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90_HB1588eng
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.
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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
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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
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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
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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,
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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
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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,
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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; or
18 (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
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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
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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)
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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
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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
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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
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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.