CHAPTER 33. OWNERSHIP AND MANAGEMENT OF STATE BANK

State Codes and Statutes

Statutes > Texas > Finance-code > Title-3-financial-institutions-and-businesses > Chapter-33-ownership-and-management-of-state-bank

FINANCE CODE

TITLE 3. FINANCIAL INSTITUTIONS AND BUSINESSES

SUBTITLE A. BANKS

CHAPTER 33. OWNERSHIP AND MANAGEMENT OF STATE BANK

SUBCHAPTER A. TRANSFER OF OWNERSHIP INTEREST

Sec. 33.001. ACQUISITION OF CONTROL. (a) Except as otherwise

expressly permitted by this subtitle, without the prior written

approval of the banking commissioner a person may not directly or

indirectly acquire a legal or beneficial interest in voting

securities of a state bank or a corporation or other entity

owning voting securities of a state bank if, after the

acquisition, the person would control the bank.

(b) For purposes of this subchapter and except as otherwise

provided by rules adopted under this subtitle, the principal

shareholder of a state bank that directly or indirectly owns or

has the power to vote a greater percentage of voting securities

of the bank than any other shareholder is considered to control

the bank.

to acquire, but not acquiring, control of a state bank or a

person that controls a state bank.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

237, Sec. 24, eff. September 1, 2007.

Sec. 33.002. APPLICATION REGARDING ACQUISITION OF CONTROL. (a)

The proposed transferee in an acquisition of control of a state

bank or of a person that controls a state bank must file an

application for approval of the acquisition. The application

must:

(1) be under oath and in a form prescribed by the banking

commissioner;

(2) contain all information that:

(A) is required by rules adopted under this subtitle; or

(B) the banking commissioner requires in a particular

application as necessary to an informed decision to approve or

reject the proposed acquisition; and

(3) be accompanied by any filing fee required by law.

(b) If a person proposing to acquire voting securities in a

transaction subject to this section includes any group of persons

acting in concert, the information required by the banking

commissioner may be required of each member of the group.

confidential or nonconfidential character of information obtained

by the banking commissioner under this section. In the absence

of rules, information obtained by the banking commissioner under

this section is confidential and may not be disclosed by the

banking commissioner or any employee of the department except as

provided by Subchapter D, Chapter 31.

(d) The applicant shall publish notice of the application, its

date of filing, and the identity of the applicant and, if the

applicant includes a group, the identity of each group member.

The notice must be published in the form and frequency specified

by the banking commissioner and in a newspaper of general

circulation in the county in which the bank's home office is

located, or in another publication or location as directed by the

banking commissioner.

(e) The applicant may defer publication of the notice until not

later than the 34th day after the date the application is filed

if:

(1) the application is filed in contemplation of a public tender

offer subject to 15 U.S.C. Section 78n(d)(1);

(2) the applicant requests confidential treatment and represents

that a public announcement of the tender offer and the filing of

appropriate forms with the Securities and Exchange Commission or

the appropriate federal banking agency, as applicable, will occur

within the period of deferral; and

(3) the banking commissioner determines that the public interest

will not be harmed by the requested confidential treatment.

(f) The banking commissioner may waive the requirement that a

notice be published or permit delayed publication on a

determination that waiver or delay is in the public interest. If

publication of notice is waived under this subsection, the

information that would be contained in a published notice becomes

public information under Chapter 552, Government Code, on the

35th day after the date the application is filed.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Amended by Acts 2001, 77th Leg., ch. 412, Sec. 2.09, eff. Sept.

1, 2001.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

735, Sec. 8, eff. September 1, 2007.

Sec. 33.003. HEARING AND DECISION ON ACQUISITION OF CONTROL.

(a) Not later than the 60th day after the date the notice is

published, the banking commissioner shall approve the application

or set the application for hearing. If the banking commissioner

sets a hearing, the department shall participate as the opposing

party and the banking commissioner shall conduct the hearing and

one or more prehearing conferences and opportunities for

discovery as the banking commissioner considers advisable and

consistent with governing law. A hearing held under this section

is confidential and closed to the public.

