Article 1. International And Foreign Banking And Financing Corporations of California Financial Code >> Division 1.1. >> Chapter 21. >> Article 1.

As used in this article, unless the context otherwise requires, "corporation" means a corporation organized under the laws of this state for the purpose of transacting business pursuant to this article.

The provisions of Chapter 1 (commencing with Section 99) of Division 1 applicable to, or with respect to, banks shall apply to, or with respect to, as the case may be, corporations.

When authorized by the previous written consent of the commissioner as provided by Chapter 3 (commencing with Section 1040) one or more persons may organize a corporation.

The articles of a corporation shall provide that the purpose of the corporation is to engage in the business of international and foreign banking and other international and foreign financial operations, the business of banking and other financial operations in any dependency or insular possession of the United States, and any other lawful activities which are not, by applicable laws or regulations, prohibited to a corporation transacting business under this article.

The articles of incorporation shall be submitted to the commissioner for his or her approval before they are filed with the Secretary of State pursuant to the Corporations Code. After the articles have been filed with the Secretary of State the corporation shall file with the commissioner a copy thereof, certified by the Secretary of State, and, after the organization meeting of the directors, a copy of its bylaws certified by its secretary.

Each corporation shall have power, under such rules and regulations as the commissioner may prescribe:
  (a) To purchase, sell, discount, and negotiate, with or without its endorsement or guaranty, notes, drafts, checks, bills of exchange, acceptances, including bankers' acceptances, cable transfers, and other evidences of indebtedness; to purchase and sell, with or without its endorsement or guaranty, securities, including the obligations of the United States or of any state thereof but not including shares of stock in any corporation except as herein provided; to accept bills or drafts drawn upon it subject to such limitations and restrictions as the commissioner may impose; to issue letters of credit; to purchase and sell coin, bullion, and exchange; to borrow and to lend money; to issue debentures, bonds, and promissory notes under such general conditions as to security and such limitations as the commissioner may prescribe; to receive deposits outside of the United States and to receive only such deposits in this state or in any other state of the United States as may be incidental to or for the purpose of carrying out transactions in foreign countries or dependencies or insular possessions of the United States.
  (b) Generally, to exercise such powers as are incidental to the powers conferred by this article or as may be usual, in the determination of the commissioner, in connection with the transaction of the business of banking or other financial operations in the countries, colonies, dependencies, or possessions in which it shall transact business and not inconsistent with the power specifically granted herein. Nothing contained in this article shall be construed to prohibit the commissioner, under his or her power to prescribe rules and regulations, from limiting the aggregate amount of liabilities of any or all classes incurred by the corporation and outstanding at any one time.
  (c) To establish and maintain for the transaction of its business branches or agencies in foreign countries, their dependencies or colonies, and in any state of the United States, and in the dependencies or insular possessions of the United States, at such places as may be approved by the commissioner and under such rules and regulations as he or she may prescribe, including any state of the United States, or countries or dependencies not specified in the original organization certificate.
  (d) With the consent of the commissioner to purchase and hold stock or other certificates of ownership in any other corporation organized under the laws of this state for the purpose of transacting business pursuant to this article, or under the laws of the United States, or under the laws of any foreign country or a colony of dependency thereof, or under the laws of any state, dependency or insular possession of the United States but not engaged in the general business of buying or selling goods, wares, merchandise, or commodities in the United States, and not transacting any business in the United States except such as in the judgment of the commissioner may be incidental to its international or foreign business.

Except with the approval of the commissioner, no corporation shall invest in any one corporation an amount in excess of 10 percent of its own shareholders' equity, except in a corporation engaged in the business of banking, when 15 percent of its shareholders' equity may be so invested.

No corporation shall purchase, own, or hold stock or certificates of ownership in any other corporation organized under this article or under the laws of any state which is in substantial competition therewith, or which holds stock or certificates of ownership in corporations which are in substantial competition with the purchasing corporation.

