N.Y. Banking Law § 609: Resumption of business by bank, trust company or industrial bank; retirement of certificates; applicability to stock-form savings banks a...

§ 609. Resumption of business by bank, trust company or industrial

bank; retirement of certificates; applicability to stock-form savings

banks and stock-form savings and loan associations. 1. Any bank, trust

company, stock-form savings bank or stock-form savings and loan

association of which the superintendent has taken possession or which is

operating under restrictions imposed by duly constituted authority may

be permitted by the superintendent, in his discretion and subject to

such conditions as may be approved by him, to resume business in

accordance with the provisions of this section.

2. No bank, trust company or industrial bank permitted by the

superintendent to resume business in accordance with the provisions of

this section shall, without previously obtaining the written permission

of the superintendent, pay, on account of any deposit made or debt

incurred before such restrictions were imposed or before the

superintendent took possession of such bank, trust company or industrial

bank, more than that proportion of eighty per centum of the total value

of its sound assets, as determined by the superintendent, which such

deposit or debt bears to the total of the deposits and debts of such

bank, trust company or industrial bank at the time of resuming business:

provided that nothing contained in this section shall affect any

preference created by any law of this state for the benefit of any

depositor or creditor or impair the rights of any secured depositor or

creditor in any assets lawfully pledged or assigned as such security.

For the purposes of this section, the holder of a judgment against any

such bank, trust company or industrial bank for the payment of money

arising out of a cause of action arising prior to such resumption of

business, whether such judgment was recovered prior or subsequent to

such resumption of business, shall have the same rights as if he were a

depositor having a balance equal to the amount of such judgment at the

time such restrictions were imposed or at the time the superintendent

took possession of such bank, trust company or industrial bank. The

superintendent shall prepare for each such bank, trust company or

industrial bank a list of the assets which, in his judgment, are sound

and the value thereof as determined by him.

3. Such bank, trust company or industrial bank shall, immediately upon

resuming business, issue to its depositors and creditors non-negotiable

transferable certificates, in a form approved by the superintendent,

representing the part of its deposits and debts which it is not

authorized to pay at that time under the provisions of subdivision two

of this section. Such certificates shall bear interest, if any, at a

rate not in excess of three per centum per annum.

4. The superintendent shall from time to time determine the excess of

the value of the sound assets of such bank, trust company or industrial

bank over the total of the principal amount of such certificates

outstanding and of the deposits and debts of such bank, trust company or

industrial bank not represented by such certificates, including deposits

made and debts incurred after resuming business. The amount by which

such excess is greater than the excess of the value of the sound assets

of such bank, trust company or industrial bank, determined as provided

in subdivision two of this section, over its total deposits and debts at

the time of resuming business may, unless the superintendent

disapproves, be paid pro rata on account of the principal due on such

certificates or, if the principal has been paid in full, on account of

the interest, if any, due thereon. No such bank, trust company or

industrial bank shall, without previously obtaining the written

permission of the superintendent, make any other payment on account of

the principal or interest of such certificates.

5. No dividends shall be paid on the stock of such bank, trust company

or industrial bank while any such certificates are outstanding, unless,

having previously secured the written permission of the superintendent

to pay such certificates, it shall set aside and maintain a sum

sufficient for the payment of all such outstanding certificates and the

interest, if any, accrued thereon and shall publish once a week for two

calendar weeks in a newspaper published in the county in which its

principal office is located, notice to the effect that it will pay all

such certificates and the interest, if any, accrued thereon upon due

presentation for payment. If, thereafter, any such certificate together

with all interest, if any, accrued thereon, shall not be paid when so

presented, the authority of such bank, trust company or industrial bank

to pay such dividends shall cease.

