shares or scrip the cash or property represented thereby shall thenceforth be treated as an asset of the bank or trust company.
Comment: The Banking Code Limits payment of dividends to tile net profits of the bank and contains specialized provisions for the calculation of sucll profit. Ga. Code Ann. Sees. 13-2029, 13-2032. Among the specialized rules are provisions relating to writing off loans and judgments as bad debts where interest payments are not received within twelve months after becoming due (unless the loan is amply secured) and excluding accrued but unpaid interest on unsecured loans. This provision would continue to allow dividends to be paid only out of profits but would define that term as it is defined in the Corporate Code leaving precise inclusions and deductions to accepted accounting practice and the regulations of the Department. This Section introduces authority for the Department to specifY the level of dividend payment above which Department approval would be required. It also sets requirements for stock dividends about which the present Code is silent. Apart from these restrictions and the restrictions, if any, of the articles, dividends are regarded as a discretionary corporate decision.
41A-2102. Distribution Upon Reduction of Capital, Stock or Paid-in Capital. (a) Upon the decrease of capital stock of a bank or trust company pursuant to amendment of it articles as provided in this Code, the board of directors may, subject to restrictions of the articles, distribute to the shareholders of the bank or trust company an amount in cash equal to all or part of the amount of the decrea e in capital stock, if immediately after such distribution the bank or trust company would have the capital stock required by this Code
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and would have the paid-in capital and/or appropriated retained earnings required by Section 41 A-1902.
(b) Any portion of the amount of a decrease in capital stock which is not distributed to shareholder in accordance with this Section shall be transferred to paid-in capital.
(c) A bank or trust company may by resolution of its board of directors distribute to its shareholder amounts repre enting a reduction in its paid-in capital provided that after such distribution the institution shall continue to have the paid-in capital and/or appropriated retained earnings required by Section 41 A-1902 and provided that such distribution is first approved in writing by the Department.
Comment: The Banking Code authorizes decreases in capital through amendment of articles, but does not contain express authority to make a distribution to shareholders incident to such reduction. This Section, derived from Pa. Stat. Ann. Tit. 7, Sec. 1305, would provide such explicit authority, which is essential in view of the statutory restrictions on distributions contained in the next Section.
41 A-2103. Unlawful Dividends and Di tributions. The directors of a bank or trust company shall not declare dividends or authorize or ratify the di tribution of any part of its a sets to shareholders by purchase of its shares or otherwise except as authorized by this Code.
Comment: This is a new provision which would expressly bar dividends or distributions not affirmatively authorized by this Code. 11 hould be read together with Section 41 A-221 5 concerning director liability. Cf Ga. Code Ann. Sec. 22-4106.
41 -2104. Preferred Share Acquisition. (a) Unless otherwise provided in its articles, a bank or trust company may, by resolution of its board of directors and with the prior approval of the Department, redeem or otherwise acquire preferred shares if immediately after the redemption or other acquisition the bank or trust company would have the paid-in capital and/or appropriated retained earning required by Section 41 A-1902. In determining whether or not to give its approval under this subsection (a) the Department hall give primary consideration to the question of whether or not after the cancellation of the preferred shares, the capital accounts of the bank or trust company would be adequate to support its anticipated deposit or trust business.
(b) Preferred shares which are redeemed or otherwise acquired hall be canceled and shall not be reissued without prior approval of the Department.
Comment: The Banking Code authorizes preferred shares, Ga. Code Ann. Sec. 13-912, but does not deal with redemption 01' other acqUisition of such shares. This proposed provision would allow
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2104 acquisition and cancellation of SLich shares. It is deriJled with modifications from Pa. Stat. A nil. Tit. 7, Sec. 1306.
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2201

CHAPTER 41A-22. MANAGEMENT.

41 A-2201. Board of Directors. (a) Administration of the business and affairs of a bank or trust company shall be the responsibility of a
board of directors. (b) Each director shall be a citizen of the United States and at
least sixty percent of the directors shall: (I) reside in Georgia; and (2) reside in the county in which the registered office of the
bank or trust company is or is proposed to be located or within forty miles of any office thereof authorized to offer a complete banking or trust service.
(c) otwithstanding other provisions of this Section, directors who are legally qualified to serve on April I, 1975, may continue to serve for such time as they are continuously members of the board of directors of their bank or trust company.
Comment: This provision would retain the basic principle stated in Section 13-2001 of the Banking Code that the directors are responsible for the affairs of a banking institution. The supervising board of a trust company would also be denominated a board of directors rather than a board of trustees as is the case under Section 109-103 of the Trust Company Code. Qualifications for directors of either type of institution are formulated as the qualifications for bank directors were enacted by the General Assembly in 1973 (Ga. Laws 1973, p. 811), except that sixty percent of the directors are required to be Georgia residents and certain linguistic and organizational changes are made. In addition, the requirement of directors' qualifying shares is removed.
4 .'\-2202. Bylaws. The board of directors shall have the power to adopt, amend or repeal bylaws as specified in Section 4IA-1201(d) unless such power is reserved exclusively to the shareholders by the articles or in bylaws previously adopted by the shareholders, but any bylaws adopted by the board of directors may be altered, amended or repealed, and new bylaws adopted, by the shareholders. The shareholders may prescribe that any bylaw or bylaws adopted by them shall not be altered, amended or repealed by the board of directors. Copies of the bylaws and any change, addition or amendment thereto shall immediately, upon adoption by the directors or the shareholders, be filed with the Department.
Comment: The Banking Code contemplates the use of bylaws but does not provide the machinery for their adoption. This Section would follow the procedure of the Corporate Code, Ga. Code Ann. Sec. 22-807 with the additional requirement that copies of the bylaws be forwarded to the Department.
41 A-2203. Number, Term, and Compensation of Directors. (a) The articles or bylaws of any bank or trust company may fix the

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number of directors at not less than five nor more than twenty-five and may provide that the board may, within such limitation, increase or decrease the number of directors by not more than two in anyone year, provided that nothing herein shall require a bank with a board of directors of less than five on July 1, 1972, to increase its board to five members.
(b) Except as otherwise provided in this Code, each director shall be elected by the shareholders for a term of one year and shall serve until he resigns, is removed, becomes disqualified or until his successor shall have been duly elected and qualified.
(c) Except as otherwise provided in the articles or bylaws, the board of directors may fix the compensation for directors and a director may be a salaried officer of the bank or trust company.
Comment: Subsection (a) and (b) restate provisions of Georgia law which require between 5 and 25 directors and fix one year as the normal term for directors. Ga. Code Ann. Sec. 13-2001 .. Ga. Laws 1972, pp. 727, 729. The Section would modify existing law as to trust companies since Section 109-103 of the present Trust Company Code requires a board of trustees rather than directors. The authority to decrease the number of directors by two in anyone year is new. Subsection (b) also introduces an express preclusion against directors continuing to serve after they cease to be qualified. Subsection ( c) is a new provision alloWing directors to fix their compensation.
41A-2204. Action by Board; Committees. (a) The board of directors shall hold regular meetings at such times as may be fixed by the bylaws, at least once during ten different months of each calendar year, and shall at all times be subject to call by the Chairman of the Board, the president or by any two members of the board.
(b) Unless otherwise provided in the articles or bylaws: (l) a majority of all the directors in office shall constitu te a quorum for the transaction of business and actions of a majority of those present at a meeting at which a quorum is present shall be actions of the board; (2) the board of director may designate three or more of it number to constitute an executive committee or other committees which, to the extent provided in such resolution, shall have and exercise the authority of the board of directors in regard to the business of the bank or trust company; and (3) any action which may be taken at a meeting of the director or of the members of an executive or other committee may be taken without a meeting if a consent or consents in writing setting forth the action hall be signed by all of the directors or all of the members of the executive or other committee and filed with the secretary of the bank or trust company. Co m ment: This provision lvould carry forward with slight modifications requirements of Section 13-2004 of the Banking Code

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relating to meetings of directors and the required quorum of directors. It would introduce a general authorization for the directors to act through committees. The Trust Company Code contains authority for an executive committee. Ga. Code Ann. Sec. 109-103. The Banking Code contemplates action by committees of the board as to specific matters without generally authorizing the use of this procedure; e.g., Ga. Code Ann. Secs. 13-2012; 13-2013. The Section also introduces a provision allowing the directors to act by unanimous consent without meeting.
41 A-220S. Oath of Directors. (a) Each director shall, before assuming office, take an oath or affirmation that he will diligently and honestly perform his duties in the administration of the affairs of the bank or trust company, that he will not permit a willful violation of law by the bank or trust company and that he meets the eligibility requirements of this Code and of the articles and bylaws.
(b) The oath or affirmation shall be signed by the director and flied with the Department.
Comment: This provision would carry forward the requirement of a director's oath contained in Ga. Code Ann. Sec. 13-2003.
41A-2206. Removal of Directors; Vacancies. (a) The entire board of directors or an individual director may be removed without cause by the vote of shareholders entitled to cast at least a majority of the votes which all shareholders would be entitled to cast at an annual election of directors.
(b) The board may remove a director from office if: (1) he is adjudicated an incompetent by a court or is convicted of a felony' (2) he does not, within sixty days after his election or such longer time as the bylaws may specify, accept the office in writing or by
a attendance at meeting and fulfill other requirements for holding
the office; (3) he fails to attend regular meetings of the board for six
uccessive meetings without having been excused by the board. (c) Vacancies in the board of directors, whether caused by
removal or otherwise and including vacancies resulting from an increase in the number of directors, may be filled by the remaining member of the board even though less than a quorum. Certified . upies of all resolutions selecting new directors to fill vacancies shall Immediately be filed with the Department. Each director so elected shall be a director until his successor is elected by the shareholders Who hall make such election at the next annual meeting of hareholders or at any special meeting called for that purpose prior thereto.
. Comment: Subsections (a) and (b) of this provision would Introduce new authority for removal of directors by shareholders and by the board. The provisions are derived from Pa. Stat. Ann. Tit. 7,
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Sec. 1408. The former law does not have similar provisions. The procedures set forth are in addition to the power of the Department to suspend directors under Section 41 A-312. Subsection (d) re tates the authority of the board to fill vacancies contained in Sectioll 13-2001 of the Banking Code. adding power for the board to take action in this regard even in the absence of a quorum.
41A-2207. Honorary and Advisory Position. The board of directors of any bank or trust company may appoint an individual, an honorary director or director emeritu or member of an advi ory board. An individual 0 appointed may be compen ated but may not vote at any meeting of the board of directors or be counted in determining a quorum and shall not have any re pon ibility or be subject to any liability impo ed upon a director, or otherwi e be deemed a director.
Comment: This new provision, derived from Pa. Stat. Ann. Tit. 7, Sec. 1402(d), would introduce express authority for honorary and advisory appoilltments. This authority is considered important within the context of the countywide banking system.
41 A-2208. Audits. (a) Except a provided in subsection (c) of this Section the board of directors shall at lea t once each year have made, by at least three of the directors or by independent or certified accountant an audit of the book and affair of the bank or trust company including uch matters a may be required by the Department and including, in the case of a trust company, account held in a fiduciary or other representative capacity. Directors who make such an audit may as ign the performance thereof to a sistants but may not delegate responsibility therefor. The Department may by regulation establi h minimum standards for audit and report under this Section.
(b) A report of the audit made under sub ection (a) shall be signed by the directors or the accountants who make it and filed with the Department and a igned copy of the report shall be submitted to the board and kept in the files of the bank or tnt t company.
(c) In the case of a bank or trust company which has a system of internal audit control approved by the Department, no audit under subsection (a) of this Section shall be required, and in lieu of the report required by subsection (b), the auditor or comptroller of the bank or trust company shall submit to the board an annual summary report of the arne matters as those required under subsection (a). Such report shall et forth the degree of compliance with the approved audit system and shall express the opinion of the auditor or comptroller as to the adequacy of the internal controls. The report shall be kept in the file of the bank or tru t company and a copy shall be filed with the Department.
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Comment: This is a new provision derived from Pa. Stat. Ann. Tit. 7. Sec. 1407 which would introduce the requirement of a mandatory annual audit.
41A-2209. Officers, Agents, Share Plans. (a) A bank or trust company shall have a president, secretary and such other officers as the directors may from time to time designate. An individual may hold more than one office except that the individual shall not be both president and secretary.
(b) Except as otherwise provided in the articles or bylaws, the board of directors shall elect the officers, fix their compensation and fill vacancies however occurring. An officer elected or appointed by the board may be removed by the board at any time whenever in its judgment the best interests of the institution will be served thereby without prejudice to any contract right of such officer. The Department shall be immediately informed in writing of the names of all officers elected or removed.
(c) The officers shall, as between themselves and the bank or trust company, have such authority and perform such duties as may be provided in the bylaws adopted by the board.
(d) A bank or trust company may also employ such agents or employees as.may be required for the prompt and orderly discharge of its business.
(e) Except as otherwise provided in the articles, a bank or trust company may adopt and carry out a plan, approved by the directors, the Department and the affirmative vote of a majority of the shares entitled to vote thereon, for the sale of shares, or for the granting of options for shares, to some or all of the officers and employees of the bank or trust company or of any affiliate of the bank or trust company or to a trustee on behalf of such employees, upon such erms and conditions and in such manner as may be provided by the bylaws or by the board.'In any sllch plan:
(I) such shares may be sold or optioned upon terms (not less than the par value thereof) which are deemed advantageous to the bank or trust company by the directors other than directors who may benefit by their action or, if the number of directors who will not benefit by the action is fewer than three, by the shareholders; and
(2) in the absence of fraud in the transaction, the judgment of the board of directors or the shareholders as to the adequacy of the con ideration received for any rights or options to purchase shares under the plan shall be conclusive. Such a plan may be adopted whether or not it qualifies for special tax treatment under the laws of the United States.
Comment: Subsections (a)-(d) of this provision would reduce the number of statutorily reqUired officers to a president and a secretary. The president is no longer required to be a director. Cf Ga. Code Ann. Sec. 13-2009. Subsection (d) provides new detail as to stock
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2209
purchase and option plans, and reduces the margin of hareholder approval required for such' plans from a two-thirds to a majority vote. Cf Ga. Code Ann. Sec. 13-912(d).
41 A-221 O. Bonds. Any director who is authorized to handle money or negotiable assets on behalf of a bank or trust company and all officers and employees of a bank or trust company shall be bonded by a regularly incorporated surety company authorized to do business in this State, and the bank or trust company may pay the cost of such bond. The form, amount and surety of such bonds shall be such as is approved by the board of directors, but the Department may require an additional amount or new or additional surety.
Comment: This provision carries forward the substance of Section 13-2010 of the Banking Code.
41A-2211. Responsibility of Directors and Officers; Delegation of Investment Decisions. Directors and officers of a bank or trust company shall discharge the duties of their respective positions in good faith and with that diligence, care and skill which ordinarily prudent men would exercise under similar circumstances in like positions. In discharging their duties, directors and officers when acting in good faith, may rely upon financial information concerning the bank or trust company represented to them to be correct by the president or the officer of the bank or trust company having charge of its books of account or stated in a written report by an independent or certified public accountant or firm of such accountants fairly to reflect the condition of such institution. A bank, through its board of directors, may delegate to a correspondent bank the power to determine within the limits set by law, the investments in which its assets including reserve assets may be held, provided that the bank must obtain the prior written approval of the Department for such delegation.
Comment: The Banking and Trust Company Codes do not have a provision expressing the general standard of care which must be exercised by officers and directors. This Section would provide such a standard by adopting the standard of the Corporate Code. Ga. Code Ann. Sec. 22-713.
41 A-2212. Financing Involving Directors or Officers. (a) Except as provided in subsection (b), a bank or trust company shall not make loans or otherwise extend financing to one of its directors or officers which in aggregate amount exceeds the principal sum of $5,000.00.
(b) A bank or trust company may, subject to other restrictions imposed by law or its articles or bylaws, make loans to a director or officer without regard to the limitation of subsection (a) if each such loan is approved in advance by the board of directors or a committee thereof authorized to act for the board, and if each such loan is either:
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(I) ecured by deposits in the bank or trust company, or cash rrender value of life insurance in an amount equal to, or by other ollateral with a market value of at least twenty percent more than,
the amount of the loan; (2) conforms with the requirements of a real estate loan under ction 41 A-1307 and regulations issued pur uant thereto and is: (j) secured by a first priority mortgage or security deed on the
home of such officer or director; or (ij) guaranteed, or is one for which a written commitment to
guarantee has been made, by the Veterans Administration pursuant to the Veteran' Benefit Act or
(iii) insured or is one for which a written commitment to insure ha been issued, pursuant to national housing legislation'
(3) an extension of credit not at any time exceeding $10,000.00 for the purpose of financing the education of a child or children of a director or officer; provided that no director shall be eligible to vote on a loan to himself under this subsection.
Comment: This provision would relax restrictions on loans to bank officers, directors, agents and employees. Sections 13-2012 and 13-2013 of tlze Banking Code require all such loans to be approved by the board of directors and to be amply secured except indebtedness of less than $1,000 arising from the acquisition of accounts or under credit card, check credit or similar plans. This provision would apply such restrictions only to directors and officers and would allow loans to these officials of up to $5,000 without such formalities. All indebtedness above the $5,000 level would have to be approved by the board, and secured with at least a twenty percent margin except for designated home or educational loans. The
rovision represents a compromise between the very restrictive attitude of present Georgia law and a more liberal Pennsylvania approach. SeePa. Stat. Ann. Tit. 7, Sec. 1415.
41 -2213. Prohibitions Applicable to Directors, Officers, ployees. 0 director, officer or employee of a bank or trust company shall:
(a) receive anything of value for procuring or attempting to procure any loan from or investment by the bank or trust company'
(b) purchase, or directly or indirectly be interested in purchasing, rom the bank or trust company for less than its face value any Pbaromissory note or other evidence of indebtedness issued by the
nk or trust company'
(c) purchase or sell any other asset to the bank or trust company cept

tba(nl)thuopseonoftfeerrmeds

not less favorable to other persons or

to the bank or trust corporations; and

company

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2213

(2) with the prior approval of the board of directors or a

committee thereof authorized to act for the board, unless the

transaction is made in the regular course of business.

No director shall be eligible to vote concerning any purchase or sale

where he is or would be a party to the transaction.

Comment: The provisions of this Section have no express

counterpart in the former statutes. They do, however, merely state

recognized principles in regard to selfdealing with a corporate entity.

The restrictions are derived from Pa. Stat. Ann. Tit. 7, Sees. 1413

and 1416.

41 A-2214. Actions Against Directors and Officers. (a) An action

may be brought by any of the persons named in subsection (b) of

this Section against one or more directors or officers of a bank or

trust company to procure for the benefit of the bank or trust

company a judgment for the following relief:

(l) to compel the defendent to account for his official conduct,

or to decree any other relief called for by his official conduct, in the

following cases:

(i) the neglect of, or failure to perform, or other violation of his

duties in the management of the bank or trust company, or in the

disposition of corporate assets committed to his charge;

(li) the acquisition by himself, transfer to others, loss or waste of

corporate assets due to any neglect of, or failure to perform or other

violation of his duties;

(lii) the appropriation, in violation of his duties, of any business

opportunity of the bank or trust company;

(2) to enjoin a proposed unlawful conveyance, assignment or

transfer of corporate assets or other unlawful corporate transaction

where there is sufficient evidence that it will be made;

(3) to set aside an unlawful conveyance, assignment or transfer of

corporate assets, where the transferee knew of its unlawfulness and is

made a party to the action.

(b) An action may be brought for the relief provided in this

Section, and in the provisions of Section 41 A-2215 relating to the

liability of directors in certain cases, by the bank or trust company,

or a receiver, trustee in bankruptcy, officer, director or judgment

creditor thereof, or by a shareholder in accordance with Sections

41A-2011 and 41A-2012 relating to derivative actions.

.

(c) No action shall be brought for the relief provided in thiS

Section more than four years from the time the cause of action

accrued.

(d) This Section shall not limit any liability otherwise imposed by

law upon any director or officer or any third party, provided that

after April I, 1975, Code Section 22-4106 relating to improper

dividends and liability of officers, shall no longer be applicable to

officers or directors of banks or trust companies.

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Comment: This Section would make provisions now contained in Section 22-714 of the Corporate Code applicable to bank and trust company directors and officers. They would replace the double liability now applicable under Section 22-4106 ill the case of improper dividends or distributions.
41 -2215. Liability of Directors in Certain Cases. (a) In addition to any other liabilities imposed by law upon directors of a bank or trust company:
(l) directors of a bank or trust company who vote for or assent to the declaration of any dividend or other distribution of the assets of a bank or trust company to its shareholders which is not authorized by this Code or is contrary to any restrictions contained in the articles shall be jointly and severally liable to the bank or trust company for the amount of such dividend which is paid or the value of such assets which are distributed in excess of the amount of such dividend or distribution which could have been paid or distributed without a violation of the provisions of this Code or the restrictions in the articles to the extent that any depositor, creditor or hareholder of the bank or trust company has suffered damage as a re ult thereoF- and
(1) the directors of a bank or trust company who vote for or a sent to any distribution of assets of a bank or trust company to its shareholder during the voluntary liquidation of the bank or trust company without the payment and discharge of, or making adequate provi ions for, all known debts, obligations, and liabilities of the bank or trust company shall be jointly and severally liable to the bank or trust company for the value of such a ets which are di tributed, to the extent that such debts obligations and liabilities of the bank or trust company are not thereafter paid and di charged.
(b) A director of a bank or trust company who i pre ent at a meeting of its board of directors at which action on any corporate matt r i taken shall be presumed to have assented to the action taken unle his dissent shall be entered in the minute of the meeting or unless he shall file his written dissent to uch action with the per on acting as the secretary of the meeting before the adjournment thereof or shall forward such dissent by registered or certified mail to the secretary of the bank or tru t company within twenty-four hours after the adjournment of the meeting. Such right to di ent shall not apply to a director who, being present at the meeting failed to vote against such action.
(c) A director shall not be liable under sub ection (a) of this ~ection if he relied and acted in good faith upon financial mformation of the bank or trust company represented to him to be Correct by the president or the officer of the bank or tru t company haVing harge of its books of account, or stated in a written report by an independent or c rtified public accountant or firm of such
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2215
accountants fairly to reflect the financial condition of such bank or trust company, nor shall be so liable if in good faith in determining the amount available for any uch dividend or distribution he considered the assets to be fairly represented on the books of the bank.
(d) Any director against whom any claim shall be asserted under or pursuant to this Section for th'e payment of a dividend or other distribution of assets of a bank or trust company, and who shall be held liable thereon shall be entitled to contribution from the shareholders who accepted or received any such dividends or assets, knowing such dividend or distribution to have been made in violation of this Code, in proportion to the amounts received by them respectively.
(e) Any director against whom any claim shall be asserted under or pursuant to this Section shall be entitled to contribution from the other directors who voted for or assented to the action upon which the claim is asserted.
(f) 0 liability under this Section shall be asserted more than six years from the time the cause of action accrued.
Comment: This new Section would make appropriate portions of Section 22-715 of the Corporate Code applicable to bank and trust company directors,
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2301
CHAPTER 4IA-23. AMENDMENT OF ARTICLES.
41 2301. Authorized Amendments. (a) A bank or trust ompany may, in the manner provided in this Chapter, amend its article at any time in order to make any change therein which would. then be authorized for inclusion in original articles under th..is Code including without limitation an amendment:
(I) to adopt a new name permitted to be used under this Code; (2) to renew the term for which it is to exist or to provide for perpetual duration; (3) to change, add to or diminish the statement of its purpose or
I purposes (4) to increase or diminish the aggregate number of shares which it has authority to issue or to reclassify the shares by changing the number, par value, designations, preferences, redemption provisions or relative, participating, optional or other special rights of the shares\ or the qualifications, limitations or restrictions of such rights, either with or without an increase or decrease in the number of shares;
(5) to restate the articles in their entirety; (6) to change its location to a new location in the same county' (7) to change its location from one county to another provided that unless the bank or trust company already lawfully has offices in both counties, it may not retain banking or trust offices in the county from which it is moving; (8) in the ca e of a bank, to become a trust company; and, in the ca of a trust company to become a bank with or without retaining an existing capacity to engage in the banking or trust business a the case may be; r (9) in the case of a regulated certificated bank existing under the law on April 1, 1975 to become a bank with all the rights and dutie of a bank incorporated under this Code. (b) Articles restated in their entirety shall state the county of the current instead of the original place of business of the bank or trust company and need not state the names or other information concerning the first directors or the incorporators. Comment: The Banking Code lists speCific purposes for which amendments may be made to the articles. Ga. Code Ann. Sec. 13-1001. Thi proposed provision would allow any amendment which could originally be included in the articles. This includes addition of trust or banking powers or conversion from a regulated certificated bank to the status of a bank incorporated under this Code. Under former law only acquisition of trust powers by a bank may be treated as a charter amendment, and in this area there is an apparently alternative petition procedure in the Trust Company Code. See Ga. Code A nil. Chapter 109-4. Separate chapters ill allY Case govern conversion of trust companies into banks alld regulated
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2301
certificated banks into standard banking institutions. See Ga. Code Ann. Chaps. 13-12 and 13-21. Under this Code all of these actions would be taken by the procedure for amendment of articles.
41A-2302. Proposal and Adoption of Amendments. (a) An amendment of the articles shall be proposed by adoption of a resolution by the board of directors, directing that it be submitted to a vote at a meeting of shareholders.
(b) The resolution proposing an amendment or amendments shall contain the language of each amendment by setting forth in full the articles as they would be amended or any provision thereof as it would be amended or by setting forth in full any matter to be added to or deleted from the articles. A copy of the resolution or a summary thereof shall be included with the notice of the meeting required under Section 41 A-I 07.
(c) Except as provided in subsections (d) and (e), adoption of each amendment shall require the affirmative vote of the shareholders entitled to cast at least a majority of the votes which all shareholders are entitled to cast thereon and, if any class is entitled to vote thereon as a class, of the holders of at least a majority of the outstanding shares of such class.
(d) If a proposed amendment would: (I) make any change in the preferences, redemption provision, qualifications, limitations, restrictions or special or relative rights of the shares of any class adverse to such class; (2) increase or decrease the par value of the shares of any class; (3) increase the authorized number of shares of any class; (4) limit or deny the existing preemptive rights of the shares of any class; or (5) authorize a new class of shares, or increase the number of authorized shares of any class, senior or superior in any respect to the shares of any class previously authorized the holders of the outstanding shares of such class shall be entitled to vote as a c1as on such amendment, regardless of any limitation stated in the articles on the voting rights of such class. (e) Any amendment for the purposes set forth in sub ection (a)(6) through (a)(8) of Section 41A-2301 shall require for it adoption the affirmative vote of at least two-thirds of all the share entitled to vote thereon or of each class entitled to vote thereon where voting by class is required. Comment: Subsections (a) and (b) would retain the procedure requiring amendments to be proposed by the directors subject to being acted on at a duly called meeting of shareholders. Ga. Code Ann. Sec. 13-1002. Under this Section a majority vote of shareholders is required to amend a bank charter except where a change of location is involved. Moves across county lines required a vote of 90 percent of the shares while intracounty moves require a two-tlzirds
11-83

approval. Procedures in regard to trust company to bank conversions

and conversions of regulated certificated banks to standard banks

require two-thirds approval, Ga. Code Ann. Secs. 13-1201 and

13-2101, but banks may acquire trust powers on approval of a

nuzjority of the shares. Ga. Code Ann. Secs. 109-402; 13-1001. This
proposed Section lVould retain in subsection (cJ the general rule that

majority approval is required to amend. It would require in

subsection (d) approval by class in designated cases affecting class

interests. And in subsection (e) it would require two-thirds approval

for basic conversions or additions of banking or trust powers or

changes in location to another county. See Section 41A-2202.

41 -2303. Articles of Amendment. (a) Upon the adoption of an

amendment, articles of amendment shall be signed by two duly

authorized officers of the bank or trust company under its seal and

shall contain:

(I) the name of the bank or trust company'

(2) the county of its location;

(3) whether it was incorporated with banking or trust powers or

both;

(4) the time and place of the meeting of shareholders at which the

amendment was adopted and the kind and period of notice given to

the shareholders;

(5) the number of shares entitled to vote on the amendment and

if the shares of any class are entitled to vote as a class, the number of

shares of each such class;

(6) the number of shares voted for and against the amendment

and if shares of any class are entitled to vote as a class, the number of

shares of each such class voted for and against the amendment; and

7) the amendment adopted which shall be set forth in full.

(b) The articles of amendment shall be filed with the Secretary of

tate in triplicate together with:

(I) the fee required by Section 41 A-3 703; and

(2) as soon as available, proof of publication of the advertisement

required by Section 41 A-2304.

The filing of articles of amendment shall constitute an application

for a certificate of amendment. If the articles of amendment involve

change in the name of a bank or trust company, it shall reserve the

p oposed new name under the procedures of Section 41 A-602.

Comment: This Section derived from Pa. Stat. Ann. Tit. 7, Sec.

1504 sets forth the form of articles of amendment. It would not alter

Bth~ekisunbgstCanocdee.

of It

Georgia would

law formulated in Section require all information to

13-1002 of the be contained in

articles of amendment rather than an application for amendment toge/~er with certified copies of minutes of the shareholders' meeting.

y, 1975

Il-84

41A-2304. Advertisement; Referral to Department. When the articles of amendment are filed, the Secretary of State shall certify one of the copies thereof and deliver the same to the bank or trust company and shall then transmit another copy of the articles of amendment to the Department for investigation by it. The bank or trust company shall, in conformity with Section 41 A-I 08, cause to be published a copy of the articles of amendment or, in lieu thereof, a statement in substantially the following form:

NOTICE OF AMENDMENT
An application for a certificate of amendment of its articles of incorporation has been made by (name of bank or trust company) to the Secretary of State of Georgia in accordance with the applicable provisions of Georgia Financial Institutions Code. The purpose (purposes) of said articles of amendment (is)(are) (state the purpose of each amendment affected by the articles of amendment).
Comment: This Section restates requirements of Sections 13-1003 and 13-1004 of the Banking Code, with addition to the alternative of summary publication as provided in Section 22-902 of the Corporate Code.
41A-2305. Approval of Articles of Amendment. (a) Upon receipt of the articles of amendment, the Department shall conduct such investigation as it may deem necessary to determine:
(1) that the articles of amendment and supporting items satisfy the requirements of this Code;
(2) where the amendment would grant new powers or status to a bank or trust company, that the criteria for the granting of such powers or status as an original matter have been satisfied;
(3) where the amendment decreases the capital stock of the institution, that the remaining capital stock will be adequate to support its anticipated banking or trust business;
(4) where the amendment provides for a change to a new location within the same county, that the criteria for establishing a bank office at the new location have been satisfied
(5) where the amendment provides for a change in location to a new county, that the criteria for establishing a new bank in that
county have been satisfied; and (6) that the interests of the shareholders, depositors and the
public will not be impaired by the amendment. (b) Within sixty days after receipt of the articles of amendment,
the Department shall in its discretion approve or disapprove the articles of amendment on the basis of its investigation and criteria set forth in subsection (a). If the Department shall approve the articles of amendment, it shall deliver its written approval to the Secretary of State and notify the bank or trust company of its action. If ~he Department shall disapprove the articles of amendment, it shall gtve written notice to the bank or trust company and to the Secretary of

May, 1975

11-85

2305
State, and shall furnish to the bank or trust company a statement generally setting out the unfavorable factors influencing it decision. The decision of the Department shall be conclusive except that it shall be subject to judicial review as provided in Section 41 A-40 I.
Comment: This provision is designed to clarify the requirements that the Department must consider in passing on amendments without changing law as established in Section 13-1005 of the Banking Code.
4IA-2306. Issuance of Certificate of Amendment. If all the fees and charges required by law have been paid and in the case of a change of name, jf the proposed new name of the bank or trust company continues to be reserved or is available on the records of the Secretary of State, upon the receipt by the Secretary of State of the written approval of the Department and of proof of publication of the amendments as required by Section 41A-2304 the Secretary of State shall immediately issue to the bank or trust company a certificate of amendment and shall retain a copy thereof along with the approved articles of amendment, the written approval of the Department, and the proof of publication.
Comment: This provision carries forward the substance of Section 13-1007 of the Banking Code.
4IA-2307. Effect of Certificate of Amendment. (a) As of the i uance of the certificate of amendment by the Secretary of State each amendment shall become effective, and the articles shall be deemed to be amended accordingly.
(b) The certificate of amendment shall be conclu ive evidence of the performance of all conditions required by this Code for amendment of articles except as against the State.
(c) 0 amendment shall affect any existing cause of action in favor of or against the bank or trust company any pending action in which the bank or trust company is a party or existing rights of p r on other than shareholders. If the amendment changes the name of the bank or trust company no action by or against the institution hall be abated for that reason.
Comment: This is a new provision derived from Pa. Stat. Ann. Tit. 7, Sec. 150 stating the effect of the certificate of amendment. It makes clear that conversions or additions of fundamental powers do not affect existing rights or lawsuits.
II-86

2401
CHAPTER 41A-24. MERGER AND CONSOLIDATION OF STATE BANKS.
41 A-240 l. Authority to Merge or Consolidate. (a) Upon compliance with the requirements of this Chapter and other applicable laws, one or more banks or trust companies may merge or consolidate, provided that an institution exercising trust powers alone may merge or consolidate only with another such trust company.
(b) A corporation other than a bank or trust company may be merged into or consolidated with a bank or trust company provided that:
(I) the resulting institution is a bank or trust company; (2) the resulting institution holds only assets and liabilities and is engaged only in activities which may be held or engaged in by a bank or trust company; (3) the merger or consolidation is not otherwise unlawful. (c) A merger or consolidation pursuant to subsection (b) shall be made by compliance with the requirements of this Chapter. The provisions of Title 22 of the Code of Georgia shall not be applicable to such a merger or consolidation. Comment: The Banking Code has two alternatively stated merger and consolidation procedures. One of these procedures in Chapter 13-14 applies to merger and consolidation of banks in general. The other in Chapter 13-13 relates to merger and consolidations involving national banks. This Code would preserve this dichotomy. This Chapter 41 A-24 applies to merger or consolidation involving State institutions, while the next Chapter applies to conversions, mergers or consolidations to which a national bank is a party. This separate statement is required because Us. law states speCific procedures for such transactions involving national banks, and preconditions national bank conversions, mergers, and consolidations into State institutions or State institutions haVing a reciprocal capacity under no more restrictive conditions to become national banks. Subsection (b) would introduce new authority for merger or consolidation of other corporations into banks or trust companies under restrictive conditions. Such mergers or consolidations appear to be completely prohibited under existing law. See Opinions of the Attorney General 1972-169. 41 A-2402. Requirements for Merger or Consolidation Plan. The requirements for a merger or consolidation which must be atisfied by the parties thereto are as follows: (a) The parties shall adopt a plan stating the method terms and conditions of the merger or consolidation, including the rights under the plan of the shareholders of each of the parties, and any
11-87

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agreement concerning the merger or consolidation. Said plan shall
pecify: (I) the name that such bank or trust company shall have, upon
and after such merger or consolidation, which may be the name of anyone of the institutions or the combined names of two or more of the institutions, or such other name as stated;
(2) the persons who shall constitute the board of directors of the bank or trust company after the merger or consolidation;
(3) the manner and basis of converting the shares of each merger or consolidated institution into shares or other securities or obligations of the surviving bank or trust company and, if any shares of any of the merged or consolidated institutions are not to be converted solely into shares or other securities of the surviving bank or trust company, the amount of cash or securities of any other corporation, or combination of cash and such securities, which is to be paid or delivered to the holders of such shares in exchange for or upon the surrender of such shares, which cash or securities may be in addition to or in lieu of the shares or other securities of the surviving bank or trust company' and
(4) uch other provisions with respect to the proposed merger or consolidation as are deemed desirable.
(b) Adoption of the plan by each party thereto shall require the affirmative vote of at least:
(l) a majority of the directors; and (2) the shareholders entitled to cast two-thirds of the votes which all hareholders are entitled to cast thereon, and if any class of hare is entitled to vote thereon as a class, the holders of at least two-thirds of the outstanding shares of such class, at a meeting of hareholders. The notice shall include a copy or summary of the plan and a full statement of the rights and remedies of dissenting hareholders the method of exercising them and the limitations on uch right and remedies. (c) Any modification of a plan which has been adopted shall be made by any method provided therein, or, in the absence of such provision, by the same vote as that required for adoption. Comment: Subsections (a) and (b) of this provision carry forward the substance of ections 13-1401 and 13-1402 of the Banking Code except that in accordance with the policies of this Code the r~quiremel1t of a special meeting of shareholders to elect new directors is eliminated and the possibility of voting by class is recognized. In addition, this Code would not require a preliminary approval of the plan by the Department as apparently contemplated by Section 13-1401. Subsection (c) is a new provision allowing the plan itself to specify a method of modification. 41 A-2403. Article of Merger and Consolidation; Referral. (a) Upon adoption of the plan of merger or consolidation as
11-88

2403
provided in the preceding Section, the parties to the merger or consolidation shall file in duplicate with the Secretary of State
articles of a merger or consolidation as required by this Section,
together with the fee required by Section 4IA-3703. (b) The articles of merger or consolidation shall be signed by two
duly authorized officers of each party to the plan under their respective seals and shall contain:
(I) the names of the parties to the plan and of the resulting bank or trust company'
(2) the county of the location of the registered office of each' (3) the votes by which the plan was adopted and the time, place and notice of each meeting in connection with such adoption; (4) the names and addresses of the first directors of the resulting bank or trust company; (5) in the case of a merger, any amendment of the articles of the resulting bank or trust company; (6) in the case of a consolidation, the provisions required in articles of a new bank or trust company by subparagraphs (3), (4), (5), (6) and (9) of su bsection (a) of Section 41 A-1803; and (7) the plan. (c) In the event the plan is amended as provided in the preceding Section, the parties shall promptly file in duplicate with the Secretary of State an amendment to the articles of consolidation or merger reflecting such amendment of the plan. (d) Upon receipt of articles of consolidation or merger and the fee required by subsection (a), the Secretary of State hall promptly refer one copy of said articles to the Department for investigation. Comment: The Banking Code requires the filing of a charter amendment with the Secretary of State, Ga. Code Ann. Sec. 13-1403. This provision would add to the detail required in such an amendment (including, for example, that the merger or consolidation plan be included) and denominate the amendment as articles of consolidation or merger. 41A-2404. Filings with Department; Publication of otice. (a) The parties to the plan shall also file with the Department: (I) information desired by the Department in order to evaluate the proposed merger or consolidation which shall be made available in the form specified by the Department; (2) applicable fees established by regulation of the Department to defray the expenses of the investigation req uired by Section 41A-2405; and (3) if the merger or consolidation involves the adoption of a new name, a certificate of the Secretary of State reserving said name under Section 41 A-602. (b) The parties to the plan shall publish, in the manner required by Section 41 A-I 08, a notice of the proposed merger or
Il-89

2404
con olidation. Such notice shall contain the names of the institutions which are parties to the proposed merger or consolidation and the proposed name of the surviving bank or trust company and shall de ignate a place where a copy of the articles of merger or consolidation may be examined. The notice shall be published in each county in which the parties to the plan have offices engaged in the banking or trust business or in the case of a party which is not a bank or trust company, in the county where the registered office of the corporation, if any, is located. The parties shall file with the Department an affidavit of the newspaper publisher or his agent attesting that the publication required by this subsection has occurred.
Comment: Subsection (a) is a new provision which would allow the Department to require the filing of additional information concerning the merger or consolidation, and provide for fees to defray the cost of its investigation. The procedure parallels that for original incorporation under this Code. See Section 41A-1904. Subsection (b) restates the substance of Section 13-1404 of the Banking Code and also specifies the required publication.
41 -2405. Approval by Department. (a) Upon receipt of the article of consolidation or merger and the filings required by ubsection (a) of the preceding Section, the Department shall conduct such investigation as it may deem necessary to ascertain whether:
(I) the articles of merger or consolidation and supporting items ti fy the requirements of this Code (2) the plan and any modification thereof adequately protect the interests of depositors, other creditors and shareholders; (3) the requirements for a merger or consolidation under all applicable laws have been satisfied and the resulting bank or trust om ny would satisfy the requirements of this Code applicable to it and
(4) the merger or consolidation would be consistent with ade~uate and sound banking or fiduciary practice and in the public IDtere t on the basis of:
(i) the financial history and condition of the parties to the plan (ii) their prospects, (~ii) the character of their management, and (tv) the convenience and needs of the area primarily to be served by t e resulting institution. (b) Within ninety days after receipt of the articles of merger or ~nS?lidation and the filing required by Section 41 A-3 703 or
:mWIthin an additional period of not more than thirty days after an ndm~nt to the application is received within the initial ninetyd~Y penod, the !?epartment shall in its discretion approve or
ISapprove the artIcles on the basis of its investigation and the
11-90

2405
criteria set forth in subsection (a). The Department shall, except as provided in Section 41 A-2406, give to the Secretary of State and the parties to the plan written notice of its decision and, in the event of disapproval, a statement in general to the parties of the reasons for its decision. The decision of the Department shall be conclusive except that it may be subject to judicial review as provided in Section 41 A-40 1.
Comment: The Banking Code does not specify the criteria to be considered by the Department in passing on a merger or consolidation. This new provision derived from Pa. Stat. Ann. Tit. 7, Sec. 1604 would fill this gap.
41A-2406. Procedure after Approval by the Department; Issuance of Certificate of Merger or Consolidation. (a) If the laws of the United States require the approval of the merger or consolidation by any federal agency, the Department may at its option, after its approval, retain its notice to the Secretary of State until it receives notice of the decision of such agency. If such agency shall refuse to give its approval the Department may at its option notify the parties to the plan that the Department's approval has been rescinded for that reason. If such agency gives its approval, the Department shall immediately deliver its written approval to the Secretary of State for issuance of a certificate of merger or consolidation by the Secretary of State and shall notify the parties to the plan.
(b) If all the taxes, fees and charges required by law shall have been paid and if the name of the resulting bank or trust company continues to be reserved or is available on the records of the Secretary of State, upon receipt of the written approval of the Department, the Secretary of State shall immediately issue to the resulting bank or trust company a certificate of merger or consolidation with the approved articles of merger or consolidation attached thereto and shall retain a copy of such certificate, article and approval by the Department. In the case of a merger or consolidation with a corporation whose articles have been granted by a superior court of this State the resulting bank or tru t company shall file a certified copy of such certificate of merger or consolidation with the clerk of said superior court.
Comment: This provision carries forward procedures contained in Section 13-1403 of the Banking Code except that it authorizes tile Department to lVithhold its notice of approval from the Secretary of State until any required federal approvals are obtained, and specific procedures for filings with the clerk of a 'superior court' corporation in case of mergers or consolidations authorized by Section 41A-2401(bJ.
41 A-2407. Effect of Merger or Consolidation. (a) As of the issuance of the certificate of merger or consolidation by the Secretary of State, the merger or consolidation shall be effective.
II-91

2407

(b) The certificate of merger or consolidation shall be conclusive

evidence of the performance of all conditions precedent to the

merger or consolidation and of the existence or creation of the bank

or trust institution, except as against the State. (c) When a merger or consolidation becomes effective, the

exi tence of each party to the plan, except the resulting bank or trust

company, shall cease as a separate entity but shall continue in and

the parties to the plan shall be, a single corporation which shall be

the bank or trust company and which shall have, without further act

or deed, all the property, rights, powers trusts, duties and

obligations of each party to the plan.

(d) The articles of the resulting bank or trust company shall be, in

the case of a merger, the same as its articles prior to the merger with

any change stated in the articles of merger, or in the case of a

consolidation, the provision stated in the articles of consolidation.

(e) The resulting bank or trust company shall have the authority

to engage only in such business and exercise only such powers as '!re

then permissible upon original incorporation under this Code and

hall be subject to the same prohibitions and limitations as it would

then be subject to upon original incorporation, except that it may

engage in any business and exercise any right that any bank or trust

company which is a party to the plan could lawfully exercise or

engage in immediately prior to the merger or consolidation.

(f) 0 liability of any party to the plan or of its shareholders,

directors, or officers shall be affected, nor shall any lien on any

property of a party to the plan be impaired, by the merger or

con olidation. Any claim existing or action pending by or against any

party to the plan may be prosecuted to judgment as if the merger or

consolidation had not taken place or the resulting bank or trust

company may be substituted in its place.

Comment: Under Section 13-1402 of the Banking Code, a merger

or consolidation becomes effective when certified copies of the

approving meetings of shareholders are filed with the Department.

This timing is permissible when the Department is required under

that Section to give advance approval of the plan before its

submission to shareholders. This Code would remove the adJlance

approlJal procedure. The Department would investigate and act on

the plan after it had received director and shareholder approval and

articles of consolidation or merger had been filed. Accordingly, the

effectiveness of the merger or consolidation must await issuance of

the certificate by the Secretary of State. as is prOVided in subsection

(a) of the provision.

.

Subsection (b) is a new provision expressly establishing that the

legal existence of the resulting institution is not subject to attack ~xcept by the State after the certificate of merger or consolidation is Issued.

II-92

2407
Subsection (d) is a new provision precisely defining the content of the articles of a merged or consolidated institution.
Subsections (c), (e), and (f) of the provision carry forward the substance of Sections 13-1406 and 13-1407 of the Banking Code.
The language for this Section is derived from Pa. Stat. Ann. Tit. 7, Sec. 1606.
41 A-2408. Rights of Dissenting Shareholders; Surrender of Certificates. (a) A shareholder of a bank or trust company which is a party to a plan of proposed merger or consolidation under this Chapter who objects to the plan shall be entitled to the rights and remedies of a dissenting shareholder as determined under the provisions of Code Section 22-1202, relating to the rights of dissenting shareholders.
(b) The bank or trust company into which the other or others have been merger or consolidated, as the case may be, shall have the right to require the return of the original certificates of stock held by each shareholder in each "Or either of the institutions, and in lieu thereof:
(I) to issue to each shareholder new certificates for uch number of shares of the institution into which the others shall have been mergerd, or consolidated, or
(2) to cause to be paid or delivered to each shareholder the amount of cash or securities of any other corporation, or combination of cash and such securities as, under the plan of merger or consolidation, the said shareholder may be entitled to receive.
Comment: Subsection (a) would change former law by recognizing that a shareholder may claim the rights of a dissenter where State institutions alone are involved. Previously dissenting rights were recognized only where national banks are involved. See Ga. Code Ann. Sec. 13-1322. This change comports with the policy of the Corporate Code Ga. Code Ann. Sec. 22-1003(2).
Subsection (b) would restate Section 13-1405 of the Banking Code as amended by the General Assembly in 1973. Ga. Laws 1973, pp. 278, 281.
II-93

2501
CHAPTER 4IA-25. CONVERSIONS, MERGERS, AND CONSOLIDATIONS INVOLVING NATIONAL BANKS.
41 A-2501. Authority for National to State Conversions, Mergers and Consolidations. Subject to the provisions of this Chapter, a national bank located in this State may convert into or merger or consolidate with, a bank or trust company upon:
(a) Compliance with the applicable laws of the United States including any provisions thereof relating to approval of said conversion, merger, or consolidation by the shareholders and directors of the national bank and to dissenting rights of shareholders in uch national bank.
(b) Adoption of any plan of merger or consolidation by the directors and shareholders of any party thereto existing under the law of this State as required by Section 4IA-2402(b).
(c) Approval of the conversion, merger or consolidation by the Department as provided in this Chapter.
(d) Issuance of the appropriate certificate by the Secretary of State as provided in this Chapter.
Comment: This provision would not change the substance of the requirements stated in Sections 13-1312 and 13-1313 of the Banking Code, except that it would allow the procedures for notice to and voting by shareholders of a Georgia bank or trust company established by this Code to be followed in the case of that instilulioll. For example, this Code recognizes a possibility that voting rights may vary by classes of stock and this possibility is reflected in the language of Section 41A-2502(b) prescribing the required shareholder approval for mergers and consolidations. This language cannot, however, be applied to the national bank since 12
u.s.c. Sec. 214a requires 'at least two-thirds of each class' of the
capital stock of that institution to approve the transactioll. 41 A-2502. Articles of Conversion, Merger or Consolidation.
(a) The party or parties desiring to consummate a conversion, merger or consolidation authorized by the preceding Section shall upon requi ite approval of the plan by their director and shareholders, file with the Secretary of State, in triplicate articles of conversion, merger, or consolidation together with the fee required by Section 4IA-3702. The Secretary of State shall promptly forward one copy of aid articles to the Department for investigation.
(b) The articles of conversion shall be signed by two duly authorized officers of the national bank under its seal and shall contain:
(I) its name and the name of the resulting bank or trust company' (2) the county of its location' (3) the location where its initial registered office will be looated;
11-94

2502
(4) the votes by which the plan of conversion was adopted and the time, place and notice of each meeting in connection with such adoption;
(5) the names and addresses of the first directors of the resulting bank or trust company;
(6) the provisions required in articles of a new bank or trust company by subparagraphs (3), (4), (5), (6), and (9) of subsection (b) of Section 41A-1803; and
(7) the plan of conversion. (c) The articles of merger or consolidation shall be in the form specified by Section 41 A-2403(b). Comment: Section 13-1315 of the Banking Code requires a similar filing with the Secretary of State. The information required in the articles would be modified to comport with the policies of this Code. For example, the location of the resulting institution need only be stated in terms of a county but the directors who will serve until the next annual meeting of shareholders must be particularly designated. The plan of conversion, merger or consolidation must also be included. 41A-2S03. Filings with Department; Publication of Notice. (a) In the case of a merger or con olidation, the parties shall make the filings and publication required by Section 41 A-2404. (b) In the case of a conversion, the national bank shall also file with the Department: (l) information desired by the Department in order to evaluate the proposed conversion in the form specified by the Department; and (2) applicable fees established by regulation of the Department to defray the expenses of its investigation under Section 41 A-2504' (3) a certificate of the Secretary of State showing the propo ed name of the resulting bank or trust company has been reserved under Section 41 A-602. (c) In the case of a conversion, the national bank shall publi h in the manner prescribed by Section 41 A-I 08 a notice of the proposed conversion setting forth its name and the name it proposes to use as a bank or trust company and designating the place where a copy of the plan of conversion may be examined. The notice shall be publi hed in each county in which the national bank has an office engaged in the banking or trust business. The national bank shall file with the Department an affidavit of the newspaper publisher, or his agent, attesting that the publication required by this subsection ha occurred. Comment: Subsections (a) and (b) are new provisions which would allow the Department to require the filing of additional information concerning the merger, consolidation or conversion. and provide for fees to defray the cost of its investigation. See Sections
11-95

2503

41A-1.804; 41A-2404. Subsection (c) restates the substance of Section 13-1318 of the Banking Code. A separate requirement in Section 13-1317 of the former Code that the plan of merger or conversion be itself published is eliminated.
41A-2504. Approval by Department. (a) Upon receipt of the articles of conversion, merger or consolidation from the Secretary of State, the Department shall conduct such investigation as it may deem necessary to ascertain whether:
(1) in the case of a conversion: (i) the articles of conversion and supporting items satisfy the
requirements of this Code; (ii) the plan adequately protects the interests of depositors, other
than creditors and shareholders; and (iii) the requirements for a conversion under all applicable laws
have been satisfied and the resulting institution would satisfy the requirements of this Code applicable to it; and
(2) in the case of a merger or consolidation, the criteria stated in Section 4IA-2505(a)* are satisfied.
(b) Within ninety days after receipt of the articles and the filings required by Section 4IA-2503, the Department shall, in its discretion, approve or disapprove the articles on the basis of its investigation and the criteria set forth in subsection (a). If the Department shall approve the articles, it shall deliver its written approval to the Secretary of State and notify the national bank, and any other parties to the plan, of its action; provided that, if approval of any federal agency is required, the Department may withhold, at its option, its approval from the Secretary of State until such federal approval is given. If required federal approval is not given, the Department may, at its option, withdraw its approval for this reason. If the Department shall disapprove at its option, the application, it sh I give written notice to the Secretary of State and to the national bank and any other parties to the plan of its disapproval and a statement to them generally of the reasons for its decision. The decision of the Department shall be conclusive, except that it may be subject
to judicial review under Section 41 A-40 I:
Comment: This is a new provision establishing criteria for the Department to use in evaluating conversions, mergers and consolidations. They are derived from Pa. Stat. Ann. Tit. 7, Sections 1604 and 1706. "'The reference in Paragraph (a)(2) above to Section 41A-2505(a) apparently should read Section 41A-2405(aJ.
41A-2S0S. Issuance of Certificate. If all the taxes, fees and charges required by law shall have been paid and if the name of the res~1ting bank or trust company continues to be reserved or is aVailable on the records of the Secretary of State, upon the receipt of !he written approval of the Department the Secretary of State shall lInmediately issue to the resulting bank or trust company a

Y,1975

11-96

2505

certificate of conversion, consolidation or merger and shall retain a copy of such certificate, the articles and the approval from the Departmen t.
Comment: This provision retains the substance of a procedure set forth in Section 13-1315 of the Banking Code.
41A-2506. Effect of Issuance of Certificate. (a) Issuance of a certificate of merger or consolidation shall have the same effect stated in Section 4IA-2407.
(b) Issuance of a certificate of conversion shall have the following effect:
(I) as of the issuance of the certificate of conversion by the Secretary of State, the conversion shall become effective;
(2) the certificate of conversion shall be conclusive evidence of the performance of all conditions required by this Code for conversion of a national bank into a State bank or trust company, except as against the State;
(3) when a conversion becomes effective the existence of the national bank shall continue in the resulting bank or trust company which shall (except as provided in subsection (2 have, without further act or deed, all the property, rights, powers, trusts, duties, and obligations of the national bank;
(4) 'the articles of the resulting institution shall be the provisions stated in the articles of conversion;
(5) the bank or trust company shall have the authority to engage only in such business and exercise only such powers as ar~ then permissible upon original incorporation under this Code and shall be subject to the same prohibitions and limitations as it would then be subject to upon original incorporation;
(6) no liability of the national bank or of its shareholders, directors or officers shall be affected, nor shall any lien on any property of the national bank be impaired, by the conversion. Any claim existing or action pending by or against the national bank may be prosecuted to judgment as if the conversion had not taken place or the resulting bank or trust company may be substituted in its place.
Comment: As to subsection (a), see the comments to the crossreferenced provisions. It appears that under the alternative procedure for mergers or consolidations of national banks into State institutions, the merger or consolidation becomes effective on issuance of the certificate by the Secretary of State. See Ga. Code Ann. Sec. 13-1315. Subsection (a) would not, therefore, change law in th~ context. Cf comment to Section 41A-2407. Subsection (b)(4 introduces a new provision defining the articles of a converted national bank. Otherwise, the proposed Section would not depart from the substance of rules stated in Sections 13-1316 and 13-1321 of the Banking Code.