(b) Based on the record, the banking commissioner may issue an

order denying an application if:

(1) the acquisition would substantially lessen competition,

restrain trade, result in a monopoly, or further a combination or

conspiracy to monopolize or attempt to monopolize the banking

industry in any part of this state, unless:

(A) the anticompetitive effects of the proposed acquisition are

clearly outweighed in the public interest by the probable effect

of the acquisition in meeting the convenience and needs of the

community to be served; and

(B) the proposed acquisition does not violate the law of this

state or the United States;

(2) the financial condition of the proposed transferee, or any

member of a group comprising the proposed transferee, might

jeopardize the financial stability of the bank being acquired;

(3) plans or proposals to operate, liquidate, or sell the bank

or its assets are not in the best interests of the bank;

(4) the experience, ability, standing, competence,

trustworthiness, and integrity of the proposed transferee, or any

member of a group comprising the proposed transferee, are

insufficient to justify a belief that the bank will be free from

improper or unlawful influence or interference with respect to

the bank's operation in compliance with law;

(5) the bank will not be solvent, have adequate capitalization,

or comply with the law of this state after the acquisition;

(6) the proposed transferee has not furnished all information

pertinent to the application reasonably required by the banking

commissioner; or

(7) the proposed transferee is not acting in good faith.

transaction may be consummated. If the approval is conditioned on

a written commitment from the proposed transferee offered to and

accepted by the banking commissioner, the commitment is

enforceable against the bank and the transferee and is considered

for all purposes an agreement under this subtitle.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 33.004. APPEAL FROM ADVERSE DECISION. (a) If a hearing

has been held, the banking commissioner has entered an order

denying the application, and the order has become final, the

proposed transferee may appeal the order by filing a petition for

judicial review.

(b) The filing of an appeal under this section does not stay the

order of the banking commissioner.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 33.005. EXEMPTIONS. The following acquisitions are exempt

from Section 33.001:

(1) an acquisition of securities in connection with the exercise

of a security interest or otherwise in full or partial

satisfaction of a debt previously contracted for in good faith

and the acquiring person files written notice of acquisition with

the banking commissioner before the person votes the securities

acquired;

(2) an acquisition of voting securities in any class or series

by a controlling person who has previously complied with and

received approval under this subchapter or who was identified as

a controlling person in a prior application filed with and

approved by the banking commissioner;

(3) an acquisition or transfer by operation of law, will, or

intestate succession and the acquiring person files written

notice of acquisition with the banking commissioner before the

person votes the securities acquired;

(4) a transaction subject to Chapter 202; and

(5) a transaction exempted by the banking commissioner or by

rules adopted under this subtitle because the transaction is not

within the purposes of this subchapter or the regulation of the

transaction is not necessary or appropriate to achieve the

objectives of this subchapter.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Amended by Acts 1999, 76th Leg., ch. 344, Sec. 2.011, eff. Sept.

1, 1999.

Sec. 33.006. OBJECTION TO OTHER TRANSFER. This subchapter does

not prevent the banking commissioner from investigating,

commenting on, or seeking to enjoin or set aside a transfer of

voting securities that evidence a direct or indirect interest in

a state bank, regardless of whether the transfer is governed by

this subchapter, if the banking commissioner considers the

transfer to be against the public interest.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 33.007. CIVIL ENFORCEMENT; CRIMINAL PENALTY. (a) If the

banking commissioner believes that a person has violated or is

about to violate this subchapter or a rule of the finance

commission or order of the banking commissioner pertaining to

this subchapter, the attorney general on behalf of the banking

commissioner may apply to a district court of Travis County for

an order enjoining the violation and for other equitable relief

the nature of the case requires.

(b) A person who knowingly fails or refuses to file the

application required by Section 33.002 commits an offense. An

offense under this subsection is a Class A misdemeanor.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Amended by Acts 2001, 77th Leg., ch. 867, Sec. 21, eff. Sept. 1,

2001.

SUBCHAPTER B. BOARD AND OFFICERS

Sec. 33.101. VOTING SECURITIES HELD BY BANK. (a) Voting

securities of a state bank held by the bank in a fiduciary

capacity under a will or trust, whether registered in the bank's

name or in the name of its nominee, may not be voted in the

election of directors or on a matter affecting the compensation

of directors, officers, or employees of the bank in that capacity

unless:

(1) under the terms of the will or trust, the manner in which

the voting securities are to be voted may be determined by a

donor or beneficiary of the will or trust and the donor or

beneficiary makes the determination in the matter at issue;

(2) the terms of the will or trust expressly direct the manner

in which the securities must be voted so that discretion is not

vested in the bank as fiduciary; or

(3) the securities are voted solely by a cofiduciary that is not

an affiliate of the bank, as if the cofiduciary were the sole

fiduciary.

(b) Voting securities of a state bank that cannot be voted under

this section are considered to be authorized but unissued for

purposes of determining the procedures for and results of the

affected vote.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

237, Sec. 25, eff. September 1, 2007.

Sec. 33.102. BYLAWS. Each state bank shall adopt bylaws and may

amend its bylaws for the purposes and according to the procedures

provided by the Business Organizations Code.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

237, Sec. 26, eff. September 1, 2007.

