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90_HB1588enr 205 ILCS 5/14 from Ch. 17, par. 321 205 ILCS 5/17 from Ch. 17, par. 324 Amends the Illinois Banking Act. Authorizes banks to engage in reverse stock splits. Provides that banks may issue fractional shares. Allows the elimination of fractional shares. Requires payment of fair value for the fractional shares eliminated. Effective immediately. LRB9002339JSpk HB1588 Enrolled LRB9002339JSpk 1 AN ACT to amend the Illinois Banking Act by changing 2 Sections 14 and 17. 3 Be it enacted by the People of the State of Illinois, 4 represented in the General Assembly: 5 Section 5. The Illinois Banking Act is amended by 6 changing Sections 14 and 17 as follows: 7 (205 ILCS 5/14) (from Ch. 17, par. 321) 8 Sec. 14. Stock. Unless otherwise provided for in this Act 9 provisions of general application to stock of a state bank 10 shall be as follows: 11 (1) All banks shall have their capital divided into 12 shares of a par value of not less than one dollar each and 13 not more than one hundred dollars each. No issue of capital 14 stock or preferred stock shall be valid until not less than 15 the par value of all such stock so issued shall be paid in 16 and notice thereof by the president, a vice-president or 17 cashier of the bank has been transmitted to the Commissioner. 18 In the case of an increase in capital stock by the 19 declaration of a stock dividend, the capitalization of 20 retained earnings effected by such stock dividend shall 21 constitute the payment for such shares required by the 22 preceding sentence, provided that the surplus of said bank 23 after such stock dividend shall be at least equal to fifty 24 per cent of the capital as increased. The charter shall not 25 limit or deny the voting power of the shares of any class of 26 stock except as provided in Section 15(3) of this Act. 27 (2) Pursuant to action taken in accordance with the 28 requirements of Section 17, a bank may issue preferred stock 29 of one or more classes as shall be approved by the 30 Commissioner as hereinafter provided, and make such amendment 31 to its charter as may be necessary for this purpose; but in HB1588 Enrolled -2- LRB9002339JSpk 1 the case of any newly organized bank which has not yet issued 2 capital stock the requirements of Section 17 shall not apply. 3 (3) Without limiting the authority herein contained a 4 bank, when so provided in its charter and when approved by 5 the Commissioner, may issue shares of preferred stock: 6 (a) Subject to the right of the bank to redeem any 7 of such shares at not exceeding the price fixed by the 8 charter for the redemption thereof; 9 (b) Subject to the provisions of subsection (8) of 10 this Section 14 entitling the holders thereof to 11 cumulative or noncumulative dividends; 12 (c) Having preference over any other class or 13 classes of shares as to the payment of dividends; 14 (d) Having preference as to the assets of the bank 15 over any other class or classes of shares upon the 16 voluntary or involuntary liquidation of the bank; 17 (e) Convertible into shares of any other class of 18 stock, provided that preferred shares shall not be 19 converted into shares of a different par value unless 20 that part of the capital of the bank represented by such 21 preferred shares is at the time of the conversion equal 22 to the aggregate par value of the shares into which the 23 preferred shares are to be converted. 24 (4) If any part of the capital of a bank consists of 25 preferred stock, the determination of whether or not the 26 capital of such bank is impaired and the amount of such 27 impairment shall be based upon the par value of its stock 28 even though the amount which the holders of such preferred 29 stock shall be entitled to receive in the event of retirement 30 or liquidation shall be in excess of the par value of such 31 preferred stock. 32 (5) Pursuant to action taken in accordance with the 33 requirements of Section 17 of this Act, a state bank may 34 provide for a specified number of authorized but unissued HB1588 Enrolled -3- LRB9002339JSpk 1 shares of capital stock for one or more of the following 2 purposes: 3 (a) Reserved for issuance under stock option plan 4 or plans to directors, officers or employees; 5 (b) Reserved for issuance upon conversion of 6 convertible preferred stock issued pursuant to and in 7 compliance with the provisions of subsections (2) and (3) 8 of this Section 14. 