Nothing contained in this article shall prevent corporations from purchasing and holding stock in any corporation where such purchase shall be necessary to prevent a loss upon a debt previously contracted in good faith; and stock so purchased or acquired in corporations shall within six months from such purchase be sold or disposed of at public or private sale unless the time to so dispose of same is extended by the commissioner.

No corporation shall carry on any part of its business in the United States except such as, in the judgment of the commissioner, shall be incidental to its international or foreign business. Except such as is incidental and preliminary to its organization no corporation shall exercise any of the powers conferred by this article until it has been duly authorized by the commissioner to commence business under the provisions of this article.

No corporation shall engage in commerce or trade in commodities except as specifically provided in this article, nor shall it either directly or indirectly control or fix or attempt to control or fix the price of any such commodities. The license of any corporation violating this section shall be subject to forfeiture as provided in this article.

It shall be unlawful for any director, officer, agent, or employee of any corporation to use or to conspire to use the credit, the funds, or the power of the corporation to fix or control the price of any commodities, and any person violating this section shall be punished by a fine of not less than two thousand dollars ($2,000) nor more than ten thousand dollars ($10,000), imprisonment in a county jail for not more than one year, imprisonment pursuant to subdivision (h) of Section 1170 of the Penal Code, or by both that fine and imprisonment, in the discretion of the court.

No corporation shall be organized without adequate shareholders' equity.

The provisions of Chapter 5 (commencing with Section 1100) (except the provisions of Section 1121) applicable to, or with respect to, banks shall apply to, or with respect to, as the case may be, corporations.

Any bank may invest in the shares of any corporation organized under the provisions of this article, but the aggregate amount of stock held in all corporations engaged in business of the kind described in this chapter shall not exceed 10 percent of the subscribing bank's shareholders' equity.

(a) In this section, "foreign bank" means any company organized under the laws of a foreign country, a territory of the United States, Puerto Rico, Guam, American Samoa, or the Virgin Islands, which engages in the business of banking, or any subsidiary or affiliate, organized under such laws, of any such company. "Foreign bank" includes, without limitation, foreign commercial banks, foreign merchant banks, and other foreign institutions that engage in banking activities usual in connection with the business of banking in the countries where such foreign institutions are organized or operating.
  (b) Except as otherwise provided in subdivision (c), a majority of the shares of the capital stock of any corporation shall at all times be held and owned by citizens of the United States, by corporations the controlling interest in which is owned by citizens of the United States, chartered under the laws of the United States or of a state of the United States, or by firms or companies, the controlling interest in which is owned by citizens of the United States.
  (c) Notwithstanding the provisions of subdivision (b), one or more foreign banks, institutions organized under the laws of foreign countries which own or control foreign banks, or banks organized under the laws of the United States, the states of the United States, or the District of Columbia, the controlling interests in which are owned by any such foreign banks or institutions, may, with the approval of the commissioner and upon such terms and conditions and subject to such rules and regulations as the commissioner may prescribe, own and hold 50 percent or more of the shares of the capital stock of any corporation.

Whenever it shall appear to the commissioner that any corporation has violated the provisions of its articles of incorporation or any law of this state, or is conducting its business in an unsafe or unauthorized manner, or if the contributed capital of any such corporation is impaired, or if the corporation shall refuse to submit its books, papers and concerns to the inspection of any examiner of the department or if any officer thereof shall refuse to be examined upon oath touching the concerns of the corporation or if the corporation shall suspend payment of its obligations, or if from any examination or report provided for by this article the commissioner shall have reason to conclude that the corporation is in an unsound or unsafe condition to transact the business for which it is organized, or that it is unsafe and inexpedient for it to continue business, or if any corporation shall neglect or refuse to observe any order of the commissioner specified in Section 580 or 581, the commissioner may forthwith take possession of the property and business of such corporation and retain such possession until such corporation shall resume business, or its affairs be finally liquidated as provided by this code for the liquidation of banks.