May, 1975

11-97

507
41 -2507. Authority for State to National Conversions, Mergers or Consolidations. (a) A bank or trust company may convert into, or merge or consolidate with, a national bank upon:
(I) authorization by and compliance with the laws of the United tate: and
(2) adoption of a plan of conversion, merger or consolidation by the affirmative vote of at least:
(i) a majority of its directors; and (ii) the holders of two-thirds of each class of its shares at a meeting held upon not less than ten days' notice to all shareholders. (b) A State bank or trust company which converts into or merges or consolidates with a national bank shall: (I) notify the Department of the proposed conversion merger or con olidation; (2) provide such evidence of the adoption of the plan of conversion, merger or consolidation as the Department may request; (3) notify the Department of any abandonment or disapproval of the plan; and (4) file with the Department and with the Secretary of State a certificate of the approval of the conversion, merger, or consolidation by the comptroller of the currency of the United States. (c) Conversion, merger, or consolidation of a State institution into a national banking association shall be effective upon completion of the requirements in subsection (b) of this Section and its charter a an institution existing under the laws of this State shall be automatically terminated. Comment: This Section generally carries forward the minimal requirements of Sections 13-1305 through 13-1309 of the Banking Code. eXCt;pt that it leaves publication requirements to be set by
federal law. See 12 u.s. C. Chap. 5, Sees. 215, 215a. The extent of permissible regulation in this area is limited by 12 u.s. C. Sec. 214c if
reciprocal ability of national institutions to convert into State institutions is to be maintained.
41 -2508. Authority for Merger or Consolidation of Non-Bank Entities into ational Banks. A national bank located in this State may merge or consolidate with a corporation other than a bank or tru t company provided that:
(a) such merger or consolidation is permitted by the laws of the nited States and such laws are complied with; (b) the laws governing the merger or consolidation of such cOrporation are complied with' (c) the resulting institution is a national bank; (d) the resulting institution holds only assets and liabilities, and n~ge only in activities that may be held or engaged in by a natIonal bank located in this State' (e) the merger or consolidation'is not otherwise unlawful.
1I-98

2508 Comment: This new provision would allow national banks to have the same restricted ability to merge or consolidate with non-banking corporations as authorized by Section 41A-240J(b) of this Code where permitted to do so by Us. law.
11-99

CHAPTER 41 A-26. SALE AND OTHER DISPOSITION OF ASSETS.
41 -2601. Secured Transactions and Other Dispositions of Assets ot Requiring Shareholder Approval. (a) Unless the article or bylaw otherwise provide, the board of directors may authorize any of the following transactions without any vote or consent of the hareholders: (I) any mortgage or pledge of, or creation of a security interest in or conveyance of title to, all or any part of the property and
t of the bank or trust company of any description, or any intere t therein, for the purpose of securing the payment or performance of any contract note, bond, or other obligation of the bank or trust company;
(2) any sale, lease, exchange or other disposition of less than ub tantially all the property and assets of the bank or trust ompany.
(b) Any transaction made as permitted by this Section without any vote or consent of the shareholders may be upon such terms and onditions and for such consideration as the board may deem to be in the be t interests of the bank or trust company.
Comment: The" Banking Code contemplates sale or disposition of bank assets but does not detail procedures whereby such sales or other disposition may occur. This and the following provision derived from Title 22 of the Corporate Code would fill this gap.
41 -2602. Sale Lease, Exchange, or Other Disposition of Assets equiring Shareholder Approval. A sale, lease, exchange, or other dispo ition of all or substantially all, the property and a sets, with or i out the good will, of a bank or trust company, in all cases other than tho e dealt with in Section 41 A-260 I regarding secured transactions may be made upon such terms and conditions which are otherwi e legal and which shall be authorized in the following manner:
(a) The board of directors shall adopt a resolution recommending such sale, lea e, exchange, or other disposition, specifying to the
tent that the board sees fit any or all of the terms and conditions thereof and the consideration to be received by the bank or trust
pany therefor, and directing the submission thereof to a vote at a meeting of hareholders, which may be either an annual or a special meeting.
(b) Written notice shall be given to each shareholder of record, het.her or not entitled to vote at such meeting, in the manner provIded in Section 41 A-I 07 and whether the meeting be an annual o r a p eclal meeting, shall state ' that the purpose, or one of the :~rpo e , is to consider the proposed sale, lease, exchange, or other I po ition. The notice hall fairly summarize the material feature of
11-100

2602
the proposed transaction, and shall contain where applicable a clear and conci e statement that if the sale, lease, exchange or other disposition is effected, shareholders may claim the rights of dissenting shareholders under this Code.
(c) At such meeting the shareholders may authorize such sale, lease, exchange, or other disposition and may approve or fix or may authorize the board of directors to fix, any or all of the terms and conditions thereof and the consideration to be received by the bank or trust company therefor. Such authorization shall require the affirmative vote of the holders of a majority of the shares of the corporation entitled to vote thereon, unless any class of shares is entitled to vote thereon as a class, in which event such authorization shall require the affirmative vote of the holders of a majority of the hares of each class of shares entitled to vote thereon as a class and of the total shares entitled to vote thereon. Any class of shares hall be entitled to vote as a class if the resolution proposing the sale, lease, exchange or other disposition contains any provision which if contained in a proposed amendment to the articles would entitle such class of shares to vote as a cla s.
(d) If the shareholders approve the proposed sale or other disposition, the bank or trust company shall make application to the Department for approval thereof in such form as may be specified by the Department. The Department shall in its discretion approve the sale or other disposition if the proposal is in conformity with law, and if the interests of the public, depo itors trust beneficiaries and other creditors of the bank or trust company are adequately protected.
(e) After such authorization by a vote of shareholders and the Department, the board of directors nevertheless in its discretion, may abandon such sale, lease, exchange, or other disposition of assets, subject to the rights of third parties under any contract relating thereto, without further action or approval by shareholder.
(f) In the case of a ale, lease, exchange or other disposition of all, or substantially all, the property and assets of a bank or tru t company, a notice shall be published in each county in which the bank or trust company has an office engaged in the banking or tru t business in the manner prescribed by Section 41 A-2503(c).
Comment: This new provision patterned after Section 22-1102 of the Corporate Code establishes procedures for the sale or other disposition of substantially all of the assets of a bank or tru t company.
41 A-2603. Right of Dissent. A shareholder of a bank or tru t company shall have the right to dissent from any sale, lease, exchange or other disposition of all, or substantially all, the property and assets of a bank or trust company pursuant to Section 41 A-2602, except for a sale wholly for cash where the shareholders'
11-101

603 pproval thereof is conditional upon the distribution of all, or b tantially all of the net proceeds of the sale to the shar holders in ccordance with their respective interests within one year after the date of the ale. The shareholders' right of dissent shall be exerci ed
provided in Code Section 22-1202 relating to the rights of d" enting hareholders.
Comment: This Section would adopt the Corporate Code proviions concerning dissenting rights in the case of sale or other disposition of substantially all of the assets of a bank or trust company. See Ga. Code Ann. Sec. 22-1201.
11-102

2701 CHAPTERS 41A-27 through 41A-29. RESERVED. Comment: These Chapters are reserved for new material appropriately codified a separate Chapters.
11-103

<

SECTION

ActioDSatlaw Judicial review of decision of Department approving or disapproving proposed
credit unions or proposed amendments to articles or bylaws

3006

AII*ldment of articles and bylaws

Department advises Secretary of State and credit union in writing of

approval or disapproval; gives reasons for disapproval

Department reaches decision within ninety days

Filings with Department

Amendment of bylaws

Filings with Secretary of State

Amendment of articles in triplicate

Fee

In case of disapproval, if correction made, Department approves and

notifies Secretary of State and credit union in writing

Judicial review of decision by Department

inety days (or longer) allowed for correction

Secretary of State transmits one copy of proposed amendment of articles

to Department

Two-thirds' vote of members needed for amendment

"

Types of amendments permitted

When amendments effective

3006 3006
3005
3005 3005
3006 3006 3006
3005 3005 3005 3005

Almual meeting Held in first quarter of each year Manner of conducting, as prescribed in bylaws Manner of notification, as prescribed in bylaws Quorum and voting regulations for, as provided in bylaws

3002 3002 3002 3002

Allldavit Of president that credit union ready to commence business Of president that proper notice of members' meeting to consider conversion has been given
Ataa..
Bond of

3004 3119 3107

Application For subsidiary office made to Department

3116

Articles of incorporation Contents of

Data on subscribers

3001

Field of membership ..................................................3001

Location of initial registered office

300I

ame of credit union

300 I

ames and addresses of directors

300 I

Purpose and nature of business

3001

~e~ of existence of credit union '

3001

E enttory of operation

3001

s:eecuted by subscribers

3001

also CREDIT U 10 S-Incorporation of and organization prior to

commencement of business-Incorporation, this index

"t

When and how made

3108

Deposits in as permissible investments for credit unions

3101

Credit Unions-Continued

SECfION

Bub for Cooperatives

Obligations of as permissible investments for credit unions

3101

Ioud.of directors See Directors, this index

Bond Of agents Of credit committee Of directors Of employees Of officers Of supervisory committee

.31 07 3107 3107 3107 3107 3107

"Bonower" defined

3109

Borrowing power Borrowings by credit union from central credit union Borrowings by central credit unions Bylaws state whether or not borrowing permitted Power of credit union to borrow

3120 3120 3002 3101

Building and loan associations Deposits in as permissible investments for credit unions ........................ .3101

Bylaws

Contents of

Owge for failure to meet obligations punctually

3002

Conditions for investment of funds

3002

Conditions for issuing, paying for, transferring, and withdrawing shares

3002

Conditions for making and repaying loans

3002

Conditions for receipt and withdrawal of deposits

3002

Date of annual meeting

3002

Duties of credit committee and supervisory committee

3002

Duties of directors

3002

Duties of officers .....................................................3002

Manner of determining and paying interest and dividends

3002

Manner of notification of meetings

3002

Method of accumulating a reserve

,

3002

Method of receipting for money

3002

umber of directors

3002

Number of members constituting a quorum

3002

umber of members of supervisory committee and credit committee

3002

Qualifications for membership

3002

Regulations about voting

3002

Whether or not credit union may borrow

3002

See also CREDIT UNIONS-Amendment of articles and bylaws, this index;

and CREDIT UNIONS-Incorporation of and organization prior to

commencement of business, this index

Clpilal

How paid and withdrawn Iy begin business with paid-in or subscribed capital derived from
~bscribers' shares alone t consists of

3101
3101 3105

2

Credit Unions-Continued

Central credit unions

Accept deposits from anyone

A<:quire assets and liabilities of credit unions in liquidation

Borrow money from anyone

Commissioner of the Department approves greater borrowings by during

emergencies

'

Definition of

.'

Eligibility for membership in of groups determined by the Commissioner

of the Department to lack potential membership required for approval

of their own credit union

Field of membership

Loans to and investments in associations of credit unions, etc

Purchase shares of and make deposits in other credit unions

Reserve fund: special regulations of the Commissioner of the

Department concerning

Rights and powers

Special regulations of the Commissioner of the Department concerning

Certificates Of incorporation

Of reservation of name
au.- made for failure to meet obligations punctually: bylaws prescribe

Checking accounts Prohibited

Commissioner of the Department Procedures concerning central credit unions See CREDIT UNIONS-Central Credit unions, this index RUle-making and regulatory powers as to central credit unions See CREDIT UNIONS-Department of Banking and Finance: Rule-making and regulatory powers as to central credit unions, this index

Common bond defmed

versions

Directors' resolution of approval needs majority vote

Filing of resolution with Department of federal authority

:

Members' approval of resolution needs majority vote

Notice of members' meeting and affidavit of president as proof of notice

required

Status of assets and liabilities after . . . . . . . . . . . . . . . . . . . . . . . . . .. .

Types of

Corpontion designated in Section 841 of Tide 31 of the United States Code u a whoUy-owned government corporation: Obligations of as permissible investments for credit unions

Credit Committee
Appointment of loan officers by
Approval of loans Bond of ~uties of as specified in bylaws
lection of

SECTION
3120 3120 3120 3120 3120
3120 3120 3120 3120 3120 3120 3120
3003, 3004 3002 3002
3101
3001
3119 3119 .3119 3119 3119 3119
3001
3109 3109 3107 3002 3106

3

Credit Unions-Continued

First election of prior to comm 'n .ement of business

Frequency of meetings

Loans to directors, officers, committee members, and employees:

procedures for

Maximum amount of loans to one borrower

:

Minimum number of members, as specified by bylaws

Oath of

Suspension and removal of

Vacancies on filled by directors till election

"Credit union" dermed Dermed as a financial institution

Deceased depositors Howdepositspaid

Dermitions "Borrower" "Central credit union" "Common bond" "Credit union" "Risk assets" "Secured loan"

Department of Banking and Finance Investigations of credit unions by of proposed credit union

Department: Procedures Approves the insurance company that uninsured credit unions may select when they eventually have to obtain insurance Approves conversion to credit union Approves dividends or interest in excess of 7% annually ten days prior to payment Approves holding of real estate beyond five years Approves mergers Determines that deposit insurance adequate For procedures concerning amendment of articles and bylaws, see CREDIT UNIONS-Amendment of articles and bylaws, this index For procedures concerning central credit unions, see CREDIT UNlONSCentral Credit unions, this index For procedures concerning incorporation and organization prior to commencement of business, see CREDIT UNIONS-Incorporation of and organization prior to commencement of business, this index Gives prior approval of establishment of a subsidiary office Is notified of members' meeting concerning suspension of officers, etc Is notified of members' meeting to consider unsafe or unauthorized practices May allow uninsured credit unions to continue to accept deposits May extent time limit in which deposit insurance must be obtained by uninsured credit unions May order establishment of a special reserve
Receives copy of directors' resolution of approval of conversion to credit union

Department of Banking and Finance - Rule-making and regulatory powers

as to credit union~

...

Rules and .regulations ~ncerOlng credIt ~ons,.generallY

To authonze types of mvestments for credIt UOlons

'.'

SECTION
3004 3109
3109 3109 3002 3106 3108 3107
102
'" ..3115
3109 3120 3001 .1 02 311 0 3109
3003
3117 3119
, .3111 3101 3118 3117
3116 3108
3108 3117
3117 3110
9 311
3114 '3101 .

4

Credit Unions-Continued
To determine extent to which credit unions may deposit funds in banks, building and loan associations, savings and loan associations, and aedit unions, and may purchase certificates of deposit and savings certificates issued by them
To establish fee to defray cost of investigating a proposed credit union To issue special regulations to allow the central credit union to promote
effectively the liquidity and sound financial management of its member aedit unions without endangering its own liquidity and sound fmancial condition (regulation by the Commissioner of the Department of Banking and Finance) To make and promulgate uniform rules and regulations for merging of aedit unions To make rules and regulations reasonable and proper for protection of funds invested in credit unions To prescribe minimum requirements for fidelity funds of officers, agents, employees, or members of credit unions, and to approve their form To prescribe the form in which application for subsidiary office will be made to Department by credit unions To promulgate special regulations concerning reserve fund of central aedit unions. (Regulation by the Commissioner of the Department of Banking and Finance)
Deposit Insurance Public notice required when insurance inadequate Requirements to obtain; exceptions When Code provisions concerning insurance take effect
Deposits Accepted by central credit unions By central credit unions in other credit unions Bylaws prescribe conditions for receipt and withdrawal of Cancellation of upon expulsion or withdrawal Deposits in banks, building and loan associations, saving and loan associations, and other credit unions as permissible investments Joint tenants' Minors' Of deceased depositors: how paid Paying of upon expulsion or withdrawal Power to receive from members and non-members Received in trust Right to offset
Directors
All loans to directors, officers, committee members, and employees reported to
Approve conversions by majority vote pprove forms for application for loans
Approve plan of merger by majority vote ~n~.of
c~ Ions of credit committee may be appealed to DUtJes of
~t up~n applications for membership Determ~ne rates of interest and dividends on deposits
ternune rates of interest on loans

SECTION
3101 3002
3120
3118
3114
3107
3116
3120
3117 3117 3117
3120 3120 3002 .3105
3101 3103 3103 '.' 3115 3104 3101 3103 3105
3109 3119 3109 3118 3107 3109
3107 3107 3107

5

Credit Unions-Continued

SECTION

Fill vacancies on board and credit committee till election Fix amount of fidelity bonds Fix maximum amount of loans ;'ix minimum amount of deposits Invest funds of credit unions Perform other duties as authorized by members Duties of as prescribed in bylaws Election of Election of officers by as prescribed in bylaws Elect officers from their number to serve until first annual meeting First election of prior to commencement of business Frequency of meetings of Loans to May not be members of supervisory committee May permit a member to remain so after leaving field of membership Names and addresses of original directors must be given in articles of incorporation Number of, as specified in bylaws Oath of Order special meeting of members Qualifications of, as specified in bylaws Suspension and removal of

3107 3107 3107 3107 3107 3107 3002 3106 3002 3004 3004 3107 3109 3106 3102
3001 3002 3106 3112 3002 3108

Dividends

Bylaws prescribe manner of determining and paying

3002

Cancellation of upon expulsion or withdrawal

3105

Directors authorize

3111

How determined

3111

Right to offset

3105

When declared, paid

3111

When in excess of 7% annually, must be approved by Department

ten days prior to payment

3111

Effect of Code on charters of credit unions existing on April 1, 1975

3007

Employees

Bond of

3107

Loans to

3109

Entrance fees

Charged as provided in bylaws

3110

Known as reserve income; added to reserve funds

3110

Expulsion of members

Cancellation of shares, deposits, dividends, and interest

in the event of

3105

Rights and liabilities of the expelled member

3104

Federal Home Loan Bank Board

Obligations of as permissible investments for credit unions

3101

Federal Home Loan Banks Obligations of as permissible investments for credit unions .................... , ..3101

Federal Intermediate Credit Banks

Obligations of as permissible investments for credit unions

3101

Federal Land Banks
Obligations of as permissible investments for credit unions ........................ ...3101

6

Credit Unions-Continued
Federal National Mortgage Association
Obligl\tions of as pemiissible investments for credit unions
Fees Enuance Of amendmen t of articles
Of incorporation
To defray cost of investigation of proposed credit union by Department
Fidelity bonds
Field of membership Of credit unions
Of central credit unions
FiIcaI year ends when
Government National Mortgage Association Obligations of as permissible investments for credit unions
"corporation of and organization prior to commencement of business Incorporation Articles of incorporation Contents of: for detailed treatment, see CREDIT UNIONSArticles of Incorporation, this index Executed by subscribers Filed in triplicate with Secretary of State Possible changes in by Department of Banking and Finance (with approval of subscribers) prior to approval Bylaws Contents of: for detailed treatment, see CREDIT UNIONSBylaws, this index Filed in duplicate with Department of Banking and Finance Possible changes in by Department of Banking and Finance (with approval of subscribers) prior to approval Certificate of incorporation issued by Secretary of State Certificate of reservation of name issued by Secretary of State "Common bond" defmed Decision by Department of Banking and Finance In case of approval Certificate of incorporation issued by Secretary of State Decision within ninety days Judicial review of decision Possible changes by Department of Banking and Finance in articles or bylaws prior to with consent of subscribers Written notice sent to Secretary of State In case of disapproval Certificate of incorporation issued by Secretary of State after corrections made If corrections made, Department of Banking and Finance approves and notifies Secretary of State and credit union Judicial review of decision Ninety days (or more) allowed for correction

SECTION
3101
3110 3005, 3703 3001, 3703 3002 3107
3001, 3102, 3103 3120 3112
3101
3001 .3001 3001
.3003
3002 3002
3003 3003 3002 3001
3003 3003 3006
3003 3003
3003
3006 3006 3006

7

Credit Unions-Continued
Reasons for stated by Department of Banking and Finance Department of Banking and Finance: procedures
Approves or disapproves proposed credit union (approval within ninety days) :
Bylaws, two copies of, flied with Certificate of reservation of name filed with Changes articles or bylaws prior to appr:oval with con~nt of
subscribers Fee to defray cost of investigation paid to In case of disapprovaJ, allows ninety days (or more) for
correction; if made, approves and notifies Secretary of State and credit union Investigates proposed credit union Sends written approval of articles to Secretary of State States reasons for disapprovaJ Fees To be paid to Secretary of State when articles of incorporation flJed
To defray cost of investigation by Department of Banking and Finance
Filing with Department of Banking and Finance Bylaws, two copies of Certificate of reservation of name Fee to defray cost of investigation
Filings with Secretary of State Articles of incorporation Fee
Initial subscribers: number of Investigation by Department of Banking and Finance: criteria for Secretary of State: procedures of
Articles of incorporation files with Certifies one copy of articles and returns to credit union Fee paid to
Forwards one copy of articles to Department Is notified of Department's approval of proposed credit union
Issues certificate of incorpora tion Issues certificate of reservation of name Organization prior to commencement of business Affidavit of president that meetings held and credit union ready to commence business filed with Department Department of Banking and Finance: procedures Issues permit to commence business Receives affidavit of president that meetings held and credit
union ready to commence business First Directors' meeting
Follows subscribers' organizational meeting Officers elected Permit to commence business Conditions to be met before issuance Issued by Department upon receipt of affidavit of president
that credit union ready to commence business Types of business permitted before issuance of, generalJy

SECTION
3006
3003 1002 3002
3003 3002
3003 3003 3003 3006
3001, 3703
3002
3002 3002 3002
3001 3001, 3703 3001 3003
3001 3001 3001, 3703 3001 3003, 3006 3003 3002
3004
3004
3004
3004 3004
3004
3004 3003

8

Credit Unions-Continued

SECTION

Steps leading to commencement of business Affidavit that meetings held and credit union ready to commence business attested by president and filed with Department First directors' meeting held Permit to commence business issued by Department Subscribers' organizational meeting held
Subscribers' organizational meeting Certificate of incorporation and bylaws accepted Directors, credit committee, and supervisory committee elected Five days' notice required
Types of busi.ness permitted before permit to commence business issued, generaUy

3004 3004 3004 3004
3004 3004 3004
3003

IDcIebtedness: collection

3105

IMpection of assets and liabilities ............................................31 08

. . . . . .t

Bylaws prescribe manner of determining and paying

3002

Cancellation of withdrawing or expeUed member's

.3105

Directors authorize

3111

How determined

3111

On loans, maximum rate ................................................ .3109

Paying of upon withdrawal or expulsion

3104

Riaht to offset

3105

When declared, paid

3111

When in excess of 7% annually, must be approved by Department ten

days prior to paymen t

3111

lDwstments

Bylaws prescribe conditions for

Deposits in other credit unions permissible as

','

Of central credit unions

Power of credit union to make

Types of permissible

Joint tenants
Riahts of Shares and deposits of, how received

3002 3101 3120 310i 3101
3103 3103

LieIII in favor of credit unions

3105

Uqailation
Central credit union may acquire assets and liabilities of a credit union in
Lou offICeR
APPOintment of by credit committee Bond of Duties of . " Oath of
Loua
:y central credit unions FYlaws prescribe conditions for making and repaying
o~s for application for approved by directors ..::um amount of to one borrower P urn rate of interest on T<0wer of credit union to make
o other credit unions as permissible investments

3120
3109 3107 3109 3106
3120 3002 3109 .3109 3109 3101 3101

9

Credit Unions-Continued

SECTION

To officers, directors, committee members, and employees: procedures for. . . .. .. . . . . . . . . . . . . . . .
To credit unions by central credit unions. .

3109 3120

Meetings Annual Date of Manner of notification of First directors' Of credit committee: notice to members of committee required Of directors Special Agenda How called Manner of notification of Subscribers' organizational: notice required To act on suspension of directors, officers, or credit committee: Department and members must be notified To amend articles or bylaws: notice required To approve conversions: notice and affidavit of president as proof of notice required To approve mergers: notice required To consider unsafe or unauthorized practices: Department and members must be notified

3002 3002 3004 3109 3101
3112 3112 3002 3004
3108 3005
3119 3118
3108

Members Approve conversions by majority vote Approve plan of merger by two-thirds' vote Consider unsafe and unauthorized practices Elect directors, supervisory committee, and credit committee at annual meeting How may withdraw: notice required Expulsion of by a two-thirds' vote of all members May remove directors, officers, or credit committee Overrule directors provided notice of meeting sta tes question Rights and liabilities after withdrawal or expulsion Ten percent of convene special meeting Two-thirds' vote of needed to amend articles or bylaws

3119 3118 3108 3106 31IM 31IM 3108 3112 31IM 3112 3005

Membership Election to Eligibility of societies and corporations for Entrance fee for
Field of
How composed Of C~~tr~ credit unio~ .. : QualifIcations for prOVIded In bylaws Retaining of after departure from field of membership at discretion
of directors

3102 3102 3110, 3102 3001, 3102, 3103 3110 ~ .
3110

MDer~gpearrstment approves
Dlfectors agree upon plan

by

maJ:~.n:t!

vote

Members approve pla.n ~~ ~wo-thlfds vote

Status of assets and liabilitIes after

,

3~~: '~118

'3118

.

10

Credit Unions-Continued

SECTION

Minors Shares and deposits of, how received

3103

arne of credit union Must be given in triplicate Articles of Incorporation, Secretary
of State reserves

3002

ational Credit Union Administration Administrator of approves conversions to federal credit union And deposit in urance

.3119 3117

Non-members Credit union has power to receive deposit from
Joint tenants' shares and deposits
Withdrawal of deposits by: notice required

3101 .3103 3104

Notice required when deposit insurance inadequate

3117

Notif-.cation of meetings ow given as provided in bylaws
See CREDIT UNIONS - Meetings, this index, for the notification requirements for individual meetings

3002

Oaths

Of credit committee

3106

Of directors

3106

Of officers

31 06

Of supervisory committee ...............................................3106

Officers Bond of Duties of as specified in bylaws Elected from among directors before first annual meeting Election of by directors provided in bylaws Loans to Oath of Suspension and removal of

3107 3002 3004 3002 3109 3106 3108

Powers

Those common to all corporations

3101

To borrow

'

3101

To have deposits subject to check - prohibited

3101

To make investments: permissible types listed

310 I

To make loans to members

3101

To organize and engage in business with paid-in or subscribed

capital derived from subscribers' shares alone

3101

To purchase, hold, and convey real e tate: permis ible

purposes for listed ....................................................3101

To receive deposits from nonmembers

3101

To receive funds from members in the form of shares, deposits, and

certificates of deposit

3101

To undertake other activities not inconsistent with Code

3101

Perpetuity of
Credit unions existing on April 1, 1975 Credit unions incorporated after March 31, 1975

3007 3001

President

:ttests to affidavit that credit union ready to commence business ttest~ to affidavit that proper notice given of meeting of members to conSider conversion

3004 3119

11

Credit Unions-Continued

SECTION

Files with Department or federal authority verified copy of resolution

of directors approving conversion

3119

See also CREDIT UNIONS - Officers, this index

Proxy

Corporate members may be represented by one person

3112

Members may not vote by

3112

Purpose and nature of business must be stated in Articles of incorporation

3001

Qualifications for membership as provided in bylaws

3002

Quorum: bylaws determine how constituted

3002

Real estate: types credit union has power to purchase, hold, convey

3101

Receipting for money: bylaws prescribe the method of

3002

Registered office

Location of initially required to be given in as set forth in Article

of Incorporation

3001

Reserve funds

Bylaws pre cribe the manner of accumulating

3002

Disposition of

3110

How accumulated

3110

How replenished

3110

Of central credit unions

3120

Regular

3110

Reserve income becomes

3110

Special

3110

Tax exemption of

3110

Right to offset

310S

"Risk assets" defmed

3110

Rules and regulations of the Department

Generally

3114

See also CREDIT UNIO S - Department of Banking and Finance:

rule-making and regulatory powers as to credit unions

Savings and Loan Associations

Deposits in as perrnis ible investments for credit unions

3101

Secretary See CREDIT UNIO S - Officers, this index

Secretary of State: procedures of concerning credit unions See CREDIT UNIONS - Amendment of articles and bylaws and CREDIT UNIONS Incorporation of and organization prior to commencement of business, this index

"Secured loan" defined

3109

Shares

Bylaws prescribe conditions for issuing, paying for, transferring,

and withdrawing

3002

Cancellation of upon withdrawal or expulsion

310~

Central credit union may purchase

312

Joint tenants' .........................................................3103

Minors'

3103

12

SECTION

Credit Unions-Continued

No more than one per subscriber or member ................................. 3102

Par value of

31 02

power of credit union to receive funds from members for

3101

Received in trust

3103

Right to offset

3105

Slate of Georgia, its counties, districts, and municipalities Obligations of as permissible investments for credit union

3101

Subscn1lers Data on number who may incorporate required in Articles of Incorporation
Subsidiary Offices

3001 3116

Supervisory committee Bond of Can meeting of members to act on uspension of directors, credit committee, officers; notifies Department of meeting Cans meeting of members to consider unsafe or unauthorized practices; notifies Department Directors may not be members of Dutie of as specified by bylaws Election of Fills vacancy in own number tiU next members' meeting First election of prior to commencement of business In peets assets and Liabilities Loan to Make audit once each calendar year umber of members of as specified by bylaws Oath of Orders special meeting of members Supervises directors, credit committee, officers Suspends directors, credit committee, officers
Surplus funds how invested

3107
3108
3108 3106 3002 3106 3109 3004 3108 3109 3108 3002 3106 3112 3108 3108
3101

Suspension and removal of officers, directors, credit committee

3 L08

Taxation Reserves tax exempt Taxes to which credit union subject

3110 3113

Tenn of existence
or credit unions existing on April 1, 1975 or credit unions incorporated after March 31, 1975

3007 3001

Territory of Operation: must be stated - Articles of Incorporation .................3001

Treasurer

Files with Department or federal authority verified copy of resolution of directors approving conversion
See also CREDIT UNIONS - Officers, this index

31L 9

Tru t, shares in: how received

3103

United States government obligations as permissible investments for c:redit unions

3101

uare and unauthorized practices: how conected

3108

13

Credit Unions-Continued
Vice president Files with Department or federal authority verified copy of resolution of directors approving conversion '.' See also CREDIT UNIONS - Officers, this index
Votes Corporate members may be represented by one person May not be by proxy Regulations as to provided in bylaws
Withdrawal of members Cancellation of shares, deposits, dividends, and in terest in the event of Notice required Rights and liabilities of the withdrawing member

SECTION
3119
3112 3112 3002
3105 3104 3104

14

TABLE OF CONTENTS PART III - CREDIT UNIONS

Chapter 41A-JO. General Provisions and Organizations.

Section 41 A-JOOI. Section 41 A-J002. Section 41 A-JOOJ. Section 41 A-J004.
Section 41 A-JOOS. Section 41 A-J006. Section 41 A-J007.

Initial Subscribers; Articles; pilings. Filings with Department. Approval by Department. Subscribers Organizational Meeting; First Directors' Meeting; Permit to do Business. Amendment of Articles and Bylaws. Procedures for Department. Effect on Existing Charters.

Chapter 41A-Jl. Operation and Regulation.

Section 41 A-JI 01. Section 41 A-J1 02. Section 41 A-JI OJ. Section 41 A-J1 04. Section 41 A-J1 OS. Section 41 A-J106. Section 41 A-J1 07. Section 41 A-J1 08. Section 41 A-31 09. Section 41 A-J110. Section 41 A-Jill. Section 41 A-31 12. Section 41A-JllJ. Section 41 A-3114. Section 4IA-31IS. Section 41 A-JI16. Section 41 A-JI17.
Section 41 A-Jl18. Section 41 A-Jl19. Section 41 A-3120.

Powers. Membership, Shares. Special Shares and Deposits. Expulsions and Withdrawals, Disposition of Deposits. Capital; Right of Offset; Cancellation of Shares. Board of Director; Credit and Supervisory Committee. Duties of Directors. Duties of Supervisory Committee; Comprehensive Annual Audit. Loans. Fees, Reserve Funds, Tax Exemption. Dividends; Interest. Fiscal Year; Meetings of Members; Proxies. Taxes to Which Subject. Rules and Re~ulations. Payment of Deposits of Deceased Depositors. Subsidiary Offices. Requirements to Obtain Deposit Insurance; Public Notice When Deposits are not Insured. Mergers. Conversion of Credit Unions. Central Credit Unions.

3001
PART ill. CREDIT UNIONS.
CHAPTER 41 A-30. GENERAL PROVISIONS AND ORGANIZATION.
41 A-3001. Initial Subscribers; Articles, Filings. (a) Any number of persons, not less than eight, having a common bond as hereinafter described, may incorporate for the purpose of organizing a credit union in accordance with the provisions of this Chapter. The persons so desiring to become incorporated shall execute articles which shall set forth the following:
(1) the name of the proposed credit union; (2) the territory in which it will operate' (3) the location where its initial registered office will be located; (4) the names and addresses of the subscribers, their occupation, length of service, and that each has subscribed to one share and paid for same; (5) the names and addresses of the original directors; (6) the proposed field of membership pecified in detail and having the same common bond as the subscribers; (7) that the purpose and nature of the business are to conduct a credit union with the rights and powers granted by this Chapter' and (8) the term of the existence of the credit union which shall be perpetual unless otherwise limited. (b) For purposes of this Chapter, common bond is described as that specific relationship of occupation, association or interest or residence within a well-defined neighborhood, community, or rural district, employees of a common employer, or members of a bona fide cooperative, educational, fraternal professional, religiou , rural or similar organization, which tends to create a mutual intere t between persons sharing the relationship. Persons related by blood, adoption or marriage to, and living in the same household with a person within the aforedescribed common bond, and the surviving spouses of deceased members shall also be considered within the common bond. (c) The subscribers shall file the articles in triplicate with the Secretary of State together with the fee specified in Section 4IA-3703. The Secretary of State shall certify one copy of the articles and return it to the subscribers, and he shall forward one copy of the articles to the Department for investigation. Comment: The parallel provision in the former Code is Ga. Code Ann. Sec. 25-101. In accord with the usage of this Code, the initial document to be executed by the incorporators is called the 'articles' rather than a 'petition' as is now the case. The information to be included in this document is expanded to include more data 011 subscribers, directors, and the proposed field of membership. A
III-I

3001
provision is also added to allow for perpetual duration of the credit union. The articles need not state the number of shares subscribed by each incorporator, since each member under this Code will hold only one share. See Section 41A-3102(aJ. The express definition of a common bond and the statutory composition of it as a requirement is new, but follows established practice in this State. The definition ofa credit union is in Section 41 A-1 02(m).
41 A-3002. Filings with Department. The subscribers shall also: (a) File with the Department a certificate of the Secretary of State attesting that the name of the proposed credit union has been reserved as authorized by Section 41 A-602. (b) File with the Department two copies of proposed bylaws setting forth the following: (I) the date of the annual meeting which shall be in the first quarter of each year, the manner of conducting the same, the number of members constituting a quomm and regulations as to voting, and the manner of notification of the meeting which shall comply with Section 4IA-I07, except that if the credit union maintains an office and the board of directors so determines, notice of the annual meeting or of any special meeting may be given by posting uch notice in a conspicuous place in the office of the credit union at least ten days prior to such meeting; (2) the number of directors, not less than five, all of whom must be members, their powers and duties, together with the duties of the officers elected by the board of director ; (3) the qualifications for membership of those coming within the defined common bond a required by this Chapter; . (4) the number of members of the credit committee and of the upervisory committee, not less than three each together with their re pective powers and duties; (5) the conditions under which shares may be issued, paid for transferred and withdrawn, deposits received and withdrawn loans made and repaid, and funds otherwise inve ted; and (6) the charges which shall be made, if any, for failure to meet obligation punctually, whether or not the credit union hall have the power to borrow, the method of receipting for money; the manner of accumulating a reserve; the manner of determining and paying interest and dividends and uch other matters consistent with this Chapter as may be requi ite to the organization and operation of the proposed credit union. (c) Pay such fee as hall be established by regulation of the Department to defray the cost of the investigation required by the next Section of this Code, provided that the Department shall not be required to set such fee if in it judgment the fee would discourage the organization of credit union under this Chapter.
1II-2

3002
Comment: This Section would continue the basic outline of former law as set forth in Ga. Code Ann. Sec. 25-102 insofar as the contents of credit union bylaws are concerned. But see Section 41A -107 which establishes a uniform procedure for calling shareholders meetings. Under this Code, the bylaws would be filed with the Department rather than the Secretary of State. The requirement of a name reservation certificate is new.
41A-3003. Approval by Department. (a) The Department shall make an appropriate investigation of the articles and bylaws for the purpose of determining:
(l) whether the articles and bylaws conform to provisions of this Chapter;
(2) the general character and qualifications of the subscribers, and the financial stability and future prospects of the sponsoring company, if any;
(3) the economic advisability of establishing the proposed credit union, and such other facts and circumstances bearing on the proposed credit union as in the opinion of the Department may be relevant;
(4) that a common bond exist in accordance with the provisons of Section 4IA-3001; and
(5) that the subscribers and person or corporation sponsoring the credit union are in agreement as to the services, if any, that the sponsor will provide.
(b) If the Department determines to its satisfaction that the proposed credit union meets the criteria set forth above, it shall, within ninety days from receipt of the articles and in compliance with Section 41 A-3002, send written approval of the articles to the Secretary of State after making such changes in the articles or bylaws consistent with this Chapter and with the consent of the subscribers that it deems appropriate. If the Department shall disapprove the articles, the procedures of Section 41 A-3006(b) shall be followed.
(c) Upon receipt of the approval of the Department, the Secretary of State shall thereupon issue a certificate attesting to the incorporation of the credit union. The credit union shall, however confine itself to organizational activities until it receives a permit to do business.
Comment: Under Section 25-103 of the for:mer Code, the Department has no choice but to approve incorporation of a credit union if the petition seeking such incorporation meets a few minimal requirements. This Section would provide more realistic criteria which must be satisfied. This provision would eliminate the requirement of filing articles with the Superior Court. Cf. Ga. Code Ann. Sec. 25-106.
41 A-3004. Subscribers Organizational Meeting; First Directors' Meeting; Permit to do Business. (a) Upon receipt of said certificate
llI-3

3004
of incorporation from the Secretary of State, the initial subscribers shall meet for the purpose of organizing the credit union. Notice of the meeting shall be given at least five days prior to the date of the meeting. At said meeting, or adjourned meeting subscribers shall accept said certificate and bylaws, noting such acceptance on the minutes of the meeting, and proceed to organize by the election of a board of directors a credit committee and a supervisory committee to serve until the first annual meeting.
(b) Immediately following the organizational meeting of the ubscribers, the board shall hold its first meeting at which time a president, vice president, secretary and treasurer shall be elected from its own number to serve until the first annual meeting. The officers shall hold office for one year and until their successors are elected and qualified. An officer elected to fill an unexpired term haH be elected for the balance of said term. The board may elect such other officers as the bylaws may provide.
(c) When the organization has been completed the credit union shall file with the Department an affidavit attested by the pre ident stating that the actions required by ubsections (a) and (b) of this Section have been performed and that the credit union is ready to commence business. Upon receipt of the affidavit the Department hall issue to the credit union a permit to commence bu iness.
Comment: This Section adds significant detail to the Code. First. it introduces the express requirement of a directors' orgalli:atiollal meeting and divides responsibilities between the subscribers alld the directors. Second, it introduces authority to have assistant vice presidents and assistant treasurers. Thirdly, it details procedures for issuance of the permit to do business following the procedure set forth in Part II of this Code for banking and trust institutions. Parallel provisions of the former Code are Ga. Code Anll. Sectiolls 25-106 and 25-113.
41 A-300S. Amendment of Articles and Bylaws. (a) A credit union may, upon the affirmative vote of two-third of its members present at a duly called meeting, amend articles or bylaws to introduce any change which would then be permissible in original articles of a credit union, including a change in name or extension or limitation of its duration.
(b) Every proposed amendment of the articles shall be filed in triplicate with the Secretary of State together with the fee specified in Section 41 A-3703, and the Secretary of State shall thereupon transmit a copy of the proposed amendment to the Department. Propo ed amendments of the bylaws shall be filed with the Departmen t.
(c) 0 amendment of the articles or the bylaws shall become effective until the Department's written approval is received by the credit union.
111-4

3005
Comment: The former Code does not have a general authority to amend a credit union charter. This Section would introdue such authority and prescribe procedures for processing amendments of the articles and the bylaws. Under this Section, bylaw amendments would be filed directly with the Department rather than the Secretary of State. Cf. Ga. Code Ann. Sec. 25-126. The requirement of a three-fourths vote of members present to adopt amendments is the present rule by bylaw amendments. Ga. Code Ann. Sec. 25-121.
41 A-3006. Procedures for Department. (a) The Department shaJl in its discretion approve or disapprove of proposed amendments to the articles or to the bylaws within ninety days after they are submitted by the Secretary of State or credit union and shall, within that time, so advise the Secretary of State and credit union in writing of its approval or disapproval.
(b) If the Department should disapprove any articles or proposed amendments to articles or bylaws, it shall state the reasons for its disapproval. The subscribers or credit union shall have reasonable time, not more than ninety days from the date of disapproval, or such additional time as the Department may allow, to correct any matters causing it disapproval. If such matter is corrected, the Department shall then advise the Secretary of State and credit union in writing of its approval, or the credit union alone in writing of its approval in the case of amendment of the bylaws.
(c) Final action by the Department in approving or disapproving articles or amendments thereto or to the bylaws shall be conclusive except as it may be subject to judicial review under Section 41 A-40 1.
Comment: Subsections (a) and (b) restate the substance of Ga. Code Ann. Sec. 25-127, but increase the time within which the Department must act from 30 to 90 days. Subsection (c) makes the review procedure of Part J applicable to credit unions.
41A-3007. Effect on Existing Charter. (a) othing in this Code shall be construed to impair the validity of the charter of a credit union existing on April 1, 1975.
(b) Each credit union existing on April 1, 1975, shall have perpetual duration unless its articles are amended under this Code to provide for a limited period of duration.
Comment: This is a new provision describing the effect of this Chapter on existing charters. The provision on perpetuity is derived from Ga. Code Ann. Sec. 22-202(a)(2).
1II-5

3101
CHAPTER 41A-31. OPERATION AND REGULATION.
41A-3101. Powers. A credit union shall have, in addition to the powers common to all corporations under the laws of this State, the following powers:
(a) It may receive funds from its members in the form of shares and deposits on accounts or as evidenced by certificates of deposit issued by the credit union but shall not have the power to have deposits subject to check.
(b) It may receive deposits from non-members in such manner as the bylaws may provide.
(c) It may make loans to members through its credit committee, or authorized loan officer pursuant to Section 41 A-31 09.
(d) It may also invest, through its board of directors, funds not used in loans to members, in the following manner:
(I) obligations of the United States including bonds and securities upon which payment of principal and interest is fully guaranteed by the United States, obligations issued by Banks for Cooperatives, Federal Land Banks, Federal Intermediate Credit Banks, Federal Home Loan Banks, the Federal Home Loan Bank Board, or any corporation designated in Section 841 of Title 31 of the United States Code as a wholly-owned government corporation; or in obligations, participations, or other instruments of or issued by, or fully guaranteed as to principal and interest by the Federal ational Mortgage Association or the Government ational Mortgage Associa tion;
(2) general and direct obligations of the State of Georgia, its counties, districts, and municipalities, which have been validated as provided by law, but no more than twenty-five percent of the shares and deposits of a credit union shall be invested in the obligations of anyone such obligor;
(3) in loans to other credit unions but loans to anyone credit union shall not exceed ten percent of the shares, deposits, and surplus of the investing credit union;
(4) may deposit its funds in banks, building and loan associations, savings and loan associations and credit unions and may purchase certificates of deposit and savings certificates which such financial institutions are authorized to issue, to the extent provided in regulations issued by the Department; and
(5) any other types of investments authorized by the Department, provided such investments shall not, in the aggregate, exceed ten percent of the shares, deposits, and surplus of the investing credit union.
(e) It may borrow from any source but the total of such borrowings shall at no time exceed fifty percent of paid-in shares. deposits, and surplus.
IlI-6

3101
(f) It may undertake other activities which are not inconsistent with the provisions of this Code or regulations adopted pursuant thereto.
(g) It may organize and engage in business without having any stated amount of capital subscribed or paid in other than that derived from the subscribers' qualifying shares, and may commence business with only such capital authorized and paid in as may be provided in its bylaws, and may provide for the payment and withdrawal thereof as and in the manner provided by its bylaws.
(h) It may purchase, hold and convey real estate for the following purposes only:
(I) such real estate as shall be necessary for the convenient transaction of its business, subject to the prior approval of the Department
(2) such real estate as shall be conveyed to it in satisfaction of debt previously contracted in the course of its business' and
(3) such real estate as it shall pruchase at sales under judgments, decrees, or mortgage foreclosures pursuant to mortgages or security deeds held by it.
(i) No real estate acquired in the cases provided for by subparagraphs (h)(2) and (h)(3) and no real estate which has ceased to be used as credit union premises shall be held for a longer period than five years, unless the time shall be extended by the Department.
Comment: This Section carries forward Section 25-105 of the former Code with the following refinements:
1) Subsection (a) expressly authorizes a credit unioll to issue certificates of deposit to its members.
2) Subsection (a) expressly prohibits a credit union from offering checking accounts, a restriction implicit in the former law.
3) Subsection (d)( 1) adds to the list of permissible investments certain specialized obligations that may be purchased by federal
credit unions under 12 u.s. C. Sec. 1757(8)(E).
4) Subsection (d)(4) gives the Department express regulatory power in regard to deposits made in other financial institutions.
5) Subsection (e) rewords the restriction on total borrowings. The former Code specifies that such borrowings shall not exceed 50 percent of the 'unincumbered assets, which term shall mean those assets not specifically pledged as security for obligations of tile borrowing credit union '. This Section would substitute 50 percent of paid-in shares, deposits, and surplus as the limits on total borrowings.
6) Subsection (f) is clarified to assure that it does not authorize activities inconsistent with this Code or regulations issued hereunder.
7) Subsection (g) is modified to conform with the rule that all members shall hold only one share. See Section 41 A-3102.
41A-3102. Membership; Shares. (a) The membership of the credit union shall consist of the initial subscribers and such other persons
II1-7