9 (c) Reserved for issuance upon conversion of 10 convertible debentures or other convertible evidences of 11 indebtedness issued by a state bank, provided always that 12 the terms of such conversion have been approved by the 13 Commissioner; 14 (d) Reserved for issuance by the declaration of a 15 stock dividend. If and when any shares of capital stock 16 are proposed to be authorized and reserved for any of the 17 purposes set forth in subparagraphs (a), (b) or (c) 18 above, the notice of the meeting, whether special or 19 annual, of stockholders at which such proposition is to 20 be considered shall be accompanied by a statement setting 21 forth or summarizing the terms upon which the shares of 22 capital stock so reserved are to be issued, and the 23 extent to which any preemptive rights of stockholders are 24 inapplicable to the issuance of the shares so reserved or 25 to the convertible preferred stock or convertible 26 debentures or other convertible evidences of 27 indebtedness, and the approving vote of the holders of at 28 least two-thirds of the outstanding shares of stock 29 entitled to vote at such meeting of the terms of such 30 issuance shall be requisite for the adoption of any 31 amendment providing for the reservation of authorized but 32 unissued shares for any of said purposes. Nothing in this 33 subsection (5) contained shall be deemed to authorize the 34 issuance of any capital stock for a consideration less HB1588 Enrolled -4- LRB9002339JSpk 1 than the par value thereof. 2 (6) Upon written application to the Commissioner 60 days 3 prior to the proposed purchase and receipt of the written 4 approval of the Commissioner, a state bank may purchase and 5 hold as treasury stock such amounts of the total number of 6 issued and outstanding shares of its capital and preferred 7 stock outstanding as the Commissioner determines is 8 consistent with safety and soundness of the bank. The 9 Commissioner may specify the manner of accounting for the 10 treasury stock and the form of notice prior to ultimate 11 disposition of the shares. Except as authorized in this 12 subsection, it shall not be lawful for a state bank to 13 purchase or hold any additional such shares or securities 14 described in subsection (2) of Section 37 unless necessary to 15 prevent loss upon a debt previously contracted in good faith, 16 in which event such shares or securities so purchased or 17 acquired shall, within 6 months from the time of purchase or 18 acquisition, be sold or disposed of at public or private 19 sale. Any state bank which intends to purchase and hold 20 treasury stock as authorized in this subsection (6) shall 21 file a written application with the Commissioner 60 days 22 prior to any such proposed purchase. The application shall 23 state the number of shares to be purchased, the consideration 24 for the shares, the name and address of the person from whom 25 the shares are to be purchased, if known, and the total 26 percentage of its issued and outstanding shares to be held by 27 the bank after the purchase. The total consideration paid by 28 a state bank for treasury stock shall reduce capital and 29 surplus of the bank for purposes of Sections of this Act 30 relating to lending and investment limits which require 31 computation of capital and surplus. The Commissioner may 32 specify the form of the application for approval to acquire 33 treasury stock and promulgate rules and regulations for the 34 administration of this subsection (6). A state bank may, HB1588 Enrolled -5- LRB9002339JSpk 1 acquire or resell its owns shares as treasury stock pursuant 2 to this subsection (6) without a change in its charter 3 pursuant to Section 17. Such stock may be held for any 4 purpose permitted in subsection (5) of this Section 14 or may 5 be resold upon such reasonable terms as the board of 6 directors may determine provided notice is given to the 7 Commissioner prior to the resale of such stock. 8 (7) During the time that a state bank shall continue its 9 banking business, it shall not withdraw or permit to be 10 withdrawn, either in the form of dividends or otherwise, any 11 portion of its capital, but nothing in this subsection shall 12 prevent a reduction or change of the capital stock or the 13 preferred stock under the provisions of Sections 17 through 14 30 of this Act, a purchase of treasury stock under the 15 provisions of subsection (6) of this Section 14 or a 16 redemption of preferred stock pursuant to charter provisions 17 therefor. 18 (8) (a) Subject to the provisions of this Act, the 19 board of directors of a state bank from time to time may 20 declare a dividend of so much of the net profits of such 21 bank as it shall judge expedient, but each bank before 22 the declaration of a dividend shall carry at least 23 one-tenth of its net profits since the date of the 24 declaration of the last preceding dividend, or since the 25 issuance of its charter in the case of its first 26 dividend, to its surplus until the same shall be equal to 27 its capital. 