No corporation shall deposit any of its funds with any other moneyed corporation unless the other corporation has been nominated and designated as a depositary for the funds of the depositing corporation by the vote of a majority of the directors of the depositing corporation and has been approved by the commissioner as a depositary. The commissioner may in his or her discretion revoke his or her approval of any such depositary. This limitation shall not apply to the deposit of funds by a corporation with another moneyed corporation, that owns all or a majority of the capital stock of the corporation.

No corporation shall be the holder of any shares of its own capital stock unless such stock shall have been taken to prevent loss upon a debt previously contracted in good faith, and stock so acquired shall, within six months from the time of its acquisition, be sold or disposed of at public or private sale.

No corporation shall, either directly or indirectly, make any discount to any person for the purpose of enabling him to pay for or hold shares of its stock either subscribed for or purchased by him. Any corporation making any such discount shall forfeit to the people of the state twice the amount of such discount.

No corporation shall by any system of accounting or any device of bookkeeping, directly or indirectly enter any of its assets upon its books in the name of any other person, or under any title or designation that is not truly descriptive thereof.

Every corporation shall conform its methods of keeping its books and records to such orders in respect thereto as have been made and promulgated by the commissioner. Any corporation that refuses or neglects to obey such order shall be subject to a penalty of one hundred dollars ($100) for each day it so refuses or neglects.

Each official communication directed by the commissioner to a corporation or to any officer thereof, relating to an examination or investigation conducted by the department or containing suggestions or recommendations as to the conduct of the business of such corporation, shall be submitted, by the officer receiving it, to the board at the next meeting of such board, and duly noted in the minutes of the meetings of such board.

On or before the first day of February in each year, each corporation and every foreign corporation licensed by the commissioner to transact the business of such a corporation in this state, shall make a written report to the commissioner which shall contain a statement of its condition on the morning of the first day of January in that year and shall be in the form and contain the matters prescribed by the commissioner. The commissioner may, however, in his or her discretion, accept from a corporation, which has branches in a foreign country or countries, a report containing a statement of its condition as of a date not later than the first day of January and not earlier than the first day of November in the preceding year. Every report shall be verified by the oaths of the two principal officers in charge of the affairs of the corporation or foreign corporation at the time of the verification, which shall state that the report is true and correct in all respects to the best of the knowledge and belief of the persons verifying it, and that the usual business of the corporation or foreign corporation has been transacted at the location required by this article and not elsewhere.

Every corporation and foreign corporation shall also make such other special reports to the commissioner as he or she may from time to time require, which shall be in such form and filed at such date as may be prescribed by the commissioner and shall, if required by the commissioner, be verified in such manner as he or she may prescribe.

If any corporation or foreign corporation shall fail to make any report required by this article on or before the day designated for the making thereof, or shall fail to include therein any matter required by the commissioner, it shall forfeit to the people of the state the sum of one hundred dollars ($100) for every day that such report shall be delayed or withheld, and for every day that it shall fail to report any such omitted matter, unless the time therefor shall have been extended by the commissioner.

Every corporation shall hold a meeting of its stockholders annually upon a date fixed in its bylaws at its main office, or if its main office is to be located outside of this state, at its branch or other office in this state.

Every corporation shall keep at its main office, or if its main office is to be located outside of this state, at its branch or other office in this state, books containing the names of all stockholders thereof, and the names and addresses of the members of its board of directors, together with copies of all reports made by it to the commissioner.

Every corporation shall make reports to the commissioner at such times and in such form as the commissioner may require and is subject to examination by examiners appointed by the commissioner, to the extent and whenever and as often as the commissioner shall deem it advisable, but in no case less than once every two calendar years. The cost of such examinations shall be fixed by the commissioner and be paid by the corporation examined.

No officer, director, clerk or other employee of any corporation, and no person in any way interested or concerned in the management of its affairs, shall as individuals discount, or directly or indirectly, make any loan upon any note or other evidence of debt, which he shall know to have been offered for discount to such corporation, and to have been refused. Every person violating the provisions of this section, shall, for each offense, forfeit to the people of the state twice the amount of the loan which he shall have made.

