SECTIONS 640-646 - California Statutes

FINANCIAL CODE

SECTION 640-646

640. This article does not apply to any distribution made to the
shareholders of a bank in any proceeding to wind up and dissolve or
to liquidate such bank.

641. Section 500 of the Corporations Code does not apply to the
making by a bank or by any majority-owned subsidiary of a bank of any
distribution to the shareholders of such bank.

642. Neither a bank nor any majority-owned subsidiary of a bank
shall make any distribution to the shareholders of such bank in an
amount which exceeds the lesser of:
(a) The retained earnings of the bank; or
(b) The net income of the bank for its last three fiscal years,
less the amount of any distributions made by the bank or by any
majority-owned subsidiary of the bank to the shareholders of the bank
during such period.

643. Notwithstanding the provisions of Section 642, a bank or a
majority-owned subsidiary of a bank may, with the prior approval of
the commissioner, make a distribution to the shareholders of such
bank in an amount not exceeding the greatest of:
(a) The retained earnings of the bank;
(b) The net income of the bank for its last fiscal year; or
(c) The net income of the bank for its current fiscal year.

644. Notwithstanding the provisions of Section 642, a bank may:
(a) With the prior approval of the commissioner, make a
distribution to its shareholders by means of redeeming its redeemable
shares; and
(b) With the prior approval of its outstanding shares and of the
commissioner, otherwise make a distribution to its shareholders in
connection with a reduction of its contributed capital.

645. If the commissioner finds that the shareholders' equity of a
bank is not adequate or that the making by a bank or by any
majority-owned subsidiary of a bank of a distribution to the
shareholders of the bank would be unsafe or unsound for the bank, the
commissioner may order the bank and its majority-owned subsidiaries
not to make any distribution to the shareholders of the bank. In
addition to the order authorized by this section, the commissioner
may levy a civil penalty against the bank pursuant to Section 216.3.

646. (a) For purposes of Section 506 of the Corporations Code, the
making by a bank or by any majority-owned subsidiary of a bank of a
distribution to any shareholder of the bank in violation of any
provision of this article shall be deemed to be prohibited by, and to
be a violation of, Section 500 of the Corporations Code.
(b) The commissioner may, in the name of the people of this state,
bring or intervene in an action under Section 506 of the
Corporations Code for the benefit of a bank against any shareholder
of the bank on account of receiving, with knowledge of facts
indicating the impropriety thereof, any distribution prohibited by
any provision of this article or by any provision of Sections 501,
502, and 503 of the Corporations Code, to the same extent as a
creditor of the bank who did not consent to the illegal distribution
to the shareholder and who had a valid claim against the bank which
arose prior to the time of the illegal distribution to the
shareholder and which exceeded the amount of the illegal distribution
to the shareholder, might bring the action in the name of the bank.
(c) As an alternative to the action provided for in subdivision
(b), the commissioner may levy a civil penalty against the bank
pursuant to Section 216.3.