Sec. 33.103. BOARD OF DIRECTORS. (a) The board of a state bank

must consist of not fewer than five but not more than 25

directors, a majority of whom are residents of this state. The

principal executive officer of the bank is a member of the board.

The principal executive officer acting in the capacity of a

board member is the board's presiding officer unless the board

elects a different presiding officer to perform the duties as

designated by the board.

(b) Unless the banking commissioner consents otherwise in

writing, a person may not serve as director of a state bank if:

(1) the bank incurs an unreimbursed loss attributable to a

charged-off obligation of or holds a judgment against:

(A) the person; or

(B) an entity that was controlled by the person at the time of

funding and at the time of default on the loan that gave rise to

the judgment or charged-off obligation;

(2) the person is the subject of an order described by Section

35.007(a); or

(3) the person has been convicted of a felony.

after the date of its regular annual meeting, the banking

commissioner may appoint a conservator under Chapter 35 to

operate the bank and elect directors, as appropriate. If the

conservator is unable to locate or elect persons willing and able

to serve as directors, the banking commissioner may close the

bank for liquidation.

(d) A vacancy on the board that reduces the number of directors

to fewer than five must be filled not later than the 30th day

after the date the vacancy occurs. If the vacancy is not timely

filled, the banking commissioner may appoint a conservator under

Chapter 35 to operate the bank and elect a board of not fewer

than five persons to resolve the vacancy. If the conservator is

unable to locate or elect five persons willing and able to serve

as directors, the banking commissioner may close the bank for

liquidation.

(e) Before each term to which a person is elected to serve as a

director of a state bank, the person shall submit an affidavit

for filing in the minutes of the bank stating that the person, to

the extent applicable:

(1) accepts the position and is not disqualified from serving in

the position;

(2) will not violate or knowingly permit an officer, director,

or employee of the bank to violate any law applicable to the

conduct of business of the bank; and

(3) will diligently perform the duties of the position.

(f) The banking commissioner in the exercise of discretion may

waive or reduce the residency requirements for directors set

forth in Subsection (a).

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Amended by Acts 1999, 76th Leg., ch. 344, Sec. 2.0115, eff. Sept.

1, 1999; Acts 2001, 77th Leg., ch. 412, Sec. 2.10, eff. Sept. 1,

2001.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

237, Sec. 27, eff. September 1, 2007.

Sec. 33.104. ADVISORY DIRECTOR. An advisory director is not

considered a director if the advisory director:

(1) is not elected by the shareholders of the bank;

(2) does not vote on matters before the board or a committee of

the board;

(3) is not counted for purposes of determining a quorum of the

board or committee; and

(4) provides solely general policy advice to the board.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

237, Sec. 28, eff. September 1, 2007.

Sec. 33.105. REQUIRED MONTHLY BOARD MEETING. (a) The board of

a state bank shall hold at least one regular meeting each month.

At each regular meeting the board shall review and approve the

minutes of the prior meeting and review the operations,

activities, and financial condition of the bank. The board may

designate a committee from among its members to perform those

duties and approve or disapprove the committee's report at each

regular meeting. Each action of the board must be recorded in its

minutes.

(b) Repealed by Acts 2007, 80th Leg., R.S., Ch. 110, Sec. 14,

eff. September 1, 2007.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

110, Sec. 14, eff. September 1, 2007.

Sec. 33.106. OFFICERS. The board shall annually appoint the

officers of the bank, who serve at the will of the board. The

bank must have a principal executive officer primarily

responsible for the execution of board policies and operation of

the bank and an officer responsible for the maintenance and

storage of all corporate books and records of the bank and for

required attestation of signatures. Those positions may not be

held by the same person. The board may appoint other officers of

the bank as the board considers necessary.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 33.107. LIMITATION ON ACTION OF OFFICER OR EMPLOYEE IN

RELATION TO ASSET OR LIABILITY. Unless expressly authorized by a

resolution of the board recorded in its minutes, an officer or

employee may not create or dispose of a bank asset or create or

incur a liability on behalf of the bank.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 33.108. CRIMINAL OFFENSES. (a) An officer, director,

employee, or shareholder of a state bank commits an offense if

the person knowingly:

(1) conceals information or a fact, or removes, destroys, or

conceals a book or record of the bank for the purpose of

concealing information or a fact, from the banking commissioner

or an agent of the banking commissioner; or

(2) removes, destroys, or conceals any book or record of the

bank that is material to a pending or anticipated legal or

administrative proceeding.