6. So long as any of such certificates are outstanding, every holder

of such a certificate shall have the same right to notice of all regular

or special meetings of the stockholders of such bank, trust company or

industrial bank and to attend and to vote in person or by proxy at such

meetings as would a holder of stock of the par value of the unpaid

principal amount of such certificate, except that no holder of a

certificate or certificates shall be entitled to vote upon any change in

respect to shares or capital stock pursuant to title eight of article

fifteen or to receive notice of or attend a meeting of stockholders

specially called for that purpose. Within sixty days after such bank,

trust company or industrial bank has resumed business a meeting of its

stockholders and holders of such certificates shall be called upon

notice prescribed by the superintendent. At such meeting directors shall

be elected who shall succeed the former directors, and the directors so

elected shall elect officers who shall succeed the former officers.

Directors in office at the date of such meeting may be elected at such

meeting to succeed themselves and the directors elected at such meeting

may elect officers then serving to succeed themselves.

7. If the superintendent shall retake possession of the business and

property of such bank, trust company or industrial bank while any such

certificates are still outstanding and liquidate its business as

elsewhere provided in this chapter, deposits and debts not represented

by such certificates, including deposits made and debts incurred after

resuming business, shall be entitled to payment of principal and

interest in priority to the payment of the principal and interest of

such certificates.

8. (a) A plan for the retirement of certificates issued or made

available by a bank, trust company or industrial bank pursuant to the

provisions of this section may be promulgated in accordance with this

subdivision eight in any case where the value of all the assets of such

bank, trust company or industrial bank as determined by the

superintendent is less than the aggregate of the amounts owing to

depositors and other creditors plus the unpaid amount of all such

certificates so issued or made available by such bank, trust company or

industrial bank. Such plan may be promulgated by such bank, trust

company or industrial bank or by the holders of ten per centum or more

in principal amount of all such outstanding certificates or the

representative or representatives of such holders.

(b) Such plan may provide for any one or more of the following:

(1) The retirement of certificates by the issuance in exchange

therefor of shares of capital stock or debentures or both of such bank,

trust company or industrial bank;

(2) The issuance of preferred stock of such bank, trust company or

industrial bank and the sale of such preferred stock for cash or its

exchange for real or personal property or for outstanding capital notes,

debentures or other obligations of such bank, trust company or

industrial bank;

(3) The issuance of fractional shares of capital stock of such bank,

trust company or industrial bank in exchange for certificates or

portions thereof in unpaid amount insufficient to permit the exchange

thereof for a full share of capital stock. Such fractional shares of

capital stock shall have no voting rights, but, when combined with other

fractional shares in sufficient amount, shall be convertible into a full

share or shares of capital stock;

(4) The transfer into a separate account upon the books of such bank,

trust company or industrial bank or to a separate corporation, of any

assets to be liquidated for the pro rata benefit of certificate holders

and the issuance to certificate holders of evidences of participation in

such assets if transferred into a separate account upon the books of

such bank, trust company or industrial bank, or of stock or obligations

or both of such separate corporation, if such assets are transferred to

a separate corporation;

(5) The organization of a corporation to issue its stock or

obligations or both in exchange for certificates and for the exchange of

certificates so acquired by such corporation for shares of the capital

stock or debentures or both of such bank, trust company or industrial

bank;

(6) The amount of capital stock which such bank, trust company or

industrial bank shall have upon the plan becoming effective, the

classes, if any, into which such capital stock shall be divided, the

number of shares in each class and the par value of each share.

In addition to provisions herein specifically authorized to be

contained in a plan promulgated pursuant to this subdivision, such plan

may also contain any other provisions deemed necessary or convenient to

effectuate the general purpose or purposes of the plan.

(c) The person or persons promulgating such plan shall first submit it

to the superintendent for his approval. If the plan is approved by the

superintendent, such person shall within sixty days of such approval

submit it to the supreme court in and for the county in which the

principal office of such bank, trust company or industrial bank is

located, together with an application for its approval. Such application

shall set forth such facts as may be necessary to enable the court to

determine the fairness of such plan and shall be made upon an order to

show cause which shall provide that notice thereof of a kind which the

court deems to be adequate shall be given by such bank, trust company or

industrial bank to all holders of such certificates and all other

persons whose interests, in the opinion of the court, may be affected by

such plan. If the issue is raised in any proceeding involving a plan

promulgated pursuant to this subdivision, a certificate executed by the

superintendent and filed with the court shall be presumptive evidence of

the fact that the value of all of the assets of such bank, trust company

or industrial bank is less than the aggregate of the amounts owing to

depositors and other creditors plus the unpaid amount of all such

certificates issued or made available by such bank, trust company or

industrial bank.

