Comptroller of the Currency, Treasury § 7.2024 § 7.2018 Lost stock certificates. (5) Reduce costs associated with If a national bank does not provide shareholder communications and meet- for replacing lost, stolen, or destroyed ings. stock certificates in its articles of as- (c) Prohibition. It is not a legitimate sociation or bylaws, the bank may corporate purpose to acquire or hold adopt procedures in accordance with treasury stock on speculation about § 7.2000. changes in its value. § 7.2019 Loans secured by a bank’s [64 FR 60099, Nov. 4, 1999] own shares. § 7.2021 Preemptive rights. (a) Permitted agreements, relating to bank shares. A national bank may re- A national bank in its articles of as- quire a borrower holding shares of the sociation must grant or deny preemp- bank to execute agreements: tive rights to the bank’s shareholders. (1) Not to pledge, give away, transfer, Any amendment to a national bank’s or otherwise assign such shares; articles of association which modifies (2) To pledge such shares at the re- such preemptive rights must be ap- quest of the bank when necessary to proved by a vote of the holders of two- prevent loss; and thirds of the bank’s outstanding voting (3) To leave such shares in the bank’s shares. custody. (b) Use of capital notes and debentures. § 7.2022 Voting trusts. A national bank may not make loans The shareholders of a national bank secured by a pledge of the bank’s own may establish a voting trust under the capital notes and debentures. Such applicable law of a state selected by notes and debentures must be subordi- the participants and designated in the nated to the claims of depositors and trust agreement, provided the imple- other creditors of the issuing bank, and mentation of the trust is consistent are, therefore, capital instruments with safe and sound banking practices. within the purview of 12 U.S.C. 83. § 7.2020 Acquisition and holding of § 7.2023 Reverse stock splits. shares as treasury stock. (a) Authority to engage in reverse stock (a) Acquisition of outstanding shares. splits. A national bank may engage in a Pursuant to 12 U.S.C. 59, including the reverse stock split if the transaction requirements for prior approval by the serves a legitimate corporate purpose bank’s shareholders and the OCC im- and provides adequate dissenting posed by that statute, a national bank shareholders’ rights. may acquire its outstanding shares and (b) Legitimate corporate purpose. Ex- hold them as treasury stock, if the ac- amples of legitimate corporate pur- quisition and retention of the shares is, poses include a reverse stock split to: and continues to be, for a legitimate (1) Reduce the number of share- corporate purpose. holders in order to qualify as a Sub- (b) Legitimate corporate purpose. Ex- chapter S corporation; and amples of legitimate corporate pur- (2) Reduce costs associated with poses include the acquisition and hold- shareholder communications and meet- ing of treasury stock to: ings. (1) Have shares available for use in connection with employee stock op- [64 FR 60099, Nov. 4, 1999] tion, bonus, purchase, or similar plans; (2) Sell to a director for the purpose § 7.2024 Staggered terms for national of acquiring qualifying shares; bank directors and size of bank board. (3) Purchase a director’s qualifying shares upon the cessation of the direc- (a) Staggered terms. Any national tor’s service in that capacity if there is bank may adopt bylaws that provide no ready market for the shares; for staggering the terms of its direc- (4) Reduce the number of share- tors. National banks shall provide the holders in order to qualify as a Sub- OCC with copies of any bylaws so chapter S corporation; and amended. 197 VerDate Mar<15>2010 13:58 Feb 23, 2011 Jkt 223035 PO 00000 Frm 00207 Fmt 8010 Sfmt 8010 Y:\SGML\223035.XXX 223035 jdjones on DSK8KYBLC1PROD with CFR.