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Comptroller of the Currency, Treasury § 7.2024

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Comptroller of the Currency, Treasury § 7.2024 Comptroller of the Currency, Treasury § 7.2024 (2) To pledge such shares at the re- proved by a vote of the holders of two- quest of the bank when necessary to thirds of the bank’s outstanding voting prevent loss; and shares. (3) To leave such shares in the bank’s custody. § 7.2022 Voting trusts. (b) Use of capital notes and debentures. The shareholders of a national bank A national bank may not make loans may establish a voting trust under the secured by a pledge of the bank’s own applicable law of a state selected by capital notes and debentures. Such the participants and designated in the notes and debentures must be subordi- trust agreement, provided the imple- nated to the claims of depositors and mentation of the trust is consistent other creditors of the issuing bank, and with safe and sound banking practices. are, therefore, capital instruments within the purview of 12 U.S.C. 83. § 7.2023 Reverse stock splits. § 7.2020 Acquisition and holding of (a) Authority to engage in reverse stock shares as treasury stock. splits. A national bank may engage in a reverse stock split if the transaction (a) Acquisition of outstanding shares. serves a legitimate corporate purpose Pursuant to 12 U.S.C. 59, including the and provides adequate dissenting requirements for prior approval by the shareholders’ rights. bank’s shareholders and the OCC im- (b) Legitimate corporate purpose. Ex- posed by that statute, a national bank amples of legitimate corporate pur- may acquire its outstanding shares and poses include a reverse stock split to: hold them as treasury stock, if the ac- (1) Reduce the number of share- quisition and retention of the shares is, holders in order to qualify as a Sub- and continues to be, for a legitimate chapter S corporation; and corporate purpose. (b) Legitimate corporate purpose. Ex- (2) Reduce costs associated with amples of legitimate corporate pur- shareholder communications and meet- poses include the acquisition and hold- ings. ing of treasury stock to: [64 FR 60099, Nov. 4, 1999] (1) Have shares available for use in connection with employee stock op- § 7.2024 Staggered terms for national tion, bonus, purchase, or similar plans; bank directors and size of bank (2) Sell to a director for the purpose board. of acquiring qualifying shares; (a) Staggered terms. Any national (3) Purchase a director’s qualifying bank may adopt bylaws that provide shares upon the cessation of the direc- for staggering the terms of its direc- tor’s service in that capacity if there is tors. National banks shall provide the no ready market for the shares; OCC with copies of any bylaws so (4) Reduce the number of share- amended. holders in order to qualify as a Sub- (b) Maximum term. Any national bank chapter S corporation; and director may hold office for a term (5) Reduce costs associated with that does not exceed three years. shareholder communications and meet- (c) Number of directors. A national ings. bank’s board of directors shall consist (c) Prohibition. It is not a legitimate of no fewer than 5 and no more than 25 corporate purpose to acquire or hold members. A national bank may, after treasury stock on speculation about notice to the OCC, increase the size of changes in its value. its board of directors above the 25 [64 FR 60099, Nov. 4, 1999] member limit. A national bank seeking to increase the number of its directors § 7.2021 Preemptive rights. must notify the OCC any time the pro- A national bank in its articles of as- posed size would exceed 25 directors. sociation must grant or deny preemp- The bank’s notice shall specify the rea- tive rights to the bank’s shareholders. son(s) for the increase in the size of the Any amendment to a national bank’s board of directors beyond the statutory articles of association which modifies limit. such preemptive rights must be ap- [68 FR 70131, Dec. 17, 2003] 195 VerDate Aug<31>2005 10:01 Feb 26, 2009 Jkt 217035 PO 00000 Frm 00205 Fmt 8010 Sfmt 8010 Y:\SGML\217035.XXX 217035 erowe on PRODPC75 with CFR.
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