Law reviews.

For article, “Complex Financial Institutions and Systemic Risk,” see 45 Ga. L. Rev. 779 (2011).

For article, “How the Poor Got Cut Out of Banking,” see 62 Emory L.J. 483 (2013).

For article, “Financial Reform’s Internationalism,” see 65 Emory L.J. 1255 (2016).

For article, “Overlapping Legal Rules in Financial Regulation and the Administrative State,” see 54 Ga. L. Rev. 791 (2020).

RESEARCH REFERENCES

Am. Jur. Pleading and Practice Forms.

4A Am. Jur. Pleading and Practice Forms, Banks, § 1 et seq.

Am. Jur. Trials. —

Alternative Dispute Resolution for Banks and Other Financial Institutions, 46 Am. Jur. Trials 231.

CHAPTER 1 Financial Institutions

Cross references.

Negotiable instruments, § 11-3-101 et seq.

Bank deposits and collections, § 11-4-101 et seq.

Making of loans for educational purposes, § 20-3-230 et seq.

Taxation of financial institutions, § 48-6-90 et seq.

State depositories, § 50-17-50 et seq.

Law reviews.

For note discussing and comparing the prudent man rule and the legal list rule in trustee investment, see 15 Mercer L. Rev. 530 (1964).

For note discussing transfer fees in home loan assumptions in reference to the Georgia usury laws, see 9 Ga. L. Rev. 454 (1975).

For article discussing the consolidation of laws dealing with various types of financial organizations into the Financial Institutions Code of Georgia, see 11 Ga. St. B.J. 225 (1975).

For survey article on business associations, see 42 Mercer L. Rev. 71 (1990).

For annual survey article on business associations, see 45 Mercer L. Rev. 53 (1993).

For note on 1995 amendments and enactments of sections in this chapter, see 12 Ga. St. U.L. Rev. 1 (1995).

For annual survey article discussing commercial and banking law, see 49 Mercer L. Rev. 95 (1997).

For survey article discussing developments in law of business associations for the period from June 1, 1998 through May 31, 1999, see 51 Mercer L. Rev. 127 (1999).

For survey article discussing developments in law of business associations for the period from June 1, 1999 through May 31, 2000, see 52 Mercer L. Rev. 95 (2000).

For annual survey article discussing developments in commercial law, see 52 Mercer L. Rev. 143 (2000).

For survey article on cases in the areas of corporate, securities, partnership, and banking law for the period from June 1, 2002 through May 31, 2003, see 55 Mercer L. Rev. 55 (2003).

JUDICIAL DECISIONS

Bank’s exercise of power of sale not state action. —

Statutory authorization of right of creditor bank to contract with debtors for power of sale under deed to secure debt does not, when combined with state’s general regulation of banking industry’s loan making procedures, convert exercise of such power of sale into state action; therefore, any contention that the creditor’s exercise of the creditor’s power of sale under a deed to secure debt violated the debtors’ rights to procedural due process under U.S. Const., amend. 14 is without merit. Ray v. Bank of Covington, 247 Ga. 758 , 279 S.E.2d 425 , 1981 Ga. LEXIS 847 (1981).

OPINIONS OF THE ATTORNEY GENERAL

Multiple office facilities. — Bank may establish multiple bank office facilities using single mobile bank unit on regular part-time basis. 1976 Op. Att'y Gen. No. 76-106.

National bank’s cancellation of debt in event of borrower’s death. — National bank operating in Georgia may not enter into a debt cancellation contract providing that debt will be automatically cancelled in the event of borrower’s death without complying with Georgia’s insurance laws. 1963-65 Ga. Op. Att'y Gen. 457.

RESEARCH REFERENCES

Am. Jur. Proof of Facts. —

Gift of Fund on Deposit in Bank Account, 7 POF2d 375.

Bank’s Failure to Use Ordinary Care in Detecting Forged or Altered Checks, 13 POF2d 347.

Commercial Paper — Negligence Contributing to Alteration or Unauthorized Signature Under UCC § 3-406, 14 POF2d 693.

Circumstances Rebutting Presumption of Payment of Savings Account, 18 POF2d 187.

Bank’s Liability for Payment of Check or Withdrawal on Less than Required Number of Signatures, 25 POF2d 165.

Liability of Bank for Criminal Attack at ATM or Night Depository, 4 POF3d 497.

Banking Negligence — Improper Dishonor of Letter of Credit, 17 POF3d 541.

Am. Jur. Trials. —

Bank Liability for Negligence in Lending and Breach of Loan Agreement, 69 Am. Jur. Trials 119.

ALR.

Finance company’s liability in connection with consumer fraud practices of party selling goods or services, 18 A.L.R.4th 824.

Exclusion from debtor status of banks and the like by § 109(b)(2) of Bankruptcy Code (11 USCS § 109(b)(2)), 87 A.L.R. Fed. 282.

Construction and application of preemption exemption, under Employee Retirement Income Security Act (29 USCS § 1001 et seq.), for state laws regulating insurance, banking, or securities (29 USCS § 1144(b)(2)), 87 A.L.R. Fed. 797.

Article 1 Provisions Applicable to Department of Banking and Finance and Financial Institutions Generally

Law reviews.

For survey article on commercial law, see 34 Mercer L. Rev. 31 (1982).

RESEARCH REFERENCES

ALR.

Failure of moneylender or creditor engaged in business of making loans to procure license or permit as affecting validity or enforceability of contract, 29 A.L.R.4th 884.

PART 1 Purposes and Preliminary Matters

Law reviews.

For note discussing the interrelationship between the International Banking Act, the provisions of the Financial Institutions Code relating to domestic banking, and the Foreign Corporations Chapter of the Corporation Code in the regulation of international banking in Georgia and comparing Georgia provisions with those of New York and California, see 27 Mercer L. Rev. 827 (1976).

7-1-1. Short title.

This chapter shall be known and may be cited as the “Financial Institutions Code of Georgia” (hereinafter called “this chapter”).

History. Code 1933, § 41A-101, enacted by Ga. L. 1974, p. 705, § 1.

7-1-2. Legislative findings.

The General Assembly finds and declares that the sound, efficient, and responsive operation of financial institutions is essential to the livelihood of the people of this state and to the stability and growth of the economy of this state and region and vitally affects the public interest.

History. Code 1933, § 41A-103, enacted by Ga. L. 1974, p. 705, § 1.

7-1-3. Objectives of chapter; standards for construction and regulation.

  1. The underlying objectives of this chapter are to provide for:
    1. Safe and sound operation of financial institutions;
    2. Proper conservation of the assets of financial institutions;
    3. Public confidence in financial institutions;
    4. Protection for the interests of the depositors, creditors, and shareholders of financial institutions;
    5. Service by financial institutions responsive to the needs and convenience of depositors, borrowers, and other customers and conducive to economic progress and, to these ends, opportunities to expand services and facilities;
    6. Appropriate competition among financial institutions and between them and other financial organizations including those organized under the laws of the United States, other states, and foreign countries;
    7. Delegation to the department of rule-making power and administrative discretion in order that supervision of financial institutions may be flexible and responsive to changes in economic conditions and banking, fiduciary, and other commercial practices;
    8. Opportunity for management of financial institutions to exercise their business judgment;
    9. Simplification and modernization of the law governing banking, trust, and other financial institutions; and
    10. As to other entities under the supervision of the department that are not financial institutions, including check cashers and mortgage lenders and brokers, to provide for:
      1. Supervision and examination of their business affairs to ensure that they operate in a manner consistent with state law;
      2. Protection of the interests of consumers and service by these entities which is responsive to their consumers; and
      3. Simplification and modernization of the law that governs these entities, together with the delegation of rulemaking power and administrative discretion to the department to carry out its responsibilities, keeping in mind the need for economic and technological progress in the industry.
  2. This chapter shall be construed and applied to promote the foregoing objectives and they shall constitute standards to be observed by the department in promulgating rules and regulations, issuing cease and desist orders, conducting examinations, and exercising discretionary powers and in connection with all other matters embraced by this chapter.

History. Code 1933, § 41A-104, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1997, p. 485, § 1; Ga. L. 2002, p. 1220, § 1.

JUDICIAL DECISIONS

Approval of proposed exercises of incidental powers guided by paragraph (a)(6). —

O.C.G.A. § 7-1-261 establishes legislative intent that state banks be authorized to exercise “incidental powers” and delegates authority to approve such powers to the commissioner, who shall be guided in this determination by the statutory objective stated in O.C.G.A. § 7-1-3(a)(6) of making state banks competitive with national banks. Department of Banking & Fin. v. Independent Ins. Agents of Ga., Inc., 158 Ga. App. 556 , 281 S.E.2d 265 , 1981 Ga. App. LEXIS 2305 (1981), rev'd, 248 Ga. 787 , 285 S.E.2d 535 , 1982 Ga. LEXIS 647 (1982) (decided prior to 1983 amendment of § 7-1-261 ).

7-1-4. Definitions.

Subject to additional definitions contained in the subsequent provisions of this chapter, as used in this chapter, the term:

  1. “Affiliate” means any corporation, business trust, association, or other similar organization:
    1. Of which a financial institution, directly or indirectly, owns or controls either a majority of the voting shares or more than 50 percent of the number of shares voted for the election of its directors, trustees, or other persons exercising similar functions at the preceding election or controls in any manner the election of a majority of its directors, trustees, or other persons exercising similar functions;
    2. Of which control is held, directly or indirectly, through stock ownership or in any other manner by the shareholders of a financial institution who own or control either a majority of the shares of such financial institution or more than 50 percent of the number of shares voted for the election of directors of such financial institution at the preceding election or by trustees for the benefit of the shareholders of any such financial institutions;
    3. Of which a majority of its directors, trustees, or other persons exercising similar functions are directors of any one financial institution; or
    4. Which owns or controls, directly or indirectly, either a majority of the shares of a financial institution or more than 50 percent of the number of shares of a financial institution voted for the election of directors of a financial institution at the preceding election or controls in any manner the election of a majority of the directors of a financial institution or for the benefit of whose shareholders or members all or substantially all the capital stock of a financial institution is held by trustees.

    (1.5) “Agency relationship” is a relationship created by a contractual agreement whereby a financial institution agrees with a third party, including another financial institution, to act in a principal or agent capacity to facilitate the conduct of activities related to the business of banking, which activities are currently authorized under this chapter or under other applicable law.

  2. “Agreement for the payment of money” means a consensual monetary obligation not in the form of an evidence of indebtedness or an investment security and includes an account or general intangible as defined in Code Section 11-9-102.
  3. Reserved.
  4. “Articles” means original or restated articles of incorporation or articles of consolidation and all the amendments thereto, including articles of merger or conversion, and also includes what heretofore have been designated by law as certificates of incorporation or charters and, in case of foreign corporations, whatever documents are equivalent to “articles” in their jurisdiction of incorporation. After an amendment restating articles in their entirety, the “articles” shall not include any prior documents, and the certificate of amendment issued by the Secretary of State shall so state.
  5. “Assets” means all the property and rights of every kind of a financial institution.
  6. “Attorney” means an attorney at law who is regularly retained as counsel for a financial institution or who is a partner or associate of a firm which is regularly retained as counsel for a financial institution.
  7. “Bank” means a corporation existing under the laws of this state on April 1, 1975, or organized under this chapter and authorized to engage in the business of receiving deposits withdrawable on demand or deposits withdrawable after stated notice or lapse of time; “bank” shall also include national banks located in this state for the purpose of Part 6 of Article 2 of this chapter, relating to deposits, safe-deposit agreements, and money received for transmission, and Article 8 of this chapter, relating to multiple deposit accounts; provided, however, that the term “bank” shall not include a credit union, a savings and loan association, or a licensee under Article 4 of this chapter, but shall include a federal or state credit union for the purposes of Part 6 of Article 2 of this chapter, provided that this inclusion is not intended to grant or expand any powers to credit unions not authorized in Part 6 of Article 2 of this chapter or by other law.
  8. Reserved.
  9. “Capital debt” means the sum of the face value of the subordinated securities of a financial institution issued pursuant to Code Section 7-1-419.
  10. “Capital stock” means the sum of the par value of the authorized shares which have been issued and remain outstanding of a bank or trust company.
  11. Reserved.
  12. “Commercial bank” means a bank authorized to hold deposits subject to check.
  13. “Commissioner” means the commissioner of banking and finance.
  14. “Corporation” means a corporation, whether profit or nonprofit, and includes a professional corporation or joint-stock association, organized under the laws of this state, the United States, or any other state, territory, or dependency of the United States or under the laws of a foreign country.
  15. “Credit union” means a cooperative society incorporated under the laws of this state on April 1, 1975, or organized under Article 3 of this chapter and existing for the twofold purpose of promoting thrift among its members and creating a source of credit for them at reasonable rates.
  16. “Department” means the Department of Banking and Finance.
  17. “Depositor” means any person or corporation who shall deposit money or items for the payment of money in any financial institution, which funds are subsequently (allowing time for collections) withdrawable either on demand or after a stated notice or lapse of time, whether interest is allowed thereon or not, and shall also include:
    1. Holders of demand and time certificates of deposit;
    2. Owners of certified or cashiers’ checks and checks purchased from a licensee under Article 4 of this chapter; and
    3. Shareholders in credit unions, federal credit unions, and savings and loan associations to the extent that funds paid in by them are withdrawable within the terms of this definition.
  18. “Evidence of indebtedness” means a note, draft, or similar negotiable or nonnegotiable instrument.
  19. “Federal credit union” means an association organized pursuant to the Federal Credit Union Act, 12 U.S.C. Sections 1750-1795i.
  20. “Fiduciary” means an executor, administrator, guardian, receiver, trustee, assignee for benefit of creditors, or one acting in a similar capacity.
  21. “Financial institution” means:
    1. A bank;
    2. A trust company;
    3. Reserved;
    4. A credit union;
    5. A corporation licensed to engage in the business of selling payment instruments in this state on April 1, 1975, or so licensed pursuant to Article 4 of this chapter;
    6. Business development corporations existing on April 1, 1975, pursuant to the former “Georgia Business Development Corporation Act of 1972,” approved April 3, 1972 (Ga. L. 1972, p. 798), or organized pursuant to Article 6 of this chapter;
    7. An international bank agency doing business in this state on April 1, 1975, pursuant to the former “International Bank Agency Act,” approved April 6, 1972 (Ga. L. 1972, p. 1140), or authorized to do business in this state pursuant to Article 5 of this chapter;
    8. In addition, as the context requires, a national bank, savings and loan association, or federal credit union for the purpose of the following provisions:
      1. Code Section 7-1-2, relating to findings of the General Assembly;
      2. Code Section 7-1-8, relating to supplementary principles of law;
      3. Code Section 7-1-37, relating to restrictions on officials and personnel;
      4. Code Section 7-1-70, relating to disclosure of information;
      5. Code Section 7-1-90, relating to judicial review of department actions;
      6. Code Sections 7-1-111 and 7-1-112, relating to emergency closings and business restrictions;
      7. Paragraph (3) of subsection (a) of Code Section 7-1-394, relating to criteria to be considered in approving new banks;
      8. Code Section 7-1-840, relating to criminal prosecutions; and
      9. Code Section 7-1-841, relating to application of Title 16 provisions;
    9. A bank holding company as defined in Code Section 7-1-605 for the purposes of Code Sections 7-1-61, 7-1-71, and 7-1-91;
    10. Banks chartered by states other than Georgia for the purposes of paragraph (10) of Code Section 7-1-261, relating to agency relationships;
    11. Federal credit unions for the purposes of Part 6 of Article 2 of this chapter, relating to deposits, safe-deposit agreements, and money received for transmission, and Article 8 of this chapter, relating to multiple-party accounts; and
    12. Banks and credit unions chartered by states other than Georgia, national banks, federal credit unions, and federal savings and loan associations for the purposes of paragraph (1) of Code Section 7-1-650, provided that such institutions have federal deposit insurance.
  22. “Insolvency” means:
    1. Inability to meet liabilities as they become due in the regular course of business; or
    2. Insufficiency in actual cash market value of assets to pay liabilities to depositors and other creditors.

    (22.5) “Main office” means the principal banking location of a bank as such location appears in the records of the Department of Banking and Finance. If a bank does not designate a main office, the department shall choose a banking location of the bank to be the main office.

  23. “National bank” means a national banking association organized pursuant to 12 U.S.C. Section 21-215b.
  24. Reserved.
  25. “Paid-in capital” means the sum of the considerations received in the sale or exchange of shares of a bank or trust company in excess of the amount of the capital stock and includes the surplus, if any, created by or arising out of a reduction of the capital stock of such financial institution effected in a manner permitted by law, any amounts properly regarded as surplus of such financial institution on April 1, 1975.
  26. “Person” means an individual, trust, general or limited partnership, unincorporated association (except a joint-stock association), or any other form of unincorporated enterprise.
  27. “Principal court” means the superior court of the county where the registered office of a financial institution is located or, in the case of a proposed financial institution, will initially be located, as shown in its articles or application for authority to commence business. Whenever under this chapter the principal court is authorized to take any action but lacks, because of constitutional restrictions, jurisdiction or venue over the person or corporation against which such action is to be taken or over the subject matter which is to be affected by its action, then such action may be taken by the superior court of this state in which jurisdiction and venue are proper or, in the absence of any such court, by a court of another state, a federal court, or a court of a foreign country in which jurisdiction and venue are proper.
  28. “Public body” means an agency, authority, board, commission, instrumentality, or similar entity which is part of or connected with the government or political subdivision referred to in the context.
  29. “Public sale” means a sale:
    1. Held at a place reasonably available to persons who might desire to attend and submit bids;
    2. At which those attending shall be given the opportunity to bid on a competitive basis;
    3. At which the sale, if made, shall be made to the highest and best bidder; and
    4. Except as otherwise provided in Title 11 for advertising or dispensing with the advertising of public sales, of which notice is given by advertisement once a week for two weeks in the newspaper in which the sheriff’s advertisements are published in the county where the sale is to be held, and which notice shall state the day and hour, between 9:00 A.M. and 5:00 P.M., and the place of sale and shall briefly identify the goods to be sold.

    (29.5) “Registered agent” means the person or corporation on whom service of process is to be made in a proceeding against a bank. Written notice of any change in the identity or address of a bank’s registered agent must be delivered to the Department of Banking and Finance in addition to and at the same time as such notice is filed with the Secretary of State. The provisions of Part 1 of Article 5 of Chapter 2 of Title 14 shall apply to any such registered agent.

  30. “Registered office” means the location of the registered agent and may be a banking location.

    (30.5) “Retained earnings” means the balance of the net profits, income, gains, and losses from the date of incorporation or from the latest date when a deficit was last eliminated of a financial institution whose articles were granted by the Secretary of State and excludes subsequent distributions to shareholders and transfers to appropriated retained earnings. Retained earnings shall also include any portion of paid-in capital or appropriated retained earnings or, in the case of other organizations, equivalent funds, allocated to retained earnings in mergers, consolidations, or acquisitions of all or substantially all of the property or assets of another such financial institution or other organization permitted by law.

  31. “Savings and loan association” means an association created pursuant to the Home Owners’ Loan Act, 12 U.S.C. Sections 1461-1470, including a federal savings bank.
  32. “Savings bank” means a state chartered bank that has powers no greater than a state bank as provided in this chapter but that may lend and invest in commercial loans in an aggregate amount that does not exceed 50 percent of its total assets. Such bank may elect, subject to department approval, or the department may require that the savings bank comply with selected provisions of the Home Owners’ Loan Act that in the judgment and discretion of the department would be consistent with the charter and purpose of the bank. For the purposes of this paragraph, the term “commercial loan” means a loan for business, commercial, corporate, or agricultural purposes.
  33. “Shareholder” means the owner of shares in a financial institution.
  34. “Shares” means the units into which the proprietary interest of the institution is divided.

    (34.1) “State savings and loan association” means a bank which pays interest on substantially all of its depositors’ funds and the majority of whose loans are secured by first liens on or other security interest in residential real property or upon the security of its deposits.

  35. “Statutory capital base” means the sum of the common equity tier 1 capital, as defined by applicable federal law, and the allowance of loan and lease losses, as defined by applicable federal law, as reported in the bank’s most recent Consolidated Report of Condition and Income; provided, however, that the department may enact regulations to phase in the revision to this definition for those banks that will have a decreased statutory capital base as of July 1, 2017. If significant capital changes occur after the filing of the Consolidated Report of Condition and Income which causes the common equity tier 1 capital to increase or decrease by 5 percent or more, then the statutory capital base will be immediately recalculated at the time of the capital change and it will be effective until the filing of the next Consolidated Report of Condition and Income.
  36. “Subject to check” includes withdrawal or transfer by negotiable or transferable order or authorization even though such order or authorization does not constitute a check under Code Section 11-3-104.
  37. “Subsidiary” means a corporation controlled by a financial institution which owns at least a majority of its voting shares.
  38. “Third-party payment service” means any system employing checks, drafts, computer transmissions, or other techniques by which a depositor may effect payment to third parties.
  39. “Treasury shares” means shares of a financial institution which have been issued, have been subsequently acquired by, and belong to the financial institution otherwise than in a fiduciary capacity and have not been canceled. Such shares shall be deemed to be “issued” but not “outstanding” shares.
  40. “Trust company” means a corporation existing under the laws of this state on April 1, 1975, or organized under this chapter and authorized by law to engage in the business of acting as a fiduciary.

History. Code 1933, § 41A-102, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 1; Ga. L. 1977, p. 730, § 1; Ga. L. 1980, p. 972, § 1; Ga. L. 1981, p. 1566, § 1; Ga. L. 1982, p. 3, § 7; Ga. L. 1982, p. 2496, §§ 1, 2; Ga. L. 1983, p. 493, § 2; Ga. L. 1984, p. 949, § 1; Ga. L. 1985, p. 258, § 1; Ga. L. 1986, p. 458, § 1; Ga. L. 1991, p. 94, § 7; Ga. L. 1995, p. 673, §§ 1, 2; Ga. L. 1996, p. 6, § 7; Ga. L. 1998, p. 795, §§ 1, 2; Ga. L. 2000, p. 174, § 1; Ga. L. 2001, p. 362, § 24; Ga. L. 2001, p. 970, § 1; Ga. L. 2005, p. 826, § 1/SB 82; Ga. L. 2006, p. 72, § 7/SB 465; Ga. L. 2007, p. 502, § 1/SB 70; Ga. L. 2009, p. 86, § 1/HB 141; Ga. L. 2011, p. 518, § 1/HB 239; Ga. L. 2012, p. 775, § 7/HB 942; Ga. L. 2015, p. 344, § 1/HB 184; Ga. L. 2015, p. 996, § 3C-1/SB 65; Ga. L. 2016, p. 390, § 7-1/HB 811; Ga. L. 2017, p. 193, § 1/HB 143; Ga. L. 2019, p. 828, § 1/HB 185.

The 2019 amendment, effective July 1, 2019, in paragraph (3), substituted “Reserved.” for “ ‘Appropriated retained earnings’ means that portion of the retained earnings of a bank or trust company set aside by resolution of the board of directors as unavailable for the payment of dividends or other distribution to shareholders.”; substituted “actions” for “action” at the end of division (21)(H)(v); deleted “and” at the end of subparagraph (21)(J); substituted “; and” for a period at the end of subparagraph (21)(K); added subparagraph (21)(L); and, in paragraph (25), deleted “and the expense fund required by Code Section 7-1-396” following “amount of the capital stock” near the middle and deleted “, and any amounts transferred from the expense fund as permitted by Code Section 7-1-412” following “1975” at the end.

Editor’s notes.

The Georgia Business Development Corporation Act of 1972, referred to in subparagraph (21)(F) of this section, was enacted by Ga. L. 1972, p. 798, and repealed by Ga. L. 1974, p. 705, § 3(k). The International Bank Agency Act, referred to in subparagraph (21)(G) of this Code section, was enacted by Ga. L. 1972, p. 1140, and repealed by Ga. L. 1974, p. 705, § 3(j).

Ga. L. 1983, p. 493, § 1, not codified by the General Assembly, provides that: “It is the intent of this Act to implement certain changes required by Article III, Section VI, Paragraph V(a) of the Constitution of the State of Georgia.”

Ga. L. 2015, p. 996, § 1-1/SB 65, not codified by the General Assembly, provides:

“(a) This Act shall be known and may be cited as the ‘Debtor Creditor Uniform Law Modernization Act of 2015.’

“(b) To promote consistency among the states, it is the intent of the General Assembly to modernize certain existing uniform laws promulgated by the Uniform Law Commission affecting debtor and creditor rights, responsibilities, and relationships and other federally recognized laws affecting such rights, responsibilities, and relationships.”

Administrative rules and regulations.

Agency relationship of financial institutions; Bank service contracts, Official Compilation of the Rules and Regulations of the State of Georgia, Department of Banking and Finance, Banks, Chapter 80-1-2.

Law reviews.

For survey article on commercial law, see 34 Mercer L. Rev. 31 (1982).

For article, “Business Associations,” see 53 Mercer L. Rev. 109 (2001).

JUDICIAL DECISIONS

Editor’s notes.

In light of the similarity of the statutory provisions, decisions under former Ga. L. 1919, p. 135 are included in the annotations for this Code section.

Corporation did not meet definition of person. —

Corporation was not an eligible “payable on death” (POD) beneficiary on certificates of deposit or a trust account because under O.C.G.A. § 7-1-810(11) , a POD payee on a death account had to have been a person, and under § 7-1-810(2) , a beneficiary on a trust account had to have been a person; under O.C.G.A. § 7-1-4(26) , a “person” was defined as an individual, trust, general or limited partnership, unincorporated association (except a joint-stock association), or any other form of unincorporated enterprise. Thus, the corporation did not meet the statutory definition of person. Tuvim v. United Jewish Cmtys., Inc., 285 Ga. 632 , 680 S.E.2d 827 , 2009 Ga. LEXIS 308 (2009).

Issuance of passbook. —

Deposit is or is not, according to agreement, subject to check on bank with which the deposit was actually placed, and may or may not bear interest, and may be or may not be payable on demand. Issuance of a passbook is not conclusive evidence, but is material on the question whether the transaction is simply that of a borrower and lender in the ordinary sense or that of a deposit. Citizens Bank v. Mobley, 166 Ga. 543 , 144 S.E. 119 , 1928 Ga. LEXIS 354 (1928), (decided under former GA. L. 1919, p. 135).

Execution and delivery of certificates of deposit. —

In suit by depositor against bank, upon certificates of deposit issued by bank to depositor or depositor’s agent, depositor made prima facie case of liability by proof of execution and delivery of certificates as alleged. Bank of Emanuel v. Hall, 33 Ga. App. 358 , 126 S.E. 728 , 1925 Ga. App. LEXIS 773 (1925), (decided under former Ga. L. 1919, p. 135).

OPINIONS OF THE ATTORNEY GENERAL

“Receiving deposits”. — Arrangement by which business corporation would receive money from individuals and in return issue to the individuals the corporation’s debt securities redeemable by negotiable checks would involve “receiving deposits” within the meaning of O.C.G.A. § 7-1-4(7) , and only persons or entities authorized to engage in the banking business by O.C.G.A. § 7-1-241 may lawfully engage in such arrangements. 1982 Op. Att'y Gen. No. 82-68.

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, §§ 1, 13, 14, 146, 147, 176 et seq., 308, 328, 711 et seq. 18 Corporations, §§ 1-4, 28 to 41, 55. 11 Am. Jur. 2d, Banks and Financial Institutions, §§ 1017 et seq., 1032, 1034, 1046 et seq.18A Am. Jur. 2d, Corporations, §§ 194, 270, 425, 439, 721. 18B Am. Jur. 2d, Corporations, § 1171. 19 Am. Jur. 2d, Corporations, § 2136 et seq.

C.J.S.

9 C.J.S., Banks and Banking, §§ 2, 3, 171, 267 et seq., 274, 497, 596, 622. 12 C.J.S., Building and Loan Associations, Savings and Loan Associations, and Credit Unions, § 1 et seq. 18 C.J.S., Corporations, § 1 et seq. 19 C.J.S., Corporations, § 707 et seq.

ALR.

What is a bank or banking corporation within exemption provision of Bankruptcy Act, 97 A.L.R. 1087 .

What are “financial corporations” or “moneyed institutions” within state tax laws, 145 A.L.R. 354 .

Maintenance of computer terminal in retail store for purpose of effecting transfer of funds between financial institution and its depositors as conduct of banking business by store, 73 A.L.R.3d 1282.

7-1-5. Unauthorized activity as a financial institution.

Whenever it shall appear to the department that any person or corporation is conducting business as a financial institution without authority pursuant to this chapter, the department may determine, for purposes of Parts 4, 7, 8, and 9 of this article, that such person or corporation is a financial institution as defined in paragraph (21) of Code Section 7-1-4.

History. Code 1933, § 41A-410, enacted by Ga. L. 1978, p. 1717, § 1.

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, § 3.

C.J.S.

9 C.J.S., Banks and Banking, §§ 20, 21, 773.

7-1-6. Notices; waivers of notice.

Except as otherwise expressly provided:

  1. Any notice required to be given under this chapter may be delivered in person or by first-class mail or statutory overnight delivery to the last known address of the person or corporation or to the registered office of the corporation. If the notice is sent by first-class mail or statutory overnight delivery, it shall be deemed to have been given when deposited in the United States mail or with a commercial firm regularly engaged in the business of document delivery;
  2. In addition to the methods of notice provided for in paragraph (1) of this Code section, notice of meetings, including annual and special meetings, may be delivered by electronic transmission, including but not limited to e-mails, pursuant to Code Section 14-2-141;
  3. If such notice is of a meeting, it shall specify the place, day, and hour of the meeting. Notice of a meeting of shareholders shall be given not less than ten nor more than 60 days before the meeting. Notice of a special meeting shall specify the general nature of the business to be transacted;
  4. Any written notice required to be given under this chapter need not be given if there is a waiver thereof in writing signed by the person or on behalf of the corporation entitled to such notice or by their proxy, whether before or after the time when the notice would otherwise be required to be given, provided that no such waiver shall apply by its terms to more than one required notice;
  5. Attendance of a person, either in person or by proxy, at any meeting shall constitute a waiver of notice of such meeting, except where a person attends a meeting for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting was not lawfully called or convened; and
  6. If the language of a proposed resolution or a proposed plan requiring approval by shareholders is included in a written notice of a meeting of shareholders, the shareholders’ meeting considering the resolution or plan may adopt it with such clarifying or other amendments as do not enlarge its original purpose without further notice to shareholders not present in person or by proxy.

History. Code 1933, § 41A-107, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2005, p. 826, § 2/SB 82; Ga. L. 2006, p. 72, § 7/SB 465; Ga. L. 2015, p. 344, § 2/HB 184; Ga. L. 2018, p. 214, § 1/HB 780.

The 2018 amendment, effective May 3, 2018, inserted “or” following “in person” in the first sentence of paragraph (1). See Editor’s notes for applicability.

Editor’s notes.

Ga. L. 2018, p. 214, § 26(b)/HB 780, not codified by the General Assembly, provides that: “It is not the intent of the General Assembly to affect the law applicable to litigation pending as of March 9, 2018.”

RESEARCH REFERENCES

Am. Jur. 2d.

18A Am. Jur. 2d, Corporations, § 954 et seq.18B Am. Jur. 2d, Corporations, § 1344.

C.J.S.

9 C.J.S., Banks and Banking, §§ 50, 51, 167.

7-1-7. Publication of notices or advertisements.

  1. Except as otherwise expressly provided, any notice or advertisement required by this chapter to be published in a newspaper shall be published once a week for four weeks in the newspaper which is, on the date of the first such publication, the official organ (as determined pursuant to Code Section 9-13-142) of the county which is or is to be the location of the main office of the financial institution.
  2. The department may waive or modify any requirement to publish a notice:
    1. In order to facilitate a merger, consolidation, or sale of assets when one of the parties is a failed or failing bank as determined by the commissioner;
    2. Whenever it determines that the public benefit is not significantly served by a second or subsequent publication in a situation where a series of transactions would otherwise require multiple publications;
    3. Where a similar publication required by another state or federal regulator serves substantially the same purpose;
    4. By regulation or order, whenever it determines that a lesser number of publications will reduce administrative burden and will adequately serve the public benefit of the notice; or
    5. For other reasons of regulatory parity.
  3. The department may require proof of publication or modified publication having been completed prior to consummation of the underlying transaction.

History. Code 1933, § 41A-108, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1980, p. 972, § 2; Ga. L. 1987, p. 1586, § 1; Ga. L. 1995, p. 673, § 3; Ga. L. 1998, p. 795, § 3; Ga. L. 2000, p. 136, § 7; Ga. L. 2000, p. 174, § 2.

Code Commission notes.

The amendment (enactment) of this Code section by Ga. L. 2000, p. 136, § 7, irreconcilably conflicted with and was treated as superseded by Ga. L. 2000, p. 174, § 2. See County of Butts v. Strahan, 151 Ga. 417 (1921).

Administrative rules and regulations.

Notification of filing and protest, Official Compilation of the Rules and Regulations of the State of Georgia, Department of Banking and Finance, Banks, Applications, Registrations, and Notifications, Rule 80-1-1-.04.

RESEARCH REFERENCES

Am. Jur. 2d.

18A Am. Jur. 2d, Corporations, § 954 et seq.18B Am. Jur. 2d, Corporations, § 1431 et seq.

C.J.S.

19 C.J.S., Corporations, § 791 et seq.

7-1-8. Applicability of common law.

Unless expressly or impliedly displaced by this chapter, general principles of common law shall apply to financial institutions.

History. Code 1933, § 41A-109, enacted by Ga. L. 1974, p. 705, § 1.

7-1-9. Reservation of power over financial institutions.

The General Assembly shall at all times have power to prescribe such regulations, provisions, and limitations as it may deem advisable, which regulations, provisions, and limitations shall be binding upon financial institutions that are subject to this chapter. The General Assembly shall have the power to amend, repeal, or modify this chapter at pleasure.

History. Code 1933, § 41A-110, enacted by Ga. L. 1974, p. 705, § 1.

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, § 20.

C.J.S.

9 C.J.S., Banks and Banking, §§ 5, 7.

7-1-10. Rules of construction.

  1. The rules of statutory construction contained in Chapter 3 of Title 1 shall apply to this title.
  2. Unless otherwise specifically indicated and to the full extent permitted by the Constitution of Georgia, any reference in this title to an existing statute or regulation shall mean to such statute or regulation as has been or may in the future be amended or have material added to it. If in any case such construction is not constitutionally permissible, such reference shall mean to the statute or regulation as it existed on July 1, 2016.
  3. Any reference in this title to an action by a superior court or other court shall authorize a judge of such court to take such action in term or in vacation, whether present in the county or absent from it.

History. Code 1933, § 41A-105, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2016, p. 390, § 7-2/HB 811.

7-1-11. [Repealed] Registration of nonresident corporations.

History. Code 1981, § 7-1-11 , enacted by Ga. L. 1987, p. 1586, § 2; Ga. L. 2015, p. 693, § 3-5/HB 233; repealed by Ga. L. 2016, p. 390, § 2-1/HB 811, effective July 1, 2016.

Editor’s notes.

Ga. L. 2017, p. 774, § 7/HB 323, part of an Act to revise, modernize, and correct the Code, repealed the reservation of this Code section.

PART 2 Organization and Personnel of Department of Banking and Finance

7-1-30. Department created.

There is created the Department of Banking and Finance.

History. Ga. L. 1919, p. 135, art. 2, § 1; Code 1933, § 13-301; Ga. L. 1972, p. 1015, § 1101; Ga. L. 1972, p. 1198, § 2.

7-1-31. Position and term of commissioner.

  1. The head of the department shall be the commissioner who shall exercise supervision and control over all divisions and employees of the department.
  2. The commissioner shall be appointed by the Governor, by and with the advice and consent of the Senate, for a four-year term. The initial term of the commissioner shall terminate on January 20, 1976. Each succeeding term of office shall be for four years commencing on the expiration date of the previous term. Beginning July 1, 1999, the salary of the commissioner shall be set by the Governor.

History. Ga. L. 1919, p. 135, art. 2, § 2; Code 1933, § 13-302; Ga. L. 1972, p. 1015, §§ 1101, 1102; Ga. L. 1972, p. 1198, §§ 2, 3; Code 1933, § 41A-201, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1999, p. 910, § 1; Ga. L. 1999, p. 1213, § 1.

Editor’s notes.

The amendment of this Code section by Ga. L. 1999, p. 910, § 1, was superseded by the amendment by Ga. L. 1999, p. 1213, § 1.

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, § 104.

C.J.S.

9 C.J.S., Banks and Banking, § 139.

7-1-32. Qualifications of commissioner.

The commissioner shall be of good moral character, shall not have been convicted in any court of competent jurisdiction of any crime involving moral turpitude, shall have been a citizen of this state for not less than three years, and shall have attained the age of 30 years but be less than 70 years. In addition, the commissioner shall have had at least five years’ experience as an active officer of a bank or national bank or as an examiner or other officer in a federal or state agency supervising such institutions.

History. Ga. L. 1919, p. 135, art. 2, § 4; Code 1933, § 13-304; Code 1933, § 40-3597, enacted by Ga. L. 1972, p. 1015, § 1102; Ga. L. 1972, p. 1198, § 3; Code 1933, § 41A-202, enacted by Ga. L. 1974, p. 705, § 1.

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, § 104.

C.J.S.

9 C.J.S., Banks and Banking, § 139.

7-1-33. Removal or suspension of commissioner.

The commissioner may be suspended or removed by the Governor whenever the Governor has in his judgment trustworthy information that the commissioner is insane or has absconded or grossly neglected his duties or is guilty of conduct plainly violative of his duties or the restrictions of Code Section 7-1-37.

History. Ga. L. 1919, p. 135, art. 2, § 7; Code 1933, § 13-307; Code 1933, § 41A-203, enacted by Ga. L. 1974, p. 705, § 1.

RESEARCH REFERENCES

Am. Jur. 2d.

2 Am. Jur. 2d, Administrative Law, § 45 et seq.

C.J.S.

9 C.J.S., Banks and Banking, § 139.

7-1-34. Vacancy in office of commissioner.

In the event there shall be a vacancy in the office caused by death, resignation, disability, disqualification, suspension, or removal of the commissioner, the senior deputy commissioner of banking and finance previously designated by the commissioner as provided in Code Section 7-1-35 shall exercise the powers and perform the duties of the commissioner until a successor is appointed and qualified to serve for the unexpired term of the commissioner.

History. Ga. L. 1919, p. 135, art. 2, § 3; Code 1933, § 13-303; Code 1933, § 41A-204, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1989, p. 1211, § 1; Ga. L. 1997, p. 485, § 2.

OPINIONS OF THE ATTORNEY GENERAL

Lack of deputy commissioner at time vacancy occurs. — In event of vacancy in office of superintendent of banks (now commissioner of banking and finance), the assistant superintendent (now deputy commissioner) shall act, or if there be none, the Governor shall appoint a superintendent who shall in turn appoint an assistant. 1948-49 Ga. Op. Att'y Gen. 16.

7-1-35. Deputy commissioners, examiners, and assistants.

  1. The commissioner shall appoint from time to time, with the right to discharge at will, a senior deputy commissioner of banking and finance. The commissioner may appoint additional deputy commissioners as needed. All deputy commissioners shall also be ex officio examiners. The commissioner may appoint such additional examiners and assistants as he or she may need to discharge in a proper manner the duties imposed upon the commissioner by law, subject to any applicable state laws or rules or regulations and within the limitations of the appropriation to the department as prescribed in this chapter. Hiring, promotion, and other personnel policies of the department shall be consistent with guidelines or directives of the state, shall be in writing, and shall be made available upon request to employees of the department.
  2. Within the limitations of its annual appropriation, the department may expend funds pursuant to the authority granted under Article VIII, Section VII, Paragraph I of the 1983 Constitution of Georgia necessary to the recruitment, training, and certification of a professional staff of financial examiners. The department may provide for the participation of examiners in such educational, training, and certification programs as the commissioner deems necessary to the continued qualification and recognition of the professional status of examiners. The department may recognize independent certification of professional qualifications as supplemental to the rules and regulations of the State Personnel Board in considering the personnel actions relative to its examiners.

History. Ga. L. 1919, p. 135, art. 2, §§ 10, 12; Ga. L. 1920, p. 102, § 1; Ga. L. 1922, p. 63, § 1; Code 1933, §§ 13-310, 13-312; Ga. L. 1943, p. 257, § 1; Ga. L. 1945, p. 403, § 1; Ga. L. 1947, p. 673, § 1a; Ga. L. 1949, p. 526, § 1; Ga. L. 1965, p. 540, § 3; Code 1933, § 41A-205, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1986, p. 458, § 2; Ga. L. 1989, p. 1211, § 2; Ga. L. 1996, p. 848, § 1; Ga. L. 1997, p. 485, § 3; Ga. L. 2005, p. 826, § 3/SB 82; Ga. L. 2009, p. 745, § 1/SB 97; Ga. L. 2012, p. 446, § 2-3/HB 642.

Editor’s notes.

Ga. L. 2012, p. 446, § 3-1/HB 642, not codified by the General Assembly, provides that: “Personnel, equipment, and facilities that were assigned to the State Personnel Administration as of June 30, 2012, shall be transferred to the Department of Administrative Services on the effective date of this Act.” This Act became effective July 1, 2012.

Ga. L. 2012, p. 446, § 3-2/HB 642, not codified by the General Assembly, provides that: “Appropriations for functions which are transferred by this Act may be transferred as provided in Code Section 45-12-90.”

OPINIONS OF THE ATTORNEY GENERAL

Classification of position. — Position of deputy commissioner of banking and finance is a position of unclassified service within the State Merit System. 1975 Op. Atty Gen. No. U75-57.

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, § 104.

C.J.S.

9 C.J.S., Banks and Banking, § 139.

7-1-36. Oath of commissioner, deputy commissioner, and examiners.

