17. Payments On Capital Stock

The state laws are more salutary in regard to payment of capital stock before commencing business than the national law, as the following quotations from the statutes will prove:

National Bank Act, Section 20: At least fifty per centum of the capital stock of every association shall be paid in before it shall be authorized to commence business; and the remainder of the capital stock of such association shall be paid in installments of at least ten per centum each, on the whole amount of the capital as frequently as one installment at the end of each succeeding month from the time it shall be authorized by the Comp- troller of the Currency to commence business; and the payment of each installment shall be certified to the Comptroller, under oath, by the president or cashier of the association.

New York State Law, Section 68; re banks: All of the capital stock of every bank shall be paid in before it shall commence business.

New York law, Section 184, re trust companies: The superintendent of banks shall, before issuing a certificate of authorization to any such corporation, examine, or cause an examination to be made, in order to ascertain whether the requisite capital of such corporation has been paid in in cash and if it appears from such examination that such capital has not been fully paid in in cash, a certificate of authorization shall not be granted; and no such corporation shall commence business until such certificate of authorization has been granted.

1 Pratt's Digest of the National Banking Laws. - A. S. Pratt & Sons, Washington, D. C.

Massachusetts law, re trust companies, Section 5: And no business shall be transacted by the corporation until the whole amount of its capital stock is subscribed for and actually paid in.

Illinois law, re trust companies, Section 6: When the directors have organized . . . and the capital stock of such association shall have been all fully paid in and record of the same laid before the Auditor, he shall by himself, or some competent person of his appointment, make a thorough examination into the affairs of such association and if satisfied the authorized capital has been paid in and that the association has the full amount dedicated to the business, including proposed surplus, if any, and when they pay into the auditor's office the reasonable expenses of such examination, he shall give them a written or printed certificate, under seal authorizing them to commence the business designated in Section 1 of this act.

18. Deposit Of Bonds

The National Bank Act requires that every association having a capital of $150,000 or less, shall deposit United States bonds equal to one-fourth of the capital stock, with the Treasurer of the United States. These bonds must be registered certificates and assigned to "The Treasurer of the United States" in trust for the bank to be chartered.

The various state laws contain similar stipulations regarding deposits of bonds with the state officer in charge. The amount to be deposited is usually larger for a trust company than for a bank.

19. Circulating Notes

The laws of the State of New York contain elaborate provisions for the issue and redemption of circulating notes, but owing to the federal tax of 10 per cent on all issues except those authorized under the national law, the notes of national banks are the only bank notes in circulation. A national bank is not compelled to take out circulating notes, but since the law requires each bank to buy bonds for deposit, most of them make use of the privilege. The bank is entitled to notes equal in amount to the face value of the bonds deposited as security therefor, unless the market value is below par. The bank may issue notes equal to the capital paid in and certified to the Comptroller.

20. State Banks

The method of organizing a state bank or trust company is, in general, the same as that employed in organizing a national bank. The laws governing the institution under organization should be carefully studied and such forms used in preparing the papers as are furnished by the officer in charge.