Article 3. Postincorporation Organization Of Associations of California Financial Code >> Division 2. >> Chapter 2. >> Article 3.
(a) The board of directors of an association which is in the
process of organization shall select a financial institution within
this state as a depository for stock, savings account and mutual
capital certificate subscription funds.
(b) The financial institution shall assure the safekeeping of the
subscription funds and the delivery of these funds to the association
after the issuance of the certificate of authority and after the
bonding of the officers. In the event of the failure to complete the
organization of the association and to commence business, the
financial institution shall insure the return of the amounts
collected to the respective subscribers or their assigns, plus any
earnings on the funds, less reasonable charges of the financial
institution for services as depository of the funds.
Before a certificate of authority is issued, the capital of
the association shall be paid into the association and, in the case
of stock, shall be the sum of the par or initially stated value of
all shares of capital stock, plus the initial paid-in surplus. The
minimum required capital shall be established by regulations, or
instructions, issued by the commissioner.
In addition to the minimum capital required, the commissioner
may require that the consideration for the issuance of capital stock
shall be sufficient to create a paid-in surplus in an amount
satisfactory to the commissioner. The minimum capital and surplus may
be used for the reserves required by law and for other purposes as
may be permitted by the board of directors, provided that the par
value or stated value of the stock subscribed shall be maintained as
the permanent capital of the association, as required by Sections
5604 and 5605.
In the case of a stock association, prior to issuance of a
certificate of authority, the association shall file with the
commissioner a statement in a form and with supporting data and proof
that the commissioner may require, that verifies that the entire
capital and paid-in surplus has been unconditionally paid in, that
these funds are on deposit with the depository financial institution,
and that all conditions contained in the notice of conditional
approval of the petition for a certificate of authority have been
(a) In the case of a stock association, on or after the date
the commissioner issues the association a certificate of authority,
the association shall issue the capital stock necessary to satisfy
the minimum capital requirements of Section 5601 and any additional
capital stock approved for issuance by its board of directors, up to
the amount authorized in its articles of incorporation, and shall
issue no additional shares except as authorized in this division.
(b) The capital stock of an association, when issued, shall
constitute permanent capital and shall not be retired or withdrawn
except as provided in this division until all liabilities of the
association have been satisfied in full, including the withdrawal
value of all savings accounts, and until outstanding capital
certificates have been retired.
(a) Any association that does not commence business within
one year after the date of the issuance of its certificate of
approval of articles of incorporation shall forfeit its certificate
of approval of articles of incorporation, unless the commissioner,
before the expiration of the one year period, shall have approved the
extension of time within which it may commence business, upon a
written application stating the reasons for delay. Upon forfeiture,
the association's certificate of approval of articles of
incorporation shall expire. Amounts credited on savings accounts or
paid in on capital stock, including any income earned on these funds,
shall be returned on a pro rata basis to their respective
(b) The commissioner shall immediately notify the Secretary of
State of forfeiture under this section.
(a) Prior to doing business in this state, an association
shall obtain and maintain insurance of its savings accounts by the
Federal Deposit Insurance Corporation.
(b) Prior to doing business in this state, a foreign savings
association, as defined in Sections 10000 and 10010, shall maintain
insurance of its savings accounts by the Federal Deposit Insurance
(c) The commissioner may enforce any statutes pertaining to, or
any regulations of, the Federal Deposit Insurance Corporation or the
Office of Thrift Supervision insofar as those statutes and
regulations apply to associations, and may enforce any and all other
federal statutes and regulations applicable to associations.
For the purposes of this article, "security" means any stock,
subordinated debenture, warrant, or right or option to purchase any
stock issued by an association.
(a) No association shall sell, except upon a sale for a
delinquent assessment made in accordance with the provisions of the
General Corporation Law, or offer for sale, or take subscriptions
for, or issue any of its securities (except stock dividends), until
the association has applied for and obtained from the commissioner a
permit authorizing it to offer, sell or issue that security.
(b) Notwithstanding subdivision (a), an association may enter into
agreements for the sale of securities with accredited investors (as
defined in Section 230. 215 of the Securities Exchange Commission
regulations) or persons approved by the commissioner prior to
obtaining a permit pursuant to subdivision (a).
(c) The commissioner may, by regulation, instruction, or order
exclude certain transactions from the operation of this section.
(a) Except as provided in subdivision (b), no issued and
outstanding stock of an association shall be sold or offered for sale
to the public, nor shall subscriptions be solicited or taken for
those sales, until the association or the selling stockholders have
applied for and obtained from the commissioner a permit authorizing
the sale of the capital stock.
(b) Subdivision (a) shall not apply to any of the following:
(1) An offering involving less than 10 percent of the issued and
outstanding capital stock of an association and less than five
hundred thousand dollars ($500,000).
(2) An offering made under a registration statement filed under
the Securities Act of 1933.
(3) Any offering exempted by regulation, instruction, or order
issued in writing by the commissioner.
An application for a permit to sell securities shall be in
writing, verified as provided in the Code of Civil Procedure for the
verification of pleadings, and shall be filed in the office of the
commissioner by the association or the selling stockholders. The
application shall include the following:
(a) Regarding the association.
(1) The names and addresses of its officers.
(2) The location of its office.
(3) A balance sheet or statement of its financial condition as of
a date within 90 days of the filing date.
(4) A copy of all minutes of any proceedings of its directors,
shareholders, or stockholders relating to or affecting the issue of
(b) Regarding the offering.
(1) A brief description of the method by which the securities are
to be offered for sale, including the offering price and the
underwriting commissions and expense, if any.
(2) A copy of a prospectus or advertisement or other description
of the securities prepared for distribution or publication in
accordance with requirements prescribed by the commissioner.
(3) A copy of any contract concerning the sale of the securities.
(4) With respect to any permit issued pursuant to Section 5614,
the names and addresses of the selling stockholders and of the
officers of any selling corporation and the partners of any selling
(c) Such additional information as the commissioner may require.
(d) An application fee as prescribed by the commissioner pursuant
to Section 9001.
Upon the filing of the application for a permit to sell
securities, the commissioner shall examine the application and other
papers and documents filed therewith, and he or she may make a
detailed examination, audit, and investigation of the association and
its affairs. If the commissioner finds that the proposed plan for
the issue and sale of such securities is fair, just, and equitable,
the commissioner shall issue to the applicant a permit authorizing it
to issue and dispose of its securities in such amounts and for such
considerations and upon such terms and conditions as the commissioner
may provide in the permit. If the commissioner does not so find, the
commissioner shall deny the application and notify the applicant in
writing of his or her decision.
Every permit to sell securities shall recite in bold type
that the issuance thereof is permissive only and does not constitute
a recommendation or endorsement of the securities permitted to be
The commissioner may amend, alter, or revoke any permit
issued by the commissioner, or temporarily suspend the rights of the
association under such permit.