  1. Before entering office, the commissioner shall take an oath before the Governor or one of the Justices of the Supreme Court to support the Constitution of the United States and the Constitution of Georgia and to execute faithfully the duties of his or her office, which oath shall be in writing and subscribed to by the commissioner and filed in the Governor’s office. Before entering their respective offices, each deputy commissioner and examiner shall take an oath of office before the commissioner to support the Constitution of the United States and the Constitution of Georgia and to execute faithfully the duties of their respective offices which shall be in writing and subscribed by the deputy commissioner or examiner and filed with the department.
  2. The commissioner, each deputy commissioner, and each examiner shall:
    1. Faithfully discharge, execute, and perform all and singular the duties required of such officer and which may be required by the Constitution and laws of the State of Georgia;
    2. Faithfully account for all moneys that may be received by such officer from time to time by virtue of his office; and
    3. Safely deliver to the successor of such office all books, moneys, vouchers, accounts, and effects whatever belonging to said office.

History. Ga. L. 1919, p. 135, art. 2, §§ 6, 11; Code 1933, §§ 13-306, 13-311; Code 1933, § 41A-206, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1984, p. 22, § 7; Ga. L. 1989, p. 1211, § 3; Ga. L. 2016, p. 390, § 1-1/HB 811; Ga. L. 2017, p. 774, § 7/HB 323.

Code Commission notes.

Pursuant to Code Section 28-9-5, in 2016, a period was added following “Governor’s office” at the end of the first sentence of subsection (a).

JUDICIAL DECISIONS

Liability of commissioner. —

In a suit against the superintendent of banks (now commissioner of banking and finance), and surety on the superintendent’s bond for loss suffered by depositor by the superintendent’s failure to discover insolvency of certain savings and loan company, the superintendent could not be held civilly liable for the superintendent’s erroneous judgment that the superintendent had no supervisory powers over the corporation unless facts were alleged to show that the superintendent’s judgment was willful, malicious, fraudulent, and corrupt. Gormley v. State, 54 Ga. App. 843 , 189 S.E. 288 , 1936 Ga. App. LEXIS 777 (1936).

Stockholders have no recourse against commissioner. —

Director of bank, and not superintendent of banks (now commissioner of banking and finance), is in charge of business and stockholders of a failed bank have no recourse against the superintendent of banks, or the superintendent’s bond, because of the mismanagement of the directors and officers. Hill v. Fidelity & Deposit Co., 44 F.2d 624, 1930 U.S. Dist. LEXIS 1438 (D. Ga. 1930).

7-1-37. Restrictions on commissioner, deputy commissioners, and examiners.

  1. Except as provided in subsections (c), (d), and (e) of this Code section, the commissioner, any deputy commissioner, any department employee with financial institution or licensee supervisory responsibilities, or any examiner employed by the department shall not directly or indirectly:
    1. Receive any money or property as a loan from or become indebted to any financial institution or from or to any director, officer, agent, employee, attorney, or subsidiary of a financial institution, unless such employee does not examine or exercise supervisory responsibility over any financial institution;
    2. Receive any money or property as a gift from any financial institution or from any director, officer, agent, employee, attorney, or subsidiary of a financial institution, unless consistent with the ethics in government policy of this state;
    3. Give any money or property as a gift to any financial institution or to any director, officer, agent, employee, attorney, or subsidiary of a financial institution, unless consistent with the ethics in government policy of this state;
    4. Own any share in or securities of a financial institution or otherwise have an ownership interest in a financial institution; or
    5. Engage in the business of a financial institution.
  2. For purposes of this Code section and subject to subsection (c) of this Code section, the term “financial institution” shall include a bank holding company and any subsidiary of a bank holding company.
  3. Notwithstanding the provisions of subsection (a) of this Code section, the commissioner, any deputy commissioner, any department employee with financial institution or licensee supervisory responsibilities, or examiners employed by the department may borrow money from and otherwise deal with any financial institution or subsidiary thereof existing under the laws of the United States or of any state other than this state, provided that the obligee financial institution or subsidiary is not examined or regulated by the department. For the purposes of this subsection, a financial institution shall not be considered regulated solely because it is required to file an exemption from licensing under Code Section 7-1-1001 or solely because it is owned or controlled by another bank or corporation which is or may be examined or regulated by the department.
  4. Nothing in this Code section shall prohibit the commissioner, any deputy commissioner, any department employee with financial institution or licensee supervisory responsibilities, or any examiner of the department from maintaining a deposit in any financial institution, purchasing banking services other than credit services, or owning a single share in a credit union in the ordinary course of business and under rates and terms generally available to other customers of the financial institution. The provisions of this Code section shall not be applicable in the cases of a lender credit card obligation to a financial institution where the maximum outstanding credit does not exceed $25,000.00 nor to any other credit obligation fully secured by the pledge of a deposit account in the lending institution, provided that the financial institution is not within the employee’s assigned examination authority and provided that the rates and terms of all such obligations are not preferential in comparison to similar obligations of the financial institution’s other customers. Such exempt obligations shall be reported to the commissioner within ten days of execution of the credit obligation if the financial institution is regulated or examined by the department, and the employee shall be disqualified from any dealings with the obligee financial institution.
    1. The commissioner, a deputy commissioner, a department employee with financial institution or licensee supervisory responsibilities, or an examiner of the department may be permitted to own securities of a financial institution under any of the following circumstances:
      1. A deputy commissioner, a department employee with financial institution or licensee supervisory responsibilities, or an examiner of the department may own such a security if the security was obtained prior to commencement of employment with the department;
      2. A deputy commissioner, a department employee with financial institution or licensee supervisory responsibilities, or an examiner of the department may own such a security if the ownership of the security was acquired through inheritance; gift; stock split or dividend; merger, acquisition, or other change in corporate structure; or otherwise without specific intent on the part of the employee to acquire the interest; and
      3. The commissioner, a deputy commissioner, a department employee with financial institution or licensee supervisory responsibilities, or an examiner of the department may own such a security if the security is part of an investment fund, provided that, upon initial or subsequent investment by the employee, excluding ordinary dividend reinvestment, the fund does not have invested, or indicate in its prospectus the intent to invest, more than 30 percent of its assets in the securities of one or more Federal Deposit Insurance Corporation insured depository institutions or Federal Deposit Insurance Corporation insured depository institution holding companies and the employee neither exercises control nor has the ability to exercise control over the financial interests held in the fund.
    2. In the case of permissible acquisitions pursuant to subparagraphs (A) and (B) of paragraph (1) of this subsection, the employee shall make a full, written disclosure to the commissioner within 30 days of beginning employment or acquiring the interest. The employee is disqualified from participating in or sharing information regarding any matter or activity that concerns the financial institution. Such disqualification must not, in the judgment of the commissioner, unduly interfere with the employee’s duties.
    3. In the event any covered person inadvertently and without intent on his or her part acquires an interest in a security that is not allowed by this subsection, such security shall be disposed of within 90 days of acquisition.
  5. No examiner, which for the purposes of this Code section shall include a supervisor as defined by the department, may examine a financial institution to which he or she is indebted or of which he or she owns securities under the exceptions in subparagraphs (e)(1)(A) and (e)(1)(B) of this Code section, nor may an examiner obtain credit from a financial institution if he or she has examined such financial institution in the preceding 12 months. An examiner who wishes to borrow funds from any financial institution he or she has examined in the past five years must first obtain the written permission of the commissioner. This subsection is included as an additional precaution and is not intended to preclude the operation of any other applicable law or regulation.
  6. The commissioner, any deputy commissioner, any department employee with financial institution or licensee supervisory responsibility, or any examiner shall not directly or indirectly:
    1. Receive any money or property as a loan from any department licensee or any director, officer, agent, employee, or attorney of a department licensee, unless such employee does not examine or exercise supervisory responsibility over that licensee;
    2. Receive any money or property as a gift from any department licensee or any director, officer, agent, employee, or attorney of a department licensee, unless consistent with the ethics in government policy of this state;
    3. Give any money or property as a gift to any department licensee or any director, officer, agent, employee, or attorney of a department licensee, unless consistent with the ethics in government policy of this state; or
    4. Engage in the business of a department licensee.
  7. No director, officer, agent, employee, or attorney of a financial institution, individually or in his or her official capacity, shall knowingly participate in a violation of this Code section. However, nothing in this Code section shall restrict the right of the commissioner, any deputy commissioner, any department employee with financial institution or licensee supervisory responsibilities, or any examiner to deal as any other consumer with such director, officer, agent, employee, or attorney in the ordinary course of business in consumer areas of trade or commerce not regulated by the department and under terms and conditions which are not preferential.
  8. The commissioner, any deputy commissioner, any department employee with financial institution or licensee supervisory responsibilities, or any examiner employed by the department who shall violate or participate in a violation of this Code section shall be guilty of a misdemeanor. Violation of this Code section shall be grounds for removal from office.
  9. The commissioner may adopt additional supplementary administrative policies and departmental rules governing ethical conduct and conflicts of interest on the part of employees of the department and providing certain definitions and clarifications to effectuate the purposes of this Code section.

History. Ga. L. 1919, p. 135, art. 2, §§ 4, 10; Ga. L. 1919, p. 135, art. 20, § 6; Code 1933, §§ 13-304, 13-310, 13-9906; Code 1933, §§ 41A-207, 41A-9904, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 2; Ga. L. 1980, p. 919, § 1; Ga. L. 1983, p. 532, § 1; Ga. L. 1985, p. 149, § 7; Ga. L. 1995, p. 673, § 4; Ga. L. 1997, p. 485, § 4; Ga. L. 2002, p. 1220, § 2; Ga. L. 2019, p. 828, § 2/HB 185; Ga. L. 2020, p. 493, § 7/SB 429; Ga. L. 2022, p. 220, § 1/HB 891.

The 2019 amendment, effective July 1, 2019, added “, unless such employee does not examine or exercise supervisory responsibility over any financial institution” at the end of paragraph (a)(1); and inserted a comma following “attorney” in paragraph (a)(3).

The 2020 amendment, effective July 29, 2020, part of an Act to revise, modernize, and correct the Code, substituted “provided that the obligee” for “provided the obligee” in the middle of the first sentence of subsection (c).

The 2022 amendment, effective July 1, 2022, deleted the former last two sentences of subsection (c), which read: “All extensions of credit, including but not limited to such permitted loans, which obligate the commissioner or any deputy commissioner to such a financial institution or subsidiary, directly or contingently by way of guaranty, endorsement, or otherwise, or which renew or modify existing obligations shall be reported by the individual concerned to the Attorney General in writing, within ten days after the execution thereof, showing the nature of the undertaking and the amount and terms of the loan or other transaction. All credit obligations of a similar nature to those set forth above on the part of any other department employee with financial institution or licensee supervisory responsibilities or examiner shall be reported to the commissioner within ten days after the execution thereof.”; in subsection (d), substituted “does not exceed $25,000.00” for “may not exceed $10,000.00” and “provided that the rates” for “provided the rates” in the second sentence, and substituted “shall be reported to the commissioner within ten days of execution of the credit obligation if the financial institution is regulated or examined by the department,” for “shall, however, be reported as provided in subsection (c) of this Code section,” in the third sentence; and deleted the former last two sentences of paragraph (g)(1), which read: “Any debt owed by a deputy commissioner, department employee with financial institution or licensee supervisory responsibility, or examiner of a department licensee must be reported to the commissioner. Reporting by the commissioner shall be made to the Attorney General”.

Code Commission notes.

Pursuant to Code Section 28-9-5, in 1988, “of this Code section” was added following “subsection (c)” in the last sentence of subsection (d).

Pursuant to Code Section 28-9-5, in 2002, a comma was added following “licensee supervisory responsibilities” near the beginning of subparagraph (e)(1)(C).

RESEARCH REFERENCES

ALR.

Validity and enforceability of agreement with bank officer or employee individually in connection with bank accommodation, 41 A.L.R. 349 .

7-1-38. Commissioner’s office expenses.

The commissioner shall be provided with suitable offices and equipment, the expense of which shall be paid by the state in the same manner as the expenses of other offices of the state government are paid.

History. Ga. L. 1919, p. 135, art. 2, § 8; Ga. L. 1920, p. 102, § 1; Ga. L. 1925, p. 119, § 1; Code 1933, § 13-308; Ga. L. 1963, p. 369, § 1; Code 1933, § 41A-208, enacted by Ga. L. 1974, p. 705, § 1.

7-1-39. Seal of department; evidentiary effect.

The department shall adopt an official seal. Any paper executed under the seal of the department shall prima facie be deemed to have been executed by a duly authorized official of the department.

History. Code 1933, § 41A-209, enacted by Ga. L. 1974, p. 705, § 1.

7-1-40. Delegation of authority by commissioner.

  1. Any authority, power, or duty vested in the commissioner or department by a provision of this chapter may be exercised, discharged, or performed by a deputy, assistant, examiner, or employee of the department acting in the commissioner’s name and by his delegated authority. In the case of any matters involving the exercise of discretion, the delegation of authority shall be in writing. Any such delegation by the commissioner may be revoked in the same manner in which it was granted.
  2. The commissioner shall be responsible for the official acts of such persons who act in his name and by his authority.

History. Code 1933, § 13-324, enacted by Ga. L. 1973, p. 526, § 2; Code 1933, § 41A-210, enacted by Ga. L. 1974, p. 705, § 1.

7-1-41. Prescribing fees; payment procedure.

  1. The department may, by regulation, prescribe annual examination fees, license fees, registration fees, and supervision fees to be paid by the institutions and entities assigned to the department by this title for regulation, supervision, licensure, or registration. In addition, the department may, by regulation, prescribe reasonable application and related fees, special investigation fees, hearing fees, mortgage loan fees, and fees to provide copies of any book, account, report, or other paper filed in its office or for any certification thereof or for processing any papers as required by this title. Such fees may vary by type of institution regulated and nature of the work performed.
  2. The department, in its discretion, may require the payment of such fees in any manner deemed to be efficient, including collection through automated clearing-house arrangements or other electronic means, so that the state receives funds no later than the date the payment is required to be made.

History. Code 1933, § 41A-212, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 3; Ga. L. 1996, p. 848, § 2; Ga. L. 2002, p. 1220, § 3.

7-1-42. Enforcement of payment.

In the event any financial institution shall fail or refuse to pay on demand any amount owed to the department, including, but not limited to, outstanding fees, the department may proceed through the Attorney General to collect the same by action at law.

History. Ga. L. 1919, p. 135, art. 3, § 6; Code 1933, § 13-406; Ga. L. 1966, p. 692, § 23; Code 1933, § 41A-213, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2016, p. 390, § 1-2/HB 811.

7-1-43. Disposition of fees collected; payment of expenses from appropriations.

Fees prescribed by this chapter shall be collected by the department and deposited with the Office of the State Treasurer. The department may, at its discretion, remit such amounts net of the cost of recovery, which cost may include fees paid to a collection agency or attorney for recovery of moneys due the department. All of the expenses incurred in connection with the conduct of the business of the department shall be paid out of the appropriations of funds to the department by the General Assembly. Such expenses shall include all expenses incurred as travel expenses by personnel of the department when away from their official station as assigned by the commissioner.

History. Ga. L. 1919, p. 135, art. 2, §§ 13, 14; Code 1933, § 13-313; Code 1933, § 13-305, enacted by Ga. L. 1965, p. 540, § 1; Code 1933, § 41A-211, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1995, p. 673, § 5; Ga. L. 2003, p. 843, § 1; Ga. L. 2010, p. 863, § 2/SB 296.

PART 3 Operations of Department of Banking and Finance

Law reviews.

For note discussing the interrelationship between the International Banking Act, the provisions of the Financial Institutions Code relating to domestic banking, and the Foreign Corporations Chapter of the Corporation Code in the regulation of international banking in Georgia and comparing Georgia provisions with those of New York and California, see 27 Mercer L. Rev. 827 (1976).

7-1-60. General scope of supervision.

Except where otherwise specifically provided, the department shall enforce and administer all laws of this state relating to financial institutions and shall exercise general supervision over financial institutions in accord with the underlying objectives of this chapter.

History. Code 1933, § 41A-301, enacted by Ga. L. 1974, p. 705, § 1.

Law reviews.

For review of 1996 banking and finance legislation, see 13 Ga. St. U.L. Rev. 1 (1996).

For article, “Business Associations,” see 53 Mercer L. Rev. 109 (2001).

RESEARCH REFERENCES

C.J.S.

9 C.J.S., Banks and Banking, §§ 11 et seq., 137.

7-1-61. Rules and regulations.

  1. The department shall have the authority to promulgate rules and regulations to effectuate the objectives or provisions of this chapter. Without limiting the generality of the foregoing, the department is expressly authorized to make rules and regulations, consistent with this chapter, relating to organization, operations, and powers of financial institutions to:
    1. Enable financial institutions existing under the laws of this state to compete fairly with financial institutions and others providing financial services in this state existing under the laws of the United States, other states, or foreign governments; or
    2. Protect financial institutions jeopardized or challenged by new economic or technological conditions or by significant changes in the legal environment.
  2. In the exercise of the discretion permitted by this Code section, the commissioner shall consider:
    1. The ability of financial institutions to exercise any additional powers in a safe and sound manner;
    2. The authority of any federally chartered bank, as the term “bank” is defined in Code Section 7-1-621, operating pursuant to federal law, regulation, or authoritative pronouncement;
    3. The powers of other entities providing financial services in this state; and
    4. Any specific limitations on financial institution operations or powers contained in this chapter.
  3. Rules and regulations promulgated by the department may provide for controls, registration, or restrictions reasonably necessary to:
    1. Prevent unfair or deceptive business practices which are prohibited under Code Section 10-1-393;
    2. Prevent deceptive or misleading business practices by financial services providers which may occur by way of alternate delivery systems for the provision of financial products and services such as the Internet or other telecommunication capabilities; or
    3. Prevent or control unfair or deceptive business practices which would operate to the detriment of any competing business or enterprise or to persons utilizing the services of any financial institution, its subsidiary, or affiliate.
  4. All rules and regulations shall be promulgated in accordance with Chapter 13 of Title 50, the “Georgia Administrative Procedure Act,” including the requirements for hearing as stated in that chapter. Regulations issued under this or other provisions of this chapter may make appropriate distinctions between types of financial institutions and may be amended, modified, or repealed from time to time.

History. Code 1933, § 41A-302, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1989, p. 1249, § 1; Ga. L. 1995, p. 673, § 6; Ga. L. 1997, p. 485, § 5; Ga. L. 2000, p. 174, § 3; Ga. L. 2005, p. 826, § 4/SB 82; Ga. L. 2015, p. 344, § 3/HB 184.

Administrative rules and regulations.

Investment securities, Official Compilation of the Rules and Regulations of the State of Georgia, Department of Banking and Finance, Banks, Chapter 80-1-4.

Borrowed money, Official Compilation of the Rules and Regulations of the State of Georgia, Department of Banking and Finance, Banks, Chapter 80-1-9.

Public disclosure of information, Official Compilation of the Rules and Regulations of the State of Georgia, Department of Banking and Finance, Banks, Chapter 80-1-11.

RESEARCH REFERENCES

Am. Jur. 2d.

2 Am. Jur. 2d, Administrative Law, § 52.

C.J.S.

9 C.J.S., Banks and Banking, §§ 10 et seq., 137. 73 C.J.S., Public Administrative Law and Procedure, §§ 112 et seq., 139.

7-1-61.1. Expansion of power for banks and credit unions; role of commissioner; documentation to legislative committees.

  1. For purposes of this Code section, the term “power” means any banking or corporate power, right, benefit, privilege, or immunity of a financial institution, the deposits of which are federally insured, as set forth in any federal statute or any regulation, ruling, circular, bulletin, order, or interpretation issued by the Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation, National Credit Union Administration, or Federal Reserve System.
  2. To provide parity with financial institutions whose deposits are federally insured, the commissioner may, by specific order directed to a category of banks or credit unions, grant any power conferred upon a financial institution, subject to the supervision of the federal government, to:
    1. State chartered banks and credit unions to enable such banks and credit unions to compete; and
    2. Subsidiaries of state chartered banks and credit unions to the same extent powers are granted to subsidiaries of national banks or federal credit unions to enable such subsidiaries of state chartered banks and credit unions to compete.
  3. No order provided for in subsection (b) of this Code section shall be issued unless the commissioner determines that such activity will not present undue safety and soundness risks to the banks or credit unions involved. In making such determination, the commissioner shall consider the financial condition and regulatory safety and soundness ratings of the banks or credit unions affected and the ability of management to administer and supervise the activity. The department shall make any order issued pursuant to this Code section available for public review.
  4. No later than ten days after the issuance of any order by the commissioner pursuant to this Code section, the commissioner shall provide a copy of such order to the chairpersons of the House Committee on Banks and Banking and Senate Banking and Financial Institutions Committee.

History. Code 1981, § 7-1-61.1 , enacted by Ga. L. 2015, p. 344, § 4/HB 184; Ga. L. 2018, p. 214, § 2/HB 780.

The 2018 amendment, effective May 3, 2018, substituted “directed to a category” for “directed to an individual bank or credit union or category” in the introductory paragraph of subsection (b); and added subsection (d). See Editor’s notes for applicability.

Editor’s notes.

Ga. L. 2018, p. 214, § 26(b)/HB 780, not codified by the General Assembly, provides that: “It is not the intent of the General Assembly to affect the law applicable to litigation pending as of March 9, 2018.”

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur.2d, Banks and Financial Institutions, § 253 et seq.

C.J.S.

9 C.J.S., Banks and Banking, § 222 et seq.

7-1-62. Accounting procedures.

The department may promulgate regulations concerning the manner in which the books of financial institutions will be maintained in order to assist the department in its examinations and other supervisory activities, provided that, in all events:

  1. A financial institution shall enter on its books a complete and accurate account of all of its assets, whether the assets are in its name or the name of others, at values which shall not, without the prior approval of the department, exceed the actual cost of the assets to the financial institution; and
  2. A financial institution shall enter on its books a complete and accurate account of its liabilities, its borrowings, and the security interests it has granted and shall maintain additional accounts for losses and expenses.

History. Code 1933, § 41A-303, enacted by Ga. L. 1974, p. 705, § 1.

Cross references.

Authority of department to issue orders requiring financial institutions to open and keep such books as will allow the department to ascertain true conditions of financial institutions, § 7-1-91 .

7-1-63. Retention of records.

  1. The department shall issue regulations classifying records kept by financial institutions and prescribing the period, if any, for which records of each class shall be retained and the form in which such records shall be maintained. Such periods may be permanent or for a lesser term of years. In issuing such regulations, consideration shall be given to the objectives of this chapter and to:
    1. Evidentiary effect in actions at law and administrative proceedings in which the production of records of financial institutions might be necessary or desirable;
    2. State and federal statutes of limitation applicable to such actions or proceedings;
    3. Availability of information contained in the records of the financial institution from other sources;
    4. Requirements of electronic systems of transferring funds; and
    5. Other pertinent matters;

      so that financial institutions will be required to retain records for as short a period as is commensurate with interests of customers, shareholders, and the people of this state.

  2. The regulations of the department shall not require financial institutions to maintain originals of checks or items for the payment of money or original computer tapes or original records with respect to accounts which have been inactive for a period of 12 successive months. Where a financial institution employs computers, its records may consist of legible products of computer operations.

History. Ga. L. 1953, p. 70, § 3; Ga. L. 1966, p. 692, §§ 45-47; Code 1933, § 41A-304, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 4; Ga. L. 2011, p. 99, § 4/HB 24.

Cross references.

Hearsay rule exceptions, § 24-8-803 .

Self authentication, § 24-9-902 .

Public records, § 24-10-1005 .

Editor’s notes.

Ga. L. 2011, p. 99, § 101/HB 24, not codified by the General Assembly, provides that this Act shall apply to any motion made or hearing or trial commenced on or after January 1, 2013.

Law reviews.

For article, “Evidence,” see 27 Ga. St. U. L. Rev. 1 (2011).

JUDICIAL DECISIONS

Applicability. —

O.C.G.A. § 7-1-63 was not applicable in an action alleging that a bank improperly cashed certificates of deposit and a savings account. Emmett v. Regions Bank, 238 Ga. App. 455 , 518 S.E.2d 472 , 1999 Ga. App. LEXIS 778 (1999), cert. denied, No. S99C1430, 1999 Ga. LEXIS 879 (Ga. Oct. 22, 1999).

7-1-64. Department examinations and investigations; disclosure of information or prior notice regarding examinations of financial institutions.

  1. Except as otherwise provided in subsection (b) of this Code section, the department shall examine all financial institutions at least once each year and may examine or investigate any financial institution more frequently at any time it deems such action necessary or desirable. At least once annually the examination shall consist of a comprehensive review of the accounts, records, and affairs of the institution.
  2. The department may, consistent with the objectives of this chapter and the purposes listed below, alter the examination frequency and scope as set out in subsection (a) of this Code section:
    1. To achieve cooperation and coordination with other state and federal regulatory authorities including but not limited to examination programs of banks or bank holding companies having multistate operations;
    2. To assure that appropriate time and attention are devoted to the supervision of troubled financial institutions; or
    3. To minimize the examination burden on well-managed financial institutions which have consistently been operated with safe and sound banking practices.
  3. In the case of a financial institution which is a member of the Federal Reserve System or whose deposits are insured by a public body of the United States, the department may accept, in lieu of any examination required by this Code section, examinations or reports thereof made pursuant to the Federal Reserve Act or statutes of the United States authorizing such insurance.
  4. Employees of the department shall not divulge any information or provide prior notice, directly or indirectly, to any officer, director, agent, representative, or employee of a financial institution concerning the time or date of examination of the financial institution except in accordance with internal policy prescribed by the commissioner. Employees violating the policy of the commissioner relating to information or prior notice concerning examinations shall be subject to immediate dismissal.

History. Ga. L. 1919, p. 135, art. 3, §§ 1, 2; Ga. L. 1925, p. 165, § 10; Ga. L. 1927, p. 344, § 3; Code 1933, §§ 13-401, 13-402, 25-122, 109-503; Ga. L. 1935, p. 114, § 1; Ga. L. 1937-38, Ex. Sess., p. 307, § 5; Ga. L. 1943, p. 279, § 1; Ga. L. 1945, p. 253, §§ 1, 2; Ga. L. 1956, p. 742, § 4; Ga. L. 1960, p. 977, § 1; Ga. L. 1960, p. 1175, § 1; Ga. L. 1962, p. 74, § 3; Ga. L. 1966, p. 692, §§ 18, 19; Ga. L. 1968, p. 465, § 8; Code 1933, § 41A-305, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1981, p. 1366, § 1; Ga. L. 1995, p. 673, § 7; Ga. L. 1997, p. 485, § 6.

Code Commission notes.

Pursuant to Code Section 28-9-5, in 1995, “are” was substituted for “is” in paragraph (b)(2).

U.S. Code.

The Federal Reserve Act, referred to in subsection (c) of this Code section, is codified generally throughout 12 U.S.C. See 12 U.S.C. § 226 .

JUDICIAL DECISIONS

Liability of commissioner. —

In a suit against the superintendent of banks (now commissioner of banking and finance), and surety on the superintendent’s bond for loss suffered by the depositor by the superintendent’s failure to discover insolvency of certain savings and loan companies, the superintendent could not be held civilly liable for the superintendent’s erroneous judgment that the superintendent had no supervisory powers over the corporation unless facts were alleged to show that the superintendent’s judgment was willful, malicious, fraudulent, and corrupt. Gormley v. State, 54 Ga. App. 843 , 189 S.E. 288 , 1936 Ga. App. LEXIS 777 (1936).

RESEARCH REFERENCES

Am. Jur. 2d.

11 Am. Jur. 2d, Banks and Financial Institutions, §§ 1192, 1194.

C.J.S.

9 C.J.S., Banks and Banking, §§ 11 et seq., 137.

ALR.

Use or publication of reports of, or information obtained by, bank examiners, as affected by their alleged confidential character, 123 A.L.R. 1278 .

7-1-65. Examinations and investigations on request.

When requested in writing by the board of directors or holders of a majority of the shares of a financial institution, the department, at a time fixed by it, shall examine or investigate the affairs and condition of the financial institution. However, this provision shall not be construed to mean that such institution, directors, or shareholders shall have any greater right to require the department to disclose the results of such examination or investigation than they have in case of any examination or investigation at the insistence of the department nor shall the department be required under this Code section to make more than one examination per year of any financial institution.

History. Code 1933, § 41A-306, enacted by Ga. L. 1974, p. 705, § 1.

RESEARCH REFERENCES

ALR.

Use or publication of reports of, or information obtained by, bank examiners, as affected by their alleged confidential character, 123 A.L.R. 1278 .

7-1-66. Method of examination and investigations; special examiners; subpoenas.

  1. Examinations and investigations shall be made by the commissioner or by qualified examiners or employees empowered in writing by the department to make examinations or investigations. The department may, when the occasion requires, appoint special examiners and prescribe their duties and powers.
  2. Officials authorized to make examinations or investigations shall have the power and authority to administer oaths and to examine under oath any person (including any officer, director, agent, attorney, member, or employee of any financial institution) whose testimony may be relevant to the examination or investigation. Such officials shall have the authority and power to compel the appearance and attendance of any such person and the production by such person of pertinent books and papers, including books and papers to which the person has access because of his position with a financial institution, and for such purposes shall have the authority to issue a subpoena requiring the appearance and attendance of any such person or for the production of any pertinent books and papers.
  3. If any person shall fail or refuse to obey an order or subpoena issued by the department, a court of appropriate jurisdiction, upon application by the department, may issue an order requiring such person to appear before the court to show cause as to why he or she should not be adjudged in contempt and punished accordingly for refusal to obey the subpoena.

History. Ga. L. 1919, p. 135, art. 2, § 18; Ga. L. 1919, p. 135, art. 3, § 3; Ga. L. 1919, p. 135, art. 20, § 1; Code 1933, §§ 13-318, 13-403, 13-9901; Ga. L. 1966, p. 692, § 20; Code 1933, §§ 41A-307, 41A-9903, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1981, p. 1366, § 19; Ga. L. 2017, p. 193, § 2/HB 143.

Cross references.

Authority of department to issue orders requiring financial institutions to submit records and affairs to legally conducted examinations or investigations by department, § 7-1-91 .

RESEARCH REFERENCES

Am. Jur. 2d.

11 Am. Jur. 2d, Banks and Financial Institutions, §§ 1192, 1194.

C.J.S.

9 C.J.S., Banks and Banking, §§ 11 et seq., 137.

ALR.

Bank’s liability, under state law, for disclosing financial information concerning depositor or customer, 81 A.L.R.4th 377.

7-1-67. Reports of examinations.

  1. Any official who shall make an examination pursuant to this chapter shall reduce the result thereof to writing in such form as shall be prescribed by the department. Such report shall contain a full, true, and correct statement of the condition of the financial institution in the case of a comprehensive examination or of the matter subject to inquiry in the case of other examinations.
  2. Each report shall be the property of the regulatory agency which generates such report; provided, however, that a copy of such report may be furnished to the examined financial institution for its internal, confidential use. A financial institution or any officer, director, or employee thereof shall not disclose a report or any portion of its contents. If a subpoena or discovery request is received for a report or any portion of its contents, the financial institution must deliver a copy of such subpoena or discovery request to the department immediately.

History. Ga. L. 1919, p. 135, art. 3, § 4; Code 1933, § 13-404; Ga. L. 1966, p. 692, § 21; Code 1933, § 41A-308, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1998, p. 795, § 4.

RESEARCH REFERENCES

C.J.S.

9 C.J.S., Banks and Banking, §§ 11 et seq., 137.

ALR.

Use or publication of reports of, or information obtained by, bank examiners, as affected by their alleged confidential character, 123 A.L.R. 1278 .

7-1-68. Reports to department; penalty for noncompliance.

  1. The department may require reports on the condition of or any particular facts concerning any financial institution at any time the department deems it necessary or advisable.
  2. The form of all reports, the information to be contained in them, and the date on which they shall be due shall be prescribed by the department. The reports shall be verified by the oath or affirmation of the president, secretary, or other managing officer of the institution.
  3. Any financial institution which fails to prepare any report in accordance with this Code section, or fails to provide any facts or information requested under subsection (a) of this Code section, shall pay the department a penalty of $100.00 for each day after the time fixed by the department for filing such report, but the department may, in its discretion, relieve any financial institution from the payment of such penalty, in whole or in part, if good cause be shown. If a financial institution fails to pay a penalty from which it has not been relieved, the department may, through the Attorney General, maintain an action at law to recover it.

History. Ga. L. 1919, p. 135, art. 4, §§ 1, 2, 5; Ga. L. 1920, p. 102, § 1; Ga. L. 1925, p. 165, § 10; Ga. L. 1927, p. 344, § 3; Code 1933, §§ 13-501, 13-502, 25-122, 109-503; Ga. L. 1935, p. 114, § 1; Ga. L. 1937, p. 425, § 1; Ga. L. 1937-38, Ex. Sess., p. 307, § 5; Ga. L. 1943, p. 279, § 1; Ga. L. 1956, p. 742, § 4; Ga. L. 1960, p. 977, § 1; Ga. L. 1960, p. 1175, § 1; Ga. L. 1962, p. 74, § 3; Ga. L. 1968, p. 465, § 8; Code 1933, § 41A-309, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 5; Ga. L. 1981, p. 1366, § 2; Ga. L. 1995, p. 673, § 8; Ga. L. 1998, p. 795, § 5; Ga. L. 2009, p. 86, § 2/HB 141; Ga. L. 2016, p. 390, § 1-3/HB 811.

OPINIONS OF THE ATTORNEY GENERAL

Publication required under former Code 1933, § 41A-309 (see now O.C.G.A. § 7-1-68 ) need not be an official organ designated pursuant to former Code 1933, §§ 39-1103 and 39-1107 (see now O.C.G.A. § 9-13-142 ). 1979 Op. Atty Gen. No. U79-25.

RESEARCH REFERENCES

C.J.S.

9 C.J.S., Banks and Banking, § 28.

ALR.

Use or publication of reports of, or information obtained by, bank examiners, as affected by their alleged confidential character, 123 A.L.R. 1278 .

7-1-69. Retention of reports.

The reports of examinations and investigations made by the department and reports made by financial institutions shall be preserved by the department for a period of five years, after which they may be destroyed.

History. Ga. L. 1919, p. 135, art. 2, § 19; Code 1933, § 13-319; Code 1933, § 41A-310, enacted by Ga. L. 1974, p. 705, § 1.

7-1-70. Disclosure of information.

  1. Records of the department, regardless of the medium by which stored, are confidential. Except as otherwise provided in this Code section, this chapter, or departmental rule or regulation, and, notwithstanding the provisions of Article 4 of Chapter 18 of Title 50, such records shall not be open to inspection by or made available to the public. The commissioner and all other officials and employees of the department shall not disclose facts and information obtained in the course of their duties, including information obtained from examinations, investigations, and reports as required or authorized in this part. The department may, however, provide by rule, regulation, or order for public access to certain records which, in the opinion of the commissioner, do not contain sensitive information and from which disclosure the public would benefit.
  2. Subject to the exceptions, safeguards, and limitations contained in subsection (c) of this Code section, the restrictions of subsection (a) of this Code section shall not apply to disclosures:
    1. Within the department or made to the Governor in the course of official duties;
    2. Required by law, including disclosures required by subpoena or other legal process of a court or administrative agency having competent jurisdiction in legal proceedings and, where applicable, when the financial institution is a party or where the information is not otherwise available upon direct subpoena of a financial institution;
    3. In prosecutions or other court actions to which the department or the commissioner is a party;
    4. Made to federal or state financial institution supervisory agencies, other federal or state regulatory agencies with legal authority over such institution, the United States Department of Justice (including the Federal Bureau of Investigation), the United States Department of the Treasury, the Georgia Bureau of Investigation, or state or local law enforcement authorities;
    5. Made to any officer, attorney, or director of the involved financial institution, made to any officer, attorney, or director of the involved financial institution’s holding company, or with the written consent of said financial institution or holding company;
    6. Made in a publication of the department which is available to the general public;
    7. Of general economic and similar data considered by the department in regard to requests for new articles, new branches, changes in the location of facilities, or similar matters made to parties interested in the department’s action in regard thereto; and
    8. Made to a financial institution concerning the past job performance of a prospective employee with the written consent of such prospective employee, provided such written consent shall not be required in circumstances provided for in Code Section 7-1-840.
  3. The following exceptions, safeguards, and limitations shall apply:
    1. Disclosures made under subsection (b) of this Code section shall be made, where appropriate, under safeguards designed to prevent further dissemination of confidential data; provided, however, that for disclosures of suspected criminal activity made under paragraph (4) of subsection (b) of this Code section, the confidentiality safeguards already in place within those agencies shall be considered adequate. Except for disclosures under paragraph (2) of subsection (b) of this Code section, the department shall not be required to make authorized disclosures where it deems such disclosures undesirable;
    2. All disclosures shall be limited to only those documents directly relevant to the inquiry or legal dispute at issue; and
    3. The documents listed below shall be considered absolutely privileged and confidential and shall be exempt from open inspection and not subject to disclosure by the department without a specific order of court pursuant to Code Section 7-1-90, which order specifically holds the public interest in the safety and soundness of the banking system and its regulation to be outweighed by other interests of justice. Such exempt documents shall include:
      1. Departmental internal investigations, documents, and notes which reflect the deliberative processes of employees;
      2. Opinions provided in confidence to the department regarding proposed new banks;
      3. Informal notes and memos of the department that are not purely factual in nature;
      4. Advisory opinions;
      5. Recommendations, summaries, and analyses that are utilized for departmental internal purposes and are not final orders or reports; and
      6. Other similar materials or notes.
  4. Notwithstanding any other provision of this Code section, the commissioner may, without waiving any privilege, authorize access to confidential supervisory information for any appropriate governmental, law enforcement, or other public purpose.
  5. Violation of this Code section shall be grounds for removal from office.

History. Code 1933, § 41A-311, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 6; Ga. L. 1982, p. 3, § 7; Ga. L. 1989, p. 1211, § 4; Ga. L. 1998, p. 795, § 6; Ga. L. 2002, p. 1220, § 4; Ga. L. 2003, p. 843, § 2.

OPINIONS OF THE ATTORNEY GENERAL

Disclosure of deficiencies. — Department of Banking and Finance may report deficiencies uncovered during examination to local officials involved. To withhold knowledge of violations of law from officials who have placed public funds in a bank serves no legitimate interest of the bank and threatens serious injury to the public. 1979 Op. Att'y Gen. No. 79-12.

RESEARCH REFERENCES

C.J.S.

9 C.J.S., Banks and Banking, §§ 11 et seq., 137.

ALR.

Use or publication of reports of, or information obtained by, bank examiners, as affected by their alleged confidential character, 123 A.L.R. 1278 .

Bank’s liability, under state law, for disclosing financial information concerning depositor or customer, 81 A.L.R.4th 377.

7-1-71. Removal of officers, directors, or employees.

  1. The department, by order of the commissioner, shall have the right to require the immediate suspension from office of any director, officer, or employee of any financial institution and to prohibit any such person’s participation in the affairs of any financial institution if the department finds such person:
    1. To be dishonest, incompetent, or reckless in the management of the affairs of the financial institution;
    2. To have persistently violated the laws of this state;
    3. To have violated the lawful orders, regulations, or conditions of a written agreement of or with the department;
    4. To have been indicted for any crime involving moral turpitude or breach of trust;
    5. To have evidenced an inability to conduct his or her own financial affairs or the affairs of a company in which such individual owns a majority interest or has responsibility for financial matters, in a fiscally responsible, diligent, or lawful fashion; or
    6. To have engaged in any unsafe or unsound practice in connection with any insured depository institution or to have demonstrated willful or continuing disregard for the safety and soundness of a financial institution.
  2. A prohibition order, which prohibits an individual from participating in any capacity in the affairs of a financial institution, may be issued by the commissioner in connection with a suspension order issued under the authority of this Code section. Such prohibition order may provide that if an officer, director, or employee has been removed from office temporarily or permanently at a financial institution, he or she may also be prohibited from participating in any manner in the conduct of the affairs of any financial institution or any financial institution’s affiliate regulated by the department during the time the prohibition order is in effect.
  3. The department shall serve written notice upon the party of its determination to suspend such person from office or prohibit such person from participating in the affairs of a financial institution pursuant to subsections (a) and (b) of this Code section.  A suspension order or a prohibition order shall be effective upon such service and shall specify whether the suspension is temporary, the duration and terms of the suspension if temporary, or if it is permanent.  The prohibition order shall be consistent in duration with the suspension order.
  4. Any person suspended or prohibited under this Code section may request his or her reinstatement in writing delivered to the department within ten days of his or her suspension or prohibition.  If such reinstatement is not requested, the director, officer, or employee shall be considered permanently removed and, if so ordered, permanently prohibited from participation in the affairs of any financial institution.
  5. Upon request for reinstatement, the department shall conduct an internal review of the matter during which such person has the opportunity to state his or her case to the commissioner. The department shall deliver the findings of the hearing to such person.  If the person requests further review, the department may refer the matter to the Office of State Administrative Hearings under Chapter 13 of Title 50, the “Georgia Administrative Procedure Act,” where a nonpublic hearing shall be held to review the department’s decision. The final decision of the department shall be conclusive, except as it may be subject to judicial review under Code Section 7-1-90.
  6. Any order issued pursuant to this Code section shall also be delivered to the financial institution with which the party was associated at the time such order was issued.

History. Ga. L. 1919, p. 135, art. 5, § 3; Code 1933, § 13-603; Code 1933, § 41A-312, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1983, p. 602, § 1; Ga. L. 1995, p. 673, § 9; Ga. L. 1997, p. 485, § 7; Ga. L. 2005, p. 826, § 5/SB 82; Ga. L. 2006, p. 72, § 7/SB 465; Ga. L. 2018, p. 214, § 3/HB 780.