Every officer, director, clerk, employee, or agent of any corporation who embezzles, abstracts, or willfully misapplies any of the moneys, funds, credits, securities, evidence of indebtedness or assets of any character of such corporation, or who, without authority from the directors, issues or puts forth any certificate of deposit, draws any order or bill of exchange, makes any acceptance, assigns any note, bond, debenture, draft, bill of exchange, mortgage, judgment, or decree, or who makes any false entry in any book, report, or statement of such corporation with intent, in either case, to injure or defraud such corporation or any other company, body politic or corporate, or any individual person, or to deceive any officer of such corporation, the commissioner, or any agent or examiner appointed to examine the affairs of any such corporation; and every receiver of any corporation and every clerk or employee of such receiver who shall embezzle, abstract, or willfully misapply or wrongfully convert to his or her own use any moneys, funds, credits, or assets of any character which may come into his or her possession or under his or her control in the execution of his or her trust or the performance of the duties of his or her employment; and every such receiver or clerk or employee of such receiver who shall, with intent to injure or defraud any person, body politic or corporate, or to deceive or mislead the commissioner or any agent or examiner appointed to examine the affairs of such receiver, shall make any false entry in any book, report, or record of any matter connected with the duties of such receiver; and every person who with like intent aids or abets any officer, director, clerk, employee, or agent of any corporation, or receiver or clerk or employee of such receiver as aforesaid in any violation of this article shall upon conviction thereof be imprisoned for two, three, or four years, and may also be fined not more than five thousand dollars ($5,000), in the discretion of the court.

Whoever being connected in any capacity with any corporation represents in any way that the State of California is liable for the payment of any bond or other obligation, or the interest thereon, issued or incurred by any corporation, or that the State of California incurs any liability in respect of any act or omission of the corporation, shall be punished by a fine of not more than ten thousand dollars ($10,000) and by imprisonment pursuant to subdivision (h) of Section 1170 of the Penal Code.

No person shall act in this state as the representative of any foreign corporation in transacting the business described in this article as the business of a corporation unless such corporation shall have complied with the provisions of this article relating to such corporations.

Every foreign corporation before being licensed by the commissioner to transact in this state the business of a corporation, or any part thereof, shall subscribe and acknowledge and submit to the commissioner at his or her office, an application certificate in duplicate, which shall specifically state:
  (a) The name of such foreign corporation.
  (b) The place where its business is to be transacted in this state.
  (c) The amount of its capital stock actually paid in cash and the amount subscribed for and unpaid.
  (d) A complete and detailed statement of its financial condition as of a date within 60 days prior to the date of such application certificate.

At the time the application certificate is first submitted to the commissioner, such corporation shall also submit a duly authenticated copy of its charter, or articles, and its bylaws.

No foreign corporation shall transact in this state the business defined in this article or any part thereof, unless such corporation shall have:
  (a) Been authorized by its charter to carry on such business and shall have complied with the laws of the state or country under which it is incorporated.
  (b) Made the deposit with the State Treasurer required by this article.
  (c) Designated the commissioner, by an instrument in writing duly executed, its true and lawful attorney upon whom all process in any action or proceeding by any resident of this state against it may be served with the same effect as if it were a domestic corporation and had been lawfully served with process within this state.
  (d) Received a license duly issued to it by the commissioner.

When the commissioner shall have issued a license to any foreign corporation, it may engage in the business of a corporation of the kind authorized by this article at the location specified in the license.

Every foreign corporation, before receiving a license to transact business in this state, shall deposit with the State Treasurer of the State of California upon authorization of the commissioner, in trust as security for the depositors with and creditors of such corporation in this state, lawful money of the United States or securities of the kind and character described in Article 3 (commencing at Section 1570) of Chapter 16, of the value of one hundred thousand dollars ($100,000). Such foreign corporation so long as it shall continue solvent and comply with the laws of this state, may be permitted by the commissioner to collect the interest on the securities so deposited and from time to time to exchange such securities for others, and examine and compare such securities, as provided by said article.