3102

within the field of membership as may be duly elected and have subscribed to one share and have paid for same together with the required entrance fee and complied with all other requirements contained in the bylaws. No subscriber or other member shall hold more than one share in the credit union. The par value of all shares
shall be $5.00. (b) Societies, associations, partnerships and corporations
composed of persons who are eligible for membership may be admitted to membership in the same manner and under the same conditions as such person.
(c) A person or corporation who leaves the field of membership may be permitted to retain his membership in the credit union at the discretion of the board of directors.
Comment: Subsection (a) carries forward Section 25-108 except that the rule that all members shall be restricted to one qualifying share is new as a matter of law. The specification of $5 as the par value of shares follows Section 25-101 of the former Code.
41A-3103. Special Shares and Deposits. (a) A share may be issued and deposits received jointly in the names of a member and a nonmember with right of survivorship, but no joint tenant shall be permitted to vote, obtain loans, or hold office unless he is within the field of membership and is a qualified member.
(b) A share may be issued and deposits received in the name of a minor and in trust in such way and manner as the bylaws may provide.
Comment: Subsection (a) is a new provision designed to convey authority for joint shares and deposits with non-members as is now
authorized for federal credit unions under 12 u.s. C. Sec. 1759.
Subsection (b) restates Ga. Code Ann. Sec. 25-111. 41A-3104. Expulsions and Withdrawals, Disposition of Deposits. At any regular or called meeting of the members, by a two-thirds vote of those present, the members may expel from the credit union any member thereof. A member may withdraw from the credit union and a non-member may withdraw deposits as hereinafter prOVided, by filing a written notice of such intention. All deposits of an expelled or withdrawing member with any interest accrued shall be paid to such member, subject to sixty days' notice, and after de~ucting any amounts due to the credit union by such meinber. S~d expelled or withdrawing member shall have no further right in ~d credit union or to any of its benefits, but such expulsion or Ithdrawal shall not operate to relieve said member from any remaining liability to the credit union. Comment: This Section restates Ga. Code Ann. Sec. 25-109. ~lA-3105. Capital Right to Offset; Cancellation of Shares. The :Ital of the .credit union shall consist of the payments that have n made to It by the members on their qualifying shares. A credit

Y.1975

III-8

3105

union shall have a lien on a member's shares and deposits and on dividends or interest payable thereon for and to the extent of any loan made by it to such member and of any dues and fines payable to it by such member. A credit union shall, upon the resignation or expulsion of a member, cancel the shares, deposits or dividends or interest due thereon and may apply the withdrawal value of such funds toward the liquidation of such member's indebtedness.
Comment: This Section carries forward provisions contained in Ga. Code. Ann. Sec. 25-11 O.
41 A-31 06. Board of Directors; Credit and Supervisory Committees. At the annual meeting the members shall elect a board of directors, a credit committee and supervisory committee. 0 member of the board may be a member of the supervisory committee, but any member of the board may be a member of the credit committee. All members of the board, all members of the committees, and all officers shall be sworn to faithfully perform the duties of their several offices in accordance with provisions of this Chapter and the bylaws or as otherwise lawfully established. The oaths shall be subscribed in writing and a copy thereof shall be retained in the office of the credit union.
Comment: This provision carries forward material contained in Ga. Code Ann. Sec. 25-112. It omits, however, provisions of that Section suggesting that the terms of directors, committee members and officers shall be fixed by the bylaws and requiring that the oaths of these officials be filed with the Department.
41 A-31 07. Duties of Directors. The board of directors shall be responsible for the affairs, funds, and records of the credit union and
shall meet as often as necessary, but at least once during ten different months of each calendar year. Unless the bylaws specifically reserve any or all of the duties to the members, it shall be the special duty of the directors:
(a) to act upon all applications for membership; (b) to determine from time to time rates of interest and dividends which shall be allowed on deposits and charged on loans consistent with this Chapter and other applicable laws; (c) to fix the amount of the fidelity bond which shall be required of all officers, employees, agents or members having custody of funds, properties or records; provided, however, that the amount of such fidelity bond shall not be less than such minimum requirements as shall be prescribed by regulation of the Department and shall be in such form as may from time to time be approved by the Department; (d) to fix within the restrictions imposed by statute the maximum amount of deposits which may be made by, and the maximum amount that may be loaned to, one member; (e) to fill vacancies on the board of directors and credit committee until the election and qualification of a successor

May, 1975

111-9

3107
(0 to have charge of the investment of funds of the credit union
other than loans to members within the restrictions imposed by tatute; and
(g) to perform such other duties as the members may from time to time authorize.
Comment: This Section carries forward powers contained in Ga. Code Ann. Sec. 25-113. It omits, however, provisions of that Section specifying that directors and committee members shall not be compensated. Additionally, the Section would allow the minimum dollar amounts of fidelity bonds to be fixed by regulation rather t/zan detailed in the Code. Finally, it removes an inconsistency in the law by omitting power for the director to act to expel members. See Section 41A-3104.
41 A-31 08. Duties of Supervisory Committee; Comprehensive Annual Audit. (a) The supervisory committee shall supervise the acts of the board of directors, credit committee and officers, any or all of whom the supervisory committee may, at any time by a unanimous vote, suspend. Within seven days after such suspension, the supervisory committee shall cause notice to be given to the members and to the Department of a special meeting to take action on such suspension' such notice shall clearly indicate the purpose of the meeting. By a majority vote the committee may call a meeting of the members to consider any violation of this Chapter or of the bylaws or any practice of the credit union which, in the opinion of the committee is unsafe or unauthorized. otice of such meeting shall al 0 be given to the Department. The committee may fill vacancies in its own number until the next meeting of the members.
(b) At frequent intervals, the supervisory committee shall make or cause to be made an inspection of the assets and the liabilities of the credit union. At least once each calendar year the supervisory committee shall make or cause to be made a comprehensive audit and submit same at the next annual meeting of the members of the credit union. The supervisory committee may employ the services of an independent accountant or firm of such accountants to make such examinations and audits as required by this Section. The annual audit shall include a confirmation of the share, deposit, and loan accounts of the members. All reports on audits by the committee or an independent accountant shall be preserved with the records of the credit union.
Comment: This provision carries forward the substance of Section 25-114 of the Code. It does add express authority for the supervisory comrnittee to employ outside accountants to conduct the annual audit and allows the audit to occur at any time during the year. Moreover, in conformity with the general policy of this Chapter that details as to credit union officials should not be fixed by statute, it
111-10

3108
omits a provlSlon authorizing the members of the supervisory committee to fill vacancies in their own number until the next annual election.
41 A-31 09. Loans. (a) Credit unions may lend money to their members at reasonable rates of interest, which shall not exceed one and one-fourth percent each month on the unpaid balance, for such purposes as may be approved by the credit committee or the loan officer.
(b) The credit committee shall hold such meetings as the business of the credit union may require and not less frequently than once a month to consider applications for loans. Reasonable notice of such meetings shall be given to all members of the committee. 0 loan shall be made unless it is approved by a majority of the entire committee; except that the credit committee may appoint one or more loan officers and delegate to him or them the power to approve loans within the limits as set by said committee. A record of loans approved by each loan officer shall be made available to the credit committee upon request by it. All loans not acted upon by a loan officer shall be acted upon by the credit committee. No person shall have the authority to disburse funds of the credit union for any loan which has been approved by him in his capacity as a loan officer. ot more than one member of the credit committee may be appointed a a loan officer. An applicant for a loan may appeal to the director from the decisions of the credit committee, if it is so provided in the bylaws and in the way and manner therein provided. Applications for loans shall be made on forms approved by the board of directors, which shall set forth the purpo e for which the loan is desired; the security, if any; and such other data as may be required.
(c) Loans may be made to officers, directors, committee members, or employees of the credit union under the same general terms and conditions a to other members of the credit union; provided, however, that no such officer, director, committee member, or employee shall participate in approving any loan in which he has a direct or indirect financial interest. The approval of all loans to officers, directors, committee members and employees of the credit uion shall be reported to the board of director at its next meeting.
Cd) 0 credit union shall be authorized to lend to any individual borrower, on an unsecured loan, more than one percent of the fir t S100,000.00 of its deposits and shares plus one-fourth of one percent of its deposits and shares over $100,000.00. 0 credit union shall be authorized to lend to an individual borrower on a secured loan more than ten percent of the first S I00 000.00 of it deposit and shares plus four percent of the next $1,000,000.00 of it deposits and hare plus two percent of its deposits and hares over S I ,100 000.00. Deposits and shares reflected in the statement of
Ill-I I

3109
condition on the last calendar day of the preceding quarter to the nearest $100,000.00 shall be used to establish loan limits for the subsequent calendar quarter, provided that where a credit union has less than $1,000,000.00 in total shares and deposits, the nearest $1,000.00 shall be used to establish these limits, and provided further that any credit union may make loans up to $200.00 regardless of the amount of its shares and deposits.
(e) For purposes of subsection (d): (I) all loans to anyone borrower shall be treated as one loan; (2) 'borrower' means the member who actually received the proceeds from a loan and shall not include any obligation which he may incur by being an endorser, guarantor, co-maker or similar obligor for another borrower; (3) 'secured loan' means a loan for which adequate collateral is given. A secured loan may include a loan for which there is an endorser, guarantor, co-maker or similar obligor. (f) Approval of loans by either the credit committee or a loan officer shall be evidenced, prior to disbursement of the loan proceeds, by a writing signed by a committee member or the loan officer stating that the committee or the loan officer has approved the loan. Comment: This provision carries forward provisions of Ga. Code Ann. Secs. 25-115,25-116 with the following changes: 1) The maximum loan rate is raised by subsection (a) from one to one and one-fourth percent per month. 2) Subsection (b) relaxes an authorized loan officer of the obligation to report loans made under his authority within seven days to the loan committee. 3) Subsection (c) relaxes restrictions on loans to officers, directors and committee members. This Section requires that the interested member refrain from participating in the loan decision and . that it be reported to the board at its next meeting. The present Code forbids loans in excess of an official's shareholdings and deposits without the prior approval of a special committee of directors and members of the supervisory committee. 4) Subsection (d) modifies the formula for limits on secured loans to allow four percent rather than one percent of deposits and shares over 1,100,000.00 to be included, allows calculations to be made on the basis of rounded figures, and permits any credit union to advance at least $200.00. All such calculations are to be made on the basis of statements of conditions for the preceding calendar quarter rather than yearly data, which is now the case for established credit unions, or monthly data, which may now be used by new credit unions. Finally, an express provision for aggregating loan to one borrower is added.
1II-12

3110
41 A-3l1 O. Fees; Reserve Funds; Tax Exemption. (a) A credit union may charge entrance fees as provided in the bylaws. All such fees shall after payment of organizational expense, be known as reserve income and shall be added to the reserve of the credit union.
(b) Immediately before the payment of each dividend, the gross earnings of the credit union shall be determined. There shall be set aside from the amount as a regular reserve against losses on loans and contingencies, not less than sums calculated in accordance with the following schedule:
(1) five percent of gross income until the regular reserve shall equal even and one-half percent of the total of outstanding loans and risk assets;
(2) whenever the regular reserve falls below seven and one-half percent of the total of outstanding loan and risk assets, it shall be replenished as provided in subparagraph (b)(1) hereof.
(c) The regular reserve shall belong to the credit union and shall be used to meet losses and shall not be distributed except on dissolution of the credit union.
(d) In addition to such regular reserves, special reserves to protect the interest of members shall be established when found necessary in any special case by the board of directors of the credit union or by the Department.
(e) For the purpose of this Section, the term 'risk assets' shall mean all assets of the credit union except:
( 1) cash on hand' (2) deposits made pursuant to Section 41A-31Ol(d)(4); (3) assets which are insured by, fully guaranteed as to principal and interest by, or due from the United States Government its agencies, the Federal National Mortgage Association, or the Government ational Mortgage Association; (4) loans to students under the provision of Title IV, Part B of the Higher Education Act of 1965 or a similar State insurance program' (5) loans insured under Title I of the National Housing Act by the Federal Hou ing Administration' (6) loans to other credit unions; (7) hares or deposits in other credit unions; (8) investments authorized by this Chapter; (9) prepaid expenses; (10) accrued interest on nonrisk investments; (11) furniture and equipment; and (12) land and buildings. (f) All reserves of credit unions or federal credit unions established in accord with generally accepted accounting procedures or upon the specific direction of the Department or any federal regulatory body or for the purpose of complying with any conditions lawfully imposed by the Department or any federal regulatory body
III-I 3

3110

hall not be considered as surplus or undivided profits of any credit
union for tax purposes. Comment: This Section carries forward the requirement of a
reserve fund found in Section 25-117 of the Code, but changes the formula for calculating the level to which the fund must be built and subsequently maintained from 1% of the assets of the credit union to 7-1/2% of its loans and risk assets. Subsection (d) relating to special
u.s. reserves is a new provision derived from 12 C. Sec. 1762 which
grants authority for such reserves jor federal credit unions. Subsection (f) is a new provision which would require exclusion of reserves maintained in conformity with accounting procedures or regulatory requirements in making tax calculations.
41A-3111. Dividends; Interest. At such intervals and for such periods as the board of directors may authorize, but not more frequently than quarterly, and after provision has been made for transfer to the reserve in accordance with provisions of the preceding
ction, dividends and interest from net earnings may be declared at uch rates as are determined by the board. Dividends or interest in excess of seven percent annually shall be reported to the Department at least ten days prior to payment. The dividend may be paid after approval by the Department upon its determination that such payment will not adversely affect the solvency of the credit union.
Comment: The former Code in Section 25-113(7) limits dividends 10 net earnings. This Section retains this basic rule and makes it applicable to payments called interest. It establishes that the available undivided profits are those remaining after the required transfer 10 the reserve fund under Section 41A-291 0, and requires prior approval of the Department when the rate of payment exce,eds 7% on an annual basis.
41A-3112. Fiscal Year; Meetings of Members; Proxies. The credit union fiscal year shall end at the close of business on the thirty-first day of December. Special meetings of the members may be held by order of the directors, or of the supervisory committee and shall be held on written request of ten percent of the members. At all meetings a member shall have but one vote. 0 member may vote by proxy, but a society association, partnership or corporation, having membership in the credit union, may be represented by one person, dUly authorized by said society, association, partnership or 'Orporation to represent it. At any meeting the members may decide on any matter of interest to the credit union and may overrule the board of directors; provided the notice of the meeting shall have tated the question to be considered.
Comment: This Section carries forward provisions contained in Ga. Code Ann. Sec. 25-121.
~lA-3113. Taxes to which Subject. Credit unions shall not be subject to any tax except the ad valorem tax upon property imposed

Y.1915

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3113

by the Constitution of this State unless made subject thereto by express provision of the law specifically naming credit unions and making them subject thereto. All ad valorem taxes against credit unions shall be assessed upon the value of their shares, including surplus and undivided profits, and not upon their assets, other than real estate, and the rate of taxation shall not exceed the rate of taxation now imposed on banking corporations under provision of Section 92-2406 of the Code of Georgia; provided, that so long as federal credit unions are exempt from the payment of the tax imposed under this Section, State credit unions shall likewise be exempt.

Comment: This provision carries forward Ga. Code Ann. Sec. 25-123. The proviso is new but does not change the law as currently interpreted.
41A-3114. Rules and Regulations. Without limitation on the authority conferred by Part I of this Code, the Department is hereby au thorized to make such rules and regulations not inconsistent with the provisions of this Chapter and other applicable statutes governing the operation of credit unions as it may consider reasonable and proper for the protection of all funds invested.
Comment: This provision expands the Department regulatory authority in accord with the underlying policies of this Code in order that it may act to protect members and credit unions themselves. The former provision on this subject is Ga. Code Ann. Sec. 23-123.1.
41A-311S. Payment of Deposits of Deceased Depositors. (a) Upon the death of any person intestate having a share and deposits in a credit union or federal credit union of not more than $2,500.00, such credit union or federal credit union shall be authorized to pay the proceeds of such share and deposits directly to the following persons:
(1) to the surviving spouse; (2) if no surviving spouse, to the children pro rata; (3) if no children or surviving spouse, to the father and mother
pro rata; (4) if none of the above, then to the brothers and sisters of the
decedent pro rata. (b) The payment to the surviving spouse or certain other family
members shall operate as a complete acquittal and discharge to t~e credit union or federal credit union of liability from any suit claJJ11 or demand of whatever nature by any heir, distributee, creditor of the decedent, or any other person. Such payment is hereby aut~~r ized to be made as provided herein, without the necessity of adml11lStration of the estate of the decedent or without the necessity of
obtaining an order that no administration is necessary. (c) in any case in which a deceased depositor has more than
$2,500.00 on deposit iTI a credit union or federal credit union such
credit union or federal credit union shall be authorized to pay any amount up to $2,500.00 to any of the persons authorized by this Section to receive said deposit. The payment shall only act as a full

MaY,1975

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3115
and final acquittance of liability up to the amount paid by the credit union or federal credit union and shall not act as a full and final acquittance to the credit union or federal credit union of all liability.
Comment: This provision carries forward Ga. Code Ann. Sec. 25-129 with an increase in amounts that may be paid out under this Seclion paralleling the change made by this Code as to banking deposits. See Sec lion 41 A -1610.
41 A-3116. Subsidiary Offices. A credit union shall not be prohibited from maintaining offices at locations other than its principal offices if the maintenance of such offices shall be reasonably necessary to furnish service to its membership. The establishment of additional offices shall be subject to the prior approval of the Department upon application to it in such form as it may prescribe by regulation.
Comment: This is a new Section which would authorize subsidiary offices for credit unions.
41A-3117. Requirements to Obtain Deposit Insurance; Public otice When Deposits are not Insured. (a) Every credit union shall be required to obtain deposit insurance satisfactory to the Department before it may conduct business and accept deposits except that: (1) credit unions in existence and accepting deposi ts on April I, 1975;and (2) credit unions which have had their deposit insurance coverage withdrawn or canceled may, in the discretion of the Department, continue to accept deposit ; provided that within three years after April I 1975, in the case of credit unions excepted under subsection (a)(1) and within six months after withdrawal or cancellation of insurance in the case of credit unions excepted in subsection (a)(2), uch credit unions shall obtain deposit insurance written by an insurance company authorized to transact business in this State and acceptable to the Department or by the National Credit Union Administration. The Department may in its discretion for cause hown extend the time limitation in which deposit insurance must be obtained. (b) Deposit insurance required to be obtained in subsection (a) need not be in excess of amounts insured by the ational Credit Union Administration at the time the insurance is obtained but wherever the insurance coverage is, in the opinion of the Department, less than amounts insured by the ational Credit Union Administration, the credit union shall be required to post a sign in boldface print, in letters at least four inches high, at a conspicuous place near the entrance of such credit union, which states 'Deposits . ot Insured' or 'Deposits Insured Up To (insert amount of deposit Insurance)'. Such wording shall also follow the name of the credit union wherever it is written or printed and shall be posted in writing
III-I 6

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which is easily legible in letters at least one inch high at each window or desk receiving deposits.
(c) The provisions of this Section shall not become effective unless and until deposit insurance required by subsection (a) is available from a corporation authorized to insure deposits of credit unions pursuant to an Act of the General Assembly of this State.
Comment: In accord with the policies of this Code, this Section introduces the mandatory requirement of deposit insurance. Existing credit unions would be allowed at least three years to satisfy this requirement.
41 A-3118. Mergers. (a) A credit union may with the approval of the Department and in accordance with such uniform rules and regulations as it shall make and promulgate be merged with another credit union under the charter of such credit union, upon any plan agreed upon by the majority of the board of each credit union joining the merger, and approved by not less than two-thirds of the members of each credit union present and eligible to vote at meetings called for that purpose. All property, property rights, and interests of the credit union so merging shall upon merger be transfelTed to and vested in the credit union under whose charter the merger is effected without deed, endorsement, or other instrument of transfer and the debts and obligations of the credit union so merging shall be deemed to have been assumed by the credit union under whose charter the merger is effected, and thereafter the charter of the credit union so merging shall be void.
(b) The provisions of Code Chapter 22-44, relating to merger and consolidation, shall no longer be applicable to credit unions.
Comment: This is a new provision allowing for mergers of credit unions. It would replace provisions of the present Corporate Code that assume that credit unions are normal stock companies and that they do not require Department approval.
4IA-3119. Conversion of Credit Unions. (a) Any credit union operating in this State may convert into a federal chartered credit union, and any federal credit union may convert into a credit union organized under this Code upon approval of the authority under whose supervision the converted credit union will operate and upon compliance with applicable federal laws as to a converted federal credit union, and upon compliance with applicable . State laws as to a converted credit union. The procedure for obtaining such approval and effecting the conversions in the case of a credit union shall be as follows:
(I) A meeting of the board of directors either regular or special, shall be called for the purpose of voting or converting from a federal credit union to a credit union, or from a credit union to a federal credit union. A majority of the board of directors shall adopt a resolution approving the contemplated conversion.
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(2) A meeting, either regular or special, of the shareholders shall

then be called for voting on the proposed conversion. otice of said

meeting shall be given in the manner prescribed in Section 41 A-I 07

and hall include a statement indicating that the proposed conversion

will be considered at the meeting. Proof of giving of the notice shall

be by the affidavit of the president of the credit union. A majority of

the members present at this meeting shall then approve the proposed

conversion. (3) Within ten days after such approval of the conversion, the

president or vice president and treasurer shall file a verified copy of

the resolution adopted by the board of directors with the state or

federal authority, under whose supervision the converting credit

union is to operate.

(b) Upon the written approval of the Department for conversions

to credit unions, and with the written approval of the Administrator

of the National Credit Union Administration for conversions to

federal credit unions the converting credit union shall then become a

credit union under the laws of this State or the United States, as the

case may be and thereupon all assets shall become the property of

the new credit union or federal credit union as the case may be,

subject to all existing liabilities, and every person who was a member

of the converting credit union shall be a member in the new credit

union or federal credit union.

Comment: This is a new provision authorizing state-federal

conversions of credit unions. The requirements for state credit

unions are similar to those for federal credit unions under 12 U. S. C.

Sec. 1771.

41A-3120. Central Credit Union. (a) A central credit union means

a credit union which is organized to serve a field of membership

which consists primarily of other credit unions operating pursuant to

this Code or the Federal Credit Union Act. A central credit union

may be organized and operated under this Code and subject to all

provisions of this Code which are not inconsistent with this Section.

Such credit union shall use the word 'central' in its name.

(b) The field of membership of a central credit union shall include

credit unions organized and operating under the provisions of this

Code or under the Federal Credit Union Act. In addition, the field of

membership may include:

(l) members of credit unions which are members of the central credit union

(2) officials and employees of any organization or association of

credit unions, and of the central credit union;

(3) except as limited in Part I of this Code, employees of the

Department or of the National Credit Union Administration;

. (4) organizations and associations of persons or credit unions

Included in the foregoing;

.

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3120
(5) persons who are (i) members of a credit union that has entered into voluntary or involuntary dissolution; or (li) indebted to a credit union which has entered into voluntary or involuntary dissolution; or (iii) non-member depositors of a credit union which has entered into voluntary or involuntary dissolution. (6) Groups within a common bond which are determined by the Commissioner to lack the potential memberships required for approval of their own credit union. (c) The central credit union may make loans to individuals who are members pursuant to paragraph (l) of subsection (b) above, only upon approval of the credit committee of the member credit union of which the individual is a member; and to individuals who are members pursuant to paragraph (3) of subsection (b) above only upon reporting such loan to the appropriate supervisory authority. (d) The Commissioner may, in his discretion, approve greater borrowings than provided in this Code when required to enable the credit union to meet its obligations to its member and otherwise assist its members during any emergency or hardship. (e) A central credit union may make loans to other credit unions, but loans to anyone credit union shall not exceed ten percent of the shares, deposits and surplus of the credit union borrower, without prior approval of the Department; purchase shares of and make deposits in other credit unions obtain or acquire the assets and liabilities of any credit union which enters into liquidation' inve tin and grant loans to associations of credit unions, and to organizations chartered to provide service to credit unions; and borrow money and accept deposits from any source. (f) The Commissioner may issu such special regulations as he may deem prudent or necessary to allow the central credit union to effectively promote the liquidity and sound financial management of its member credit unions without unduly endangering its own liquidity and sound financial condition. Such special regulations need not be applicable to aU credit unions but may be applicable only to the central credit union. The central credit union shall be exempt from the provisions relating to the establishment of a regular re erve as set forth in Section 41 A-311 0 of this Code but, in lieu thereof, shall maintain a reserve fund as required by regulations promulgated by the Commissioner. Such regulations shall not call for a re erve fund or annual transfers to the reserve fund in excess of those required by Section 41 A-31l 0 of this Code. (g) A central credit union shall have all the rights and powers of any other credit union organized under this Code and the additional rights and powers specified in this Section, notwithstanding any limitations or restrictions found elsewhere in this Code.
1II-19/1II-20

International Banking

Business Development

v

Corporations and

VI

Corporations

Bank Aaencies

x

Buk

IV

Sale of Checks Act

TABLE OF CONTENTS PART IV - SALE OF CHECKS ACT.

Section 41 A-3201. Section 41 A-3202. Section 41 A-3203. Section 41 A-3204. Section 41 A-320S. Section 41A-3206. Section 41 A-320? Section 41 A-320S. Section 41 A-3209. Section 41 A-321 O. Section 41 A-3211. Section 41 A-3212. Section 41 A-3213.

Chapter 41 A-32. Sale of Checks Act.
Definitions. License. Qualifications. Application; Bonding; Securities. Investigation; Granting of Licenses. Renewal of License; Annual License Fees. Maintenance of Bond or Securities. Agents and Subagents. Rules and Regulations. Denial, Suspension and Revocation of Licenses. As ignment of Claims to Department. Civil Liability of Licensee. Prohibited Transactions.

3201
PART IV. SALE OF CHECKS ACT.
CHAPTER 41A-32. SALE OF CHECKS ACT.
41 A-3201. Definitions. (a) As used in this Chapter: (1) 'Check' means any check, money order, or any other instrument for the payment or transmission of money whether or not it is a negotiable instrument under the terms of Code Chapter 109A-3, relating to commercial paper; (2) 'Sale' and 'selling' mean the passing of title from the seller or his agent to a holder or remitter for a price; and (3) 'Licensee' means a corporation duly licensed by the Department pursuant to this Chapter. (b) Other statutory definitions applying to this Chapter are: (1) 'Delivery' as defined in Code Section 109A-I-20l(14); (2) 'Issue' as defined in Code Section 109A-3-102(1 )(a); (3) 'Signed' as defined in Code Section 109A-I-20 1(39). Comment: This Chapter is designed to carry forward the Sale of Checks Act as enacted in 1965. For the most part the only changes are linguistic and stylistic modifications designed to assure conformity with the usage and format of this Code. However, this Code would restrict licensees to corporate entities as with other types of financial institutions. Moreover, under Part J, check sales corporations would be subject to reporting and examination requirements applicable to all financial institutions. See Sections 41A-305; 41A-309. 41 A-3202. License. No person or corporation, other than a bank or trust company, the authorized agent of a licensee, or an incorporated telegraph company which receives money at any of its offices or agencies for immediate transmission by telegraph, shall engage in the business of selling or issuing checks without having first obtained a license under this Chapter. This restriction applies to any nonresident person or corporation that engages in this State in the business of selling or issuing checks through a branch, subsidiary, affiliate or agent in this State. Comment: This provision restates the basic licensing requirement of Ga. Code Ann. Sec. 13-2203. A proviso to that Section allowing parties engaged in selling checks on the effective date of that Sectioll (March 2, 1965) to continue the business after filing an applicatioll within thirty days of that date until the regulator acted all tile application is deleted as no longer operative. 41 A-3203. Qualifications. In order to qualify for a license under this Chapter, an applicant shall: (a) satisfy the Department that it is financially responsible and appears able to conduct the business of selling checks in an hone t
IV-I

3203

and efficient manner, and with confidence and trust of the
community; and (b) comply with the bonding requirements, furnish the state-
ments, and pay the fees hereinafter prescribed. Comment: This provision restates Ga. Code Ann. Sec. 13-2204
with the addition of requirements relating to honest and efficient operation and community trust. These requirements are stated in Section 13-2206, and are brought forward here in order to state all of the criteria in one Section.
41 A-3204. Application; Bonding; Securities. (a) Each application for a license shall be in writing and under oath to the Department in such form as it may prescribe and shall include the following:
(I) The legal name and principal office address of the corporation applying for the license;
(2) The name, residence and business address of each director, or equivalent official, and of each officer who will be involved in selling checks in this State;
(3) The date and place of incorporation; (4) If the applicant has one or more branches, subsidiaries, affiliates, agents or other locations at or through which the applicant proposes to engage in the business of selling or issuing checks within the State of Georgia, the complete name of each and the address of each such location; (5) The location where its initial registered office will be located in this State; and (6) Such other data, fmancial statements and pertinent information as the Department may require with respect to the applicant, its directors, trustees, officers, members, branches, subsidiaries, affiliates or agents. (b) The application shall be filed together with: (I) An investigation and supervision fee established by regulation of the Department which shall not be refundable but which, if the license is granted, shall satisfy the fee requirement for the first license year or the remaining part thereof; and (2) A corporate surety bond issued by a bonding company or insurance company authorized to do business in this State and approved by the Department. The bond shall be in the principal sum of $100,000.00, and in an additional principal sum of $5,000.00 for each location, in excess of one, at or through which the applicant proposes to engage in this State in the business of selling or issuing checks; but in no event shall the bond be required to be in excess of 250,000.00. The bond shall be in a form satisfactory to the Department and shall run to the State of Georgia for the benefit of any creditors or claimants against the licensee or his agents. The condition of the bond shall be that theJicensee will pay any and all moneys that may become due and owing any creditor of or claimant

Y.1975

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3204

against the licensee arising out of the Ucensee's business of selling or issuing checks in this State, whether through its own act or the acts of an agent. The aggregate liability of the surety in no event shall exceed the principal sum of the bond. Claimants again t the licensee may themselves bring suit directly on the bond; provided, however, that the liability arising hereunder shall be limited with respect to the receipt, handling, transmission and payments of money arising out of the licensee's business of selling or issuing checks in this State.
(c) In lieu of such corporate surety bond or bonds or of any portion of the principal thereof, the applicant may deposit with the Department or a bank or trust company located in this State, as uch applicant may designate and the Department may approve, bonds, notes, debentures, or other obligations of the United States or any agency or instrumentality thereof, or guaranteed by the United States, or of the State of Georgia, or of a municipality, county school district, or instrumentality of the State of Georgia or guaranteed by the State, to an aggregate amount, based upon principal amount or market value, whichever is lower of not less than the amount of the required corporate surety bond or portion thereof. The securities shall be held to secure the same obligations as would the surety bond, but the depositor shall be entitled to receive all interest thereon, and shall have the right, with the approval of the Department, to substitute other securities for those deposited, and shall be required so to do on written order of the Department made for good cause shown. In the event of the failure or insolvency of such licensee, the securities, any proceeds therefrom, and the funds deposited pursuant to this Section shall be applied to the payment in full of claims arising out of transactions in this State for the sale or issuance of checks.
Comment: This provision carries forward the requirements of Ga. Code Ann. Sec. 13-2205. Material relating to noncorporate licensees is deleted. Unless the Department otherwise requires, the application must name only those officers who will be involved in the selling of checks in this State. The applicant is required to designate a county of principal location in order that the principal court may be determined under Section 41A-102.
41A-320S. Investigation; Granting of Licenses. Upon the fIling of application in due form, accompanied by the documents and fee prescribed in Section 41 A-3204, the Department shall conduct an investigation to determine if the criteria established by Section 41 A-3203 have been satisfied. If the Department determines to its satisfaction that the criteria of Section 41 A-3203 have been met, it shall issue to the applicant a license to engage in the business of selling and issuing checks in this State. A license issued pursuant to this Chapter shall remain in force and effect through the remainder of the calendar year following its date of issuance unless earlier

May, 1975

IV-3

3205
surrendered, suspended or revoked pursuant to this Chapter. Comment: This provision carries forward the investigation require-
ment of Ga. Code Ann. Sec. 13-2206. 41A-3206. Renewal of Licenses; Annual License Fee. A license
may be renewed for the ensuing twelve-month period upon filing of an application conforming to the requirements of Section 41A-3204 with such modifications as the Department may allow. Such renewal application shall be filed on or after June 1 of the year in which the existing license expires. No investigation fee shall be payable in connection with such renewal application but an annual license fee established by regulation of the Department to defray the cost of supervision shall be paid with each renewal application which shall not be refunded or prorated if the renewal application is approved and the renewal license thereunder goes into effect on the following January 1. If a renewal application is filed with the Department before July 1 of any year, the license sought to be renewed shall continue in force until the issuance by the Department of the renewal license applied for or until twenty days after the Department shall have refused to issue such renewal license.
Comment: This provision restates Ga. Code Ann. Sec. 13-2207. 41A-3207. Maintenance of Bond or Securities. (a) A licensee shall give notice to the Department by registered or certified mail of any action which may be brought against it and of any judgment which may be entered against it by any creditor or any claimant, with respect to a check sold or issued in this State, with details sufficient to identify the action or judgment within thirty days after the commencement of any such action or the entry of any such judgment. The corporate surety shall, within ten days after it pays any claim to any creditor or claimant, give notice to the Department by registered or certified mail of such payment, with details sufficient to identify the claimant or creditor and the claim or judgment so paid. Whenever the principal sum of such bond is reduced by one or more recoveries or payments thereon, the licensee shall furnish a new or additional bond so that the total or aggregate principal sum of such bond or bonds shall equal the sum required under Section 41A-3204, or shall furnish an endorsement duly executed by the corporate surety reinating the bond to the required principal sum thereof. The Department may, by reasonable rules and regulations, provide for corresPonding measures with respect to deposits made in lieu of a bond under Section 41A-3204(c). (b) A licensee shall give notice to the Department by registered or rtified mail of any increase in the number of locations at which it engages in the business of selling or issuing checks over the number reviously reported in either his original or renewal application and all show to the Department that the bond or securities required

',197S

IVA

3207

under Section 41 A-3 204 have been increased accordingly. This notice shall be given quarterly within thirty days after the end of each calendar quarter, and, if not given, such new location will not be considered as included under the licensee's license under this Chapter. At any time the Department is shown that a licensee has decreased the number of locations at or: through which it proposes to engage in business, the Department may decrease the bond or security requirements accordingly.
(c) A bond filed with the Department for the purposes of compliance with Section 41A-3204 may not be canceled either by the licensee or the corporate surety except upon notice to tHe Department by registered or certified mail with return receipt requested, the cancellation to be effective not less than thirty days after receipt by the Department of such notice and only with respect to any breach of condition occurring after the effective date of such cancellation.
Comment: This provision restates Ga. Code Ann. Sec. 13-2208. 41A-3208. Agents and Subagents. A licensee may conduct its business at one or more locations in this State so long as such locations have been included in the licensee's application and reports under Sections 41A-3204 and 41A-3207, and through such agents as it may designate. The Department may, within ten days after application, for cause, refuse to approve a licensee's designation of an agent, or, for cause, suspend a licensee's designation of an agent. In such cases the agent shall have the same procedural rights as are herein provided for the denial, suspension or revocation of a licensee's license. No additional license than that obtained by the licensee shall be required of any agent of a licensee duly reported. An agent of a licensee shall sell or issue checks only at the location designated in the licensee's report to the Department or other locations of which the Department has been notified. Comment: This provision restates Ga. Code Ann. Sec. 13-2209. 41A-3209. Rules and Regulations. Without limitation on the power conferred by Part I of this Code, the Department may make reasonable rules and regulations, not inconsistent with law, for the enforcement of this Part, ahd a violation of any such rule or regulation shall be cause for suspension or revocation of a licensee's license, or the designation of an agent of a licensee. Comment: This provision restates the substance of Ga. Code Ann. Sec. 13-2210 with a proviso protecting powers granted under Part I of this Code. See, e.g., Sections 41A-301; 41A-302. 41A-3210. Denial, Suspension and Revocation of Licenses. (a) The Department may suspend or revoke an original or renewal license, or the designation of an agent of a licensee, on any ground on which it migh t refuse to issue an original license, or for a violation

May, 1975

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3210
of any provision of this Chapter or any rule or regulation issued under this Chapter, or for failure of the licensee to pay a judgment recovered in any court, within this State, by a claimant or creditor in an action arising out of the licensee's business in this State of selling or issuing checks within thirty days after the judgment becomes final.
(b) 0 application for a license under this Chapter shall be denied, and no license granted under this Chapter shall be suspended or revoked, unless the applicant or licensee be given a reasonable opportunity to be heard by the Department. For this purpose, the Department shall give the applicant or licensee at least twenty days' written notice of the time and place of such hearing by registered or certified mail, addressed to the principal place of business of such applicant or licensee. Any order of the Department denying, suspending or reyoking a license shall state the grounds upon which it is based and shall not be effective for twenty days after its rendition. A copy thereof shall be forwarded promptly by registered or certified mail, addressed to the principal place of business of such applicant or licensee.
(c) A decision of the Department denying a license, original or renewal, shall be conclusive except as it may be subject to judicial review under Section 41A-401. A decision of the Department suspending or revoking a license shall be subject to judicial review in the same manner as a decision of the Department to take possession of the assets and business of a bank under Section 41 A-706.
Comment: This provision carries forward Ga. Code Ann. Secs. 13-2211 through 13-2214. The new judicial review procedure of Section 41 A-401 is made applicable to license denials.
41 A-3211. Assignment of Claims to Department. At the written request of any claimant or creditor of a licensee whose claim is based on a transaction in this State for the sale or issuance of a check ubject to regulation under this Chapter, the Department may in its discretion take an assignment of such claim in trust for the benefit of the assigning claimant or creditor and may bring any legal action nece sary to collect such claim. Two or more such claims against a licensee may be combined in one such action.
Comment: This provision restates Ga. Code Ann. Sec. 13-2215. 41 A-3212. Civil Liability of Licensee. Every check issued in the conduct of the business regulated by this Chapter shall be signed by the licensee or his authorized representative, and the licensee shall be liable for the payment thereof to the same extent as a drawer of a ~egotiable instrument whether or not the check is a negotiable lOs~rument under the terms of Article 3 (Commercial Paper) of the Umform Commercial Code, Chapter l09A-3 of the Code of Georgia. Comment: This provision restates Ga. Code Ann. Sec. 13-2216.
IV-6

3213 41 A-3213. Prohibited Transactions. (a) 0 person or corporation shall sell checks as an agent of a principal seller when such principal seller is subject to licensing under this Chapter but has not obtained a license hereunder, and any person who does so shall be deemed to be the principal seller thereof, and not merely an agent, and shall be liable to the holder or remitter as the principal seller. (b) No person or corporation other than a bank or trust company, or agent thereof, a licensee, or an agent of a licensee, shall undertake, in the course of carrying on the business herein regulated, to receive transmit or handle money on behalf of another to whom he issues a money order or a similar payment paper, and any person who doe so shall be liable to the owner of the money order or similar payment paper for the payment thereof to the same extent as a drawer of a negotiable instrument whether or not the money order or similar payment paper is a negotiable instrument under the terms of Article 3 (Commercial Paper) of the Uniform Commercial Code, Chapter l09A-3 of the Code of Georgia. Comment: This provision restates Ga. Code Ann. Sec. 13-2217.
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TABLE OF CONTENTS
PART V - INTERNATIONAL BANKING CORPORATIONS AND BANK AGENCIES.

Chapter 4IA-33. International Banking Corporations and Bank Agencies.

Section 41 A-3301. Section 41 A-3302. Section 41 A-3303. Section 41 A-3304.
Section 41 A-330S. Section 41 A-3306. Section 41 A-3307. Section 41 A-3308. Section 41 A-3309.
Section 41 A-331 O. Section 41 A-3311.

Definitions. Application of Code. Provision of Chapter 22-14 Applicable. Requirements for Carrying on Banking Busines .
Actions. Application for Licen e. Licenses; Permissible Activitie . Securities. Financial Certifications; Re trictions.
Reports. Dissolution.

3301
PART V. INTERNATIONAL BANKING CORPORATIONS AND BANK AGENCIES.
CHAPTER 41A-33. INTERNATIONAL BANKING CORPORATIONS AND BANK AGENCIES.
41 A-3301. Defintions. As used in this Chapter: (a) The term 'international banking corporation' means a banking corporation organized and licensed under the laws of some foreign country or a political subdivision thereof, other than the United States of America or any of the States within the United States of America. (b) The term 'international bank agency' means the international banking corporation with respect to all business or activities conducted in this State or through an office located in this State. Comment: This Chapter is designed to carry forward without substantive change the International Bank Agency Act as passed in 1972. This Section restates Ga. Code Ann. Sec. 13-2401, except that the definition of 'international bank agency' is clarified so that it clearly refers to a legal entity. 41A-3302. Application of Code. International bank agencies shall be subject to all the provisions of Parts I and II of this Code, except where it may appear, from the context or otherwise, that such provisions are clearly applicable only to banks or trust companies organized under the laws of this State or the United States. An international bank agency shall have no greater right under or by virtue of this Chapter and amendments thereto than is granted to banks organized under the laws of this State. Legal and financial terms used herein shall be deemed to refer to equivalent terms used by the country in which the international banking corporation is organized. Comment: This provision would restate Ga. Code Ann. Sec. 13-2402 with technical changes. 41 A-3303. Provisions of Chapter 22-14 Applicable. otwithstanding the definitions of th term 'foreign corporation' appearing in Code Section 22-1 02(b), all of the provisions of Code Chapter 22-14, relating to foreign corporations, shall apply to all international bank agencies doing business in this State, except that references therein to the Secretary of State should be construed as references to the Department. Comment: This provision restates Ga. Code Ann. Sec. 13-2403. 41 A-3304. Requirements for Carrying on Banking Busine . (a) No international banking corporation shall transact a banking business, or maintain in this State any office for carrying on such business or any part thereof, unless such corporation shall have:
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3304
(1) been authorized by its charter to carryon such business and hall have complied with the laws of the country under which it is chartered'
(2) furnished to the Department such proof as to the nature and character of its business and as to its financial condition as the Department may require;
(3) filed with the Department: (i) a duly executed instrument in writing, by its terms of indefinite duration and irrevocable, appointing the Department its true and lawful attorney, upon whom all process in any action against it may be served with the same force and effect as if it were a domestic corporation and had been lawfully served with process within the State; (ii) a written certificate of designation, which may be changed from time to time thereafter by the filing of a new certificate of designation, specifying the name and address of the officer, agent, or other person to whom such process shall be forwarded by the Department; (4) paid to the Department the fee established by regulation of the Department to defray the cost of investigation and supervision' and (5) received a license duly issued to it by the Department. (b) The Department shaH not issue a license to an international banking corporation unless it is chartered in a country which permits banks chartered in the United States of America or any of its states to establish similar facilities therein. Comment: This provision restates Ga. Code Ann. Sec. 13-2404. 4IA-3305. Actions. (a) An action against an international banking corporation doing business in thi State may be maintained by a re ident of this State for any cause of action. For purposes of this ub ection, the term 'resident of this State' shall include any corporation formed under the laws of this State. (b) An action against an international banking corporation doing business in this State may be maintained by another international banking corporation or by a nonresident of this State in the fOllowing cases only: (I) where the action is brought to recover damages for the breach of a contract made or to be performed within this State, or relating to property situated within this State at the time of the making of the contract (2) where the subject matter of the litigation is situated within this State'
(3) where the cause of action arose within this State, except ~here the object of the action is to affect the title of real property situated outside this State',
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3305
(4) where the action is based on a liability for acts done within this State by an international banking corporation or its international bank agency.
Comment: This provision restates Ga. Code Ann. Sec. 13-2405. 41 A-3306. Application for License. (a) Every international banking corporation, before being licensed by the Department to transact a banking business in this State, or before maintaining in this State any office to carryon such business or any part thereof, shall subscribe and acknowledge and submit to the Department at its office, a separate application, in duplicate, which shall state: (1) the name of such international banking corporation; (2) the location by street and post office address and county where its bu iness is to be transacted in this State, and the name of the person who shall be in charge of the business and affairs of such agency; (3) the location where its initial registered office will be located in this State; (4) the amount of its capital actually paid in and the amount subscribed for an unpaid; (5) the actual value of the assets of such international banking corporation, which must be at least $50,000,000 in excess of its liabilities; and a complete and detailed statement of its financial condition as of a date within sixty days prior to the date of such application, except that the Department, in its discretion, may, when necessary or expedient, accept such statement of financial condition as of a date within one hundred and twenty days prior to the date of such application. (b) At the time such application is submitted to the Department such corporation shall also submit a duly authenticated copy of its articles and an authenticated copy of its bylaws, or an equivalent thereof satisfactory to the Department, and pay an investigation and supervision fee to be established by regulation of the Department. Comment: This provision restates Ga. Code Ann. Sec. 13-2406. 41A-3307. Licenses; Permissible Activities. (a) When the Department shall have issued a license to any such international banking corporation it may engage in the business authorized by this Chapter at the office specified in such license for a period not exceeding one year from the date of such license or until such license is surrendered or revoked. No such license shall be transferable or assignable. Every such license shall be, at all times, conspicuously displayed in the place of business specified therein. (b) Such license may be renewed annually upon application to the Department upon forms to be supplied by it for that purpose within thirty days of the expiration of such license. Such license may be renewed by the Department upon its determination, with or without examination, that the international banking corporation is in a safe
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3307
and sati factory condition, has complied with requirements of law with respect to the international bank agency, and that such renewal of the license is proper and has been duly authorized by proper corporate action.
(c) Such license may be revoked by the Department with or without examination upon its determination that the international banking corporation does not meet the criteria established by 6ubsection (b) for renewal of licenses.
(d) In the event any such license shall be revoked by the Department, or the renewal thereof refused by the Department, all the rights and privileges of such international banking corporation to transact the business thus licensed shall forthwith cease, and such license shall be surrendered to the Department within twenty-four hours after the licensee has received written notice of such decision.
(e) An international banking corporation licensed under the term of this Chapter to carryon business in this State shall be authorized to conduct a general banking business in like manner as banks existing under the laws of this State through its international bank agency, except that no such international banking corporation shall, through such agency, make loans, exercise fiduciary powers or receive deposits but may maintain for the account of others credit balances incidental to, or arising out of, the exercise of its lawful power.
Comment: This provision restates Ga. Code Ann. Sec. 13-2407. That Section refers to Section 13-11 04 of the Banking Code on renewal of bank charters for criteria to govern the renewal and revocation of licenses of international bank agencies. Since Section 13-11 04 is not carried forward under this Code, the criteria stated there are fully expressed in this proposed Section.
41 A-3308. Securities. (a) Each international banking corporation hall hold at its office in this State, currency, bonds, notes, debentures, drafts, bills of exchange or other evidence of indebtedne s or other obligations payable in the United States or in United States funds or with the prior approval of the Department, in funds freely convertible into United States funds, in an amount which shall be not less than one hundred and eight percent of the aggregate amount of liabilities of such international banking corporation payable at or through its office in this State or as a result of the operations of the international bank agency, including acceptances but excluding (I) accrued expenses, and (2) amounts due and other liabilities to other offices or branches of, and wholly owned (except for a nominal number of directors' shares) subsidiaries of, such international banking corporation.
(b) For the purpose of this Section, the Department shall value ~arketable securities at principal amount or market value, whichever 1 lower, shall have the right to determine the value of any
V-4

3308
nonmarketable bond, note debenture, draft, bill of exchange, other evidence of indebtedness, or of any other obligation held by or owed to the international banking corporation in this State, and in determining the amount of assets for the purpose of computing the above ratio of assets to liabilities, shall have the power to exclude any particular assets, but may give credit, subject to such rules and regulations as the Department may from time to time promulgate, to deposits and credit balances with unaffiliated banking institutions outside this State if such deposits or credit balances are payable in United States funds or in currencies freely convertible into United State funds; provided that credit given for such deposits and credit balances shall not exceed in aggregate amounts such percentage, but not less than eight percent, as the Department may from time to time prescribe of the aggregate amount of liabilities of such international banking corporation, determined as hereinabove provided.
(c) If by reason of the existence or the potential occurrence of unusual or extraordinary circumstances, the Department deems it necessary or desirable for the maintenance of a sound financial condition, the protection of creditors and the public intere t, and to maintain public confidence in the business of the international bank agency of the international banking corporation, it may reduce the credit to be given as above provided for deposits and credit balances with unaffiliated banking institutions outside this State, and it may require such international banking corporation to deposit, in accordance with such rules and regulations as the Department shall from time to time promulgate the as ets required to be held in thi State pursuant to this Section with such bank or trust company existing under the laws of this State as such international banking corporation may designate and the Department may approve.
Comment: This provision restates Ga. Code Ann. Sec. 13-2408. 41 A-3309. Financial Certifications Restrictions. (a) Before opening an office in this State, and annually thereafter so long a a bank office is maintained in this State, an international banking corporation, licensed pursuant to this Chapter shall certify to the Department the amount of its paid-in capital, surplus, and it undivided profits each expressed in the currency of the country of its incorporation. The dollar equivalent of which amount a determined by the Department, shall be deemed to be the amount of it capital, surplus and undivided profits. (b) Purchases and discounts of bills of exchange, bonds, debentures and other obligations and extensions of credit and acceptance by an international bank agency within thi State hall be subject to the same limitations as to amount in relation to capital, surplus, and undivided profits as are applicable to banks organized under the la'.V of this State; provided, however that with the prior approval of the
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3309
Department, the capital notes and capital debentures of such international banking corporation may be treated as capital in computing such limitations.
Comment: This provision restates Ga. Code Ann. Sec. 13-2409. 4IA-3310. Reports. (a) Every international banking corporation doing business in this State shall, at such times and in such form as the Department shall prescribe, make written reports in the English language to the Department under the oath of one of its officers, managers or agents transacting business in this State, showing the amount of its assets and liabilities and containing such other matters a the Department shall prescribe. If any such international banking corporation shall fail to make any such report as directed by the Department or if any such report shall contain any false statement knowingly made, the same shall be grounds for revocation of the license of the international banking corporation. (b) Section 41A-309 shall not apply to international banking corporations or international bank agencies. Comment: Subsection (a) restates Ga. Code Ann. Sec. 13-2410. Since international bank agencies are authorized to engage only in a limited banking business, they are, under subsection (b), exempted from tlze mandatory reporting requirements imposed by Part / of this Code. 41 A-3311. Dissolution. When an international banking corporation, licensed to maintain an international bank agency in this State, i di solved, or its authority or existence is otherwise terminated or canceled in the jurisdiction of its incorporation, a certificate of the official responsible for records of banking corporations of the jurisdiction of incorporation of such international" banking corporation attesting to the occurrence of any such event or a certified copy of an order or decree of a court of such jurisdiction directing th di solution of such international banking corporation or the termination of it existence or the cancellation of its authority shall be delivered to the Department. The filing of the certificate, order or decree hall have the same effect as the revocation of such international banking corporation's license as hereinabove provided. The Department shall continue as agent of the international banking corporation upon whom process against it may be served in any action based upon any liability or obligation incurred by the international banking corporation within this State prior to the filing of such certificate, order or decree, and it shall promptly cau e a copy of such process to be mailed by registered mail, return receipt reque ted to such international banking corporation at the post office address on file in hi office specified for such purpose. Comment: This provision restates Ga. Code Ann. Sec. 13-2411.
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IV

Sale of Checks Act ,

I>' B u s i n e s s Development """" V

VI

Corporations

International Hanking Corporations and Bank Agencies

TABLE OF CONTENTS PART VI - BUSINESS DEVELOPMENT CORPORAnONS

Chapter 41A-34. Business Development Corporations.