The 2018 amendment, effective May 3, 2018, inserted “or any financial institution’s affiliate regulated by the department” near the end of the second sentence of subsection (b). See Editor’s notes for applicability.

Editor’s notes.

Ga. L. 2018, p. 214, § 26(b)/HB 780, not codified by the General Assembly, provides that: “It is not the intent of the General Assembly to affect the law applicable to litigation pending as of March 9, 2018.”

RESEARCH REFERENCES

Am. Jur. 2d.

2 Am. Jur. 2d, Administrative Law, §§ 41, 45, 47 et seq.

C.J.S.

9 C.J.S., Banks and Banking, §§ 11 et seq., 137.

7-1-72. Regulation of persons performing services for financial institutions.

  1. Notwithstanding any other provisions of law to the contrary and consistent with the objectives of this chapter as set forth in Code Section 7-1-3 and subject to the procedures provided in regulations of the department, a financial institution may provide financial services to its customers either directly or through employment of duly licensed persons, provided that such financial institution or its licensed employee or agent has qualified under other laws otherwise applicable to other providers of such financial services.
  2. Where financial services are being performed by a person or corporation for a financial institution, such person or corporation shall be subject to:
    1. Examination and investigation by the department to the same extent as if the services were performed by the financial institution on its own premises;
    2. Regulation by the department in regard to such services to the same extent as if such services were being performed by the financial institution for its own internal benefit or as an extension of the range of financial services products offered to customers of the financial institution; and
    3. All enforcement proceedings made available to the department in this title.
  3. In the event of conflicting statutory responsibilities, except as otherwise provided by law, the department shall not grant licenses to providers of financial services to or through financial institutions. The department shall be the responsible authority in reviewing, authorizing, or otherwise regulating, consistent with this chapter, the contractual relationship entered into by financial institutions for the provision of such services or incidental to application for further licensing.
  4. For purposes of this Code section, “financial services” shall include, but is not limited to, business and consumer financial record keeping, investments, planning and advisory assistance, surety, brokerage, data processing, electronic fund transfers, information services, and protective services performed for a financial institution which are normally performed by the financial institution for its own benefit or provided to the customers of the financial institution incidental to its conduct of the banking business. The department may further define “financial services” to include other activities of a financial nature which it determines to be consistent with the safe and sound operation of a banking business, not otherwise in violation of this chapter, and in the public interest.
  5. The department may, by regulation, prescribe fees to be paid for examinations of a person or corporation that performs financial services for a financial institution.
  6. Notwithstanding Code Section 7-1-70, the department may furnish a copy of any report of a financial service provider prepared by the department to the financial institution serviced by the financial service provider.

History. Code 1933, § 13-411, enacted by Ga. L. 1973, p. 526, § 3; Code 1933, § 41A-313, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 7; Ga. L. 1987, p. 1586, § 3; Ga. L. 2004, p. 458, § 1; Ga. L. 2017, p. 193, § 3/HB 143.

RESEARCH REFERENCES

C.J.S.

9 C.J.S., Banks and Banking, §§ 5, 7.

7-1-73. Regulation of affiliates.

The department may examine or investigate any affiliate of a financial institution for the purpose of determining the condition of the financial institution to the same extent and in the same manner as it may examine or investigate the financial institution itself.

History. Code 1933, § 13-411, enacted by Ga. L. 1973, p. 526, § 3; Code 1933, § 41A-314, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 8.

RESEARCH REFERENCES

C.J.S.

9 C.J.S., Banks and Banking, §§ 5, 7.

7-1-74. Annual report of department.

For each calendar year the department shall compile and publish in print or electronically an annual report in such form and containing such information as it may determine necessary to summarize reasonably its operations. The report may contain recommendations which the department may have for changes in the laws governing financial institutions.

History. Ga. L. 1919, p. 135, art. 2, §§ 15, 16, 17; Ga. L. 1919, p. 135, art. 7, § 28; Ga. L. 1920, p. 102, § 1; Ga. L. 1922, p. 63, § 1; Ga. L. 1925, p. 119, § 1; Code 1933, §§ 13-315, 13-316, 13-317; Code 1933, § 41A-315, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1997, p. 485, § 8; Ga. L. 2010, p. 838, § 10/SB 388.

7-1-75. Discretion of department.

Whenever in this chapter the department is authorized but not required to take any action, the taking of such action shall be within the discretion of the commissioner or his duly authorized deputy. The department shall not be required to grant opportunity for hearing except where such hearing is specifically required by this chapter or Chapter 13 of Title 50, the “Georgia Administrative Procedure Act.” The department shall maintain accurate memoranda or transcripts of all hearings conducted by the department pursuant to this Code section.

History. Code 1933, § 41A-316, enacted by Ga. L. 1974, p. 705, § 1.

7-1-76. Department may act after time limit without resubmittal; withdrawal of applications and requests; imposition of conditions; nullification.

  1. Failure of the department to act within any of the time limits established by this chapter or regulations issued pursuant thereto shall not deprive the department of jurisdiction thereafter to act in regard to the matter involved without need for resubmittal of any application, request, or similar action.
  2. Any action, application, or request requiring department approval under this chapter may be withdrawn by the applicant prior to department action thereon without prejudice to the applicant’s right to resubmit such application at a later date. If such application has been forwarded to the department through the Secretary of State, the department shall notify the Secretary of State of any such withdrawal and that the application or request is no longer pending.
  3. The department may impose conditions on any approval, including but not limited to conditions designed to address competitive, financial, managerial, safety and soundness, convenience and needs, compliance, and other concerns, to ensure that such approval is consistent with the provisions of this chapter.
  4. The department may nullify a decision on any request, action, or application if:
    1. The department becomes aware of any material misrepresentation or omission by the applicant;
    2. The department is not promptly informed by the applicant of a subsequent material change in circumstances;
    3. The decision is contrary to law, regulation, or departmental policy; or
    4. The decision was granted due to clerical or administrative error or was based on a material mistake of law or fact.

History. Code 1933, § 41A-317, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1998, p. 795, § 7.

7-1-77. Approval by commissioner of state rules and regulations affecting financial institutions.

Any rule, regulation, order, or administrative directive issued by a state official, agency, or entity which is intended to be applicable to banks, banking associations, bank holding companies, savings and loan associations, credit unions, or companies engaged in selling money orders or any other company or financial institution under the supervision of the commissioner and required to report to the commissioner or subject to rules and regulations issued by the commissioner shall be effective as to any such company or financial institution only after the rule, regulation, order, or other directive has been approved in writing by the commissioner. Nothing in this Code section shall be construed to modify, limit, or otherwise restrict the authority of the department to conduct an examination, bring a civil or administrative action, or otherwise enforce state or federal laws against a financial institution.

History. Code 1933, § 41A-318, enacted by Ga. L. 1979, p. 950, § 1; Ga. L. 2016, p. 390, § 7-3/HB 811.

RESEARCH REFERENCES

C.J.S.

9 C.J.S., Banks and Banking, §§ 11 et seq., 137.

7-1-78. Agreements with other supervisory or regulatory authorities.

  1. The department may, at its discretion, enter into cooperative or reciprocal agreements with other supervisory or regulatory authorities or law enforcement and may furnish to such entities information contained in the examinations, reports, and institution files, provided that the information is to be used for confidential, regulatory purposes.
  2. Furnishing information as permitted by this Code section shall not be deemed to change the confidential character of the information furnished.
  3. The department may accept reports of examination and other records from such entities in lieu of conducting its own examination.
  4. Any examination reports, reports of investigation, or other information obtained from such entities shall be deemed the property of the providing entity and not available for public review. Any requests for such information shall be made to the providing entity.
  5. The department may take such actions as are reasonably necessary, either independently or with such entities, to facilitate the regulation of financial services providers doing business in this state.

History. Code 1981, § 7-1-78 , enacted by Ga. L. 1995, p. 673, § 10; Ga. L. 2004, p. 458, § 2; Ga. L. 2015, p. 344, § 5/HB 184.

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, § 19 et seq.

7-1-79. Discretionary expedited approval process; considerations.

  1. The department may determine that formal approvals for certain transactions or activities to be conducted by its regulated entities are not necessary but may be replaced by a discretionary expedited approval process to begin with written notice to the department by the entity which describes the transaction or activity in a form and with a specificity acceptable to the department. For such instances, the department shall promulgate rules and regulations consistent with the authority provided to it in this chapter.
  2. In the exercise of the discretion permitted by this Code section, the commissioner shall consider:
    1. Whether the transaction or activity poses unacceptable safety and soundness risks;
    2. Whether the transaction or activity is warranted only for financially strong and well-managed institutions, as such institutions are further defined in department regulations;
    3. Whether the transaction or activity is necessary to reduce the burden on financial institutions or other entities which the department regulates;
    4. Whether the transaction or activity will assist regulated entities in remaining competitive and responsive to both economic and consumer demands; and
    5. Whether the transaction or activity is consistent with the objectives of this Code section.

History. Code 1981, § 7-1-79 , enacted by Ga. L. 1997, p. 485, § 9.

PART 4 Proceedings Involving the Department of Banking and Finance

7-1-90. Judicial review of department actions.

  1. Any final action of the department or refusal of the department to act may be subject to judicial review by any person or corporation affected by such action. Such action shall be brought within 60 days of the final action or refusal of action by the department as a special statutory proceeding in the county in which the affected person or corporation resides or is domiciled if within this state (which in the case of a corporation shall be the county of its registered office if it has such an office) or in Fulton County if the affected person or corporation resides or is domiciled outside of this state. The review shall be conducted by the court without a jury. The court shall not substitute its judgment for that of the department but may:
    1. Compel department action unlawfully withheld; or
    2. Hold unlawful and set aside department action found to be:
      1. In violation of constitutional or statutory provision;
      2. In excess of statutory authority;
      3. Made upon unlawful procedure; or
      4. Arbitrary, capricious, or otherwise in abuse of discretion,

        provided that any action reviewable under Chapter 13 of Title 50, the “Georgia Administrative Procedure Act,” or through the injunction procedure of Code Section 7-1-155 shall be reviewed under that chapter or Code section and not under this Code section.

  2. Appeals from all final orders and judgments entered by the superior court under this Code section may be taken to the Court of Appeals or the Supreme Court in the same manner as in other cases.

History. Code 1933, § 41A-401, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 9; Ga. L. 1981, p. 1366, § 3.

RESEARCH REFERENCES

C.J.S.

73A C.J.S., Public Administrative Law and Procedure, §§ 315, 317.

7-1-91. Orders by department; enforcement; civil penalty.

  1. Whenever it shall appear to the department that the capital stock of a financial institution has been reduced below the minimum required by law or below the amount required by its articles, the department may issue a written order directing such corporation to restore the deficiency within such period as shall be specified in the order.
  2. Whenever it shall appear to the department that any financial institution is not keeping its books and accounts in such manner as to enable the department, with reasonable facility, to ascertain the true condition of the financial institution, the department may issue a written order requiring such financial institution, within such period as shall be specified in the order, to open and keep such books as the department may, in its discretion, reasonably determine are essential for the purpose of keeping accurate and convenient records of the transactions and accounts of such financial institution.
  3. Whenever any financial institution shall refuse to submit its records and affairs to a legally conducted examination or investigation by the department, the department may issue a written order requiring such financial institution to permit the commissioner or other duly authorized examiner to make such examination or investigation, within such period as shall be specified in the order.
  4. Whenever it shall appear to the department that any financial institution has violated its articles or any law of this state or any order or regulation of the department or that any financial institution is conducting business in an unsafe or unauthorized manner, the department may issue a written order requiring the financial institution to cease and desist from such unsafe and unauthorized practices.
  5. Whenever a financial institution shall fail to comply with the terms of an order of the department which has been properly issued under the circumstances, the department, upon notice of three days to the financial institution, may, through the Attorney General, petition the principal court for an order directing the financial institution to obey the order of the department within such period as shall be fixed by the court. Upon the filing of such petition, the court shall allow a rule to show cause why it should not be granted. Whenever, after a hearing upon the merits or after failure of the financial institution to appear when ordered, it shall appear that the order of the department was properly issued, the court shall grant the petition of the department.
  6. Any financial institution which violates the terms of any order issued pursuant to this Code section shall be liable for a civil penalty not to exceed $1,000.00. Each day during which the violation continues shall constitute a separate offense. In determining the amount of penalty, the department shall take into account the appropriateness of the penalty relative to the size of the financial resources of the institution, the good faith efforts of the financial institution to comply with the order, the gravity of the violation, the history of previous violations by the financial institution, and such other factors or circumstances as shall have contributed to the violation. The department may at its discretion compromise, modify, or refund any penalty which is subject to imposition or has been imposed pursuant to this Code section. The financial institution or other person assessed as provided in this subsection shall have the right to request a hearing into the matter within ten days after notification of the assessment has been served upon the financial institution involved; otherwise, such penalty shall be final except as to judicial review as provided in Code Section 7-1-90.
  7. All penalties recovered by the department pursuant to this Code section shall be paid into the state treasury to the credit of the general fund; provided, however, that the department at its discretion may remit such amounts recovered, net of the cost of recovery, in the same manner as prescribed for judgments received through derivative actions pursuant to the provisions of Code Section 7-1-441.
  8. The term “financial institution” as used in this Code section shall include a bank holding company as defined in Code Section 7-1-605 and those entities required to be licensed pursuant to Article 4A of this chapter and any officer, director, employee, agent, or other person participating in the conduct of the affairs of the financial institution subject to the orders issued pursuant to this Code section.

History. Ga. L. 1919, p. 135, art. 5, § 1; Code 1933, § 13-601; Code 1933, § 41A-402, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 10; Ga. L. 1985, p. 258, § 2; Ga. L. 1998, p. 795, § 8; Ga. L. 2009, p. 86, § 3/HB 141; Ga. L. 2017, p. 193, § 4/HB 143.

Cross references.

Issuance of subpoenas for production of books and papers pursuant to examinations and investigations of financial institutions, § 7-1-66 .

Code Commission notes.

Pursuant to Code Section 28-9-5, in 1985, a comma was deleted following “written order” in subsection (b), and “institution” was substituted for “institutions” the last time that word appears in the third sentence of subsection (f).

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, § 286.

C.J.S.

9 C.J.S., Banks and Banking, §§ 11 et seq., 28, 137. 73A C.J.S., Public Administrative Law and Procedure, § 481 et seq.

ALR.

Bank’s duty to customer or depositor not to disclose information as to his financial condition, 92 A.L.R.2d 900.

Bank’s liability, under state law, for disclosing financial information concerning depositor or customer, 81 A.L.R.4th 377.

7-1-92. Forfeiture proceedings.

  1. Articles of financial institutions existing under the laws of this state are subject to forfeiture:
    1. In the case of an institution subject to such requirements, for failure to file its annual report with the Secretary of State or its annual license or occupation tax return within the time required by law;
    2. For failure to maintain a registered office in this state as required by the provisions of Title 14, relating to corporations, or by Code Section 7-1-132;
    3. For having procured its articles through fraud;
    4. For failure to organize and proceed to do business within a period of 24 months from the date of the certificate of incorporation;
    5. For failure to obey a final court order issued pursuant to subsection (a) of Code Section 7-1-91 within the time specified in such order; or
    6. Where, because of violation of law or its articles or the unsafe condition or manner of operation of the financial institution, its continued existence is likely to injure the public or the institution’s creditors or depositors.
  2. Where such grounds exist, the department, through the Attorney General and in the name of the state, is authorized to institute quo warranto or other appropriate proceedings in the principal court to vacate and forfeit the articles of any financial institution.
  3. Where the articles of any financial institution shall be forfeited, the department shall, if it has not already done so, take charge of the business and assets of such institution and proceed to liquidate it in the same manner as is herein provided in cases where the department takes possession of a financial institution directly.
  4. No action to forfeit the articles of any financial institution shall be brought except as provided herein, but any person or corporation shall have the right to submit to the department any facts which under the law would authorize the forfeiture of the articles of a financial institution.
  5. On and after April 1, 1975, the provisions of Title 14, relating to forfeiture, shall not be applicable to financial institutions.

History. Ga. L. 1919, p. 135, art. 15, §§ 1-4; Ga. L. 1925, p. 165, § 10; Code 1933, §§ 13-1601, 13-1602, 13-1603, 13-1604, 25-122; Ga. L. 1935, p. 114, § 1; Ga. L. 1937-38, Ex. Sess., p. 307, § 7; Ga. L. 1943, p. 279, § 1; Ga. L. 1949, p. 442, § 1; Ga. L. 1956, p. 742, § 4; Ga. L. 1960, p. 977, § 1; Ga. L. 1962, p. 74, § 3; Ga. L. 1968, p. 465, § 8; Code 1933, § 41A-403, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 11.

Cross references.

Declaration by Secretary of State of forfeiture of charter of Secretary of State corporations, § 14-4-160 .

RESEARCH REFERENCES

C.J.S.

9 C.J.S., Banks and Banking, §§ 166 et seq., 527.

7-1-93. Injunction and other actions by department.

The department may bring an appropriate civil action to enforce any provision of this chapter or regulations issued hereunder, whether by injunction or otherwise, in the superior court of this state having jurisdiction over one or more of the defendants.

History. Code 1933, § 13-208, enacted by Ga. L. 1960, p. 67, § 7; Ga. L. 1970, p. 954, § 6; Code 1933, § 41A-404, enacted by Ga. L. 1974, p. 705, § 1.

RESEARCH REFERENCES

C.J.S.

73A C.J.S., Public Administrative Law and Procedure, §§ 481, 483.

7-1-94. Evidential value of results of examinations or investigations; editing out of information tending to undermine public confidence in financial institution.

When the record of any examination or investigation of a financial institution by the department or the report by the examiner or employee of the department who conducted such examination or investigation is admissible in evidence under Title 24, the department, with the permission of the court, may edit out of the record or report any portion thereof which is not pertinent to the issue in question before the court or which would tend unnecessarily to affect adversely the public confidence in the financial institution.

History. Ga. L. 1919, p. 135, art. 2, § 20; Ga. L. 1919, p. 135, art. 3, § 10; Ga. L. 1920, p. 102, § 1; Code 1933, §§ 13-320, 13-410; Ga. L. 1966, p. 692, § 27; Code 1933, § 41A-405, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 12; Ga. L. 2011, p. 99, § 5/HB 24.

Cross references.

Hearsay rule exceptions, § 24-8-803 .

Self authentication, § 24-9-902 .

Public records, § 24-10-1005 .

Editor’s notes.

Ga. L. 2011, p. 99, § 101/HB 24, not codified by the General Assembly, provides that this Act shall apply to any motion made or hearing or trial commenced on or after January 1, 2013.

Law reviews.

For article, “Evidence,” see 27 Ga. St. U. L. Rev. 1 (2011).

For article on the 2011 amendment of this Code section, see 28 Ga. St. U.L. Rev. 1 (2011).

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, § 108.

11 Am. Jur. 2d, Banks and Financial Institutions, §§ 1192, 1194.

C.J.S.

9 C.J.S., Banks and Banking, §§ 11 et seq., 137.

7-1-95. [Reserved] Admissibility of department’s certificates and copies.

History. Repealed by Ga. L. 2011, p. 99, § 6/HB 24, effective January 1, 2013.

Editor’s notes.

This Code section was based on Ga. L. 1974, p. 705, § 1.

Ga. L. 2011, p. 99, § 101/HB 24, not codified by the General Assembly, provides that this Act shall apply to any motion made or hearing or trial commenced on or after January 1, 2013.

Ga. L. 2015, p. 5, § 7/HB 90, effective March 13, 2015, part of an Act to revise, modernize, and correct the Code, reserved the designation of this Code section.

Law reviews.

For article on the 2011 repeal of this Code section, see 28 Ga. St. U.L. Rev. 1 (2011).

7-1-96. [Reserved] Liability on bonds for nonperformance of duty.

History. Ga. L. 1919, p. 135, art. 2, § 21; Code 1933, § 13-321; Code 1933, § 41A-407, enacted by Ga. L. 1974, p. 705, § 1; repealed by Ga. L. 2016, p. 390, § 1-4/HB 811, effective July 1, 2016.

Editor’s notes.

Ga. L. 2016, p. 390, § 1-4/HB 811 repealed and reserved this Code section, effective July 1, 2016.

7-1-97. [Reserved] Costs of actions by or against department.

History. Ga. L. 1919, p. 135, art. 2, § 22; Ga. L. 1931, p. 7, § 91; Code 1933, § 13-322; Code 1933, § 41A-408, enacted by Ga. L. 1974, p. 705, § 1; repealed by Ga. L. 2016, p. 390, § 1-4/HB 811, effective July 1, 2016.

Editor’s notes.

Ga. L. 2016, p. 390, § 1-4/HB 811 repealed and reserved this Code section, effective July 1, 2016.

7-1-98. Department of Law to advise department.

It shall be the duty of the Department of Law to advise the department on any question of law submitted by it.

History. Ga. L. 1919, p. 135, art. 2, § 23; Ga. L. 1931, p. 7, § 91; Code 1933, § 13-323; Code 1933, § 41A-409, enacted by Ga. L. 1974, p. 705, § 1.

7-1-99. Duties and responsibilities of department regarding interest and usury complaints; advisory opinions; effect.

  1. Except as provided in Chapter 3 of this title, as amended, and Chapter 22 of Title 33, as amended, the department is designated as the appropriate agency of this state to receive and investigate complaints or allegations regarding violations of the interest and usury laws of this state. In processing such matters, the department may refer complaints or allegations to other state or federal officials or agencies which have jurisdiction over the lender involved for investigation or other action.
    1. The department, in consultation with the Department of Law, may render and publish advisory opinions for the assistance and guidance of financial institutions as defined in this chapter.
    2. Reliance in good faith upon an opinion issued as provided in paragraph (1) of this subsection shall constitute prima-facie evidence of good faith on the part of any person charged with any violation, resulting from the reliance, which subjects him to forfeiture or other sanctions imposed by the interest and usury laws. The provisions of this paragraph shall apply even if, following the reliance, the opinion is amended, rescinded, or determined by any judicial or other authority to be invalid.

History. Code 1933, § 41A-411, enacted by Ga. L. 1979, p. 951, § 1; Ga. L. 1989, p. 14, § 7.

Law reviews.

For article surveying 1979 legislative developments in commercial law, see 31 Mercer L. Rev. 13 (1979).

RESEARCH REFERENCES

ALR.

Constitutionality, construction, and effect of statutes relating to inspection, dissolution and liquidation of building and loan associations, 78 A.L.R. 1090 .

Usury in connection with loan calling for variable interest rate, 18 A.L.R.4th 1068.

PART 5 Permissive Closing Days, Emergency Closings, Business Restrictions, and Voluntary Liquidations

Cross references.

Taking of possession of the business and property of financial institutions by department, § 7-1-150 et seq.

Dissolution of business corporations generally, § 14-2-1401 et seq.

Forfeiture of charter and dissolution of Secretary of State corporations generally, § 14-4-160 et seq.

7-1-110. Permissive closing days; deferral of business conducted on Saturday.

Any financial institution may remain closed one day each week in addition to Sundays and other legal holidays; and any act authorized, required, or permitted to be performed at or by any such financial institution on a day when it is closed may be performed on the next succeeding business day; and no liability or loss of rights of any kind shall result from the delay. Saturday shall not be construed to be a business day and any business conducted on Saturday may be deferred to the next succeeding business day, provided that such deferral is applicable to all business conducted by said financial institution on that day and is in accordance with a resolution adopted by the board of directors of the institution. Customers of any financial institution adopting such a deferral policy shall be notified of any such deferral of business by prominent notice posted in the lobby of the financial institution and by circularization in regular statement mailings at least 30 days prior to the effective date of any such deferral policy. Any financial institution changing its permissive closing day, temporarily or otherwise, shall post a notice of the change and the effective date thereof in a conspicuous place at each location affected by the change at least 30 days preceding the date of the change. Notwithstanding the foregoing, credit unions serving a limited membership base may establish uniform business hours and days consistent with the needs of their membership.

History. Code 1933, § 41A-501, enacted by Ga. L. 1978, p. 1714, § 2; Ga. L. 1983, p. 602, § 2; Ga. L. 2020, p. 493, § 7/SB 429.

The 2020 amendment, effective July 29, 2020, part of an Act to revise, modernize, and correct the Code, substituted “provided that such deferral” for “provided such deferral” in the middle of the second sentence.

RESEARCH REFERENCES

C.J.S.

9 C.J.S., Banks and Banking, § 224.

7-1-110.1. Posting notice of intent to close banking location.

Except in the case of an emergency closing, before a financial institution may close a banking location, it must post at such location in a conspicuous place at least 30 days in advance of such closing a notice of intent to close. Such notice must remain posted for at least 30 consecutive days. Customers of a banking location shall be considered to have received notice if the requirements of this Code section have been met.

History. Code 1981, § 7-1-110.1 , enacted by Ga. L. 1999, p. 674, § 1.

7-1-111. Emergency closings.

Whenever it appears to the Governor that the welfare of this state or any region thereof or the welfare and security of any financial institution or the lives of the employees of the financial institution or the safety of the funds of depositors and property of the shareholders are endangered or placed in jeopardy by any impending or existing emergency or other catastrophe, including, but not limited to, economic crises, hurricanes, tornadoes, fire hazards, disruption or failure of utility, transportation, communication, or information systems, or civil disorders, the Governor may proclaim that an emergency exists and such state of emergency proclamation shall authorize financial institutions to elect to close. The Governor may also proclaim that any financial institution or type of financial institution shall be subject to special regulation as herein provided until the Governor, by a like proclamation, declares the period of such emergency to have terminated. The department may declare emergencies in specific cases for cause shown, and its declaration shall remain in effect until terminated by the Governor or the commissioner, whichever occurs first.

History. Code 1933, § 14-1811, enacted by Ga. L. 1971, p. 812, § 1; Code 1933, § 41A-501, enacted by Ga. L. 1974, p. 705, § 1; Code 1933, § 41A-502, enacted by Ga. L. 1978, p. 1714, § 4; Ga. L. 1999, p. 674, § 1; Ga. L. 2015, p. 344, § 6/HB 184; Ga. L. 2016, p. 390, § 1-5/HB 811.

RESEARCH REFERENCES

ALR.

Statute relating to closing of bank and assessment of stockholders as subject to constitutional objection of conferring judicial power upon administrative or executive officers, 78 A.L.R. 774 .

Legal questions presented by the reopening of closed bank, 80 A.L.R. 1487 ; 99 A.L.R. 1217 .

Legal aspects and consequences of declaration of “bank holiday,” 86 A.L.R. 1138 ; 95 A.L.R. 934 .

7-1-111.1. [Repealed] Posting notice of intent to close banking location.

History. Code 1981, § 7-1-111.1 , enacted by Ga. L. 1998, p. 795, § 9. For present comparable provisions, see Code Section 7-1-110.1 ; repealed by Ga. L. 1999, p. 674, § 1, effective July 1, 1999.

7-1-112. Business restrictions.

  1. During the period of or as a result of any financial emergency proclaimed by the Governor or declared by the department, or during any impending or existing emergency situation as described in Code Section 7-1-111, the department, in addition to all of the powers conferred upon it by law, shall have the authority to order any one or more financial institutions to restrict all or any part of their business and to limit or postpone for any length of time the payment of any amount or proportion of the deposits in any of the departments of the financial institutions as it may deem necessary or expedient. The department may further regulate the payments of such financial institutions as to time and amount, as in its opinion the interest of the public or of such financial institutions or the depositors thereof may require.
  2. No liability or loss of any rights of any kind shall be incurred by any financial institution during any emergency period declared by the Governor or the department by reason of the delay in the payment of any item or by the return or transmission of any item or document if such delay is caused by orders of the Governor or the department, interruption of communication facilities, suspension of payments by another financial institution, war or emergency conditions, or other circumstances beyond the control of the financial institution if it exercises such diligence as the circumstances require.

History. Code 1933, § 14-1812, enacted by Ga. L. 1971, p. 812, § 2; Code 1933, § 41A-501, enacted by Ga. L. 1974, p. 705, § 1; Code 1933, § 41A-503, enacted by Ga. L. 1978, p. 1714, § 5; Ga. L. 1999, p. 674, § 2.

RESEARCH REFERENCES

C.J.S.

9 C.J.S., Banks and Banking, § 130.

7-1-113. Voluntary dissolution prior to commencement of business; failure to properly file articles of dissolution; power of department to seek dissolution.

  1. A financial institution which has not transacted any business as a financial institution other than organizational business may propose to dissolve by the affirmative vote of shareholders entitled to cast at least two-thirds of the votes which all shareholders are entitled to cast on the plan and by delivering to the department articles of dissolution which shall be executed by two duly authorized officers or shareholders under the seal of the financial institution and which shall contain:
    1. The date of incorporation of the financial institution;
    2. A statement that it has not transacted any business as a financial institution other than organizational business;
    3. A statement that all liabilities of the financial institution have been paid or provided for;
    4. A statement that all amounts received on account of capital stock and paid-in capital, less amounts disbursed for expenses, have been returned to the persons entitled thereto; and
    5. The number of shares entitled to vote on the dissolution and the number of shares voted for and against it, respectively.
  2. The articles of dissolution shall be delivered to the department together with the filing fee required by Code Section 7-1-862. If the department is satisfied that the financial institution has not conducted any business other than organizational business and if it finds that the articles of dissolution satisfy the requirements of this chapter, it shall deliver them with its written approval to the Secretary of State and notify the financial institution of its action. If the department shall disapprove the articles of dissolution, it shall give written notice to the financial institution of its disapproval and a general statement of the reasons for its decision. The decision of the department shall be conclusive, except as it may be subject to judicial review under Code Section 7-1-90.
  3. If the department determines that a financial institution has not conducted any business other than organizational business and if articles of dissolution satisfying the requirements of this chapter are not delivered to the department together with the filing fee as required by Code Section 7-1-862, the department may make written demand upon the financial institution to immediately provide articles of dissolution or to provide cause why such dissolution should not be pursued directly by the department. If the financial institution fails to provide articles of dissolution as required within 60 days from the date of demand by the department, the department may seek dissolution of the financial institution in organization directly from the Secretary of State’s office.

History. Code 1933, § 41A-502, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 13; Code 1933, § 41A-504, as redesignated by Ga. L. 1978, p. 1714, § 3; Ga. L. 1993, p. 917, § 1; Ga. L. 2011, p. 518, § 2/HB 239; Ga. L. 2015, p. 344, § 7/HB 184; Ga. L. 2019, p. 828, § 3/HB 185.

The 2019 amendment, effective July 1, 2019, substituted “capital stock and paid-in capital,” for “capital stock, paid-in capital, and expense fund,” in paragraph (a)(4).

RESEARCH REFERENCES

Am. Jur. 2d.

11 Am. Jur. 2d, Banks and Financial Institutions, §§ 1020, 1182.

C.J.S.

9 C.J.S., Banks and Banking, § 593 et seq.

7-1-114. Voluntary dissolution after commencement of business.

  1. A financial institution which has commenced business may elect to dissolve voluntarily upon:
    1. Adoption by the vote required of its shareholders under subsection (b) of this Code section of:
      1. A plan of dissolution involving both a provision for assumption of its liabilities by another financial institution and a provision for continuance of its business if such assumption of its liabilities is not effected; or
      2. Any other plan of dissolution providing for full payment of its liabilities; and
    2. Approval by the department of the plan of dissolution after application for approval thereof in a manner prescribed by the department.
  2. Adoption of the plan by the shareholders of the financial institution shall require the affirmative vote of the shareholders entitled to cast at least two-thirds of the votes which all shareholders are entitled to cast on the plan and, if any class of shareholders is entitled to vote on the plan as a class, of the holders of at least two-thirds of the outstanding shares of such class, provided that, in the case of a credit union, adoption of the plan may be made by the affirmative vote of at least two-thirds of the members present and entitled to vote at a meeting duly called for that purpose.
  3. Upon receipt of an application for approval of a plan of dissolution, the department shall conduct such investigation as it may deem necessary to determine whether:
    1. The plan satisfies the requirements of this chapter;
    2. The plan adequately protects the interests of depositors, other creditors, and shareholders; and
    3. If the plan involves an assumption of liabilities by another financial institution, such assumption would be consistent with adequate and sound banking and in the public interest on the basis of factors substantially similar to those set forth in Code Section 7-1-534.
  4. Within 90 days after receipt of the application, the department shall approve or disapprove the application on the basis of its investigation and shall immediately give to the financial institution written notice of its decision and, in the event of disapproval, a general statement of the reasons for its decision. The decision of the department shall be conclusive, except as it may be subject to judicial review under Code Section 7-1-90.

History. Ga. L. 1919, p. 135, art. 14, §§ 1, 2, 10; Code 1933, §§ 13-1501, 13-1502, 13-1510; Ga. L. 1967, p. 597, § 1; Code 1933, § 41A-503, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1977, p. 730, § 2; Code 1933, § 41A-505, as redesignated by Ga. L. 1978, p. 1714, § 3; Ga. L. 2020, p. 493, § 7/SB 429.

The 2020 amendment, effective July 29, 2020, part of an Act to revise, modernize, and correct the Code, substituted “provided that, in the case” for “provided, in the case” in the middle of subsection (b).

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, § 207 et seq.

11 Am. Jur. 2d, Banks and Financial Institutions, §§ 1020, 1182.

C.J.S.

9 C.J.S., Banks and Banking, § 593 et seq.

ALR.

Trust or preference in respect of money placed in bank for purpose of transaction with third person where bank subsequently becomes insolvent, 31 A.L.R. 472 ; 93 A.L.R. 881 .

Right of creditors or stockholders of insolvent bank in charge of liquidating officer who refuses or fails to enforce liability of third persons to bank, to maintain action for that purpose, and conditions of such right, 116 A.L.R. 783 .

7-1-115. Winding up voluntary dissolution proceedings.

  1. The board of directors shall have full power to wind up and settle the affairs of a financial institution in voluntary dissolution proceedings.
  2. Within 30 days after the department’s approval of voluntary liquidation and dissolution, the financial institution shall give notice of its dissolution:
    1. By mail to each depositor and creditor (except those as to whom the liability of the financial institution has been assumed by another financial institution pursuant to the plan), including a statement of the amount shown by the books of the financial institution to be due to such depositor or creditor and a demand that any claim for a greater amount be filed with the financial institution before a specified date at least 60 days after the date of notice;
    2. By mail to each lessee of a safe-deposit box and each customer for whom property is held in safe deposit (except those as to whom the liability of the financial institution has been assumed by another financial institution pursuant to the plan), including a demand that all property held in a safe-deposit box or held in safe deposit by the financial institution be withdrawn by the person entitled thereto before a specified date at least 60 days after the date of the notice;
    3. By mail to each person interested in funds held in a fiduciary account or other representative capacity;
    4. By a conspicuous posting at each office of the financial institution; and
    5. By such publication as the department may prescribe.
  3. As soon as feasible after the department’s approval of voluntary liquidation and dissolution, the financial institution shall resign all of its fiduciary appointments and take such action as may be necessary to settle its fiduciary accounts.
  4. Except where liabilities are to be assumed by another financial institution:
    1. All claims of depositors and creditors shall be paid promptly after the date specified in the notice given under paragraph (1) of subsection (b) of this Code section, and unearned portions of rentals for safe-deposit boxes shall be rebated to the lessee thereof;
    2. Safe-deposit boxes whose contents have not been removed after the date specified in the notice given under paragraph (2) of subsection (b) of this Code section shall be opened under the supervision of the department and the contents placed in sealed packages which, together with unclaimed property held by the financial institution in safe deposit, shall be transmitted to the department to be held by it subject to Article 5 of Chapter 12 of Title 44, provided that the department while holding such property may take such actions as it deems appropriate to protect the interests of the owner, including reducing such property to cash;
    3. After payment of amounts due to all known depositors and creditors, unclaimed amounts due to depositors and creditors shall be paid through the department and held by it subject to Article 5 of Chapter 12 of Title 44; and
    4. Assets remaining after the performance of all obligations of the financial institution under this subsection and subsection (c) of this Code section shall be distributed to its shareholders according to their respective rights and preferences. Partial distributions to shareholders may be made prior to such time only if and to the extent approved by the department.
  5. During the course of dissolution proceedings, the financial institution shall make such reports as the department may require and shall continue to be subject to the provisions of this chapter concerning examinations and investigations of financial institutions. Furthermore, during the course of a voluntary dissolution, the financial institution with the written permission of the department may elect to use provisions of Article 14 of Chapter 2 of Title 14 that are not in conflict with this chapter.
  6. If, at any time during the course of dissolution proceedings, the department finds that the assets of the financial institution will not be sufficient to discharge its obligations, the department may then or at any time thereafter take possession of the business and property of the financial institution and complete the dissolution in accordance with this chapter.

History. Ga. L. 1919, p. 135, art. 14, §§ 3-6; Code 1933, §§ 13-1504, 13-1505, 13-1506; Ga. L. 1967, p. 597, § 1; Code 1933, § 41A-504, enacted by Ga. L. 1974, p. 705, § 1; Code 1933, § 41A-506, as redesignated by Ga. L. 1978, p. 1714, § 3; Ga. L. 1989, p. 14, § 7; Ga. L. 2003, p. 843, § 3; Ga. L. 2020, p. 493, § 7/SB 429.

The 2020 amendment, effective July 29, 2020, part of an Act to revise, modernize, and correct the Code, substituted “the owner, including” for “the owner including” near the end of paragraph (d)(2).

OPINIONS OF THE ATTORNEY GENERAL

Disposition of proceeds of accounts not claimed during voluntary liquidation. — Proceeds of accounts not claimed during a voluntary liquidation of a financial institution pursuant to former Code 1933, § 41A-506 (see now O.C.G.A. § 7-1-115 ) pass to the custody of the Department of Banking and Finance for ultimate disbursement pursuant to the former Disposition of Unclaimed Property Act (see now O.C.G.A. § 44-12-190 et seq.). 1975 Op. Att'y Gen. No. 75-135.

RESEARCH REFERENCES

Am. Jur. 2d.

11 Am. Jur. 2d, Banks and Financial Institutions, §§ 1020, 1182.

C.J.S.

9 C.J.S., Banks and Banking, §§ 163, 164.

ALR.

Right of creditors or stockholders of insolvent bank in charge of liquidating officer who refuses or fails to enforce liability of third persons to bank, to maintain action for that purpose, and conditions of such right, 116 A.L.R. 783 .

Bank’s or safe deposit company’s liability for denying access to box, 4 A.L.R.3d 1462.

7-1-116. Articles of dissolution where business commenced; procedure if not filed.

  1. When all the liabilities of the financial institution have been discharged and all of its remaining assets have been distributed to its shareholders pursuant to Code Section 7-1-115 or its liabilities have been assumed by another financial institution, the articles of dissolution shall be signed by two duly authorized officers of the financial institution under its seal and shall contain:
    1. The name of the financial institution and the post office address of its principal place of business;
    2. A statement that the department has previously approved a plan to dissolve the institution and the date on which such approval was transmitted to the Secretary of State;
    3. A statement that all liabilities of the financial institution have been discharged and that the remaining assets of the financial institution have been distributed to its shareholders or that its liabilities have been assumed as provided in this chapter; and
    4. A statement that there are no actions pending against the financial institution.
  2. The articles of dissolution shall be delivered to the department together with the filing fee required by Code Section 7-1-862. If the department finds that the articles satisfy the requirements of this chapter, it shall deliver its written approval to the Secretary of State with a copy of the articles of dissolution attached.
  3. Where a financial institution fails to file articles of dissolution within 180 days after the department determines that dissolution proceedings have been completed as provided in this part, the department may cause notice to be published in accordance with this chapter to the effect that persons having claims against the financial institution should notify the department within 30 days of the date of initial publication. If the department receives no such notifications or if claims are otherwise satisfied, the department shall notify the Secretary of State that the articles of incorporation or charter are no longer valid and should be promptly canceled of record in the offices of the Secretary of State.

History. Ga. L. 1919, p. 135, art. 14, §§ 7, 9; Code 1933, §§ 13-1507, 13-1509; Ga. L. 1967, p. 597, § 1; Code 1933, § 41A-505, enacted by Ga. L. 1974, p. 705, § 1; Code 1933, § 41A-507, as redesignated by Ga. L. 1978, p. 1714, § 3; Ga. L. 1980, p. 972, § 3; Ga. L. 1993, p. 917, § 2; Ga. L. 2015, p. 344, § 8/HB 184.

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, § 207 et seq.

11 Am. Jur. 2d, Banks and Financial Institutions, §§ 1020, 1182.

7-1-117. Certificate of dissolution.

If all applicable fees, charges, and taxes required by law have been paid upon the receipt of the department’s approval, under Code Section 7-1-113 or 7-1-116, of the articles of dissolution, the Secretary of State shall immediately issue to the financial institution a certificate of dissolution with the approved articles of dissolution attached thereto and shall retain a copy of such certificate, the approval of the department, and the articles; and the existence of the financial institution shall cease.

History. Ga. L. 1919, p. 135, art. 14, § 12; Code 1933, § 13-1512; Ga. L. 1967, p. 597, § 1; Code 1933, § 41A-506, enacted by Ga. L. 1974, p. 705, § 1; Code 1933, § 41A-508, as redesignated by Ga. L. 1978, p. 1714, § 3.

PART 6 Names, Registered Offices, and Advertising

RESEARCH REFERENCES

ALR.

Duty of depositor to report loss or theft of unsigned check, 26 A.L.R. 613 .

7-1-130. Permissible names.