(b) An officer, director, or employee of a state bank commits an

offense if the person:

(1) knowingly makes a false entry in a book, record, report, or

statement of the bank; or

(2) violates or knowingly participates in a violation of, or

permits another of the bank's officers, directors, or employees

to violate, the prohibition on lending trust funds under Section

113.052, Property Code.

degree.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

237, Sec. 29, eff. September 1, 2007.

Sec. 33.109. TRANSACTIONS WITH MANAGEMENT AND AFFILIATES. (a)

Without the prior approval of a disinterested majority of the

board recorded in the minutes or, if a disinterested majority

cannot be obtained, the prior written approval of the banking

commissioner, a state bank may not directly or indirectly:

(1) sell or lease an asset of the bank to an officer, director,

or principal shareholder of the bank or of an affiliate of the

bank; or

(2) purchase or lease an asset in which an officer, director, or

principal shareholder of the bank or of an affiliate of the bank

has an interest.

(b) An officer or director of the bank who knowingly

participates in or permits a violation of this section commits an

offense. An offense under this subsection is a felony of the

third degree.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Amended by Acts 2001, 77th Leg., ch. 412, Sec. 2.11, eff. Sept.

1, 2001.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

237, Sec. 30, eff. September 1, 2007.

SUBCHAPTER C. LIMITED BANKING ASSOCIATION

Sec. 33.201. LIABILITY OF PARTICIPANTS AND MANAGERS. (a) A

participant or manager of a limited banking association is not

liable for a debt, obligation, or liability of the limited

banking association, including a debt, obligation, or liability

under a judgment, decree, or order of court. A participant or a

manager of a limited banking association is not a proper party to

a proceeding by or against a limited banking association unless

the object of the proceeding is to enforce a participant's or

manager's right against or liability to a limited banking

association.

(b) Repealed by Acts 2007, 80th Leg., R.S., Ch. 237, Sec. 80,

eff. September 1, 2007.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

237, Sec. 31, eff. September 1, 2007.

Acts 2007, 80th Leg., R.S., Ch.

237, Sec. 80, eff. September 1, 2007.

Sec. 33.204. MANAGEMENT OF LIMITED BANKING ASSOCIATION. (a)

Management of a limited banking association is vested in a board

of managers elected by the participants as prescribed by the

bylaws.

(b) A board of managers operates in substantially the same

manner as, and has substantially the same rights, powers,

privileges, duties, and responsibilities, as a board of directors

of a banking association, and a manager must meet the

qualifications for a director under Section 33.103.

agreement of a limited banking association may use "director"

instead of "manager" and "board" instead of "board of managers."

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

237, Sec. 32, eff. September 1, 2007.

Sec. 33.206. INTEREST IN LIMITED BANKING ASSOCIATION;

TRANSFERABILITY OF INTEREST. (a) The interest of a participant

in a limited banking association is the personal property of the

participant and may be transferred as provided by the bylaws or

the participation agreement.

(b) The bylaws or the participation agreement may not require

the consent of any other participant in order for a participant

to transfer participation shares, including voting rights.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

237, Sec. 33, eff. September 1, 2007.

Sec. 33.208. DISSOLUTION. The bylaws or the participation

agreement may not require automatic termination, dissolution, or

suspension of the limited banking association on the death,

disability, bankruptcy, expulsion, or withdrawal of a

participant, or on the happening of any other event other than

the passage of time.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

237, Sec. 34, eff. September 1, 2007.

Sec. 33.209. ALLOCATION OF PROFITS AND LOSSES. The profits and

losses of a limited banking association may be allocated among

the participants and among classes of participants as provided by

the participation agreement. Without the prior written approval

of the banking commissioner to use a different allocation method,

the profits and losses must be allocated according to the

relative interests of the participants as reflected in the

articles of association and related documents filed with and

approved by the banking commissioner.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 33.210. DISTRIBUTIONS. Subject to Section 32.103,

distributions of cash or other assets of a limited banking

association may be made to the participants as provided by the

participation agreement. Without the prior written approval of

the banking commissioner to use a different distribution method,

distributions must be made to the participants according to the

relative interests of the participants as reflected in the

articles of association and related documents filed with and

approved by the banking commissioner.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 33.211. APPLICATION OF OTHER PROVISIONS TO LIMITED BANKING

ASSOCIATIONS. For purposes of the provisions of Subtitle A and

this subtitle other than this subchapter, as the context

requires:

(1) a manager is considered to be a director and the board of

managers is considered to be the board of directors;

(2) a participant is considered to be a shareholder;

(3) a participation share is considered to be a share; and

(4) a distribution is considered to be a dividend.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

237, Sec. 35, eff. September 1, 2007.

State Codes and Statutes

State Codes and Statutes

State Codes and Statutes

State Codes and Statutes

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