Section 41A-3401. Section 41A-3402. Section 41A-3403. Section 41A-3404. Section 41A-3405. Section 41A-3406. Section 41 A-3407. Section 41A-3408. Section 41A-3409. Section -41 A341 O. Section 41A-3411. Section 41A-3412. Section 41A-3413. Section 41A-3414. Section 41A-3415 Section 41A-3416. Section 41A-3417. Section 41A-3418. Section 41A-3419.

Definitions. Articles. Action by Superior Court; Preconditions to Business. Approval of Department. Certification by Secretary of State. Powers. Right to Deal in Corporation's Stock or Obligations. Membership; Loans by Members. Terms of Membership; Withdrawal. Powers of Shareholders and Members. Amendment of Articles. Board of Directors, Officers and Agents. Earned Surplus; Fiscal Year. Deposit of Funds. Supervision. First Meeting and Organization Duration and Dissolution of Corporation. State Credit Not Pledged. Tax Exemptions; Occupational License.

May, 1975

PART VI. BUSINESS DEVELOPMENT CORPORATIONS.
CHAPTER 41A-34. BUSINESS DEVELOPMENT CORPORATIONS.
41A-3401. Definitions. As used in this Chapter, unless the con text otherwise requires:
(a) 'Corporation' means a Georgia business development corporation created under this Chapter or existing on April 1, 1975, pursuant to the Georgia Business Development Corporation Act of 1972, approved April 3, 1972 (Ga. Laws 1972, p. 798.)
(b) 'Lending institution' means any bank or trust company, building and loan association, savings and loan association, insurance company or related corporation, partnership, foundation, pension funds or other institution engaged primarily in lending or investing funds.
(c) 'Member' means any lending institution authorized to do business in this State which shall undertake to lend money to a corporation created under this Chapter, upon its call, and in accordance with the provisions of this Chapter.
(d) 'Board of directors' means any board of directors of a corporation created under this Chapter.
(e) 'Loan limit' means, for any member, the maximum amount permitted to be outstanding at anyone time on loans made by such member to the corporation, as determined under the provisions of this Chapter.
Comment: This Chapter is designed to carry forward the Georgia Business Development Corporation Act as passed in 1972 without substantive changes. This Section restates definitions contained in Ga. Code Ann. Sec. 84-6402, except that it employs the term 'lending institution' rather than 'financial institution' to avoid confusion with the general (iefinition of the latter term under this Code. See Section 41A-102.
41A-3402. Articles. (a) Five or more persons competent to contract, a majority of whom shall be residents of this State, who may desire to create a business development corporation under the provisions of this Chapter, for the purpose of promoting, developing and advancing the prosperity and economic welfare of the State of Georgia and, to that end, to exercise the powers and privileges hereinafter provided, may be incorporated by presenting articles to any judge of a superior court of this State, as hereinafter provided. The articles shall contain:
(1) the name of the corporation, which shall include the words 'Business Development Corporation of Georgia', and a recitation that the corporation is organized under this Chapter;
(2) the location of its initial registered office, but such corporation may have branch offices in such other places within the State as may be fixed by the board of directors;

May, 1975

VI-l

3402
(3) the purposes for which the corporation is founded, which shall include: to promote, stimulate, develop and advance the busines prosperity and economic welfare of the State of Georgia and its citizens; to encourage and assist through loans investments or other business transactions in the location of the business and industry in this State and to rehabilitate and assist existing business and industry to stimulate and assist in the expansion of all kinds of business activity which will tend to promote the business development and maintain the economic stability of this State to provide maximum opportunities for employment, encourage thrift and improve the standard of living of the citizens of this State; similarly to cooperate and act in conjunction with other organizations, public or private, in the promotion and advancement of industrial, commercial agricultural and recreational developments in this State; and to provide financing for the promotion, development and conduct of all kinds of business activity in this State;
(4) the names and post office addresses of the members of the first board of directors who, unless otherwise provided by the articles or the bylaws, shall hold office for the first year of existence of the corporation or until their successors are elected and have qualified;
(5) any provisions which the incorporators may choose to insert for the regulation of the business and for the conduct of the affairs of the corporation and any provision creating, dividing, limiting and regulating the powers of the corporation the directors shareholders or any class of the shareholders, including, but not limited to, a list of the officers, and provisions governing the issuance of stock certificates to replace lost or destroyed certificates, provided that no provision shall be contained for cumulative voting for directors: and
(6) the amount and number of authorized shares, the par value of each share and the minimum amount of capital with which it shall do business and, if there is more than one class of stock a description of the different classes, the names and post office addres es of the subscribers of stock and the number of shares subscribed by each. The aggregate of the subscription shall be the minimum amount of capital with which it shall do business and, if there is more than one class of stock, a description of the different classes, the names and post office addresses of the subscribers of stock and the number of shares subscribed by each. The aggregate of the subscription shall be the minimum amount of capital with which the corporation shall commence business which shall not be less than S100,000.00. The articles may also contain any provisions consistent with the law of this State for the regulation of the affairs of the corporation.
(b) The articles shall be in writing subscribed by the incorporator and acknowledged by each of them before an officer
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3402
authorized to take acknowledgments. A copy of the articles so subscribed and acknowledged shall be ftled with the Department for approval.
Comment: This provision restates Ga. Code Ann. Sec. 84-6403 with minor linguistic and organizational changes.
41 A-3403. Action by Superior Court; Preconditions to Business. Superior court judges shall not approve the articles until at least fifteen lending institutions authorized to do business in this State have agreed in writing to become members of said corporation; and said written agreement shall be ftled with the clerk of the superior court with the articles and the filing of same shall be a condition precedent to the approval of the articles by the judge of the superior court. Whenever the articles shall have been filed in the office of the clerk of the superior court and approved by the judge of the superior court, and all filing fees and taxes prescribed by law have been paid, the subscribers, their successors and assigns shall constitute a corporation. Said corporation shall not be authorized to commence business until its articles are approved by the Department and certified by the Secretary of State as hereinafter provided. Upon such approval and certification, authorized stock of the corporation may thereafter be issued.
Comment: This provision restates Ga. Code Ann. Sec. 84-6404 with linguistic changes.
41 A-3404. Approval of Department. (a) Upon receipt of an application for approval of articles from a corporation organized pursuant to this Act, the Department shall exercise its discretion in its consideration of the application, but the Department shall not approve the application until it has ascertained to its satisfaction:
(1) that the public need and advantage will be promoted by the establishment of the corporation;
(2) that conditions in the locality in which the corporation will transact business afford reasonable promise of a successful operation;
(3) that the applicants may legally invest in the stock of the corporation and that such investment would not be to the detriment of the applicants;
(4) that the proposed members are in good standing with their respective supervisory authorities; and
(5) that the proposed officers and directors have sufficient experience, ability and standing to afford reasonable promise of a successful operation.
(b) Within ninety days after receipt of an application for approval of the articles, the Department shall issue a certificate either granting or denying permission for the corporation to commence business; provided, that in no instance shall the Department grant such permission until it has ascertained to its satisfaction that the above
VI-3

3404
conditions and circumstances have been met and that the articles are in accordance with this Act.
Comment: This provision restates, with minor linguistic changes, a new provision of the Business Development Corporation Act passed by the General Assembly in 1973. Ga. Laws 1973, p. 536.
41 A-340S. Certification by Secretary of State. Upon receiving the approval of the judge of the superior court and the Department, the incorporators shall file the same together with the fee specified by Section 41 A-3703 to the Secretary of State. The Secretary of State haU then issue a certificate in the form contemplated by Section 22-803 of the Corporate Code.
Comment: This is a new provision. As amended by the General Assembly in 1973, this Act contemplated certification by the Secretary of State but did not specify the procedure for obtaining that certificate. This Section would fill this gap.
41 A-3406. Powers. In furtherance of its purposes and in addition to the powers now or hereafter conferred on business corporations by the laws of this State, the corporation shall, subject to the restrictions and limitations herein contained, have the foUowing powers:
(a) to elect, appoint and employ officers, agents and employees; to make contracts and incur liabilities for any of the purposes of the corporation; provided, that the corporation shall not incur any econdary liability by way of the guaranty or endorsement of the obligations of any person or corporation or in any other manner;
(b) to borrow money from its members, from any lending institution, from any agency established under the Small Business Investment Act of 1958, as amended, or other similar federal or state legislation, for any of the purposes of the corporation; to issue therefor its bonds, debentures, notes or other evidences of indebtedness, whether secured or unsecured, and to secure the same by mortgage, pledge, deed of trust or other lien on its property, franchise, rights and privileges, of every kind and nature or any part thereof or interest therein, without securing shareholder or member approval;
(c) to make loans to any person or corporation, and to establish and regulate the terms and conditions with respect to any such loans and the charges for interest and services connected therewith; provided, however, that the corporation shall not approve any application for a loan unless and until the person applying for said loan shall show that he has applied for the loan through ordinary banking channels and that the loan has been refused by at least two banks or other financial institutions that would be qualified by law to make such a loan, it not being the intention hereof to take from any financial institution any such loans or commitments as may be
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3406
desired by such organizations generally in the ordinary course of their business;
(d) to purchase, receive, hold, lease, or otherwise acquire and to sell, convey, transfer, lease, or otherwise dispose of real and personal property, together with such rights and privileges as may be incidental and appurtenant thereto and the use thereof, including, but not restricted to, any real or personal property acquired by the corporation from time to time in the satisfaction of debts or enforcement of obligations;
(e) to acquire the good will, business rights, real and personal property and other assets, or any part thereof, or interest therein, of any persons or corporations, and to assume undertake, or pay the obligations, debts, and liabilities of any such person or corporation, to acquire improved or unimproved real estate for the purpose of constructing industrial plants or other business establishments thereon or for the purposes of disposing of such real estate to others for the construction of industrial plants or other business establishments; and to acquire, construct or reconstruct, alter, repair, maintain, operate, sell, convey, transfer, lease, or otherwise dispose of industrial plants or business establishments'
(f) to acquire, subscribe for, own, sell, hold, assign transfer, mortgage, pledge or otherwise dispose of the stock, shares, bonds, debentures, notes or other securities and evidences of interest in, or indebtedness of any person or corporation, and, while the owner or holder thereot, to exercise all the rights, powers, and privileges of ownership, including the right to vote thereon;
(g) to mortgage, pledge, or otherwise encumber any property, right or thing of value, acquired pursuant to the powers contained in subsections (d), (e) or (f) as security for the payment of any part of the purchase price therefor;
(h) to cooperate with and avail itself of the facilities of the United States Department of Commerce, the Georgia Department of Community Development, and any other similar state or federal governmental agencies; and to cooperate with and assist, and otherwise encourage organizations in the various communities of this State in the promotion, assistance and development of the business prosperity and economic well-being of such communities or of this State or any political subdivision thereof; and
(i) to do all acts and things necessary or convenient to carry out the powers expressly granted in this Chapter.
Comment: This provision restates Ga. Code Ann. Sec. 84-6405 with minor linguistic changes.
41A-3407. Right to Deal in Corporation's Stock or Obligations. Notwithstanding any rule at common law or any provision of any general or special law or any provision in their respective charters,
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3407
agreements of association, articles or organization or trust indentures:
(a) Any person, including all domestic corporations organized for the purpose of carrying on business. within this State, and further including, without implied limitation, public utility companies and insurance companies, and foreign corporations licensed to do business within this State, and all lending institutions as defined herein, and all trusts are hereby authorized to acquire, purchase, hold, sell, assign, transfer, mortgage, pledge, or otherwise dispose of any bonds, securities, .or other evidences of indebtedness created by or the shares of the corporation, and,. while owners of said shares, to exercise all the rights, powers, and privileges of ownership, including the right to vote thereon, all without the approval of any regulatory authority of the State, except as otherwise provided in this Chapter.
(b) All lending institutions are hereby authorized to become members of the corporation and to make loans to the corporation as provided herein.
(c) Each lending institution which becomes a member of the corporation is hereby authorized to acquire, purchase, hold, sell, assign, transfer, mortgage, pledge, or otherwise dispose of any bonds, securities or other evidences of indebtedness created by, or the shares of the capital stock of the corporation, and, while owners of said stock, to exercise all the rights, powers, and privileges of ownership, including the right to vote thereon, all without the approval of any regulatory authority of the State of Georgia; provided, that the amount of the capital of the corporation which may be acquired by any member pursuant to the authority granted herein shall not exceed five percent of the capital base of such member.
(d) The amount of shares of the corporation which any member is authorized to acquire pursuant to the authority granted herein is in addition to the amount of shares in the corporation which such member may otherwise be authorized to acquire.
Comment: This provision restates Ga. Code Ann. Sec. 84-6406 with minor linguistic changes.
41A-3408. Membership; Loans by Members. (a) Any lending institution may request membership in the corporation by making application to the board of directors on such fonn and in such manner as said board of directors may require; and membership shall become effective upon acceptance of such application by said board.
(b) Each member of the corporation shall make loans to the corporation when called upon by it to do so on such tenns and other ~nditions as shall be approved from time to time by the board of directors, subject to the following conditions:
(I) all loan limits shall be established at the $1,000.00 amount near~st the amount computed in accordance with provisions of this
ctlon; and
VI-6

3408

(2) no loan to the corporation shall be made if immediately thereafter the total amount of the obligations of the corporation would exceed fifty times the amount then paid in on the capital of the corporation.
(c) The total amount outstanding on loans to the corporation made by any member at anyone time, when added to the amount of the investment in the capital of the corporation then held by such member, shall not exceed the lesser of:
(1) twenty percent of the total amount then outstanding on loans to the corporations by all members, including, in said total amount, outstanding amounts validly called for loan but not yet loaned; or
(2) the following limit, to be determined each calendar year of me~bership on the basis of the audited balance sheet of such member at the close of its fiscal year immediately preceding; or, in the case of an insurance company, its last annual statement to the State Insurance Commissioner:
(i) two percent of the statutory capital base of a bank or trust company or $750,000.00, whichever is the lesser amount;
(li) 'one-half of one percent of the total outstanding loans made by building and loan or savings and loan associations;
(iii) two and one-half percent of the capital and unassigned surplus of stock insurance companies, except fIre insurance companies;
(iv) two and one-half percent of the unassigned surplus of mutual insurance companies, except fIre insurance companies;
(v) one-tenth of one percent of the assets of fire insurance companies; and
(vi) such limits as may be approved by the board of directors of the corporation for other lending institutions.
(d) Subject to subparagraph (1) of subsection (c) of this Section, each call made by the corporation shall be prorated among the members of the corporation in substantially the same proportion that the adjusted loan limit of each member bears to the aggregate of the adjusted loan limits of all members. The adjusted loan limit of a member shall be the amount of such member's loan limit, reduced by the balance of outstanding loans made by such member to the corporation and the investment in capital of the corporation held by such member at the time of such call.
(e) All loans to the corporation by members shall be evidenced by bonds, debentures, notes, or other evidences of indebtedness of the corporation, which shall be freely transferable at all times, and which shall bear interest at a rate of interest determined by the board of directors to be the prime rate prevailing at the date of issuance thereof on unsecured commercial loans plus one-quarter of one percent.

May, 1975

Vl-7

3408
Comment: This provisIOn restates Ga. Code Ann. Sec. 84-6407 with minor Linguistic and organizational changes.
41A-3409. Terms of Membership; Withdrawal. (a) Membership in the corporation shall be for the duration of the corporation; provided, that upon written notice given to the corporation two years in advance, a member may withdraw from membership in the corporation at the expiration of such notice.
(b) A member shall not be obligated to make any loans to the corporation pursuant to calls made subsequent to notice of the intended withdrawal of said member.
Comment: This provision restates Ga. Code Ann. Sec. 84-6408. 41 A-341 O. Powers of Shareholders and Members. (a) The shareholders and the members of the corporation shall have the following powers of the corporation: (l) to determine the number of and elect directors as provided in Section 41A-3412; (2) to make, amend, and repeal bylaws' (3) to amend its charter as provided in Section 41 A-34 11; (4) to dissolve the corporation as provided in Section 41A-3417; (5) to do all things nece sary or desirable to secure aid, assistance loans and other financing from any lending institutions, and from any agency established under the Small Business Investment Act of 1958, or any other similar federal laws now or hereafter enacted' and (6) to exercise such other of the powers of the corporation consistent with this Chapter as may be conferred on the shareholders and the members by the bylaws. (b) As to all matters requiring action by the shareholders and the members of the corporation, said shareholders and said members shall vote separately thereon by classes, and, except as otherwise herein provided, such matters shall require the affirmative vote of a majority of the votes to which the shareholders present or represented at the meeting shall be entitled and the affirmative vote of a majority of the votes to which the members present or represented at the meeting shall be entitled. (c) Each shareholder shall have one vote, in person or by proxy, for each share of stock held by him, and each member shall have one vote, in person or by proxy except that any member having a loan limit of more than $1,000.00 shall have one additional vote, in person or by proxy, for each additional $1,000.00 which such member is authorized to have outstanding on loans to the corporation at anyone time, as determined under Section 41A-3407(c). Comment: This provision restates Ga. Code Ann. Sec. 84-6409. 41 A-3411. Amendment of Articles. (a) Except as provided in ub ections (b) and (c) and subject to the approval of the Department, the articles may be amended by the votes of the shareholders and the members of the corporation, voting separately
VI-8

3411
by classes, and such amendments shall require approval by the affirmative vote of two-thirds of the votes to which the members shall be entitled.
(b) 0 amendment shall be adopted which is inconsistent with the general purposes expressed in Section 41A-3402(a)(3) or which authorizes any additional class of stock to be issued or which would tend to impair the ability of the Department to examine and supervise the corporation.
(c) 0 amendment of the articles which increases the obligation of a member to make loans to the corporation, or makes any change in the principal amount, interest rate, maturity date, or in the security or credit position of any outstanding loan of a member to the corporation, or affects a member's right to withdraw from membership as provided herein or affects a member's voting rights as provided herein, shall be made without the consent of each member affected by such amendment.
(d) Within thirty days after any meeting at which an amendment to the articles is approved, it shall be submitted to the Department together with such information as the Department shall require. If the Department finds in its discretion that the proposed amendment is in conformity with the objectives and requirements of this Chapter, it shall issue its certificate approving the amendment. If the amendment is disapproved, the Department shall briefly state its reasons for such action to the corporation. The decision of the Department shall be conclusive except as it may be subject to judicial review as provided in Section 41 A-40 I.
(e) Upon the approval of the Department, articles of amendment signed and sworn to by the president, treasurer, and a majority of the directors, setting forth such amendment and due adoption thereof shall, together with the Department's certificate of approval be submitted to the judge of the superior court who shall examine them, and if he finds that they conform to the requirements of this Chapter, shall so certify and endorse his approval thereon. Thereupon, the original and one certified copy of the amendment shall be filed with the Secretary of State, but no such amendment shall take effect until such articles of amendment shall have been approved by the judge of the superior court.
Comment: This provision generally carries forward Ga. Code Ann. Sec. 84-6410. However, a new requirement of Department approval of amendments is introduced. The original 1972 Act did not contain such a requirement but attempted to specifically bar objectionable amendments. This approach is inconsistent with the policy enunciated that the Department shall have supervision over such corporations to the same extent that it supervises banks. See Ga. Code Ann. Sec. 84-6414. In addition, this Section provides that amendments are effective only when approved by the judge of the superior court.
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3412
41A-3412. Board of Directors, Officers and Agents. The business affairs of the corporation shall be managed and controlled by a board of directors, a presiden t, a vice president, a secretary, a treasurer and such other officers and such agents as the corporation shall authorize by its bylaws. The board of directors shall consist of such number not less than 15 nor more than 21 as shall be determined in the first instance by the incorporators and thereafter annually by the members and the shareholders of the corporation. The board of directors may exercise all the powers of the corporation except such as are conferred by law or by the bylaws of the corporation upon the shareholders or members and shall choose and appoint all the agents and officers of the corporation and fill all vacancies except vacancies in the office of director, which shall be filled as hereinafter provided. The annual meeting shall be held prior to April lor, if no annual meeting shall be held in the year of incorporation, then within ninety days after the approval of the articles at a special meeting as hereinafter provided. At such annual meeting, or at each special meeting held as provided in this Section, the members of the corporation shall elect two-thirds of the board of directors, and the shareholders shall elect the remaining directors. The directors shall hold office until the next annual meeting of the corporation or special meeting held in lieu of the annual meeting after the election and until their successors are elected and qualified, unless sooner removed in accordance with provisions of the bylaws. Any vacancy in the office of a director elected by the members shall be filled by the directors elected by the members, and any vacancy in the office of a director elected by the shareholders shall be filled by the directors elected by the shareholders. Directors and officers shall not be responsible for losses unless the same shall have been occasioned by the willful misconduct of such directors and officers.
Comment: This provision restates Ga. Code Ann. Sec. 84-6411. 41A-3413. Earned Surplus; Fiscal Year. Each year the corporation shall set apart as earned surplus not less than ten percent of its net earnings for all the preceding fiscal year until such surplus shall be equal in value to one-half of the amount paid in on the capital then ou tstanding. Whenever the amount of surplus established herein shall become impaired, it shall be built up again to the required amount in the manner provided for its original accumulation. Net earnings and surplus shall be determined by the board of directors, after providing for such reserves as said directors deem desirable, and the determination of the directors made in good faith shall be conclusive on all persons. Corporations organized under this Chapter shall adopt the calendar year as their fiscal year. Comment: This provision restates Ga. Code Ann. Sees. 84-6412 and 84-6421.

May, 1975

VI-IO

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41A-3414. Deposit of Funds. The corporation shall not deposit any of its funds in any bank or other financial institution unless such institution has been designated as a depository by a vote of a majority of the directors present at an authorized meeting of the board of directors, exclusive of any director who is an officer or director of the depository so designated. The corporation shall not receive money on deposit.
Comment: This provision restates Ga. Code Ann. Sec. 84-6413. 41 A-3415. Supervision. The Department shall exercise the same power and authority over corporations organized under this Code as is now or hereafter exercised over banks and trust companies by the provisions of Parts I and II of this Code, where such law is not in conflict with this Code. Comment: This provision restates a basic policy set forth in Go. Code Ann. Sec. 84-6414, as amended in 1973. Ga. Laws 1973, p. 536. It does not, however, ca"y forward material as to examinations and reports contained in that Code Section as such matters are covered by Sections 41A-305 and 41A-309. 41A-3416. First Meeting and Organization. (a) The fIrst meeting of the corporation shall be called by a notice signed by three or more of the incorporators, stating the time, place, and purpose of the meeting, a copy of which notice shall be mailed or delivered to each incorporator at least fIve days before the day appointed for the meeting. Said fIrst meeting may be held without such notice upon agreement in writing to that effect, signed by all the incorporators. There shall be recorded in the minutes of the meeting a copy of said notice or of such unanimous agreement of the incorporators. (b) At such first meeting, the incorporators shall organize by the choice, by ballot, of a temporary clerk; by the adoption of bylaws; by the election by ballot of directors; and by action upon such other matters within the powers of the corporation as the incorporators may see fIt. The temporary clerk shall be sworn and shall make and attest a record of the proceedings. Four of the incorporators shall be a quorum for the transaction of business. Comment: This provision restates Ga. Code Ann. Sec. 84-6415. 41A-3417. Duration and Dissolution of Corporation. (a) The period of duration of the corporation shall be thirty-fIve years; subject, however, to the right of its shareholders and the members to dissolve the corporation prior to the expiration of said period as provided in subsection (b). (b) The corporation may, upon the affIrmative vote of two-thirds of the votes to which the shareholders shall be entitled, dissolve said corporation. Upon any dissolution of the corporation, none of the corporation's assets shall be distributed to the shareholders until all sums due the members of the corporation as creditors thereof have been paid in full.

MaY,1975

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Comment: This provision restates Ga. Code Ann. Sees. 84-6416 and 84-641 7.
41 A-3418. State Credit Not Pledged. Under no circumstances shall the credit of the State of Georgia be pledged to any corporation organized under this Chapter, nor shall acts of such corporation in any manner constitute or result in the creation of any indebtedness of the State of Georgia or any county or municipal corporation therein.
Comment: This provision restates Ga. Code Ann. Sec. 84-6418. 41 A-3419. Tax Exemptions; Occupational License Tax. (a) Any tax exemptions, tax credits, or tax privileges granted to banks or trust companies, building and loan associations, and other financial institutions by any general laws of this State are granted to corporations organized pursuant to this Chapter. (b) Every corporation organized and engaged in business under the provisions of this Chapter shall pay an annual State occupational license tax of $50.00. Counties and municipalities are authorized, in addition, to levy the occupational license taxes as prescribed: Provided, however, no county or municipality shall levy any such occupational license tax in a greater amount than those prescribed. Comment: This provision restates Ga. Code Ann. Sees. 84-6419 and 84-6420.
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59
>

TABLE OF CONTENTS
PART VII - BUILDING AND LOAN ASSOCIATIONS, SAVINGS AND LOAN ASSOCIATIONS AND SIMILAR ENTITIES.

Chapter 41A-35. Building and Loan Associations and Savings and Loan Associations.

Section 41A-3501. Section 41 A-3502. Section 41 A-3503. Section 41 A-3504. Section 41 A-3505. Section 41 A-3506. Section 41 A-3507. Section 41 A-3508. Section 4IA-3509. Section 41A-3510. Section 41 A-351 1. Section 41A-3512. Section 41 A-3513. Section 41A-3514. Section 41 A-3515. Section 41A-3516. Section 41 A-3517. Section 41 A-3518. Section 41 A-351 9. Section 41 A-3520. Section 41 A-3521. Section 41 A-3522. Section 41 A-3523. Section 41 A-3524. Section 41 A-3525. Section 41 A-3526. Section 41 A-3527. Section 41 A-3528. Section 41 A-3529.

Definition . Member and Voting. Articles. Approval of Department. Approval of the Principal Court. Amendment of Articles. Certificate of Secretary of State. Offices. Rules and Regulations.
omenclature. Lien on Depo its to Secure Loans. Conversion into Savings and Loan Association. Effect of Conversion. Previous Conver ions Ratified. Conversions into Building and Loan A ociation. Effect of Conversion of Savings and Loan Association. Taxation. Securities Exemption.
otaries not Disqualified. Minor' Deposits. Joint Accounts. Deposits of Fiduciaries. Payment on Death of Depositor. Deposits Applied to Funeral Expenses. Investment for Trust Funds and Other Funds. Accounts as Security or In Lieu of Bond. Account Books and Certificates. Insanity, Incompetence, Bankruptcy or Death of Depositor. Requirements to Obtain Deposit Insurance; Public otice Deposits are not Insured.

when

Section 41 A-360 I. Section 41 A-3602. Section 41 A-3603. Section 41 A-3604.

Chapter 41A-36. Entities Similar to Building and Loan Associations.
Persons and Corporations Subject to Chapter. Restrictions on Loans and Investments. Operation under Chapter 41 A-35. Requirements as to Securities; Acceptance of Savings Accounts or Deposits Prohibited.

3501
PART VII. BUILDING AND LOAN ASSOCIATIONS, SAVINGS AND LOAN ASSOCIATIONS A D SIMILAR ENTITIES.
CHAPTER 41A-35. BUILDING AND LOAN ASSOCIATIONS AND SAVINGS AND LOAN ASSOCIATIONS.
41 A-3501. Definitions. As used in this Chapter: (a) 'Deposit' means any arrangement whereby a withdrawable interest is created in a building and loan association or whereby the building and loan association becomes indebted to a person transferring to it money, commercial paper or similar items for the payment of money whether called a 'share', 'account', 'certificate' 'share account', 'savings account' 'deposit', 'savings deposit', 'deposit account'orotherwise. (b) 'Building and Loan Association' means a local mutual association existing under the laws of this State on April I, 1975, or organized under this Chapter without capital stock which: (l) is authorized to receive deposits, but not to hold them subject to check (2) receives the greater portion of its funds from such deposits; and (3) lends the greater portion of its funds on the security of first liens or security titles on homes and on the security of first liens on its own deposits. (c) An association is local within the meaning of this Chapter if the greater portion of its investment in real estate loans is limited to loans on the security of a fir t lien or security title on real estate. Any such association may purchase real estate loans or interests in real estate loans which are made and owned by other associations qualified under the building and loan statutes of their respective states or from any savings and loan association to the extent authorized by the regulations of the Department; provided, that such regulations shall not permit the purchase of loans or interests in loans, of any type or in any amounts (per individual loan or in the aggregate) which are not permitted by law to be purchased by saving and loan associations with principal offices in this State. (d) An association is mutual if all depositors il) such association participate in the income of such association and if all borrowers are privileged to vote at least one vote at any meeting of members, it being unnecessary that any borrower should subscribe to, or purchase any shares or be entitled to participate in any way in the income of such association. Comment: This provision seeks to update the definitions set forth in Ga. Code Ann. Sees. 16-402 through 16-407 without changing t~le substance of existing law. Those provisions are cast in terms of
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3501
members having 'share' interests in the building and loan association. In addition, Section 16-402 of the former Code states that building and loan associations do not receive deposits. This treatment of withdrawable interests as 'shares' rather than deposits is inconsistent with both economic reality and current usage. These inconsistencies are apparent in 1973 legislation restricting the power of building and loan associations to receive deposits except at established, full-time offices. Ga. Laws 1973, p. 653. Accordingly, this Code employs the modem terminology 'deposits' rather than 'shares' in the case of building and loan associations.
For the definition of a savings and loan association see Section 41A-102.
Although the former Title 16 is entitled 'Building and Loan Associations', some of its provisions also refer to savings and loan associations. Accordingly, this Part and Chapter bear titles embracing both types of institutions. In regard to such organizations, this Chapter seeks to remove obsolete material from the statutory law and to effect linguistic and organizational changes designed to assure uniformity with other parts of the Code. It does not seek to make substantive changes in the law regulating such institutions. Part I of this Code would bring the reporting and examination requirements of loan associations in line with those pertaining to banks. Compare Go. Code Ann. Secs. 16-409, 16-410 with Sections 41A-305, 41A-309 of this Code. As with banks under the policies of this Code, Part I would also replace the specific fee schedules of Ga. Code Ann. Sections 16-416 and 16-417 with authority to levy fees by regulation tied to costs of the supervision and examination provided (see Section 41A-212) and change the method of enforcing those fees from direct execution, as provided in Ga. Code Ann. Sec. 16-418 to action through the Attorney General. See Section 41A-213. Moreover, the fees collected would be paid to the Department of Administrative Services with the regulatory financing provided by appropriations rather than directly using the fees to support the regulation. Compare Section 41 A-211 with Ga. Code Ann. Sec. 16-419.
41 A-3502. Members and Voting. All depositors of the building and loan association and all borrowers from it, all persons assuming or obligated upon loans made or held by it, and all persons buying the property securing loans made by such association subject to such loans, shall be members of such association. At all meetings of the members of such association each borrower and each obligor upon a loan, and each owner of property subject to a loan shall be entitled to one vote as such borrower, obligor or owner. Depositors, whether borrowers or not, shall be entitled to vote as otherwise provided by law or the regulations of the Department.
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3502
Comment: This provlslOn carries forward the substance of Ga. Code Ann. Sec. 16-405.1.
41 A-3503. Articles. (a) Five or more persons competent to contract, a majority of whom shall be residents of this State, who may desire to create a building and loan association under provisions of this Chapter hall present articles as herein described to the principal court. The articles shall contain:
(1) the name of the building and loary association; (2) a recitation that it is being organized under this Chapter; (3) the county of its location; (4) the location where its initial registered offices will be located; (5) the period of its duration, which shall be perpetual unless other~se limited; (6) the number of directors constituting the initial board of directors end the name and address of each person who is to serve a a membd~thereof; (7) the name and address of each incorporator and (8) any provision which the incorporators may choose to insert for the regulation of the business and affairs of the association. (b) The articles shall be in writing, subscribed by the incorporators and acknowledged by each of them before an officer authorized to take acknowledgments. A copy of the articles so subscribed and acknowledged shall also be filed with the Department for approval. The proposed building and loan association shall not constitute a corporation or engage in business until the articles are approved by the principal court as provided herein. Comment: This is a new provision which would detail the contents of articles of incorporation for building and loan associations. Cf. Ga. Code Ann. Sec. 22-802. 41 A-3504. Approval of Department. (a) Upon receipt of article, the Department shall exercise its discretion in its consideration thereof, but the Department shall not approve them until it ha ascertained to its satisfaction : (1) that the public need and advantage will be promoted by the establishment of the building and loan association ~ (2) that conditions in the locality in which the corporation will transact business afford reasonable promise of a successful operation: (3) that the proposed officers and directors have sufficient experience, ability and standing to afford reasonable promise of a successful operation. (b) Within ninety days after receipt of the articles the Department shall approve or disapprove the articles in writing. The decision of the Department shall be conclusive except as it may be subject to judicial review under Section 41 A-40 1. Comment: Legislation enacted in 1973 established the requirement of Department approval but did not delineate the criteria to be
VIl-3

3504

used or otherwise establish the procedures to be used. Ga. Laws 1973, pp. 533, 534. This Section would fill these gaps.
4IA-3505. Approval of the Principal Court. (a) The principal court shall not approve the articles u"ntil it has received:
(1) a certificate of the Secretary of State certifying that the proposed name of the building and loan association has been reserved pursuant to Section 41A-602;
(2) the written approval of the Department issued pursuant to
Section 41A-3304. (b) No court in this State hereafter may grant any renewals or
amendments to any existing articles of any such association without the prior written approval of the Department. Any new articles or any renewals of, or amendments to, any existing charters, granted in the future without such prior written apprQval shall be null and void.
Comment: This provision carries forward 1973 legislation with the addition of a requirement of a name reservation certificate. See Ga. Laws 1973, pp. 533,534.
4IA-3506. Amendment of Articles. (a) Subject to the approval of the Department under subsection (b), the articles may be amended by the affirmative vote of two-thirds of the members of the building and loan association entitled to vote thereon.
(b) Within thirty days after any meeting at which an amendment to articles is approved, it shall be submitted to the Department together with such information as the Department shall require. If the Department finds in its discretion that the proposed amendment is in conformity with the objectives and requirements of this Chapter, it shall issue its written approval of the amendment. If the amendment is disapproved, the Department shall briefly state its reasons for such action to the corporation. The decision of the Department shall be conclusive except as it may be subject to judicial review as provided in Section 41 A-40 1.
(c) Upon the approval of the Department, articles of amendment signed and sworn to by the president setting forth such amendment and due adoption thereof, shall, together with the Department's written approval thereof, be submitted to the principal court which shall examine them, and if it finds that they conform to the requirements of this Chapter, shall so certify and endorse its approval thereon.
Comment: This is a new provision setting forth procedures to be used in amending the articles.
41A-3507. Certificate of the Secretary of State. Upon approval by the principal court of articles or amendments thereto, the building and loan association shall submit such articles and approval wi th the fees required by Section 41A-3703 to the Secretary of State who shall then issue to the incorporators a certificate of incorporation or amendment, as the case may be.

May, 1975

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3507

Comment: This is a new provision patterned after Ga. Code Ann. Sec. 22-803(g).
41A-3508. Offices. No building and loan association or savings and loan association or similar corporation existing under the laws of this State or of the United States shall accept deposits in this State except on the premises of an established principal office or branch operated pursuant to the provisions of this Chapter. For the purposes of this Act, the term 'branch office' shall be construed to mean any office of such association or corporation which is intended to be permanently established in a fIxed location and to be operated 'at such location on substantially a full-time basis.
Comment: This provision restates legislation enacted by the General Assembly in 1973. Ga. Laws 1973, p. 653.
41A-3509. Rules and Regulations. Without limitation on the authority conferred by Part I of this Code, the Department may make all such reasonable rules and regulations governing the operation of building and loan associations, provided the same are not in conflict with any of the provisions of this Chapter; such rules and regulations shall provide reasona ble bonds for all officers and employees of building and loan associations handling moneys; reasonable limitations on the type of real estate on which funds may be loaned and the percentage of value to be loaned; and the Department shall have power to make all such other reasonable rules and regulations to protect all funds deposited by the public in the building and loan associations.
Comment: This Section restates Ga. Code Ann. Sec. 16-415 adding a cross-reference to the Department's general regulatory power under Section 41A-302 and making minor linguistic changes to conform with the language of that Section.
41A-3510. Nomenclature. No person or corporation, except a building and loan association or a savings and loan association actually engaged in carrying on a building and loan or savings and loan business as contemplated by this Chapter or the laws of the United States, shall transact business under any name or title which contains the terms 'savings and loan' or 'building and loan' or combination of the words used in said phrases, nor use any sign, or use any letterhead, or billhead, circular, or paper of any kind, or advertise in any manner which indicates that his or its business is the character or kind of business carried on or transacted by a building and loan, or savings and loan association, or which is likely to lead the public to believe that his or its business is that of a building and loan, or savings and loan association.
Comment: This provision carries forward the substance of Ga. Code Ann. Sec. 16-420 with linguistic changes designed to assure uniform usage under this Code. In addition, grandfather clauses no longer operative or obsolete are deleted.

MaY,1975

VII-5

3511
41A-3511. Lien on Deposits to Secure Loans. To secure loans, building and loan associations and savings and loan associations, shall have a lien without further agreement or pledge upon all deposits with it by a borrower, and upon default upon any loan, such associations may, without notice to or consent of the borrower, cancel on its books part or all of the amount outstanding to the. credit of the borrower not exceeding his obligations to the association and apply such amount in payment of the obligations.
Comment: This provision restates Ga. Code Ann. Sec. 16-421. 41A-3512. Conversion into Savings and Loan Associations. Any building and loan association or other financial institution existing under the laws of this State doing a home financing business may convert itself into a savings and loan association in accordance with the provisions of Section 5 of the Home Owners' Loan Act of 1933, 12 U.S.c. Sections 1751-1790, upon a vote of fifty-one percent or more of the votes of the members cast at an annual meeting, or at any special meeting called to consider such action. Comment: This provision restates Ga. Code Ann. Sec. 16-422. 41A-3513. Effect of Conversion. Upon the conversion of any building and loan association into a savings and loan association, the corporate existence of such association shall not terminate, but such savings and loan association shall be deemed to be a continuation of the entity of the building and loan association so converted and all property of the converted building and loan association, including its rights, titles and interests in and to all property of whatsoever kind, whether real, personal or mixed, and choses in action and every right, privilege, interest and asset of any conceivable value, or benefit, then existing or pertaining to it, or which inure to it, shall immediately, by act of law and without any conveyance or transfer and without any further act or deed, remain and be vested in and continue to be the property of such savings and loan association into which the bUilding and loan association has converted itself, and such savings and loan association shall have, hold and enjoy the same in its own right as fully and to the same extent as the same was possessed, held and enjoyed by the converting building and loan association; and such savings and loan association, as of the time of the taking effect of such conversion, shall continue to have and succeed to all of the rights, obligations and relations of the converting building and loan association. All pending actions and other judicial proceedings to which the converting building and loan association is a party shall not be deemed to have abated or to have discontinued by reason of SUch conversion, but may be prosecuted to final judgment, order or decree in the same manner as if such conversion had not been made and such savings and loan association resulting from such conversion may continue such action in its corporate name and any judgment,
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order or decree may be rendered for or against the converting building and loan association theretofore involved in such judicial proceedings.
Comment: This provision restates Ga. Code Ann. Sec. 16-423. 41 A-35 14. Previous Conversions Ratified. Any building and loan association or corporation, which has heretofore converted itself into a federal loan association, under the provisions of the Home Owners' Loan Act of 1933, and has received a charter from the Federal Home Loan Bank Board, shall hereafter be recognized as a savings and loan association and its federal charter shall be given full credence by the courts of this State and to the same extent as if such conversion had taken place under the provisions of this Chapter. Comment: This provision restates the substance of Ga. Code Ann. Sec. 16-424. 41 A-35 15. Conversion into Building and Loan Association. Any savings and loan association may convert itself into a building and loan association under this Chapter upon a vote of fifty-one percent or more of the votes of members of such savings and loan association cast at any annual meeting, or at any special meeting called to consider such action. Comment: This provision restates Ga. Code Ann. Sec. 16-425. 41 A-35 16. Effect of Conversion of Savings and Loan A sociation. All of the provisions regarding property and other rights contained in Section 41 A-3 513 shall apply, in reverse order, to the conversion of a savings and loan association into a building and loan association operating under this Chapter, so that the building and loan association shall be a continuation of the corporate entity of the converting savings and loan association and continue to have all of its property and rights. Comment: This pro vision restates Ga. Code Ann. Sec. 16-426. 41 A-35 17. Taxation. 0 building and loan association or savings and loan association with a home office in this State shall be assessed or subjected to taxation by the State, any county, municipality or other political subdivision taxing authority, on its franchise, capital, reserves, surplus, loans, shares, or accounts; except that any real property and any tangible personal property not hereinbefore specifically mentioned, which may be owned by it, shall be subject to taxation to the same extent, according to its value, as all other real and tangible personal property is taxed; provided, that nothing herein shall prevent an Act relating to the taxation of national banks and banking associations, federal savings and loan associations and building and loan associations in the same manner and to the same extent as banks organized and chartered under the laws of Georgia, approved April 17, 1973 (Ga. Laws 1973, p. 924), from becoming effective in accordance with its terms.
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Comment: This provIsIOn restates Ga. Code Ann. Sec. 16-427, with a proviso to protect 1973 legislation from implied repeal.
41A-3S18. Securities Exemption. The opening and transfer of deposits in a building and loan association or savings and loan association are hereby exempted from all provisions of law of this State which provide for the supervision and the regulation of the sale of securities, even if the word 'shares' or similar terminology is used in connection therewith, and the sale of any such deposits shall be legal without any action or approval whatsoever on the part of any official authorized to license, regulate, and supervise the sale of
securities. Comment: This provision restates Ga. Code Ann. Sec. 16-428
with appropriate linguistic changes. 41A-3S19. Notaries not Disqualified. No notary public or other
public officer shall be disqualified from taking the acknowledgement of or witnessing any instrument, in writing, in which a building and loan association or a savings and loan association is interested, by reason of his holding an office in or being a member of, or being pecuniarily interested in or employed by such associations so interested, and any such acknowledgements, or attestations heretofore taken are hereby validated.
Comment: This provision restates Ga. Code Ann. Sec. 16-429. 41A-3S20. Minor's Deposits. A minor shall be allowed to have deposits in a building and loan association or savings and loan association in his own name, and the deposits made by the minor shall not be subject to the control of his parent, guardian, or trustee. A receipt or acquittance signed by such a minor depositor shall be a valid and sufficient release and discharge of such association for any payment of any deposit to such minor. Comment: This provision restates Ga. Code Ann. Sec. 16-430. 41A-3S21. Joint Accounts. (a) Unless otherwise provided in the deposit contract, whenever a deposit has been made, or shall hereafter be made, in any building and loan 'ociation or savings and loan association in the names of two or mo .~ persons, payable to any one or more of them (or payable to anyone or more of them or the survivor of any of them), such deposit or any part thereof, including part or all of any interest or dividend thereon, may be paid to any one or more of said persons; and the receipt or acquittance of the person or persons so paid shall be valid and sufficient release and discharge to the association for any payment so made. For the purposes of this Section, the term 'deposit' shall include a certificate of deposit, a savings account, a share account, a savings certificate, and similar deposits and accounts. The foregoing right to pay either Party shall not be terminated by the death or incompetency of any other party.

"'Y,1975

VII-8

3521

(b) This Section shall not be construed as affecting ownership rights to such deposit as between such persons, but shall be construed as permissive and protective to the association paying such deposit. Ownersrup rights as between such persons shall be determined pursuant to other principles of law, including the deposit contract where same is pertinent.
Comment: This provision would change the statutory approach to joint accounts in building and loan and savings and loan associations. Section 16-431 of the former Code creates a statutory Joint tenancy with right of survivorship' in regard to such accounts. This approach is in contrast with the Banking Code which contains in Section 13-2039 a 'bank shield' provision allowing a bank to pay either depositor, but does not speak to the ultimate ownership of the funds. The 'bank shield' approach is carried forward in Section 41A-1603 of this Code, and is introduced here for joint accounts in building and loan and savings and loan associations. This change produces uniformity in regard to these accounts, and leaves the question of ultimate ownership to the contract of the parties where it is dealt with most appropriately.
41A-3522. Deposits of Fiduciaries. A building and loan association or a savings and loan association may receive deposits in the name of an administrator, executor, guardian, trustee or other fiduciary, in trust, for a named or an unnamed beneficiary or beneficiaries. Such deposit and dividends or interest thereon, or other rights relating thereto, may be paid or delivered, in whole or in part, to such fiduciary or may be exercised by such fiduciary without regard to any notice to the contrary so long as such fiduciary is living and until the association has received notice of the death of such fiduciary. The payment or delivery to any such fiduciary or a receipt or acquittance signed by any such fiduciary, to whom any such payment, or any such delivery of rights, is made, shall be a valid and sufficient release and discharge of such association for the payment or delivery so made.
Comment: This provision restates Ga. Code Ann. Sec. 16-432, with appropriate linguistic changes. In addition, it is made express that an association is not affected by the death of a fiduciary until it has notice of that death.
41A-3523. Payment on Death of Depositor. (a) Upon the death of a depositor of a building and loan association or a savings and loan association, such association may pay the amount of his deposit or any portion thereof to an executor, administrator or other fiduciary duly appointed and qualified pursuant to the last will and testament of the depositor or by any court of competent jurisdiction in tills State, or any other state.
(b) In addition to the foregoing, if such depositor dies intestate, such association may, at any time thereafter, pay up to $2,500.00 of

MaY,1975

VII-9

3523
the deposit to the following persons: (1) to the surviving spouse; (2) if no surviving spouse, to the children pro rata; (3) if no children or surviving spouse, to the father and mother
pro rata (4) if none of the above, then to the brothers and sisters of he
decedent pro rata. (c) The payment to the surviving spouse or certain other family
members shall operate as a complete acquittal and discharge to the building and loan association or savings and loan association of liability from any suit, claim or demand of whatever nature by any heir, distributee, creditor of the decedent, or any other person. Such payment is hereby authorized to be made -as provided herein, without the necessity of administration of the estate of the decedent or without the necessity of obtaining an order that no administration is necessary.
(d) In any case in which a deceased depositor has more than $2,500.00 on deposit in a building and loan association or savings and loan association, such association shall be authorized to pay any amount up to $2,500.00 to any of the persons authorized by this Section to receive said deposit. The payment shall only act as a full and final acquittance of liability up to the amount paid by the association and shall not act as a full and final acquittance to the association of all liability.
Comment: This provision restates Ga. Code Ann. Sec. 16-433, except that the amount that may be paid out on intestacy is raised to
2,500 as with the parallel provision of the banking law, see Section 41A-1510, and appropriate linguistic changes are made.