  1. The name of a financial institution shall not contain the words “Government,” “Official,” “Federal,” “National,” or “United States” or any abbreviation of any such words and shall not in the opinion of the department:
    1. Be indistinguishable from the corporate name of another financial institution conducting a banking business in this state as reflected in the records of the department; or
    2. Contain any word which may lead to the conclusion that the financial institution is authorized to perform any act or conduct any business which it is unauthorized or forbidden to perform by law, its articles, or otherwise.
  2. A financial institution may, without regard to subsection (a) of this Code section, use:
    1. Its name in use on April 1, 1975;
    2. A name in use on April 1, 1975, by another financial institution which is adopted by:
      1. A financial institution which is the resulting institution in a plan of merger or consolidation to which the institution using the name is a party; or
      2. A financial institution which is incorporated under this chapter in pursuance of a plan of segregating the banking business and the trust business of the institution using the name; or
    3. A name of another financial institution already transacting business with the consent of the latter institution, provided that the names are distinguishable in the records of the Secretary of State.

History. Code 1933, § 41A-601, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1998, p. 795, § 10.

Cross references.

Further restrictions on use of names by banks and trust companies, § 7-1-243 .

Restriction on use of terms “savings and loan,” “building and loan,” § 7-1-779 .

Permissible corporate names generally, § 14-2-401 .

Use of corporate names by Secretary of State corporations, §§ 14-4-22 , 14-4-25 .

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, § 183.

C.J.S.

9 C.J.S., Banks and Banking, §§ 43, 528.

7-1-131. Reservation of name; term.

  1. The exclusive right to use a corporate name permitted to be used by a financial institution may be reserved by a person intending to incorporate such an institution, by a corporation intending to engage in business in this state as a financial institution, by a financial institution intending to change its name, or by a national bank, a federal credit union, or a savings and loan association intending to convert into a financial institution organized under the laws of this state.
  2. Such reservation may be made by filing with the department a letter form application to reserve a specified name. If the department concludes that the use of the name complies with the requirements of Code Section 7-1-130, is otherwise consistent with the purposes and provisions of this chapter, and is distinguishable upon the records of the Secretary of State from the name of any other corporation, limited partnership, or limited liability company, it shall approve the name and notify the Secretary of State to issue such name reservation.
  3. The right to the exclusive use of a name reserved pursuant to this Code section may be transferred to anyone who would be entitled to reserve such name under this Code section except for such prior reservation by filing with the department a notice of the transfer which shall be executed by the transferor who reserved the name and which shall set forth the name and address of the transferee. The department shall send a copy of such notice to the Secretary of State.
  4. Notwithstanding any other provisions of law, the process set forth in this Code section shall be the exclusive process for reserving the corporate name of a financial institution. Such reservation shall be valid for a period of six months.

History. Code 1933, § 41A-602, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 14; Ga. L. 1978, p. 1717, § 2; Ga. L. 1989, p. 1257, § 1; Ga. L. 1998, p. 795, § 11; Ga. L. 2021, p. 323, § 1/HB 111.

The 2021 amendment, effective July 1, 2021, substituted “limited liability company” for “professional association” in the second sentence of subsection (b) and added the last sentence of subsection (d).

Cross references.

Use of corporate names by Secretary of State corporations, §§ 14-4-22 , 14-4-25 .

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, § 183.

7-1-132. Registered agent and office.

  1. Every financial institution shall continuously maintain a registered agent and a registered office. Such agent and office shall be located in a county in this state where the financial institution is authorized to conduct its general business; and, in the case of financial institutions subject to Chapter 2 or 3 of Title 14, such agent and office shall be the same as is required under those chapters.
  2. Not later than September 30, 1998, every financial institution shall file with the department a statement designating the name of its registered agent and the place of its registered office by street, post office address, and county. In the event of the failure of an institution to file said statement, the registered agent shall be the chief executive officer of the bank and the registered office of the institution shall be the business address where the chief executive officer is located.
  3. A financial institution may change, and a new financial institution may establish, its registered agent and the location of its registered office by filing a statement with the department designating the name of the new registered agent or the street, post office address, and county of its new registered office or both, provided that no change in the registered agent or office shall affect actions or proceedings commenced before the time of said change.
  4. Nothing contained in this Code section shall affect the obligation of a financial institution to file information with the Secretary of State.

History. Code 1933, § 41A-603, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1998, p. 795, § 12.

Cross references.

Maintenance of office in state by international bank agency not transacting a banking business in state, § 7-1-721 .

7-1-133. Prohibited advertising.

  1. No person or corporation doing business in this state shall advertise in or through any newspaper, radio, television, letters, circulars, billheads, or in any way or through any medium seeking to induce any person to purchase an instrument which is purported to be insured or guaranteed in a manner comparable to an insured deposit or share account in any financial institution authorized to have such deposits or accounts when in fact such instrument does not possess comparable insurance coverage as determined by the department. Whenever any person, firm, or corporation doing business in this state shall compare, in any such advertising media, an investment or a return on an investment, except an investment or return on an investment in the form of a deposit or share account, to a deposit or share account or a return on a deposit or share account in an authorized financial institution, it shall be clearly stated in such advertising or solicitation that the investment is not a deposit insured by a public body of the United States or of this state.
  2. No person or corporation shall use the terms “savings,” “savings account,” “deposit,” or “withdrawal” or any equivalent thereof in any advertisement as above described in subsection (a) of this Code section indicating reference to instruments issued by or to be issued by the person or corporation.

History. Code 1933, § 13-204.2, enacted by Ga. L. 1973, p. 534, § 1; Code 1933, § 41A-604, enacted by Ga. L. 1974, p. 705, § 1.

Cross references.

Duty of bank to post notice if deposit insurance maintained by bank is less than amounts insured by Federal Deposit Insurance Corporation, § 7-1-244 .

False advertising generally, § 10-1-420 et seq.

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, §§ 68, 107, 111, 419, 420.

7-1-134. Unfair competition, unfair trade practice, and trade name and trademark laws unaffected.

Nothing in this chapter shall abrogate or limit the law as to unfair competition or unfair trade practice nor derogate from the common law or principles of equity or the statutes of this state or of the United States with respect to the right to acquire and protect trade names and trademarks.

History. Code 1933, § 41A-605, enacted by Ga. L. 1974, p. 705, § 1.

Cross references.

Deceptive or unfair trade practices generally, § 10-1-370 et seq.

PART 7 Receivership Powers and Procedures Generally

RESEARCH REFERENCES

ALR.

Trust or preference in respect of money placed in bank for purpose of transaction with third person where bank subsequently becomes insolvent, 32 A.L.R. 472 ; 93 A.L.R. 881 .

Balance due other banks on clearing house settlement as preferred claim against insolvent bank, 44 A.L.R. 1535 .

Right of savings bank to liquidate voluntarily and close business, 69 A.L.R. 1255 .

When bank deemed insolvent, or “hopelessly” insolvent, in civil cases, 85 A.L.R. 811 .

Time when suit may be brought on bond of officer taking charge of insolvent bank, 85 A.L.R. 964 .

Bank conservators, 107 A.L.R. 1431 .

7-1-150. Taking of possession by department; cumulative remedies.

  1. The department may in its discretion take possession of the business and property of any financial institution whenever such financial institution:
    1. Is insolvent or in an unsafe or unsound condition to transact its business;
    2. Has generally suspended payment of its obligations, without authority of law;
    3. Has violated any court order, statute, rule, or regulation, or its articles and the department determines that its continued control of its own affairs threatens injury to the public, the financial community, or its depositors and other creditors; or
    4. Requests the department, by its board of directors, to take possession for the benefit of depositors, other creditors, and shareholders.
  2. The right of the department to take possession of a financial institution shall be in addition to and cumulative with all other rights, remedies, and powers of the department. The department may, in its discretion before or after taking possession, petition the principal court for appointment of a receiver pursuant to subsection (c) of Code Section 7-1-151.

History. Ga. L. 1919, p. 135, art. 7, § 1; Ga. L. 1925, p. 165, § 10; Code 1933, §§ 13-801, 13-802, 25-122; Ga. L. 1935, p. 114, § 1; Ga. L. 1937-38, Ex. Sess., p. 307, § 7; Ga. L. 1943, p. 279, § 1; Ga. L. 1956, p. 742, § 4; Ga. L. 1960, p. 977, § 1; Ga. L. 1962, p. 74, § 3; Ga. L. 1967, p. 597, § 2; Ga. L. 1968, p. 465, § 8; Code 1933, § 41A-701, enacted by Ga. L. 1974, p. 705, § 1.

JUDICIAL DECISIONS

Exercises of discretion not interfered with absent gross abuse. —

Under banking laws of this state, the superintendent of banks (now commissioner of banking and finance), is vested with broad discretion in supervision of banks and in determining when a particular bank should be closed for purpose of liquidation; the superintendent’s discretion in such matters will not be interfered with by the court, unless that discretion has been exercised arbitrarily or capriciously and thus grossly abused. McGinty v. Gormley, 181 Ga. 644 , 183 S.E. 804 , 1935 Ga. LEXIS 170 (1935).

Injunctive relief to enjoin interference with department’s possession. —

Court of equity will enjoin any unauthorized interference with possession of superintendent of banks (now department of banking and finance) of assets of insolvent bank. Especially will injunction in such case lie when the plaintiff also contests the justness of the laborers’ liens sought to be enforced against the grantor in the security deed and property therein conveyed. Bennett v. Green, 156 Ga. 572 , 156 Ga. 573 , 119 S.E. 620 , 1923 Ga. LEXIS 275 (1923).

RESEARCH REFERENCES

C.J.S.

9 C.J.S., Banks and Banking, § 133.

ALR.

Balance due other banks on clearing house settlement as preferred claim against insolvent bank, 44 A.L.R. 1535 .

When bank deemed insolvent, or “hopelessly” insolvent, in civil cases, 85 A.L.R. 811 .

Bank conservators, 107 A.L.R. 1431 .

7-1-151. Status of department as receiver; restrictions on appointment.

  1. Upon taking possession of a financial institution, the department shall automatically become the receiver of said institution with all rights, powers, and duties conferred by this chapter and, to the extent not in conflict with this chapter, all rights, powers, and duties of a receiver appointed pursuant to Chapters 5 and 8 of Title 9, relating to injunctions and receivers.
  2. Except as provided in subsection (c) of this Code section, no court shall appoint anyone but the department as receiver of a financial institution. Whenever any court, at the instance of the department, a depositor, a shareholder, or other person entitled by law to institute such proceedings, shall determine that a receiver should be appointed, for any reason whatsoever, it shall appoint the department as such receiver. When thus appointed receiver by a court, the department shall serve in the same manner and with the same limitations and shall have the same rights, powers, and duties as when it becomes receiver by operation of law and without appointment by any court. No court shall impose upon the department as receiver any duties or restrictions in conflict with this chapter.
  3. In any proceeding for the appointment of a receiver of an institution whose deposits or shares are insured by a public body of the United States, the court may upon the recommendation of the department (whether or not the department is a party) appoint said public body or its administrator as receiver.  If said public body or its administrator accepts the appointment, it or he or she shall have all the rights, powers, and duties of the department as receiver under this chapter and all the rights, powers, and duties as conferred by other applicable law. The public body or its administrator may act as receiver without bond.

History. Code 1933, § 41A-702, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2005, p. 826, § 6/SB 82.

RESEARCH REFERENCES

Am. Jur. 2d.

11 Am. Jur. 2d, Banks and Financial Institutions, § 1032 et seq.

C.J.S.

9 C.J.S., Banks and Banking, § 136.

ALR.

Bank conservators, 107 A.L.R. 1431 .

7-1-152. General assignment prohibited; taking of possession upon request.

No financial institution shall make a general assignment of its business and property for the benefit of its creditors by the appointment of an assignee or a trustee or otherwise. In lieu of the power to make an assignment for the benefit of creditors, a financial institution may request the department to take possession as provided in this part. In such cases, the department shall take possession and become receiver in the same manner and subject to the same provisions of this chapter as when it takes possession of the business and property of a financial institution without the request of such financial institution.

History. Ga. L. 1919, p. 135, art. 7, §§ 2, 4; Code 1933, § 13-804; Code 1933, § 41A-703, enacted by Ga. L. 1974, p. 705, § 1.

7-1-153. Posting of notice of taking possession.

The department, upon taking possession of the business and property of a financial institution as receiver, shall post notice of such fact on the front door of all offices of the institution open to the public for the transaction of business in person.

History. Code 1933, § 41A-704, enacted by Ga. L. 1974, p. 705, § 1.

RESEARCH REFERENCES

C.J.S.

9 C.J.S., Banks and Banking, § 134.

7-1-154. Certificate of possession; naming deputy receiver.

The department shall immediately after taking possession file with the principal court a certificate to be known as the certificate of possession, setting forth the facts on the basis of which it has taken possession. The certificate shall state the name of the deputy receiver, if any, whom the department, pursuant to this chapter, appoints to take charge of the affairs of the financial institution, together with the duties of such deputy receiver. If the department does not appoint a deputy receiver prior to the date of the filing of the certificate of possession or if it appoints a new deputy receiver or an additional one or if it adds to the duties of the deputy receiver, it shall file a supplement to the certificate of possession setting forth such acts. The certificate of possession and any supplement thereto shall be listed in the judgment index in the name of the financial institution as defendant and of the department as plaintiff.

History. Ga. L. 1919, p. 135, art. 7, § 5; Ga. L. 1927, p. 195, § 2; Code 1933, § 13-805; Code 1933, § 41A-705, enacted by Ga. L. 1974, p. 705, § 1.

7-1-155. Injunction to restrain department.

Any financial institution of whose business or property the department has taken possession as receiver may, at any time within ten days after the department has become receiver, apply to the principal court for an order requiring the department to show cause why it should not be enjoined from continuing as receiver. Service may be made in such action by serving the commissioner personally or by leaving a copy with the deputy in charge of his or her office in the department or by serving the deputy receiver appointed by the department to manage the affairs of such financial institution. The court shall, after a hearing upon the merits, either dismiss the application or order the department to surrender to the financial institution possession of its business and property; but no such injunction shall issue where the department has been appointed receiver by action of a court of competent jurisdiction or by action of the financial institution itself, in accordance with this chapter. Such application for injunction may in the discretion of the court be heard at any time after service as provided in this Code section, with the right by either party to appeal, as in other cases of applications for temporary injunction.

History. Ga. L. 1919, p. 135, art. 7, § 8; Code 1933, § 13-810; Code 1933, § 41A-706, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2016, p. 883, § 3-3/HB 927.

Editor’s notes.

Ga. L. 2016, p. 883, § 1-1/HB 927, not codified by the General Assembly, provides that: “This Act shall be known and may be cited as the ‘Appellate Jurisdiction Reform Act of 2016.’ ”

Ga. L. 2016, p. 883, § 6-1/HB 927, not codified by the General Assembly, provides that: “Part III of this Act shall become effective on January 1, 2017, and shall apply to cases in which a notice of appeal or application to appeal is filed on or after such date.”

Law reviews.

For article on the 2016 amendment of this Code section, see 33 Georgia St. U. L. Rev. 205 (2016).

7-1-156. Supervision of department by court.

  1. Except as otherwise provided in this chapter, the department, when it has taken possession of a financial institution, shall be responsible to the principal court and not to any other court. All actions against the department or any official of it involving a financial institution which is or has been in the department’s possession shall be brought in the principal court.
  2. The principal court shall sit as a court of equity. It shall have the power, upon petition of the department, to make and enforce any appropriate order to enable the department, with the utmost dispatch, to discharge its duties in connection with the business and property of any financial institution of which it has taken possession.
  3. The court shall grant to any party against whom an order is sought the right to appear, within ten days after notice is given, to show cause why the order should not be made. The court shall have the power, at the end of the ten-day period, ex parte if the other party does not appear to show cause, or upon the merits if the party does appear, to issue the aforementioned order.
  4. Whenever this chapter empowers the department as receiver to take any action with the leave of court, the department shall give the financial institution and its creditors, depositors, and shareholders ten days’ notice of its proposed action before seeking the approval of the court, provided that the court may, upon cause shown, shorten the time or dispense with such notice or direct that it be sent to only specified parties. In determining what, if any, notice shall be provided, the court may consider, among other factors, the necessity for immediate action in the interest of the financial institution as a whole and whether the interests of potential addressees are actually at stake. Where parties object to the proposed action of the department, the court shall allow them an opportunity to present their views appropriate to the nature of the case.

History. Ga. L. 1927, p. 195, § 15-A; Code 1933, § 13-809; Code 1933, § 41A-707, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 15.

RESEARCH REFERENCES

C.J.S.

9 C.J.S., Banks and Banking, § 134.

7-1-157. General powers of department in possession.

  1. The department in possession shall be vested with all the rights, powers, and duties of such financial institution; with the title or the right to possession of all property to which the financial institution has title or the right to possession, including debts due, and liens and other security therefor; and with the financial institution’s rights of action or redemption. This shall be so whether such property and debts due, such liens or other security therefor, or such rights of action or redemption are held in the name of such financial institution or in the name of some other corporation or person.
  2. The department shall be the representative of the creditors of the financial institution and shall be entitled, as such, to have vacated and set aside, for the benefit of the creditors, any judgment, execution, attachment, sequestration, payment, security interest, assignment, transfer, conveyance, or encumbrance which could have been avoided by any of the creditors or by which one creditor is given a preference over another. As used in this subsection, the term “preference” means all transfers of the assets of a financial institution made or suffered, either after or in contemplation of insolvency, for the purpose of allowing a creditor to gain more than his ratable share of the assets of the institution as determined by Code Section 7-1-202.
  3. The department is authorized to collect all moneys due to the financial institution and to do such other acts as are necessary to conserve its assets and business. In exercising its power as receiver, the department shall give first consideration to the interests of depositors and other creditors as a whole and shall give consideration to the interests of shareholders and other owners only when depositors and other creditors have received or are assured of full payment of their claims.
  4. The department as receiver shall have the power to execute in its name or in the name of the financial institution any instrument necessary or proper to effectuate its powers or perform its duties as receiver. Any instrument executed in the name of the institution pursuant to the authority given by this subsection shall be valid and effectual for all purposes as though executed by proper officers of the institution by authority of its board of directors or other governing body.

History. Ga. L. 1919, p. 135, art. 7, § 3; Ga. L. 1922, p. 63, § 1; Code 1933, §§ 13-803, 13-808; Code 1933, § 41A-708, enacted by Ga. L. 1974, p. 705, § 1.

JUDICIAL DECISIONS

Collection of debts. —

While superintendent (now department) has possession of bank only superintendent or an authorized agent may collect debts. Bennett v. Simmons, 30 Ga. App. 529 , 118 S.E. 493 , 1923 Ga. App. LEXIS 522 (1923).

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, § 104.

C.J.S.

9 C.J.S., Banks and Banking, §§ 133 et seq., 147.

ALR.

Bank conservators, 107 A.L.R. 1431 .

7-1-158. Appointment of deputy receivers, counsel, and other assistants.

The department may appoint one or more official agents, to be known as deputy receivers, to assist it in the management, reorganization, consolidation, liquidation, or distribution of the assets and affairs of any financial institution of which it has taken possession as receiver. The department may delegate to each deputy receiver any duty imposed upon or any right or power granted to it as receiver. The department may also employ such other assistants as it deems necessary, including such assistant attorneys general or other attorneys as may be appointed by the Attorney General or independently retained by the department in connection with the receivership. The department may also retain, to assist it in the management, reorganization, consolidation, liquidation, or distribution, any officer or other employee of the financial institution of which it has taken possession.

History. Ga. L. 1919, p. 135, art. 7, § 9; Ga. L. 1931, p. 7, § 91; Code 1933, §§ 13-811, 13-812; Code 1933, § 41A-709, enacted by Ga. L. 1974, p. 705, § 1.

JUDICIAL DECISIONS

Designation of agent to perform duties connected with liquidation. —

Although the superintendent (now department) is not required to transfer bank assets and affairs to the superintendent’s office, the superintendent is not expected to be present at all times at the office of the bank, either in person or by agent clothed with the superintendent’s power. The superintendent may designate an agent to perform such duties connected with liquidation as the superintendent could do personally. Bennett v. Simmons, 30 Ga. App. 529 , 118 S.E. 493 , 1923 Ga. App. LEXIS 522 (1923).

Department may surrender bank to bank’s officers rather than appoint agent. —

Circumstances of a particular case may not demand appointment of such agent. The superintendent (now department) may conclude to surrender the bank to the bank’s officers. Bennett v. Simmons, 30 Ga. App. 529 , 118 S.E. 493 , 1923 Ga. App. LEXIS 522 (1923).

Authority to make collections. —

Fact that some person is, during superintendent’s (now department’s) control, in building or office of bank, engaged in work upon the bank’s books or papers, does not, without more, establish that the person has authority to make collections. This is true for the reason, among others, that the superintendent may employ such attorneys or others as may be necessary in liquidation and distribution of the assets. Bennett v. Simmons, 30 Ga. App. 529 , 118 S.E. 493 , 1923 Ga. App. LEXIS 522 (1923).

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, § 104.

ALR.

Bank conservators, 107 A.L.R. 1431 .

7-1-159. Suspension or continuation of business.

The department is authorized, upon taking possession of the business and property of a financial institution as receiver, to continue or to suspend the business for such period as it may deem necessary to enable it to determine whether to surrender such possession to the financial institution, to authorize a merger or consolidation, to liquidate the affairs of such financial institution, or to take such other action as is authorized by law.

History. Code 1933, § 41A-710, enacted by Ga. L. 1974, p. 705, § 1.

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, § 104.

C.J.S.

9 C.J.S., Banks and Banking, § 133.

7-1-160. Determination to liquidate; filing of supplemental certificate.

The department shall, within six months after the date on which it takes possession of any financial institution as receiver, determine whether or not to liquidate the business and property and distribute the assets of the financial institution. If it shall determine to liquidate, it shall forthwith file with the principal court a supplement to the certificate of possession, setting forth this determination. The department shall then proceed to liquidate the affairs of the financial institution with as much dispatch as shall appear to be expedient under the circumstances.

History. Code 1933, § 41A-711, enacted by Ga. L. 1974, p. 705, § 1.

RESEARCH REFERENCES

Am. Jur. 2d.

11 Am. Jur. 2d, Banks and Financial Institutions, § 1182.

C.J.S.

9 C.J.S., Banks and Banking, § 133.

7-1-161. Powers and duties of department before and after determination to liquidate.

Except where otherwise specifically provided, all powers and duties granted by this chapter to the department in possession of the business and property of a financial institution as receiver may be exercised by it both before and after its formal determination, pursuant to this chapter, to liquidate the affairs of such financial institution.

History. Code 1933, § 41A-712, enacted by Ga. L. 1974, p. 705, § 1.

RESEARCH REFERENCES

C.J.S.

9 C.J.S., Banks and Banking, §§ 133, 136, 139.

7-1-162. Inventory and appraisement.

  1. When the department has taken possession of the business and property of a financial institution as receiver, it shall forthwith prepare a complete and detailed inventory of the assets of such financial institution. The inventory shall be verified by oath or affirmation of the commissioner or other person making it.
  2. As soon as expedient after taking possession, the department shall cause a complete appraisement of the assets of the financial institution to be made, in duplicate, under oath or affirmation, by not less than two nor more than three disinterested appraisers selected by it. Such appraisement shall be included upon the same document or documents as the inventory. The value of the assets shall be computed in the appraisement as of the date on which the department took possession.
  3. The original and duplicate of the inventory and appraisement shall be filed in the office of the commissioner. However, if the commissioner shall determine, in accordance with this chapter, to liquidate the affairs of the financial institution, he shall immediately, after the determination to liquidate, file the duplicate inventory and appraisement with the principal court.
  4. When the department takes possession of business and property of a financial institution which in the two immediately preceding reports of condition filed in accordance with subsection (a) of Code Section 7-1-68 reported assets of less than $150,000.00, the department shall not be required to secure an appraisement of the assets of the financial institution under subsection (b) of this Code section or to file an appraisement of the assets with a determination to liquidate under subsection (c) of this Code section, unless the principal court, upon application by a shareholder or creditor, shall otherwise order.

History. Ga. L. 1919, p. 135, art. 7, § 12; Code 1933, § 13-814; Code 1933, § 41A-713, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1976, p. 1681, § 1.

RESEARCH REFERENCES

C.J.S.

9 C.J.S., Banks and Banking, § 759 et seq.

7-1-163. Notice to holders of assets; power of court to order transfer.

  1. Upon becoming receiver, the department shall forthwith give notice in writing of such fact to all corporations and persons having custody or possession of any assets or other property of the financial institution in receivership or of any other property with respect to which such institution has a right to possession or custody for any purpose whatsoever.
  2. The principal court shall have the power, except in cases where a jury trial is requested, upon petition of the department, to order any corporation or person which has custody or possession of assets or other property to which such financial institution shall have the right of custody or possession, for any reason whatsoever, to transfer or convey such property to the department and to execute and deliver any instrument necessary to accomplish that purpose.
  3. Any person aggrieved by an order of the court may request a jury trial to determine the validity of his claim.

History. Ga. L. 1919, p. 135, art. 7, § 5; Ga. L. 1927, p. 195, § 2; Code 1933, § 13-805; Code 1933, § 41A-714, enacted by Ga. L. 1974, p. 705, § 1.

7-1-164. Power of department to borrow money.

The department may, without leave of court, borrow money from any federal or state public body or from any person or corporation and grant as security therefor any real or personal property of the financial institution for the purpose of facilitating the liquidation, reorganization, or rehabilitation of the financial institution. The repayment of money borrowed under this Code section and interest thereon shall be considered an expense of administration under Code Sections 7-1-197 and 7-1-202.

History. Code 1933, § 41A-715, enacted by Ga. L. 1974, p. 705, § 1.

RESEARCH REFERENCES

Am. Jur. 2d.

11 Am. Jur. 2d, Banks and Financial Institutions, § 1083.

ALR.

Power of receiver or liquidating officer of insolvent bank or trust company to borrow and pledge assets and power of court to authorize him to do so, 91 A.L.R. 1119 .

7-1-165. Surrender of burdensome assets.

The department may, with leave of court, surrender to the financial institution real or personal property which it finds to be burdensome and of no advantage to the depositors or other creditors of the institution. It may likewise, with leave of court, convey title to any holder of a mortgage, security deed, security interest, or a lien against property in its possession, where it shall appear that to continue to hold such property is burdensome and of no advantage to the financial institution, its depositors, or other creditors.

History. Code 1933, § 41A-716, enacted by Ga. L. 1974, p. 705, § 1.

7-1-166. Compromise of claims; extension of mortgages or notes.

  1. The department may, with leave of court, compound or compromise any debt, claim, or judgment due to the financial institution in receivership and discontinue any action or other proceeding pending therefor.
  2. The department may, without leave of court, enter into an agreement in writing upon such terms as shall seem reasonable to it to extend, for a period not to exceed three years, the maturity of any mortgage or security deed obligation in its possession. However, the department shall not enter into any agreement extending any such obligation which shall have been pledged by the financial institution of which it is in possession as receiver unless it shall first obtain the written consent of the pledgee of such mortgage to such extension. The department may likewise renew or extend, for limited periods, other notes and drafts held by the financial institution.

History. Ga. L. 1919, p. 135, art. 7, § 7; Ga. L. 1922, p. 63, § 1; Code 1933, §§ 13-807, 13-808; Code 1933, § 41A-717, enacted by Ga. L. 1974, p. 705, § 1.

JUDICIAL DECISIONS

Conclusiveness of order granting application to settle doubtful claim. —

Order of judge of superior court granted on application of state superintendent of banks (now commissioner of banking and finance), authorizing settlement of bad or doubtful claims, is conclusive on all the parties to the proceeding, including the bank, until set aside in a manner prescribed by law for setting aside judgments. Rucker v. Upshaw, 199 Ga. 529 , 34 S.E.2d 602 , 1945 Ga. LEXIS 324 (1945).

RESEARCH REFERENCES

Am. Jur. 2d.

11 Am. Jur. 2d, Banks and Financial Institutions, § 1083.

C.J.S.

9 C.J.S., Banks and Banking, § 139.

7-1-167. Payment of mortgages and liens; protection of equities.

The department may, with leave of court, pay off all mortgages, security deeds, security agreements, and liens of or upon any real or personal property which belong to the financial institution. It may, without leave of court, purchase, at a judicial sale or at any sale authorized by an order of a court of competent jurisdiction, any real or personal property in order to protect any equity which the financial institution has in such real or personal property.

History. Ga. L. 1922, p. 63, § 1; Code 1933, § 13-808; Code 1933, § 41A-718, enacted by Ga. L. 1974, p. 705, § 1.

7-1-168. Sales of real property.

The department may, with leave of and upon the terms and conditions prescribed by the court, sell any real property of the financial institution of which it is in possession as receiver. The order of the court authorizing such sale shall state whether the sale shall be entirely for cash or partly for cash and partly for evidences of indebtedness and whether it shall be public or private. Each such sale of real property shall be confirmed by the court if all the terms and conditions of its order authorizing such sale have been complied with. If the real property is located in this state but in a county other than the county of the principal court, the department shall file a certified copy of all orders relating to the property in the office of the clerk of the superior court of the county where the real property is located.

History. Ga. L. 1919, p. 135, art. 7, § 7; Code 1933, § 13-807; Code 1933, § 41A-719, enacted by Ga. L. 1974, p. 705, § 1.

7-1-169. Leases of property.

The department may, without leave of court, enter into leases for a period not to exceed one year of real or personal property belonging to the financial institution in receivership. It may, with leave of court, enter into such leases for a period not to exceed ten years, upon the terms and under the conditions prescribed by the order of the court.

History. Code 1933, § 41A-720, enacted by Ga. L. 1974, p. 705, § 1.

RESEARCH REFERENCES

C.J.S.

9 C.J.S., Banks and Banking, § 139.

7-1-170. Sales or exchanges of securities; sales of liens or personal property.

  1. The department may, without leave of court, sell on any stock exchange or otherwise, at such times and in such manner as it may deem advisable, listed or unlisted securities which belong to the financial institution in receivership.
  2. The department may, without leave of court, exchange listed or unlisted securities for other securities of the corporation issuing the securities or of a corporation which has merged or consolidated with or has taken over such corporation.
  3. The department may, without leave of court, sell any mortgage or other lien upon real property or any judgment, at such times and in such manner as it shall deem to be advisable.
  4. Except as otherwise specifically provided by this chapter, the department may, without leave of court, sell:
    1. At public sale; or
    2. At private sale, for a net consideration not below the amount at which such personal property has been valued in the appraisement required by this chapter,

      any personal property which belongs to the financial institution in receivership or which such financial institution has the power to sell. It may, with leave of court, sell such personal property at private sale upon such terms and under such conditions as the court shall prescribe to be commercially reasonable.

History. Ga. L. 1919, p. 135, art. 7, § 7; Code 1933, § 13-807; Code 1933, § 41A-721, enacted by Ga. L. 1974, p. 705, § 1.

RESEARCH REFERENCES

C.J.S.

9 C.J.S., Banks and Banking, § 141.

7-1-171. Deposit of moneys by department.

All moneys received by the department as receiver of a financial institution except those moneys necessary to administer the liquidation shall be deposited by it in interest-bearing accounts with one or more institutions authorized by law to receive deposits and subject to the supervision of either federal or state regulatory authorities. It shall require of such depository security therefor, in such amount and of such nature as the department shall deem adequate.

History. Ga. L. 1919, p. 135, art. 7, § 22; Code 1933, § 13-824; Code 1933, § 41A-722, enacted by Ga. L. 1974, p. 705, § 1.

7-1-172. Disposition of property in safe-deposit vault or held for safekeeping.

  1. The department may, any time after taking possession of a financial institution as receiver, give written notice to anyone claiming or appearing on the books of such financial institution to be the owner or to be entitled to the possession of any personal property left with such financial institution as bailee for safekeeping or depository for hire and to anyone appearing on the books of the financial institution to be the lessee of any safe, vault, or safe-deposit box, notifying such bailor, depositor, or lessee, respectively, to remove all such personal property within the period fixed by the notice, provided that such period shall in no case be less than 60 days after the date of the notice.
  2. At the expiration of such period, if the lessee of a safe, vault, or safe-deposit box has not removed the contents thereof, the department may open such safe, vault, or safe-deposit box in the presence of a notary public not an officer or employee of the financial institution or of the department. The contents, if any, of such safe, vault, or safe-deposit box shall then be sealed and marked by such notary with the name and address of the lessee in whose name such safe, vault, or safe-deposit box appeared on the books of the financial institution and with a list and description of the property therein. The department shall hold such property until it is delivered to the owner or those claiming through him or is disposed of under Article 5 of Chapter 12 of Title 44 and, while holding such property may take such action as it deems appropriate to protect the interest of the owner therein, including reducing the property to cash.
  3. The department shall follow the same procedure and have the same powers with regard to the property left with the financial institution as bailee for safekeeping or depository for hire and not called for within the period specified by the notice.
  4. The contract of bailment, deposit, or lease, if any, shall be considered at an end upon the date designated by the commissioner for the removal of the property therein. The amount of unearned rent or charges, if any, paid by the bailor, depositor, or lessee, shall become a debt of the financial institution.

History. Code 1933, § 41A-723, enacted by Ga. L. 1974, p. 705, § 1.

Cross references.

Disposition by banks and trust companies of adverse claims to deposits and property held in safe deposit, § 7-1-353 .

RESEARCH REFERENCES

Am. Jur. 2d.

11 Am. Jur. 2d, Banks and Financial Institutions, § 1013.

ALR.

Levy upon or garnishment of contents of safe deposit box, 19 A.L.R. 863 ; 39 A.L.R. 1215 .

Liability for loss of contents of safe-deposit box, 42 A.L.R. 1304 ; 133 A.L.R. 279 .

Rights of owners of securities deposited in bank upon its insolvency, 84 A.L.R. 1534 ; 126 A.L.R. 625 .

Presumption as to ownership of property in safe deposit box, 101 A.L.R. 832 .

Presumption and burden of proof, in action or proceeding against bank or its liquidator, as to reasons or justification for failure to return subject of special deposit on demand, 119 A.L.R. 831 .

Bank’s or safe deposit company’s liability for denying access to box, 4 A.L.R.3d 1462.

7-1-173. Bringing or defending actions.

  1. For the purpose of executing any of the powers and performing any of the duties respectively conferred or imposed upon it, as receiver, by this chapter, the department may, in its name as receiver of such financial institution, prosecute any action at law or in equity in any court of this state or of any other state or in any federal court, whether or not such action is pending on behalf of the financial institution at the time it takes possession. It may likewise defend any action at law or in equity pending against the financial institution at the time it takes possession. The department may, in its name as receiver of a corporation, institute and maintain any action which any director, officer, or such corporation or any shareholder or creditor thereof could have instituted or maintained.
  2. Notwithstanding the provisions of other laws to the contrary, the statute of limitations on all causes of action which may accrue to any financial institution over whose affairs the department is receiver shall be extended for a period of six months.

History. Ga. L. 1922, p. 63, § 1; Code 1933, § 13-808; Code 1933, § 41A-724, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1984, p. 949, § 2.

JUDICIAL DECISIONS

Constitutionality. —

See Shannon v. Mobley, 166 Ga. 430 , 143 S.E. 582 , 1928 Ga. LEXIS 320 (1928).

Section is confined to matters relating to bank’s assets. —

Statute does not give to superintendent of banks (now department of banking and finance) any authority to prosecute any cause of action which is vested by law in the bank or in the bank’s stockholders or the creditors thereof. The section is in terms confined to such matters as relate to the assets of bank as such, debts and liabilities due to the bank in the bank’s corporate capacity. Hines v. Wilson, 164 Ga. 888 , 139 S.E. 802 , 1927 Ga. LEXIS 303 (1927).

Action against directors causing insolvency lies by superintendent (now department), not by stockholders. Hinton v. Mobley, 167 Ga. 60 , 144 S.E. 738 , 1928 Ga. LEXIS 98 (1928).

Tax lien on realty. —

Realty sold by department pursuant to court order carries with the realty any outstanding tax lien. Stephens v. First Nat'l Bank, 166 Ga. 380 , 143 S.E. 386 , 1928 Ga. LEXIS 311 (1928).

RESEARCH REFERENCES

Am. Jur. 2d.

11 Am. Jur. 2d, Banks and Financial Institutions, § 1083.

C.J.S.

9 C.J.S., Banks and Banking, §§ 614, 629, 630.

ALR.

Right of creditors or stockholders of insolvent bank in charge of liquidating officer who refuses or fails to enforce liability of third persons to bank, to maintain action for that purpose, and conditions of such right, 97 A.L.R. 169 ; 116 A.L.R. 783 .

7-1-174. Surrender of possession by department prior to final liquidation; special liquidations and reorganizations.

  1. The department may, upon conditions approved by it, surrender possession of a financial institution in receivership at any time prior to final liquidation and distribution under the following circumstances:
    1. It may surrender possession to the financial institution itself when it finds the institution to be in a safe and sound condition to resume its business; or
    2. It may surrender to the financial institution itself or to any other corporation or person possession of all or part of the business, property, moneys, credits, or other assets of the financial institution in receivership, to permit to be carried into effect a special plan of liquidation, reorganization, or rehabilitation under the requirements of this Code section.
  2. Before the department may surrender possession of any of the assets of a financial institution pursuant to a special plan of liquidation, such plan shall have been approved by the principal court and a majority of creditors (including depositors) of the institution, both as to number of creditors and as to the amount of claims.
  3. Before the department may surrender possession of any of the assets of a financial institution pursuant to a special plan of reorganization or rehabilitation, such plan shall have the same approvals as required under subsection (b) of this Code section and, in addition, shall be approved by the affirmative vote of the holders of a majority of shares entitled to vote thereon.
  4. Whenever the department shall surrender possession under this Code section, it shall forthwith file with the principal court a supplement to the certificate of possession, setting forth in detail all the conditions and purposes of such surrender. This supplement shall be indexed in a manner which will, insofar as necessary, satisfy the prior record of the certificate of possession.
  5. Whenever the department shall, under this Code section, surrender possession of the entire business and property of a financial institution in receivership, it shall file in the principal court an account, which shall correspond to any other final account under this chapter. Such account shall be subject to exceptions by shareholders, or depositors, or other creditors, and to confirmation by the court, in the same manner as is provided by this chapter for any account filed by the department as receiver.

History. Code 1933, § 41A-725, enacted by Ga. L. 1974, p. 705, § 1.

RESEARCH REFERENCES

C.J.S.

9 C.J.S., Banks and Banking, § 136.

7-1-175. Ability of department to reject executory contract or lease of financial institution in receivership.

Within 180 days after the department takes possession of a financial institution, the department, as receiver, may at its election reject any executory contract to which the financial institution is party without further liability to the financial institution or the receiver or may reject any obligation of the financial institution as a lessee of real or personal property. The department’s election to reject a lease creates no claim for rent other than rent accrued to the date of termination or for actual damages, if any, for such termination, not to exceed the equivalent of six months’ payment.

History. Code 1981, § 7-1-175 , enacted by Ga. L. 1984, p. 949, § 3.

7-1-176. Sale of assets of financial institution in receivership.

  1. Whenever the department as receiver, with leave of court as provided in Code Section 7-1-156, undertakes to sell all or part of the assets of a financial institution in its possession in consideration of the assumption by the purchaser of the liabilities due to depositors and other creditors other than the holders of subordinated securities, the department shall be under no further obligation to file any inventory, appraisement, partial accounting, or deliver any notice to creditors other than holders of subordinated securities until the filing of the final accounting unless otherwise directed by the court.
  2. Notwithstanding any other law to the contrary, in facilitation of a purchase of assets and assumption of liabilities as described in subsection (a) of this Code section, all or any part of the assets may be sold to the deposit insurer for the financial institution in liquidation notwithstanding such insurer’s capacity as receiver or deputy receiver of the financial institution. Such insurer as receiver or deputy receiver may also borrow from itself in its corporate capacity any amounts necessary to facilitate the assumption of deposit liabilities by an existing financial institution or a newly chartered financial institution, assigning any part or all of the assets of the closed bank as security for such loan.

History. Code 1981, § 7-1-176 , enacted by Ga. L. 1984, p. 949, § 4.

PART 8 Claims, Priorities, and Accounting in Receiverships

RESEARCH REFERENCES

Am. Jur. Proof of Facts. —

Liability for Torts Committed in Repossession, 42 POF 355.

ALR.

Trust or preference in respect of money placed in bank for purpose of transaction with third person where bank subsequently becomes insolvent, 31 A.L.R. 472 ; 93 A.L.R. 881 .

Prerogative right of county or other political subdivision to preference in assets of insolvent, 52 A.L.R. 755 ; 90 A.L.R. 208 .

Character of service contemplated by statutes giving a lien or preference, in event of insolvency, to servants, employees, laborers, 54 A.L.R. 567 .

Right of one indebted to insolvent bank to setoff deposits which he has made as trustee, 55 A.L.R. 822 .

Election of remedies or estoppel as regards claims against insolvent bank, 69 A.L.R. 456 .

Insolvency of bank guaranty fund as affecting rights or obligations of member banks and their depositors, 78 A.L.R. 808 .

Construction and effect of statutes or constitutional provisions in relation to priority or preference of deposits in assets of insolvent bank or trust company, 86 A.L.R. 1310 ; 93 A.L.R. 1017 .

Rights against receiver or other liquidating officer of bank as to paper deposited before but not collected at the time bank closed its doors, 94 A.L.R. 1395 .

Character or class of claims protected by deposit by foreign corporation as condition of doing business, and rank or priority of such claims, 104 A.L.R. 748 .

Rights and preferences in respect of assets of insolvent bank as affected by its division into departments, 114 A.L.R. 680 .

Rights of owners of securities deposited in bank, upon its insolvency, 126 A.L.R. 625 .

7-1-190. Preservation of assets; proceedings in lieu of attachment, execution, or repossession.