28 (b) No dividends shall be paid by a state bank 29 while it continues its banking business to an amount 30 greater than its net profits then on hand, deducting 31 first therefrom its losses and bad debts. All debts due 32 to a state bank on which interest is past due and unpaid 33 for a period of 6 months or more, unless the same are 34 well secured and in the process of collection, shall be HB1588 Enrolled -6- LRB9002339JSpk 1 considered bad debts. 2 (9) A State bank may, but shall not be obliged to, issue 3 a certificate for a fractional share, and, by action of its 4 board of directors, may in lieu thereof, pay cash equal to 5 the value of the fractional share. A certificate for a 6 fractional share shall entitle the holder to exercise 7 fractional voting rights, to receive dividends, and to 8 participate in any of the assets of the bank in the event of 9 liquidation. 10 (Source: P.A. 86-754.) 11 (205 ILCS 5/17) (from Ch. 17, par. 324) 12 Sec. 17. Changes in charter. 13 (a) By compliance with the provisions of this Act a 14 State bank may: 15 (1) change its main banking premises provided that 16 there shall not be a removal to a new location without 17 complying with the capital requirements of Section 7 and 18 of subsection (1) of Section 10 hereof, nor unless the 19 Commissioner shall find that the convenience and needs of 20 the area sought to be served by the bank at its proposed 21 new location will be promoted;
.22 (2) increase, decrease or change its capital stock, 23 whether issued or unissued, provided that in no case 24 shall the capital be diminished to the prejudice of its 25 creditors; 26 (3) provide for authorized but unissued capital 27 stock reserved for issuance for one or more of the 28 purposes provided for in subsection (5) of Section 14 29 hereof; 30 (4) authorize preferred stock, or increase, 31 decrease or change the preferences, qualifications, 32 limitations, restrictions or special or relative rights 33 of its preferred stock, whether issued or unissued, HB1588 Enrolled -7- LRB9002339JSpk 1 provided that in no case shall the capital be diminished 2 to the prejudice of its creditors; 3 (5) increase, decrease or change the par value of 4 its shares of its capital stock or preferred stock, 5 whether issued or unissued; 6 (6) extend the duration of its charter; 7 (7) eliminate cumulative voting rights under all or 8 specified circumstances, or eliminate voting rights 9 entirely, as to any class or classes or series of stock 10 of the bank pursuant to paragraph (3) of Section 15, 11 provided that one class of shares or series thereof shall 12 always have voting in respect to all matters in the bank, 13 and provided further that the proposal to eliminate such 14 voting rights receives the approval of the holders of 70% 15 of the outstanding shares of stock entitled to vote as 16 provided in paragraph (7) of subsection (b) of this 17 Section 17; or18 (8) increase, decrease, or change its capital stock 19 or preferred stock, whether issued or unissued, for the 20 purpose of eliminating fractional shares or avoiding the 21 issuance of fractional shares, provided that in no case 22 shall the capital be diminished to the prejudice of its 23 creditors; or 24 (9) (8)Make such other change in its charter as 25 may be authorized in this Act. 26 (b) To effect a change or changes in a State bank's 27 charter as provided for in this Section 17: 28 (1) The board of directors shall adopt a resolution 29 setting forth the proposed amendment and directing that 30 it be submitted to a vote at a meeting of stockholders, 31 which may be either an annual or special meeting. 32 (2) If the meeting is a special meeting, written or 33 printed notice setting forth the proposed amendment or 34 summary thereof shall be given to each stockholder of HB1588 Enrolled -8- LRB9002339JSpk 1 record entitled to vote at such meeting at least 30 days 2 before such meeting and in the manner provided in this 3 Act for the giving of notice of meetings of stockholders. 4 (3) At such special meeting, a vote of the 5 stockholders entitled to vote shall be taken on the 6 proposed amendment. Except as provided in paragraph (7) 7 of this subsection (b), the proposed amendment shall be 8 adopted upon receiving the affirmative vote of the 9 holders of at least two-thirds of the outstanding shares 10 of stock entitled to vote at such meeting, unless holders 11 of preferred stock are entitled to vote as a class in 12 respect thereof, in which event the proposed amendment 13 shall be adopted upon receiving the affirmative vote of 14 the holders of at least two-thirds of the outstanding 15 shares of each class of shares entitled to vote as a 16 class in respect thereof and of the total outstanding 17 shares entitled to vote at such meeting. Any number of 18 amendments may be submitted to the stockholders and voted 19 upon by them at one meeting. A certificate of the 20 amendment, or amendments, verified by the president, or a 21 vice-president, or the cashier, shall be filed 22 immediately in the office of the Commissioner. 