May, 1975

VII-9a

3524

41A-3524. Deposits Applied to Funeral Expenses. If no application for the deposit is made by any person named in Section 41A-3523 within ninety days from the death of a depositor, a building and loan association or a savings and loan association shall be authorized to apply not more than $1,000.00 of the deposit of such deceased depositor in payment of the funeral expenses of such deceased depositor upon receipt of an itemized statement of such expenses and the affidavit of the undertaker conducting the funeral that said statement was true and correct and had not been paid.
Commen"t: This provision restates Ga. Code Ann. Sec. 16-434 with appropriate linguistic changes.
41A-3S2S. Investment for Trust Funds and Other Funds. Administrators; executors, guardians, trustees, and other fiduciaries of every kind and nature, insurance companies, charitable, educational, eleemosynary and public corporations and organizations, and municipalities and other public corporations and bodies, and public officials are authorized to invest funds held by them, without any order of any court, in deposits in building and loan associations or savings and loan associations, which are insured by the Federal Savings and Loan Insurance Corporation, and, to the extent of such insurance, such investments shall be deemed and held to be legal investments for such funds.
Comment: This provision restates Ga. Code Ann. Sec. 16-437 with appropriate linguistic changes.
41A-3S26. Accounts as Security or in Lieu of Bond. Whenever, under the laws of this State or otherwise, a deposit of securities is required, for any purpose, the deposits made legal investments by the foregoing Section shall be acceptable as such security, and whenever, under the law of this State, or otherwise, a bond is required with security, such bond may be furnished and the deposits made legal investments by the foregoing Section in the amount of such bond shall be acceptable to secure said bond without other security. The provisions of this Section and the foregoing Section are supplemental to any and all other laws relating to and declaring what shall be legal investments for the persons, corporations, organizations and officials referred to in these Sections and the laws relating to the deposit of securities and the making and filing of bonds for any purpose.
Comment: This provision restates Ga. Code Ann. Sec. 16-438 with appropriate linguistic changes.
41A-3S27. Account Books and Certificates. The original record of deposits in building and loan associations and savings and loan associations is the record on the books of the association, and the depositor shall be entitled to a savings account book or certificate, which is a duplicate of such record. Those dealing with such savings account books and certificates shall be bound by the record on the books of the association. In the event of the loss or destruction of

MaY,1975

VII-l 0

3527
any such savings account book or certificate, any association may, upon receipt of an affidavit of such loss or destruction, issue a duplicate thereof and remain liable only to the holder or holders as shown on the records of the association. The only wayan effective transfer or pledge may be accomplished so as to affect the rights of the association is by transfer on the books of the association in the case of transfer or written notice of a pledge entered on the books of the association and acknowledged in writing in the case of a pledge, and the association shall be protected in paying any part of a deposit to the holder thereof as shown on the books of the association unless it has received written notice of a pledge or transfer thereof.
Comment: This provision restates Ga. Code Ann. Sec. 16-439 with addition of the language 'so as to affect the rights of the association' in the last sentence of the provision relating to pledges and transfers. This language is added to make it clear that transfers not evidenced on the books may be effective as against the parties thereto and their creditors other than the association. Other linguistic changes are also made.
41A-3528. Insanity, Incompetency, Bankruptcy, or Death of Depositor. A building and loan association or a savings and loan association paying deposits to an insane or otherwise incompetent depositor or bankrupt depositor or acting upon the release and discharge or authorization of such depositor or acting upon the power of attorney of an insane, deceased or bankrupt depositor in good faith and without actual knowledge of the insanity or other incompetency, bankruptcy, or death of such depositor shall be protected in so doing and may lawfully charge such payment to the depositor's account.
Comment: This provision restates Ga. Code Ann. Sec. 16-440 with appropriate linguistic changes.
41 A-3529. Requirements to Obtain Deposit Insurance; Public Notice When Deposits Are Not Insured. (a) Every building and loan association shall be required to obtain deposit insurance satisfactory to the Department before it may conduct business and accept deposits, except that:
(1) building and loan associations in existence and accepting deposits on April 1, 1975; and
(2) building and loan associations which have had their deposit insurance coverage withdrawn or canceled' may, in the discretion of the Department, continue to accept deposits; provided that within three years of April 1, 1975, in the case of associations excepted under subsection (a)(1) and within six months after withdrawal or cancellation of insurance in the case of associations excepted in subsection (a)(2), such associations shall obtain deposit insurance written by an insurance company au thor-

May, 1975

VII-II

3529
ized to transact business in this State and acceptable to the Department or by the Federal Savings and Loan Insurance Corporation. The Department may, in its discretion, for cause shown, extend the time limitation in which deposit insurance must be obtained.
(b) Deposit insurance required to be obtained in subsection (a) need not be in excess of amounts insured by the Federal Savings and Loan Insurance Corporation at the time the insurance is obtained, but wherever the insurance coverage is, in the opinion of the Department, less than amounts insured by the Federal Savings and Loan Insurance Corporation, the building and loan association shall be required to post a sign in boldface print, in letters at least four inches high, at a conspicuous place near the entrance of such association, which states 'Deposits Not Insured' or 'Deposits Insured Up To (insert amount of deposit insurance)' Such wording shall also follow the name of the building and loan association wherever it is written or printed and shall be posted in writing which is easily legible in letters at least one inch high at each window or desk receiving deposits.
Comment: In accord with the policies of this Code, this Section introduces the mandatory requirement of deposit insurance. Existing building and loan associations would be allowed at least three years to satisfy this requirement.

May, 1975

VII-I 2

3601

CHAPTER 41A-36. ENTITIES SIMILAR TO BUILDING AND LOAN ASSOCIATIONS.

41A-3601. Persons and Corporations Subject to Chapter. This Chapter shall apply to any corporation or person doing business as a building association, savings and loan association, building and loan association or the building society plan - where such corporation or person is neither a building and loan association nor a savings and loan association.
Comment: This provision restates subsection (a) of Ga. Code Ann. Sec. 16-501. Subsection (b) of this provision relating to corporations organized under Chapter 16-2 of the former Code is omitted as obsolete.
41A-3602. Restriction on Loans and Investments. The entities subject to this Chapter shall make no loans or other investments not allowed to building and loan associations under Chapter 41A-35 and the regulations of the Department issued pursuant thereto.
Comment: This provision restates Ga. Code Ann Sec. 16-502. 41A-3603. Operation under Chapter 41A-35. All such corporations subject to this Chapter that have no capital stock but are local and mutual associations as defined in Section 41A-3501 shall, upon written application to the Department and upon compliance with law and regulations of the Department, be classified and operate as building and loan associations under Chapter 41A-35. Comment: This Section restates Ga. Code Ann. Sec. 16-503. 41A-3604. Requirements as to Securities; Acceptance of Savings Accounts or Deposits Prohibited. All such corporations subject to this Chapter and which have not become building and loan associations shall raise their funds and their capital solely by issue of securities after complying with the Georgia Securities Act and all appropriate federal laws and: (a) Shall register an issue of securities with the Commissioner of Securities only once within any period of 24 consecutive months. (b) Shall not sell any such security except during the six-month period immediately following registration of such security with the Commissioner of Securities. (c) Shall not follow the general practice of redeeming ou tstanding securities bu t shall redeem before the maturity da te thereof a maximum of five percent of the aggregate amount outstanding of any issue of a creditor-type security, and shall redeem a maximum during any calendar year of two percent of the total aggregate value of the securities outstanding of any noncreditor-type security issue (valued according to the amounts paid to such corporation for such noncreditor securities). (d) Shall not advertise in or through any newspaper, radjo, television, letters, circulars, billheads or in any manner or through

May, 1975

VII-I 3

3604
any medium that it will redeem any type security at any time other than at the maturity of a creditor-type security.
(e) Shall not accept 'savings' or 'savings accounts' or 'deposits' as such from the public, or from any substantial portion thereof, and shall not use the terms 'savings,' 'savings accounts,' 'deposits,' or any equivalent thereof in any advertisement as above-described in subparagraph (d) indicating reference to securities issued or to be issued by the corporation.
(0 For the purpose of this Section, the terms 'redemption' and 'redeem' shall have reference to any redemption, purchase, exchange, distribution, or any other device or transaction whereby the holder of any such security shall receive cash or its equivalent for his interest in such security. A 'creditor-type security' shall mean any promissory note or other type security as defined in said Georgia Securities Act which raises the relationship of debtor and creditor between the corporation issuing same and the person to whom same is issued. A 'noncreditor-type security' shall have reference to any security as defined in said Georgia Securities Act which is not a 'creditor-type' security.
Comment: This provision restates Ga. Code Ann. Sec. 16-504.
VII-14

[
I-
CIll
><

;=> ~

GENERAL PROVISlONS (please note: ADMINISTRATIVE AND TRANSITION
PROVISIONS and CRIMINAL AND
RELATED PROVISIONS are fJ.1ed as headings hereunder.)

Accounting procedures to be followed by financial institutions

SECTION 303

Actions, applications, or requests requiring Department approval

Applicant's right to withdraw

317

Preservation of jurisdiction by Department after time limit lapses

317

Actions at law Actions at law generally Actions authorized in term or in vaca tion, whether judge present in county or absen t from it Actions by Department to collect examination fees Actions by Department to enforce its orders Actions concerning nonperformance of duty by Department officials Admissibility as evidence of copies and certificates of books and records on file with Department Admissibility as evidence of copies of records permitted to be kept by financial institutions in lieu of originals Costs of suits by or against Department: who pays Department obtains subpoena from principal court to order appearance, testimony, or production of books and papers by persons in connection with examinations and investigations Department proceeds through Attorney General to recover from financial institutions penalties not waived for failure to prepare or publish reports or to furnish proofs of publication Disclosures of information by Department personnel during actions at law Evidential value of records and reports of Department examinations and investigations Evidentiary effect of Department seal Forfeiture proceedings Injunction suits by Department to enforce Code or regulations Judicial review of Department decision approving or disapproving voluntary dissolutions after commencement of business Judicial review of Department deision ae.Proving or disapproving voluntary dissolutions prior to commencement of business, Judicial review of Department decision suspending and removing directors, officers, or employees of financial institutions Judicial review of Department actions or refusals to act, generally Actions at law in receivermips
Actions and suits by and against Department as receiver, generally Actions against Department for recovery of specific property Actions by depositors against officers or employees of financial
institutions for failure to have depositor's name on books of fmancial institution, etc Actions concerning secured claims and liens Adjudication of rejected claims All suits against Department brought in superior court Confrrmation of final account discharges Department from further civil liabilit y Creditors, shareholders, et ai, may petition superior court to order
Department to me account Department has vacated and set aside judgments, executions, attachments,
sequestrations, payments, security interests, assignments, transfers,

.1 05 213 .402 .407
.406
304 .408
307
309 311
.405 209 .403 .404
503
502
312 .401
724 802
804 813 810 707
811
809

General Provisions-Continued

SECTIQ

conveyances, or encumbrances that creditors could have avoided or that

give one creditor preference

708

Department petitions superior court for appointment of receiver

701

Superior court appoints Department or Federal body receiver

702

Depositors, shareholders, et aI, may institute receivership proceedings

702

Disputed claims

801

Exceptions to account

809

Adjudication of exceptions

810

Injunction suits to restrain Department from continuing as receiver

706

Staying of actions during receiverships

802

Subrogation of insurer

814

Superior court may grant creditors other than depositors time extension

for pre enting and proving claims

803,

805

Superior court may grant depositors time extension for proving claims at

variance with records of financial institution

803,

804

Superior court may order transfer to Department of assets of the fmancial

institution in custody or possession of other persons or corporations;

remedies of aggrieved per ons

714

Administrative and transition provisions of Code

Effective date of Code

3701

Fees paid to Secretary of State under Code: schedule ..........................3703

Power of Department to promulgate regulations prior to effective date of

Code

3702

Validity of article, charters, regulation, fees, and appointments of

officers in existence prior to April I, 1975

3702

Validity of transactions during transition

3702

Advertisements: publication of

108

Advertising

Code does not limit law as to unfair competition or unfair trade practices

605

Prohibited advertising

604

Protection of trade names and trademarks

605

"Affiliate" defmed

102

Affiliates

Examination and investigation of affiliates by Department

314

Agents of financial institutions

Appearance, testimony, or production of book and records by, may be compelled

during examinations and investigations by Department

307

Extension of money, hares, or property to Department personnel in violation

of Section 207 prohibited

207

"Agreement for the payment of money" defined

.102

Applications, actions, or requests requiring Departmen t approval

Applicant's right to withdraw

317

Pre ervation of jurisdiction by Department after time limit lap e ..................317

"Appropriated retained earnings" defined

102

Articles Articles and charters in effect prior to April 1, 1975 not impaired by Code Articles of dissolution after commencement of busines

3702 505

2

General Provisions-Continued
Articles of dissolution prior to commencement of bu ine s Article of incorporation: forfeiture

SECTION
502 .403

"Articles" defmed

.I 02

"Assets" defmed .......................................................102

Assistants of the Department. See Department: personnel

Attorney General: procedures

.

Departmen't proceeds through, to collect examination fees

213

Department proceeds through, to recover penalties not waived against

fmancial institutions for failure to prepare or publish reports or to

furnish proofs of publication

309

Procedures in enforcement of Department orders

.402

Procedures in forfeiture proceedings

.403

"Attorney" defined

102

Attorneys of fmancial institutions

Appearance, testimony, or production of books and papers by, may be compelled

during examinations and investigations by Department

307

Disclosures of information to attorneys by Department personnel

311

Exten ion of money, shares, or property to Department personnel prohibited

207

"Bank" defmed

.I 02

Bank holding companies

Pre-Code laws relating to remain intact

104

Books and records of Department

Admissibmty as evidence of copies and certificates

.406

Evidential value of results of examinations and investigations

.405

Books and records of financial institutions

Accounting procedures to be followed

303

Admissibility of copies a evidence in action at law

304

Order of Department to change bookkeeping procedures

.402

Production of, during examinations and investigations by Department

307

Retention of records

304

Bond

OfCommis ioner, Deputy Commi sioner, and exarrti.ners ........................206

Of receiver's tru tee

815

Branch banking

Pre-Code laws relating to remain intact

104

"Building and loan association" defined

102

"Capital debt" defined

102

Capital stock

Order of Department to restore deficiency in

.402

"Capital stock" defined

"Certificate of reliance" defined

102

Certifica tes
Of disSOlution issued by Secretary of State ....................................506 Of possession and supplements. See Receiverships

3

General Provisions-Continued

SECTION

Code

Administrative and transition provisions. See Administrative and transition provisions

Objectives: standards for construction and regulation

104

Part, Chapter, and Section captions are parts of

106

Power of General Assembly to amend, repeal, or modify

.110

Short title of

101

"Commercial bank" defmed

.1 02

"Commissioner" defined

.I 02

Commissioner of the Department. See Department: personnel

Common law

Applicability of principles of, to financial institutions

.1 09

"Corporation" dermed

102

Court of Appeals

Appeals from final orders and judgments of superior court reviewing Department

actions may be taken to

.401

Courts generally

Actions authorized in term or in vacation, whether judge in county or absent

from it

.105

"Credit union" dermed

102

Criminal and related provisions

Criminal Code

9902

Applicability of certain Chapters Abuse of Government Office

'.'

9902

9902

Arson

9902

Burglary ..........................................................9902

Deceptive practices

9902

Perjury and other Falsifications Robbery

9902 9902

Theft

9902

General applicability of Criminal Code

9902

Criminal prosecutions: Department procedures Felonies of directors, officers, agents, and employees of fmancial institutions

9901 9905

Advertising capital stock in excess of that actually paid-in

9905

Allowing deposits when fmancial institution insolvent

9905

Making false en tries in books, etc; omission of entries Making false statements of condition; omission of statements of condition

9905 9905

Miscellaneous misdemeanors

Slander and libel of financial institutions

9908

Unlawfully engaging in business of: Banks

9908, 1102

Building and loan associations

9908. 3505

Business development corporations

9908, 3404

Credit unions

9908, 3004

International bank agencies

9908, 3304

4

General Provisions-Continued

SECTION

Selling Checks

9908,

3202

Trust companies

9908,

1103

Unlawfully using bank or trust nomenclature

9908,

1104

Unlawfully using building and loan or savings and loan nomenclature

9908,

3510

Misdemeanors of Department personnel

Giving notice of examinations

9903

Receiving gifts and loans; owning shares or interest; engaging in banking business 9904,

207

Misdemeanors of directors, officers, agents, and employees of financial institutions

Allowing shareholders to pay less than full consideration for shares

9906

Concealing loans

9906

Concurring in improper dividends or reductions or distributions of capital stock

9906

Extending money, share, or property as gifts or loans to Department personnel

9907,

207

Falsely advertising deposits as insured

9906

Improperly certifying checks, drafts, or orders ..............................9906

Issuing or concurring in issuing unauthorized increases in capital stock;

selling such unauthorized shares

9906

Making conveyances, assignments, tran fers, mortgages, or liens to defraud

creditors when financial institution is insolvent

9906

Using funds of financial institutions to purchase its own stock

9906

Violating accounting procedures

9907,

303

Violating borrowing limits of banks

9907,

1312

Violating loan limits of banks

9907,

1306

Violating loan limits of credit unions

9907,

3109

Violating limitations on financing to directors and officers of banks

or trust companies

9907,

2212

Violating provisions relating to trust company operations as a fiduciary

9907,

1402

Violations by directors, officers, and employees of banks or trust companies

concerning prohibitions on commissions on loans and investments, purchases

of financial institution's obligations at discount, and improper sale of

financial institution's assets

9907,

2213

Protection on bad checks

9909

Punishment for misdemeanor violations

9910

Definitions

"Aff"iliate"

102

"Agreement for the payment of money"

.102

::Ap~ropria ted retained earnings"

.1 02

::~~::" .......m

5

General Provisions-Continued

SECTION

"Building and loan association"

102

"Capital debt"

.1 02

"Capital stock"

.1 02

"Certificate of reliance"

'

102

"Commercial bank"

102

"Commissioner"

.1 02

"Corporation"

.1 02

"Credit union"

.1 02

"Department"

.1 02

"Depositor"

,

.1 02

"Evidence of indebtedness"

.1 02

"Federal credit union"

102

"Fiduciary"

.1 02

"Financial institution"

.1 02

"Financial services"

313

"Insolvency"

.1 02

"National bank"

.1 02

"Net assets"

102

"Paid-in capital"

.1 02

"Person"

.1 02

"Pooled assets"

901

"Preference"

708

"Principal court"

.1 02

"Public body"

.1 02

"Public sale"

102

"Retained earnings"

102

"Savings and loan association" ,

.1 02

"Savings bank"

.1 02

"Shareholder"

102

"Shares"

,

102

"State Merit System"

205

"Statutory capital base"

.1 02

"Subject to check"

102

"Subsidiary"

.1 02

"Third party payment service"

102

"Trea sury shares"

.1 02

"Trust assets"

901

"Trust company"

.1 02

Department

Actions at law by or against generally. See Actions at law

Appropriations

Expenses paid out of

.211

Limitations of, determine hiring of Department personnel

205

Books and records

Admissibility as evidence of copies and certificates

406

Evidential value of results of examinations and investigations

.405

Department of Law to advise

.409

Discretion of

316

General standards in the exercise of discretion

.1 04

Examinations and investigations

Disclosures of information developed pursuant to examinations and investigations

311

Disclosures of results of examinations and investigations on request

306

Examinations and investigations generally

305

Annual examinations

305

6

General Provisions-Continued
Federal examinations in Lieu of Department examinations Special examinations and investigations Examina tions and investigations on request Examinations and investigations of affiliates of financial institutions Examinations and investigations of persons or corporations performing financial service for financial institutions Fees of examinations and investigations Enforcement of payment of fees Rate Charged Financial institutions continue subject to Department examinations and investigations during voluntary dissolution after commencement of business General standards of examinations and investigations Investigation prior to approval of plan of voluntary dissolution after commencement of business Method of examina tion and investigation Order of Department to compel fmancial institutions to submit to examination or investigation; enforcement Power of examiners and other Department officials to compel appearance, testimony, or production of books and papers by persons; subpoenas Reports of examinations Evidential value of Form and criteria Period of retention by Department Special examiners: duties and powers Expenses Costs of suits taxed against Department paid out of expenses Expenses paid out of appropriations Premium on bonds of Department officials paid as are other expenses Travel expenses of personnel paid from appropriations Fees Annual examination and supervision fees: level of Collection and depositin~ of fees with Department of Administrative Services Enforcement of payment of fees Fees to defray costs of providing copies or certifications of records, or of processing papers; level of Special investigation fees: level of Hearings
Hearing requirements pursuant to promulgation of rules and regulations by Department
Hearings held pursuant to request for reinstatement by directors, officers, or employees of financial institutions
Hearings held in connection with discretion of Department Orders
Cease and desist orders: general standards of Enforcement of orders Order to cease and desist from unsafe and unauthorized practices Order to change bookkeeping procedures Order to restore deficiency in capital stock Order to restrict business and limit or postpone payments of deposits in
connection with financial emergencies Order to submit to examinations or investigations Personnel As istants
Appointment of

SECTION
305 305 306 314
313
213 212
504 104
503 307
.402
307
.405 308 310 307
408 211 206 211
212 211 213
212 212
302
312 316
104 .402 .402 .402 .402
501 .402
205

7

General Provisions-Continued
Delegation of authority to Discharge of
Discharge for unlawful disclosure of information
Disclosures of information by Disclosures of results of examinations and investigation upon request
Discretion of Department Duties and salary of Engaging in business of a financial institution prohibited Examinations and investigations by. See Department: examinations and
investigations Ownership interests in financial institutions prohibited Receipt of loans, gifts, or credit restricted; permissible borrowings
by State Merit System rules and regulation as they apply to Commissioner Bond of Delegation of authority by Disclosures of information by
Disclosures of results of examinations and investigations on request Discretion of Department Engaging in business of financial institution prohibited Examinations and investigations by. See Department: examinations and
investigations General scope of authority Liability for nonperformance of duty Oath of Office and equipment pf Ownership interests in financial institutions prohibited Qualifications Receipt of loans, gifts, or credit restricted; permissible borrowings by Removal or suspension; grounds for
Removal for unlawful disclosure of information
Term of office Vacancy in the office of Deputy Commissioner Acting as Commissioner: bond and salary Appointment of Bond of Delegation of authority to Discharge of
Discharge for unlawful disclosure of information
Disclosures of information by Disclosures of results of examinations and investigations on request
Discretion of Department Duties and salary of Engaging in business of financial institution prohibited Examinations and investigations by. See Department: examinations and
investigations Liability for nonperformance of duty Oath of Ownership interest in financial institutions prohibited

SECTION
210 205 311, 9904 311 306 316 205 207
207
207 205
206 210 311 306 316 207
201 .407 206 208 207 202 207 203 311, 9904 201 204
204 205 206 210 205 311, 9904 311 306 316 205 207
.407 206 207

8

General Provisions-Continued
Receipt of loans, gifts, or credit restricted; permissible borrowings by State Merit System rules and regulations as they apply to Employees Delegation of authority to Discharge of, for unlawful disclosure of information
Disclosures of information by Disclosures or results of examinations and investigations on request
Discretion of Department Engaging in business of a fmancial institution prohibited Ownership interest in fmancial institutions prohibited Receipt of loans, gifts, or credit restricted; permissible borrowings by Examiners Appointment of Bond of Delegation of authority to Discharge of
Discharge for unlawful disclosure of information
Disclosures of information by Disclosures of results of examinations and investigations on request
Discretion of Department Duties and salary of Engaging in business of a fmancial institution prohibited Examinations and investigatIons by. See Department examinations and
investigations Liability for nonperformance of duty Oath of Ownership interest in financial institutions prohibited Receipt of loans, gifts, or credit restricted; permissible borrowings by State Merit System rules and regulations as they apply to Special examiners: appointment, duties, and powers Preservation of jurisdiction Reports Reports made by Department Annual reports Reports of examinations and investigations: form and criteria
Evidential value of Period of retention by Department Summary of condition of fmancial institutions Reports made by fmancial institutions to Department Penalty for failure to prepare or publish reports or to furnish proofs of publication Period of retention by Department Proof of publication Publication of abstract summaries Reports during voluntary liquidations after commencement of business Types, number, and forms of reports Rules and regulations General rule-making and regulatory powers Delegation of rule-making and regulatory powers to Department by Code General scope of power General standards for rules and regulations Injunction suits by Department to enforce regulations

SECTION
207 205
210 311, 9904 .311 306 316 207 207 207
205 206 210 205 311, 9904 311 306 316 205 207
.407 206 207 207 205 307 317
315 308 405 310 311
309 310 309 309 504 309
104 302 104 .404

9

General Provisions-Continued
Power of Department to amend, modify, or repeal its rules and regulations Power of Department to make appropriate distinctions among types of
financial institutions in the exercise of its rule-making and regulatory power Power of Department to promulgate proposed regulations prior to April I, 1975 Rules and regulations promulgated in accordance with Georgia Administrative:~rocedure Act, including hearing requirements therein stated Validity of pre-April 1, 1975, regulations until changed pursuant to Code List of rules and regulations To classify records kept by financial institutions and to prescribe the period, if any, for which records of each class shall be retained and the form in which such records shall be maintained To determine the manner in which books of financial institutions will be maintained To enable f"mancial institutions existing under the laws of Georgia to compete fairly with financial institutions existing under the laws of the United States or other states To prescribe examination, supervision, and special investigation fees to replace those in effect on April 1, 1975 To prescribe reasonable fees to defray costs of providing copies of any book, account, report, or other paper med with the Department, of certifying the copies, or of processing papers To prescribe the form for proof of claims of creditors (other than depositors) and for an affadavit as to the truth of statements therein to be included To prescribe the form for proof of claims of depositors and for an affidavit as to the truth of statements therein to be included To pre,scribe the form of all reports of examinations made by Department pursuant to Code To prescribe the form of and the information to be contained in the annual reports of the Department To prescribe the form of, information to be contained in, and due date of all reports of condition submitted to the Department by f"mancial institutions To prescribe the manner in which application for voluntary dissolution of a financial institution after commencement of business will be made by Department To promulgate special regulations pertaining to individual f"mancial institutions or a type of financial institution when a f"mancial emergency requires To protect financial institutions jeopardized by new economic or technological conditions Seal of: eviden tiary effect Subpoena powers in connection with examinations and investigations Supervision 01 financial institutions General scope of General standards for
"Department" defmed
Department of Administrative Services Fees collected by Department deposited with

SECTION 302
302 3702
302 3702
304 303
302 212
" 212
805 804 308 315
.309
503
501 302 209 307 301 104
211

10

General Provisions-Continued

SECTION

Department of Investigation

Disclosures of information by Department personnel may be made to

311

Deparbnentof Justice

Disclosures of information by Department personnel may be made to

311

Department of Law

Advises Department on questions of law

409

Department of the Treasury Disclosures of information by Department personnel may be made to ...............311

"Depositor" defmed

102

Deputy Commissioner of the Department. See Department: personnel

Directon of fmancial institutions

Appearance, testimony, or production of books and papers by, may

be compelled during examinations or investigations by Department

307

Directors attest to correctness of reports made to Department by

fmancial institutions

309

Directors may request Department to take possession of fmancial institutions

701

Directors settle affairs after approval by Department of plans of voluntary

dissolution after commencement of business

504

Disclosures of information to directors by Department personnel

311,

306

Extension of money, shares, or property to Department personnel as gifts or

loans prohibited

207

Suspension and removal of directors by Department ............................312

Emerpncies and emergency closings

501

Employees of the Department. See Department: personnel

Employees of financial institutions Appearance, testimony, or production of books and papers by, may be compelled during examinations and investigations by Department Extension of money, shares, or property to Department personnel as gifts or loans prohibited Suspension and removal of employees by Department

307 .
207 : 312

"Evidence of indebtedness" defined

102

Examinen of the Department. See Department: personnel

Examinations by the Department. See Department: examinations and investigations

Pecleral Bureau of Investigation

Disclosures of information by Department personnel may be made to

311

"Pedenl credit union" defmed
Pecleral Deposit Insurance Corpontion Examinations of financial institutions by the F.D.I.C. may be substituted for Department examinations
FedenI Reserve System
Examinations of financial institutions by the Federal Reserve System may be substituted for Department examinations
Pe~demraalt.lSoa~ngss aonfdfmLoanacniaIlnsinusratintucetioCnosrpboy:athtieonF.S.L.l.C. may be substituted
or Department examinations

102
305 .
305
305

11

General Provisions-Con tinued
Pees Fee of dissolution after commencement of business paid to Secretary of State
Fee of dissolution prior to commencement of business paid to Secretary of State
Fees paid to the Department. See Department: fees Schedule of fees to be paid to Secretary of State under Code Validity of pre-April I ,1975 fee schedules until changed by Code
"Fiduciary" dermed
Financial emergencies and emergency closin~
Financial institutions Accounting procedures to be followed by Financial emergencies and emergency closings: procedures; liabilities Forfeiture proceedings Names Permissible names Reservation of names Receiverships. See Receiverships. Registered offices Reports to Department Penalty for failure to prepare or publish report or to furnish proof of publication Period of retention by Department Proof of publication Publication of abstract summaries Reports during voluntary liquidations after commencement of business Types, number, and forms of reports Retention of records; admissibility of copies in evidence Sound operation of financial institutions essential Voluntary liquidations. See Voluntary liquidations
"Financial institution" dermed
Financial services Examination, investigation, and regulation by Department of persons or corporations performing financial services
"Financial services" dermed
Findings of the General Assembly
Forfeiture proceedin~
General Assembly Findin&s Reserva tion of power by
Georgia Administrative Procedure Act Rules and regulations of the Department promulgated in accordance with Takes precedence in judicial review of Department actions
Governor Appoints Commissioner of the Department Procedures of, concerning oaths and bonds of Department personnel Proclaims and ends states of financial emergency Removes Commissioner of the Department

SECTION
505, 3703
502, 3703
3703 3702
102 501
303 501 .403
601 602
603
309 310 309 309 504 309 304 .103
102
313 313 .I 03 403
.I 03 .110
302 401
201 206 .501 203

12

General Provisions-Continued

SECTION

Holding companies

Pre-Code laws relating to remain intact

104

Injunction suits by Department

.404

"Insolvency" defmed

102

Investigations by the Department. See Department: examinations and investigations

Law, supplementary principles of

109

Members of fmancial institutions

Appearance, testimony, or production of books and papers by, may be

compelled during examinations or investigations by Department

307

Names of fmancial institutions

Permissible names

601

Reservation of names

602

"National bank" defmed

102

National Credit Union Administration

Examinations of fmancial institutions by the N.C.U.A. may be substituted for

Department examinations

305

"Net assets" defined

102

Notices

General requirements for ................................................. 107

Notices in connection with receiverships. See Receiverships

Publication of notices

108

Oaths

Oaths in connection with receiverships. See Receiverships

Oaths of Commissioner, Deputy Commissioner, and examiners of the Department

206

Oa ths of officers verifying reports made to Department by

fmancial institutions

309

<;laths of persons testifying pursuant to examinations and investigations

by Department

307

Objectives of the Code

104

Officers of fmancial institutions

Appearance, testimony, or production of books and papers by, may be

compelled during examinations and investigations by Department

307

Disclosures of information to officers by Department personnel

311

Extension of money, shares, or property to Department personnel as gifts or

loans prohibited

207

Officers sign articles of dissolution after commencement of business

505

Officers sign articles of dissolution prior to commencement of business

502

Officers verify by oath reports submitted to Department by fmancial

institutions

309

Suspension and removal of officers by Department

312

Offices of fmancial institutions

Registered offices

603

"Paid-in capital" defmed

102

Penalty against financial institution for failure to prepare or

pUblish reports or to furnish proofs of publication

309

13

General Provisions-Con tinued
Permissible names for financial institutions Reservation of names

SECTION
601 602

"Person" defmed

102

""ooled assets" defined

901

Possession

Department activities during forfeiture proceedings are same as possession

403

Possession and receivership generally. See Receiverships

Possession during voluntary dissolution after commencement of business

504

"Preference" defmed

708

"Principal court" defined

102

Principal court: procedures. See Superior court: procedures

Prohibited advertising

604

Code does not limit law as to unfair competition or unfair trade practices

605

Protection of trade names and trademarks

605

Publication

Of notices and advertisements generally

108

Of reports made to Department by financial institutions

309

Penalty for failure to publish or to furnish proof of publication

309

Proof of publication required

309

"Public body" defmed

102

"Public sale" defmed

102

Receiverships

Accounts

Final account upon surrender of possession prior to fmalliquidation ............. 725

Partial or fmal account after determination to liquidate

Conf1rJJled ......................................................... 811

Excepted to

809,

810

Filed

809

Actions and suits by Department as receiver

724

Appointment of deputy receivers, counsel, and assistants by Department;

retaining of officers or employees

709

Assignment for creditors prohibited

703

Bond of shareholders' trustee

815

Certificates of possession

Certificate of possession

705

Supplements concerning deputy receiver

705

Supplements concerning surrender of possession prior to fmal

liquidation and distribution

725

Supplements setting forth determination to liquidate

711

Claims

Adjudication of rejected claims and exceptions to account

810

Advertisement and notice to creditors upon determination to liquidate

803

Advertisement and notice to creditors upon filing account

809

Allowance of

806

Changing the rank of

806

Exceptions to expenses of administration

809

Exclusivity of claims procedure as to suits filed after possession; actions

for return of specific property exempted; fate of actions pending prior

to possession

802

14

SECTION

General Provisions-Continued

Expenses of administration .............................................. 808,

809

Notice of hearing to adjudicate rejected claims and exceptions

810

Partial or final account filed; objections listed and exceptions ftled

809

Preservation of assets: attachments by creditors after possession

prohibited ..........................................................801

Proof of claims of depositors in disagreement

804

Proof of claims of creditors other than depositors

805

Rejection of claims

806

Subrogation of insurer

814

Time limit for filing claims

803,

804,

805

Trust assets: claims upon

803

Compensation of deputy receiver, attorneys, and other assistants

808

Compromising of debts due financial institution

717

Confirmation of account and termination of receivership when assets

inadequate

811

Creditors and depositors approve special plans of liquidation,

reorganization, or rehabilitation

725

Decision to liquidate

."

'.'

711

Powers and duties of Department before and after

712

Deposit of moneys received by Department

722

Destruction of records by Department

816

Directors may request Department to take possession

701

Disposition of property in safe deposit vault or held for safekeeping;

unearned rent or charges a debt

723

Dividends

Advance payment to depositors

807

Distribution upon confirmation of account

811

Unclaimed dividends

812

Extension of debts due financial insli tu lion ...................................717

General powers of Department in possession

CoUects moneys due and conserves assets and business

708

Combats "preference" (here defined)

708

Considers creditors first

'

708

Executes instruments

708

Has rights of the fmancial institution

708

Represents creditors

708

Injunction to restrain Department from continuing as receiver: procedure, and

circumstances where prohibited

706

Inventory and appraisement

713

Lease of real or personal property

720

Notice

And advertisement of determination to liquidate

803

And advertisement of filing of partial or final account

809

Of court hearing to adjudicate exceptions and rejected claims

810

Of exception

809

Of meeting of shareholders to elect trustee Of possession, posting of by Department

, 815 704

Of proposed actions by Department with leave of court

707

To holders of assets Oath

,

714

Of appraisers

713

15

General Provisions-Continued

SECTION

Of CommisSioner verifying inventory .. :

713

Of creditors

805

Of Department verifying distribution of notices of determination

to liquidate and of filing of final account

,

809

Of Department verifying final account

809

Of depositor, creditor, or shareholder verifying exception

809

Of serving or sending notice of exception

809

Order of distribution of-assets upon insolvency; delay in payment

of secured claims and liens

813

Orders of principal cowt

Authorizing sale of real property

719

Generally

707

Requiring transfer of assets ..............................................714

Possession by initiative of Department

Conditions leading to ...................................................701

Department automatically becomes receiver

702

Department may petition court to appoint receiver

701

Right to possession cumulative with other rights of Department

701

Status and rights of Department as receiver

702

Possession on request

703,

701,

702

Power of Department to borrow money

715

Pre-payment of debts owed by financial institution

718

Proofs of publication of advertisements

809

Purchase of property to protect an equity

718

Receivership by cowt action

Court appoints Department as receiver

702

Federal receiver appointed upon recommendation of Department

702

No court-imposed restrictions on Department as receiver

702

Rights of Department same as in receivership by operation of law

702

Sale of mortgages and liens

721

Sale of personal property

721

Sale of real property

719

Sale or exchange of listed or unlisted securities

721

Shareholders

Approve special plans of reorganization or rehabilitation

725

Elect trustee (not Department) to liquidate excess assets

815

May file exceptions to account

809

May institute receivership proceedings

702

May petition principal court to order Department to file account

809

Shareholders of building and loan associations and credit unions called same

803

Supervision by principal court

Department responsible to principal court

707

Department actions with leave of cowt: required notice and procedures

707

Orders of court generally

707

Suits against Department in cowt

707

Surrender of burdensome assets and conveying title to holder

716

Swrender of possession prior to fmalliquidation and distribution, conditions

for; special liquidations, rehabilitations, and reorganizations; final

account

725

Suspension or continuation of business: decision concerning

710

Termination of receivership when assets sufficient: liquidation of

.

excess assets by trustee other than Department

815

Transfer of assets to Department

714

16

General Provisions-Continued

SECTION

Trust or pooled assets

Chapter 9 overrides other Code Chapters with respect to

901

Claims upon trust assets ,

803

Department as receiver is fiduciary

902

How assets held upon possession; nonoQvailability to depositors, other

creditors, or shareholders

902

Jwisdiction of principal cowt

903

Rights of grantors or beneficiaries to designate or seek appointment

of substituted trustee or manager

904

Transfer to another financial institution to act as substituted trustee or

manager, or appointment of substituted trustee or manager

904

Transfer to the substituted trustee or manager with accounting;

deficiencies; subcharges

906

Transfer to the substituted trustee or manager without accounting

905

"Trust assets" and "pooled assets" defmed

901

Records of fmandal institutions. See Books and records

Registered offices of fmancial institutions

603

Reports

Reports made by Department

Annual reports

315

Reports of examinations and investigations: form and criteria

308

Evidential value of

405

Period of retention by Department

310

Summary of conditions of fmancial institutions

311

Reports made by financial institutions to Department

Penalty for failwe to prepare or publish reports or to fwnish proofs

of publication

309

Period of retention by Department

310

Proof of publication

309

Publication of abstract summaries

309

Reports during voluntary liquidations after commencement of business

504

Types, number, and forrns of reports

309

Requests, applications, or actions requiring Department approval

AppLicant's right to withdraw

Preservation of jwisdiction by Department after time limit Lapses

317

Reservation of names by financial institutions

602

Permissible names ...................................................... 601

"Retained earnin~" defmed

L02

Retention of records of fmancial institutions

304

Rules of statutory construction

105

"Savings and loan association" defined

102

"Savings bank" defined

102

Seal of the Department: evidentiary effect

209

Secretary of State: procedwes

Is notified by Department of withdrawal of applications earlier

forwarded by Secretary of State to Department

317

Procedures dwing voluntary liquidations. See Voluntary liquidations

Procedures in reservation of names by fmancial institutions

602

17

General Provisions-Continued

SECTION

Schedule of fees to be paid to under Code Validity of pre-April 1, 1975 schedules until changed by Code

3703 3702

Service contracts

Examination, investigation, and regulation by Department of

persons or corporations holding service contracts

313

"Shareholder" defined

102

Shareholders

Disclosures of information to shareholders by Department personnel

306

Distributions to, during voluntary dissolution after commencement of business

505

Shareholders approve plans of dissolution after commencement of business

503

Shareholders approve special plans of reorganization or rehabilitation

of fmancial institutions for which Department surrenders possession

725

Shareholders approve voluntary dissolutions prior to commencement of business

502

Shareholders elect trustee to liquidate excess assets of fmancial

institutions at the end of receivership procedure

815

Shareholders may me exceptions to account of Department as receiver

809

Shareholders may institute receivership proceedings

702

Shareholders may petition superior court to order Department

to me account as receiver

809

Shareholders sign articles of dissolution prior to commencement of business

502

"Shares" dermed

102

Short title of Code

101

State Merit System

Rules and regulations of, as applied to Department personnel

205

"State Merit System" dermed

205

"Statutory capital base" dermed

.1 02

Statutory construction, rules of

105

"Subject to check" dermed

102

"Subsidiary" dermed

102

Superior court (principal court): procedures

Determines who pays costs of suits by or against Department ......................408

Issues subpoenas to compel appearance, testimony, or production of books and

papers in connection with examinations and investigations by Department

307

Judges may take actions in term or in vacation, whether in county or absent

from it

lOS

Procedures in enforcement of Department orders

402

Procedures in forfeiture proceedings

403

Procedures in injunction suits by Department

404

Procedures in judicial review of Department actions, generally

.401

Procedures in receiverships. See Receiverships

Supplementary principles of law

Supreme Court

Appeals from final orders and judgments of superior court reviewing Department

actions may be taken to

401

Oath of Department personnel may be taken before justices of

206

"Third party payment service" defmed

.102

18

General Provisions-Continued
Trade names and trademarks: protection of
Transition provisions of Code. See Administrative and transition provisions of Code
"Treasury shares" dermed
"Trust assets" defined
"Trust company" dermed
Voluntary liquidations Voluntary dissolution after commencement of business Articles of dissolution Contents Department approves or disapproves articles Drawn up after liabilities discharged and assets distributed Filed in triplicate with Secretary of State Signed by officers Certificate of dissolution issued by Secretary of State after approval of articles of dissolution by Department; Secretary of State keeps ddcuments on file Election to dissolve Applicatlon for approval of plan by Department Approval or disapproval of plan by Department; Department gives notice Investigation by Department Judicial review of decision by Department Plan of dissolution approved by shareholders Fee of dissolution paid to Secretary of State when articles med
Winding up voluntary dissolution proceedings Department management of unclaimed amounts due to depositors and creditors Directors to settle affairs after approval of plan of dissolution by Department Distribution of remaining assets to shareholders; partial distributions Financial institution continues subject to examinations and investigations by Department Notice of dissolution Payment of claims of depositors and creditors and return of unearned portions of rentals for safe deposit boxes Reports to Department Resignation of fiduciary appointments and settling of fiduciary accounts
Voluntary dissolution prior to commencement of business Articles of dissolution Contents Filed in triplicate with Secretary of State Signed by officers or shareholders Certificate of dissolution issued by Secretary of State after approval by Department; Secretary of State keeps documents on file Department approves or disapproves liquidation after receipt of articles of dissolution from Secretary of State; gives reasons Fee of dissolution paid to Secretary of State when articles filed
JUdicial review of Department decision Plan of dissolution: shareholders' approval needed
Wan and other emergencies interfering with functioning of rmancial institutions
Withdrawal ohpplications and requests

SECTION
605
102 901 .1 02
505 505 505 505 .505
506
503 503 503 503 503 505, 3703
504
504 504
5 04 504
504 504
504
502 502 502
506
502 502, 3703 502 502 501 317

19

TABLE OF CONTENTS PART VIII - ADMINISTRATIVE AND TRANSITION PROVISIONS.

Chapter 41A-37. Administrative and Transition Provisions.

Section 41 A-3701. Section 41 A-3702.
Section 41 A-3703.

Effective Date. Tran ilion; Protection of Existing Charters; Regulations, Fees and Appointments; Proposed Regulations. Fee to be Paid to Secretary of State.

PART IX - CRIMINAL AND RELATED PROVISIONS.

Section 41 A-990I. Section 41 A-9902. Section 41 A-9903. Section 41 A-9904. Section 41 A-9905.
Section 41 A-9906.
Section 41 A-9907.
Section 41 A-9908. Section 41 A-9909. Section 41 A-991 O.

Chapter 41 A-99. Criminal and Related Provisions.
Criminal Prosecution. Applicability of Criminal Code. Giving otice of Examination. Reception of Gift; Illegal Interests. Felonies of Directors, Officers, Agents and Employee of Financial In titulions. Certain Mi demeanors of Directors, Officers, Agent and Employee of Financial Institutions. Other Midsdemeanors of Directors, Officers, Agents and Employees of Financial Institutions. Miscellaneous Mi demeanor Crimes. Protection on Bad Check, Draft, Orders. Punishment for 1isdemeanor for Violations.

3701

PART VllI. ADMINISTRATIVE AND TRANSITION PROVISIONS.

CHAPTER 41 A-37 . ADMINISTRATIVE AND TRANSITION PROVISIONS.

41A-3701. Effective Date. This Code shall become effective at

12:01 a.m. on April 1, 1975. It applies to transactions and events

occurring on and after that date.

Comment: This is a new provision specifying the time when this

Code will become effective.

41 A-3702. Transition; Protection of Existing Charters, Regula-

tions, Fees, and Appointments; Proposed Regulations. (a) Trans-

actions validly entered into before April 1, 1975 and the rights,

duties and interests flowing from them remain valid thereafter and

may be terminated, completed, consummated or enforced as

required or permitted by any statute or other law amended or

repealed by this Code as though such repeal or amendment had not

occurred.

(b) The validity of existing articles and charters shall not be

impaired by this Code. Appointments of officers in effect on April 1,

1975, shall continue in force until changed as permitted by this Code

or other applicable law. Regulations which have been issued by the

Department or the Commissioner and fee schedules established by

either of them or existing pursuant to statute shall remain in effect

until changed pursuant to this Code.

(c) The Department is hereby authorized to exercise its power to

make rules and regulations bestowed by this Code by promulgating

proposed regulations prior to April 1, 1975, which regulations would

become effective on or after said effective date.

Comment: This is a new provision designed to protect existing

rights, articles, appointments and regulations, and to provide for

promulgation of proposed regulations prior to the effective date of

this Code.

41 A-3703. Fees to be Paid to Secretary of State. The Secretary of

State shall charge and collect the following fees in connection with

the ftling of the designated documents:

Articles of incorporation, amendments, merger,

consolidation, conversion or dissolution of a

bank or trust company

$100

Articles of incorporation of a credit union

$ 10

Articles of amendment of a credit union

$1

Approved articles of a business development

corporation or amendments thereto

$ 15

VIII-l

3703

Approved articles of a building and loan

association or amendments thereto

$ 15

Application to reserve a name for a financial

institution

S 3.

Comment: This provision gathers into one Section the various fees

payable to the Secretary of State under this Code. EXisting fees are

carried forward. except that the fee for amendment of bank articles

is raised from 50 to 100 to compensate for elimination of the

requirement of reviewin$ articles under this Code.