  1. The status of all parties shall become fixed on the date the department takes possession of a financial institution. No corporation or person shall thereafter acquire any lien or charge against the financial institution for so long as it remains in receivership, provided that nothing in this Code section or elsewhere in this chapter shall be construed to impair any preferred claim arising pursuant to Code Section 11-4-214.
  2. No execution, attachment, or repossession (whether by action or otherwise) shall issue or be proceeded with against any assets owned by or in the custody or possession of a financial institution in receivership. In lieu of the right to issue an attachment or execution against assets of or lawfully in the possession or custody of the financial institution, a plaintiff may proceed by giving written notice of his claim to the department or to the deputy receiver of such financial institution; and he shall thereafter prove his claim in the regular manner prescribed by this chapter. If, in filing its account, the department rejects the claimed right to execution or attachment, the court shall adjudicate the matter as in the case of other disputed claims.

History. Ga. L. 1919, p. 135, art. 7, § 3; Code 1933, § 13-803; Code 1933, § 41A-801, enacted by Ga. L. 1974, p. 705, § 1.

JUDICIAL DECISIONS

Purpose of Ga. L. 1919, p. 135 (see now O.C.G.A. § 7-1-190 ) is to protect possession of assets of bank by superintendent (now department) from interference by any legal proceedings, such as one for receivership, by levy of process upon such assets, or any proceedings by which possession of the superintendent would be disturbed. Berrien County Bank v. Alexander, 154 Ga. 775 , 115 S.E. 648 , 1922 Ga. LEXIS 465 (1922); Bennett v. Green, 156 Ga. 572 , 156 Ga. 573 , 119 S.E. 620 , 1923 Ga. LEXIS 275 (1923).

RESEARCH REFERENCES

C.J.S.

9 C.J.S., Banks and Banking, § 181.

ALR.

Deposits on interest as waiver of state’s priority, 42 A.L.R. 1296 .

Trust or preference in assets of insolvent bank in respect of proceeds of collection as affected by notice or instructions with respect to collection, 90 A.L.R. 6 .

Bank conservators, 107 A.L.R. 1431 .

Rights and preferences in respect of assets of insolvent bank as affected by its division into departments, 114 A.L.R. 680 .

Payment of depositor’s debt to insolvent bank against which deposit might otherwise have been set off as affecting depositor’s equivalent rights, 139 A.L.R. 723 ; 162 A.L.R. 1175 .

7-1-191. Exclusivity of claims procedure; effect of receivership on pending actions.

All claims against the financial institution, action upon which has not been commenced prior to the time the department took possession, shall be presented in the regular manner provided by this chapter for the presentation of claims. Neither a depositor or other creditor of the financial institution nor any other claimant may maintain any action at law or in equity upon such claim, except by regular method provided by this chapter for exceptions to the accounting of the department as receiver. However, an action for the return of specific property or property with respect to which the plaintiff holds a perfected security interest or security title which could have been recovered by the plaintiff from the financial institution in receivership may be maintained in the principal court against the department in its name as receiver of the financial institution. All actions pending against the financial institution when the department takes possession shall be automatically stayed during the receivership, provided that all such actions, except those specified in subsection (b) of Code Section 7-1-190, may proceed with prior approval of the principal court.

History. Code 1933, § 41A-802, enacted by Ga. L. 1974, p. 705, § 1.

JUDICIAL DECISIONS

Remedy exclusive. —

Under state law, procedure provided in O.C.G.A. T. 7, C. 1 is an exclusive remedy. FDIC v. Willis, 497 F. Supp. 272, 1980 U.S. Dist. LEXIS 17238 (S.D. Ga. 1980).

RESEARCH REFERENCES

Am. Jur. 2d.

11 Am. Jur. 2d, Banks and Financial Institutions, § 1115.

C.J.S.

9 C.J.S., Banks and Banking, § 189.

ALR.

Right of creditors or stockholders of insolvent bank in charge of liquidating officer who refuses or fails to enforce liability of third persons to bank, to maintain action for that purpose, and conditions of such right, 97 A.L.R. 169 ; 116 A.L.R. 783 .

7-1-192. Notice to depositors and other creditors to present claims.

  1. After filing a supplement to the certificate of possession setting forth its determination to liquidate the affairs of a financial institution in receivership, the department shall forthwith give notice of such determination to all corporations or persons who appear upon the books of the financial institution as depositors or other creditors or who are otherwise known to the department to be or who claim to be depositors or other creditors or who have given notice to the department claiming a right of execution or attachment against any assets owned by or legally in the custody or possession of the financial institution.
  2. The notice to depositors shall state the amount which the books or other records of the financial institution show to be due to such depositor. It shall also state that unless such depositor shall, within a specified time, present to the department his bank statement or passbook or other evidence of his account showing a different amount to be due or unless such depositor shall, within a specified time from the date of such notice, otherwise prove in the manner provided by this chapter that a different amount is due, the amount shown to be due by the books of the financial institution will be conclusively presumed to be correct unless the court, pursuant to this chapter, grants him an extension of time.
  3. The notice to each creditor, other than a depositor, shall inform such creditor that he must present his claim in the manner provided by this chapter within a specified time from the date of such notice or else be permanently barred from sharing in any distribution of the assets of the financial institution unless the court, pursuant to this chapter, grants him an extension of time.
  4. The department shall also advertise, in the manner prescribed by this chapter, its determination to liquidate the financial institution. Such advertisement shall state that the department has filed an inventory and appraisement of the assets of the institution and shall designate the superior court with which such documents have been filed and shall describe the legal consequences to depositors and other creditors of failure to prove those claims within the time set in the notice. For purposes of this advertisement and other notices or advertisements required hereunder, the department may, to the extent it deems appropriate, describe shareholders of credit unions as such, not by use of the defined term “depositors” used in this chapter.
  5. The department shall specify as the last day upon which depositors and other creditors can prove their claims a date at least 30 days after the date of the sending of such notice to depositors and creditors. However, claims based upon deficiencies in, or surcharges with respect to, assets which such financial institution held in a fiduciary capacity may be proved at any time within six months after the appointment of a substituted fiduciary of the estate of which such assets were a part and the adjudication of the account of such estate by the competent court.

History. Ga. L. 1919, p. 135, art. 7, § 13; Code 1933, §§ 13-815, 13-816; Code 1933, § 41A-803, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2016, p. 390, § 7-4/HB 811.

RESEARCH REFERENCES

Am. Jur. 2d.

11 Am. Jur. 2d, Banks and Financial Institutions, § 1115.

7-1-193. Proof of claims of depositors.

  1. Any depositor who disagrees with the amount shown by the books or other records of the financial institution to be due to him shall prove his claim by presenting his bank statement or passbook or other documentary indication of indebtedness to the department within the time and in the manner designated by the department pursuant to this chapter. Any such depositor who shall not have received or shall have lost his bank statement or passbook or other documentary evidence or who shall believe that the amount shown to be due him by such bank statement or passbook or other documentary evidence is incorrect shall, within the time designated by the department, present his claim to the department by whatever method, including affidavits, the department shall designate.
  2. Any depositor who shall not present his claim within the designated time and in the manner provided by this Code section shall be bound by the amount appearing to be due to him upon the books or records of the financial institution or, where the name of such depositor does not appear at all upon the books or records of the financial institution or appears on such books or records but with no balance appearing to be due to him by the financial institution, shall be permanently barred from sharing in any distribution of the assets of the financial institution. However, the principal court may, upon petition and adequate cause shown, permit any depositor to file his claim at a later date, but no claim shall in any event be allowed to be filed after the last day for the filing of exceptions to the first account of the department.
  3. This Code section shall not, however, be construed to deprive any depositor of any right of action at law or in equity which he may have against an officer or employee or former officer or employee of the financial institution or upon the bond of such officer or employee or former officer or employee for any act committed by such officer or employee which resulted in such depositor’s name not appearing upon the books of the financial institution or appearing upon them but being credited with an amount below that actually due.
  4. The department shall prescribe the form for the proof of claim of all depositors and for an affidavit as to the truth of statements therein to be included with the claim. Whenever requested by any such depositor to prepare such proof of claim or to take the affidavit thereto, the department may do so without any charge to such depositor if the department concludes that it would be burdensome or difficult for the depositor to prepare the proof.

History. Ga. L. 1919, p. 135, art. 7, § 18; Ga. L. 1925, p. 119, § 1; Code 1933, § 13-820; Code 1933, § 41A-804, enacted by Ga. L. 1974, p. 705, § 1.

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, § 643.

11 Am. Jur. 2d, Banks and Financial Institutions, §§ 1098, 1116.

C.J.S.

9 C.J.S., Banks and Banking, §§ 151 et seq., 213.

ALR.

Right of depositor to rescind, or to claim a trust in respect of a deposit because of insolvency of bank when it was made, 20 A.L.R. 1206 ; 81 A.L.R. 1078 .

Admissibility of extrinsic evidence to explain or contradict bank deposit slips, deposit entries in passbooks, certificates of deposit, or similar instruments, 42 A.L.R.2d 600.

7-1-194. Proof of claims of creditors.

Creditors other than depositors shall not share in any distribution of the assets of the financial institution unless the creditor or his designated representative shall, within the time and in the manner specified by the department pursuant to this chapter, present to the department a statement of his claim, together with a copy of any book entries pertaining thereto, any evidence of indebtedness or other instrument received as evidence thereof, the details with respect to any collateral or agreement of pledge received in connection therewith, and a description of any insurance pertaining thereto. The department shall prescribe the form for the proof of claim of creditors and for affidavit as to the truth of statements therein to be included with the claim. However, the court may, upon petition and adequate cause shown, permit any creditor to file his claim upon a later date, but no claim shall in any event be allowed to be filed after the last day for the filing of exceptions to the first account of the department.

History. Ga. L. 1919, p. 135, art. 7, § 18; Ga. L. 1925, p. 119, § 1; Code 1933, § 13-820; Code 1933, § 41A-805, enacted by Ga. L. 1974, p. 705, § 1.

RESEARCH REFERENCES

Am. Jur. 2d.

11 Am. Jur. 2d, Banks and Financial Institutions, §§ 1098, 1116.

ALR.

Balance due other banks on clearing house settlement as preferred claim against insolvent bank, 44 A.L.R. 1535 .

Election of remedies or estoppel as regards claims against insolvent bank, 69 A.L.R. 456 .

7-1-195. Allowance of claims.

For the purposes of the accounting provided for in this chapter, the department shall allow the claims of depositors for the amounts shown to be due to them upon the books or other records of the financial institution (unless it determines such books or records to be in error) or for such other amounts as they shall, within the time and in the manner provided by this chapter, prove to the satisfaction of the department are due to them. It shall likewise allow the claims of all other creditors, when presented within the time and in the manner provided by this chapter, if it shall be satisfied that the amounts claimed are rightfully due. In allowing claims, the department may change their rank to that which it determines to be proper and may reduce them by exercise of the financial institution’s right of setoff against the claimant. It shall reject all other claims of depositors and other creditors.

History. Ga. L. 1919, p. 135, art. 7, § 15; Ga. L. 1927, p. 195, § 4; Code 1933, § 13-817; Code 1933, § 41A-806, enacted by Ga. L. 1974, p. 705, § 1.

RESEARCH REFERENCES

Am. Jur. 2d.

11 Am. Jur. 2d, Banks and Financial Institutions, §§ 1098, 1116.

C.J.S.

9 C.J.S., Banks and Banking, § 151 et seq.

ALR.

Election of remedies or estoppel as regards claims against insolvent bank, 69 A.L.R. 456 .

Right to set off deposit in insolvent bank against indebtedness to bank, 97 A.L.R. 588 .

7-1-196. Advance payment of dividends to depositors.

  1. After filing a supplement to the certificate of possession setting forth its determination to liquidate the affairs of the financial institution, the department may, without leave of court and without filing an account, make an advance payment of a dividend to all depositors the amounts of whose claims, as they appear upon the books or other records of the financial institution, are undisputed. The dividend shall be calculated as if the claims of all other depositors, as they appear upon the books or other records of the financial institution, and the claims of all creditors or other corporations or persons who assert priority over or parity with depositors in the order of distribution of the assets, were valid and uncontested.
  2. However, the department shall not make such an advance payment of a dividend to any depositor until it shall have set aside an amount sufficient to pay in full the claims of all creditors or other corporations or persons asserting or entitled to priority over depositors in the order of distribution and to pay the proportionate dividend on the amounts claimed by the other depositors and by any creditors or other corporations or persons who are entitled to or who claim parity with depositors in the order of distribution provided for by law. The department shall likewise set aside, before making such advance payment, such amount as it shall deem necessary for the expenses of administration of the receivership.

History. Ga. L. 1919, p. 135, art. 7, § 21; Code 1933, § 13-823; Code 1933, § 41A-807, enacted by Ga. L. 1974, p. 705, § 1.

RESEARCH REFERENCES

Am. Jur. 2d.

11 Am. Jur. 2d, Banks and Financial Institutions, § 1117.

C.J.S.

9 C.J.S., Banks and Banking, §§ 187, 195.

7-1-197. Expenses of administration.

Any reasonable expenditure made by the department as receiver of a financial institution, including any expense incurred in the management, reorganization, consolidation, liquidation, or distribution of the assets and affairs of the financial institution, any payment of a loan or interest thereon under Code Section 7-1-164, and any compensation paid to the deputy receiver, attorneys, or any other person employed to assist the department in such management, reorganization, consolidation, liquidation, or distribution shall be paid out of the assets of the financial institution, provided it is included in any partial or final account filed by the department pursuant to this chapter and is approved by the principal court in which such account is filed. Where such expenses are incurred or such compensation is paid for the benefit of the estate of more than one financial institution in the possession of the department as receiver, an equitable portion of such expenses or compensation shall be paid out of the assets of each financial institution on whose behalf such expenditures were incurred or paid.

History. Ga. L. 1919, p. 135, art. 7, § 23; Ga. L. 1925, p. 119, § 1; Ga. L. 1931, p. 7, § 91; Code 1933, § 13-825; Code 1933, § 41A-808, enacted by Ga. L. 1974, p. 705, § 1.

RESEARCH REFERENCES

Am. Jur. 2d.

11 Am. Jur. 2d, Banks and Financial Institutions, §§ 1084, 1121.

C.J.S.

9 C.J.S., Banks and Banking, § 669 et seq.

7-1-198. Filing or ordering partial or final account; notice of filing; exceptions.

  1. At any time after the expiration of the period fixed by the department for the presentation of claims, it may file a partial account of its administration of the business and property of the financial institution, duly verified under oath or affirmation, with the principal court. If the department does not file its first account within one year after it takes possession of a financial institution, any depositor, other creditor, or shareholder of such financial institution may petition the court to order the department to file an account. The court may, in its discretion, grant or refuse the petition. Whenever it becomes economically advisable to wind up finally the affairs of a financial institution in liquidation, the department shall file with the principal court its final account, duly verified under oath or affirmation. The clerk of the principal court shall not be under any duty to recopy or otherwise to record any account and shall make no charge except the regular fee for filing such or similar papers.
  2. The account shall present the department’s administration of the estate, including a statement of all receipts or expenditures, a list of all claims which have been allowed, and a separate list of claims which have been objected to or are disputed, showing as to all depositors and other creditors, their names and addresses, the amounts due or claimed to be due to them, and any priorities in the order of distribution granted to or claimed by them. A final account need not present matters previously settled incident to partial accounts.
  3. The department shall forthwith give written or printed notice of the filing of an account to all corporations or persons whom it knows to be, or who claim to be depositors or other creditors or who have given to it notice claiming a right of attachment or execution. Such notice shall also state that unless an exception to the account or to any item therein is filed with the principal court within 30 days from the date of the filing thereof, it will be confirmed absolutely. The department shall also advertise such notice in a newspaper or newspapers as provided in this chapter, stating the date upon which it has filed its partial or final account and that all exceptions to the account must be filed within 30 days from the date of the filing of the account. The department shall forthwith file with the court, under oath or affirmation, a statement that it has, in the manner provided by this chapter, sent both the notice of its determination to liquidate and the notice of its filing of an account to all corporations or persons entitled thereto. The department shall also file the proofs of publication of the advertisements required by this Code section.
  4. Any corporation or person who is or who claims to be a depositor, other creditor, or shareholder of a financial institution or who has given to the department notice of his claim to the right of execution or attachment or who asserts any other type of claim against a financial institution may, within 30 days after the filing of an account by the department, file in the principal court specific exceptions in writing, under oath or affirmation, to such account or to any item therein. Notice of any exception to an individual item in an account shall forthwith be personally served upon or sent by registered or certified mail or statutory overnight delivery to the corporation or person whose claim is thus objected to or his counsel and also the department or the deputy receiver managing the affairs of the particular financial institution or the counsel of either. Affidavit of the serving or sending of such notice shall forthwith be filed with the court.
  5. Whenever an exception is filed to any expenditure made by the department as an expense of administration, the department shall keep an accurate record of the salaries and other expenses properly incurred by it in the contesting of such exception. If the exception is overruled and the expenditure is sustained, the court may, in its discretion, assess such expenses and salaries, together with the regular costs provided by law, upon the depositor, other creditor, or shareholder filing such exception.

History. Ga. L. 1919, p. 135, art. 7, §§ 15-17; Ga. L. 1927, p. 195, §§ 4, 4A; Code 1933, §§ 13-817, 13-818, 13-819; Code 1933, § 41A-809, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2000, p. 1589, § 3.

Editor’s notes.

Ga. L. 2000, p. 1589, § 16, not codified by the General Assembly, provides that the amendment to this Code section is applicable with respect to notices delivered on or after July 1, 2000.

RESEARCH REFERENCES

C.J.S.

9 C.J.S., Banks and Banking, §§ 151 et seq., 175, 213.

7-1-199. Adjudication of rejected claims and exceptions to account.

  1. If any claim has been rejected by the department or any exception has been filed to the account or to any item thereof, the principal court shall, as soon as expedient after the expiration of the period for the filing of exceptions to the account, fix a date for hearing in court arguments on all rejected claims and all exceptions to the account or to any item thereof. The department shall give notice of such hearing to all corporations or persons whose claims have been rejected by the department or objected to in the manner provided by this chapter. It shall likewise give notice to all corporations or persons who have filed exceptions to the account or to any item thereof. Such notice shall set forth, insofar as possible, the reasons for the rejection of the claim or the nature of the exception to the item of the account and shall state that all parties whose claims are rejected or objected to must appear in the principal court upon the date fixed by the court to prove their claims or they will be bound by the ex parte decision of the court.
  2. The principal court in which the account is filed shall itself hear arguments upon any rejected claim or upon any exception to an account, or to any item thereof, upon the date fixed by it for this purpose. The court shall itself decide, without delay, all matters in controversy. If any party does not appear in court on the day fixed, the court shall conduct the hearing ex parte and shall render its decision upon the merits as they appear after such hearing.

History. Code 1933, § 41A-810, enacted by Ga. L. 1974, p. 705, § 1.

JUDICIAL DECISIONS

Editor’s notes.

In light of the similarity of the statutory provisions, decisions under former Ga. L. 1919, p. 135 are included in the annotations for this Code section.

Remedy exclusive. —

Under state law, the procedure provided in O.C.G.A. Ch. 1, T. 7 is an exclusive remedy. FDIC v. Willis, 497 F. Supp. 272, 1980 U.S. Dist. LEXIS 17238 (S.D. Ga. 1980).

Prerequisite to suit under Ga. L. 1919, p. 135. —

When the superintendent (now department) has given the required notice as to the presentment of claims, a suit cannot be brought against the bank upon any claim, unless the claim, with sworn proof thereof, has been filed with the superintendent of banks or office of bank and been rejected by the superintendent, and unless the suit be brought as required by Ga. L. 1919, p. 135 (see now O.C.G.A. § 7-1-199 ). Berrien County Bank v. Alexander, 28 Ga. App. 55 , 110 S.E. 311 , 1922 Ga. App. LEXIS 296 (1922) (decided under former Ga. L. 1919, p. 135).

RESEARCH REFERENCES

C.J.S.

9 C.J.S., Banks and Banking, §§ 151 et seq., 191, 213.

7-1-200. Confirmation of account; distribution of dividends; final disposition of assets insufficient for distribution; cancellation of articles.

  1. If the department has approved all depositors’ claims, as proved by them pursuant to this chapter or if not proved as they appear upon the books or other records of the financial institution and if no exception has been filed to an account or to any item thereof within 30 days after the filing of such account by the department, the principal court shall confirm the account absolutely. If any funds are available for distribution, the department shall then declare and pay out of such funds a partial or a final dividend, according to the priorities established by law. If the department has rejected any deposit or claim or if any exception has been filed, the court shall confirm the account as to all other matters and claims. The department may then declare and pay out of the funds available for distribution, if any, a dividend, according to the priorities established by law. The dividend shall be calculated as if all deposits and other claims were valid and approved. The department, before paying any such dividend, shall set apart funds or assets sufficient to pay required distribution on any claim still being asserted which has been rejected or reduced in priority by the department or to which an exception has been filed if the amount and the priority claimed were sustained by the court. If any such claim shall be determined by the court to be valid, the department shall pay to the corporation or person entitled thereto the dividend which has been set apart in the manner provided by this Code section. If any such claim shall be determined by the court to be invalid, the dividend which has been set apart in the manner provided by this Code section shall be distributed in the order of the priorities established by law to those whose claims have been approved by the court; provided, however, that any final determination as to disputed claims may be appealed as provided by law and payments may be withheld pending the results of the appeal.
  2. The confirmation of any account after the adjudication of all claims therein which have been rejected or reduced in priority by the department or to which exceptions have been filed and of all other exceptions to such account shall be conclusive as to all matters therein. Except as otherwise provided in this chapter, no claim of any depositor or other creditor shall be valid if not listed and approved in the first account which has been filed. The confirmation of the final account and distribution thereunder shall discharge the department, the commissioner, the deputy receiver, any other employee, and the legal counsel, as well as the surety for any of them, from all further civil liability for any act done in an official capacity with respect to the receivership.
  3. Upon confirmation of the final account the department may impound the balance of the assets, including real property, remaining in its hands and shall not be obligated to sell such assets or actively to collect on the impounded assets. With regard to said assets, including real estate and including after-discovered assets, it shall, however, retain all of its powers to receive payment for them or, with leave of court, to adjust or compromise them. After its final accounting and discharge, the department shall have power to make further distribution to the creditors, depositors, and shareholders when, in its opinion, sufficient funds are realized to justify such distribution after deducting reasonable costs for collection, preservation, and distribution. If the department is of the opinion that the funds collected or probably to be collected will be insufficient to make a distribution practicable and that all interested claimants will not in the future have their claims satisfied, it shall, after deducting reasonable costs for collection and preservation, hold the remainder of such property subject to Article 5 of Chapter 12 of Title 44. Thereafter, the articles of incorporation or charter shall no longer be valid and the department shall notify the Secretary of State that the receivership has been concluded. The Secretary of State shall promptly cancel such articles or charter of record in that office.

History. Ga. L. 1919, p. 135, art. 7, § 21; Code 1933, § 13-823; Code 1933, § 41A-811, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1980, p. 972, § 4.

RESEARCH REFERENCES

Am. Jur. 2d.

11 Am. Jur. 2d, Banks and Financial Institutions, § 1117.

C.J.S.

9 C.J.S., Banks and Banking, §§ 151 et seq., 213.

7-1-201. Unclaimed dividends.

Whenever a dividend remains unclaimed six months after it has been declared and the department is unable to locate the depositor or other claimant to whom said dividend was payable, the dividend shall become a part of the general assets of the financial institution and be distributed as other assets.

History. Ga. L. 1919, p. 135, art. 7, § 24; Ga. L. 1925, p. 119, § 1; Code 1933, § 13-826; Code 1933, § 41A-812, enacted by Ga. L. 1974, p. 705, § 1.

7-1-202. Order of payment of liabilities; secured or preferred claims and liens.

  1. In the distribution of the assets of a financial institution which is liquidated or dissolved, whether under this chapter or by any other method, the order of payment of liabilities of the financial institution in the event that its assets are insufficient to pay in full all its liabilities for which claims are duly made shall be:
    1. First, the payment of costs and expenses of administration of the liquidation or dissolution;
    2. Second, the payment of debts due depositors;
    3. Third, the payment of all state taxes;
    4. Fourth, judgments;
    5. Fifth, contractual obligations;
    6. Sixth, unliquidated claims for damages and the like;
    7. Seventh, capital securities.
  2. Nothing in this chapter shall impair the validity or the priority otherwise accorded by law to any security interest, security title, preferred claim arising under Code Section 11-4-214, or any lien arising by force of law; provided, however, any of the foregoing may be delayed in payment by the principal court until costs of administration including loans or interest payments under Code Section 7-1-164 or the costs of selling or otherwise disposing of assets under this chapter have been met in any case where the principal court determines that the claimant of the security interest, security title, preferred claim, or lien has expressly or impliedly consented to the administrative activities involved or has benefited from such activities.

History. Ga. L. 1919, p. 135, art. 7, § 19; Ga. L. 1925, p. 119, § 1; Ga. L. 1927, p. 195, § 5; Ga. L. 1931, p. 7, § 91; Code 1933, § 13-821; Code 1933, § 41A-813, enacted by Ga. L. 1974, p. 705, § 1.

Cross references.

Priority of payment of notes, debentures, and other instruments issued by a bank or trust company which becomes insolvent or is liquidated, § 7-1-419 .

JUDICIAL DECISIONS

Georgia Law 1927, p. 195, § 5 (see now O.C.G.A. § 7-1-202 ) does not violate Ga. Const. 1976, Art. VII, Sec. I, Para. IV (see now Ga. Const. 1983, Art. VII, Sec. II) even though the statute fixes the priority of other claims relative to taxes. Baggett v. Mobley, 171 Ga. 268 , 155 S.E. 334 , 1930 Ga. LEXIS 331 (1930).

Georgia Law 1927, p. 195, § 5 (see now O.C.G.A. § 7-1-202 ) does not violate Ga. Const. 1976, Art. VII, Sec. I, Para. III (see now Ga. Const. 1983, Art. VII, Sec. I, Para. III) since the statute does not affect the uniformity of taxes in any way, the statute does not in any way change or make less uniform the rate of taxes fixed upon the same class of subject, nor does the statute affect ad valorem taxes on all property subject to taxes within territorial limits of the state; even though the statute fixes the priority of other claims relative to taxes. Baggett v. Mobley, 171 Ga. 268 , 155 S.E. 334 , 1930 Ga. LEXIS 331 (1930).

Order of distribution of insolvent bank. —

Order of distribution of assets upon insolvency of a bank which grants payment of debts due depositors priority over payment of state taxes is not an unconstitutional violation of Ga. Const. 1976, Art. VII, Sec. I, Paras. I, III, IV (see now Ga. Const. 1983, Art. VII, Sec. I, Paras. I, III and Art. VII, Sec. II). Felton v. McArthur, 173 Ga. 465 , 160 S.E. 419 , 1931 Ga. LEXIS 342 (1931).

Statute is general law. —

Ga. L. 1927, p. 195, § 5 (see now O.C.G.A. § 7-1-202 ) does not violate Ga. Const. 1976, Art. I, Sec. II, Para. VII (see now Ga. Const. 1983, Art. III, Sec. VI, Para. IV) and is a general law and not a special law; and it was competent for the legislature to pass this general law without violating this provision of the constitution. Felton v. McArthur, 173 Ga. 465 , 160 S.E. 419 , 1931 Ga. LEXIS 342 (1931).

Georgia Law 1927, p. 195, § 5 does not attempt to exempt property from taxation. —

Georgia Law 1927, p. 195, § 5 (see now O.C.G.A. § 7-1-202 ) may render execution issued by tax collector unfruitful, in view of fact that claims which are given priority may exhaust property classed among assets of the bank; but no attempt is made by the statute to exempt property from taxation; even though the statute fixes priority of other claims relative to taxes. Baggett v. Mobley, 171 Ga. 268 , 155 S.E. 334 , 1930 Ga. LEXIS 331 (1930).

Priorities set by Ga. L. 1927, p. 195, § 5 supersede O.C.G.A. §§ 48-5-28 and 48-2-56 . —

Priorities of payment established by Ga. L. 1927, p. 195, § 5, (see now O.C.G.A. § 7-1-202 ) which allow payment to depositors before payments of state taxes supersede the provisions of former Code 1933, §§ 92-5707 (see now O.C.G.A. § 48-5-28 ) and 92-5708 (see now O.C.G.A. §§ 48-2-56 and 48-5-28 ) which make tax collection a priority above other debts. Felton v. McArthur, 173 Ga. 465 , 160 S.E. 419 , 1931 Ga. LEXIS 342 (1931).

Property in possession of liquidating agent of bank cannot be levied upon. Gormley v. Askew, 176 Ga. 210 , 167 S.E. 600 , 1933 Ga. LEXIS 47 (1933).

Equity will enjoin levy on fieri facias against insolvent bank. —

Equity will enjoin tax collector and sheriff from trying to enforce by levy and sale collection of tax fieri facias against insolvent bank taken over by superintendent of banks (now commissioner of banking and finance) for liquidation. Gormley v. Askew, 176 Ga. 210 , 167 S.E. 600 , 1933 Ga. LEXIS 47 (1933).

“Debts due depositors” must mean all depositors and there are several kinds. There are general deposits, special deposits, and deposits for specific purposes. Gormley v. Board of Comm'rs of Rds. & Revenues, 178 Ga. 439 , 173 S.E. 667 , 1934 Ga. LEXIS 69 (1934).

Effect of liquidation upon liability on checks deposited for collection. —

When principal-agent relationship exists between the bank and the depositor for purpose of collecting a check and an agency ceases due to the failure of the bank and takeover of the bank by the superintendent of banks (now commissioner of banking and finance), the check and the check’s proceeds are property of the depositor and not subject to the provisions of this section. Hogansville Banking Co. v. Ware, 171 Ga. 167 , 155 S.E. 4 , 1930 Ga. LEXIS 296 (1930).

Ad valorem taxes on bank’s assets are not administrative obligation or expense incurred by receiver but are a charge imposed by the sovereign. Taxes are referred to as expenses of administration only because it is a duty of the receiver to pay the taxes. Tharpe v. Gormley, 184 Ga. 605 , 192 S.E. 211 , 1937 Ga. LEXIS 589 (1937).

Taxes payable only after expenses of liquidation and claims of depositors. —

State taxes are payable only after all costs and expenses of the administration of the liquidation or dissolution, and the payment of the claims of depositors. Roberts v. Gunter, 251 Ga. 276 , 304 S.E.2d 369 , 1983 Ga. LEXIS 757 (1983).

Waiver of state’s right to first collect taxes extends to assets. —

If, in administration of assets of insolvent bank, the superintendent of banks (now commissioner of banking and finance), comes into possession of deeds given to the bank conveying title to the land, leaving debtor to bank owner of a mere equity in premises conveyed, the state’s waiver of the state’s right to first collect the state’s taxes (in favor of depositors’ claims), as embodied in Ga. L. 1927, p. 195, § 5, naturally extends so as to include such taxes as are a liability upon the assets in the hands of the superintendent of banks. Gormley v. Askew, 176 Ga. 210 , 167 S.E. 600 , 1933 Ga. LEXIS 47 (1933).

OPINIONS OF THE ATTORNEY GENERAL

Credit union acting as receiver violates section by preferring unsecured creditor. — Credit union deposit insurance corporation, acting as receiver or deputy receiver of member credit union, cannot purchase an unsecured note with the assets of the credit union since such purchase would give an unsecured creditor priority over the depositors and other more senior claimants. 1977 Op. Att'y Gen. No. 77-7.

RESEARCH REFERENCES

Am. Jur. 2d.

11 Am. Jur. 2d, Banks and Financial Institutions, §§ 1120, 1124.

C.J.S.

9 C.J.S., Banks and Banking, §§ 151 et seq., 213.

ALR.

Right of owner of check which the drawee bank held for him at time it closed its doors, to a preference, 17 A.L.R. 196 .

Right of depositor to rescind, or to claim a trust in respect of a deposit because of insolvency of bank when it was made, 20 A.L.R. 1206 ; 81 A.L.R. 1078 .

Balance due other banks on clearing house settlement as preferred claim against insolvent bank, 44 A.L.R. 1535 .

Right, in absence of statute, to preference in respect of deposit of public funds in insolvent bank, 51 A.L.R. 1336 ; 65 A.L.R. 690 ; 90 A.L.R. 184 ; 103 A.L.R. 621 ; 167 A.L.R. 640 .

Prerogative right of county or other political subdivision to preference in assets of insolvent, 52 A.L.R. 755 ; 90 A.L.R. 208 .

Trust or preference in assets of insolvent bank or trust company in respect of funds which it held as executor, administrator, or testamentary trustee, 56 A.L.R. 806 ; 83 A.L.R. 1110 ; 94 A.L.R. 1123 .

Deposit of funds except from claims of creditors of depositor, as entitled to preference out of the assets of insolvent depositee, 71 A.L.R. 1181 .

Right of holder of cashier’s check to preference out of assets of insolvent banks, 73 A.L.R. 66 ; 95 A.L.R. 676 .

Right of depositor to preference in assets of insolvent bank because dissuaded by bank officials or employees from withdrawing deposit after insolvency, 80 A.L.R. 795 .

Rights and preference in respect of assets of insolvent bank or trust company as affected by its division into departments, 81 A.L.R. 1479 ; 89 A.L.R. 1218 ; 114 A.L.R. 680 .

Constitutionality of statute relating to preferences in assets of insolvent bank, 83 A.L.R. 1080 .

Garnishment of deposit by depositor’s creditor as entitling latter to trust or preference out of assets of insolvent garnishee bank, 83 A.L.R. 1085 .

Preference in assets of insolvent bank in respect of deposits of veterans’ compensation or war-risk insurance proceeds or pension money, 83 A.L.R. 1089 ; 84 A.L.R. 1530 .

Trust or preference in assets of insolvent bank or trust company in respect of deposit by receiver, 83 A.L.R. 1097 .

Trust or preference in assets of insolvent bank or trust company as to deposits by trustee in bankruptcy, 83 A.L.R. 1105 .

Trust or preference in assets of insolvent bank or trust company in respect of funds which it held as executor, administrator, or testamentary trustee, 83 A.L.R. 1110 ; 94 A.L.R. 1123 .

Waiver of right of government to preference in the assets of insolvent debtor by taking security, 83 A.L.R. 1119 .

Right of surety who discharges obligation due to government to be subrogated to priority or preference of latter, 83 A.L.R. 1131 .

Rights of owners of securities deposited in bank upon its insolvency, 84 A.L.R. 1534 ; 126 A.L.R. 625 .

Construction and effect of statutes or constitutional provisions in relation to priority or preference of deposits in assets of insolvent bank or trust company, 86 A.L.R. 1310 ; 93 A.L.R. 1017 .

State’s prerogative right of preference at common law, 90 A.L.R. 184 ; 167 A.L.R. 640 .

Prerogative right of county or other political subdivision to preference in assets of insolvent, 90 A.L.R. 208 .

Right of holder of cashier’s check to preference out of assets of insolvent bank, 95 A.L.R. 676 .

Trust or preference in assets of insolvent bank in respect of money deposited or left on deposit pursuant to agreement of bank to purchase bonds or make other investment for depositor, 105 A.L.R. 516 .

7-1-203. Subrogation of insurer of deposits or shares.

Where the deposits or shares of a financial institution are insured by a federal public body or otherwise, the claims of depositors shall be subrogated in favor of said insurer to the extent that it pays or makes available for payment claims of such depositors against the financial institution, provided that the rights of such depositors to receive dividends or other distributions upon that portion of their claims not made available for payment shall not be affected by such subrogation.

History. Code 1933, § 41A-814, enacted by Ga. L. 1974, p. 705, § 1.

7-1-204. Liquidation of excess assets by trustees.

If any unliquidated assets remain in the department’s possession after the filing and confirmation of its final account, the payment in full of the claims of all depositors, creditors, and other claimants which have been approved by the court and the distribution to shareholders of any cash balance remaining thereafter, it shall call a meeting of all the shareholders of the financial institution by giving them written notice at least 30 days before the day fixed for the meeting. At such meeting, the shareholders shall elect by ballot a trustee or trustees, who shall complete the liquidation. A majority of the shares present in person or by proxy shall be necessary to elect such trustee or trustees. The department shall file a certified copy of the minutes of said meeting with the principal court. If no trustee is elected in this manner on the day designated, the department shall petition the principal court for the appointment of a trustee or trustees. The trustee or trustees who are thus elected by the shareholders or appointed by the court shall give bond to the state, in such amount, with such surety, and under such conditions as the court may direct. The department shall then transfer to such trustee or trustees all the assets of the financial institution which are still in its possession. After such transfer by the department to a trustee or trustees for the benefit of the shareholders, the financial institution shall have no corporate powers or privileges whatsoever, except that its shareholders may elect a successor trustee or trustees upon death, removal, or inability of the first trustee or trustees to act. The trustee or trustees shall not succeed to any powers or privileges except such as shall be necessary to the liquidation of the remaining assets which have been transferred to such trustee or trustees by the department.

History. Ga. L. 1919, p. 135, art. 7, §§ 24-27; Code 1933, §§ 13-827, 13-828, 13-829; Code 1933, § 41A-815, enacted by Ga. L. 1974, p. 705, § 1.

7-1-205. Destruction of records.

The department is authorized to destroy all records of the financial institution of which it was in possession as receiver and all records of such receivership at the expiration of six years from the date of the absolute confirmation of its final account, except where any provision of this chapter expressly provides a different method for the disposition of the records or a longer period for their preservation.

History. Code 1933, § 41A-816, enacted by Ga. L. 1974, p. 705, § 1.

PART 9 Receivership Procedures Involving Trust or Pooled Assets

RESEARCH REFERENCES

ALR.

Trust or preference in respect of money placed in bank for purpose of transaction with third person where bank subsequently becomes insolvent, 31 A.L.R. 472 ; 93 A.L.R. 881 .

Trust or preference in respect of money used to purchase exchange or to be transmitted, 57 A.L.R. 1168 ; 84 A.L.R. 1470 ; 93 A.L.R. 938 ; 101 A.L.R. 631 .

Trust or preference in, or lien upon, assets of insolvent bank or trust company in respect of funds which it held as executor, administrator, or testamentary trustee, 94 A.L.R. 1123 .

7-1-220. Definitions and applicability.

  1. As used in this part, the term:
    1. “Pooled assets” means mortgages, securities, or other assets comprising any mortgage or securities pool operated by such financial institution (whether said assets are held in the name of the institution or a nominee therefor) or with respect to which undivided interests have been created, regardless of whether or not the financial institution is technically a trustee and regardless of whether or not certificates of participation have been issued with respect thereto.
    2. “Trust assets” means all assets held by financial institutions as trustee, administrator, executor, guardian, or in a similar fiduciary capacity but shall not include assets held by the commercial department of the financial institution or pooled assets, as defined in paragraph (1) of this subsection.
  2. In the event of conflict, this part and not other parts of this article or other articles of this chapter shall control as to the trust assets and the pooled assets of any financial institution in receivership.

History. Code 1933, § 41A-901, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2020, p. 493, § 7/SB 429.

The 2020 amendment, effective July 29, 2020, part of an Act to revise, modernize, and correct the Code, substituted “or pooled assets, as defined” for “or ‘pooled assets’ as defined” near the end of paragraph (a)(2).

7-1-221. Status of department in relation to trust and pooled assets.

  1. Upon taking possession of a financial institution, the department shall hold trust and pooled assets separate from the assets of the financial institution itself. Trust and pooled assets shall not be available for distribution to depositors, other creditors, or shareholders.
  2. The department as receiver shall have all rights, powers, and duties of the financial institution in regard to trust and pooled assets, including title to the assets and the right to administer them.

History. Code 1933, § 41A-902, enacted by Ga. L. 1974, p. 705, § 1.

7-1-222. Jurisdiction of court over trust and pooled assets.

The principal court shall have exclusive jurisdiction over all matters concerning trust and pooled assets during the period that such assets are held by the department as receiver.

History. Code 1933, § 41A-903, enacted by Ga. L. 1974, p. 705, § 1.

7-1-223. Substituted trustee or manager for trust and pooled assets.

  1. Upon determining to liquidate a financial institution or if it otherwise deems it advisable, the department shall:
    1. With leave of court, transfer all of the trust assets or all of the pooled assets or all of both types of assets to another financial institution which shall assume the responsibilities of the institution in receivership in regard to such assets and act as substituted trustee or manager; or
    2. Give written notice, insofar as the giving of such notice is practicable, to all parties interested in trust or pooled assets that they must within 30 days after the giving of notice apply for the appointment of a substituted trustee or manager to take over the trust or pooled assets. In the event that no such application is made with respect to particular trust assets or pooled assets, the department shall itself apply for appointment of a substituted trustee or manager. Upon application by an interested party or parties or by the department, the court shall appoint as successor trustee or manager that person or corporation best able, in its judgment, to protect the interests of those interested in particular trust or pooled assets. The successor trustees or managers shall have all rights, powers, and duties of the financial institution in regard to the trust or pooled assets committed to them except as these relationships may be modified by the court in accordance with law.
  2. Nothing in this Code section or Code Section 7-1-222 shall be construed to impair any right of the grantor or beneficiaries of trust or pooled assets under applicable instruments or otherwise to secure or provide for the appointment of a substituted trustee or manager.

History. Code 1933, § 41A-904, enacted by Ga. L. 1974, p. 705, § 1.

7-1-224. Transfers to substituted trustee or manager without accounting.

In the event that the department and a substituted trustee or manager agree as to the identity and amount of the trust or pooled assets to be paid to the substituted trustee or manager and the substituted trustee or manager waives in writing the right to an accounting, then the department may transfer the trust or pooled assets to the substituted trustee or manager and will thereupon (together with the financial institution) be discharged from all liability or responsibility in connection with the trust or pooled assets.

History. Code 1933, § 41A-905, enacted by Ga. L. 1974, p. 705, § 1.

7-1-225. Transfers to substituted trustee or manager with accounting; deficiencies.

