N.Y. Banking Law § 606: When superintendent may take possession of banking organization; when possession may be surrendered

§ 606. When superintendent may take possession of banking

organization; when possession may be surrendered. 1. The superintendent

may, in his discretion, forthwith take possession of the business and

property of any banking organization whenever it shall appear that such

banking organization:

(a) Has violated any law;

(b) Is conducting its business in an unauthorized or unsafe manner;

(c) Is in an unsound or unsafe condition to transact its business;

(d) Cannot with safety and expediency continue business;

(e) Has an impairment of its capital; or, in the case of a mutual

savings and loan association or credit union, has assets insufficient to

pay its debts and the amount due members upon their shares;

(f) Has suspended payment of its obligations; or, in the case of a

mutual savings and loan association, has failed for sixty days after a

withdrawal application has been filed with it by any shareholder to pay

such withdrawal application in full;

(g) Has neglected or refused to comply with the terms of a duly issued

order of the superintendent;

(h) Has refused, upon proper demand, to submit its records and affairs

for inspection to an examiner of the department;

(i) Has refused to be examined upon oath regarding its affairs.

(j) Has neglected, refused or failed to take or continue proceedings

for voluntary liquidation in accordance with any of the provisions of

this chapter.

2. The superintendent may, in his discretion, and upon such conditions

as may be approved by him, surrender possession and permit such banking

organization to resume business.

3. When the superintendent shall have duly taken possession of the

property and business of any such banking organization, he may hold such

possession until its affairs are finally liquidated by him, unless he

shall surrender possession as provided in subdivision two of this

section or be enjoined from continuing possession as provided in section

six hundred seven of this article, or unless such banking organization

shall, with the written approval of the superintendent, voluntarily wind

up its affairs as provided in section six hundred five of this article.

4. (a) The superintendent may also, in his or her discretion,

forthwith take possession of the business and property in this state of

any foreign banking corporation that has been licensed by the

superintendent under the provisions of this chapter, including, for the

purposes of this article, any such corporation whose license has been

surrendered or revoked, upon his or her finding that any of the reasons

enumerated in subdivision one of this section exist with respect to such

corporation or that it is in liquidation at its domicile or elsewhere or

that there is reason to doubt its ability or willingness to pay in full

the claims of the creditors hereinbelow described. Title to such

business and property shall vest by operation of law in the

superintendent and his or her successors forthwith upon taking

possession. Thereafter the superintendent shall liquidate or otherwise

deal with such business and property in accordance with the provisions

of this chapter applicable to the liquidation of banking organizations,

except that the superintendent may deal with such business and property

and prosecute and defend any and all actions relating thereto in his or

her own name as superintendent. Only the claims of creditors of such

corporation arising out of transactions had by them with its New York

agency or agencies, or with its New York branch or branches, shall be

accepted by the superintendent for payment out of such business and

property in this state as provided in this article. Acceptance or

rejection of such claims by the superintendent shall not prejudice such

creditors' rights to otherwise share in the assets of such corporation.

The following claims shall not be accepted by the superintendent for

payment out of such business and property in this state: (1) claims

which would not represent an enforceable legal obligation against such

branch or agency if such branch or agency were a separate and

independent legal entity; and (2) amounts due and other liabilities to

other offices, agencies or branches of, and affiliates of, such foreign

banking corporation.

(b) Whenever the accepted claims, together with interest thereon, if

interest was paid, and the expenses of the liquidation have been paid in

full or properly provided for, the superintendent upon the order of the

supreme court shall turn over the remaining assets to, in the first

instance, other offices of the foreign banking corporation that are

being liquidated in the United States, upon the request of the

liquidators of those offices, in amounts which the liquidators of those

offices demonstrate to the superintendent are needed to pay the claims

accepted by those liquidators and any expenses incurred by the

liquidators in liquidating those other offices of the foreign banking

corporation. After such payments, if any, have been made, any assets of

the foreign banking corporation remaining in the hands of the

superintendent shall be turned over to the principal office of such

foreign banking corporation, or to the duly appointed domiciliary

liquidator or receiver of said foreign banking corporation. Dividends

and other amounts remaining unclaimed or unpaid in the hands of the

superintendent for six months after such turn-over shall be deposited by

him or her as provided in article two of this chapter.

(c) As used in this subdivision the phrase "business and property in

this state" includes, but is not limited to, all property of the foreign

corporation, real, personal or mixed, whether tangible or intangible,

(1) wherever situated, constituting part of the business of the New York

agency or branch and appearing on its books as such, and (2) situated

within this state whether or not constituting part of the business of

the New York agency or branch or so appearing on its books.

(d) For the purposes of this subdivision, the words "debts",

"obligations", "deposits" and other similar terms as used in subsequent

sections of this article, shall be deemed to refer to the claims that

the superintendent shall accept pursuant to paragraph (a) of this

subdivision, the words "creditors" and "depositors" shall be deemed to

refer to the owners of such accepted claims and, except when the context

shall otherwise require, the terms "banking organization" and

"corporation" shall be deemed to refer to the New York agency or

agencies or branch or branches and the word "officer" shall include the

agent or other person in charge of such agency or agencies and any

person in charge of or who is an officer of such branch or branches. As

used in this subdivision, (i) "affiliate" shall mean any person, or

group of persons acting in concert, that controls, is controlled by or

is under common control with such foreign banking corporation and (ii)

"control" means any person, or group of persons acting in concert,

directly or indirectly, owning, controlling or holding with power to

vote, more than fifty percent of the voting stock of a company, or

having the ability in any manner to elect a majority of the directors of

a company, or otherwise exercising a controlling influence over the

management and policies of a company as defined by the superintendent by

regulation. For purposes of this subdivision, the term "person" shall

mean a corporation, unincorporated association, partnership, or any

other entity or individual.

5. The term "banking organization" as used in this and subsequent

sections of this article shall be deemed to include a corporation which

has engaged in any business or other activity prohibited by section one

hundred thirty-one of this chapter, and an unincorporated association,

partnership, fiduciary or individual who has engaged in any business or

other activity prohibited by section one hundred eighty of this chapter.

6. (a) In the case of the liquidation of an investment company by the

superintendent, accepted claims, amounts due and other liabilities owed

to affiliates of such investment company shall be paid only after all

accepted claims, amounts due and other liabilities owed have been fully

paid to such creditors and other claimants of the investment company

that are not affiliates of such investment company.

(b) For the purposes of this subdivision, (i) "affiliate" shall mean

any person, or group of persons acting in concert, that controls, is

controlled by or is under common control with such investment company,

and (ii) "control" means any person, or group of persons acting in

concert, directly or indirectly, owning, controlling, or holding with

power to vote, more than fifty percent of the voting stock of a company,

or having the ability in any manner to elect a majority of the directors

of a company, or otherwise exercising a controlling influence over the

management and policies of a company as defined by the superintendent by

regulation. For purposes of this subdivision, the term "person" shall

mean a corporation, unincorporated association, partnership, or any

other entity or individual.