VIII-2

9901
PART IX. CRIMINAL AND RELATED PROVISIONS.
CHAPTER 41A-99. CRIMINAL AND RELATED PROVISIONS.
41A-9901. Criminal Prosecutions. Upon discovery, by report or otherwise, of any violation of any criminal law of this State which relates to a financial institution, the Department shall institute criminal proceedings in the manner provided by law. The Department shall have the right to submit to the grand juries of the respective counties of the State any criminal violations of the laws of Georgia known by it to have occured in such counties or it may likewise submit to any United States District Attorney any criminal violations of the laws of Georgia which also constitute violations of the laws of the United States applicable to such financial institution. This provision shall not be so construed as to preven t the Commissioner or other persons from proceeding in such cases by affidavit and warrant.
Comment: Section 13-9936 of the Banking Code gives the Department the right to present information on violations of the banking laws to county grand juries. This proposed Section adds to the existing law an express duty to institute criminal proceedings when a violation of law is discovered and an express authority to share relevant information with appropriate federal prosecutors. Moreover, this Section would apply to violations concerning all types of institutions. not just to banks. This last change is generally carried forth in this Chapter, the present criminal provisions as to nonbanking institutions being very skimpy under law. The original provisions of this Chapter are.codified as Chapter 41A-99. in keeping with the existing Georgia codification scheme.
41 A-9902. Applicability of Criminal Code. (a) The following Chapters of the Criminal Code of Georgia are hereby expressly made applicable to financial institutions, their directors, officers, agents and employees, and persons or corporations having dealings with, supervision over, or other contact with financial institutions:
(I) Chapter 26-13 relating to Damage to Property; (2) Chapter 26-14 relating to Arson and Related Offenses; (3) Chapter 26-16 relating to Burglary and Related Offenses; (4) Chapter 26-17 relating to Deceptive Practices; (5) Chapter 26-18 relating to Theft (6) Chapter 26-19 relating to Robbery; (7) Chapter 26-23 relating to Abuse of Government Office and (8) Chapter 26-24 relating to Perjury and other Falsifications. (b) othing in the foregoing Section shall be construed to indicate that the designated Chapters of the Criminal Code were not applicable to the enumerated financial institutions, persons or
IX-l

9902
corporations prior to April 1, 1975, or that other provisions of the Criminal Code are not in appropriate circumstances also applicable to the enumerated financial institutions, persons or corporations.
Comment: This is a new Section designated to clarify the relationship between the new Criminal Code and the law of financial institutions. It also seeks to reduce unnecessary duplication. Since crimes such as embezzlement, misappropriation, perjury and false swearing are now adequately treated in the Criminal Code, there is no longer any need for them to be dealt with in this Chapter. For t!xample, a special embezzlement statute was required in the past because of restrictions implicit in the notion of larceny. These restrictions are removed from the definition of theft in the new Criminal Code and a separate definition of embezzlement has become redundant. See Committee Notes & Chapter 28-18, Ga. Code Ann. Tit. 26, pp. 136, 141. Only crimes uniquely related to financial institutions are treated in this Chapter.
41 A-9903. Giving Notice of Examination. Any commissioner, deputy commissioner, or other employee of the Department who shall give notice or information, directly or indirectly to any officer director, agent, representative or employee of any financial institution as to the time when such financial institution will be visited for examination, shall be guilty of a misdemeanor; provided, this Section shall not apply to special examinations made at the request of the financial institution or on motion by the Commissioner in addition to the annual examination required by Section 41 A-305.
Comment: This provision carries forward Ga. Code Ann. Sec. 13-9901 with clarifications.
41 A-9904. Reception of Gifts; Illegal Interests. Any commissioner, deputy commissioner, or other employee of the Department w 0 shall violate or participate in a violation of Section 41 A-207, relating to restrictions on Department officials and employees, shall be guilty of a misdemeanor. Violation of this provision shall be grounds for removal from office.
Comment: Section 13-9906 of the former banking law makes reception of loans, gifts or compensation by Department officials from banking institutions a misdemeanor. This Section broadens the prohibition to other improper activities barred by Chapter I and makes the prohibitions applicable to all types of institutions. Since Chapter 26-23 of the Criminal Code of Georgia dealing with abuse of governmental office is expressly made applicable to Department employees and officials by this Code, Section 13-9904 of the present Banking Code dealing vaguely with neglect and misconduct by such officials is omitted from these criminal provisions.
41 A-990S. Felonies of Directors, Officers, Agen ts and Employees of Financial Institutions. Any director, officer, agent or employee of a financial institution who knowingly:
IX-2

9905
(a) makes any false entry in any book, report or statement of the financial institution, or who omits or concurs in omitting to make any material entry in its books or accounts with intent in either case to injure or defraud the financial institution, or any other company, firm or person, or to deceive any officer of the financial institution, the Commissioner or any examiner, and every person who with like intent aids or abets any officer, director, clerk, agent or employee in making any false entry, report or statement, or omitting to make any material entry on its books and accounts shall be punished by imprisonment and labor in the penitentiary for not less than one year nor more than ten years;
(b) while in charge of or employed in a financial institution, allows it to receive a deposit knowing the financial institution to be insolvent shall be punished by imprisonment in the penitentiary for not less than one year nor more than ten years if loss or injury shall result to such depositor;
(c) by letterheads, newspaper advertisements, signs, circulars, or otherwise, represents the capital stock of any financial institution to be in excess of the capital actually paid in, or who knowingly makes or concurs in making or publishing any written report, exhibit, or statement of its affairs or pecuniary condition, containing any material statement therein which is false, or who knowingly omits or concurs in omitting any statement required by law or to be contained therein, shall be punished by imprisonment and labor in the penitentiary for not less than one year nor more than five years'
(d) violates or is involved in violating any provision of the charter or bylaws of said financial institution shall be punished by imprisonment and labor in the penitentiary for not less than one year nor longer than five years.
Comment: This Section collects felony offenses of officials, agents and employees of financial institutions. It carries forward the substance of the present provisions of the Banking Code dealing with false entries, receipt of deposits while insolvent, misrepresentations as to capital or financial condition, and violating of charter and bylaws Ga. Code Ann. Secs. 13-9910; 13-9912; 13-9914; 13-9928. The present Section 13-9913 containing presumptions as to knowledge of charter or bylaws violations is omitted. It is the policy of this Chapter that felony offenses occur only when committed knowingly.
41 A-9906. Certain Misdemeanors of Directors, Officers, Agents and Employees of Financial Institutions. Any officer, director, agent or employee of any financial institution who shall perform the following acts or deeds shall be guilty of a misdemeanor:
(a) advertises by any office sign or upon any letterhead, billhead, bank note, receipt, certificate, circular, or on any written or printed paper that the deposits in said financial institution are insured or guaranteed, unless such deposits in said financial institution are, in
IX-3

9906
fact, insured and guaranteed as required by Sections 41 A-II OS, 4lA-3117 and 4lA-3529 of this Code or regulation or action of the Department pursuant thereto;
(b) intentionally conceals from the directors of any financial institution, or from the committee to whom the directors have delegated authority to pass on loans and discounts, any discount or loan made for and in behalf of said financial institution, or the purchase or sale of any evidence of indebtedness or agr.eement for the pay-
ment of money; (c) uses or applies any part of the capital or other funds of any
fmandal institution to the purchase of shares of its own stock, unless such purchase shall be necessary to prevent loss upon a debt previously contracted in good faith under Section 41 A-I 204 or is otherwise permitted by law;
(d) concurs in any vote or act of the directors of such financial institution by which it is intended to declare a dividend or reduce or make a distribution of capital except as authorized by Sections 4IA-2l0l, 4lA-2l02, or otherwise under this Code or other applicable law;
(e) discounts or receives any evidence of indebtedness or agreement for the payment of money in payment of any subscription for common or preferred shares or with intent to enable any shareholder to withdraw any part of the money paid by him for shares held in the fmancial institution;
(f) knowingly and wilfully issues, participates in issuing, or concurs in any vote of the directors to issue any increase of its capital beyond the amount of the capital thereof duly authorized by or in pursuance of law, or who knowingly or wilfully sells, or agrees o sell, or who is interested, directly or indirectly, in the sale of any such shares of stock of such financial institution, or in any agreement to sell the same'
(g) certifies any check, draft, or order where drawer of such check, draft or order does not have on deposit with the financial institution at the time of such certification an amount of money equal to the amount specified in such check, draft or order, or fails !o charge or set aside such amount from the deposit of the drawer unmediately for the purpose of paying such certified check, draft or order when presented;
(h) makes or consents to the making of any conveyance, assignment, transfer, mortgage or lien, with intent to hinder, delay, or defraud creditors, after insolvency of the financial institution or in Contemplation thereof, whether the same be made to an innocent purchaser or to any other person,
Comment: This provision carries forward with linguistic changes the substance of provisions contained in Sections 13-9915,13-9916, 13-9924, 13-9925, 13-9927 and 13-9929 of the present Banking

MaY,1975

IX-4

9906
Code and makt:~, the prohibitions of these Sections applicable to other types of financial institutions.
41 A-9907. Other Misdemeanors of Directors, Officers, Agents and Employees of Financial Institutions. Any director, officer, agent, or employee of a financial institution who shall wilfully violate or participate in the violation of the following provisions of this Code shall be guilty of a misdemeanor:
(a) Section 41A-207 relating to restrictions on Department officials and employees;
(b) Section 41A-303 relating to accounting requirements to be followed by financial institutions;
(c) Section 41A-1306 relating to loan limits on banks; (d) Section 41 A-13l2 relating to borrowing limits on banks;
(e) Section 41A-1402 relating to operations as a fiduciary by a trust company;
(f) Section 41A-22l2 relating to limitations on financing to director and officers of banks and trust companies;
(g) Section 41 A-22l3 relating to prohibitions applicable to directors, officers, employees and attorneys of bank and trust companies in dealings with the institution with which they are connected; and
(h) Section 41 A-3l 09 relating to loan limits on credit unions. Comment: The policy of this Code is that criminal offenses should be specifically described. Accordingly, the catch-all provision
found in Section 13-9930 of the Banking Code making a wilful violation of any provision of this Code a misdemeanor is omitted. In lieu thereof this and other Sections designate specific provisions whose violation carries a criminal sanction. This Section deals with wilful violation or participation in violations on the restrictions imposed on the Commissioner and other Department personnel, the accounting rules, the loan and borrowing restrictions, the restrictions on dealings including financing between bank and trust company personnel and their own institution, and restrictions on fiduciary operations. The only explicit parallel provisions of law are Section 13-9906 dealing with improper loans or gifts to Department personnel and Section 13-9922 proscribing violations of the present restrictions on loans to officers, directors and employees.
41A-9908. Miscellaneous Misdemeanor Crimes. Any person or corporation, including any financial institution or its directors, officers, agents or employees, who shall perform the following acts or deeds shall be guilty of a misdemeanor.
(a) publishes or causes to be published any false statement expressed either by printing or writing, or signs, pictures, or the like, of or concerning any financial institution as to the assets or liabilities of said financial institution, or as to its solvency or ability to meet its obligations, or as to its soundness or who shall publish or cause to be

May, 1975

IX-S

9908
published any other false statement so expressed, calculated to affect the credit or standing of said financial institution, or to cast
u picion upon its solvency, soundness, or ability to meet it deposits or other obligations in due cour e;
(b) falsely circulate any report, or makes any false oral statement as to the assets or liabilitie of a financial institution or as to its olvency or ability to meet its obligations, or as to its soundness or who shall make any other false oral statement calculated to affect the credit or standing of said financial institution, or ability to meet its deposits or other obligations in due course; and
(c) wilfully engages in the business of: (l) a bank in viola tion of Section 41 A-II 02; (2) a trust company in violation of Section 41 A-II 03; (3) a credit union before receiving a permit to do business under Section 4IA-3004' (4) selling checks before receiving a license as required by Section 41A-3202; (5) an international bank agency before receiving the permit required by Section 41A-3304; (6) a bu iness development corporation before approval of the Department is granted under Section 41A-340; and (7) a building and loan association before its articles are approved pursuant to Section 41 A-3505. (d) Wilfully violate: (l) Section 41 A-II 04 dealing with restrictions on banking or tru t nomenclature' and (2) Section 41A-3510 dealing with re trictions on building and loan and saving and loan association nomenclature. Comment: Subsections (a) and (b) carry forward provisions of the Banking and Building and Loan Codes in regard to libel and slander against such institutions (See Ga. Code Ann. Sees. 13-9931, 13-9932, 16-9904, 16-9905) and extends these prohibitions to cover all [illallcial institutions. Subsection (c) makes operating a financial institution without authority criminal. The only provisions on this point are Ga. Code Ann. Sees. 13-9907 prohibiting banking without a permit and 13-9939 dealing with violations of the Sale of Checks Act. Subsection (d) is a new provision designed to protect important terminology against unauthorized use. 41A-9909. Protection on Bad Checks; Drafts, Orders. If any per on or corporation shall be arrested or prosecuted for violation of Section 26-1704 of the Criminal Code the person or corporation ,,:ho arrested or caused such person to be arrested and prosecuted, or eIther, shall be conclusively deemed to have acted with reasonable or probable cause in bringing about such arrest or prosecution in any civil action for damages which may be brought by the person who
IX-6

9909
made, drew, uttered, or delivered such instrument, if, after payment of such check, draft or order is not made by the drawee upon due presentation, the one who arrested or caused such person to be arrested and prosecuted, or either, shall have mailed written notice to such maker, drawer, or transferor informing him that payment of such check, draft or order has been refused, and then waited ten days after mailing such notice, without the amount due under the provisions of such instrument being paid; provided, however, that said notice by mail must be evidenced by a registered or certified mail return receipt bearing the signature of such maker, drawer or transferor; and provided, further, however, if payment of any check, draft, or order for the payment of money be refused because the maker or drawer had no account with the bank or other depository on which said instrument was drawn, the one causing the arrest or prosecution shall be deemed to have acted with reasonable or probable cause even though he or it has not mailed the written notice or waited for the ten-day period to elapse. In any such civil action, no evidence of statements or representations as to the status of the check, draft, order, or deposit involved, or of any collateral agreement with reference to the check, draft, order, or deposit shall be admissible unless such statements, representations, or collateral agreement shall be written upon the instrument at the time it is delivered by the maker thereof.
Comment: This provision would carry forward Ga. Code Ann. Sec. 13-9933fc) with clarifications designed to conform with the policies of the Criminal Code.
41 A-991 O. Punishment for Misdemeanor for Violations. Upon conviction of a misdemeanor as prescribed by the several provisions of this Code, the offender shall be punished as prescribed by Code Section 27-2506, as now or hereafter amended.
Comment: This Section carries forward Ga. Code Ann. Sec. 13-9937.
IX-7/IX-8

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TABLE OF CONTENTS PART X - BANK HOLDING COMPANIES.

Acts 1960, p. 67 Section 13-201. Section 13-207.

Legislative Intent. Definition of Term 'Bank.' Bank Holding Companies.

Acts 1960
PART X. BANK HOLDING COMPANIES.
Act 1960, p. 67: Legi lative Intent. It is intended that this Act be an amendment to the Banking Law of Georgia (Ga. L. 1919, p. 135) later codified as Title 13 to the Code of Georgia as the same has from time to time been amended and codified. It is intended that this Act have uniform and general application to all phases of banking, dealt with herein, wherever located in this State. It is the intent of this Act to prevent the extension of statewide banking by any institution and to encourage the normal growth of banking units in the local communities. It is the intent of thi Act to recognize and provide local units of banking with additional service outlets (offices and facilities) within the local municipality to meet the requirements of public need and advantage occasioned by urban growth and development, and to put on an equal competitive basis branch banks, a defined in this Act, with parent banks in the municipal corporation where such branch banks are located. It is the intent of this Act to restrict further the acqui ition of voting shares of bank by bank holding companies. It i the intent of this Act to keep banking units from expanding into territories beyond their municipal corporate limits.
13-201. Definition of Term 'Bank.' The term bank,' a u ed in this Title, means any moneyed corporation authorized by law to receive depo its of money and commercial paper, to make loans, to discount bills, notes and other commercial paper, to buy and sell bills of exchange, and to issue bills, notes, acceptances or other evidences of debt, and shall include incorporated banks, savings banks banking companies, trust companies, and other corporations doing a banking business, but unless the context otherwi e indicates, shall not include private bankers, partnerships or voluntary association doing a banking bu iness, or national banking association or building and loan associations or similar associations or corporations; provided however that the following Sections of this Title to-wit Section 13-207, restricting the acquisition and ownership of bank shares or assets, Section 13-2035 defining due diligence on the part of a bank in collections; Section 13-2036, authorizing the forwarding of collection items direct to the payor; Section 13-2039 providing for the payment of deposits in two name; Section 13-2040 authorizing the payment under certain circum tances of the checks of a deceased, bankrupt or insane depositor; Section 13-2041, authorizing deposit accounts by minors; Section 13-2042, providing for the payment of deposits by agents trustees or other fiduciaries; Section 13-2043, providing for the payment of deposits in tru t; Section 13-2044, providing a limitation for claims on account of forged or raised checks; Section 13-2048 as amended by Georgia Laws 1943, page 253, 1952, page 189 and 1955 pages 202, 203 providing for
X-I

13-201
the payment of deposits of deceased depositors' Section 13-2049 providing for stale checks; Section 13-2050 providing for stoppayment orders to be renewed' Section 13-2052, as provided by Georgia Laws 1945 page 228, providing for forged or unauthorized endorsements; Sections 13-2053 through 2057, provided by Georgia Laws 1953, page 70, relating to records; Section 13-9931 providing for libel of bank' Section 13-9932 providing for slander of bank' Section 13-9933, providing for check or draft without funds, shall apply to private banks national banking associations, and all other person corporations, or associations, by whatever authority organized, doing a banking business in this State. ational banking as ociations shall have the same, but no greater right under or by virtue of this Title and Acts amendatory and supplementary thereof, than i granted to banks and trust companies organized under the laws of this State.
13-207. Banking Holding Companies. (a) On and after the effective date of thi Section, it shall be unlawful (I) for any action to be taken which results in a company becoming a bank holding company as defined in this Title; (2) for any bank holding company to acquire or hold direct or indirect ownership or control of more than 5 per centum of the voting shares of any bank; (3) for any bank holding company or subsidiary thereof, other than a bank, to acquire all or ubstantially all of the assets of a bank' or (4) for any bank holding company to merge or consolidate with any other bank holding company. otwithstanding the foregoing, the e prohibitions hall not apply (A) to shares of voting stock in banks or bank holding companies acquired, owned, controlled, or held on the effective date of thi Section, or hares of voting stock acquired after the effective date of this Section as a result of the distribution of a stock dividend di tributed in voting shares or as the result of the exercise and receipt of preemptive rights provided that after the receipt of such stock dividend or exercise of preemptive rights, or both, the percentage of voting stock owned in such bank shall not exceed the percentage owned on the effective date of this Section, or (B) to hares acquired by a bank (i) in good faith in a fiduciary capacity, except when such
hare acquired after the effective date of this Section are held for the benefit of the shareholders of such bank or (ij) in the regular course of securing or collecting a debt previously contracted in good ~aith, but any shares acquired after the effective date of this Section In ecuring or collecting any such previously contracted debt shall be di Posed of within a period of two years from the date on which they were acquired; or (C) to additional shares acquired by a bank holding company in a bank in which such bank holding company Owned or controlled a majority of the voting shares prior to such acqui ition and prior to the effective date of this Section; or (D) to any action taken whjch results in a company becoming a bank
X-2

13-207
holding company in a corporate reorganization involving an existing bank which is chartered under the laws of Georgia and which owns a banking holding company if, immediately after such reorganization, such company owns directly or indirectly no property other than (1) the share of such bank, and (2) the property which such bank directly or indirectly owns, and if the reorganization is approved by the Commi sioner of the Department of Banking and Finance as being not inconsistent with the purposes of this Section.
(b) The term 'company' as used in this Section and in Section 13-201.1 (e) means any corporation, partnership, foundation, joint stock company, business or voting trust, association or similarly organized group of persons, whether incorporated or not and includes the shareholders and those persons who otherwi e own the 'company' and including any foreign corporation or other organization or a sociation doing business in Georgia.
(c) On or before January 15, 1961 and annually thereafter each bank holding company shall register with the Superintendent of Banks on forms prescribed by him which shall include such information with respect to the financial condition, operation, management and intercompany relationships of the bank holding company and its subsidiaries and related matters as the Superintendent of Banks may deem necessary or appropriate to carry out the purpose of this Section; provided, however, that any bank holding company required to register under the Federal Bank Holding Company Act of 1956 (70 Stat. 133) with the Board of Governor of the Federal Reserve System shall be made exempt from the above requirements by certifying to the Superintendent of Banks that it ha registered under the federal statute.
(d) The Superintendent of Banks is authorized to issue such regulations and orders a may be necessary to enable him to administer and carry out the purposes of this Section and prevent evasions thereof.
(e) The Superintendent of Banks from time to time may require report under oath to keep him informed as to whether the provision of this Section and such regulations and orders thereunder issued by him have been complied with may make examination of each bank holding company and each subsidiary thereof, the co t of which may be assessed against and paid by such holding company, and shall as far as possible, use the reports of examination made by the Comptroller of the Currency, Federal Deposit Insurance Corporation or the Board of Governors of the Federal Reserve System for the purposes of this Section; provided however, that no bank holding company or subsidiary thereof required to register under the Federal Bank Holding Company Act of 1956 (70 Stat. 133) with the Board of Governors of the Federal Reserve System shall be required
X-3

13-207 to furnish any reports or be subject to any examination by the Superintendent of Banks, but the Superintendent of Bank shall rely upon the reports of examination thereof made by the Comptroller of the Currency, Federal Deposit Insurance Corporation or the Board of Governors of the Federal Reserve System.
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TABLE OF CONTENTS PART X1- BRANCH BANKING.

Act 1970, p. 954 Section 13-201.1. Section 13-202.2. Section 13-203. Section 13-203.1. Section 13-204.1. Section 13-208.

Legi lative Intent. Other Definition. Expan ion or Extension of the Existing Facilitie . Branch Bank. Bank Office and Bank FaciJitie . Banking Busine Prohibited E cept at a Banking Hou e. Suits by Superintendent of Banks.

Act 1970
PART XI. BRA CH BANKl G.
Act 1970, p. 954: Legislative Intent. It i the intention of thi Act to recognize and provide local unit of banking with additional ervice outlet (bank office and bank facilitie ) within the entire county in which they are located rather than being re tricted to municipal limit a her tofore required in order to meet the requirement of public need and advantage occa ioned by urban growth and development out ide municipal limit, 0 that territorial criteria for the e tab Ii hment of and operation of bank office and bank facilitie hall be the county t rritorial limit rather than the municipal territorial limit. It is the intention of thi Act that no new or additional branch bank will b e tablished except wher by r a on of changing from municipal limit to county limit there exi t bank office in two countie within the am muni ipality i.e., Fulton and DeKalb Counties by rea on of the City of Atlanta being in both countie .
13-201.1. Other Definition . (a) The t rm paren t bank a u ed in thi Title mean the principal plac of bu ine wher the gen ral bu ine of each bank shall be tran acted in the particular ity, town or village pecified in thi charter.
(b) The term 'branch bank as u ed in this Title mean any additional principal place of busine of any parent bank locat d in a county other than in the county wherein th parent bank i chartered and is situated.
(c) The term 'bank office' a u ed in thi Titl mean any additional place of bu ine s of a parent bank or a branch bank located in the arne county in which aid parent bank or branch bank i ituated and which has obtained a permit to operate a complete banking ervice in the manner and under the condition provided in this Title.
Cd) The term 'bank facility' as used in thi Title means any add itional place of bu iness of a parent bank or branch bank located in the same county in which said parent bank or branch bank i ituated and which ha obtained a permit to operate a limited banking ervice in the manner and under the conditions provided in thi Title.
(e) The term 'bank holding company' as used in this Title m an any company incorporated or organized under the' laws of thi State, or doing bu ine in this State, which directly or indirectly own, control or hold with power to vote more than five per centum of the voting shares of each of two or more banks.
(f) The term 'bank' a defined in Section 13-20 I of the Code of Georgia (Article I Section I of the Banking Law) as u ed el ewhere in this Title, shall include 'bank office' bank facility' 'parent bank'. and branch bank unles the context indi at s that it does not.
XI-l

13-201

(g) The term 'city' or 'town' as u ed in this Title means a municipal corporation incorporated and chartered pur uant to an Act of the General Assembly of Georgia which de cribe the territorial boundarie and limits of uch municipal corporation.
(h) The term village' a used in this Title means an a emblage or aggregation of houses for dwelling or busine ,or both, rea onably contiguou to each other and identifiabl and generally known a a village or community but unin orporated and not chartered as a municipal corporation under the laws of th State of Georgia. For the purpo e of this Title, the territorial boundaries and limits of each village in which a par nt bank i located hall b fix d by the Superintendent of Bank immediately upon thi Section becoming effective and thereafter upon the grant of a charter to the bank ituated in a village provid d however the territorial boundarie and limit of a village hall not extend beyond three mile in any direction from the geographic center of the villag and hall not contain more than 12 quare mile in total ar a and provided, further that a plat showing the boundary of uch village shall be filed in the office of the Superintendent as a public record; and al 0 provided, that such villag shall not extend into the territory, or incorporated area of any municipal corporation.
(i) The t rm 'county' a u d in thi Title mans a political subdivision of thi State organiz d pursuant to an Act of the General
sembly of Georgia which de rib the territorial boundarie and limi t ther of and is named a a county in Section _3-101 of the Code of Georgia, a am nded.
13-203. Branch Bank. (a) Branch bank a defined in Section 13-_01.I(b), hall be operated a branche and under the nam of the arent bank, and under th ontrol and dir ction of the board of directors and executive officer of aid parent bank. The board of director of the paren t bank hall elect a cashier and uch other officer that may b required to properly conduct the bu in of aid branch; and a board of directors or loan committee, hall be re pon ible for the conduct and management of aid branch, but not of the parent bank or of any other branch ave that of which they are officers directors, or ommittee.
(b) Taxation of all banks, branch banks, bank offices and bank facHitie, hall be in the manner provided in Section 9_-2406 of the
ode of Georgia and all Acts amendatory and supplementary thereof.
(c) 0 new or additional branch bank a defined in Section 13-101.1(b) hall be establi hed e cept as follows:
(1) On the effectiv date of thi sub ction (c)(l), any par nt bank or branch bank, which has a bank office or bank offices, in op ration and which wa , or were properly e tabli h d with the approval and permi ion of the Superintendent of Bank and which

Y,1975

XI-_

13-202

is, or are, located in a county having a population of 250,000 or more according to the 1960 United States Decennial Census and any future such census other than in the county wherein the parent bank or branch bank is situated, shall be required to designate the bank office, or one of them, as a branch bank, but in no event shall a parent bank have more than one branch bank in any county; neither before nor after the effective date of this subsection (c)(1) shall there be established a new or additional branch bank as defined in this Title.
(2) Any parent bank located in any county of this State having a population of 400,000 or more according to the United States
Decennial Census of 1970 may establish branch banks as provided by law within any adjacent county having a population of 400,000 or more according to the United States Decennial Census of 1970.
13-203.1 Bank Offices and Bank Facilities. (a) A parent bank or a branch bank, subject to the conditions provided in this Title, may, upon obtaining approval and a permit from the Superintendent of Banks, establish and operate a bank office or offices within the same county in which said parent bank or branch bank is situated.
(b) A parent bank or branch bank, subject to the conditions provided in this Title, may, upon obtaining approval and a permit
4 from the Superintendent of Banks, establish and operate a bank
facility or facilities within the same county in which said parent bank or branch bank is situated.
(c)(1) Application for a permit to establish either a bank office or a bank facility shall be made to the Superintendent of Banks in such form as he may prescribe by regulation from time to time. The Superintendent of Banks shall exercise his discretion in his consideration of the application, but the Superintendent of Banks shall not approve the application until he has ascertained to his satisfaction that the public need and advantage will be promoted by the establishment of the proposed bank office or bank facility according to the same criteria of examination and determination provided in Section 13-905 of the Code of Georgia (Section 4-A of Article VIII of the Banking Law of Georgia).
(2) Without limitation on the authority contained in paragraph (1) of this subsection (c), and in furtherance thereof, the Superintendent of Banks may approve, with respect to any county now or hereafter having a population of 120,000, or under, the establishment of not more than the following number of either bank offices or bank facilities anywhere within the county in which the parent bank or branch bank is situated, as follows: counties with a population of 20,000 and under - two; counties with a population of 20,001 to 40,000 - three; counties with a population of 40,001 to 60,000 - four; counties with a population of 60,001 to 80,000 - five; counties with a population of 80,001 to

May, 1975

XI-3

13 ...03
100000 - six; and counties with a population of 100,001 to 1_0000 - seven. The Commi ioner of the Department of BankiRg and Finance may determine the population according to the United State decennial census of 1970 or any future such census or he may, in his di cretion utilize population estimate compiled by the Department of Human Resources and population data compiled by public utili tie and local governmental agencie in determining the population criteria set forth herein.
(3) Without limitation on the authority contained in paragraph (1) of thi ubsection (c), and in furtherance thereof, the Superintendent of Bank may approve, with re pect to any county now or hereafter having a population of more than 120 000, the establi hment of bank office or bank facilities withou t specific limitation on the number, anywhere in aid county in which the parent bank or branch bank i ituated. The population hall be determined according to the 1960 official United States census, or any future official United State cen us.
(4) The Superintendent of Banks may, in his di cretion to accommodate the public need and advantage of each locality, con ider an application for a bank office as an application for a bank facility, or vice ver a, and he may, in the exerci e of his di cretion to accommodate the publicneedand advantage determine the amount of fund which may be committed for the con truction of each bank office or bank facility, whether by ou trigh t expenditure or by longterm lease contract or by creation of, or utilization of a real e tate holding company. Within 90 day after the filing of an application for a permit to establish a bank office or bank facility the Sup rintendent of Banks hall is ue under hi hand and seal a certificate approving or disapproving the application of a permit, which determination shall be final as to that application.
(d) All bank office and bank facilitie , as defIned in thi Title already lawfully establi hed in certain cities, towns or village, hall not be required to apply for the permit hereinabove required to continue the pre ent operations already e tabli hed.
(e) In the event of merger or con olidation of two or more banks pursuant to Chapter 14 of this Title where all of the con tituent bank shall have either a parent bank or a branch bank located in the same county, then the urviving or re ulting bank hall be the parent bank and may retain and continue to operate any or all places of bu iness of each constituent bank as either a branch bank, a bank office or a bank facility a i consi tent with and may be authorized by this Title. In the event of the purcha e of su b tantiaUy all of the a et of a bank pur uant to the approval of the Superintendent of Banks, where both the elling and the purcha ing bank shall have either a parent bank or branch bank in the same county, then the purchasing bank hall be the parent bank and may retain and
XI-4
May, 1975

13-203

continue to operate any or all places of bu ine of the elling bank as either a branch bank, a bank office, or a bank facility, as i con i tent with and may be authorized by this Title.
(f) (1) Th'e provisions of any other laws to the contrary notwithstanding, a branch bank may be establi hed through merger, con 0lidation, or ale of assets pursuant to the provision of hapters 41A-24, 41A-25, or 41A-26 of the Financial In titutions Code of Georgia where, prior to such merger, con olidation or ale of assets, the Commi sioner and the appropriate federal regulatory authority have detennined that one of the parties to the merger consolidation or ale of a ets:
(A) is insolvent or in an un 'afe or un ound condition to tran act it busine . and
(B) ha g nerally suspended payment of its obligations without authority of law; and where the oth r party maintains either a parent bank or a branch bank within the same county; provided that where banks might merge or consolidate in accordance with the foregoing are unwilling to enter into uch merger or consolidation, the other party may be a bank which maintains either a parent bank or branch bank within an adjacent county; and provided further that, where no banks in the adjacen t county are willing to enter into such a merger or con 0lidation, the other party may be any bank domiciled within this State.
(2) othing herein contained hall be constnled to permit the bank which ha been found in olvent or suspended payment pursuant to ( ) or (B) of ub ection I of this Section to accept, under Ie favorable terms than can be obtained from a bank within it county a merger with a bank outside the county in which it is located.
13-203-2. Expan ion or Exten ion of the Existing Facilitie. otwithstanding any other provisions of this hapter, a bank may establish and operate a facility as hereinafter provided which hall not be considered a an additional office or facility as defined in thi Chapter but such facility hall be deemed an expansion or extension of the existing parent bank, branch bank, bank office or bank facility.
Any such facility may be established under the following conditions and circumstance only:
(a) within the boundary lines of a ingle contiguous area of property owned or leased and occupied as a banking house or place of busine s by uch parent bank, branch bank, bank office or bank facility whether or not such facility is physically connected to the banking house or place of business' or
(b) across a street, alley railroad right-of-way, or thoroughfare from the existing parent bank, branch bank bank office or bank

May, 1975

Xl-5

13-203
facility when uch facility is phy ically conne ted to the banking hou e or place of bu ine by a private, enclo ed ecure overhead pa ageway or underground tunnel; or
(c) within two hundred (200) yard of a parem bank branch bank, bank office or bank facility wh ther or not such facility is phy ically connected to the banking hou or place of bu ines and after being granted the prior written approval of the Department tating that sl:;h facility qualifie for thi xc ption.
(d) within th county in which a par nt bank or bran h bank i located provided uch facility i e tabli hed with the approval of the Commi ioner and i an unmanned automated tiler facility or un manned point-of- ale terminal as hereinafter d fin d. Such fa ilitie may be operated individually by any bank or jointly on a co t- haring ba i by two or more bank or other financial in ti tution . ' utomated teller facilities' mean electronic or mechanical equipment which performs -routine banking tran action for the public at location off premi e of a parent bank, branch bank, bank office, r bank facility under regulations pre cribed by the ommi ioner. Automatic tell r hall be unmanned. 'Point-of- ale terminal mean electronic or mechanical equipm nt located in nonbank bu in ou tlet to r cord, dir cUy wi th a bank tran action occurring a arc ult of the ale of good or ervice .
Provided, however that the bank facility located on Robin Air Force Ba e in Hou ton ounty, Georgia, hall not be authorized to etabli h an automated t Her facility or point-of- ale terminal anywhere in Hou ton oun ty.
(e) loan production office hall not be con id red to be a parent bank branch bank bank office or bank facility.
13-204.1 Banking Bu ine Prohibited Except at a Banking Hou e. o bank hall carry on or conduct or do a banking bu in in thi t except on th premi e of th place of busine (banking hou e) e tabli h d and operated under and pur uant to a pennit from the Superintendent of Bank. banking bu ine i the bu ines which a bank i authorized to do pur uant to hapter 13-18 of thi Title and the Banking La . It i intended that thi Section be con tru d a a part of the law of thi Stat dealing with branch banking. 13-208. Suit by Superintendent of Bank. The Superintend nt of Bank of thi State may bring an appropriate civil action to enforce any provi ion of thi hapter whether by injunction, or otherwi e, in an I up rior ourt of thi State having juri di tion of one or more 01 the d fendan t .

Y. 1975

XI-6

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TABLE OF CO TENTS PART XII - INTEREST DUSURY.

Section 28-50 I. Section 28-502. Section 28-503. Section 28-504. Section 28-505. Section 28-506.

Short Title of Chapter. Scope. Definition. Finance harge. Additional Charge. Penaltie ; Waiver.

(Section 28-501 through Section 28-506 - Lender Credit ard Act)

Section 57-101. Section 57-101.l.
ection 57-109. Section 57-116.
Section 57-118. Section 57-I 19. Section 57-20 I.
Section 57-202.
Section 96-1002. Section 96-[004. Section 25-3 [5. Section 41 A-31 09.

Legal Rate of [ntere t; Rate Higher than Eight Percentum Forbidden. Ma imum Interest on Real Estate Loan. Payment on Debt, How Applied to [ntere t. [ntere t on Loans to be Repaid in Monthly, Quarterly, or Yearly Installment . Interest Payable by Profit orporation on Loan in E ce of $2,500. Interest Rates on Loans of $100,000 or More. Rate of Charge Regulated; Renewal or Additional Loan; Rjoht of Borrower to Anticipate Payment. 'Rate of Charge' Defined; [n urance Requirement; Right of Parties Where no Loan on ummated; [ntere t Rate. Definitions. Finance Charge Limitation. 1aximum Rate of harge. Maximum Rate of [ntere t Permitted to Credit Unions.

GTE: The following Code Section hould be read in conjunction with ection 41 A-1313 of the Financial In titution ode of Georgia to determine Maximum Rates of harge Permi ible to Banking [n titution .

28-501
PART XII. SELECTED LAWS GOVER ING I TEREST D USURY.
LE DER CREDIT C RD ACT
28-501. Short Title of Chapter. Thi Chapter haJJ be known and may be cited a The Lender Credit Card Act.'
28-502. Scope. This Chapter applie to revolving loan account made pursuant to a lender credit card.
28-503. Definition. (a) The term lender' means a financial organization other than an insurance company or other organization primarily engaged in an insurance bu ine :
(I) Organized chartered or holding an authorization certificate under the law of thi State or of the United States which authorize the per on to make loan and to receive depo it including a aving hare, certificate or depo it account and
(2) Subject to upervision by an official or agency of this State or of the United States.
(b) The term 'lender credit card' mean an arrangement or loan agreement pur uant to which a lender give a debtor th privilege of u ing a credit card or other credit confirmation or identification in transactions out of which debt ari e :
(I) By the lender's honoring a draft or similar order for the payment of money drawn or accepted by the debtor'
(2) By the lender' payment or agreement to pay the debtor' obliga tions.
(c) The term 'revolving loan account' mean an arrangement between a lender and a debtor for the creation of debt pursuant to a lender credit card and under which:
(I) The lender may permit the debtor 0 to create debt from time to time;
(_) the unpaid balance of principal of uch debt and the loan finance and other appropriate charges are debited to an account
(3) A loan finance charge i computed on the out tanding balances of the debtor' account from time to time; and
(4) The lender is to render bill or tatements to the debtor at regular interval (the 'billing cycle'), the amount of which bill or tatement i payable by and due from the d btor on a specified date tated in uch bill or tatement or at the debtor' option may be paid by the debtor in in taUment .
28-504. Finance Charge. otwith tanding the provi ion of any other law, on a revolving loan account a lender may re eive or contract to receive and collect a loan finance charge in an amount not in exce of 111 percent per month of either the average daily unpaid balance of the debt during the billing cycle, or of the unpaid balance of the debt on the arne day of the billing cycle. If the billing
XIl-l

28-504
cycle i other than montWy, the maximum loan finance charge for such billing cycle shall be the p rcentage which bear the same
relation to I Y2 percent as the number of days in the billing cycle
bear to 30. A variation of not more than four days from billing cycle to billing cycle shall be deemed the arne day of the billing cycle.'
28-505. Additional Charge. In addition to the finance charge permitted by Section 28-504, a lender may contract for and receive the following additional charges in connection with a lender credit card:
(I) A fe for making a ca h advance pur uant to a revolving loan account uch fee not to exceed the greater of 5, or an amount not exceeding $25 which i 5 percent of the amount of the ca h advance;
(2) A delinquency charge on any required minimum installment not paid within five day after it maturity in an amount not exceeding the greater of I or an amount not exceeding 5 which i five percent of the amount of the unpaid minimum installment, provided that a delinquency charge may be collected only once on an in tallment however long it remain in default'
(3) Charge for premiums on credit life and credit accident and health in urance for which a eparate charge is di clo ed to the debtor' and
(4) AU cost, disbursements and rea onable attorney' fees incurred by the lender in legal proceeding to collect and enforce the debt in the event of delinquency by th debtor or in the event of a breach of any obligation of the debtor under the arrangement.
28-506. Penaltie; Waiver. (a) Any lender who wilfully makes charge in exce of tho e permitted by thi hapter i guilty of a misdemeanor and upon conviction may be entenced to pay a fine not exceeding 1,000.
(b) Any lender who knowingly contracts for charge or receives charge in excess of tho e permitted by this Chapter shall pay to the debtor an amount equal to two times the total charges added to his account, plu rea onable attorney' fee incurred in collecting the penalty. If such lender shall, a the result of an accidental or bona fide error, contract, charge or receive a greater amount than permitted by this Chapter he hall not be subject to any penalty under thi Chapter if it i corrected within 20 day from the time uch lender notices or i notified in writing of the error' but failure to correct an overcharge within 20 day shall subject such lender to the penalty tated in the previou sentence. If the amount of the overcharge i Ie s than 5 or if the overcharge is corrected without it having been called to the attention of the lender by a debtor or Someone acting on behalf of a debtor there shall be a rebuttable presumption that the overcharge was an accidental or bona fide error' otherwi e, there hall be a rebuttable pre u,mption to the
XII-2

28-506 contrary. Such pre umption may b rebutted by a preponderance of th evidence indicating a contrary con lu ion. Howev r, the lender may recover from the debtor an amount equal to the principal amount of the debt in any event.
(c) It hall be again t the public policy of thi State for any of the provi ion of this Chapter which are established in favor of the debtor to be waived by any informal or formal agreement before, at the time of, or after the creation of a debt within the regulation of thi Chapter.
XII-3

57-101 LEGAL RATE OF I TEREST (SIMPLE)
57-101. (3426, 3436) Legal Rate of Intere t; Rate Higher than Eight Percentum Forbidden. The legal rate of intere t shall be even percentum per annum where the rate percentum i not named in the contract, and any higher rate must be pecified in writing but in no event shall any per on, company or corporation reserv , charge, or take for any loan or advance of money or forbearance to enforce the collection of any urn of money any rat of intere t greater than eight percentum per annum, either directly or indirectly by way of commis ion for advances di count, exchange or by any contract or contrivance or device whatever.
XII-4

57-101.1
MAXIMUM I TEREST 0 REAL ESTATE LO S
57-101.1. Maximum [ntere t on Real Estate Loan. (a) otwith tanding any other provi ion of thi Code, Title or any other Act to the contrary, the maximum rate of intere t of eight percent per annum hall not be applicable and the legal maximum rate hall be nine percent per annum in transaction where the ecurity given for any loan charge re erve advance of money or forbearance to enforce collection of money i or includes real property or an intere t therein: provided however that the rate of intere t for a loan, the repayment of which i guaranteed by the Veterans Admini tration pur uant to the provi ion of Public Law 85-857 (72 Stat. 1203) or in ured by the Federal Hou ing
Administration pur uant to the provi ions of Subchapter n of
Chapter 13 of Title 12 of the United State Code Annotated may exceed nine percent per annum: and provided, further, that amounts paid to or contracted to b paid to the lender by per on other than the borrower hall not be con idered interest and hall not be taken into account in the calculation of interest.
(b) For the purpo e of thi Title, it i declared to be the intent of the legi lature and the exi ting law of Georgia that the rate of interest shall be computed upon the as umption that the debt will be paid accord ing to the agreed terms and will not be paid before the end of the agreed term. Any urns of money re erved or taken for the loan or forbearan e which are in the nature of and taken into account in the calculation of intere t even though paid at one time, hall be pread over the tated term of the loan for the purpo e of determining the rate of intere t under this Code Section.
(c) The foregoing ub ection hall apply to all loan tran action and renewals and extensions of prior loan tran action entered into after the effective date of thi Code Section (February 26 1969).
(d) othing contained in thi Code Section hall be con trued to amend, modify super ede or repeal any Act Code Section or any other law which presently allows any per on company or corporation to reserve, charge, or take for any loan or advance of money, or forbearance to enforce the collection of any urn of money any rate of interest greater than eight percent per annum including, but not limited to, the Georgia Indu trial Loan Act (Chapter 25-3)' or Code Section 57-118 relating to intere t rate on loan by certain corporation . or Chapter 57-2, relating to charge and intere t on secondary ecurity deeds; or Code Section 57-116 relating to interest on in tallment loans.
XII-5

57-109 PAYME TO DEBT HOW APPLIED TO INTEREST
57-109. Payment on Debt How ppHed to Interest. When a payment i made upon any debt, it hall be applied first to the di charg of any interest due at the time, and the balance if any to the reduction of the principal. If the payment doe not extinguish the intere t then due, no intere t hall be calculated on such balance of intere t but only on th principal amount up to the tim of the next payment.
XII-6

57-116 MAXIMUM INTEREST 0 I STALLME T LOA S 57-116. Intere t on Loans to be Repaid in Monthly, Quarterly or Yearly Installments. Any per on, natural or artificial in thi State, I nding money to be paid back in monthly quarterly or yearly installments, may charge intere t thereon at LX percent per annum or less for the entire period of the loan aggregating the principal and intere t for th entire period of the loan and dividing the arne into monthly quarterly or yearly in tallments and may take security therefor by mortgage with waiver of exemption or title or both, upon and to real estate or per onal property or both, and the arne hall be valid for the amount of the principal and intere t charged; and uch contract hall not be held usuriou .
XII-7

57-118 MAXIMUM I TEREST TO CORPORATIO S
57-118. Interest Payable by Profit Corporation on Loans in Exce of S2,500. otwith tanding any contrary provision of law any foreign or domestic corporation organized for pecuniary gain may in writing agree to pay such rate of interest as uch corporation may determine on any loan under which the principal balance to be repaid shall originally exceed the urn of $2 500 or on any series of advances of money pursuant to a loan agreement or undertaking if the principal balance to be repaid thereunder shall originally exceed the urn of S2 500 or on any serie of advances of money pur uant to a loan agreement or undertaking if the principal balance to be repaid thereunder hall originally exceed the sum of $2 500 or on any xtension or renewal thereof and as to any uch transaction the claim or defense of usury by such corporation or it ucces or or anyone in it behalf is prohibited: provided, however, that nothing contained in this Section shall apply to any loan to a public charitable, religious, or other nonprofit corporation.
XII-

57 -119
AXIMUM INTEREST 0 LOA S OVER $100,000 57-119. Intere t Rate on Loan of $100,000 or More. otwithstanding any contrary provi ion of law, any per on (and for the purpose of thi Section the term 'per on' hall include but not be limited to individuals group of individual corporation tru t partnerships, limited partner hips joint ventures joint enterpri es, joint arrangements, labor organizations association, or other entitie of any nature whatsoever) may in writing agree to pay and may pay, such rate of interest as such person may determine contract for, or agree to, on any loan, any advance of money any forbearance to enforce a claim for the collection of money any purcha e price any installment obligation or any obligation under which the principal balance to be repaid is 100 000 or more, or on any series of advances of money pursuant to a loan agreement or undertaking if the total principal balance to be repaid thereunder shall originally be 100,000 or more, or on any extension or renewal thereof and as to any uch transaction the claim or defense of u ury by uch person or it ucce or or anyone in its behalf i prohibited. There hall be no re triction on the amount of intere t which may be paid under the laws of the State of Georgia on any loan of 100 000 or more.
XII-9

57-201
MAXlMU I TEREST 0 SECO D MORT GE LO S
57-201. Rate of Charge Regulated' Renewal or dditional Loan Right of Borrower to Anticipate Payment. 0 per on, copartnership, a ociation, trust corporation or other I gal entity shall directly or indirectly charge, take or receive for a loan secured in whole or in part by a ecurity deed, mortgage or other security in trument, other than a fir t ecurity deed fir t mortgage or other first ecurity in trument on re idential real estate improved by th con truction thereon of hou ing consisting of four or Ie family dwelling units, executed by an individual or individual, a rate of charge a herein defined, in addition to interest at a rate hereinafter authorized whether payable directly to the lender or to a third party in connection with such loan, which in the aggregate i greater than 10 percent of the principal amount of the loan as hereinafter defined: provided, that where the stated principal urn of the indebtedne i $1,500 or less, the rate of charge may exceed aid 10 percent but shall not be greater than $150; provided, that if a renewal or additional loan hall b made to the arne borrower within 36 months after the original loan or after the pr viou renewal or additional loan, the borrower hall receive a rebate from the previou Iy charged rate of charge in accordance with the Standard Rule of 78 ba d upon a 36-month term regard Ie of the actual term of the original loan renewal thereof or additional loan. The borrower hall further have the right to anticipate payment of hi debt in whole or in part at any time and hall receive a rebate of the unearned intere t which rebate hall be computed in accordance with the Standard Rule of 78. The aggregate of the amount or value actually received at the time of the loan, plus the afore aid rate of charge plu the urn of all exi ting indebtednes of the borrower paid on hi behalf by the lender, hall be deemed the principal amount of th loan.
57-202. 'Rate of Charge' Defined: In urance Requirement; Right of Parties Where no Loan Con ummated; Intere t Rate. (a) Th 'rat of charge a u ed in this Chapter hall be con trued as a ervice charge and hall include any and every type of charge for c mpensation, consideration or expen e, or for any other purpo e whatsoever including by what oever name called, but not by way of limitation title earche, title report, title opinion title guarantee, credit report investigation co t , preparation of in trument , placement or di count fee, brokerage fee, recording, apprai al . in urance of any nature except a provided in ub ection (b) belo\ . and clo ing co t but aid rate of charge' hall not be onstrued a an inter t charg or a including intere t, and int re t may be charg d in addition th reto upon the prin ipal amount of the loan a defined herein at any rat hereinaft r authorized.
XII-IO

57-202
(b) Evidence of hazard in urance may be required by the lender of the borrower. Decreasing term life insurance in an amount not exceeding the sum of the monthly installment payable under the loan and for a period not exceeding the term of the loan, and accident and health insurance in an amount ufficient to make the monthly payments due on aid loan in the event of di ability of the borrower and for a period not exceeding the life of said loan may also be required by the lender of the borrower. The premium for any such insurance, if paid by the lender on behalf of the borrower shall be included in the principal amount of the loan for the purpose of computing the rate of charge and the rate of interest applicable thereto, but shall not be considered as a 'charge' for the purpo e of the 10 percent limitation on the allowable 'rate of charge.' To the extent that the Insurance Commissioner shall have approved a standard rate for any such insurance the premium charged for such insurance by the lender to the borrower shall not exceed such approved standard rate. Proof of all insurance issued in connection with loans subject to this Chapter shall be furnished to the borrower, within 10 days from the date of application therefor by said borrower, by a certificate from the carrier. A delinquent or 'late charge not exceeding five percent of the montWy payment may be charged on any installment made 15 or more day after the regularly cheduled due date, aid charge to be made only once on any given installment during the term of the loan.
(c) 0 charge for or application fee may be allow d whether or not the loan is con ummated: provided, however that the borrower may be required to reimbur e the lender for actual expen es incurred after acceptance and approval of a loan propo al made in accordance with the provisions of this Chapter which is not con ummated becau e of:
(l) The borrower's wilful failure to close said loan; or (2) The borrower's false or fraudulent repre entation of a material fact which prevents closing of the loan as propo ed. (d) Interest may be charged on the principal amount of the loan as hereinbefore defined at any rate not greater than the greater of: (i) ix percent per annum computed in accordance with the provisions of Section 57-116, as amended, relating to interest on loans to be repaid in montWy, quarterly or yearly installments as amended; or (ii) eight percent per annum if said rate is computed upon the unpaid principal balance outstanding at the time each payment is made with uch payment being applied fir t to the payment of interest and the balance to principal reduction.
XlI-II

96-1002
M XIMUM INTEREST 0 LO S SECURED BY OTOR VEHICLES
96-1002. Definition . (a) Unles clearly indica ted otherwise by the context the following words when used in this Chapter for the purposes of this Chapter shaH have the meanings respectively ascribed to them in this Section:
(l) 'Motor vehicle' means any device or device including automobile, motorcycles motor trucks, trailer and aU other vehicles operated over the public highways and streets of this State and propelled by power other than muscular power, but doe not include traction engines road roller, implements of hu bandry and other agricultural equipment and such vehicle as run only upon a track.
96-1004. Finance Charge Limitation. (a) otwithstanding the provisions of any other law the finance charge exclusive of insurance and other benefits and official fees shall not exceed the foHowing rates:
Class I. Any new motor vehicle designated by the manufacturer by a year model not earlier than the year in which the sale is made -
8 per $100 per year. Cia 2. Any new motor vehicle not in cia s I and any used motor
vehicle de ignated by the manufacturer by a year model of the same or not more than two years prior to the year in which the sale is made - $11 per 100 per year.
Class 3. Any used motor vehicle not in clas 2 and designated by the manufacturer by a year model not more than four years prior to the year in which the ale is made - $15 per $100 per year.
Class 4. Any used motor vehicle not in cia 2 or class 3 and de ignated by the manufacturer by a year model more than four years prior to the year in which the sale i made - $17 per 100 per year.
(b) Such finance charge shall be computed on the unpaid balance on contract payable in uccessive monthly payments substantially equal in amount. Such finance charge may be computed on the basis of a full month for any fractional month period in excess of 10 days. A minimum finance charge of $25 may be charged on any retail in tallment transaction. As used herein, 'unpaid balance' shall be determined in accordance with Section 2268(c) of Regulation Z promulgated by the Board of Governors of the Federal Re erve
y tern pur uant to Title I (Truth in Lending Act) and Title V (general provi ions) of the Consumer Credit Protection Act (Public Law 90-321, 82 Stat. 146 et eq.) as the same existed upon its becoming effective on July I 1969.
(c) When a retail in tallment contract provides for unequal or irregular installment payments the finance charge may be at a rate
XII-I 2

96-1004 which will provide the same yield as i permitted on monthly contracts under paragraph (a) and (b) having due regard for the schedule of payment.
(d) Any ales finance company may purchase or acquire or agree to purcha e or acquire from any seller any contract on such term and conditions a may be agreed upon between them. Unle s the buyer ha notice of the a ignment of hi contract, payment thereunder made by the buyer to the last known holder of such contract hall be binding upon all sub equent holders.
(e) In no event will any uch as ignment bar any right of action against the eller arising as a result of the provi ions of this Chapter or will any such a signment bar any defen e against the ale finance company or other as ignee arising as a re ult of the provisions of Section 96-1 008(b).
XII-13

25-315
MAXIMUM INTEREST A 0 FEES CHARGEABLE BY I DUSTRIAL LOA COMPANIES
25-315. Maximum Rate of Charge. Every licen ee hereunder may loan any urn of money not exceeding 2 500 for a period of two year or Ie and may charge contract for collect and receive intere t and fees, and may require the fulfillment of conditions on uch loans as hereinafter provided:
(a) Charge contract for receive and collect interest at a rate not to exceed eight percent per annum of the face amount of the contract whether repayable in one ingle payment or repayable in monthly or other periodic installment. On loan contracts repayable in 18 months or less, the interest may be discounted in advance, and on contracts repayable over a greater period the intere t hall be added to the principal amount of the loan. On all contracts intere t or di count shall be computed proportionately on equal calendar month.
(b) In addition thereto, charge, contract for receive or collect at the time the loan i made a fee in an amount not gr ater than eight percent of the fir t 600 of the face amount of the contract plus four percent of the exce : provided however that uch fee shall not be carri d or ollected on that part of a loan which is used to payor apply on a prior loan or installment of a prior loan from the arne licensee to the same borrower made within the immediately pr ceding ix months period: provided however if the loan balance i 100 or Ie ,the said period shall be two month, not six months: provided, further that nothing contained in subsections (a) and (b) of thi Section hall be con trued to permit charge, intere t or fee of any nature whatsoever in the aggregate in exce s of the charges, int re t and fees which would constitute a violation of Section 57-117 and the repeals hereinafter set forth in this Chapter shall in no wi e affect Section 57-117 and Section 57-9901. If a borrower prepay hi entire loan to a licen ee and within the following 15 days make a new loan with that licen ee (and if thi is done within the ix-month period or the two-month period above de cribed, a may b applicable) the fee may be charged only on the exces by which the face amount of the new contract exceeds the amount which the borrower repaid to that licen ee within the said 15-day period.
XII-14

Ref. 41A-3109 MAXIMUM RATES OF I TEREST PERMITTED TO
CREDIT UNIO S Refer to Section 41 A-31 09 of the Financial In titutions Code of Georgia.
XII-15/XII-16

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Section I
PART XIII. CREDIT UNIO DEPOSIT
I SURA CE CORPORAno .
Section t. (a) Within one year after the effective date of this Act, the duly authorized repre entative of not Ie than three credit union chartered and exi ting under the law of this State may petition the Secretary of State for incorporation of a nonprofit Credit Union Depo it Insurance Corporation herein referred to a the Corporation'. Such petition hall be accompanied by article of incorporation in triplicate which shall include the following:
(1) the name of the propo ed corporation, which shall include the word Credit Union Depo it Insurance Corporation' and no corporation other than one incorporated pur uant to this Act shall u e the word in equence 'credit union depo it in urance corporation'
(2) the location of it initial regi tered office (3) the purpo e and nature of the bu ine of the Corporation which hall be to aid and a si t any member credit union which i in liquidation or facing liquidation due to in olvency in order that the depo it and hare of any member hall be in ured or guaranteed again t 10 s in uch amount a may from time to time be established by the board of directors of the Corporation pur uant to th provision of this Act (4) membership in the Corporation which shall be limited to State chartered credit unions operating in this State, approved for membership by the directors of the Corporation upon recommendation of the Commissioner of the Department of Banking and Finance of this State, hereinafter referred to as the 'Department' and (5) the term of existence of the Corporation, which shall be perpetual unles otherwise limited. (b) Upon receipt of the articles, the Secretary of State shall forward one copy to the Department. (c) Before the articles are approved by the Department, an appropriat.e investigation shall be made by the Department for the purpose of determining (1) whether the articles conform to the provisions of this Act (2) the general character and fitness of the petitioners (3) the economic advisability of establishing the proposed corporation; and (4) whether such corporation would cause undue harm to a Corporation already existent under this Act. Upon approval of the articles in writing by the Department uch written approval shall be delivered to the Secretary of State. (d) Upon receipt of the approval of the Department the Secretary of State shall thereupon issue a certificate of incorporation to the petitioners.
XIII-l

Section 2
Section 2. Amendments to the articles of incorporation adopted by a vote of two-thirds of the member credit union pre ent at an annual meeting or a special meeting called for that purpose, shall be filed with the Secretary of State in the same manner as the original articles and shall become effective upon approval by th Department and subsequent notification of the Secretary of State.
Section 3. (a) At it organizational meeting the membership of the Corporation hall adopt bylaw to govern the operation of the Corporation which hall be submitted to the Department for approval. If found to be consistent with this Act, conducive to the purposes for which the Corporation was formed and equitable to all member the bylaws shall be approved by the Department.
(b) The original bylaws shall be adopted by and may thereafter be amended by a vote of at least two-thirds of the member present and voting.
Section 4. The orporation may: (a) enter into contracts including contract for reinsurance; (b) sue and be sued' (c) adopt, use and display a corporate eal; (d) advance funds in accordance with agreed terms and condition to aid member credit unions to operate and to meet liquidity requirements' (e) a ume control of the property and business of any member credit union upon the written direction of the Department and operate the credit union in accordance with the recommendations of the Department (f) assist in the merger, consolidation or liquidation of member credit unions; (g) receive money or other property from its member credit unions, or any corporation association or person' (h) invest its funds in such manner as permitted to credit unions under the laws of this State, and in uch other manner as may be approved by the Department (i) borrow money from any source upon such terms and conditions as the board of directors may determine; U) purcha e in it own name, hold and convey property of any nature necessary for the convenient transaction of its business' (k) receive by as ignment or purchase from its member any property of any nature owned by those members' (I) ell, assign, mortgage, encumber or transfer property of any nature' (m) declare and pay dividends on membership fees with the approval of the Department; (n) adopt and amend bylaws' rules and regulations carrying out the purpo e of the Corporation.