Except as authorized by Code Section 7-1-224, the department shall, upon appointment of a substituted trustee or manager, file a full account with the appropriate court setting forth its administration of the trust or pooled assets and shall, upon the order of the court, transfer the trust or pooled assets to the substituted trustee or manager. Whenever the court shall determine that there is a deficiency in regard to the trust or pooled assets or that the financial institution is liable for a surcharge in connection therewith, the amount thereof shall constitute a claim against the financial institution. Such claim shall be filed in the manner of other claims with the principal court within 30 days of a final adjudication with respect to the amount thereof.

History. Code 1933, § 41A-906, enacted by Ga. L. 1974, p. 705, § 1.

PART 10 Change in Control of Financial Institutions

Cross references.

Requirement that department approve of merger or consolidation of state banks or trust companies, § 7-1-534 .

Requirement that department approve mergers, consolidations, and other activities involving national banks, § 7-1-550 et seq.

7-1-230. Definitions.

As used in this part, the term:

  1. “Concert with one or more persons” includes, but is not limited to, the following persons and relationships:
    1. A company and any controlling shareholder, partner, trustee, or management official of the company if both the company and the individual own voting securities of the financial institution;
    2. An individual and the individual’s immediate family;
    3. Companies under common control;
    4. Persons that are parties to any agreement, contract, understanding, or other arrangement, whether written or otherwise, regarding the acquisition, voting, or transfer of control of voting securities of a financial institution;
    5. Persons that have made, or propose to make, a joint filing under Section 13 or 14 of the Securities Exchange Act of 1934 and the rules promulgated thereunder by the United States Securities and Exchange Commission; and
    6. A person and any trust for which the person serves as trustee.
  2. “Control” means the power directly or indirectly to direct the management or policies of a financial institution or to vote 25 percent or more of any class of voting securities of a financial institution.
  3. “Person” means an individual or a corporation, partnership, trust, association, joint venture, pool, syndicate, sole proprietorship, unincorporated organization, or any other form of entity not specifically listed in this paragraph.
  4. “Presumption of control” means a person which directly or indirectly owns, controls, or has the power to vote more than 10 percent but less than 25 percent of any class of voting securities of a financial institution if no other persons will own, control, or hold the power to vote a greater percentage of that class of voting securities immediately after the transaction.

History. Code 1933, § 41A-1005, enacted by Ga. L. 1980, p. 1076, § 1; Ga. L. 2022, p. 220, § 2/HB 891.

The 2022 amendment, effective July 1, 2022, added paragraph (1), redesignated former paragraphs (1) and (2) as paragraphs (2) and (3), and added paragraph (4).

7-1-231. “Financial institution” defined; acquisition of control without permission prohibited

  1. For purposes of this Code section, the term “financial institution” shall include any “bank holding company” as such term is defined in subsection (a) of Code Section 7-1-605.
  2. It shall be unlawful for a person, acting directly or indirectly or through concert with one or more persons, to acquire control or the presumption of control of any financial institution through a purchase, assignment, pledge, or other disposition of voting stock of such institution, except with the approval of the department or as otherwise permitted by this part.

History. Code 1933, § 41A-1001, enacted by Ga. L. 1980, p. 1076, § 1; Ga. L. 2022, p. 220, § 3/HB 891.

The 2022 amendment, effective July 1, 2022, added subsection (a), redesignated the existing provisions of this Code section as subsection (b), and inserted “or the presumption of control” in subsection (b).

Cross references.

Requirement that department be notified of change in ownership of or right to vote outstanding shares of bank or trust company which will result in control or change in control of the bank or trust company, § 7-1-236 .

7-1-232. Notice of proposed acquisition required; approval or disapproval by department; judicial review.

  1. For purposes of this Code section, the term “financial institution” shall include any “bank holding company” as that term is defined in subsection (a) of Code Section 7-1-605.
  2. The department shall be given at least 60 days’ prior written notice of any such proposed acquisition. The department may extend the period during which a disapproval may issue for another 30 days. The period for disapproval may be further extended only if the department determines that any acquiring party has not furnished all the information required under Code Section 7-1-233 or that in its judgment any material information submitted is substantially inaccurate. An acquisition may be made prior to expiration of the disapproval period if the department issues written notice of its intent not to disapprove the action.
  3. Within three days after its decision to disapprove any proposed acquisition, the department shall notify the acquiring party in writing of the disapproval. Such notice shall provide a statement of the basis for the disapproval.
  4. Within ten days of receipt of such notice of disapproval, the acquiring party may request a hearing on the proposed acquisition. At the conclusion thereof, the department shall by order approve or disapprove the proposed acquisition on the basis of the record made at such hearing.
  5. Any person whose proposed acquisition is disapproved after a department hearing under this Code section may obtain review in accordance with Code Section 7-1-90.

History. Code 1933, § 41A-1002, enacted by Ga. L. 1980, p. 1076, § 1; Ga. L. 2022, p. 220, § 4/HB 891.

The 2022 amendment, effective July 1, 2022, rewrote the second sentence in subsection (b), which read: “If the department does not issue a notice disapproving the proposed acquisition within that time or extend the period during which a disapproval may issue for another 30 days, the proposed acquisition shall stand approved.”.

Cross references.

Time for giving notice to department of change in control of bank or trust company resulting from change in ownership of or right to vote outstanding shares of the bank or trust company, § 7-1-236 .

7-1-233. Contents of notice.

Except as otherwise provided by regulation of the department, a notice filed pursuant to Code Section 7-1-232 shall contain the following information:

  1. The identity, personal history, business background, and experience of each person by whom or on whose behalf the acquisition is to be made, including his material business activities and affiliations during the past five years and a description of any material pending legal or administrative proceedings in which he is a party and any criminal indictment or conviction of such person by a state or federal court;
  2. A statement of the assets and liabilities of each person by whom or on whose behalf the acquisition is to be made, as of the end of the fiscal year for each of the five fiscal years immediately preceding the date of the notice, together with related statements of income and source and application of funds for each of the fiscal years then concluded, all prepared in accordance with generally accepted accounting principles consistently applied, and an interim statement of the assets and liabilities for each such person, together with related statements of income and source and application of funds, as of a date not more than 90 days prior to the date of the filing of the notice;
  3. The terms and conditions of the proposed acquisition and the manner in which the acquisition is to be made;
  4. The identity, source, and amount of the funds or other considerations used or to be used in making the acquisition and, if any part of these funds or other considerations has been or is to be borrowed or otherwise obtained for the purpose of making the acquisition, a description of the transaction, the names of the parties, and any arrangements, agreements, or understandings with such persons;
  5. Any plans or proposals which any acquiring party making the acquisition may have to liquidate the financial institution, to sell its assets or merge it with any company, or to make any other major change in its business or corporate structure or management;
  6. The identification of any person employed, retained, or to be compensated by the acquiring party or by any person on his behalf to make solicitations or recommendations to stockholders for the purpose of assisting in the acquisition and a brief description of the terms of such employment, retainer, or arrangement for compensation;
  7. Copies of all invitations or tenders or advertisements making a tender offer to stockholders for purchase of their stock to be used in connection with the proposed acquisition; and
  8. Any additional relevant information in such forms as the department may require by regulation or by specific request in connection with any particular notice.

History. Code 1933, § 41A-1003, enacted by Ga. L. 1980, p. 1076, § 1; Ga. L. 2022, p. 220, § 5/HB 891.

The 2022 amendment, effective July 1, 2022, substituted “financial institution” for “bank” in paragraph (5).

7-1-234. Grounds for disapproving proposal.

The department may disapprove any proposed acquisition if:

  1. The proposed acquisition of control would result in a monopoly or would be in furtherance of any combination or conspiracy to monopolize or attempt to monopolize the business of banking in any part of this state;
  2. The effect of the proposed acquisition of control in any section of this state may be substantially to lessen competition or to tend to create a monopoly or the proposed acquisition of control would in any other manner be in restraint of trade and the anticompetitive effects of the proposed acquisition of control are not clearly outweighed in the public interest by the probable effect of the transaction in meeting the convenience and needs of the community to be served;
  3. The financial condition of any acquiring person is such as might jeopardize the financial stability of the financial institution or prejudice the interests of the depositors of the financial institution;
  4. The competence, experience, or integrity of any acquiring person or of any of the proposed management personnel indicates that it would not be in the interest of the depositors of the financial institution or in the interest of the public to permit such person to control the financial institution;
  5. Any acquiring person neglects, fails, or refuses to furnish the department all the information required by it;
  6. In the case of trust companies, any individual who exercises control of a person that submits an application for approval under Code Section 7-1-232 has unsatisfactory results from a fingerprint record check report conducted by the Georgia Crime Information Center and the Federal Bureau of Investigation. The department shall be authorized to obtain conviction data with respect to any individual who exercises control of a person that submits an application for approval under Code Section 7-1-232, and such individual shall provide express written consent to the department to conduct a criminal background check and to use all information necessary to run such check, including, but not limited to, a classifiable set of fingerprints. The individual who exercises control of a person that submits an application for approval pursuant to Code Section 7-1-232 shall be responsible for all fees associated with the performance of such criminal background check. Upon receipt of fingerprints, fees, and other required information, the Georgia Crime Information Center shall transmit the necessary information to the Federal Bureau of Investigation for a search of its records; or
  7. In the case of trust companies, any acquiring person or an individual who is a director or officer of such person has failed to demonstrate financial responsibility, character, and general fitness. The department shall be authorized to obtain personal history and work experience and other information, including, but not limited to, independent credit reports obtained from a consumer reporting agency described in the federal Fair Credit Reporting Act, 15 U.S.C. Section 1681a(f) with respect to such acquiring person and an individual who is a director or officer of such person.

History. Code 1933, § 41A-1004, enacted by Ga. L. 1980, p. 1076, § 1; Ga. L. 2019, p. 828, § 4/HB 185; Ga. L. 2020, p. 320, § 1/HB 781; Ga. L. 2020, p. 493, § 7/SB 429; Ga. L. 2021, p. 323, § 2/HB 111; Ga. L. 2022, p. 220, § 6/HB 891.

The 2019 amendment, effective July 1, 2019, deleted “or” from the end of paragraph (4), substituted a semicolon for a period at the end of paragraph (5), and added paragraphs (6) and (7).

The 2020 amendments.

The first 2020 amendment, effective January 1, 2021, rewrote paragraph (6), which read: “In the case of trust companies, any acquiring person or an individual that is a director or officer of such person has unsatisfactory results from a fingerprint record check report conducted by the Georgia Crime Information Center and the Federal Bureau of Investigation. The department shall be authorized to obtain conviction data with respect to any acquiring person or an individual that is a director or officer of such person, and such acquiring person or an individual that is a director or officer of such person shall provide express written consent to the department to conduct a criminal background check and to use all information necessary to run such check, including, but not limited to, a classifiable set of fingerprints. The acquiring person or an individual that is a director or officer of such person shall be responsible for all fees associated with the performance of such criminal background check; or”. The second 2020 amendment, effective July 29, 2020, part of an Act to revise, modernize, and correct the Code, substituted “individual who is” for “individual that is” throughout paragraphs (6) and (7).

The 2021 amendment, effective July 1, 2021, rewrote paragraph (6), which read: “In the case of trust companies, any individual who is an acquiring party under Code Section 7-1-232 or an individual who is a director or officer of an acquiring party under Code Section 7-1-232 has unsatisfactory results from a fingerprint record check report conducted by the Georgia Crime Information Center and the Federal Bureau of Investigation. The department shall be authorized to obtain conviction data with respect to any individual who is an acquiring party or an individual who is a director or officer of an acquiring party, and such individual who is an acquiring party or an individual who is a director or officer of an acquiring party shall provide express written consent to the department to conduct a criminal background check and to use all information necessary to run such check, including, but not limited to, a classifiable set of fingerprints. The individual who is an acquiring party or an individual who is a director or officer of an acquiring party shall be responsible for all fees associated with the performance of such criminal background check; or”.

The 2022 amendment, effective July 1, 2022, substituted “financial institution” for “bank” twice each in paragraphs (3) and (4).

7-1-235. Part inapplicable to bank holding company transactions.

This part shall not apply to a transaction subject to Code Sections 7-1-605 through 7-1-608, relating to bank holding companies.

History. Code 1933, § 41A-1006, enacted by Ga. L. 1980, p. 1076, § 1; Ga. L. 1984, p. 22, § 7.

7-1-236. Report of change in control.

Whenever a change occurs in the ownership of or right to vote the outstanding shares of any bank or trust company which will result in the control or a change in the control of the bank or trust company, the president or other officer of such bank or trust company shall, within ten days after knowledge thereof, report such facts to the department. Notwithstanding Code Section 7-1-230, as used in this Code section, the term “control” means the power to direct or cause, directly or indirectly, the direction of the management or policies of the institution. If there is any doubt as to whether a change in the ownership or voting rights of such shares is sufficient to result in control thereof or to effect a change in the control thereof, such doubt shall be resolved in favor of reporting the facts to the department.

History. Code 1933, § 13-2006, enacted by Ga. L. 1965, p. 524, § 1; Code 1933, § 41A-2013, enacted by Ga. L. 1974, p. 705, § 1; Code 1981, § 7-1-442; Code 1981, § 7-1-236 , as redesignated by Ga. L. 1986, p. 458, § 3; Ga. L. 2022, p. 220, § 7/HB 891.

The 2022 amendment, effective July 1, 2022, substituted “Notwithstanding Code Section 7-1-230, as” for “As” at the beginning of the second sentence.

Cross references.

Procedure for giving notice to department of proposed change in control of financial institution, § 7-1-230 et seq.

Editor’s notes.

Ga. L. 1986, p. 458, § 3, redesignated former Code Section 7-1-442 as present Code Section 7-1-236.

PART 11 Costs on Judicial Process

7-1-237. Reimbursement of costs incurred in answering subpoena, garnishment, or order; subpoena to be answered within five days.

Any financial institution shall be reimbursed by the requesting party for costs which are reasonably necessary and which have been directly incurred in searching for, reproducing, or transporting books, papers, records, or other data of a customer required or requested to be produced pursuant to a lawful subpoena, summons, warrant, garnishment, attachment, request for the production of documents, or court order where the financial institution is not a party to the action. Except as may otherwise be ordered by a judge of the court issuing the same, a financial institution shall have five business days from service of a subpoena within which to produce any books, papers, or records ordered produced pursuant to such subpoena. In the case of a garnishment or attachment of funds held by the financial institution, such reimbursement may be deducted prior to remission of such funds in response to the garnishment or attachment. Rates and conditions under which reimbursement may be made under this Code section shall be prescribed by regulations of the department.

History. Code 1981, § 7-1-237 , enacted by Ga. L. 1983, p. 602, § 3; Ga. L. 1985, p. 1467, § 1; Ga. L. 1987, p. 805, § 1.

RESEARCH REFERENCES

ALR.

Bank’s liability, under state law, for disclosing financial information concerning depositor or customer, 81 A.L.R.4th 377.

PART 12 Deposits of Deceased Depositors

7-1-239. Definitions; payment of large deposits of deceased intestate depositors; affidavit for disbursement; form for affidavit.

  1. As used in this Code section, the term:
    1. “Affidavit of the provider” means the form provided for in subsection (e) of this Code section.
    2. “Financial institution” means any federally chartered financial institution or state chartered financial institution, including, but not limited to, those chartered by states other than the State of Georgia whose deposits are federally insured.
  2. Except as provided in subsection (c) of this Code section and in Article 8 of this chapter, whenever any person dies intestate having a deposit of not more than $15,000.00 in a financial institution, such financial institution, upon receipt of an affidavit, shall be authorized to pay the proceeds of such deposit directly to the following individuals:
    1. To the surviving spouse;
    2. If no surviving spouse, to the children pro rata;
    3. If no children or surviving spouse, to the father and mother pro rata; or
    4. If none of the above, then to the brothers and sisters of the decedent pro rata.

      Such affidavit shall state that such individuals qualify as the proper relation to the decedent as specified in this subsection, there is no known will of the decedent, and that there are no other known corresponding claimants to such deposit.

  3. Except as provided in Article 8 of this chapter and in paragraph (2) of subsection (d) of this Code section, if no application for the deposit is made by any person named in subsection (b) of this Code section within 45 days from the death of the intestate depositor, the financial institution shall be authorized to apply not more than $15,000.00 of the deposit of such deceased depositor in payment of the funeral expenses and expenses of the last illness of such deceased depositor upon the receipt of itemized statements of such expenses and the affidavit of the providers of such services that the itemized statements are true and correct and have not been paid. Except as otherwise provided in paragraph (2) of subsection (d) of this Code section, the financial institution applying such deposit as authorized in this subsection shall pay such expenses in the order received after the death of the depositor.
    1. Except as otherwise provided in paragraph (2) of this subsection, payments made in compliance with this Code section shall operate as a complete acquittal and discharge to the financial institution of liability from any suit, claim, or demand of whatever nature by any heir, distributee, or creditor of the decedent, or any other person. Except as otherwise provided in paragraph (2) of this subsection, the financial institution may rely on a properly executed affidavit in disbursing the funds in accordance with this Code section.
    2. The protection provided by paragraph (1) of this subsection does not extend to payments made after a financial institution has received:
      1. Written notification sent by any party able to request present payment or the legal representative of any such party to the registered agent of the financial institution by registered or certified mail, return receipt requested, or statutory overnight delivery, expressly stating that payments in accordance with the provisions of this Code section should not be permitted; or
      2. Service of notice upon the registered agent of the financial institution of a proceeding in the probate court in the estate of the deceased depositor in accordance with Chapter 11 of Title 53;

        provided, however, that, if any payment is made pursuant to subsection (c) of this Code section by an employee of the financial institution who is without actual knowledge of such written notification or service of notice within three business days following the receipt of such written notification or service of notice by the registered agent of the financial institution, the protection provided by paragraph (1) of this subsection shall extend to any such payment.

    3. A financial institution that is asked to apply funds from the deposit of a deceased depositor as requested in an affidavit of the provider may, without risk of incurring any penalty or liability to any person:
      1. Rely on the written notification or service of notice provided by paragraph (2) of this subsection in refusing to disburse the funds as requested in the affidavit of the provider;
      2. Delay disbursement of the funds as requested in the affidavit of the provider for up to 180 days following the receipt by the financial institution of such affidavit of the provider; and
      3. Decline to disburse funds from the deposit of the deceased depositor except as authorized or directed in an order entered by the probate court having jurisdiction over the estate of the deceased depositor.
    4. Notwithstanding subsection (c) of this Code section or any other provision of this subsection, payments made pursuant to an order entered by the probate court having jurisdiction over the estate of a deceased depositor shall operate as a complete acquittal and discharge to the financial institution of liability from any suit, claim, or demand of whatever nature by any heir, distributee, or creditor of the decedent, or any other person.
    5. Nothing in this subsection shall relieve the liability of or limit the availability of any remedies against any provider of services giving an affidavit in the form provided for in subsection (e) of this Code section for any violation of Code Section 16-10-71, Code Section 53-6-2, or other applicable law.
  4. A document substantially in the following form shall be used as the affidavit of the providers of services of funeral expenses and expenses of last illnesses of deceased depositors: “State of Georgia County of _______________ _______________ from _______________ attests that (Claimant) (Facility) _______________ died on the _______________ day of _______________ , 20 _______________ . (Deceased) On information and belief, the Deceased has funds on deposit with _______________ . (Financial Institution) Under O.C.G.A. § 7-1-239 , such Financial Institution is authorized to pay the proceeds of the Deceased’s deposits, but in no event more than $15,000.00, directly to the following persons identified, collectively, as potential recipient(s):
    1. To the surviving spouse;
    2. If no surviving spouse, to the children pro rata;
    3. If no children or surviving spouse, to the father and mother pro rata; or
    4. If none of the above, then to the brothers and sisters of the decedent pro rata.

      _______________

      Signature of Claimant

      Sworn and subscribed

      before me this _______________ day

      of _______________ , 20 _______________ .

      Notary public (SEAL)

      My commission expires: _______________ .”

      Except as provided for by Article 8 in Title 7 of the O.C.G.A., if no request for the Deceased’s deposit is made by a potential recipient(s) within 45 days from the Deceased’s death, the Financial Institution is authorized to release up to $15,000.00 for funeral expenses and expenses of the last illness of the Deceased upon the receipt of itemized statements of such expenses and this executed attestation.

      The Claimant attests that there is no known will of the Deceased and there is no known potential recipient of the Deceased’s deposits. The Claimant also attests that funeral expenses or expenses of the last illness in the amount of $ _______________ were incurred related to the Deceased and that true and correct copies of the itemized receipts fully supporting such amount are attached to this affidavit. Finally, the Claimant further attests that such expenses have not been paid as of the date of execution of this affidavit.

      Pursuant to O.C.G.A. § 7-1-239 , the Claimant submits this form in order to receive payment in the amount of $ _______________ (shall not exceed $15,000.00) for outstanding funeral expenses or expenses of the last illness of the Deceased.

STATUTORY AFFIDAVIT FORM

History. Code 1981, § 7-1-239 , enacted by Ga. L. 1983, p. 661, § 1; Ga. L. 1985, p. 1241, § 1; Ga. L. 1986, p. 887, § 1; Ga. L. 1996, p. 848, § 3; Ga. L. 2019, p. 279, § 1/HB 490; Ga. L. 2020, p. 377, § 2-2/HB 865.

The 2019 amendment, effective July 1, 2019, added subsection (a); redesignated former subsections (a) through (c) as present subsections (b) through (d), respectively; substituted “$15,000.00” for “$10,000.00” in subsections (b) and (c); in the introductory language of subsection (b), substituted “subsection (c)” for “subsection (b)” near the beginning, inserted “, upon receipt of an affidavit,” in the middle, and substituted “individuals” for “persons” at the end; added the ending undesignated language in subsection (b); substituted “subsection (b) of this Code section within 45 days” for “subsection (a) of this Code section within 90 days” near the middle of the first sentence of subsection (c); in subsection (d), deleted “subsections (a) and (b) of” following “pursuant to” near the beginning and rewrote the second sentence, which read: “Such payment is authorized to be made as provided in this Code section without the necessity of administration of the estate of the decedent or without the necessity of obtaining an order that no administration is necessary.”; deleted former subsections (d) through (g); and added present subsection (e).

The 2020 amendment, effective January 1, 2021, deleted “claimant or” preceding “claimants” in the ending undesignated paragraph in subsection (b); in subsection (c), inserted “and in paragraph (2) of subsection (d) of this Code section” in the first sentence and substituted “Except as otherwise provided in paragraph (2) of subsection (d) of this Code section, the financial institution applying such deposit as authorized in this subsection” for “The financial institution” in the last sentence; designated the existing provisions of subsection (d) as paragraph (d)(1), and in paragraph (d)(1), substituted “Except as otherwise provided in paragraph (2) of this subsection, payments made in compliance with” for “Payments pursuant to” at the beginning of the first sentence and substituted “Except as otherwise provided in paragraph (2) of this subsection, the” for “The” at the beginning of the second sentence, and added paragraphs (d)(2) through (d)(5).

Law reviews.

For article surveying trust and estate law in 1984-1985, see 37 Mercer L. Rev. 443 (1985).

For annual survey of law of wills, trusts, and administration of estates, see 38 Mercer L. Rev. 417 (1986).

For annual survey article discussing wills, trusts and administration of estates, see 52 Mercer L. Rev. 481 (2000).

For annual survey on wills, trusts, guardianships, and fiduciary administration, see 71 Mercer L. Rev. 327 (2019).

7-1-239.1. Payment of checks or instruments payable to deceased intestate persons; affidavit included with application for payment.

  1. Whenever any person dies intestate having possession of or a right to possession of a check or other instrument payable to such deceased person and the amount of the check or instrument does not exceed $15,000.00, the financial institution on which the check or instrument is drawn shall be authorized to accept and redeem the check or instrument by payment to the following persons:
    1. To the surviving spouse;
    2. If no surviving spouse, to the children pro rata;
    3. If no children or surviving spouse, to the father and mother pro rata; or
    4. If none of the above, then to the brothers and sisters of the decedent pro rata.
  2. If a check or other instrument is payable to more than one person, it may be accepted and redeemed as provided in subsection (a) of this Code section only if it has been endorsed by each payee other than the decedent.
  3. Payments made pursuant to this Code section shall operate as a complete acquittal and discharge to the financial institution of liability from any suit, claim, or demand of whatever nature by any heir, distributee, creditor of the decedent, or any other person. Such payment is authorized to be made as provided in this Code section without the necessity of administration of the estate of the decedent and without the necessity of obtaining an order that no administration is necessary.
  4. As used in this Code section, the term “financial institution” includes any federally chartered financial institution.
  5. Application by any claimant or claimants entitled in this Code section to receive payments of checks or other instruments at a financial institution upon which such instrument is drawn shall include an affidavit by the claimant or claimants which states that they qualify as the proper relation to the decedent as specified in this Code section and that the claimant or claimants know of no other corresponding claimant or claimants to such funds. The financial institution may rely on a properly executed affidavit in disbursing the funds according to this Code section.

History. Code 1981, § 7-1-239.1 , enacted by Ga. L. 1985, p. 1241, § 2; Ga. L. 1996, p. 848, § 4; Ga. L. 2019, p. 279, § 2/HB 490.

The 2019 amendment, effective July 1, 2019, substituted “$15,000.00” for “$10,000.00” in the middle of the introductory language of subsection (a).

Law reviews.

For annual survey on wills, trusts, guardianships, and fiduciary administration, see 71 Mercer L. Rev. 327 (2019).

PART 13 Bank Fees

7-1-239.5. Fee for instruments drawn on other institutions.

Reserved. Repealed by Ga. L. 2016, p. 390, § 2-2/HB 811, effective July 1, 2016.

History. Code 1981, § 7-1-239.5 , enacted by Ga. L. 1997, p. 572, § 1; repealed by Ga. L. 2016, p. 390, § 2-2/HB 811, effective July 1, 2016, p. 352, Ga. L. 2022, § 7(1)/HB 1428, effective May 2, 2022/HB 1428; Code 1981, § 7-1-239.5 , enacted by Ga. L. 1997, p. 572, § 1; repealed by Ga. L. 2016, p. 390, § 2-2/HB 811, effective July 1, 2016.

The 2022 amendment, effective May 2, 2022, part of an Act to revise, modernize, and correct the Code, designated this Code section as reserved.

Editor’s notes.

Ga. L. 2017, p. 774, § 7/HB 323, part of an Act to revise, modernize, and correct the Code, repealed the reservation of this Code section.

Ga. L. 2022, p. HB 1428, § 7(1)/HB 1428, part of an Act to revise, modernize, and correct the Code, designated this Code section as reserved.

7-1-239.6. Convenience fees.

A financial institution or mortgage lender, as such term is defined by Code Section 7-1-1000, may charge a convenience fee provided that such fee is permissible in accordance with Code Section 13-1-15. For purposes of this Code section, the term “convenience fee” means any additional amount imposed to a consumer at the time of a transaction for the election of making a payment by electronic means. A convenience fee may include, but is not limited to, any fee charged for payment to an account with the assistance of a live representative or agent of the financial institution or mortgage lender, by telephone, using a voice response unit, or other electronic means. A convenience fee does not include a discount offered by a lender or merchant to a person for payment by cash, check, or similar means.

History. Code 1981, § 7-1-239.6 , enacted by Ga. L. 2017, p. 193, § 5/HB 143.

PART 14 Savings Promotion Raffles

Effective date. —

This part became effective July 1, 2019.

Cross references.

Lotteries, Ga. Const. 1983, Art. I, Sec. II, Para. VIII.

Gambling and related offenses, § 16-12-20 et seq.

RESEARCH REFERENCES

Am. Jur. 2d.

38 Am. Jur. 2d, Gambling, § 187 et seq.

C.J.S.

38 C.J.S., Gaming, § 14.

7-1-239.10. Definitions; conduct of savings promotion raffles; application.

  1. As used in this Code section, the term:
    1. “Bank” means a national bank or a state chartered bank, regardless of which state issued the charter, that has federal deposit insurance.
    2. “Credit union” means a federally chartered credit union or a state chartered credit union, regardless of which state issued the charter, that has federal deposit insurance.
    3. “Savings promotion raffle” means a contest in which the sole consideration required for a chance of winning a designated prize is obtained by the deposit of a specified amount of money in a savings account or other savings program offered by a bank or credit union, where each ticket or entry has an equal chance of being drawn.
  2. A bank or credit union may conduct a savings promotion raffle, provided that the raffle is conducted in a manner that does not:
    1. Jeopardize the ability of the bank or credit union conducting the savings promotion raffle to operate in a safe and sound manner; or
    2. Mislead depositors about the chances of winning.
  3. A bank or credit union conducting a savings promotion raffle:
    1. Shall provide each person making a deposit in a savings promotion raffle account with information regarding:
      1. The terms of the raffle;
      2. The verifiable retail value of each prize that a depositor has a chance of winning;
      3. The odds of a depositor winning a prize; and
      4. Any fees or penalties associated with such account;
    2. Shall not charge any fees associated with the underlying savings account or other savings program in excess of the fees charged for the savings account or other savings program offered by the bank or credit union that is the most similar to such savings promotion raffle account;
    3. May contract for and use the services of a third-party service provider to handle the administrative details of conducting a savings promotion raffle; and
    4. Shall maintain all records the department determines are necessary to conduct an examination or audit of a savings promotion raffle.
  4. The provisions of this Code section applicable to credit unions shall apply to an organization composed primarily of credit unions and the provisions of this Code section applicable to banks shall apply to an organization composed primarily of banks.

History. Code 1981, § 7-1-239.10 , enacted by Ga. L. 2019, p. 736, § 1/HB 193.

Article 2 Banks and Trust Companies

Law reviews.

For survey article on business associations, see 34 Mercer L. Rev. 13 (1982).

OPINIONS OF THE ATTORNEY GENERAL

Investment programs offered jointly by banks and brokerage firms. — Brokerage firm is not prohibited, by virtue of O.C.G.A. T. 7, C. 1, Art. 2 and O.C.G.A. § 7-1-241 , from offering, in conjunction with a bank, an investment program whereby the brokerage permits customers to maintain special accounts and receives and transmits money in connection with such accounts. 1981 Op. Att'y Gen. No. 81-59.

RESEARCH REFERENCES

ALR.

Bank to which paper is sent for collection of principal or interest as agent of obligor, 55 A.L.R. 1168 .

Effect of appointment of conservator for bank, 91 A.L.R. 234 ; 92 A.L.R. 1258 ; 107 A.L.R. 1431 .

Legal questions presented by the reopening of closed bank, 99 A.L.R. 1217 .

State banks, insurance companies, or building and loan associations, which are members of federal reserve bank or similar federal agency, or national banks, as within state social security or Unemployment Compensation Act, 165 A.L.R. 1250 .

PART 1 General Matters

Cross references.

Limitations on legislature’s powers, Ga. Const. 1983, Art. III, Sec. VI, Para. V.

Secretary of State corporations, T. 14, C. 4.

Forgery and criminal issuance of bad checks, § 16-9-1 et seq.

Criminal penalties for illegal use of credit cards or bank services cards, § 16-9-30 et seq.

Bond requirements for banks and trust companies acting as guardian of property, § 29-4-16 .

Authority of notaries public who are officers, employees, or other representatives of banks to take acknowledgment of any party to any written instrument executed to or by such bank, § 45-17-12 .

Appointment of banks and trust companies as state depositories, § 50-17-50 et seq.

RESEARCH REFERENCES

ALR.

Liability of bank which credits paper payable to a corporation to the personal credit of corporate officer who indorsed it, and pays out the proceeds on the latter’s personal checks, 9 A.L.R. 346 .

Duty and liability of bank under agreement to remit money or establish credit, 27 A.L.R. 1488 ; 45 A.L.R. 1052 ; 69 A.L.R. 673 .

When bank deemed insolvent, or “hopelessly” insolvent, in civil cases, 85 A.L.R. 811 .

Statute regulating banks and trust companies as special or class legislation, or as denying the equal protection of the laws, 111 A.L.R. 140 .

Stipulation relieving bank from, or limiting its liability for disregard of, stop-payment order, 1 A.L.R.2d 1155.

Admissibility, in negligence action against bank by depositor, of evidence as to custom of banks in locality in handling and dealing with checks and other items involved, 8 A.L.R.2d 446.

Bank’s liability for breach of implied contract of good faith and fair dealing, 55 A.L.R.4th 1026.

Bank’s liability to customer for imposing allegedly excessive service charges, 73 A.L.R.4th 1028.

7-1-240. Powers and restrictions applicable when acting as bank and trust company.

Any financial institution authorized by law to act as both a bank and a trust company shall enjoy and be subject to the powers and restrictions of a bank of its type in regard to its banking activities and in like manner shall enjoy and be subject to the powers and restrictions of a trust company in regard to its trust activity. With respect to general corporate matters not identified with either banking or trust functions, it shall have the privileges and restrictions of a bank of its type.

History. Code 1933, § 41A-1101, enacted by Ga. L. 1974, p. 705, § 1.

Law reviews.

For article, “An Argument Evaluating Price Controls on Bank Credit Cards in Light of Certain Reemerging Common Law Doctrines,” see 9 Ga. St. U.L. Rev. 797 (1993).

For article, “An Economic Perspective on Interest Rate Limitations,” see 9 Ga. St. U.L. Rev. 821 (1993).

For article, “Regulating Bank Reputation Risk,” see 54 Ga. L. Rev. 523 (2020).

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, § 595 et seq.

C.J.S.

9 C.J.S., Banks and Banking, §§ 650, 661.

ALR.

Power of banking corporation to loan money for others, 33 A.L.R. 597 .

7-1-241. Restrictions on engaging in banking business.

  1. No person or corporation may lawfully engage in this state in the business of banking or receiving money for deposit or transmission or lawfully establish in this state a place of business for such purpose, except a bank, a national bank, a credit union to the extent provided in Article 3 of this chapter, a licensee engaged in selling payment instruments to the extent permitted by Article 4 of this chapter, an international banking agency to the extent provided in Article 5 of this chapter, or a savings and loan association to the extent provided by the laws of the United States.
  2. None of the following shall be deemed to be engaged in the business of receiving money for deposit or transmission within the meaning of subsection (a) of this Code section:
    1. A club or hotel to the extent it receives money from members or guests for temporary safekeeping;
    2. An express, steamship, or telegraph company to the extent it receives money for transmission;
    3. An attorney at law, real estate agent, fiscal agent, insurance company, utility company, or any other person or corporation to the extent he or she or it receives and transmits money solely as an incident to a business or profession not governed by this chapter;
    4. Persons or corporations engaged in the business of cashing checks, dispensing cash through credit or debit card activated electronic devices, or recording of financial transactions resulting from and initiated at the point of the sale of goods or services; provided, however, that no such person or corporation shall receive deposits except as provided in Code Section 7-1-603 or otherwise engage in the business of banking; or
    5. A securities broker or dealer registered pursuant to the provisions of 15 U.S.C. Section 78o or Chapter 5 of Title 10 to the extent that such securities broker or dealer:
      1. Sells certificates of deposit or interest in certificates of deposit or other deposit instruments issued by a bank or savings association, provided such securities broker or dealer fully and fairly discloses at the time of solicitation and confirmation whether or not federal deposit insurance is available for that deposit instrument;
      2. Purchases certificates of deposit or other deposit instruments issued by a bank or savings association for the account of the customer of such securities broker or dealer, provided that such instruments are registered in the name of the customer or the custodian of such customer on the books or other records of the issuing bank or savings association; or
      3. Holds customer funds incidental to the purchase and sale of securities on behalf of such customer.
  3. The department is authorized to promulgate regulations and establish policy, consistent with the objectives of this chapter, which objectives include for the purposes of this Code section providing for appropriate competition between financial institutions and other financial organizations and protection of the interests of depositors, and to further define, restrict, or require registration of entities which provide financial products and services to the citizens of this state via the Internet, other online access to financial products and services, or alternate methods of delivery which differ from geographically based banking.

History. Ga. L. 1919, p. 135, art. 1, § 4; Code 1933, § 13-204; Ga. L. 1960, p. 1170, § 1; Ga. L. 1966, p. 691, § 1; Code 1933, § 41A-1102, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1985, p. 258, § 3; Ga. L. 1986, p. 458, § 4; Ga. L. 1990, p. 301, § 1; Ga. L. 1997, p. 485, § 10; Ga. L. 2004, p. 631, § 7; Ga. L. 2008, p. 381, § 2/SB 358; Ga. L. 2016, p. 390, § 7-5/HB 811; Ga. L. 2017, p. 774, § 7/HB 323; Ga. L. 2018, p. 1112, § 7/SB 365; Ga. L. 2019, p. 1056, § 7/SB 52.

The 2018 amendment, effective May 8, 2018, part of an Act to revise, modernize, and correct the Code, substituted “15 U.S.C. Section 78o” for “15 U.S.C. Section 780” in paragraph (b)(5).

The 2019 amendment, effective May 12, 2019, part of an Act to revise, modernize, and correct the Code, substituted “online” for “on-line” near the end of subsection (c).

OPINIONS OF THE ATTORNEY GENERAL

Foreign state savings and loan association may not offer and sell certificates of deposit in Georgia through one or more broker-dealers located in Georgia. 1983 Op. Atty Gen. No. 83-23.

“Business of banking” construed. — As used in O.C.G.A § 7-1-241 “the business of banking” is not a separate concept perhaps extending into areas beyond the business of receiving money for deposit or transmission. Rather, it is the receipt of money for deposit or transmission which defines the business of banking for purposes of Georgia law. 1981 Op. Att'y Gen. No. 81-59.

Activities reserved exclusively to regulated financial institutions. — Some activities, such as the lending of funds, while properly engaged in by banks and other regulated financial institutions, are not reserved exclusively to them. Under Georgia law, the only functions which are prohibited to persons and corporations in general are the receipt of deposits and the transmission of funds. 1981 Op. Att'y Gen. No. 81-59.

Automated teller operations limited to financial institutions. — A nonfinancial institution may not establish and operate on its own behalf an unmanned automated teller facility which provides cash withdrawal services. 1985 Op. Att'y Gen. No. 85-2.

Restriction on renting of, or accepting deposits for, safe deposit boxes. — No person or entity, other than those specifically excepted by former Code 1933, § 41A-1102 (see now O.C.G.A. § 7-1-241 ), may lawfully engage in the business of renting safe deposit boxes or receptacles for purpose of receiving money, or may accept deposits of money in such facilities. 1980 Op. Att'y Gen. No. 80-88.

Lockbox operations. — An out-of-state bank may not use a lockbox operator as a conduit for deposit-taking in Georgia; however, the operation of a lockbox in and of itself does not constitute engaging in the business of banking. 1985 Op. Att'y Gen. No. 85-3.

Operation of a lockbox in compliance with Department of Banking and Finance Proposed Rule 80-7-1-.06 is permissible under Georgia law. 1985 Op. Att'y Gen. No. 85-43.

Investment motive removes deposits from category of deposit which may be accepted pursuant to former Code 1933, § 41A-1102 (see now O.C.G.A. § 7-1-241 ). 1980 Op. Att'y Gen. No. 80-108.

Investment programs offered jointly by banks and brokerage firms. — Brokerage firm is not prohibited, by virtue of O.C.G.A. T. 7, C. 1, Art. 2 and O.C.G.A. § 7-1-241 , from offering, in conjunction with a bank, an investment program whereby the brokerage permits customers to maintain special accounts and receives and transmits money in connection with such accounts. 1981 Op. Att'y Gen. No. 81-59.

Actions of a bank, participating with a brokerage in offering a particular type of investment program, do not constitute the business of banking in violation of O.C.G.A. § 7-1-241 or O.C.G.A. § 7-1-604 . 1981 Op. Att'y Gen. No. 81-59.

Programs proposed to be offered by a brokerage firm, which would be directly involved in soliciting funds from the public primarily for the purpose of facilitating the making of deposits and the earning of interest, would be prohibited by O.C.G.A. § 7-1-241(a) . 1988 Op. Att'y Gen. No. 88-10.

Issuance by corporations of debt securities redeemable by check. — Arrangement by which business corporation would receive money from individuals and in return issue to the individuals its debt securities redeemable by negotiable checks would involve “receiving deposits” within the meaning of O.C.G.A. § 7-1-4(7) , and only persons or entities authorized to engage in the banking business by O.C.G.A. § 7-1-241 may lawfully engage in such arrangements. 1982 Op. Att'y Gen. No. 82-68.

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, § 19.

C.J.S.

9 C.J.S., Banks and Banking, § 5 et seq.

ALR.

Power of banking corporation to loan money for others, 33 A.L.R. 597 .

Duty and liability of bank under agreement to remit money or establish credit, 27 A.L.R. 1488 ; 45 A.L.R. 1052 ; 69 A.L.R. 673 .

Licensing and regulation of business of transmitting funds to foreign countries, 94 A.L.R.2d 496.

7-1-242. Restriction on corporate fiduciaries.

  1. No corporation, partnership, or other entity may lawfully act as a fiduciary in this state except:
    1. A financial institution authorized to act in such capacity pursuant to the provisions of Georgia law;
    2. A trust company;
    3. A national bank or a state bank lawfully doing a banking business in this state and authorized to act as a fiduciary under the laws of the United States or another state;
    4. A savings bank or savings and loan association lawfully doing a banking business in this state and authorized to act as a fiduciary under the laws of the United States or another state;
    5. Attorneys at law licensed to practice in this state, whether organized as a professional corporation or otherwise;
    6. An investment adviser registered pursuant to the provisions of 15 U.S.C. Section 80b-3 or Chapter 5 of Title 10, provided that this exception shall not authorize an investment adviser to act in any fiduciary capacity subject to the provisions of Title 53, relating to wills, trusts, and the administration of estates, or Title 29, relating to guardianships and conservatorships;
    7. A securities broker or dealer registered pursuant to the provisions of 15 U.S.C. Section 78o or Chapter 5 of Title 10 acting in such fiduciary capacity incidental to and as a consequence of its broker or dealer activities; or
    8. A nonprofit corporation.
  2. Acting as a fiduciary for purposes of this Code section includes but is not limited to:
    1. Accepting or executing trusts or otherwise acting as a trustee;
    2. Administering real or tangible personal property located in Georgia or elsewhere. For the purposes of this paragraph, “administer” means to possess, purchase, sell, lease, insure, safekeep, manage, or otherwise oversee; and
    3. Acting pursuant to a court order as personal representative, executor, or administrator of the estate of a deceased person or as guardian or conservator for a minor or incapacitated person.
  3. Nothing in this chapter shall be construed to repeal or to change Article 15 of Chapter 12 of Title 53 or any other statutes or rules of law on such subject.