(d) The superintendent or the bank, trust company or industrial bank

or any person or persons authorized to promulgate a plan hereunder may

propose and submit to the court an alternative plan or a modification or

modifications of any plan before the court. The court may modify any

such plan or may propose a new or alternative plan, provided, however,

that a modification or modifications, whether proposed by the court or

by any other person or persons, may be made only after a hearing upon

notice to all holders of certificates and all other persons whose

interests, in the opinion of the court, may be affected thereby, and

subject to the right of any person who shall previously have consented

to such plan to withdraw such consent within a period to be prescribed

by the court and after such notice as the court may direct. If any

person having such right of withdrawal shall not withdraw within the

period so prescribed he shall be deemed to have approved such plan as so

modified.

(e) After the hearing or hearings above provided the court shall by

order approve a plan, with or without modifications, or shall reject all

such plans, provided, however, that no order made pursuant to this

paragraph approving such plan shall be made or entered unless such plan,

in final form, shall first have been approved in writing by the

superintendent and such written approval shall have been filed in the

proceeding. If at the time of making the order approving such plan, the

court is satisfied that the holders of two-thirds in amount of such

certificates have approved such plan, the order of the court shall

recite such fact and shall declare that such plan shall be effective

upon the filing by the superintendent in the office of the clerk of the

county in which is located the principal office of such bank, trust

company or industrial bank of the certificate required to be filed

pursuant to paragraph (k) of this subdivision. If at the time of making

such order, such plan shall not have been approved by the holders of

two-thirds in amount of such certificates, such order shall provide that

upon satisfactory proof of the fact that the holders of two-thirds in

amount of such certificates shall have approved the same, a further

order may be entered ex parte declaring that such plan shall be

effective upon the filing by the superintendent in the office of the

clerk of the county in which is located the principal office of such

bank, trust company or industrial bank of the certificate required to be

filed pursuant to paragraph (k) of this subdivision.

(f) Upon the entering of an order declaring that such plan shall be

effective upon the filing by the superintendent in the office of the

county clerk of the certificate required to be filed pursuant to

paragraph (k) of this subdivision, such plan shall become binding upon

the holders of all certificates of such bank, trust company or

industrial bank and all such holders shall be conclusively deemed to

have consented to all the terms and conditions of such plan whether or

not all of such holders shall actually have consented thereto and

whether or not all of them shall have received notice thereof or of the

hearing thereon hereinbefore provided.

(g) Every executor, administrator, trustee, guardian, committee,

conservator, receiver, or other fiduciary, and every public and private

corporation or association, and every political and public

instrumentality or body, including, but not by way of limitation of the

generality of the foregoing, boards of education and school districts

and other special districts, is hereby authorized and empowered to

approve and accept a plan promulgated pursuant to this subdivision and

to execute and deliver such papers and documents as may be necessary or

proper to evidence such approval and acceptance, and shall not be

subject to any liability whatsoever for any such approval or acceptance

or any exchange of certificates for stock or other securities or both

made pursuant thereto.