Section 5
Section 5. (a) Any State chartered credit union may become a member of the Corporation upon application by it directors, recommendation of the Department and approval of the director of the Corporation.
(b) Before making its recommendation the Department hall con ider:
(l) the history, financial condition and management policies of the applicant
(2) the economic advi ability of insuring the applicant without undue risk to the fund
(3) the general character and fitnes of the applicant s management
(4) th convenience and needs of the member to be served by the applicant; and
(5) whether the applicant is a cooperative association organized for the purpo e of promoting thrift among its members and creating a ource of credit for provident or productive purposes.
(c) Membership in the Corporation may be terminated upon thirty days' written notice to the Corporation and after providing evidence sati factory to the Department that alternate, comparable in urance of deposits ha been obtained by the credit union. Upon termination of membership, the credit union shall be entitled to the refund set forth in ubsection (d) of Section 6.
Section 6. (a) Each credit union accepted for membership with the exception of newly formed credit unions shall be required to pay a membership fee of one percent of the deposits and shares of the credit union up to $1,000,000.00, plus one-half of one percent of the deposits and hares of the next 4 000 000.00 plu one-fourth of one percent of the deposits and hare over 5 000 000.00; provided, however that the maximum amount of the required fee hall be 100,000.00. Payment of the membership fee may be made in three equal installment the first installment being due upon the approval of the member credit union's application and the remaining two installments being due annually thereafter.
(b) Minimum member hip fees for newly formed credit unions accepted for membership shall be established by the board of directors with the approval of the Department.
(c) Membership fees when paid by the individual member credit union may be charged to it regular reserve account, or undivided earning, or may be established a an a set, or charged in such other manner as may be approved by the Department.
(d) The membership fee and annual premiums of each member credit union may be refunded in whole or in part to the extent that the unemcumbered funds of the Corporation exceed two percent of the aggregate total deposits and hares of the member credit unions a determined by the most recent call report of condition submitted
XI 11-3

Section 6
to the Department. Special a sessments levied pursuant to subsection (b) of Se tion 7 may be repaid in such manner as may be approved by the director of the Corporation with approval by the Department. Refunds maybe paid only to members of the Corporation at the time of declaration by the directors or the Corporation in proportion to their paid-in membership fees.
(e) Upon termination or revocation of member hip, the credit union shall be entitled to refunds as follows:
(I) membership fees in full within thirty days; (2) pro rata portion of annual premium which is unearned by the Corporation in full within thirty days (3) any special assessments in accordance with its terms. Section 7. (a) A regular annual premium, not to exceed onetwelfth of one percent of the m mber credit union's deposit and shares shall be levied by the directors of the Corporation. Such premium may be rai ed, lowered or waived annually by the directors with prior approval by the Department in the event that the total fund held by the Corporation justify or require such change. (b) In the event of potential impairment of the Corporation's funds special a se ments may be levied by the director of the Corporation with the prior approval of the Department; provided such special asses ments hall not exceed one percent of each member credit union's deposits and share. Such special assessments shall be in the form of loans from the member credit union to the Corporation. (c) Annual premiums and special asse sments shall be based upon deposits and shares of member credit unions as reported to the Department in its most recent annual call report of condition and shall be payable within thirty days of the date on which the Corporation notifies it members of such assessment. (d) Annual premiums paid hereunder shall be charged to the operating expen es of each member credit union. (e) In the event of liquidation of the Corporation all assets remaining after the payment or provision for payment of all debts and taxes and expenses of liquidation shall be distributed to the then existing member credit union in proportion to their membership fees paid into he Corporation. Section 8. (a) Upon receipt of the first installment of the pre cribed membership fee from the credit unions which have agreed to become members of the Corporation a provided in this Act the Corporation may commence it in urance of the deposits and shares of the member credit union. (b) Each member credit union may advi e its members and advertise that its deposits and shares are insured by the Corporation,
XIII-4

Section 8
in such manner established by the directors of the Corporation and with approval by the Department, upon receipt of a notification from the Corporation that it has been accepted for membership in the Corporation by it directors.
(c) The amount of insurance coverage on deposit and share provided by the Corporation may be increa ed from time to time by the directors of the Corporation with the approval of the Department; provided, however that in no event may the insurance be increased in amount beyond that provided by the Federal Deposit In urance Corporation the Federal Savings Loan In urance Corporation and the ational Credit Union Administration.
(d) 0 other forms of insurance except that authorized by thi Section may be old or offered by the Corporation.
Section 9. The Corporation's bu ine s shall be conducted by the incorporators who shall serve until the organizational meeting of the Corporation, at which time not less than three directors shall be elected by the member of the Corporation in accordance with the bylaw. Thereafter, the Corporation' business hall be conducted by the director.
Section 10. The Corporation hall not be deemed an insurance company within the meaning of the laws of the State of Georgia relating to insurance or providing for the supervision of insurance companies, but it shall be subject to the exclusive supervi ion of the Department. The Department hall exercise the same power and authority over the Corporation as is now or hereafter exercised over banks cr dit unions and building and loan a ociations under its juri diction and shall issue such rules and regulations a shall be necessary to carry out its responsibilities under thi Act.
Section 11. (a) The Department shall forward to the Corporation copie of all examination reports of member credit unions or ummaries thereof. In the event a summary is provided, the Corporation may request a complete and full report.
(b) The Corporation may request the Department to conduct additional examinations or to order independent audits of the records of member credit unions. The Department shall cooperate with the Corporation upon such a request but shall use its discretion in determining the scope and timing of uch additional examinations or audits.
( ) If the directors of the Corporation ascertain evidence of careles ne , unsound practices or mismanagement of any member credit union which appears to adver ely affect the solvency of the credit union or threatens undue loss to the Corporation the directors may order that corrective action b taken, or revoke the credit union membership in the Corporation and recommend to the Department that the credit union be liquidated. The Department hall be provided a copy of any such order or letter of revocation. In
Xlll-S

Section 11
the event of revocation of its membership, the credit union shall notify all of its members of such revocation and that the deposits and shares are no longer in ured by the Corporation' provid d in the event membership i revoked, insurance coverage shall continue in effect for 180 days. 0 refund required by ub ection (e) of Section 6 hall be payable until after in urance coverage is terminated.
(d) If any member credit union shall fail to pay any assessment "r membership fee lawfully required under this Act, the director of the Corporation shall notify the Department, and the Department shall forthwith notify the credit union in writing. The failure of such credit union to make such payment within fifteen day after the said written notice may subject the credit union to the anction set forth in ub ection (c) of this Section.
Section 12. (a) If a credit union i aggrieved by a decision or order of the Corporation or if the Corporation is aggrieved by a decision or order of the Department, the credit union or the Corporation, as the case may be shall, upon appropriate petition and after due notice, be entitled to a hearing and administrative review of the action before the Department, which may stay enforcement of such actions pending the administrative review.
(b) Judicial review of uch decisions or order other than deci ions or order to revoke a credit union' membership hall not be available unle s the aggrieved party has sought administrative review under thi Section.
Section 13. The Corporation hall be exempt from all State and local taxe except real property taxes.
Section 14. Any building and loan a sociation chartered under the laws of the State of Georgia shall be entitled to membership under this Section.
Section 15. In the event any section, ub ection, sentence clause or phras of thi Act shall be declared or adjudged invalid or uncon titutional, uch adjudication hall in no manner affect the other e tion, ub ction entences clau es or phra e of thi A t which hall remain of full force and effect, a if the ection subsection, sentence, clause or phrase so declared or adjudged invalid or unconstitutional were not originally a part hereof. The General A embly hereby declares that it would have passed the remaining parts of thi Act if it had known that such part or parts hereof would be declared or adjudged invalid or unconstitutional. "
Section 16. All law and parts of law in conflict with thi A t ar hereby repealed.
XIII-a

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oii:

DEPARTMENT OF BANKING AND FINANCE RULES AND REGULATIONS

TABLE OF CONTENTS

CHAPTER

PAGE NO.

80-1-1
80-1-2 80-1-3 80-1-4 80-1-5 80-1-6 80-1-7 80-1-8
80-1-9 80-1-10 80-1-11 80-1-12 80-1-13 80-1-14 80-5-1

Applications for Establishment or Relocation of

Banks, Bank Offices and Facilities or Extensions

of Existing Facilities. . . . . . . . . . . . . . . . . . . . . . . .. 1

Bank Service Contracts. . . . . . . . . . . . . . . . . . . . . .. 7

Books and Records . . . . . . . . . . . . . . . . . . . . . . . . .. 9

Investment Securities . . . . . . . . . . . . . . . . . . . . . . .. 19

Loans and Discounts

21

Bank Financial and Other Reports . . . . . . . . . . . . .. 31

Legal Reserves

33

Disposition of Dormant Accounts and

Abandoned Property

37

Borrowed Money .. . . . . . . . . . . . . . . . . . . . . . . . . . 41

Fixed Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

Public Disclosure of Information

47

Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 49

Correspondent Funds . . . . . . . . . . . . . . . . . . . . . . .. 51

Audits

53

Supervision, Examination, and

Investigation Fees

55

RULES OF
DEPARTMENT OF BANKING AND FINANCE BANKS
CHAPTER 80-1-1
APPLICATIONS FOR ESTABLISHMENT OR RELOCATION OF BANKS, BANK OFFICES AND FACILITIES OR EXTENSIONS
OF EXISTING FACILITIES
TABLE OF CONTENTS
80-1-1-.01 Form of Application, Request for 80-1-1-.02 Submission and Completion of Applications 80-1-1-.03 Order oflnvestigation 80-1-1-.04 Notification of Filing, Protest 80-1-1-.05 Public Hearing 80-1-1-.06 Extensions of Existing Facilities
80-1-1-.01 Form of Application, Request for (l) Applicants submitting to the Department of Banking and Finance a statement in support of an Application (Petition) for Bank Charter, an Application for Approval to Establish a Bank Office or Bank Facility or an Application to Relocate any Office or Facility shall use forms provided by the Department of Banking and Finance in the preparation of such Statement or Application. (2) A request for forms must be in writing, and must contain a precise statement as to the proposed location of the proposed bank, bank office or bank facility. In the case of a request for Statement forms to be submitted in support of a petition to the Secretary of State for a Bank Charter, the request also must contain the names and addresses of the organizers and the capitalization proposed for the bank.
Authority: Ga. L. 1960, pp. 67, 72; 1963, pp. 602,604; 1967, p. 555; 1970, pp.954,958; 1919,p. 165; 1955,p.201; 1964,p. 689.
80-1-1-.02 Submission and Completion of Applications (1) A Statement in support of an Application for Approval of a Bank Charter shall be fJ.led with the Department of Banking and Finance simultaneously with the filing of the Application (petition) for Charter with the Secretary of State. If the Department of Banking and Finance notifies the organizers of deficiencies in the Statement, they must complete the Statement within thirty (30) days after they receive such notificiation. (2) A Statement in support of a Petition for charter, or an application for permission to establish a bank office or bank facility

Chapter 80-]-] Page 2
will not be deemed to have been filed and received until such time as the required fee ha been paid and all portions of the statement or application have been completed to the satisfaction of the Department of Banking and Finance. The investigation fee for bank charters
a pre cribed by law is * $750; the investigation fee for bank offices
or facilities shall be $500.
Authority: Ga. L. 1974, p. 733.
80-1-1-.03 Order of Investigation (I) A Statement or Application will not be considered for investigation until accorded official acceptance in compliance with the above regulation, until a similar application to the Federal banking agency having jurisdiction (Federal Deposit Insurance Corporation or Federal Reserve Bank of Atlanta) has been accepted for filing by the Federal agency, and until any required publication of otice of Filing is completed. (2) Investigations of conflicting applications shall be conducted by the Department of Banking and Finance in order of receipt and official acceptance of the required Statements or Applications, in accordance with the above, as determined by the dates of acceptance recorded by either the Department of Banking and Finance or the appropriate Federal banking agency, whichever is later. (3) Where an application filed with the Department of Banking and Finance conflicts with an application filed with the Regional Admini trator of ational Banks, the Department reserves the right to withhold investigation of its application where such ational Bank application ha previou Iy been accorded official acceptance for filing by the Office of the Regional Administrator of ational Banks.
Authority: Ga. L. 1974, p. 733.
80-1-1-.04 otifica tion of Filing, Protest (I) Applicants will be notified of official acceptance of application for filing. Upon receipt of such notification, the applicant shall forthwith cause a notice in uch form as the Department may prescribe, to be published in a newspaper of general circulation in the community in which the applicant's main office is located and in a newspaper of general circulation in the community in which the applicant proposes to engage in business as notification to any interested parties of their right to protest the application. (2) Any per on desiring to protest an application must notify the Department of Banking and Finance in writing of their intention to protest within 15 days of the date of the publication of the notice in paragraph (I). (3) All per on filing the notice of intent required by this regulation on a timely basis shall be notified of a date for hearing as
* Superceded by 80-5-1 - now $2500.
2

Chapter 80-1-1 Page 3
established by the Department. Intention to appear at such hearing must be filed in writing with the Department within 15 days from date of notification of hearing date. Failure to file such intentions shall constitute grounds for canceling any scheduled hearing.
(4) otwithstanding other provisions of this regulations, final determination to grant, conditionally or otherwise, or deny any application shall be in the sole discretion of the Commissioner of Banking and Finance or his legally authorized representative, and such action shall be final; provided, however, no action shall be required before the expiration of 90 days after the date of filing of the application.
Authority: Ga. L. 1925, p. 132; 1949, p. 308; 1951, pp. 287, 288; 1964, p.338; 1974,p. 733.
80-1-1-.05 Public Hearings (l) Hearings shall be conducted in accordance with the following procedure:
(a) The applicant and each other participant may make opening statements in length within the discretion of the presiding officer. Such opening statement should precisely state what the participant intends to show. The applicant shall have the opportunity to present his statement first.
(b) Following the opening statement, the applicant shall present his data and materials oral or documentary.
(c) Following the applicant's presentation a person contesting the application shall present his data and material oral or documentary. The conte tants may agree, with the approval of the presiding officer, to have one of their number make their presentation.
(d) Following the evidence of the applicant and the contestant, the presiding officer in his discretion may recognize other interested persons who may present their views with respect to the application under consideration.
(e) After all the above presentations have been concluded, the participants may make short and concise summary statements reviewing their positions. The applicant shall present his concluding summary statement first. (2) The obtaining and use of witnesses is the responsibility of the parties. All witnesses will be present on their own volition, but any person appearing as a witness may be subject to questioning by any participant or by the presiding officer. The refusal of a witness to answer questions may be considered by the Department in determining the weight to be accorded the testimony of that witness. Witnesses shall not be sworn. (3) The presiding officer shall have the authority to exclude data or materials which he deems improper or irrelevant. Formal rules of
3

Chapter 80-1-1 Page 4
evidence shall not be applicable to these hearings. Documentary material must be of a size consistent with ease of handling, transportation, and filing and copies must be provided for each participant. While large exhibts may be used during the hearing, copies of such exhibits must be provided by the party in reduced size for submission as evidence. Two copies of all such documentary evidence shall be furnished to the Department and one copy shall be furnished to each other person represented at the proceeding.
(4) The presiding officer or any person designated by the Department shall be the final judge of all procedural questions not governed by this rule. The presiding officer shall have the authority to limit the number of'witnesses to be used in any part, and to impose such final limitations as he shall deem reasonable.
(5) The transcripts of each proceeding including a copy for each participant and two copies for the Department shall be arranged for by the Department, with all expenses of such service being borne by the person or persons requesting the opportunity to be heard, except for hearings ordered by the Department where the applicant will bear the expense of furnishing transcripts of the record.
Authority: Ga. L. 1925, p. 132; 1949, p. 308; 1951, pp. 287, 288; 1964, p. 338; 1974, p. 733.
80-1-1-.06 Extensions of Existing Facilities (1) Applications submitted for the approval of extensions of existing facilities pursuant to Section 13-203.2, subsection (c) and (d) of the Code of Georgia shall be in letter form and shall specify the exact location of such facilities and the distance from such facilities to the nearest approved branch, office, or facility of the applicant. The letter shall further itemize the cost of establishing the facilities and, where the site is to be leased, shall include a copy of any proposed lease agreement. (2) The term "unmanned" as used in Section 13-203.2, subsection (d) of the Code of Georgia shall generally have reference to persons regularly employed by a bank or acting as its agents, but shall not include persons performing only maintenance or servicing duties with respect to automated teller equipment or point-of-sale terminals or persons demonstrating the operations of such machines during the first 60 days of their operation whether or not such persons are employed by a bank; nor shall the term include persons regularly employed by merchants and acting as agents for the merchants in completing transactions occurring as a result of the sale of goods or services through point-of-sale terminals housed on the merchants' premises. (3) The term "loan production office" as used in Section 13-203.2 subsection (e) of the Code of Georgia shall mean a place of business of a bank or of a subsidiary of a bank established outside of
4

Chapter 80-1-1 Page 5
a county in which the bank is otherwise authorized to maintain a bank office in this State and established for the sole purpose of soliciting loans or leases of personal property. Such loans must be disbursed from an authorized bank office, and no depository relationship may be solicited or created as a direct result of the transacti0 n.
Authority: Ga. L. 1966, pp. 590, 591; 1973, pp. 526-527; 1975, p. 475. Effective Sept. 17, 1975
5

6

RULES OF
DEPARTMENT OF BANKING AND FINANCE BANKS
CHAPTER 80-1-2 BANK SERVICE CONTRACTS
TABLE OF CONTENTS
80-1-2-.01 General Provisions and Definitions 80-1-2-.02 Application for Pennission to Perfonn Bank Services 80-1-2-.03 Contracting to Perfonn or have Perfonned Bank Services
80-1-2-.01 General Provisions and Definitions (1) No state bank shall cause to be perfonned by contract or otherwise, any bank services for itself with any bank service corporation or others, whether on or off its premises, without the prior consent of the Department of Banking and Finance. (2) The tenn "bank services" means services such as check and deposit sorting and posting, computation and posting of interest and other credits and charges preparation and marking of checks, statements, notices and similar items, or other clerical bookkeeping, accounting, statistical or similar functions perfonned by a bank. (3) Prior consent shall be deemed to have been given if the bank or bank service corporation seeking to perform bank services for state banks obtains approval in accordance with the provisions of this regulation to contract for the performance of such ervices with state banks.
Authority: Ga. L. 1974, p. 733, 739.
80-1-2-.02 Application for Pennission to Perfonn Bank Services (1) Bank service corporations and banks wishing to perform bank services for State Chartered banks shall submit the following information in upport of their letter-fonn applications for approval to contract with state banks for the performance of bank services:
(a) A copy of the standard form contract to be utilized. (b) A schedule of fees to be charged for each type of service to be performed. (c) Assurance in the form of a certified resolution of the Board of Directors of the bank or bank service corporation that the records of the bank for which the services are to be performed will be subject to examination and regulation by the Department of Banking and Finance as if the records were maintained by the bank on its own premises that the records of the bank will be available to examiners promptly upon receipt of notice that the
7

Chapter 80-1-2 Page 2
records are being subjected to examination and that the Department shall have the authority to periodically review the internal routine and controls of the processor to ascertain that the operations are being conducted in sound manner in keeping with generally accepted banking procedures.
(d) A listing of all reports and printout which the servicer is offering the bank and the time required, after receipt of notice of examination, to provide those reports in readable form to the examiners. (2) State banks wishing to contract with banks or bank service corporations not approved in accordance with this regulation may acquire prior approval for such contracts by providing the information set forth in paragraph (1) (a) through (1) (d) above to the Department of Banking and Finance in addition to assurances of their own Board of Directors that the records maintained off-premise will be subject to review and examination by the Department of Banking and Finance to the same extent as if such records were maintained on the bank's own premises.
Authority: Ga. L. 1974, pp. 733, 739.
80-1-2-.03 Contracting to Perform or Have Performed Bank Services
(I) Bank service corporations or banks which obtain approval pursuant to the above may contract with any state bank for the performance of bank services as defined above and no further approval will be required, provided, however, that banks contracting with approved servicers shall notify the Department of Banking and Finance promptly of their action and such notice will be accompanied by a certified copy of the contracting bank's Board of Directors' resolution authorizing the contract and providing assurance that the bank's records will be subject to examination and regulation to the same extent as if such records were maintained on the bank's own premises.
(2) Banks and bank service corporations approved in accordance with the above shall notify the Department of Banking and Finance promptly of any substantive changes in the service contract or delivery time of reports and printouts.
Authority: Ga. L. 1974, pp. 733,739. Effective Sept. 17,1975.
8

RULES OF
DEPARTMENT OF BANKING AND FINANCE BANKS
CHAPTER 80-1-3 BOOKS AND RECORDS
TABLE OF CONTENTS
80-1-3-.01 Minimum Requirements for Books and Records 80-1-3-.02 Minimum Records Retention Periods 80-1-3-.03 Effects of Microfilm and EDP Processing 80-1-3-.04 Applicability of Regulation to National Banks and Others
Chapter Number 80-1-3 relating to Books and Records is hereby repealed in its entirety and in lieu thereof a new Chapter 80-1-3 relating to Books and Records is inserted to correct Authority for the Rule, which shall read as follows:
80-1-3-.01 Minimum Requirements for Books and Records (1) Each bank must maintain for each business day a Daily Statement properly supported by a General Ledger showing daily activity to each asset, liability, and capital account, and the following subsidiary ledgers must be maintained and must be balanced to the controlling amount in the General Ledger at least monthly:
(a) Securities Register - containing a record of all stocks and bonds bought or sold showing date of transaction, proper name of the security, interest rate, maturity date, par value, purchase price, schedule of amortization of premium taken, book value, pledge status, and location.
(b) Liability Ledger - containing the direct and indirect liability or obligations separately for each of the bank's borrowing customers excluding liabilities for overdrafts, cash items, and loans repayable in regular installments due more frequently than quarterly.
(c) Installment Loan Ledger - where a bank elects to maintain installment loans separately from other direct loans of a borrower and does not include them on the Liability Ledger above, they may be maintained in a separate ledger with payments being posted directly to a separate pre-scheduled record card for payments. The notes or payment record may be maintained in whatever order; i.e., alphabetical, numerical, class of loans desired by management except that where they are not maintained alphabetically, an alphabetical cross-reference file must be maintained summarizing the notes of each borrower.
(d) Cash Item Register - a listing daily of all cash items held by a bank must be maintained which shows the maker of the item
9

Chapter 80-)-3 Page 2
last endorser if any, date acquired by the bank, amount of the item, and reason held. The register may be maintained on a decentralized basis at each of the bank's operating offices. The current register shall be reviewed by the Board of Directors at least monthly. For purposes of thi Rule, Cash Items shall include any item received by a bank and paid but for which reimbursement by the maker or endorser i not made before the end of the next business day following the day in which the item is received except uch item as are customarily held by the bank for settlement with its customer whether maker or endor er on the item not less frequently than weekly. Where the item is held beyond the regular settlement date it shall be considered as a Cash Item within the definition of this Rule. In addition to the foregoing, Cash Items and the register thereof shall include uch other items as the Board of Directors shall from time to time determine.
(e) Deposit Ledgers - eparate deposit ledgers must be maintained for each General Ledger segregation of deposits and each ledger must contain a continuing itemized record of all deposits and withdrawals. Deposits will be segregated into no fewer than the following categories: Demand Deposits, Savings Deposits Open Accounts, Certificates of Deposit, Official Check. In lieu of the requirement for a register of outstanding Certificates of Depo it and Official Checks, copies of the outstanding obligations may be maintained in numerical order.
(f) Income and Expense Registers - a detailed record of Income and Expense must be maintained.
(g) Overdrafts - a Ii t of all overdrawn deposit accounts shall be maintained daily and reviewed monthly by the Board of Directors or Loan Committee and such review noted in the minutes.
(h) Charged Off As ets - all charge-off must be approved by the Loan Committee in the case of loans, or Board of Directors and uch approval recorded in the minute book. A record of all charge-offs and recoveries thereon must be maintained.
(i) A register must be maintained of all items held for safekeeping by a bank for its customers other than items maintained in a afe deposit box under the sole control of the customer. The register should de cribe the item fully, show the name of the owner, date received, and number of receipt given.
U) Each bank shall maintain a reconcilement book on each of its correspondent bank account with other banks and reconcilements of each account shall be made at lea t monthly and recorded in the reconcilement book. (2) Where a bank has common capital surplus and capital securities of $5,000,000 or more review by the Board of Directors as required in paragraphs (1) (d) (1) (g) and (1) (h) above may be
10

Chapter 80-1-3 Page 3
delegated to a specific officer or department of the bank where such delegation is recorded in the minutes of the Board of Directors. A properly constituted Loan Committee may perform this function for the full Board of Directors regardless of the size of the banle
Authority: Ga. L. 1974, pp. 733,849.

80-1-3-.02 Minimum Records Retention Periods

( 1) Statutory Requirements:

Georgia Minimum Retainment Period

(a) Minute Book of Stockholders &

Directors' Meetings

Permanent

(b) Capital Stock Ledger

Permanent

(c) Capital Stock Certificate Book or Stubs

Permanent

(d) General Ledger

Permanent

(e) General Journal (book or original entry)

Permanent

(f) Investment Ledger or Bond Register

Permanent

(g) Daily Statement of Condition

Permanent

(h) Copies of Examination Reports

Permanent

(i) Evidence of Compliance with Regulation 2

of Federal Reserve Board (Truth-in-Lending) . 2 Years

( 2) Auditing and Accounting:
(a) Accrual & Bond Amortization Records (b) Audit Work Papers (c) Bank Call Reports (d) Daily Reserve Computation (e) Earnings and Dividend Reports (f) Internal Reports to Exec.
Committee or Directors (g) Securities Vault "In and Out" Tickets (h) Tax Records. . . . . . .. . (i) Record of all Assets Charged Off U) General Ledger Tickets (debits & credits) (k) General Ledger Journal (not book
of original entry) (1) Internal Audit Reports

G.M.R.P.*
4 Years . 2 Years . 3 Years . 2 Years . 3 Years
. 2 Years . I Year . 7 Years . 10 Years . 5 Years
. 1 Month . 5 Years

( 3) Capital: (a) Dividend Checks (paid and cancelled) (b) Proxies
( 4) Investments: (a) Brokers' Confirmations (b) Brokers' Invoices
Georgia Minimum Retainment Period
11

G.M.R.P.* 7 Years 2 Years
G.M.R.P.* . 2 Years . 2 Years

Chapter 80-1-3 Page 4

( 5) Loans and Discounts:

G.M.R.P. *

(a) Collateral Receipts

10 Years

(b) Debit & Credit Tickets other than

General Ledger Tickets. . . . . . . . . . . . . . . . .. I Year

(c) Loan & Discount Journal;

1. If Journal is a by-product of

posting to Liability Ledger

5 Years

2. If Journal is used as book of

original entry with descriptions

5 Years

(d) Liability Ledger

10 Years

(e) Loan Applications

Life of Loan

(f) Margin Cards

Life of Loan

(g) Loan & Discount Register

7 Years

(h) Resolutions to borrow (after account closed). 7 Years

(i) Interest Received

2 Years

U) Financial Statements and Credit Files

5 Years

After payout on

loans of $5M or

more not secured

by real estate. All

others, life of loan.

( 6) Record Retention Schedule for Credit Card Accounts:

Record

Retention

(a) Cardholder Statement

(b) Teller Work (Proof Operation)

(c) Trial Balance

.

(d) Merchant Discount Journal

Life of Loan plus 5 Years
I Year Life of Loan plus 5 Years
5 Years

( 7) Personnel:
(a) Time Card (b) Salary Ledger (c) Salary Receipts

G.M.R.P.*
3 Year 3 Years 3 Years

( 8) Proof and Clearings: (See Int'l Section)
(a) Clearing House Settlement Sheets (b) Copies of Advices of Corrections (c) Departmental Proof Sheets

G.M.R.P. *
6 Months 6 Month 6 Months

* Georgia Minimum Retainment Period
12

(d) Deposit Proof Sheets or Master Tapes of Proof Machine
(e) Out-of-Town Clearings Proof Sheets (f) Cash Tickets

Chapter 80-1-3 Page 5
6 Months 6 Months 3 Months

( 9) Tellers:
(a) Cash Item Record (b) Receipts for Return Items (c) Return Items Record Book (d) Tellers' Day Book (Register) (e) Tellers' Recapitulation (f) Tellers' Blotter, Journal or Proof

G.M.R.P.*
2 Years I Month 6 Months 2 Years 3 Months 2 Years

(10) Cash and Due From Banks:
(a) Incoming Cash Letter Memos for Remittance
(b) Incoming Cash Letters for Credit (c) Outgoing Cash Letter Memos
for Credit or Remittance (d) Advices of Credit or Debit (e) Proof Sheets (f) Bank Statements (g) Reconcilement Ledger or Register

G.M.R.P. *
3 Months 3 Months
6 Months 6 Months 6 Months I Year 2 Years

(II) Deposit & Certificate Accounts:
(a) Social Security or Tax lD umber for Accounts opened after 6/30/72 (after account closed)

G.M.R.P.* 5 Years

(12) Due to Banks:

G.M.R.P.*

(a) Incoming Cash Letter Memos for Credit

6 Months

(b) Incoming Cash Letters for Remittance

6 Months

(c) Advices of Credit or Debit

6 Months

(d) Proof Sheets

6 Months

(e) Bank Ledger Sheets

5 Years

(f) Ledger Journal

6 Months

(g) Copies of Advices . . . . . . . . . . . . . . . . . . . . .. 6 Months

(h) Reconcilement Verifications

6 Months

(i) Resolutions (after account closed)

7 Years

U) Signature Cards (after account closed)

5 Years

(k) Statement Copies

5 Years

Georgia Minimum Retainment Period 13

Chapter 80-1-3 Page 6
(13) Commercial Deposits (Demand): (See Int') Section)
(a) Bookkeeper' Daily List of Checks, charged in total
(b) Deposit Tickets and Other Credits (c) Individual Ledger Sheets (after last entry) (d) Individual Ledger Journal (e) Resolutions (after account closed) (f) Signature Cards (after account clo ed) (g) Statements Undelivered (h) Stop Payment Orders (i) Checks Paid Copy U) Statements (copies of)

G_M.R.P. *
1 Year 2 Year 5 Years 6 Months 7 Year 5 Year 7 Year 6 Months 5 Years 5 Years

(14) Savings Deposits: (See InCI Section)

G.M.R.P.*

(a) Deposit Tickets

_ Years

(b) Journal

6 Month

(c) Ledger Cards or Sheets (after last entry)

5 Year

(d) Machine Control Journal Tapes

6 Months

(e) Resolutions (after account closed)

7 Years

(f) Signature Cards (after account clo ed)

5 Year

(g) Savings Checks . . . . . . . . . . . . . . . . . . . . . . .. 7 Year

(h) Statement Copies

5 Years

(15) Certificates of Deposit:
(a) Certificates (after date paid) (b) Register Ledger (after account clo ed)
customer or account record

G.M.R.P. *
7 Years
2 Year

(16) Christmas Savings or Similar Clubs:

G.M.R.P. *

(a) Checks (after date paid)

1 Year

(b) Carbon Copie of Checks (check register)

I Year

(c) Coupons (used as deposit ticket)

1 Year

(d) Ledger Sheets or Cards . . . . . . . . . . . . . . . . .. 5 Years

(e) Withdrawal Receipts

1 Year

(f) Signature Cards

5 Year

(17) Official Drafts and Checks: (a) Cashiers' Checks and Bank Money Orders (after paid) (b) Certified Checks or Receipts for same (after paid)
Georgia Minimum Retainment Period
14

G.M.R.P. * 7 Years 7 Years

Chapter 80-1-3 Page 7

(c) Drafts (after Paid (d) Expense Checks (after paid) (e) Official Check (after closed) copies (f) Affidavits, indemnities, etc., pertaining
to lost drafts and checks

7 Years 7 Years 2 Years
Permanent

(18) Insurance Records:

G.M.R.P.*

(a) Casualty Liability policies (expired) (b) Bankers Blanket Bond, theft forgery, safe
deposit and other forms of insurance issued for same purpose (unless present bond covers all liability in prior bonds)

1 Year 10 Years

(19) Collections:

G.M.R.P. *

(a) Collections Receipts, carbons of

2 Years

(b) Collection Register. . . . . . . . . . . . . . . . . . . .. 2 Years

(c) Coupons - cash letters outgoing (after

settlement)

6 Months

(d) Departmental Blotter, Journal or Proof

2 Years

(e) Incoming collection letters

6 Months

(f) Installment Contract or note records

(after account closed)

2 Years

(20) Bond Department:
(a) Brokers' Confirmations (b) Brokers' Invoices (c) Securities - "Buy and sell orders"

G.M.R.P. *
2 Years 2 Years 2 Years

(21) Safekeeping:

G.M.R.P.*

(a) Records and Receipts (after account closed) . 5 Years

(b) Brokers' Invoices

2 Years

(22) Safe Deposit Vault:

G.M.R.P.*

(a) Access Tickets

5 Years

(b) Cancelled Signature Cards

5 Years

(c) Correspondence pertaining to Authorization

(after account closed)

5 Years

(d) Lease or Contracts - closed accounts

(after account closed)

5 Years

(e) Ledger Record of Account

I Year

(f) Night Depository Agreements

(after account closed) . . . . . . . . . . . . . . . . . .. 1 Year

(g) Night Depository (after account closed)

Register

I Year

Georgia Minimum Retainment Period 15

Chapter 80-1-3 Page 8

(23) Personal Trust Department:

G.M.R.P.*

(a) Cash Ledger and Property Ledgers

Permanent

(b) Checks ... . . . . . . . . . . . . . . . . . . . . . . . . . .. lOYears

(c) Cash Regi ter . . . . . . . . . . . . . . . . . . . . . . . .. 10 Years

(d) Correspondence - Files - General

3 Years

(24) Document Files:

G.M.R.P.*

(a) Estates, Trusts Guardianships

Permanent

(b) Agencies (after account closed)

5 Years

(c) Daily Blotter, Departmental (block sheets) " 2 Years

(d) Journals - Daily

2 Years

(e) Posting Tickets

2 Years

(f) Property Controls - General Ledger

Permanent

(g) Tabulating Cards

After

completion of Income Tax Record for Previous Year

(h) Trial Balance

2 Years

(i) Annual Trial Balance

20 Years

U) Copy or Listing for Form 1099

I Year

after Filing

(k) Purchase & Sell Invoices and Approvals .. 5 Years

(1) Daily Statement of Trust Department

3 Years

(m)Minute Books - Trust Committee and

Trust Investment Committee

50 Years

(25) Tax Returns:

G.M.R.P.*

(a) Federal & State Income Tax Returns

5 Years

after Filing

(b) Estate Tax Returns. . . . . . . . . . . . . . . . . . . .. 15 Years

after Filing

(c) Intangible Tax Returns

2 Years

after Filing

(d) Ad Valorem Tax Returns

2 Years

after Filing

(e) Social Security Returns

5 Years

after Filing

(26) Corporate Trust Department:

G.M.R.P.*

(a) Corporate Cash and Property Ledgers

Permanent

Correspondence:

Corporate Trust (bond issue)

3 Years

Dividend. . . . . . . . . . . . . . . . . . . . . . . . . . . .. 3 Years

General

3 Years

* Georgia Minimum Retainment Period
16

Chapter 80-13 Page 9

(b) Coupon Collection Record

. Optional

(c) Coupon Envelopes

. Optional

(d) Dividend and Interest Disbursement Checks .. 7 Years

(e) Dividend and Interest Disbursement List ..... Optional

(f) Document Files - Trusts

(after account closed)

Permanent

(g) Document Files - Agency

(after account closed) . . . . . . . . . . . . . . . . . .. 5 Years

(h) Stock Transfer Journals

Permanent

(i) Stock Certificates (cancelled) and

supporting documents, and replace-

ment surety bond . . . . . . . . . . . . . . . . . . . . .. 20 Years

(27) Ledger Records: (a) Stockholders' Ledger (unless transfer agency account closed) (b) Stock (Register Journal)
(c) Stock Transfer Receipts (d) Receipts for cancelled bonds, coupons
and/or cremation certificates
(e) Stockholders' List (f) Daily Blotter, Departmental (block sheets)

G.M.R.P.
Permanent Until Acct.
Closed 5 Years
Until Acct. Closed
Optional 2 Years

(28) International:
(a) Accounts with foreign banks (b) Records of transfer of more than $1 OM
to persons outside U.S (c) Copy of item of more than $ IOM
remittance or transferred outside U.S (d) Copy of check of more than $ IOM drawn
on or issued by a foreign bank and acquired by "bank" (e) Items of more than $ IOM received from outside U.S
Authority: Ga. L. 1974, pp. 733, 849.

G.M.R.P. . 5 Years . 5 Years . 5 Years
. 5 Years . 5 Years

80-1-3.03 Effects of Microfilm and EDP Processing (I) All records maintained by the banks may be microfJlmed or photographed at the bank's discretion and the retention of the resultant film for the periods of time designated in the regulation shall be considered as complying with this regulation and the law.