History. Code 1933, § 109-302.1, enacted by Ga. L. 1973, p. 525, § 1; Code 1933, § 41A-1103, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1980, p. 972, §§ 5, 6; Ga. L. 1981, p. 1366, § 4; Ga. L. 1990, p. 301, § 2; Ga. L. 1991, p. 810, § 2; Ga. L. 1998, p. 795, § 13; Ga. L. 2004, p. 631, § 7; Ga. L. 2008, p. 381, § 3/SB 358; Ga. L. 2010, p. 579, § 2/SB 131.

Cross references.

Substitution of parties to contracts generally, § 13-4-20 .

Impossibility as excuse for nonperformance, § 13-4-21 .

JUDICIAL DECISIONS

Legislative intent. —

It was not the intent of the General Assembly in enacting former Code 1933, § 41A-1103 (see now O.C.G.A. § 7-1-242 ) to repeal former Code 1933, § 22-5503 (see now O.C.G.A. § 14-5-42 ). McGonagle v. Duncan, 244 Ga. 308 , 260 S.E.2d 44 , 1979 Ga. LEXIS 1218 (1979).

OPINIONS OF THE ATTORNEY GENERAL

Applicability to facilities conducting only trust business. — Branch banking and bank holding company restrictions apply to bank facilities conducting only trust business. 1980 Op. Att'y Gen. No. 80-156.

State-chartered credit unions not custodians of retirement funds. — State-chartered credit unions may not act as a custodian or trustee for retirement funds under the Employee Retirement Income Security Act of 1974. 1975 Op. Att'y Gen. No. 75-56.

Applicability to investment advisors. — Term “fiduciary” as used in O.C.G.A. § 7-1-242 includes the specific persons or entities identified in O.C.G.A. § 7-1-4(20) as well as other persons or entities who take possession of or title to assets of others or exercise control over such assets for the purpose of managing those assets. This definition of fiduciary and the restrictions of O.C.G.A. § 7-1-242 would also apply to corporate investment advisers who, in addition to offering advice for sale, also take custody of or exercise control over the customers’ assets for the purpose of administering those assets, but this opinion does not address the issue of whether the restrictions of O.C.G.A. § 7-1-242 apply to a securities dealer who, incidental to the trading of securities, may hold uninvested client funds and securities subject to customer instruction and directives. 1989 Op. Att'y Gen. 89-25.

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, §§ 19, 23.

C.J.S.

9 C.J.S., Banks and Banking, §§ 222, 223.

7-1-243. Restrictions on banking and trust nomenclature.

  1. Except as provided in subsection (c) of this Code section, no person or corporation except a bank, a national bank, a bank as defined in Code Section 7-1-628.1, a corporation lawfully owning the majority of the voting stock of a bank, a national bank, or a bank as defined in Code Section 7-1-628.1, or a subsidiary of such bank, national bank, bank as defined in Code Section 7-1-628.1, or corporation shall use the words “bank,” “banker,” “banking company,” “banking house,” or any other similar name indicating that the business done is that of a bank upon any sign at its place of business or elsewhere, or upon any of its letterheads, billheads, blank checks, blank notes, receipts, certificates, circulars, advertisements, or any other written or printed matter.

    (a.1) Except as provided in subsection (c) of this Code section, no person or corporation except a credit union, a federal credit union, or credit union chartered by another state whose deposits are federally insured, or a subsidiary of such credit union, federal credit union, or credit union chartered by another state whose deposits are federally insured shall use the words “credit union,” or any other similar name indicating that the business done is that of a credit union upon any sign at its place of business or elsewhere, or upon any of its letterheads, billheads, blank checks, blank notes, receipts, certificates, circulars, advertisements, or any other written or printed matter.

  2. Except as provided in subsection (c) of this Code section, no person or corporation except:
    1. A corporation lawfully authorized to exercise trust powers or any subsidiary thereof;
    2. A corporation lawfully owning the majority of the voting stock of any corporation authorized to exercise trust powers, or any subsidiary of such owner corporation;
    3. An enterprise whose structure is in the nature of a trust where the trustees include a corporation lawfully authorized to exercise trust powers in this state; or
    4. An eleemosynary institution

      shall use the words “trust” or “trust company” or any similar name indicating that the business done is that of a trust company upon any sign at its place of business or elsewhere, or upon any of its letterheads, billheads, blank checks, blank notes, receipts, certificates, circulars, advertisements, or any other written or printed matter.

  3. Nothing in this Code section shall be construed to:
    1. Prevent the use of the words “banks,” “banker,” “banking,” “banker’s,” “trust,” or any similar word in a context clearly not purporting to refer to a banking or a trust business or to a business primarily engaged in the lending of money, underwriting or sale of securities, acting as a financial planner, financial service provider, investment or trust adviser, or acting as a loan broker;

      (1.1) Prevent the use of the words “credit union,” or any similar word in a context clearly not purporting to refer to a credit union or to a business primarily engaged in the lending of money, or accepting shares or deposits or acting as a loan broker;

    2. Prohibit advertisement in media distributed in or transmitted into this state by persons or corporations lawfully engaged in the banking, credit union, or trust business outside of this state; or
    3. Prevent any person or corporation from continuing to use its name legally in use on April 1, 1989.
  4. The department shall advise the Secretary of State of any corporate name or proposed corporate name it deems to be inconsistent with this Code section.

History. Ga. L. 1927, p. 344, §§ 1, 2; Code 1933, § 109-502; Ga. L. 1974, p. 463, § 1; Code 1933, § 41A-1104, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1978, p. 1717, § 3; Ga. L. 1981, p. 1366, § 5; Ga. L. 1989, p. 1257, § 2; Ga. L. 1999, p. 674, § 3; Ga. L. 2009, p. 86, § 4/HB 141; Ga. L. 2010, p. 878, § 7/HB 1387; Ga. L. 2018, p. 214, § 4/HB 780; Ga. L. 2021, p. 323, § 3/HB 111.

The 2018 amendment, effective May 3, 2018, inserted “or a subsidiary of such credit union or federal credit union” in the middle of subsection (a.1). See Editor’s notes for applicability.

The 2021 amendment, effective July 1, 2021, substituted “a national bank, a bank as defined in Code Section 7-1-628.1, a corporation lawfully owning the majority of the voting stock of a bank, a national bank, or a bank as defined in Code Section 7-1-628.1, or a subsidiary of such bank, national bank, bank as defined in Code Section 7-1-628.1,” for “a national bank, or a corporation lawfully owning the majority of the voting stock of a bank or national bank or a subsidiary of such bank, national bank” in subsection (a); and, in subsection (a.1), substituted “a credit union, a federal credit union, or credit union chartered by another state whose deposits are federally insured, or a subsidiary of such credit union, federal credit union, or credit union chartered by another state whose deposits are federally insured” for “a credit union or a federal credit union or subsidiary of such credit union or federal credit union”.

Cross references.

Further regulations pertaining to use of names by financial institutions, § 7-1-130 .

Editor’s notes.

Ga. L. 2018, p. 214, § 26(b)/HB 780, not codified by the General Assembly, provides that: “It is not the intent of the General Assembly to affect the law applicable to litigation pending as of March 9, 2018.”

OPINIONS OF THE ATTORNEY GENERAL

Open-end investment fund not engaged in banking may use term “trust”. — When open-end investment fund is not engaged in the banking business in this state, use of the term “trust” does not violate former Code 1933, § 41A-1104. 1975 Op. Att'y Gen. No. 75-92.

Name did not indicate that trust company business was conducted. — Use of the name Fidelity Daily Income Trust by a duly organized business trust does not indicate that the business being done by the fidelity is that of a “trust company”; therefore, fidelity is not in violation of former Code 1933, § 41A-1104 (see now O.C.G.A. § 7-1-243 ). 1975 Op. Att'y Gen. No. 75-92.

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, § 183.

C.J.S.

9 C.J.S., Banks and Banking, § 43.

ALR.

Modern status of the Massachusetts or business trust, 88 A.L.R.3d 704.

7-1-244. Deposit insurance requirements; public notices when deposits not properly insured.

  1. Every bank shall obtain and maintain deposit insurance satisfactory to the department; provided, however, that banks which have had their deposit insurance withdrawn or canceled may, in the discretion of the department, continue to accept deposits; provided, further, that such banks shall within six months after such withdrawal or cancellation of insurance obtain deposit insurance, satisfactory to the department, written by an insurance company authorized to transact business in this state or by the Federal Deposit Insurance Corporation. The department may, in its discretion, for cause shown, extend the time limitation in which deposit insurance must be obtained.
  2. Deposit insurance required to be obtained in subsection (a) of this Code section need not be in excess of amounts insured by the Federal Deposit Insurance Corporation at the time the insurance is obtained; but wherever the insurance coverage is, in the opinion of the department, less than amounts insured by the Federal Deposit Insurance Corporation, the bank shall be required to post at a conspicuous place near the entrance of such bank a sign in boldface print, in letters at least four inches high, which states “Deposits Not Insured” or “Deposits Insured Up To (insert amount of deposit insurance).” Such wording shall also follow the name of the bank wherever it is written or printed and shall be posted in writing which is easily legible in letters at least one inch high at each window or desk receiving deposits.

History. Ga. L. 1966, p. 692, § 17; Code 1933, § 41A-1105, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2020, p. 493, § 7/SB 429.

The 2020 amendment, effective July 29, 2020, part of an Act to revise, modernize, and correct the Code, substituted “provided, further, that such” for “provided, further, such” in the second proviso of subsection (a).

Cross references.

Restrictions on advertising for sale instruments purporting to be insured or guaranteed in manner comparable to insured deposit or shared account when such instrument does not in fact possess comparable insurance coverage, § 7-1-133 .

For similar provisions as to deposit insurance requirements for credit unions, § 7-1-666 .

For similar provisions pertaining to building and loan association deposit insurance requirements, § 7-1-797 .

RESEARCH REFERENCES

Am. Jur. 2d.

11 Am. Jur. 2d, Banks and Financial Institutions, §§ 1086, 1087.

C.J.S.

9 C.J.S., Banks and Banking, § 25.

ALR.

Insurance of bank or trust company against loss by burglary or robbery as covering contents of safety deposit boxes rented to customers, 30 A.L.R. 623 .

Liability on bond for security of public funds deposited in banks as affected by form of transaction, or nature or validity of deposit, 65 A.L.R. 798 .

Purchaser or holder of draft, cashier’s check or certified check as a depositor within statutes relating to guaranty or insurance of deposits or deposit liability, 111 A.L.R. 228 .

Circumstances under which federal appellate court will allow Federal Deposit Insurance Corporation (FDIC) or Resolution Trust Corporation (RTC) to raise on appeal issues not raised at trial involving financial institution put in receivership or conservatorship after trial, 120 A.L.R. Fed. 469.

Determination, under 12 USCS § 1821(f), of disputes concerning insured nature of deposits as entitled to Federal Deposit Insurance Protection, 120 A.L.R. Fed. 485.

PART 2 General Powers of Banks and Trust Companies

RESEARCH REFERENCES

ALR.

Duty of bank when several checks which, in the aggregate, exceed the depositor’s balance, are presented at the same time, 26 A.L.R. 1486 ; 66 A.L.R. 404 ; 109 A.L.R. 858 ; 114 A.L.R. 518 .

Liability of bank for loss of liberty bonds and war savings stamps, 40 A.L.R. 899 .

Right of savings bank to liquidate voluntarily and close business, 69 A.L.R. 1255 .

Liability for interest or profits on funds of estate deposited in bank or trust company which is itself executor, administrator, trustee, or guardian, or in which executor, is interested, 88 A.L.R. 205 .

Statute regulating banks and trust companies as special or class legislation, or as denying the equal protection of the laws, 111 A.L.R. 140 .

7-1-260. General corporate powers.

Subject to restrictions contained in this chapter or in its articles, a bank or trust company shall have the power:

  1. To have perpetual duration unless a limited period of duration is stated in its articles. Each bank or trust company existing on April 1, 1975, shall have perpetual duration unless its articles are amended under this chapter to provide for a limited period of duration;
  2. To sue and be sued, complain and defend in its corporate name;
  3. To have a corporate seal, which may be altered at pleasure, and to use the same by causing it or a facsimile thereof to be impressed or affixed or in any manner reproduced;
  4. To adopt, alter, and repeal bylaws pursuant to the procedures of Code Section 7-1-481 containing provisions for the regulation and management of affairs of the institution not inconsistent with law or its articles;
  5. To elect or appoint and remove officers and agents of the institution and to define their duties and fix their compensation;
  6. To make contracts;
  7. To make, irrespective of corporate benefit, loans, investments, contributions, and donations for community development and the promotion of the public welfare or for other religious, charitable, scientific, educational, hospital, civic, or similar purposes and in time of war or other national emergency in aid of the national effort with respect thereto;
  8. At the request or direction of the United States government or any public body thereof, to transact lawful business in time of war or national emergency in aid of the national effort in connection therewith;
  9. To procure, for its benefit, insurance on the life of any of its directors, officers, or employees or any other person whose death might cause financial loss to the bank or trust company; or, pursuant to any contract lawfully obligating the bank or trust company as guarantor or surety, on the life of the principal obligor; and
  10. To reimburse and indemnify litigation, liabilities, and expenses of directors, officers, and employees pursuant to agreements with them or otherwise and to purchase and maintain liability insurance for their benefit unless otherwise limited pursuant to this chapter.

History. Ga. L. 1898, p. 78, § 3; Civil Code 1910, § 2817; Ga. L. 1917, p. 56, § 1; Ga. L. 1919, p. 135, art. 17, § 1; Ga. L. 1920, p. 76, § 1; Code 1933, §§ 13-1801, 109-201; Code 1933, § 41A-1201, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1989, p. 946, § 67; Ga. L. 1989, p. 1257, § 3; Ga. L. 1995, p. 673, § 11.

Editor’s notes.

The amendment to this Code section by Ga. L. 1989, p. 946, § 67, was superseded by the amendment by Ga. L. 1989, p. 1257, § 3, which was enacted later.

JUDICIAL DECISIONS

Operation of a general insurance agency does not qualify as an “incidental power” as it is not convenient or useful in connection with one of the bank’s activities established pursuant to the exercise of the bank’s express powers. The business of a general insurance agency encompasses selling various types of insurance to the general public. In operating such an agency, a bank would be engaged in an independent, profit-seeking venture unrelated to the bank’s express powers. Independent Ins. Agents of Ga., Inc. v. Department of Banking & Fin., 248 Ga. 787 , 285 S.E.2d 535 , 1982 Ga. LEXIS 647 (1982).

OPINIONS OF THE ATTORNEY GENERAL

Banking corporations of this state may not make political contributions. 1970 Op. Att'y Gen. No. 70-144.

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, § 595 et seq.19 Am. Jur. 2d, Corporations, §§ 1979 et seq., 2071.

C.J.S.

9 C.J.S., Banks and Banking, §§ 222, 223.

ALR.

Right of setoff by or against bank or trust company as affected by division of its business into departments, 81 A.L.R. 1508 .

Power of bank or trust company with respect to assistance of or cooperation with another bank financially embarrassed, 84 A.L.R. 1425 .

Trust company’s agreement to repay in cash principal of trust fund investment as ultra vires, 96 A.L.R. 453 .

Dealings between bank or trust company and itself acting as executor, administrator, or trustee, 112 A.L.R. 780 .

Power of savings bank or similar institution to provide checking facilities or negotiable orders of withdrawal (NOW) to customers, 64 A.L.R.3d 1314.

7-1-261. Additional operational powers.

Banks and trust companies shall, in addition, have the power:

  1. To act as agent of the United States or any public body thereof for the sale or issue of bonds, notes, or other obligations of the United States, or those for which the full faith and credit of the United States is pledged, and to grant security interests in its assets for the faithful performance of its duties as agent;
  2. To receive for safekeeping or to rent out receptacles or safe-deposit boxes for the deposit of papers and other personal property;
  3. To grant security interests in their assets for borrowings authorized by this chapter and to dispose of their assets in the same manner as corporations generally;
  4. To give bond in any proceeding in any court in which they are a party or upon any appeal in any such proceeding and to secure such bond;
  5. To acquire and hold real property to the extent permitted by Code Sections 7-1-262, 7-1-282, and 7-1-286;
  6. To acquire and hold stocks and investment securities subject, in the case of banks, to the restrictions of Code Sections 7-1-287 and 7-1-288 and, in the case of trust institutions, to the restrictions of Code Section 7-1-312;
  7. To acquire and hold personal property necessary in the exercise of powers conferred by this chapter;
  8. To acquire and hold any property in order to avoid loss on an evidence of indebtedness, agreement for the payment of money, or an investment security previously acquired lawfully and in good faith subject to the restrictions of Code Section 7-1-263;
  9. To hold property lawfully held on April 1, 1975, irrespective of any restriction or limitation in this chapter, subject to the inclusion of any such property in any computation of limitation on the acquisition of property of like character under this chapter;
  10. To enter into an agency relationship as defined in Code Section 7-1-4 subject to restrictions and qualifications prescribed by regulations of the department; and
  11. To have and exercise all powers necessary, convenient, or incidental to effect any and all purposes for which the bank or trust company and its subsidiaries and affiliates is organized, provided that the commissioner may establish approval procedures by regulation for additional powers as needed to satisfy the objectives of this chapter. Powers shall include but not be limited to: sale of securities, annuities, and other investment products upon the order of and for the account of its customers, subject to applicable federal or state securities requirements; sale of insurance subject to state insurance laws, regulations, and licensing requirements, applicable federal laws, and departmental regulations and policies; sale or lease of excess computer capacity; expansion of customer services through the use of technology; other powers including those bank and trust powers authorized to subsidiaries of the bank or trust company pursuant to subparagraph (c)(2)(F) of Code Section 7-1-288; and other such powers to carry on banking, trust, or other activities determined by the commissioner to be financial in nature or incident or complementary to such financial activities and consistent with the objectives of this chapter and the regulations of the department.

History. Ga. L. 1898, p. 78, § 3; Civil Code 1910, § 2817; Ga. L. 1917, p. 56, § 1; Ga. L. 1919, p. 135, art. 17, § 1; Ga. L. 1920, p. 76, § 1; Code 1933, §§ 13-1801, 109-201; Code 1933, § 13-1802, enacted by Ga. L. 1968, p. 1044, § 1; Code 1933, § 41A-1202, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1983, p. 602, § 4; Ga. L. 1989, p. 1249, § 2; Ga. L. 1995, p. 673, § 12; Ga. L. 1996, p. 6, § 7; Ga. L. 1997, p. 485, § 11; Ga. L. 2000, p. 174, § 4.

Code Commission notes.

Pursuant to Code Section 28-9-5, in 1997, commas were deleted preceding and following “and its subsidiaries and affiliates” in the first sentence in paragraph (11).

Law reviews.

For survey article on insurance, see 34 Mercer L. Rev. 177 (1982).

JUDICIAL DECISIONS

Section 33-3-23 and paragraph (10), (now paragraph (11)), must be construed in pari materia. —

O.C.G.A. § 33-3-23 and O.C.G.A. § 7-1-261(10) , (now paragraph (11)) were enacted at the same legislative session and relate to the same subject matter — permissible scope of bank’s powers — and must, therefore, be construed in pari materia. Department of Banking & Fin. v. Independent Ins. Agents of Ga., Inc., 158 Ga. App. 556 , 281 S.E.2d 265 , 1981 Ga. App. LEXIS 2305 (1981), rev'd, 248 Ga. 787 , 285 S.E.2d 535 , 1982 Ga. LEXIS 647 (1982).

Approval of proposed exercises of incidental powers guided by § 7-1-3(a)(6). —

O.C.G.A. § 7-1-261 establishes legislative intent that state banks be authorized to exercise “incidental powers” and delegates authority to approve such powers to the commissioner, who shall be guided in this determination by the statutory objective stated in O.C.G.A. § 7-1-3(a)(6) of making state banks competitive with national banks. Department of Banking & Fin. v. Independent Ins. Agents of Ga., Inc., 158 Ga. App. 556 , 281 S.E.2d 265 , 1981 Ga. App. LEXIS 2305 (1981), rev'd, 248 Ga. 787 , 285 S.E.2d 535 , 1982 Ga. LEXIS 647 (1982).

General words following list of particulars are construed to embrace only objects similar in nature to particulars. Independent Ins. Agents of Ga., Inc. v. Department of Banking & Fin., 248 Ga. 787 , 285 S.E.2d 535 , 1982 Ga. LEXIS 647 (1982).

Operation of general insurance agency does not qualify as “incidental power” as it is not convenient or useful in connection with one of the bank’s activities established pursuant to the exercise of the bank’s express powers. The business of a general insurance agency encompasses selling various types of insurance to the general public. In operating such an agency, a bank would be engaged in an independent, profit-seeking venture unrelated to the bank’s express powers. Independent Ins. Agents of Ga., Inc. v. Department of Banking & Fin., 248 Ga. 787 , 285 S.E.2d 535 , 1982 Ga. LEXIS 647 (1982).

OPINIONS OF THE ATTORNEY GENERAL

Sale of data processing equipment and technology services by bank to other banks is authorized. 1974 Op. Att'y Gen. No. 74-121.

Banking corporations of this state may not make political contributions. 1970 Op. Att'y Gen. No. 70-144.

State trust company may establish foreign branch office for purpose of developing new international business. 1970 Op. Att'y Gen. No. 70-59.

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, § 595 et seq.19 Am. Jur. 2d, Corporations, §§ 1979 et seq., 2071.

C.J.S.

9 C.J.S., Banks and Banking, §§ 222, 223.

ALR.

Levy upon or garnishment of contents of safety deposit box, 19 A.L.R. 863 ; 39 A.L.R. 1215 .

Insurance of bank or trust company against loss by burglary or robbery as covering contents of safety deposit boxes rented to customers, 30 A.L.R. 623 .

Liability for loss of contents of safe-deposit box, 42 A.L.R. 1304 ; 133 A.L.R. 279 .

Power of bank or trust company with respect to assistance of or cooperation with another bank financially embarrassed, 84 A.L.R. 1425 .

Trust company’s agreement to repay in cash principal of trust fund investment as ultra vires, 96 A.L.R. 453 .

Power of bank or trust company to create trust out of its securities and sell participation certificates therein, 97 A.L.R. 1182 .

Presumption as to ownership of property in safe deposit box, 101 A.L.R. 832 .

Dealings between bank or trust company and itself acting as executor, administrator, or trustee, 112 A.L.R. 780 .

Power of savings bank or similar institution to provide checking facilities or negotiable orders of withdrawal (NOW) to customers, 64 A.L.R.3d 1314.

7-1-262. Power to hold real estate; prior approval of acquisitions.

  1. A bank or trust company may solely or jointly with other persons or corporations acquire and hold such real property as it:
    1. Occupies or intends to occupy primarily for the transaction of its business, the business of any subsidiary or affiliate, or the recreational use of its employees or partly so occupies and partly leases;
    2. Acquires for the purpose of providing parking or other facilities primarily for the use of its tenants, customers, officers, and employees; or
    3. Acquires with others for the purpose of providing data processing facilities or other support services for the bank or trust company or any subsidiary solely or in cooperation with others,

      subject to the limitation that the investment of the bank or trust company in all such real property, in all furniture, fixtures, and equipment acquired in connection with any real property owned or leased by the bank or trust company, in all alterations of buildings on real property owned or leased by the bank or trust company, in all shares of corporations organized for the purpose of holding real estate in the categories described above where the bank or trust company or a subsidiary of the bank or trust company owns 25 percent or more of such shares outstanding, in obligations of or for the benefit of such corporations or loans upon the security of the shares of such corporations or, to the extent of the bank’s or trust company’s pro rata interest, the security of the real estate itself, and in all real estate, furniture, fixtures, or equipment held beyond the limits specified in Code Section 7-1-263 shall not exceed 60 percent of the statutory capital base of the bank or trust company, or such larger amount as may be approved by the department.

  2. All acquisitions of real property for purposes authorized above must be accorded prior written approval by the department in advance of the acquisition except to the extent authorized by regulation.

History. Ga. L. 1898, p. 78, § 3; Civil Code 1910, § 2817; Ga. L. 1917, p. 56, § 1; Ga. L. 1919, p. 135, art. 19, § 24; Ga. L. 1920, p. 76, § 1; Code 1933, §§ 13-2024, 109-201; Ga. L. 1963, p. 512, § 1; Ga. L. 1972, p. 1242, § 1; Code 1933, § 41A-1203, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 16; Ga. L. 1989, p. 1249, § 3.

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, § 600 et seq.

C.J.S.

9 C.J.S., Banks and Banking, § 239.

7-1-263. Property held to avoid loss.

A bank or trust company may acquire and hold property for the purpose of avoiding loss as specified in paragraph (8) of Code Section 7-1-261, subject to:

  1. A determination by a majority vote of its directors at least once each year as to the advisability of retaining any such property, provided that no such property may be held for more than five years without the prior written approval of the department; and
  2. Disposition within a period of six months after the date of acquisition or such longer period as the department may approve in writing of shares of its own stock so acquired and of shares of stock of any bank, bank holding company, or trust company held after such acquisition.

History. Ga. L. 1898, p. 78, § 3; Civil Code 1910, § 2817; Ga. L. 1917, p. 56, § 1; Ga. L. 1919, p. 135, art. 19, §§ 22-24; Ga. L. 1920, p. 76, § 1; Ga. L. 1924, p. 76, § 1; Ga. L. 1927, p. 195, § 10; Code 1933, §§ 13-2022, 13-2023, 13-2024, 109-201; Ga. L. 1946, p. 65, § 1; Ga. L. 1947, p. 501, § 1; Ga. L. 1950, p. 18, § 1; Ga. L. 1951, p. 284, § 1; Ga. L. 1957, p. 275, § 1; Ga. L. 1958, p. 133, § 1; Ga. L. 1959, p. 238, § 1; Ga. L. 1962, p. 95, § 1; Ga. L. 1963, p. 512, § 1; Ga. L. 1965, p. 523, § 1; Ga. L. 1966, p. 590, § 8; Ga. L. 1968, p. 1162, § 1; Ga. L. 1969, p. 976, § 1; Ga. L. 1972, p. 1242, § 1; Code 1933, § 41A-1204, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1981, p. 1366, § 6.

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, § 600 et seq.

C.J.S.

9 C.J.S., Banks and Banking, § 239.

ALR.

Liability of bank for loss of liberty bonds and war savings stamps, 40 A.L.R. 899 .

PART 3 Powers of Banks

RESEARCH REFERENCES

ALR.

Powers of bank president or vice president, 1 A.L.R. 693 ; 67 A.L.R. 970 .

Duty of bank when several checks which, in the aggregate, exceed the depositor’s balance, are presented at the same time, 26 A.L.R. 1486.

Power of banking corporation to loan money for others, 33 A.L.R. 597 .

Rights of owners of securities deposited in bank, upon its insolvency, 51 A.L.R. 914 ; 84 A.L.R. 1534 ; 126 A.L.R. 625 .

Right of savings bank to liquidate voluntarily and close business, 69 A.L.R. 1255 .

Statute regulating banks and trust companies as special or class legislation, or as denying the equal protection of the laws, 111 A.L.R. 140 .

Power of bank officer respecting security or collateral held by bank, 11 A.L.R.2d 1305.

7-1-280. Major banking powers.

Subject to restrictions contained in this chapter or in its articles, a bank shall have the power:

  1. To receive money or commercial paper for deposit and to provide by its rules or by agreement for the terms of withdrawal and interest thereon;
  2. To act as an agent to collect checks, drafts, and other items of commercial paper and in exercising this power to become a member of a clearing-house and grant security interests in its assets for its qualification therein;
  3. To lend money and discount or purchase evidence of indebtedness and agreements for the payment of money and to take security title or security interests in real or personal property to secure obligations owing thereunder;
  4. To service loans made by it or by others whether or not held by the bank;
  5. To issue, advise, and confirm letters of credit authorizing the beneficiaries thereof to draw upon the bank or its correspondents;
  6. To receive money for transmission;
  7. To buy and sell exchange, coin, and bullion; and
  8. To provide third-party payments services.

History. Ga. L. 1919, p. 135, art. 17, § 1; Code 1933, § 13-1801; Code 1933, § 41A-1301, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1985, p. 258, § 4; Ga. L. 1986, p. 458, § 5.

Cross references.

Definition of “clearing-house” for purposes of the Uniform Commercial Code, § 11-4-104 .

Definition of “collecting bank” for purposes of the Uniform Commercial Code, § 11-4-105 .

For provisions of T. 11, the Uniform Commercial Code, pertaining to letters of credit generally, § 11-5-101 et seq.

Effect of laws relating to regulation of practice of law on power of banks to give advice to customers in matters incidental to banks or banking, § 15-19-52 .

JUDICIAL DECISIONS

Operation of general insurance agency does not qualify as “incidental power” as it is not convenient or useful in connection with one of the bank’s activities established pursuant to the exercise of the bank’s express powers. The business of a general insurance agency encompasses selling various types of insurance to the general public. In operating such an agency, a bank would be engaged in an independent, profit-seeking venture unrelated to the bank’s express powers. Independent Ins. Agents of Ga., Inc. v. Department of Banking & Fin., 248 Ga. 787 , 285 S.E.2d 535 , 1982 Ga. LEXIS 647 (1982).

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, § 595 et seq.

Am. Jur. Proof of Facts. —

Damages for Brach of Contract to Lend Money, 41 POF2d 337.

C.J.S.

9 C.J.S., Banks and Banking, §§ 222, 223.

ALR.

Liability of bank on letter of credit as affected by quality or condition of goods for purchase price of which it is issued, 39 A.L.R. 755 .

Liability of collecting bank which accepts something other than cash, 61 A.L.R. 739 ; 89 A.L.R. 1336 .

Misappropriation by agent or employee of bank of proceeds of loan made through him to third person as chargeable to bank or to borrower, 69 A.L.R. 804 .

What amounts to a deposit within statute in relation to civil or criminal liability for accepting deposit when bank is unsafe or insolvent, 76 A.L.R. 1320 .

Financial statement by borrower as basis of loan or extension of credit, 104 A.L.R. 921 .

Dealings between bank or trust company and itself acting as executor, administrator, or trustee, 112 A.L.R. 780 .

Power of bank to agree to repurchase real estate mortgage or other securities sold by it, 120 A.L.R. 485 .

Noncompliance by bank with statutory provisions relating to loans or discounts as defense to recovery of loan or enforcement of its security, 125 A.L.R. 1512 .

Power and capacity of bank to take devise or bequest, 8 A.L.R.2d 454.

Power of savings bank or similar institution to provide checking facilities or negotiable orders of withdrawal (NOW) to customers, 64 A.L.R.3d 1314.

Measure of damages for breach of contract to lend money, 4 A.L.R.4th 682.

Recovery by bank of money paid out to customer by mistake, 10 A.L.R.4th 524.

Bank’s liability to real property purchaser for misrepresentation respecting purchaser’s obtaining government guaranteed or subsidized loan, 37 A.L.R.4th 773.

7-1-281. Participation in federal programs.

Any bank may:

  1. Become a member of the Federal Reserve System and conform to the rules and regulations of that system and the federal reserve bank of which it is a member;
  2. Become an insured bank pursuant to the Federal Deposit Insurance Act and take all action necessary to the maintenance of insured status thereunder;
  3. Apply for and obtain insurance on loans pursuant to national housing legislation.

History. Ga. L. 1919, p. 135, art. 19, § 38; Code 1933, § 13-2038; Code 1933, § 41A-1302, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 17; Ga. L. 1984, p. 22, § 7.

U.S. Code.

The Federal Deposit Insurance Act, referred to in paragraph (2) of this Code section, is codified as 12 U.S.C. §§ 1728, 1811 et seq.

7-1-282. Direct leasing of personal and real property.

Notwithstanding any other provision of law to the contrary and subject to such regulations as the department may prescribe, a bank may:

  1. Become the owner and lessor of personal property acquired upon the specific request and for the use of a customer and may incur such additional obligations as may be incident to becoming an owner and lessor of such property. At the end of any lease, the bank shall, within six months, enter into a new lease with respect to the property or dispose of it. The leasing shall constitute an indebtedness under Code Section 7-1-285 and shall be subject to the lending limitations of such Code section;
  2. Become the owner and lessor of certain public real property and facilities. A bank may purchase or construct a municipal building, school building, or other similar state, local, or other governmental authority facility if, as holder of legal title, such purchase is for the purpose of leasing the facility to a municipality or other public or governmental authority which has the authority to enter into such lease, is authorized to levy taxes or is backed by the taxing authority of another political subdivision, and has the resources sufficient to make lease payments as they come due. The lease agreement must provide that the lessee will become the owner of the building or facility upon the expiration of the lease; and
  3. Become the owner and lessor of real property acquired upon the specific request and for the use of a customer or an affiliate thereof and may incur such additional obligations as may be incidental to becoming an owner and lessor of such property. The lessee, or an affiliate thereof, shall be responsible for any and all construction of buildings or other improvements related to such real property. Any lease with respect to such real property shall provide that the lessee thereof shall be responsible for maintaining the property, insuring the property, and paying real estate taxes related to the property. At the end of any lease, the bank shall, within six months, enter into a new lease with respect to the property or dispose of it. The leasing shall be subject to credit approval by the bank in a manner substantially similar to a loan and shall constitute an indebtedness under Code Section 7-1-285 and shall be subject to the lending limitations of such Code section. The assignment of any purchase contract, or the right to purchase real property thereunder, by the lessee or an affiliate thereof to the bank shall not affect the entitlement of any real estate broker to any real estate brokerage commissions owing upon the sale of such real property.

History. Ga. L. 1919, p. 135, art. 19, § 22; Code 1933, § 13-2022; Ga. L. 1966, p. 590, § 8; Code 1933, § 41A-1303, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1999, p. 674, § 4; Ga. L. 2000, p. 174, § 5; Ga. L. 2001, p. 4, § 7; Ga. L. 2004, p. 458, § 3.

7-1-283. Participations.

  1. A bank may purchase and may sell participations in:
    1. One or more evidences of indebtedness or agreements for the payment of money, subject to regulations by the department; or
    2. Pools of evidences of indebtedness or agreements for the payment of money, subject to regulations by the department.
  2. The department may prohibit the sale of any type of participation to the public or otherwise not in the usual course of banking business, except as permitted by other provisions of this chapter.

History. Code 1933, § 41A-1304, enacted by Ga. L. 1974, p. 705, § 1.

RESEARCH REFERENCES

ALR.

Power of bank or trust company to create trust out of its securities and sell participation certificates therein, 97 A.L.R. 1182 .

7-1-284. Acceptances.

  1. A bank may accept drafts upon it having not more than nine months’ sight to run arising out of transactions involving:
    1. The import or export of goods;
    2. The domestic shipment of goods, if secured by documents of title covering such goods; or
    3. The storage of readily marketable staples, if secured by documents of title covering such staples.
  2. The aggregate amount of acceptances under subsection (a) of this Code section shall not at any time exceed, for all such acceptances on behalf of one customer, 15 percent of the statutory capital base of the bank, exclusive of any acceptance secured by documents of title or other security growing out of the same transaction as the acceptance.
  3. In addition, a bank may, with the prior approval of the department, accept drafts having not more than three months’ sight to run drawn upon it by banking institutions or bankers in foreign countries or in dependencies or insular possessions of the United States for the purpose of creating dollar exchange as required in an aggregate amount which shall not at any time exceed:
    1. For all such acceptances on behalf of a single banking institution or banker, 10 percent of the statutory capital base;
    2. For all such acceptances, 50 percent of the statutory capital base, provided that the department may, by regulation, impose additional restrictions on the acceptance of drafts under this subsection.

History. Ga. L. 1919, p. 135, art. 19, § 20; Code 1933, § 13-2020; Code 1933, § 41A-1305, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1976, p. 275, § 1; Ga. L. 1981, p. 1366, § 7; Ga. L. 1983, p. 602, § 5.

Cross references.

Effect of proffered acceptance of draft by drawee which varies draft as presented, § 11-3-412 .

Warehouse receipts, bills of lading, and other documents of title, § 11-7-101 et seq.

RESEARCH REFERENCES

Am. Jur. 2d.

11 Am. Jur. 2d, Bills and Notes, § 379 et seq.

C.J.S.

9 C.J.S., Banks and Banking, §§ 240, 241.

7-1-285. Limits on obligations of one person or corporation.

  1. As used in this Code section, the term:
    1. “Credit exposure as a counterparty in derivative transactions” means an amount that the bank reasonably determines, pursuant to a methodology acceptable to the department under the terms of the derivative or otherwise, would be its loss if a counterparty were to default on the date of determination, taking into account any netting and collateral arrangements and any guarantees or other credit enhancements; provided, however, that the bank may elect to determine credit exposure on the basis of such other method of determining credit exposure as may be permitted by the department and the bank’s primary federal regulator.
    2. “Derivative transaction” includes any transaction that is an agreement, contract, note, option, swap, or warrant that is based, in whole or in part, on the value of, any interest in, or any quantitative measure or the occurrence of any event relating to, one or more commodities, securities, currencies, interest or other rates, indices, or other assets.
    3. “Person or corporation” includes, but is not limited to, an individual, corporation, partnership, trust, association, joint venture, pool, syndicate, sole proprietorship, or unincorporated organization. The term “person or corporation” shall not include the affiliates of a bank or a clearing organization registered or exempt from registration with the Commodity Futures Trading Commission, the Securities and Exchange Commission, any other federal agency, or any successor agencies.

      where the aggregate of such loans, obligations, and credit exposure together exceeds 15 percent of the statutory capital base of the bank at the time of issuance of a binding commitment unless each loan, discount, purchase, or derivative transaction in excess of such 15 percent limit is approved in advance by the board of directors or a committee authorized to act for it subject to the provisions set forth in subsections (b) and (c) of this Code section. Approval by the board of directors or authorized committee shall be recorded in the formal minutes of the actions of the board or its committee by name of borrower, amount of loan, maturity of loan, general type of collateral, and such other information as required pursuant to the rules and regulations of the department. Any action required by this subsection may be taken pursuant to Code Section 7-1-483, provided that the minutes of the proceedings of the board or of the committee reflect such action and each director taking such action signs the minutes reflecting such action by no later than the next regular meeting of the board or committee attended by such director.

    (a.1) A bank shall not at any time:

  2. Except as provided in subsection (c) of this Code section, a bank shall not directly or indirectly make loans, have obligations, or have credit exposure as a counterparty in derivative transactions to any one person or corporation which in aggregate exceed 15 percent of the statutory capital base of the bank at the time of issuance of a binding commitment unless the entire amount of such loans, obligations, and credit exposure in derivative transactions is secured by good collateral or other ample security and does not exceed 25 percent of the statutory capital base at the time of issuance of a binding commitment. Except as otherwise indicated in subsection (c) of this Code section, the purchase or discount of agreements for the payment of money or evidences of indebtedness shall be regarded as indirect loans to the person or corporation receiving the proceeds of such transactions. In estimating the legal lending limit for any one person or corporation, loans to related corporations, partnerships, and other entities shall be combined subject to regulations established by the department.
  3. The limitations of subsection (b) of this Code section shall not apply to:
    1. Obligations of and obligations guaranteed by:
      1. The United States;
      2. The State of Georgia or a public body thereof authorized to levy taxes;
      3. Any state of the United States or any public body thereof if the obligations or guarantees are general obligations; or
      4. Any agency of this state as defined in subparagraph (a)(1)(A) of Code Section 50-14-1;
    2. Obligations to the extent secured by:
      1. Obligations specified in paragraph (3) of this subsection;
      2. Obligations which the bank would be authorized to acquire without limit as investment securities pursuant to Code Section 7-1-287;
      3. Obligations fully guaranteed by the United States;
      4. Guaranties or commitments or agreements to take over or purchase made by any public body of the United States or any corporation owned directly or indirectly by the United States; or
      5. Loan agreements between a local public agency or a public housing agency and an instrumentality of the United States pursuant to national housing legislation under which funds will be provided for payment of the obligations secured by such loan agreements;
    3. Obligations in the form of investment securities acquired pursuant to Code Section 7-1-287 and related regulations;
    4. Obligations with respect to the sale of federal or correspondent funds to financial institutions having their deposits insured to the same extent as that required of similar institutions chartered in this state; and
    5. A renewal or restructuring of a loan as a new loan or extension of credit following the exercise by the bank of reasonable efforts, consistent with safe and sound banking practices, to bring the loan into conformance with the lending limits of this Code section, unless:
      1. New funds are advanced by the bank to the borrower, except as permitted under this Code section;
      2. A new borrower replaces the original borrower; or
      3. The department determines that a renewal or restructuring was undertaken as a means to evade the bank’s lending limit.
  4. In lieu of following the limitations contained in subsections (a) through (c) of this Code section and the related regulations of the department, a bank may petition the department for approval to utilize all of the limitations applicable to national banks regarding obligations of a single person or corporation.
  5. The department may, by regulation not inconsistent with this Code section, prescribe definitions of and requirements for transactions included in or excluded from the indebtedness to which this Code section applies. The department may also by regulation prescribe less restrictive limitations than those listed in subsections (a) through (c) of this Code section for banks meeting certain financial and management criteria. In addition, the department may, by regulation or otherwise, specify that the liabilities of a group of one or more persons or corporations or both shall be considered as owed by one person or corporation for the purposes of this Code section because the borrowers within the group are related through common control or the group meets other criteria established by the department for the combination of indebtedness for legal lending limitation purposes.