23 (4) At any annual meeting without a resolution of 24 the board of directors and without a notice and prior 25 publication, as hereinabove provided, a proposition for a 26 change in the bank's charter as provided for in this 27 Section 17 may be submitted to a vote of the stockholders 28 entitled to vote at the annual meeting, except that no 29 proposition for authorized but unissued capital stock 30 reserved for issuance for one or more of the purposes 31 provided for in subsection (5) of Section 14 hereof shall 32 be submitted without complying with the provisions of 33 said subsection. The proposed amendment shall be adopted 34 upon receiving the affirmative vote of the holders of at HB1588 Enrolled -9- LRB9002339JSpk 1 least two-thirds of the outstanding shares of stock 2 entitled to vote at such meeting, unless holders of 3 preferred stock are entitled to vote as a class in 4 respect thereof, in which event the proposed amendment 5 shall be adopted upon receiving the affirmative vote of 6 the holders of at least two-thirds of the outstanding 7 shares of each class of shares entitled to vote as a 8 class in respect thereof and the total outstanding shares 9 entitled to vote at such meeting. A certificate of the 10 amendment, or amendments, verified by the president, or a 11 vice-president or cashier, shall be filed immediately in 12 the office of the Commissioner. 13 (5) If an amendment or amendments shall be approved 14 in writing by the Commissioner, a like certificate, 15 together with the Commissioner's written approval, shall 16 be recorded, a file marked copy delivered to the 17 Commissioner, and thereupon the amendment or amendments 18 so adopted and so approved shall be accomplished in 19 accordance with the vote of the stockholders. The 20 Commissioner shall revoke such approval in the event such 21 amendment or amendments are not effected within one year 22 from the date of the issuance of the Commissioner's 23 certificate and written approval except for transactions 24 permitted under subsection (5) of Section 14 of this Act. 25 (6) No amendment or amendments shall affect suits 26 in which the bank is a party, nor affect causes of 27 action, nor affect rights of persons in any particular, 28 nor shall actions brought against such bank by its former 29 name be abated by a change of name. 30 (7) A proposal to amend the charter to eliminate 31 cumulative voting rights under all or specified 32 circumstances, or to eliminate voting rights entirely, as 33 to any class or classes or series or stock of a bank, 34 pursuant to paragraph (3) of Section 15 and paragraph (7) HB1588 Enrolled -10- LRB9002339JSpk 1 of subsection (a) of this Section 17, shall be adopted 2 only upon such proposal receiving the approval of the 3 holders of 70% of the outstanding shares of stock 4 entitled to vote at the meeting where the proposal is 5 presented for approval, unless holders of preferred stock 6 are entitled to vote as a class in respect thereof, in 7 which event the proposed amendment shall be adopted upon 8 receiving the approval of the holders of 70% of the 9 outstanding shares of each class of shares entitled to 10 vote as a class in respect thereof and of the total 11 outstanding shares entitled to vote at the meeting where 12 the proposal is presented for approval. The proposal to 13 amend the charter pursuant to this paragraph (7) may be 14 voted upon at the annual meeting or a special meeting. 15 (8) Written or printed notice of a stockholders' 16 meeting to vote on a proposal to increase, decrease or 17 change the capital stock or preferred stock pursuant to 18 paragraph (8) of subsection (a) of this Section 17 and to 19 eliminate fractional shares or avoid the issuance of 20 fractional shares shall be given to each stockholder of 21 record entitled to vote at the meeting at least 30 days 22 before the meeting and in the manner provided in this Act 23 for the giving of notice of meetings of stockholders, and 24 shall include all of the following information: 25 (A) A statement of the purpose of the proposed 26 reverse stock split. 27 (B) A statement of the amount of consideration 28 being offered for the bank's stock. 29 (C) A statement that the bank considers the 30 transaction fair to the stockholders, and a 31 statement of the material facts upon which this 32 belief is based. 