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Banking Interpretations

NYSBL 143-b

Memorandum


December 17, 1980

To: Examiner Lulek - C/B Division

From: Associate Attorney Gelman

Re: [ ] TRUST COMPANY §143-b


Your 12/9/80 memo poses numerous issues as to how to deal with control situations under §143-b.

First, it should be noted that if a person or group of persons acting together (i.e., a "company") acquired or had been tendered control of a bank prior to January 1, 1969 such control is grandfathered and any such further control by those persons as may be acquired i.e. by acquisition of addi- tional shares, does not trigger a §143-b filing.

Second, in determining whether control exists solely by reason of ownership of shares, both direct and indirect owner- ship interests are counted. In the case of family members it is generally held that one family member will be deemed the in- direct owner of the others' shares (i.e., the beneficial owner) where, in the case of husband and wife, they live together in the same household. Absent special circumstances other relatives' shares would not be attributed to one owner where the parties did not reside together. A corporation's shares will be attri- buted to those persons who control the corporation. Control, of course, does not imply absolute control to the exclusion of all others and it is therefore, possible for many parties to be deemed in control of the same corporation by virtue of their offices, directorships or share ownership or any combination of these elements.

In the first situation you pose, [ ], a director, is said to have owned, as of about March 6, 1980, more than 10% of the bank's shares. You should be inquiring as to (1) when she acquired all or any part of her shares, (2) when she sold any, (3) the same for members of her immediate household and for entities she controls, (4) what the arrangement is with the law firm to which she transferred her excess shares i.e., are they merely her nominee, does she hold the proxies, what consideration was given for the transfer, (5) when she took office as a director of the bank.

For the [ ] family situation it appears that father and son, Chairman and President of [ ], are both in control of the Corporation (unless one or the other owns a majority of the shares) and the corporations shares in the bank should be attributed to each. Assuming the son lives apart from his parents [ ] shares would only be attributed to [ ], provided there is no evidence that they are acting in concert to control the bank.

[ ] is also listed as a principal stock- holder. The same rules apply to its shares in the bank.

A complete rundown of share transactions over the years by the [ ] family and corporate group is necessary before their control situation under §143-b can be evaluated.

A.A.G.

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