* Georgia Minimum Retainment Period
17

Chapter 80-1-3 Page 10
(2) Electronic Data Processing Operations are considered merely as extensions of the bookkeeping mechanics and shall not alter the retention requirements of the regulation. Printouts of EDP records which provide essentially the same information as the conventional records listed herein may be retained in lieu of the records listed.
Authority: Ga. L. 1974, pp. 733, 849.
80-1-3-.04 Applicability of Regulation to National Banks and Others
(I) To the extent that this regulation does not contravene any Law or Regulation of the United States regarding retention of records by National Banks, the provisions contained herein shall apply to all ational Banks doing business in this State.
(2) The provisions of this regulation shall extend to non-bank service corporations performing bank services for banks pursuant to Regulation 80-1-2 to the extent that they are maintaining records for banks subject to this regulation.
Authority: Ga. L. 1974, pp. 733,849. Eff.9-17-75
18

RULES OF
DEPARTMENT OF BANKING AND FINANCE BANKS
CHAPTER 80-1-4 INVESTMENT SECURITIES
TABLE OF CONTENTS
80-1-4-.01 Investment Securities Chapter Number 80-1-4 relating to investment securities is hereby repealed in its entirety and in lieu thereof a new Chapter umber 80-1-4 relating to investment securities is inserted which shall read as follows:
80-1-4-.01 Investment Securities (I) A bank may purchase, sell and hold investment securities which are obligations in the form of bonds, notes or debentures:
(a) without limitation if such securities are the general obligations of the United States Government or any state or territorial government or any agency of such governments; or if such securities are guaranteed as to principal and interest by such governments' or if such securities are pre-refunded with the proceeds therefor invested in securities which may be held without limitation;
(b) up to 25% of the statutory capital ba e of the bank if the securities are the general obligations of a single obligor domiciled within the United States which is authorized to levy taxes and up to 25% if the securities are the revenue obligations of a political ubdivision authorized to establish utility fees, public transportation usage fees, or public use fees where such tax levies or fees are pledged to and are sufficient to pay the principal and interest on the securities as they become due' and
(c) such other securities as the Department may approve and subject to such limitations as the Department may specify upon a finding that the securities are saleable under ordinary circumstances, with reasonable promptness at a fair value. Securities issued by political subdivisions which are rated in the three highest rating categories by either "Moody's" or "Standard and Poor" shall be deemed approved for investment up to 10% of the statutory capital base. (2) The limitations of subsection (b) above shall not apply where the statutory capital base is at least $5,000,000. (3) With the exception of revenue obligations listed in subsection (l) (b) above, where the repayment of revenue obligations is dependent upon rentals or other fees payable to a political subdivision by a
19

Chapter 80-1-4 Page 2
non-governmental unit, the obligor shall be deemed to be the nongovernmental unit responsible for the payment of such rentals or other fees and any guarantor of such payments.
(4) Where the repayment of the revenue obligations of one political subdivision is secured by the pledge of taxes levied and collected by another political subdivision, the securities shall be subject to the limitations of subsection (I) (b) above.
(5) 0 bank having a statutory capital base of less than $5,000,000 shall underwrite or otherwise participate as principal in the marketing of securities except to the extent authorized above or for the account of and upon specific instruction from its customer.
Authority. Ga. L. 1974, pp. 733, 797. Effective Sept. 17,1975
20

RULES OF
DEPARTMENT OF BANKING AND FINANCE BANKS
CHAPTER 80-1-5 LOANS AND DISCOUNTS
TABLE OF CONTENTS
80-1-5-.0 I Loans Generally, Interpretations and Rulings 80-1-5-.02 Real Estate Loans 80-1-5-.03 Commodity Loans 80-1-5-.04 Participation Loans 80-1-5-.05 Discounted Dealer Paper
Chapter 80-1-5 relating to loans and discounts is hereby repealed in its entirety and in lieu thereof a new Chapter 80-1-5 relating to loans and discounts is inserted to read as follows:
80-1-5-.01 Loans Generally, Interpretations and Rulings (1) "Indirect" loans as used in Code Section 41 A-1306 shall mean loans made for the substantial benefit of a third party where repayment of the loan is dependent on activities of the third party rather than solely dependent on the resources of the borrower. (2) Loans extended to any Industrial Development Authority domiciled in Georgia which are dependent upon revenues obtained under an assigned lease contract naming the Authority as lessor shall be considered as loans to the lessee in calculating legal loan limitations. (3) Loans to any wholly-owned subsidiary located within an approved office of a bank and which has agreed to abide by all laws, rules and regulation applicable to the bank shall be exempt from the 20% maximum lending limit of the parent bank. (4) In determining amounts loaned, all amounts guaranteed or insured by any instrumentality of the United States Government shall be deducted to the extent of the guaranty or insurance coverage. Immediate and deferred partipations on loans by an instrumentality of the United States Government shall also be excluded. Where the source of repayment of a loan, i.e. lease payments, is guaranteed by an instrumentality of the United States Government and such guarantee is assignable and has been assigned to the bank, such loan may be excluded to the extent of the gurarantee. (5) In determining whether or not a loan in excess of the ten (10) percent limitation is secured by "good collateral and other ample security," the lack of a perfected lien, inadequate insurance, required margins between collateral value and the amount of the loan shall be prima facie evidence of inadequate security to the debt.
21

Chapter 80-1-5 Page 2
Loans secured by endorsement must be supported by a financial statement on the endorser properly signed, which is not less than eighteen months old, if the loan is to be considered secured, and such statements must reflect adequate income to service the loan and unemcumbered equity sufficient to protect the loan.
(6) A borrower's deposit accounts in the lending bank may not be regarded as collateral to a loan unless they are not subject to check, mature after the loan which is secured, are under the sole control of the bank, and are properly assigned. Where deposit balances are properly taken as collateral to a loan, the loan may be reduced to the extent of the deposit in determining the amounts loaned for legal limitation purposes.
(7) Extensions of credit in the form of insufficient funds checks held beyond the permissible return date and overdrafts shall be considered extensions of credit included in determining compliance with the legal limitations as it applies to the maker of the check or owner of the overdraft. Such extensions of credit shall also be subject to the requirements for prior written approval and ample collateral where the total indebtedness of the borrower exceeds 10% of the statutory capital base.
(8) Wherever approval of the Board of Directors or Loan Committee is required, such approval must be specific, prior, written approval of each extension of credit, except that advances made under a master note covering a specific purpose or project need not receive specific approval where such approval was accorded the master note. Commodity, floor-plan and discount lines of credit which are anticipated to exceed ten (10) percent of the statutory capital base may be approved annually to be deemed appropriate by the Board of Directors without each transaction receiving specific prior approval. When in excess of 20% of the statutory capital base, the line must be reviewed quarterly by the Board of Directors or Loan Committee.
(9) In determining the primary collateral basis upon which a loan is granted that portion of the collateral having the greatest market value, shall be assumed to be the primary collateral and the credit worthiness of the individual and of endorsers shall not be considered in determining conformity with the law unless proper, current financial information is in file on the borrower or endorser.
(10) In determining amounts loaned to "any person, firm or corporation," amounts acquired as a result of purchasing accounts receivable from a third party (factoring) shall not be considered to the extent that such accounts receivable from the borrower do not exceed ten percent (10%) of the bank's capital and unimpaired surplus.
(II) Extensions of credit to political subdivisions of the State of Georgia authorized to levy taxes shall qualify for exemption from
22

Chapter 80-1-5 Page 3
the 20% loan limitation under the provisions of Code Section 41 A1306, subparapgrah (c) (4Hii), only where such extension of credit otherwise conforms with the provisions of Georgia Code Annotated Section 2-6004.
Authority: Ga. L. 1974, pp. 733,791-797.
80-1-5-.02 Real Estate Loans (I) A real estate loan within the meaning of Code Section 4IA-1307 shall be any loan secured by real estate where the bank relies primarily upon sUG:h real estate as the primary security for the loan. Where the bank relies substantially upon other factors, such as the general credit standing of the borrower, guaranties, or security other than real estate, the loan does not constitute a real estate loan, although as a matter of prudent banking practice it may also be secured by real estate, provided:
(a) The proceeds of the loan were not used for the purpose of purchasing the real estate pledged, and
(b) Current credit information on the borrower and/or the guarantors is maintained sufficient to show the credit worthiness of the borrower or guarantors adequate to support the debt, and
(c) The other collateral is properly pledged to the bank, protected by adequate insurance against fire, and supported by a statement of appraised or estimated value. (2) A loan may be secured by a first lien within the meaning of Code Section 41A-1307 although subordinate to another lien if (i) the bank takes obligations of the borrower in an amount equal to the debt outstanding on the prior mortgage obligation plus the amount secured by such bank's lien and (ii) the bank may at any time effect payment of the prior lien. In such case the bank may require the borrower to make all mortgage payments to such bank, with that bank servicing the prior lien from such payments. Provided, that where such "wrap around" arrangements are made, the bank will obtain a statement from the borrower and the holder of the first lien that no further advances will be made to the borrower by the first lien holder and subject to its lien without the prior consent of the bank and that the bank may repay the first lien at its option with no penalty or a stated prepayment penalty. (3) Conditions common to all real estate loans as to legal requirements and technical aspects shall be met, particularly with respect to evidence of title search, recordation, written appraisal, adequate insurance protection upon the insurable improvements with loss payable clause to the bank, and the loan supported by adequate credit information on the borrower. The lack of the foregoing technical requirements, while causing the loan to be technically defective, shall not be cause to consider the loan as nonconforming and in violation of law unless the total aggregate borrowings by the
23

Chapter 80-1-5 Page 4
borrower exceeds the ten (10) percent limitation set forth in Section 41 A-1306 of the Code of Georgia in which case the real estate collateral will not contribute to the "ample security" of the line.
(4) Interpretations of provisions within the statute: (a) nonamortized real estate loans - as to the proviso for
nonamortized real estate loans (not to exceed 75% of the fair market value of the property pledged) such loans and renewals thereof may be made payable on demand, or on demand after a specified future date, but no such loans or renewals may be made or held for a period in excess of five years.
(b) If the terms of the obligations are to require regular monthly payments including principal and interest, they must be based on standard tables that will provide for amortization of at least 50 percent of the principal and interest in the case of loans maturing in fifteen (15) years or entire principal and interest of loans maturing in thirty (30) years.
(c) Amortization requires that there be a reduction of the principal of the debt during the life of the loan. Such reductions must occur not less frequently than annually and if extended indefinitely would amortize the loan in accordance with the provisions of paragraph (b) above. (5) Exemptions from the limitations of Section 41 A-1307 as to property values are as follows:
(a) Loans or that portion of loans, in which the Small Business Administration cooperates through agreements to participate on an immediate or deferred basis under the Small Business Act. That portion of such loans for which the bank assumes the full risk is subject to all provisions of this section except as other exemptions as defined in this regulation may apply.
(b) Loans to the extent secured in whole or in part by guarantees or by commitments to take over insure, participate in or purchase the same, made by the United States, a Federal Reserve Bank, or any governmental agency of the United States including corporations wholly-owned either directly or indirectly by the United States.
(c) Loans which are fully guaranteed or insured by this State or by a State Authority for the payment of the obligations of which the faith and credit of the State is pledged under terms of the guaranty or agreement to insure.
(d) Home improvement loans, whether insured or not made in primary reliance upon the character and credit standing of the borrower, where such additional security in the form of a junior mortgage is taken as a matter of prudent banking practice. The nature of the improvements must be specified.
(e) Temporary loans or regular commercial transactions secured in whole or in part by real estate or where the total
24

Chapter 8015 Page 5
amount of any single loan matures in three years or less and does not exceed 2 percent of the bank's statutory capital base or $10,000, whichever is less.
(0 Temporary or commercial loans, or loans made for other purposes (than purchase, investment, improvement of real estate), including operating funds, working capital, or similar purposes, predicated on the borrower's or endorser's or guarantor's credit standing, or other such security, but on which real estate collateral (including second mortgages) is taken as precautionary measure against possible contingencies, may be exempt from the restrictions and limitations imposed upon real estate loans, provided:
1. Such loans are supported (in addition to adequate credit information and/or collateral documents) by a general purpose statement signed by the borrower, stating the purpose for which the loan was made and sufficient to indicate the exemption is valid.
2. Such loans, if unamortized, shall not be permitted to run longer than twelve (12) months, and if on an amortized basis, maturity shall not extend beyond three (3) years, and the loan must require regular equal payments recurring not less than annually which would amortize the entire principal and interest on date of its maturity. (g) Loans representing the sale by the bank of other real estate acquired for debts previously contracted shall be exempt from the limitations as to property values, but shall be subject to all other requirements of this regulation, including the aggregate total of real estate loans which may be held by a bank, provided that the amount so financed shall not be for a greater sum than the bank's investments in such property. (h) Loans which, when made, were either unsecured or secured by personalty, but which are now secured in whole or in part by liens on real estate taken in order to prevent loss on a debt previously contracted. (i) Amortized loans in excess of ninety (90) percent of fair market value, but less than one hundred (100) percent of fair market value, where not less than twenty (20) percent of the outstanding principal balance on the loan is insured or a commitment is made to insure for the first ten (10) years of the loan by a mortgage guaranty insurance company licensed to do business in this State. (6) All construction and development loans made or held by a bank shall be exempt from the limitations of this statute as to property values and aggregate totals when made to comply with the follOWing conditions: (a) Loans having maturities not to exceed sixty (60) months may be made to finance the construction of industrial or com-
25

Chapter 80-1-5 Page 6
mercial buildings where there is a valid and binding agreement entered into by a financially responsible lender to advance the full amount of the bank's loan upon completion of the buildings.
(b) Loans having maturities not to exceed twenty-four (24) months may be made for residential construction or development purposes where the bank holds a firm (or conditional) commitment to guarantee or insure from any instrumentality or corporation wholly-owned by the United States or by any Authority of this State as indicated in 80-1-5-.02 (5) (b) (c) of this regulation, or where there is a take-out agreement by any financially responsible lender to advance the full amount of the bank's loan upon completion of the dwelling.
(c) Temporary construction or development loans may be made by a bank for a period not to exceed sixty (60) months where the loan is made to finance the construction of industrial or commercial buildings or for a period not to exceed twenty-four (24) months where the loan is made to finance construction of residential or fann buildings or to improve and develop land preliminary to such construction, without a prior commitment to guarantee or insure or take-out agreement by an instrumentality or corporation wholly-owned by the United States or of this State or any other financially responsible lending agency, provided the parties actually intend the loan to be paid off or refinanced by a purchaser within the specified maturities and where lots are to be released during the development of land for such purposes, pro rata reductions are made in the principal of the debt. (All such temporary construction and development loans must be supported by a statement of purpose or intent and if held beyond the construction or development periods, must be made to conform with the 75% and 90% limitations; otherwise, they will be held to be nonconforming real estate loans.)
(d) Commitments to guarantee, insure or purchase must be currently valid, and maturities of the loans may not be extended or loans held beyond the periods stipulated above.
Authority: Ga. L. 1974, pp. 733,795-797.
80-1-5-.03 Commodity Loans (1) In order that commodity loans and advances may be exempt from the 20% legal loan limitation of the lending bank, strict compliance with the following requirements must be met:
(a) The commodity must have a market value with ready sale in the open market.
(b) First lien security title to the commodity must be vested in the name of the bank.
(c) The commodity must be covered by insurance against fire and other appropriate hazards with loss payee designated as the lending bank.
26

Chapter 80-1-5 Page 7
(d) The initial advance or loan shall not exceed 80% of the market value of the commodity on the date of the loan, the margin of 20% between market value and outstanding loan is maintained at all times, and to that end, the bank shall have the right to call for additional collateral if the margin falls below 20% and if the additional collateral is not provided, the bank shall have the right to sell the commodity on the open market.
(e) Where the borrower is not independent of the warehouseman or other person holding the commodity, the commodity must be subjected to inspection by the lender or his agent at least monthly and a written record of such inspections must be maintained.
(f) Tne obligation matures in no more than 10 months if secured by nonperishable staples; or the obligation matures in not more than 6 months if secured by refrigerated or frozen staples.
(g) There must be a written agreement, signed by both the bank and the borrower, which clearly outlines the requirements of the bank and the duties and responsibilities of the borrower. (2) Manufactured or agricultural products in the processing stages shall not be considered as commodities within the meaning of this regulation, but are inventory or goods-in-process to be treated as additional collateral only. (3) In order for livestock to qualify as commodities subject to treatment under section (I) of this rule, the borrower must be engaged in livestock production and the collateral must be marked for identification and confined to feed lots ready for sale in the open market. Livestock held as fixed assets such as for reproduction or dairy purposes do not qualify for the treatment accorded under section (I) of this rule. (4) Manufactured products commonly financed under floorplan arrangements shall be subject to treatment as commodities under section (I) of this rule if they meet the requirements of that section and the conveyance of title identifies each individual unit and does not convey merchandise in bulk. Liens on merchandise in bulk are considered as inventory loans and not commodity loans.
Authority: Ga. L. 1974, pp. 733, 793-795.
80-1-5-.04 Participation Loans (I) That portion of a loan which is sold by the originating bank to another bank must conform to all laws and regulations applicable to that category of loan to the same extent as if the purchasing bank had itself originated the loan; i.e., collateral documentation, maturity, loan-to-collateral value ratio, maximum loan limits, etc. The purchasing bank shall obtain from the selling bank copies of all pertinent documents or a summary of sufficient information there-
27

Chapter 80-1-5 Page 8
from to allow that bank to conclude that all legal and regulatory requirements have been met and that the loan may be legally carried upon its books.
(2) Participations in Pools of Loans or Discount Lines: (a) Loans contained in the pool or discount line must be
physically marked or specifically identified on the selling bank's records.
(b) The participation agreement must call for the participant to share pro rata in losses experienced by the pool or discount line.
(c) The participation agreement must provide for periodic, at least quarterly, reports by the seller to the purchaser as settlement for losses incurred and providing past due status of loans contained in the pool or discount line.
(d) Where the participation purchased is in excess of 10% of the purchasing bank's statutory capital base, the participation must have the prior written approval of the bank's Board of Directors or Loan Committee. (3) Where there exist agreements to repurchase or loss indemnity agreements between the selling and purchasing bank, participations shall be treated as loans to the selling bank by the purchasing bank and the amount of the participation shall be considered to be remaining on the selling bank's books for purposes of legal limitations.
Authority: Ga. L. 1974, pp. 733, 791-792.
80-1-5-.05 Discounted Dealer Paper (1) Purchases of dealer paper, with or without recour e, may generally be made without limitation; however, when the aggregate amount of such paper outstanding exceeds 20% of the bank's statutory capital base and the paper has been taken with recourse or pursuant to an agreement to repurchase between the bank and the dealer the following conditions must be met:
(a) The dealer must maintain a dealer's reserve in an amount equal to at least 5% of the total outstanding balance on notes discounted with recourse or pursuant to the repurchase agreement and such reserve must be under the control of the lending bank.
(b) The bank must maintain a balance sheet and profit and loss statement on the dealer covering ills most recent fiscal period for which such information is available, but in no event shall the statements be more than eighteen months old.
(c) The obligors on all such notes shall have been notified that the bank is owner of the note and payments are to be made directly to the bank.
(d) The dealers shall not be permitted to make payments on the discount notes, but shall be required to take over, in full,
28

Chapter 80-1-5 Page 9
any note which is past due four months or more. (e) There must be a written agreement signed by both the
bank and the dealer, which clearly outlines the requirements of the bank and the duties and responsibilities of the dealer. (2) Whenever the aggregate outstanding balance of discount notes on a single dealer exceed lO% of the bank's statutory capital base and the notes are taken with recourse or pursuant to a repurchase agreement, the Board of Directors shall approve the maximum amount to which such aggregate outstanding balance may extend at least annually. When in excess of 20% of the statutory capital base the line must be reviewed quarterly by the Board of Directors or Loan Committee.
Authority: Ga. L. 1974, pp. 733,793-795. Effective Sept. 17, 1975
29

30

RULES OF
DEPARTMENT OF BANKING AND FINANCE BANKS
CHAPTER 80-1-6 BANK FINANCIAL AND OTHER REPORTS
TABLE OF CONTENTS
80-1-6-.01 Reports to Departments 80-1-6-.02 Reports to Shareholders 80-1-6-.03 Directors' Financial Reports
80-1-6-.01 Reports to Department (1) Upon call by the Commissioner of Banking and Finance each bank shall me within fifteen (15) days from the date of call the following reports with the Department on forms provided by the Department:
(a) Report of Assets, Liabilities and Capital (Form 64) (b) Report of Publisher (Form 64p) (c) Report of Income (Form 73) (d) Report of Stockholders (Form 19-3 and 19-4) (e) Oath of Directors (Form 19-1) (f) Report of Officers, Blanket Bond and Depositories (Form 19-2) (2) Every bank shall within 10 days after knowledge thereof report, whether upon call by the Commissioner or otherwise: (a) The election of any new officers or directors, (b) The resignation or removal of all officers and directors giving the reason for such action, (c) The discharge of any non-officer employee where the reason for such action was dishonest or fraudulent acts or breach of trust by the employee, (d) The transfer of any common stock of the bank aggregating 15% of the outstanding shares of common stock of the bank or smaller transfer resulting in the new owner holding in the aggregate more than 25% of the outstanding common stock of the bank.
Authority: Ga. L. 1974, pp. 733, 736-737
80-1-6-.02 Reports to Shareholders (1) On or before the date of the annual stockholders' meeting of any bank, the shareholders of the bank, regardless of class or voting rights, shall each be provided with the following schedules for the last fiscal year on a comparative basis with the next preceding fiscal year:
31

Chapter 80-1-6 Page 2
(a) Statement of Assets, Liabilities, and Capital (b) Statement of Earnings and Expenses (c) Reconcilement of Changes in Capital Accounts (2) Bank Report Maintained' Compensation to Directors etc. (a) Each bank shall maintain throughout the year for inspection by any shareholder:
(i) The most recent copy of reports submitted to the Department pursuant to Rule Number 80-1-6-.01 Section (1), and
(ii) A listing of compensation to each director and chief executive officer if not a director including salaries, bonuses, committee fees, commission from sale of insurance, etc. (b) Provided, such information shall be available only upon written request by the shareholder setting forth the reasons for which such information is requested and certifying that the recipient will not further distribute any information furnished.
Authority: Ga. L. 1974, p. 733; 1975, S. B. 145.
80-1-6-.03 Directors' Financial Reports Each bank director shall maintain on file with the chief executive officer of the bank for which he serves as a director a financial statement on forms prescribed by the Department. Such financial statement shall be revised annually, but in no event shall the statement on file be more than eighteen months old. At the discretion of the Board of Directors of each bank, such financial statements may be maintained in sealed envelopes available for inspection only by state or federal examiners.
Authority: Ga. L. 1974, p. 733; 1975, S. B. 145. Effe-:tive September 17, 1975
32

RULES OF
DEPARTMENT OF BANKING AND FINANCE BANKS
CHAPTER 80-1-7 LEGAL RESERVES
TABLE OF CONTENTS
80-1-7-.01 Definitions 80-1-7-.02 Records to be Maintained 80-1-7-.03 Amounts of Reserves to be Maintained
80-1-7-.01 Definitions (l) Legal Reserve:
(a) Lawful money of the United States in the office and vaults of the bank.
(b) Moneys on deposit subject to immediate call with other insured banks such as approved by the Department of Banking and Finance pursuant to Code Section 41 A-170 1.
1. Reciprocal demand balances due to such banks shall be deducted from the balance due from those banks before making any calculations.
2. Outgoing cash letters shall be included and incoming cash letters deducted before making any calculations of available moneys on deposit. (c) Cash items and clearings held over shall not be regarded as Legal Reserves within the meaning of this regulation. (2) Gross Demand Deposits means the sum of all demand deposits including demand deposits made by other banks, the United States, states, counties, school districts, and other governmental subdivisions and municipalities, and all outstanding certified and officers' checks and letters of credit and travelers' checks sold for cash. (3) Net Demand Deposits shall mean the gross demand deposits, less the following allowable deductions: (a) Demand deposits which are legally secured by a pledge of bank assets at the market value thereof. (b) Net Due From Reciprocal Demand Bank Balances; except those of Uninsured Certificated Banks and American branches of foreign banks. (4) Gross Time Deposits shall include savings deposits, certificates of deposit, time deposits-open accounts, and savings club accounts, and all other accounts which are subject to not less than thirty (30) days' notice, in writing, before withdrawal of the deposit,
33

Chapter 80-1-7 Page 2
or which otherwise, have a fixed maturity date at which time deposits may be withdrawn.
(a) A deposit which, at the time of deposit came within the defmition of gross time deposits above, shall continue to be considered a time deposit until such time as it is presented for payment, or the required notice is given to the bank that withdrawal of the funds will be made. (5) Net Time Deposits are defined as the gross time deposits, less the following allowable deductions:
(a) Time deposits which are legally secured by a pledge of bank assets at the market value thereof.
(b) Net Due from Reciprocal Time Bank Balances, except those of Uninsured Certificated Banks and American branches of foreign banks. (6) Banks eligible to act as depository for reserves of other banks shall be F.D.I.C. insured State-chartered or National banking associations domiciled within the United States; provided that no bank day deposit reserve balances in any such depository in excess of ten percent (10%) of the depositing bank's total capital notes, common capital, and surplus unless prior approval of such depository is granted by the Commissioner at least annually. (7) The bi-weekly averaging period shall commence on any Thursday and shall continue for the next consecutive 14-calendarday period. Calculations of reserves and reserve requirements shall include data from all business days; provided banks which are open for business, making loans, taking deposits or both, six days per week may designate to exclude data from any Wednesday, Thursday, or Saturday for which deposit ledgers are not regularly posted but not more than one day each week may be so excluded. Wherever data is unavailable or excluded for a calendar day, data from the previous business day shall be used in lieu thereof.
Authority: Ga. L. 1974, pp. 733. 820-822
80-1-7-.02 Records To Be Maintained Each bank shall maintain, for a period of not less than two calendar years, a record of its bi-weekly calculations of reserve requirements and reserves maintained. Such record shall be subject to review during examinations of the bank. A copy of the recommended format to be used in calculating reserves will be available from the Department of Banking and Finance, but alternative forms may be utilized if they provide the same basic information as provided by the recommended form.
Authority: Ga. L. 1974, pp. 733,820-822.
80-1-7-.03 Amounts of Reserves to be Maintained (1) Every bank shall maintain average legal reserves on hand or on deposit with approved reserve depositories subject to immediate
34

Chapter 80-1-7 Page 3
call for the bi-weekly period then ended an amount equal to: (a) Fifteen (15) percent of the average net demand deposits
as may be computed for the bi-weekly period then ended. (b) Five (5) percent of the average net aggregate savings and
time deposits as may be computed for the bi-weekly period then ended.
(c) Savings banks and trust companies whose deposits are not subject to check without notice shall maintain a reserve of five (5) percent of the average net deposits as may be computed for the bi-weekly period then ended. (2) The following exceptions to the foregoing are permitted:
(a) Not more than fifty percent (50%) of the reserve against demand deposits may be invested in bonds of the United States or agencies thereof, at market value which are not pledged to secure other deposits, and which mature in less than one year, or in certificates of deposit issued by any commercial bank with deposits insured by the Federal Deposit Insurance Corporation; provided, each certificate must mature within one year and the maximum amount deposited with anyone bank shall not exceed $100,000 or 10% of the depositing bank's reserve requirement, whichever is greater.
(b) The reserve against savings and time deposits may be invested in bonds of the United States or agencies thereof or oblig'ations of this State or agencies thereof, at the market value thereof, or in certificates of deposit issued by any commercial bank with deposits insured by the Federal Deposit Insurance Corporation, which are not pledged to secure other deposits and not used to meet reserve requirements against demand deposits.
(c) Banks which are members of the Federal Reserve System may, in lieu of the reserve herein required, keep and maintain such reserve as is required under the Acts of Congress, relating to Federal Reserve Banks.
Authority: Ga. L. 1974, pp. 733,820-822. Effective Sept. 17, 1975
35

36

RULES OF
DEPARTMENT OF BANKING AND FINANCE BANKS
CHAPTER 80-1-8 DISPOSITION OF DORMANT ACCOUNTS
AND ABANDONED PROPERTY
TABLE OF CONTENTS
80-1-8-.01 Dormant Accounts; Service Charges 80-1-8-.02 Abandoned Property Defmed 80-1-8 -.03 Reports of Abandoned Property Sold 80-1-8-.04 Disposition of Abandoned Property
80-1-8-.01 Dormant Accounts; Service Charges (I) Dormant accounts are hereby defined as follows:
(a) Demand Deposit Accounts are deemed to be dormant when the depositor has neither increased nor decreased the amount of the deposit nor corresponded with the bank regarding the deposit for a period of not less than twelve months immediately preceding the determination.
(b) Time and Savings Deposits, including Certificates of Deposits, are deemed to be dormant when the depositor or shareholder in the case of credit unions and savings and loan associations has neither increased nor decreased the amount of the deposit or shares, nor corresponded with the financial institution regarding the deposit or shares for a period of not less than five (5) years from the date upon which the deposit or share fIrst became eligible for withdrawal.
(c) Certified and Official checks shall be deemed to be dormant when they have not been presented for payment within seven (7) years of their date of issue, or if the issuing financial institution has not had correspondence with the registered owner of the check for a period of seven (7) years immediately preceding the determination of dormancy. (2) Where the signature card or other evidence of the financial institution's debt does not make provision for a maintenance or service charge on a dormant account as heretofore described, such a charge may be assessed in an amount not to exceed $2.00 per month for the twelve-month period immediately following any deposit to or withdrawal from the account. No service charge or maintenance charge may be assessed for the dormancy period beyond the first twelve months.
Authority: Ga. L. 1974, pp. 733,819.
37

Chapter 80-1-8 Page 2
80-1-8-.02 Abandoned Property Defined (1) Dormant accounts as heretofore defined shall be considered abandoned when the accounts have been inactive for fifteen (15) years including the period of time from last activity to date of dormancy as defined in Rule 80-1-8-.01. (2) Shares of interest or funds paid for the purpose of purchasing shares of interest in a financial in titution and interest and dividends accumulated thereon shall be deemed to have been abandoned when the amount has been neither increased nor decreased for a period of fifteen years following the payment of the funds or when the owner has not corresponded in writing with the finanacial institution regarding the shares. (3) Accrued or accumulated dividends on shares of interest found to be abandoned shall be deemed abandoned. (4) Any property held by a financial organization for safekeeping or in a safe deposit box for a period of fifteen (15) years without rental having been paid on the safe deposit box or the owner of the property having otherwise corresponded with the bank in writing concerning the property shall be deemed abandoned.
Authority: Ga. L. 1972, p. 762; 1974, p. 733.
80-1-8-.03 Reports of Abandoned Property Held (1) 0 later than November 1 of each year each financial organization shall file with the Commissioner of Banks a report showing all abandoned property held by that financial organization on the preceding June 30. Each report shall contain the following information:
(a) The name and last known address of each person appearing as owner of the property, where the value of the property is estimated to be $25 or more.
(b) The date when the property was first available for transfer withdrawal or conversion by the owner.
(c) The date of the last transaction with regard to the property.
(d) The total aggregate value of all property deemed to be abandoned in accordance with this regulation which is not required to be listed under paragraph (a) above.
(e) An itemized listing of all changes to properties reported to have been abandoned on previous reports. (2) The reports shall be certified as correct by an officer of the financial organization reporting. (3) Before filing the required reports, the holder of the property shall make a reasonable effort to notify the owner that the property is to be declared abandoned and for this purpose the mailing of a statement of the property held to the last known address of the owner will be deemed as sufficient reasonable effort.
Authority: Ga. L. 1972, p. 762; 1974, p. 733.
38

Chapter 80-1-8 Page 3
80-1-8-.04 Disposition of Abandoned Property (1) Upon receipt of notice by the holder of abandoned property from the Department of Banking and Finance, the holder shall within thirty (30) day~ transfer all sums representing abandoned Demand Deposits, Time and Savings Deposits, Member Shares, Certified and Official Checks, and Accrued Interest or Dividends to an interest-bearing account. (2) Upon receipt of notice by the holder of abandoned property from the Department of Banking and Finance, the holder shall within sixty (60) days cause all property in the form of shares of interest in a financial organization to be sold to the highest bidder at public sale in the city where the principal office of the holder is located.
(a) Such public sale shall be preceded by the publication on a single occasion of notice of the sale at least three weeks prior thereto in a newspaper of general circulation in the county where the property is to be sold.
(b) Moneys received from such sale shall be deposited in an interest-bearing account in the name of the owner of the shares prior to the determination of its abandonment. (3) Property held for safekeeping and in safe deposit boxes deemed to have been abandoned shall be placed for sale in the manner prescribed in paragraph (2) above and the moneys received shall be deposited to an interest-bearing account in the name of the last known owner of the property. (4) Holders of abandoned property in interest-bearing accounts who do not choose to maintain such accounts shall within thirty (30) days of receipt of notice from the Department of Banking and Finance to transfer abandoned properties to interest-bearing accounts, transmit such funds to the Commissioner and thereafter such financial organizations shall be relieved of reporting as to those properties surrendered.
Authority: Ga. L. 1972, p. 762; 1974, p. 733. Effective Sept. 17, 1975
39

40

RULES OF
DEPARTMENT OF BANKING AND FINANCE BANKS
CHAPTER 80-1-9 BORROWED MONEY
TABLE OF CONTENTS
80-1-9-.01 Borrowed Money Defined 80-1-9-.02 Limitations on Borrowed Money
Rule umber 80-1-9 relating to Borrowed Money is hereby repealed in its entirety, and in lieu thereof a new Rule Number 80-1-9 relating to Borrowed Money is inserted to make corrections in content and Authority for the Rule, which will read as follows:
80-1-9-.01 Borrowed Money Defined. Borrowed money for purposes of this Regulation and as used in Section 41 A-1312 of the Code of Georgia shall mean the sum of all moneys owned by a bank including participations sold with recourse but excluding:
(a) Liabilities for deposits and official checks recorded during the regular course of business,
(b) Liabilities for moneys accrued as expenses payable or income deferred,
(c) Liabilities for commercial paper rediscounted, (d) Liabilites to a Federal Reserve Bank on account of money borrowed or rediscounts, (e) Liabilities on account of the acquisition of reserve balances at a Federal Reserve Bank or other reserve agent from a member or nonmember bank, (f) Liabilities on account of agreements to repurchase securities sold by the bank (commonly known as "repurchase agreements"), (g) Liabilities which result from the purchase of Federal or Correspondent Funds in excess of amounts excluded under subparagraph (d) above to the extent that such Federal or Correspondent Funds are held for resale to other financial institutions, (h) Liabilities which result from the acquisition of excess funds of any State Building and Loan or Federal Savings and Loan Association for the purpose of investing such funds in the "federal fund" market at the direction of the association, (i) Liabilities which result from borrowing from the ExportImport Bank of the United States to the extent that such borrowings are secured by obligations to the bank which are guaranteed by the Export-Import Bank,
41

Chapter 80-1-9 Page 2
U) Liabilities in the fonn of subordinated securities issued under Code Section 41 A-191 O.
Authority Ga. L. 1974, pp. 733,801,802.
80-1-9-.02 Limitations on Borrowed Money. Borrowed Money as defmed in Rule 80-1-9-.0 I shall not at any time exceed the aggregate of the amount of twice the common capital plus the amount of the capital notes, unimpaired surplus and undivided profits of the borrowing bank.
Authority: Ga. L. 1974, pp. 733,801,802. Effective Sept. 17, 1975
42

RULES OF
DEPARTMENT OF BANKI G AND FINANCE BANKS
CHAPTER 80-1-1 0 FIXED ASSETS
TABLE OF CONTENTS
80-1-10-.01 Limitation on Fixed Asset Investment; Excessive Investments
80-1-10-.02 Purchase of Real Estate for Future Expansion 80-1-10-.03 Expansion of Existing Facilities 80-1-10-.04 Relocation; Construction of ew Facilities 80-1-10-.05 Organization of Real Estate Holding Company
Subsidiaries 80-1-10-.06 Depreciation and Amortization of Fixed Asset
Investments 80-1-10-.07 Leasehold Interests in Fixed Assets 80-1-10-.08 Definitions
Rule umber 80-1-10 relating to Fixed Assets is hereby repealed in its entirety, and in lieu thereof a new Rule umber 80-1-10 relating to Fixed Assets is inserted to make corrections in content ana Authority for the Rule, which will read as follows:
80-1-10-.01 Limitation on Fixed Asset Investment; Excessive Investmen ts
(1) Banks may purchase hold and convey real estate only such as shall be neces ary for the convenient transaction of its busine s and recreational use of its employees, except that real estate commonly referred to as Other Real Estate and as defined herein may be held for not longer than five (5) year unless the time limitation is extended by the Department of Banking and Finance.
(2) The aggregate inve tment by a bank in real estate, bank premises, and furniture and fixtures, stock in any real estate holding subsidiary, and leasehold as defined herein shall not exceed sixty (60) percent of the bank's statutory capital base; except that a greater sum may be invested with the prior approval of the Department of Banking and Finance.
(3) Applications for approval to invest in fixed assets an amount in excess of the limitation set forth in paragraph (2) shall be in letter form and must provide for an orderly plan for restoring the fixed as et investment to the sixty (60) percent limitation within not more than five (5) years through one of the following means:
(a) Regular annual depreciation charges consistent with current Federal Income Tax regulations, or
43

Chapter 80-1-10 Page 2
(b) Predetermined plans for restructuring the capital accounts to increase the sixty (60) percent legal limitation, or
(c) Any combination of the methods set forth in (a) and (b) above.
Authority: Ga. L. 1974, pp. 733,789.
80-1-10-.02 Purchase of Real Estate for Future Expansion (I) In that bank expansion through the establishment of additional offices or facilities, relocation, and certain extensions of existing facilities may be made only with the prior consent of the Department of Banking and Finance purchase of real property for those purposes may be made only with the prior consent of the Department of Banking and Finance. (2) Consent to purchase real property for future expansion shall be granted only in those cases where the applicant bank provides reasonable assurance that it plans to utilize the property as bank premises within five (5) years from the date of purchase and indicates the purpose for which the property is being acquired. (3) Permission to hold property for future expansion shall expire at the expiration of five (5) years from the date of purchase unless the property is utilized as bank premises prior to that time. Banks holding property beyond the expiration of the approval by the Department of Banking and Finance must divest themselves of the property through sale unless the time limitation is extended by the Department of Banking and Finance. (4) The granting of approval to purchase property for future expansion shall in no way be considered as approving the expansion program.
Authority Ga. L. 1974, pp. 733,789.
80-1-10-.03 Expansion of Existing Facilities
(I) Expansion of bank premises may be performed by a bank without the prior approval of the Department of Banking and Finance wherever the ultimate and final cost of the expansion or extensions will not result in a fixed asset investment by the bank in excess of the sixty percent (60%) legal limitation and
(a) The proposed extension will be physically connected to the existing banking house, or
(b) The proposed extension will be located on the ame contiguous area of property as the existing banking house and
(c) In either the case of subparagraph (a) or (b) the proposed extension will not involve the purchase of real property. (2) Pneumatic Tube equipment may not be considered as physically connecting banking facilities within the meaning of The Banking Code.
Authority: Ga. L. 1974, pp. 733, 789.
44

Chapter 80-1-10 Page 3
80-1-10-.04 Relocation: Construction of New Facilities. Any relocation or construction of new bank premises which will result in a change of the official street address of any bank, whether or not such change can be accomplished within the legal limitation on fixed asset investment, must have the prior approval of the Department of Banking and Finance.
Authority: Ga. L. 1974, pp. 733,789.
80-1-10-.05 Organization of Real Estate Holding Company Subsidiaries
(I) With the prior approval of the Department of Banking and Finance, any bank may invest in all of the outstanding capital stock of a subsidiary corporation organized for the purpose of owning bank premises which might be legally owned by such bank and such investment shall be included as fixed assets in determining whether the bank's total investment in fixed assets is within the limitations pre cribed by law.
(2) Such real estate holding company subsidiaries shall not be permitted to own or otherwise invest its funds in Other Real Estate, furniture and fixtures other than for its own use, securities, or any other assets inconsistent with the purpose for which it was originally organized.
(3) Such real estate holding company subsidiaries shall be subject to all of the limitations, prohibitions, and requirements with respect to the purchase, ownership, and expansion of bank premises that the parent bank would be subject to, except the limitation imposed on fixed asset investment, but provided that:
(a) The Department of Banking and Finance may set such limitations on the total investment in fixed assets the total authorized borrowings the total capitalization, and the annual rental charges of the real estate holding company as it considers necessary to the sound operation of the holding company. (4) Banks may invest, with the prior approval of the Department of Banking and Finance, not more than ten (10) percent of their total as ets or 100% of their statutory capital base, whichever is less, in stock of such corporations and corporations organized by merchants to provide parking facilities and such investments shall be included in determining the bank's legal limitation on investment in fixed as ets. (5) Such real estate holding company subsidiaries shall be subject to examination by the Commissioner of Banking and Finance on the same basis as the parent corporation.
Authority: Ga. L. 1974, pp. 733, 789, 799, 800.
80-1-10-.06 Depreciation and Amortization of Fixed Asset Investments. Book values of bank fixed assets must be depreciated or
45

Chapter 80-1-10 Page 4
amortized at rates consistent with the provisions of current Internal Revenue Regulations for Federal Income Tax purposes.
Authority: Ga. L. 1974, pp. 733,849.
80-1-10-.07 Leasehold Interests in Fixed Assets. Lease contracts covering land, buildings or furniture fixtures and equipment which results in a bank obtaining title to the property at the expiration of the lease or at any time prior thereto for the payment of any moneys less than the fair market value of the property at time title is acquired shall be considered as fixed assets within the meaning of Georgia Law and this Regulation and shall be reflected on the books of the bank as such and an appropriate liability account similarly established.
Authority: Ga. L. 1974, pp. 733, 789.
80-1-10-.08 Definitions (1) Fixed As et Investment as used in this Regulation shall include land, buildings furniture, fixtures, equipment stock in real estate holding company subsidiary, stock in cooperative parking facilities corporations and loans to such subsidiary corporations, and leasehold interests defined in 80-1-10-.07 above, but shall not include Other Real Estate. (2) Other Real Estate is real property conveyed to a bank in satisfaction of debt previously contracted in the course of its business and real property purchased at sales under judgments, decrees or mortgage foreclosures under securities held by it, but a bank shall not bid at any such sale a larger amount than sufficient to satisfy its debt, costs and expenses.
Authority: Ga. L. 1974, p. 733. Effective Sept. 17, 1975
46

RULES OF
DEPARTMENT OF BANKING AND FINANCE BANKS
CHAPTER 80-1-11 PUBLIC DISCLOSURE OF INFORMAnON
TABLE OF CONTENTS
80-1-11-.01 Public Access to Records 80-1-11-.02 Limited Access to Records 80-1-11-.03 Confidential Records 80-1-11-.04 Protection of Privacy 80-1-11-.05 Requests for Records
Rule Number 80-1-11 relating to Public Disclosure of Information is hereby repealed in its entirety, and in lieu thereof a new Rule Number 80-1-11 relating to Public Disclosure of Information is inserted to correct Authority for the Rule, which will read as follows:
80-1-11-.01 Public Access to Records. The following records of the Department of Banking and Finance shall be subject to inspection by members of the public:
(a) Articles of Incorporations and Amendments thereto (b) Charter Records (c) Report of Assets, Liabilities and Capital (Form 64) (d) Report of Publisher (Form 64p) (e) Non-confidential Section of Applications for Charter, Branch, Bank Office or Facility, and Relocation (f) Names of Officers and Directors (g) Information available in subparagraph (5) above will come within Section 80-1-11-.03 after disposition has been made of the application.
Authority: Ga. L. 1974, pp. 733, 736-738.
80-1-11-.02 Limited Access to Records. The following records of the Department of Banking and Finance shall be subject to inspection by stockholders of the bank to which the record pertains:
(a) List of Stockholders (Form 19-4) (b) Report of Officers, Blanket Bond and Depositories (Form 19-2) (c) Oath of Directors (Form 19-1) (d) Report of Earnings (Form 73)
Authority Ga. L. 1974, pp. 733,736-738.
47

Chapter 80-1-11 Page 2
80-1-11-.03 Confidential Records. The following records of the Department of Banking and Finance are declared to be in the nature of examination reports obtained by or for the confidential use of the Department in ascertaining the true condition of the bank and, therefore, shall not be available for inspection except as specifically authorized by the Commissioner:
(a) Reports of Examination (b) Reports of Investigation of ew Charters, Branches, Bank Offices, and Facilities, Relocations, Mergers and other corporate actions (c) Reports of Independent Audits (d) All general correspondence and other record not expressly made available by Rules 80-1-11-.01 and 80-1-11-.02.
Authority: Ga. L. 1974, pp. 733, 736-738.
80-1-11-.04 Protection of Privacy. To the extent neces ary to prevent an invasion of personal privacy, the Commissioner may delete identifying details from documents described in this chapter. In each case of such deletion the justification therefor will be clearly explained in writing.
Authority: Ga. L. J 974, pp. 733, 736-738.
80-1-11-.05 Requests for Records (I) Requests for copies of records must be in writing and must state the name of the per on for whom the records are being sought and the purpo e for which the records are to be used. (2) Requests for copies of records believed to be for fradulent anti-competitive, or other illegitimate purposes shall be denied. (3) The bank who e records are requested shall be notified of the reque t and disposition of same. (4) Charge for copies shall be at the ra te of $.10 per page. There shall be a minimum charge of $1.00.
Authority: Ga. L. 1974, p. 733. Effective Sept. 17, 1975
48

RULES OF
DEPARTMENT OF BANKING AND FINANCE BANKS
CHAPTER 80-1-12 DIVIDENDS
80-1-12-.01 Dividends (I) The Board of Directors of any state-chartered bank in this State may declare and the bank may pay cash dividends on its outstanding capital stock without any requirement to notify the Department or request the approval of the Department under the following conditions:
(a) The ratio of total capital funds to total assets of the bank shall not be less than 7.5%. Capital funds shall mean the aggregate of capital stock, paid-in capital and appropriated retained earnings (surplus and capital reserves), and retained earnings (undivided profits), capital notes and debentures; and
(b) The aggregate amount of dividends to be paid or anticipated to be paid in the calendar year does not exceed 50% of the net profits of the bank after taxes for the previous calendar year; and
(c) Classified loans of the bank at the most recent examination of the bank by the Department or the Federal Deposit Insurance Corporation did not exceed 10% of total loans at that examination. (2) Any dividend declared by the Board of Directors of a bank at a time when each of the foregoing conditions did not exist must be approved, in writing, by the Department prior to the payment thereof pursuant to the provisions of Section 41A-210l (a) (3) of the Code of Georgia. Requests for approval of dividends shall be on forms prescribed by the Department.
Authority: Ga. L. 1974, pp. 853,854,855. Effective May 21, 1975
49

50

RULES OF
DEPARTMENT OF BANKING AND FINANCE BANKS
CHAPTER 80-1-13 CORRESPONDENT FUNDS
TABLE OF CONTENTS
80-1-13-.01 Definitions 80-1-13-.02 Status of Accounts
80-1-13-.01 Definitions. Correspondent Fund shall mean excess funds of one financial institution, including a federal savings and loan association, placed with another financial institution at interest and subject to immediate withdrawal. Where both financial institutions acting as principal in the transaction are member banks of the Federal Reserve System, Correspondent Funds shall mean Federal Funds. Where such funds are placed with a State bank by a federal savings and loan association Correspondent Fund shall include "unsecured day (s) funds."
Authority: Ga. L. 1974, pp. 705, 733.
80-1-13-.02 Status of Accounts (1) Correspondent Fund Placed shall not be considered to be extensions of credit subject to the limitations of Code Section 41 A-1306, but shall have the same status as a time deposit provided the financial in titution receiving the funds is an approved depository of the placing financial institution and the funds are unsecured. (2) Corre pondent Funds Held shall not constitute borrowing subject to the limitations of Code Section 41A-1312, but hall have the same status as depositors of the financial institution receiving such fund provided the recipient financial institution does not pledge its assets to secure such funds.
Authority: Ga. L. 1974, pp. 705, 733, 793-795, 801-802. Effective Sept. 17, 1975
51

52

RULES OF
DEPARTMENT OF BANKING AND FINANCE BANKS
CHAPTER 80-1-14 AUDITS
TABLE OF CONTENTS
80-1-14-.01 Minimum Standards for Internal Audit 80-1-14-.02 Independent Audits 80- I-I4-.03 Reporting Requirements
80-1-14-.01 Minimum Standards for Internal Audit (1) Minimum standard and procedure for an acceptable internal audit program are outlined in the publication "Internal Audit Program for State Chartered Banks" available through the Department of Banking and Finance. Variation from published minimum standards and procedures implemented by a state chartered bank must be approved by the Department. (2) The Board of Directors of every bank shall elect an auditor to serve at the pleasure of the Board. Such person shall be charged with implementation of the bank's internal audit program. The auditor shall report a summary of audit activities to the Board of Directors at least annually.
Authority: Ga. L. 1974, pp. 733,860.
80-1-14-.02 Independent Audits (I) In lieu of the requirements of Rule No. 80-1-14-.01 (I) any bank may have an audit performed at least annually by qualified persons independent of bank per onne!. Such persons shall be regularly engaged in the performance of audits, including but not limited to, certified public accountants, corre pondent bank auditors, internal auditors of other banks, and bank consultants. (2) Independent auditors shall perform their duties in accordance with generally accepted auditing procedures and as such shall include a review of the bank's internal controls and such other tests and reviews of bank records as deemed appropriate. At least 10% of all loan and 10% of all deposit account shall be verified with the bank customer at least annually. (3) The internal auditor designated for any bank utilizing the services of an independent auditor shall be responsible for implementing corrective action with respect to audit exceptions reported by the independent auditor and, unless performed by the independent auditor, shall complete at least annually a review of internal controls on forms provided by the Department of Banking and Finance.
Authority: Ga. L. 1974, pp. 733,860.
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Chapter 80-1-14 Page 2
80-1-14-.03 Reporting Requirements. Reports of bank audits whether by internal auditor or independent auditor, shall be filed with the Department by the bank within 15 days after receipt thereof.
Authority: Ga. L. 1974, pp. 733,860. Effective Sept. 17, 1975
54

RULES OF
DEPARTMENT OF BANKING AND FINANCE FINANCIAL INSTITUTIONS
CHAPTER 80-5-1 SUPERVISION, EXAMINATION AND INVESTIGATION FEES
TABLE OF CONTENTS
80-5-1-.01 General 80-5-1-.02 Supervision Fees 80-5-1-.03 Examination and Investigation Fees 80-5-1-.04 Other Charges
80-5-1-.01 General (I) The annual appropriation for the Department of Banking and Finance as enacted by the General Assembly and signed into law by the Governor, after deduction of any excess of departmental revenue collections over departmental expenditures for the preceding fiscal year, shall be prorated as to both Supervisory and Examination activities between the activities of the Department related to the regulation of banks, trust companies, and related corporations and the activities related to the regulation of thrift institutions (credit unions and building and loan associations), check sales licensees and related corporations. (2) The proration required under subsection (l) above shall be based upon full-time budgeted personnel positions assigned to each Departmental activity. (3) That portion of the annual appropriation prorated to each departmental division shall be assessed against supervised financial institutions in accordance with Section 80-5-1-.02 and 80-5-1-.03 of this Chapter. Such assessments shall be payable on or before January 31 of each year and shall be based upon assets reported as of June 30 of the preceding year. Where no report was made on the preceding June 30, the most recent report available shall be used. No examination or supervision fee shall be payable during the first twelve months after beginning of business by any financial institution.
Authority: Ga. L. 1974, pp. 732,733.
80-5-1-.02 Supervision Fees (1) That portion of the annual appropriation allocable to Administrative activities related to thrift institutions and check sellers shall be assessed as follows:
(a) Check Sellers shall pay an annual license fee of $300 plus one dollar ($1.00) per agent designated at the time of renewal application.
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Chapter 80-5-1 Page 2

(b) Credit Unions and Building and Loan Associations shall pay

an annual supervision fee in accordance with the following scale:

Where Total Assets are:

Fee

Less than $250,000

$100

At least $250,000 but less than $500,000

225

At least $500 000 but less than $1,000 000

350

Over $1,000,000

550

(2) That portion of the annual appropriation allocable to Ad-

mini trative activities related to banks, trust companies and other

financial institutions not covered elsewhere in this Chapter shall be

asses ed as follows:

(a) Banks shall pay an annual supervision fee in accordance

with the following scale:

Where Total Assets are:

Fee

Less than $1,000,000

$300

At least SI ,000,000 but less than $2,000,000

450

At least $2,000 000 but less than $5 000,000

650

At least $5,000,000 but less than $10 000,000

850

At least $10,000000 but less than $20000,000

1,050

At least $20,000,000 but less than $50,000,000

1,275

Over $50,000,000

1,500

(b) All other financial institutions supervised by the Depart-

ment shall pay an annual supervision fee of $300.

(3) The Department may discount or surcharge all supervision or

license fees herein provided to assure funding of annual appro-

priations by the General Assembly.

Authority: Ga. L. 1974, pp. 732,733.

80-5-1-.03 Examination and Investigation Fees

(1) That portion of the annual appropriation allocable to Exami-

nation activities related to credit unions and building and loan asso-

ciations shall be assessed in accordance with the following scale:

Where total assets are:

Fee

Less than 1,000,000

$.00050 times total assets

or $80 whichever is greater

At least $1,000,000 but less than $5,000,000 .00045 times as-

sets in excess of

$1 000000 plus

$500

At least 5,000,000 but less than $25,000000 .00035 times as-

sets in excess of

$5,000 000 plus

$2300

Over $25 000,000

00025 times assets in

excess of $25,000,000 plus

$9300.

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Chapter 80-5-1 Page 3

(2) That portion of the annual appropriation allocable to Exami-

nation activities related to banks, trust companies, and other finan-

cial institutions shall be assessed as follows:

(a) Banks shall pay an annual examination fee in accordance

with the following scale:

Where the total resources are $500,000 or less

$500

Where the total resources are more than -

$500,000 and not exceeding $750,000

600

$750,000 and not exceeding $1,000,000

700

$1,000,000 and not exceeding $1,200,000

750

$1,200,000 and not exceeding $1,400,000

900

$1,400,000 and not exceeding $1,600,000

1,050

$1,600,000 and not exceeding $1,800,000

1,300

$1,800,000 and not exceeding $2,000,000

1,450

$2,000,000 and not exceeding $2,250,000

1,600

$2,250,000 and not exceeding $2,500,000

1,750

$2,500,000 and not exceeding $2,750,000

1,950

$2,750,000 and not exceeding $3,000,000

2,150

$3,000,000 and not exceeding $3,500,000

2,350

$3,500,000 and not exceeding $4,000,000

2,550

$4,000,000 and not exceeding $4,500,000

2,750

$4,500,000 and not exceeding $5,000,000

2,950

$5,000,000 and not exceeding $6,000,000 . .

3,000

$6,000,000 and not exceeding $7,000,000

3,150

$7,000,000 and not exceeding $8,000,000

3,350

$8,000,000 and not exceeding $10,000,000

3,550

$10,000,000 and not exceeding $12,500,000

3,600

$12,500,000 and not exceeding $15,000,000

3,800

$15,000,000 and not exceeding $17,500,000

4,000

$17,500,000 and not exceeding $20,000,000

4,200

$20,000,000 and not exceeding $25,000,000

4,250

$25,000,000 and not exceeding $30,000,000

4,500

$30,000,000 and not exceeding $35,000,000

4,750

$35,000,000 and not exceeding $40,000,000

5,000

$40,000,000 and not exceeding $50,000,000

5,500

$50,000,000 and not exceeding $60,000,000

6,000

$60,000,000 and not exceeding $70,000,000

6,500

$70,000,000 and not exceeding $80,000,000

7,000

$80,000,000 and not exceeding $90,000,000

7,500

$90,000,000 and not exceeding $100,000,000

8,000

$100,000,000

8,000

plus

.00005 times resources in excess of $100,000,000

(b) In addition to the foregoing, each bank having branches, offices or facilities as defined by the Code of Georgia shall pay an
57

Chapter 8051 Page 4
annual examination fee of $250 for each such branch, office or facility approved.
(c) All financial institutions and related corporations not covered elsewhere in this Section and trust departments shall pay an examination fee at the rate of $10 per manhour required for such examination, but not less than $80.
(d) Applicants for new branch offices or facilities shall pay an investigation fee of $500 for each application.
(e) Applicants for approval of new bank charters shall pay an investigation fee of $2,500 for each such application. (3) If an examination is conducted of any financial institution during the same calendar year in which a previous examination has already been conducted, the institution shall pay an additional examination fee at the rate of $10 per manhour required for such examination. (4) The Department may discount or surcharge all examination fees herein provided to assure that anticipated revenues of the Department will fund the annual appropriation by the General Assembly.
Authority: Ga. L. 1974, pp. 732,733.
80-5-1-.04 Other Charges. The Department may from time to time establish reasonable charges for copies of records and publications of the Department. One copy of any publication may be provided to financial institutions paying supervision fees pursuant to Section 80-5-1-.02 without charge.
Authority: Ga. L. 1974,pp. 732,733. Effective Nov. 24,1975
58

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