(h) A plan promulgated pursuant to this subdivision may be effectuated

even though it has not been expressly approved by the holders of

two-thirds in amount of all outstanding certificates, provided, as an

alternative to such express approval, the provisions of this paragraph

have been complied with. After the plan is approved by the

superintendent as provided by paragraph (c) of this subdivision, the

person or persons promulgating such plan shall file a copy thereof with

the clerk of the court and shall prepare and mail to each of the holders

of such certificates and to each of the holders of stock of the bank,

trust company or industrial bank, addressed by registered mail to him,

postage prepaid, to his last known address as the same appears on the

records of the bank, trust company or industrial bank, a summary of such

plan together with a notice stating in substance that such plan will be

presented to the supreme court in and for the county in which the

principal office of the bank, trust company or industrial bank is

located, and designating a date, which date shall not be less than

thirty days after the mailing of such notice, when such court will

consider such plan and hear any objection thereto on the part of any

holder of a certificate or of stock. Such notice shall also be published

by the person or persons promulgating such plan once, at least twenty

days before said date, in a daily newspaper of general circulation

published in the county where such hearing is to be had and if no such

daily newspaper is published in such county, then such notice shall be

published in a newspaper of general circulation in said county. Upon the

return of such notice or any adjourned date or dates thereof, the court

shall hear the parties interested therein and may accept proof in

affidavit form or otherwise as to any facts and circumstances material

thereto. The court upon proof by affidavit that the provisions hereof

with respect to mailing and publication have been fully complied with

shall thereupon approve, modify or disapprove such plan, but in no event

shall any such plan, with or without modifications, be approved by the

court unless the court deems such plan fair and equitable to the holders

of certificates and unless such plan, in final form, shall first have

been approved in writing by the superintendent, and such written

approval shall have been filed in the proceeding; or if written dissent

therefrom, duly executed and acknowledged, shall be filed with the clerk

of the court prior to such return date, or prior to such other date as

may be fixed by the court, by the holders in the aggregate of more than

thirty-three and one-third per centum of the face amount of the

certificates affected by such plan. All holders of certificates who have

not dissented from the plan in the manner provided by this paragraph and

prior to the return date or such other date as may be fixed by the court

shall be conclusively deemed to have assented thereto. Such plan shall

contain a provision in respect of certificate holders dissenting

thereto, to the effect that adequate protection will be provided for the

realization by them of the value of their certificates by such method as

will in the opinion of the court, under and consistent with the

circumstances of the particular case, be equitable and fair to them.

When such plan, with or without modifications, shall be approved by the

court, the court shall make an order reciting such approval and

declaring that such plan shall be effective upon the filing by the

superintendent in the office of the clerk of the county in which is

located the principal office of such bank, trust company or industrial

bank of the certificate required to be filed pursuant to paragraph (k)

of this subdivision. The appellate court to which an appeal is taken by

any dissenting certificate holder or by any stockholder from any action

by the court pursuant to this section shall have the right to impose

upon the appellant as part of the costs of the appeal, reasonable fees

of counsel for the respondent, and such appellate court may also, in its

discretion, require bond therefor before entertaining any such appeal.

(i) Upon the entering of an order declaring that such plan shall be

effective upon the filing by the superintendent in the office of the

county clerk of the certificate required to be filed pursuant to

paragraph (k) of this subdivision, such steps shall be taken by the

superintendent and all other persons, and all acts shall be done as may

be required by such plan and as may be necessary or desirable to make

such plan operative. Within ten days after the entering of such order,

the superintendent shall issue an order pursuant to article two of this

chapter directing that such bank, trust company or industrial bank shall

forthwith make good the impairment of its capital. Upon receipt of such

order, the directors of the bank, trust company or industrial bank shall

give notice to each stockholder of such requisition and of the amount of

the assessment he must pay, which amount shall be the aggregate par

value of his shares. Such notice shall be mailed to each stockholder at

his address appearing on the records of the bank, trust company or

industrial bank or shall be served personally upon him. Notwithstanding

any provision of section one hundred fourteen or section three hundred

six of this chapter, all outstanding stock certificates of the bank,

trust company or industrial bank shall be canceled of record not less

than thirty days after notice of assessment is given to stockholders as

herein provided, and thereupon such stock certificates shall be null and

void for all purposes and the rights of the holders thereunder shall

cease and determine; provided, however, that each stockholder who pays

the full amount of such assessment within thirty days after notice of

assessment is given as herein provided shall receive, in lieu of the

stock on account of which such assessment was paid, new stock in the

amount to which he would be entitled if he held certificates issued by

such bank, trust company or industrial bank pursuant to the provisions

of this section in an aggregate unpaid principal and interest amount

equal to the assessment so paid.