The foreign corporation shall pay a license fee of five hundred dollars ($500).

Every foreign corporation, duly licensed by the commissioner to transact in this state the business defined and authorized in this article, or any part thereof, shall within 30 days after the date of such license, submit to the commissioner a statement verified by two of its principal officers, which shall contain the full name and business address of every individual, partnership or unincorporated association, who is acting or whom it proposes to have act as its agent or representative in this state. Whenever any such corporation shall engage any person to act for it in this state and the name and address of such person is not contained in such verified statement submitted to the commissioner, such foreign corporation shall forthwith submit to the commissioner an amended statement verified in the same manner as the original. A violation of this provision shall subject such foreign corporation to a forfeiture of one thousand dollars ($1,000) for each offense.

Whenever the commissioner shall have revoked the license of any such foreign corporation and shall have taken the action to make such revocation effective, all the rights and privileges of the foreign corporation to transact business in this state shall forthwith cease and determine.

Nothing in this division restricts the right of a state international or foreign banking or financing corporation to convert into an international or foreign banking or financing corporation organized under the laws of the United States upon compliance with such laws.

An international or foreign banking or financing corporation organized under the laws of the United States may convert into a state international or foreign banking or financing corporation with the approval of the commissioner which he or she shall not grant unless he or she is satisfied that such international or foreign banking or financing corporation organized under the laws of the United States meets all of the requirements set forth in this article for the establishment of a state international or foreign banking or financing corporation.

Nothing in this division restricts the right of any one or more state international or foreign banking or financing corporations to merge into or consolidate with one or more international or foreign banking or financing corporations organized under the laws of the United States.

Nothing in this division restricts one or more international or foreign banking or financing corporations organized under the laws of the United States from merging into one or more state, international or foreign banking or financing corporations. For the purpose of effecting any such merger any such international or foreign banking or financing corporation shall be deemed a "foreign corporation" as that term is used in Section 1108 of the Corporations Code and the laws of Congress shall be deemed the "laws of the state" in which such international or foreign banking or financing corporation is formed.

Whenever a state international or foreign banking or financing corporation survives the merger of one or more international or foreign banking or financing corporations and the agreement for merger has been filed with the Secretary of State with the approval of the commissioner endorsed thereon, a copy thereof, certified by the Secretary of State, shall immediately be filed with the commissioner and upon, but not until, such filing the merger shall be and become effective for all purposes.

Whenever one or more state international or foreign banking or financing corporations and one or more international or foreign banking or financing corporations organized under the laws of the United States have been merged or consolidated, the surviving or resulting international or foreign banking or financing corporation succeeds without other transfer to all the rights and property of each constituent international or foreign banking or financing corporation and is subject to all the debts and liabilities of each such constituent corporation in the same manner as if the surviving or resulting international or foreign banking or financing corporation had incurred them. All rights of creditors of each constituent international or foreign banking or financing corporation are preserved unimpaired, limited in lien to the property affected by such liens immediately prior to the time of the consolidation or merger. Any action or proceeding pending by or against any one of the constituent international or foreign banking or financing corporations may be prosecuted through judgment, which binds the resulting or surviving international or foreign banking or financing corporation; or such consolidated or surviving corporation may be proceeded against or substituted in the place of any such constituent corporation.

Whenever an international or foreign banking or financing corporation organized under the laws of the United States converts into a state international or foreign banking or financing corporation, or whenever such state corporation converts into such corporation organized under the laws of the United States, or if any such state corporation merges or consolidates with any such corporation organized under the laws of the United States, the surviving or resulting corporation shall be deemed to be the same corporate entity as the converting or constituent corporation and any reference to the converting corporation or to any constituent corporation, whether executed or taking effect before or after the conversion, merger or consolidation, shall be deemed a reference to the surviving or resulting corporation.