33 (D) A statement that the bank has secured an 34 opinion from a third party with respect to the HB1588 Enrolled -11- LRB9002339JSpk 1 fairness, from a financial point of view, of the 2 consideration to be paid, the identity and 3 qualifications of the third party, how the third 4 party was selected, and any material relationship 5 between the third party and the bank. 6 (E) A summary of the opinion including the 7 basis for and the methods of arriving at the 8 findings and any limitation imposed by the bank in 9 arriving at fair value and a statement making the 10 opinion available for reviewing or copying by any 11 stockholder. 12 (F) A statement that objecting stockholders 13 will be entitled to the fair value of those shares 14 that are voted against the charter amendment, if a 15 proper demand is made on the bank and the 16 requirements are satisfied as specified in this 17 Section. 18 If a stockholder shall file with the bank, prior to or at the 19 meeting of stockholders at which the proposed charter 20 amendment is submitted to a vote, a written objection to the 21 proposed charter amendment and shall not vote in favor 22 thereof, and if the stockholder, within 20 days after 23 receiving written notice of the date the charter amendment 24 was accomplished pursuant to paragraph (5) of subsection (a) 25 of this Section 17, shall make written demand on the bank for 26 payment of the fair value of the stockholder's shares as of 27 the day prior to the date on which the vote was taken 28 approving the charter amendment, the bank shall pay to the 29 stockholder, upon surrender of the certificate or 30 certificates representing the stock, the fair value thereof. 31 The demand shall state the number of shares owned by the 32 objecting stockholder. The bank shall provide written notice 33 of the date on which the charter amendment was accomplished 34 to all stockholders who have filed written objections in HB1588 Enrolled -12- LRB9002339JSpk 1 order that the objecting stockholders may know when they must 2 file written demand if they choose to do so. Any stockholder 3 failing to make demand within the 20-day period shall be 4 conclusively presumed to have consented to the charter 5 amendment and shall be bound by the terms thereof. If within 6 30 days after the date on which a charter amendment was 7 accomplished the value of the shares is agreed upon between 8 the objecting stockholders and the bank, payment therefor 9 shall be made within 90 days after the date on which the 10 charter amendment was accomplished, upon the surrender of the 11 stockholder's certificate or certificates representing the 12 shares. Upon payment of the agreed value the objecting 13 stockholder shall cease to have any interest in the shares or 14 in the bank. If within such period of 30 days the 15 stockholder and the bank do not so agree, then the objecting 16 stockholder may, within 60 days after the expiration of the 17 30-day period, file a complaint in the circuit court asking 18 for a finding and determination of the fair value of the 19 shares, and shall be entitled to judgment against the bank 20 for the amount of the fair value as of the day prior to the 21 date on which the vote was taken approving the charter 22 amendment with interest thereon to the date of the judgment. 23 The practice, procedure and judgment shall be governed by the 24 Civil Practice Law. The judgment shall be payable only upon 25 and simultaneously with the surrender to the bank of the 26 certificate or certificates representing the shares. Upon 27 payment of the judgment, the objecting stockholder shall 28 cease to have any interest in the shares or the bank. The 29 shares may be held and disposed of by the bank. Unless the 30 objecting stockholder shall file such complaint within the 31 time herein limited, the stockholder and all persons claiming 32 under the stockholder shall be conclusively presumed to have 33 approved and ratified the charter amendment, and shall be 34 bound by the terms thereof. The right of an objecting HB1588 Enrolled -13- LRB9002339JSpk 1 stockholder to be paid the fair value of the stockholder's 2 shares of stock as herein provided shall cease if and when 3 the bank shall abandon the charter amendment. 4 (c) The purchase and holding and later resale of 5 treasury stock of a state bank pursuant to the provisions of 6 subsection (6) of Section 14 may be accomplished without a 7 change in its charter reflecting any decrease or increase in 8 capital stock. 9 (Source: P.A. 88-546; 89-541, eff. 7-19-96.) 10 Section 99. Effective date. This Act takes effect upon 11 becoming law.
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