(j) Not less than thirty nor more than sixty days after notice of

assessment is given to stockholders as provided in paragraph (i) of this

subdivision, the superintendent shall, if the plan so provides, cause

any assets of such bank, trust company or industrial bank which are to

be liquidated for the pro rata benefit of certificate holders, to be set

aside in a special account upon the books of such bank, trust company or

industrial bank or transferred to a separate corporation.

(k) Upon the completion of the acts required to be done pursuant to

paragraph (i) and paragraph (j) of this subdivision and not more than

sixty days after notice of assessment is given to stockholders as

provided in paragraph (i) of this subdivision, the superintendent shall

execute in triplicate a certificate declaring such plan to be effective

and stating the amount of capital stock which such bank, trust company

or industrial bank shall thereafter have, the classes, if any, into

which such capital stock shall be divided, the number of shares in each

class and the par value of each such share. The amount of capital stock

stated in such certificate shall be not less than the amount of capital

stock required to be issued to certificate holders pursuant to such

plan, plus the amount of capital stock required, pursuant to paragraph

(i) of this subdivision, to be issued to stockholders who shall have

paid the full amount of the assessments levied pursuant to such

paragraph (i). The amount of capital stock, the number of shares and

the par value of each such share as stated in such certificate shall be

the amount of capital stock, the number of shares and the par value

thereof which such bank, trust company or industrial bank shall

thereafter be authorized to have, provided that nothing herein contained

shall be deemed to limit the power of any such bank, trust company or

industrial bank subsequently to change the amount of its capital stock,

the number of its shares or the par value of its shares pursuant to

subdivision two of section eight thousand one. One of such triplicate

certificates shall be transmitted forthwith by the superintendent to

such bank, trust company or industrial bank, another shall be filed in

the office of the superintendent and the third shall be filed by the

superintendent in the office of the clerk of the county in which is

located the principal office of such bank, trust company or industrial

bank. Upon such filing in the office of the county clerk, the plan shall

become effective and all certificates theretofore issued by such bank,

trust company or industrial bank pursuant to the provisions of this

section shall be null and void and shall not be deemed to be outstanding

for any purpose. Thereupon such bank, trust company or industrial bank

shall issue and make available to the holders of such certificates

shares of stock or debentures or both of such bank, trust company or

industrial bank, and if the plan so provides, evidences of participation

in the assets aside in a special account or stock or other securities or

both of a separate corporation, in the proportions and amounts specified

in such plan.

(l) Within sixty days after a plan pursuant to this subdivision has

become effective with respect to any bank, trust company or industrial

bank, there shall be called in accordance with its by-laws a meeting of

its stockholders who shall elect directors who shall succeed the former

directors. The directors so elected shall elect officers who shall

succeed the former officers. Directors in office at the date of such

meeting may be elected at such meeting to succeed themselves and the

directors elected at such meeting may elect officers then serving to

succeed themselves. Notwithstanding the requirements as to ownership of

capital stock contained in section one hundred sixteen or section three

hundred three of this chapter, the directors of such bank, trust company

or industrial bank holding office at the time that such plan becomes

effective may continue to hold office as directors, until their

successors are elected and shall have qualified.

(m) The supreme court in and for the county in which is located the

principal office of such bank, trust company or industrial bank is

hereby vested with jurisdiction and authority to determine the fairness

of, and to approve or disapprove, any plan, or modification or

modifications thereof, which may be promulgated hereunder and to

determine the fairness of, and to approve or disapprove, the terms and

conditions of the issuance and exchange of stock or other securities, or

both, of any corporation for certificates issued pursuant to the

provisions of this section and to make such orders and do such other

things as may be required by this subdivision or as may be necessary or

convenient to carry out the purposes hereof.

9. If there be in article fifteen of this chapter a provision which

conflicts with any provision of this section six hundred nine, the

provision of this section six hundred nine shall prevail, and the

conflicting provision of article fifteen shall not apply in such case.

If there be in article fifteen a provision relating to a matter embraced

in this section six hundred nine, but not in conflict therewith, both

provisions shall apply.