(1) Make loans to any one person or corporation;

(2) Have obligations owing to it from any one person or corporation as a result of purchasing or discounting evidences of indebtedness or agreements for the payment of money; or

(3) Have credit exposure as a counterparty in derivative transactions with any one person or corporation,

History. Ga. L. 1919, p. 135, art. 19, § 13; Ga. L. 1922, p. 63, § 1; Ga. L. 1927, p. 195, § 9; Code 1933, § 13-2013; Ga. L. 1943, p. 254, § 1; Ga. L. 1951, p. 201, § 1; Ga. L. 1955, p. 414, § 1; Ga. L. 1966, p. 590, § 7; Ga. L. 1969, p. 603, § 1; Ga. L. 1973, p. 526, § 4; Code 1933, § 41A-1306, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1981, p. 1366, § 8; Ga. L. 1982, p. 3, § 7; Ga. L. 1983, p. 602, § 6; Ga. L. 1992, p. 6, § 7; Ga. L. 2000, p. 174, § 6; Ga. L. 2009, p. 86, § 5/HB 141; Ga. L. 2010, p. 1, § 1/HB 926; Ga. L. 2012, p. 349, § 1/HB 886; Ga. L. 2017, p. 193, § 6/HB 143; Ga. L. 2018, p. 214, § 5/HB 780.

The 2018 amendment, effective May 3, 2018, deleted “or” at the end of subparagraph (c)(1)(B), added “or” at the end of subparagraph (c)(1)(C), and added subparagraph (c)(1)(D). See Editor’s notes for applicability.

Editor’s notes.

Ga. L. 2018, p. 214, § 26(b)/HB 780, not codified by the General Assembly, provides that: “It is not the intent of the General Assembly to affect the law applicable to litigation pending as of March 9, 2018.”

Administrative rules and regulations.

Loans and discounts, Official Compilation of the Rules and Regulations of the State of Georgia, Department of Banking and Finance, Banks, Chapter 80-1-5.

Law reviews.

For annual survey on business corporations, see 64 Mercer L. Rev. 61 (2012).

JUDICIAL DECISIONS

Editor’s notes.

In light of the similarity of the statutory provisions, decisions under former Civil Code 1910, § 2280(m) have been included in the annotations for this Code section.

Reasonable control and supervision as to loans of less than certain percentage. —

As to loans of less than ten percent (now 15 percent), directors are not justified in absolutely relinquishing to any officer or agent unlimited discretion; but they must retain and exercise reasonable control and supervision over such officers, amounting to exercise on their part of ordinary care and diligence. Mobley v. Faulk, 42 Ga. App. 314 , 156 S.E. 40 , 1930 Ga. App. LEXIS 381 (1930) (decided under former Civil Code 1910, § 2280(m)).

OPINIONS OF THE ATTORNEY GENERAL

Loans not rendered illegal by reduction of lending limit. — No loans in excess of a bank’s lending limit can be made, but loans which were legal when made are not rendered illegal by reduction of bank’s lending limit. 1977 Op. Att'y Gen. No. 77-58.

Purpose of ten percent (now fifteen percent) lending limit imposed is to protect depositors, other creditors, and shareholders from loss in the event that one or two large loans become uncollectible; relaxation of 10 percent (now 15 percent) ceiling is tied to factors such as collateral security and government guarantees, which reduce the risk of uncollectibility. 1977 Op. Att'y Gen. No. 77-58.

RESEARCH REFERENCES

Am. Jur. 2d.

11 Am. Jur. 2d, Banks and Financial Institutions, § 998.

7-1-286. Real estate loans; acquisition by bank or trust company of ownership interest.

  1. A bank shall make loans secured by improved or unimproved real estate (including a leasehold) subject to the provisions of Part 365 of the Federal Deposit Insurance Corporation’s rules and regulations, including 12 C.F.R. 365.1 and 365.2 and the Interagency Guidelines for Real Estate Lending Policies in Appendix A and 12 C.F.R. 208.51 and the guidelines contained in 12 C.F.R. Part 208 in the case of Federal Reserve member banks. Such loans shall also be subject to the additional provisions and exceptions as set forth in the rules of the department.
  2. The limitations of subsection (a) of this Code section shall not apply to:
    1. An investment security acquired pursuant to Code Section 7-1-287;
    2. A loan in connection with which the bank takes a real estate lien as security in the exercise of banking prudence but as to which it is relying for repayment on:
      1. The general credit of the obligor or of an installment buyer or of a lessee of the real estate;
      2. Collateral other than the real estate lien;
      3. A guaranty or an agreement to take over or purchase the loan, in the event of default, by a financially responsible person other than a person engaged in the business of guaranteeing real estate loans; or
      4. An agreement by a financially responsible person to take over or purchase the loan, or to provide funds for payment thereof, within a period of two years from the date of the loan;

        and there is documentation in the file setting forth the applicable facts to support reliance on this paragraph.

  3. For the purpose of this Code section, a “leasehold” shall mean the interest, which is security for a loan, of a lessee of real estate under a lease which on the date of the loan has an unexpired term extending at least ten years beyond the maturity of the loan or contains a right of renewal, which may be exercised by the bank, extending at least ten years beyond the maturity of the loan.
  4. Notwithstanding any other provisions of this chapter and otherwise subject to regulations of the department, a bank or trust company may acquire, directly or indirectly, an ownership interest in real estate incidental to the financing of the purchase, development, or improvement of such real estate, provided that:
    1. The amount of such ownership interest shall not exceed 25 percent of the appraised value of the real estate;
    2. The amount of such ownership interest when aggregated with the amount financed shall not exceed the limitations prescribed by this Code section and Code Section 7-1-285;
    3. The ownership interest shall be terminated upon substantial repayment of the financing in the manner prescribed in Code Section 7-1-263, relating to the divestiture of real estate interest; and
    4. Any time real estate owned by a bank or trust company pursuant to this subsection is held or disposed of pursuant to the provisions of Code Section 7-1-263, said action to hold or dispose shall be reported in writing annually to the stockholders. Said report shall include disclosure of any real estate acquired by foreclosure or the taking by a deed in lieu of foreclosure and the name or names of the corporation or individuals from whom title was taken.

History. Ga. L. 1919, p. 135, art. 19, § 15; Code 1933, § 13-2015; Ga. L. 1937, p. 423, § 1; Ga. L. 1945, p. 208, § 1; Ga. L. 1959, p. 250, § 1; Ga. L. 1965, p. 281, § 1; Ga. L. 1972, p. 556, § 1; Code 1933, § 41A-1307, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 18; Ga. L. 1989, p. 1249, § 4; Ga. L. 1992, p. 6, § 7; Ga. L. 1998, p. 795, § 14; Ga. L. 2000, p. 174, § 7; Ga. L. 2001, p. 970, § 2; Ga. L. 2007, p. 502, § 2/SB 70; Ga. L. 2020, p. 493, § 7/SB 429.

The 2020 amendment, effective July 29, 2020, part of an Act to revise, modernize, and correct the Code, substituted “provided that:” for “provided:” at the end of the introductory language of subsection (d).

Code Commission notes.

Pursuant to Code Section 28-9-5, in 1989, “Any time” was substituted for “Anytime” at the beginning of paragraph (e)(4) (now (d)(4)).

Administrative rules and regulations.

Rules governing real estate loans, Official Compilation of the Rules and Regulations of the State of Georgia, Rules of Department of Banking and Finance, Rule 80-1-5.02.

Law reviews.

For article, “Business Associations,” see 53 Mercer L. Rev. 109 (2001).

For note, “Opportunity Costs: Nonjudicial Foreclosure and the Subprime Mortgage Crisis in Georgia,” see 25 Ga. St. U.L. Rev. 1205 (2009).

JUDICIAL DECISIONS

When bank letter confirming loan did not specify the financing terms the seller could not be sure that the buyer had obtained a commitment in accordance with the contract by terms which the buyer would be bound. Brown v. Morris Real Estate Consultants, Inc., 256 Ga. 269 , 347 S.E.2d 563 , 1986 Ga. LEXIS 812 (1986).

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, § 602.

C.J.S.

9 C.J.S., Banks and Banking, § 477.

ALR.

Bank’s liability to real property purchaser for misrepresentation respecting purchaser’s obtaining government guaranteed or subsidized loan, 37 A.L.R.4th 773.

Financing agency’s liability to purchaser of new home or structure for consequences of construction defects, 20 A.L.R.5th 499.

7-1-287. Dealings in securities; conflicts of interest; divestiture and fines.

Notwithstanding the limitations of Code Section 7-1-288, a bank may purchase, sell, underwrite, and hold securities which are obligations in the form of bonds, notes, or debentures or mutual funds, investment trusts, or pools primarily consisting of such bonds, notes, or debentures, and may purchase, sell, and hold corporate debt obligations, to the extent authorized by regulations of the department. The department may issue regulations which prescribe operating restrictions and standards of conduct dealing with potential conflicts of interest and shall prescribe rules for divestiture of securities held in violation of such regulations and fines for violations not to exceed $10,000.00 per day during which each violation remains uncorrected. A bank may hold without limit securities which are obligations of the United States or obligations which are guaranteed fully as to principal and interest by the United States or general obligations of any state.

History. Ga. L. 1919, p. 135, art. 19, § 23; Ga. L. 1924, p. 76, § 1; Ga. L. 1927, p. 195, § 10; Code 1933, § 13-2023; Ga. L. 1946, p. 65, § 1; Ga. L. 1947, p. 501, § 1; Ga. L. 1950, p. 18, § 1; Ga. L. 1951, p. 284, § 1; Ga. L. 1957, p. 275, § 1; Ga. L. 1958, p. 133, § 1; Ga. L. 1959, p. 238, § 1; Ga. L. 1962, p. 95, § 1; Ga. L. 1965, p. 523, § 1; Ga. L. 1968, p. 1162, § 1; Ga. L. 1969, p. 976, § 1; Code 1933, § 41A-1308, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1989, p. 1249, § 5; Ga. L. 1999, p. 674, § 5.

Administrative rules and regulations.

Investment securities, Official Compilation of the Rules and Regulations of the State of Georgia, Rules of Department of Banking and Finance, Banks, Chapter 80-1-4.

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, §§ 501, 515, 613, 636.

C.J.S.

9 C.J.S., Banks and Banking, § 238.

ALR.

Rights of owners of securities deposited in bank upon its insolvency, 51 A.L.R. 914 ; 84 A.L.R. 1534 ; 126 A.L.R. 625 .

7-1-288. Corporate stock and securities.

  1. A bank may engage in any transaction with respect to shares of stock or other capital securities of any corporation in accordance with this Code section and in other instances as provided in state or federal law.
  2. A bank may:
    1. Engage in transactions with respect to issuance and transfer of shares of its own stock and capital securities and in other transactions with respect to such stock and capital securities authorized by this chapter;
    2. Purchase and sell shares of stock, bonds, capital securities, and other investment products upon the order of and for the account of a customer without recourse against it;
    3. Receive a pledge or other security interest in stock or capital securities in order to secure loans made in good faith, except that it may not receive such interests in its own stock or capital securities nor lend in one or more transactions, involving one or more borrowers, more than 30 percent of its statutory capital base on the stock or capital securities of any corporation (including therein loans made directly to the corporation without ample security but excluding obligations representing the sale of federal or correspondent funds to another financial institution). The department may, by regulation or otherwise, specify that two or more corporations are so interrelated that their stock shall be regarded as the stock of one corporation for the purposes of this subsection.
  3. Notwithstanding any other provisions of law to the contrary, a bank may acquire and hold for its own account:
    1. Shares of stock of a federal reserve bank without limitation of amount;
    2. Shares of stock or interests in:
      1. Any state or federal government sponsored instrumentality for the guarantee, underwriting, or marketing of residential housing or financing of residential housing;
      2. A business development corporation or small minority business development corporation authorized under Article 6 of this chapter;
      3. An agricultural credit corporation duly organized under the laws of this state having authority to make loans to farmers of this state for agricultural purposes under programs administered by the federal farm credit system;
      4. A bank service corporation created to provide support services for one or more financial institutions;
        1. A bank principally engaged in foreign or international banking or banking in a dependency or insular possession of the United States, either directly or through the agency, ownership, or control of local institutions in foreign countries or in such dependencies or insular possessions, including the stock of one or more corporations existing pursuant to Section 25(a) of the Federal Reserve Act, provided that, before a bank may purchase a majority interest in any such banking institution, it shall enter into an agreement with the department to restrict its operations in such manner as the department may prescribe; and provided, further, that, if the department determines that said restrictions have not been complied with, it may order the disposition of said stock upon reasonable notice.
        2. A bank engaged in providing banking or other financial services to depository financial institutions, which bank’s ownership consists primarily of such depository financial institutions;
      5. A corporation or limited liability company engaged in functions or activities that the bank or trust company is authorized to carry on, including, but not limited to: conducting a safe-deposit business; holding real estate; acting as a financial planner or investment adviser; offering of a full range of investment products; promoting and facilitating international trade and commerce; and exercising powers incidental to financial activities as provided in paragraph (11) of Code Section 7-1-261; in addition to functions or activities which include exercising powers granted by department regulations or exercising powers determined by the commissioner to be financial in nature or incidental to the provision of financial services, so long as these activities do not pose undue risk to the safety and soundness of the financial institution and are consistent with the objectives of this chapter as stated in Code Section 7-1-3; provided, however, unless the bank is exempt, nothing contained in this subparagraph shall relieve any such corporation or limited liability company from undertaking registration, licensing, or other qualification to engage in such functions or activities as may otherwise be required by law; and
      6. Other corporations created pursuant to act of Congress or pursuant to Chapter 3 of Title 14, known as the “Georgia Nonprofit Corporation Code,” for the purpose of meeting the agricultural, housing, health, transit, educational, environmental, or similar needs where the department determines that investment therein by banks is in the public interest;
    3. Shares of stock of small business investment companies organized under acts of Congress and doing business in this state, provided that the aggregate investment by the bank in such shares shall not exceed 5 percent of its statutory capital base; and
    4. Shares of stock or partnership interests in a corporation or partnership the primary business of which, as determined by the department, is to promote the public welfare or community development by engaging in the development of low and moderate-income housing, job training and job placement programs, credit counseling, public education regarding financial matters, small business development, and other similar purposes. The ability to invest in such stock or partnership interests shall also be subject to such limitations and approval procedures as the department deems necessary in order to assure that such investments are not a safety and soundness concern.
  4. A bank acquiring stock or an interest in an entity listed in paragraph (2) of subsection (c) of this Code section shall be subject to the following limitations:
    1. Where the entity carries on only such activities as the bank could legally perform itself, there is no limitation on investment;
    2. Where the activities of the entity go beyond those that the bank could legally perform, the bank’s investment may not exceed 10 percent of its statutory capital base; and
    3. Where the investment is in stock of the Federal Home Loan Bank, there is no limitation on the bank’s investment, provided that such investment is for the purpose of utilizing the services of the Federal Home Loan Bank.
  5. Prior approval by the department is required for acquisitions listed in subparagraphs (c)(2)(D) through (c)(2)(G) of this Code section. The department, by regulation, may permit expedited or notice only procedures and may provide for applicable administrative fees.
  6. The department may by rule or regulation prescribe less restrictive investment limitations than those contained in this Code section for banks meeting certain financial and management criteria.

History. Ga. L. 1919, p. 135, art. 19, §§ 20, 23; Ga. L. 1924, p. 76, § 1; Ga. L. 1927, p. 195, § 10; Code 1933, §§ 13-2017, 13-2023; Ga. L. 1946, p. 65, § 1; Ga. L. 1947, p. 501, § 1; Ga. L. 1950, p. 18, § 1; Ga. L. 1951, p. 284, § 1; Ga. L. 1953, Nov.-Dec. Sess., p. 328, § 1; Ga. L. 1957, p. 275, § 1; Ga. L. 1958, p. 133, § 1; Ga. L. 1959, p. 238, § 1; Ga. L. 1959, p. 328, § 1; Ga. L. 1962, p. 95, § 1; Ga. L. 1965, p. 523, § 1; Code 1933, § 13-2023.1, enacted by Ga. L. 1968, p. 1042, § 1; Ga. L. 1968, p. 1162, § 1; Ga. L. 1969, p. 976, § 1; Ga. L. 1972, p. 798, § 6; Code 1933, § 41A-1309, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 19; Ga. L. 1977, p. 730, § 3; Ga. L. 1979, p. 953, § 1; Ga. L. 1983, p. 602, § 7; Ga. L. 1984, p. 22, § 7; Ga. L. 1987, p. 1586, § 4; Ga. L. 1989, p. 1249, § 6; Ga. L. 1995, p. 673, § 13; Ga. L. 1996, p. 6, § 7; Ga. L. 1997, p. 143, § 7; Ga. L. 1997, p. 485, § 12; Ga. L. 1999, p. 674, § 6; Ga. L. 2000, p. 174, § 8; Ga. L. 2001, p. 970, § 3; Ga. L. 2002, p. 1220, § 5; Ga. L. 2005, p. 826, § 7/SB 82; Ga. L. 2020, p. 493, § 7/SB 429.

The 2020 amendment, effective July 29, 2020, part of an Act to revise, modernize, and correct the Code, substituted “provided that such investment” for “provided such investment” in the middle of paragraph (d)(3).

Code Commission notes.

Pursuant to Code Section 28-9-5, in 2001, “subparagraphs (c)(2)(D) through (c)(2)(G)” was substituted for “subparagraphs (D) through (G)” in subsection (e).

U.S. Code.

Section 25(a) of the Federal Reserve Act, referred to in subsection (c)(2)(E)(i) of this Code section, is codified as 12 U.S.C. § 611 et seq.

Administrative rules and regulations.

Investment securities, Official Compilation of the Rules and Regulations of the State of Georgia, Department of Banking and Finance, Banks, Chapter 80-1-4.

Law reviews.

For article, “Business Associations,” see 53 Mercer L. Rev. 109 (2001).

OPINIONS OF THE ATTORNEY GENERAL

Discussion of former Code 1933, § 13-2022 (see now O.C.G.A. §§ 7-1-288 and 7-1-370 ) and deposits by banks in mutual savings and loan association. — See 1978 Op. Att'y Gen. No. 78-66.

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, §§ 613, 616.

C.J.S.

9 C.J.S., Banks and Banking, §§ 234 et seq., 477, 499.

ALR.

Rights of owners of securities deposited in bank, upon its insolvency, 51 A.L.R. 914 ; 84 A.L.R. 1534 ; 126 A.L.R. 625 .

Power of bank or trust company to create trust out of its securities and sell participation certificates therein, 97 A.L.R. 1182 .

7-1-289. Security for deposits.

  1. A bank may pledge or otherwise grant security interests in its assets to secure deposits of:
    1. Public funds;
    2. Funds of a pension fund for employees of a public body of the state;
    3. Funds for which a public body of the state or an officer or employee thereof or any court of law is the custodian or trustee pursuant to statute;
    4. Funds held by the department as receiver;
    5. Funds which are required to be secured by law or by an order of a court;
    6. Its own fiduciary funds or the fiduciary funds of an affiliate. In either case, the funds shall be deposited with the pledging institution and held in its commercial department; and
    7. Public funds deposited in another bank.
  2. Except for the deposits listed in subsection (a) of this Code section, a bank may not pledge or otherwise grant security interests in its assets as security for deposits unless otherwise specifically approved in writing by the department.

History. Code 1933, § 13-2068, enacted by Ga. L. 1973, p. 526, § 8; Code 1933, § 41A-1310, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1993, p. 929, § 1; Ga. L. 1995, p. 673, § 14; Ga. L. 2016, p. 390, § 7-6/HB 811.

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, §§ 610, 611.

C.J.S.

9 C.J.S., Banks and Banking, §§ 222, 223.

ALR.

Power of bank to pledge assets to secure general depositors, 65 A.L.R. 1412 ; 87 A.L.R. 1456 ; 101 A.L.R. 515 ; 112 A.L.R. 483 .

7-1-290. Powers as surety or guarantor.

  1. Except as authorized in subsection (b) of this Code section, in paragraph (10) of Code Section 7-1-260, and in paragraph (4) of Code Section 7-1-261, a bank shall not lend its credit, bind itself as a surety to indemnify another, or otherwise become a guarantor.
  2. A bank may act as a surety or guarantor if it has a substantial interest in the performance of the transaction involved or has a segregated deposit sufficient in amount to cover the institution’s potential liability.
  3. Nothing in this Code section shall be construed to prohibit banks from:
    1. Giving warranties or guaranties in connection with the handling of items for collection; the transfer, exchange, or collection of securities; or the sale or disposition of its assets;
    2. Issuing letters of credit; and
    3. Pledging or otherwise granting security interests in their assets to secure public funds deposited in the bank or another bank, including, but not limited to, deposits made pursuant to a pledging pool.
  4. Notwithstanding other provisions of law to the contrary, irrevocable letters of credit issued by banks domiciled in this state may, in the discretion of the party in whose favor such irrevocable letter of credit is issued, be accepted in lieu of any bond, surety, or pledge of assets required by the laws of this state or regulations promulgated pursuant to such laws.

History. Code 1933, § 41A-1311, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1983, p. 602, § 8; Ga. L. 1989, p. 1211, § 5; Ga. L. 1993, p. 929, § 2; Ga. L. 2016, p. 390, § 2-3/HB 811.

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, § 610.

C.J.S.

9 C.J.S., Banks and Banking, § 229.

ALR.

Liability of bank on letter of credit as affected by quality or condition of goods for purchase price of which it is issued, 39 A.L.R. 755 .

Liability of guarantor of or surety for bank deposit as affected by reorganization, merger, or consolidation of bank, 78 A.L.R. 381 .

7-1-291. Borrowings; liabilities not subject to restrictions; restrictions; borrowing for emergencies.

  1. Subject to the restrictions of subsection (c) of this Code section, a bank may borrow money and issue notes, debentures, or other obligations to evidence such borrowings.
  2. The following outstanding liabilities are not subject to the restrictions in this Code section:
    1. Liabilities to a federal reserve bank on account of money borrowed or rediscounts;
    2. Liabilities on account of the acquisition of reserve balances at a federal reserve bank or other reserve agent from a member or a nonmember bank;
    3. Liabilities on account of agreements to repurchase securities sold by the bank (commonly known as “repurchase agreements”);
    4. Liabilities in the form of subordinated securities under Code Section 7-1-419; and
    5. Liabilities which do not constitute or result from the borrowing of money under definitions prescribed by regulation of the department.
  3. A bank that wishes to borrow from sources other than those listed in subsection (b) of this Code section may borrow an aggregate amount which exceeds the sum of twice its unimpaired capital stock plus 100 percent of its unimpaired paid-in capital and retained earnings, provided that the bank’s board of directors has approved a comprehensive written funding plan that addresses the following safety and soundness concerns:
    1. The plan must contain a detailed evaluation of the bank’s management expertise and information systems to support the plan; and
    2. The plan must contain adequate asset and liability, liquidity, and funds management policies and procedures to specifically address the use of borrowings as an alternate funding source.
  4. The department may, notwithstanding the other provisions of this Code section, temporarily waive the requirements of this Code section to permit an individual bank to borrow for emergency purposes. The department shall review the funding plan of each bank as a part of its normal supervisory program. The department may prohibit or place additional restrictions upon borrowings of any bank which would, in the judgment of the department, constitute an unsafe or unsound practice in view of the condition and circumstances of the bank.

History. Ga. L. 1919, p. 135, art. 19, § 25; Code 1933, § 13-2025; Ga. L. 1966, p. 590, § 9; Ga. L. 1973, p. 526, § 5; Code 1933, § 41A-1312, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 20; Ga. L. 1996, p. 848, § 5; Ga. L. 2019, p. 828, § 5/HB 185; Ga. L. 2020, p. 493, § 7/SB 429.

The 2019 amendment, effective July 1, 2019, in the introductory language of subsection (c), deleted “appropriated retained earnings,” following “paid-in capital,” and inserted “that” following “provided” in the middle.

The 2020 amendment, effective July 29, 2020, part of an Act to revise, modernize, and correct the Code, revised punctuation in subsection (c).

Administrative rules and regulations.

Borrowed money, Official Compilation of the Rules and Regulations of the State of Georgia, Rules of Department of Banking and Finance, Chapter 80-1-9.

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, §§ 483, 484, 608 et seq.

C.J.S.

9 C.J.S., Banks and Banking, §§ 227, 228.

7-1-292. Interest and fees.

Any bank may take, receive, reserve, and charge interest and fees on any loan, advance of money, or forbearance to enforce the collection of money at rates not exceeding the limits set by the laws of this state. Whenever such laws authorize a special interest or fee rate with respect to a designated type of loan, then a bank may charge that special interest or fee on loans of that type made by it. Whenever such laws authorize a person or a corporation other than a bank to charge a special interest or fee rate with respect to a designated type of loan, then a bank may charge such rate or fee on loans made by it which would qualify as the designated type of loan if made by the person or corporation so authorized without any requirement for the bank to obtain any license, qualification, or permit.

History. Ga. L. 1919, p. 135, art. 19, § 19; Code 1933, § 13-2019; Code 1933, § 41A-1313, enacted by Ga. L. 1974, p. 705, § 1.

Cross references.

Regulation of rates of interest generally, T. 7, C. 4.

Law reviews.

For article surveying Georgia cases dealing with commercial law from June 1977 through May 1978, see 30 Mercer L. Rev. 15 (1978).

For article discussing methods of computation of finance charges in Georgia consumer credit contracts, see 30 Mercer L. Rev. 281 (1978).

For survey article on commercial law, see 34 Mercer L. Rev. 31 (1982).

OPINIONS OF THE ATTORNEY GENERAL

Bank will not be authorized to charge rates permitted by former Code 1933, § 41A-3109 (see now O.C.G.A. § 7-1-658 ). 1975 Op. Att'y Gen. No. 75-2.

RESEARCH REFERENCES

Am. Jur. 2d.

11 Am. Jur. 2d, Banks and Financial Institutions, § 993.

C.J.S.

9 C.J.S., Banks and Banking, § 502 et seq.

ALR.

Enforceability of provision in loan commitment agreement authorizing lender to charge standby fee, commitment fee, or similar deposit, 93 A.L.R.3d 1156.

7-1-293. Savings banks and state savings and loan associations.

  1. A bank desiring to be accorded treatment under this chapter as a savings bank or state savings and loan association shall so state in its articles.
  2. A savings bank or a state savings and loan association may apply to the department for permission to relinquish its status as a savings bank or state savings and loan association and become a commercial bank by filing an appropriate amendment to its articles. The department may exercise its discretion in determining whether to approve such a change and shall consider in connection therewith the same criteria considered in approving the original articles of incorporation.
  3. A savings bank shall provide its depositors with deposit insurance coverage pursuant to those deposit insurance provisions of this chapter applicable to commercial banks. A state savings and loan association shall provide its depositors, but not its shareholders, with deposit insurance coverage.
  4. Reserved.
  5. The conversion, merger, or consolidation of a federal savings and loan association or federal savings bank, including a federal mutual savings and loan association or federal mutual savings bank, shall be accomplished pursuant to the same procedures as are prescribed in this chapter for a conversion, merger, or consolidation involving a national bank, provided that the approval of such conversion by the members of such association or bank shall be by such vote as is required in the articles of association and bylaws of such association or bank. A federal mutual savings and loan association or federal mutual savings bank shall upon conversion be and be known as a mutual savings bank. In considering any plan for the conversion, merger, or consolidation of a federal savings and loan association or federal savings bank, the department shall not approve the plan unless it is satisfied that such plan is fair and equitable to all borrowers, depositors, and shareholders.
    1. The conversion, merger, or consolidation of a federal mutual savings and loan association holding company or federal mutual savings bank holding company shall be accomplished pursuant to the same procedures as are prescribed in this chapter for a conversion, merger, or consolidation involving a national bank, provided that the approval of such conversion shall be by such vote of the members of such holding company as is required in the articles of association and bylaws of such holding company but shall be further conditioned upon the conversion of the federal savings and loan association or federal savings bank subsidiary of such holding company to a savings bank contemporaneously with the holding company’s conversion.
    2. A state mutual savings bank holding company shall be subject to all of the rules and regulations of the department as if it were a commercial bank organized under this chapter, provided that it shall be authorized to own the stock of a savings bank subsidiary.
  6. With respect to the corporate governance of a mutual savings bank or mutual savings bank holding company, the members of the savings bank or holding company as defined in the articles of association, subject to the approval of the department, shall be the equivalent of the shareholders of a commercial bank or bank holding company having such rights, preferences, and powers and subject to such limitations as may be contained in the rules and regulations of the department and in the articles of association and bylaws of the savings bank or holding company approved by the department.
  7. Except as provided therein, Article 1 of this chapter and all other parts of this article shall apply to all mutual savings banks, savings banks, and state savings and loan associations and unless specifically exempt therein, all rules and regulations promulgated by the department applicable to banks shall be applicable to mutual savings banks, savings banks, and state savings and loan associations.
  8. Unless otherwise provided, the provisions of Part 18 of this article applicable to bank holding companies shall be applicable to mutual savings bank holding companies and unless specifically exempt therein, all rules and regulations promulgated by the department applicable to bank holding companies shall be applicable to mutual savings bank holding companies.
  9. In the event that a federal mutual savings and loan association or federal mutual savings bank upon conversion to a savings bank would own or hold assets or engage in any business that would not be allowable for a commercial bank, then the plan of conversion presented to the department shall include a plan for disposal of such assets or the termination of such nonconforming business within a reasonable time but in no event longer than four years from the date of the conversion.

History. Code 1933, § 41A-1314, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1981, p. 1566, § 2; Ga. L. 1982, p. 3, § 7; Ga. L. 1982, p. 1781, § 1; Ga. L. 1983, p. 602, § 9; Ga. L. 1987, p. 1586, § 5; Ga. L. 1988, p. 13, § 7; Ga. L. 1992, p. 6, § 7; Ga. L. 1997, p. 485, § 13; Ga. L. 2016, p. 390, § 7-7/HB 811; Ga. L. 2021, p. 323, § 4/HB 111.

The 2021 amendment, effective July 1, 2021, deleted “or conversion of a building and loan association” following “federal savings bank” in the last sentence in subsection (e).

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, §§ 14, 598.

C.J.S.

9 C.J.S., Banks and Banking, §§ 631, 632.

ALR.

Construction of savings bank by-law expressly assented to by depositor, relieving bank from liability for payment to unauthorized person, 52 A.L.R. 760 .

Liability of savings bank to depositor for amounts withdrawn by depositor’s agent without presentation of passbook, 139 A.L.R. 835 .

7-1-294. Transaction of business on holidays and outside of banking hours.

  1. Notwithstanding any existing provisions of law relative to the time of maturity or presentment of negotiable instruments, any financial institution doing business in this state may, at its option, outside of regular banking hours on any day, or at any time on a day which is in whole or in part a holiday, pay, certify, or accept negotiable or nonnegotiable instruments including a demand instrument dated on the holiday on which it is presented for payment, certification, or acceptance and transact any other business which would be valid if done on a business day during regular banking hours.
  2. Nothing in this Code section shall require any financial institution which remains open for business on all or a part of any holiday to do or perform any act on that day in its capacity as a collection agent which would not be required of it if it were closed on such holiday or part holiday.

History. Code 1933, § 14-1809.2, enacted by Ga. L. 1949, p. 352, § 1; Ga. L. 2017, p. 193, § 7/HB 143.

Cross references.

Public, legal and religious holidays, §§ 1-4-1 , 1-4-2 .

Definition of “banking day” for purposes of the Uniform Commercial Code, § 11-4-104 .

RESEARCH REFERENCES

ALR.

Power of municipal corporation to legislate as to Sunday observance, 37 A.L.R. 575 .

Power to extend Sunday observance laws beyond Sunday hours, 50 A.L.R. 628 .

Legal aspects and consequences of declaration of “bank holiday”, 95 A.L.R. 934 .

Validity, construction, and effect of “Sunday closing” or “blue” laws — modern status, 10 A.L.R.4th 246.

7-1-295. Transaction fees charged by operators of automated teller machines.

An operator of an automated teller machine in this state may charge a transaction fee to the customer using the machine. An agreement to share automated teller machines may not prohibit, limit, or restrict the right to charge such transaction fees and no such agreement may prohibit, limit, or restrict the right of one or more financial institutions to enter into an agreement not to charge such transaction fees to their common customers.

History. Code 1981, § 7-1-295 , enacted by Ga. L. 1993, p. 917, § 3; Ga. L. 1997, p. 575, § 1.

7-1-296. “Federal power” defined; construction with federal law; notifications; objections; authority; construction.

  1. For purposes of this Code section, the term “federal power” means any banking or corporate power, right, benefit, privilege, or immunity of a national bank, the deposits of which are federally insured, that may be exercised by a national bank doing business in this state pursuant to the National Bank Act, 12 U.S.C. Section 1, et seq.; any other federal statute; or any regulation, ruling, circular, bulletin, order, or interpretation issued by the Office of the Comptroller of the Currency. Such term shall include only the provisions set forth above which were effective on January 1, 2018.
  2. Notwithstanding any other provisions of law, a bank may exercise any federal power while a national bank may also exercise such power subject to the same limitations and restrictions as are applicable to national banks, provided that the requirements of subsection (d) of this Code section have been satisfied. Nothing in this subsection shall be construed as authorizing a bank chartered by this state to exercise a federal power prior to compliance with subsection (d) of this Code section.
  3. Notwithstanding any other provisions of law, to the extent the National Bank Act, 12 U.S.C. Section 1, et seq., or any other federal law or regulation in effect on January 1, 2018, precludes or preempts or has been determined to preclude or preempt the application of any provision of law, rule, or regulation of this state, as to any national bank doing business in this state, a bank may also exercise such power authorized by the preclusion or preemption subject to the same limitations and restrictions as are applicable to a national bank, provided that the requirements of subsection (d) of this Code section have been satisfied. Nothing in this subsection shall be construed as authorizing a bank chartered by this state to exercise a federal power prior to compliance with subsection (d) of this Code section.
  4. In furtherance of the commissioner’s statutory duties to regulate, supervise, and examine, a bank shall notify the commissioner in writing by certified or registered mail that, pursuant to subsection (b) or (c) of this Code section, it intends to exercise a federal power or to avail itself of any federal preclusion or preemption of any provision of law, rule, or regulation of this state. Such notice shall include the specific federal authorization of the activity to be utilized, the proposed action to be undertaken by the bank, documentation indicating that the bank satisfies the prescribed federal standards, if any, to engage in the activity, and such other information as may be required by the department. Upon receipt of such notice, the commissioner shall determine whether the exercise of any federal power or the availing of any federal preclusion or preemption, or any part thereof, by the bank is inconsistent with the purposes of this chapter or presents undue risk to the safety and soundness of the banking system. In making such a determination, the commissioner shall consider the financial condition of the bank, the regulatory safety and soundness ratings of the bank, the ability of bank management to administer and supervise the activity, and the overall impact on the safety and soundness to all other state chartered banks. Based on such a determination, the commissioner may object to the exercise of the federal power, in whole or in part, or to the federal preclusion or preemption of the law, rule, or regulation of this state, in whole or in part, including objecting to a level or quantity above which a bank may be seeking to exercise a federal power or availing itself of any federal preclusion or preemption of law, rule, or regulation of this state. If the commissioner so objects, the commissioner shall deliver such objection in writing by certified or registered mail to the bank within 45 days of receipt of the notice; provided, however, that the commissioner may extend such period of review for an additional 45 days by providing the bank with written notice of such extension prior to the expiration of the initial notice period. If the commissioner sends such an objection, the federal power, preclusion, or preemption, or the part thereof, objected to by the commissioner shall not be exercised by the bank pursuant to subsections (b) and (c) of this Code section. The objection by the commissioner of a bank’s intent to exercise a federal power or avail itself of any federal preclusion or preemption shall not preclude such bank from providing notice to the department of its intent to exercise the same federal power or to avail itself of the same federal preclusion or preemption at a later date; provided, however, that the requirements of this subsection shall be applicable for any such additional notice. Further, in the event a bank determines, after satisfying the notice provisions of this subsection, that it no longer wishes to exercise a federal power or avail itself of any federal preclusion or preemption, then such bank shall provide written notice of such fact to the commissioner by certified or registered mail.
  5. Notwithstanding the provisions of Code Section 7-1-70, the department shall publish information stating the federal powers that are being exercised or federal preemptions or preclusions that are being utilized by each bank. All other information related to the notices or objections provided under subsection (d) of this Code section are governed by Code Section 7-1-70.
  6. Notwithstanding any other provisions of law, a bank may exercise any power that was granted through an order or ruling declared by the commissioner on or before January 1, 2018, pursuant to the current or former provisions of Code Section 7-1-61, 7-1-61.1, or 7-6A-12 and which has not been rescinded or withdrawn.
  7. Any federal power or activity authorized and exercised or conducted pursuant to this Code section shall be independent from, and in addition to, any other powers granted to banks under applicable laws of this state or rules or regulations promulgated thereunder. The express and incidental powers granted to banks under the Official Code of Georgia Annotated are not limited or otherwise restricted by this Code section.
  8. Nothing in this Code section shall be construed as limiting the commissioner’s authority conferred by this chapter, including the powers granted under Code Sections 7-1-61 and 7-1-61.1.
  9. Nothing in this Code section shall be construed as authorizing the imposition of interest rates by a bank in excess of those authorized by Chapter 4 of this title nor shall any provision of this Code section be construed as permitting a bank to make loans in violation of Chapter 17 of Title 16.

History. Code 1981, § 7-1-296 , enacted by Ga. L. 2018, p. 214, § 6/HB 780.

Effective date. —

This Code section became effective May 3, 2018. See Editor’s notes for applicability.

Editor’s notes.

Ga. L. 2018, p. 214, § 26(b)/HB 780, not codified by the General Assembly, provides that: “It is not the intent of the General Assembly to affect the law applicable to litigation pending as of March 9, 2018.”

Administrative rules and regulations.

Notification of intent to utilize a federal power, Official Compilation of the Rules and Regulations of the State of Georgia, Department of Banking and Finance, Banks, Applications, Registrations and Notifications, Rule 80-1-1-.12.

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur.2d, Banks and Financial Institutions, §§ 475 et seq., 529 et seq.

C.J.S.

9 C.J.S., Banks and Banking, § 512 et seq.

PART 4 Powers of Trust Companies

RESEARCH REFERENCES

ALR.

Statute regulating banks and trust companies as special or class legislation, or as denying the equal protection of the laws, 111 A.L.R. 140 .

C.J.S.

9 C.J.S., Banks and Banking, § 650.

7-1-310. Powers to act as fiduciary and in other representative capacities.

  1. A trust company may act, alone or with others, as:
    1. Fiduciary;
    2. Investment advisor;
    3. Custodian of property;
    4. Agent or attorney in fact;
    5. Registrar or transfer agent of securities;
    6. Fiscal agent of the United States, a state or a public body thereof, a corporation, or a person; and
    7. Treasurer of a public body or of a nonprofit corporation.
  2. A trust company shall have, in respect to any capacity in which it may act pursuant to a power under subsection (a) of this Code section, all the rights and duties which a person has in such capacity under applicable laws and under the terms upon which the trust company is designated to act in such capacity.
  3. Every bank and credit union operating pursuant to this chapter shall possess all of the rights, privileges, powers, and responsibilities herein conferred upon trust companies; provided, however, that no such bank or credit union shall exercise such powers and privileges without the prior written approval of the department after a careful consideration of the factors enumerated in Code Section 7-1-394, relating to the chartering of trust companies. Any bank exercising or partially exercising trust powers prior to February 27, 1976, authorized by its articles may continue to exercise or partially to exercise those powers to the extent approved by the department without the necessity of obtaining a new approval.

History. Ga. L. 1898, p. 78, § 3; Civil Code 1910, § 2817; Ga. L. 1917, p. 56, § 1; Ga. L. 1919, p. 135, art. 2, § 2; Ga. L. 1920, p. 76, § 1; Code 1933, § 109-201; Code 1933, § 41A-1401, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1976, p. 274, § 1; Ga. L. 1981, p. 1366, § 9; Ga. L. 1982, p. 3, § 7; Ga. L. 1989, p. 1257, § 4; Ga. L. 2016, p. 390, § 7-4/HB 811.

7-1-311. Operations as a fiduciary.

Except as otherwise permitted by Code Section 7-1-315, a trust company in its capacity as fiduciary shall:

  1. Segregate all property (other than items in the course of collection) held as a fiduciary from its nonfiduciary assets and keep separate records of all such fiduciary property for each account for which such property is held;
  2. Hold property held as fiduciary in a form complying with applicable law;
  3. Keep fiduciary funds awaiting investment or distribution in deposits in an authorized financial institution (including, in the case of a trust company which is also a bank, its own commercial department or the commercial department of an affiliate as provided in Code Section 7-1-289) which is insured or, to the extent of any deficiencies in insurance coverage, fully secured by a pledge or assignment of bonds or obligations of the United States, this state, or a public body of either or other obligations guaranteed as to principal and interest by the United States, this state, or a public body of either or real estate loans secured by a first lien or security title to improved realty and insured pursuant to any title of the National Housing Act. The beneficial owners of such uninvested funds shall have a first and prior lien on such security;
  4. Not be required to execute a bond or give any security required by the law of fiduciaries but may give its own bond and pledge or otherwise grant security interests in its assets as security for the faithful performance of its duties as fiduciary or as surety for such faithful performance by any cofiduciary where such is requested or otherwise required; and
  5. Provide any oath or affirmation or any affidavit required of the trust company through an officer thereof acting on behalf of the trust company.

History. Ga. L. 1935, p. 484, §§ 1, 2; Ga. L. 1953, Jan.-Feb. Sess., p. 108, §§ 1-3; Ga. L. 1965, p. 244, §§ 1, 2; Ga. L. 1966, p. 468, § 1; Code 1933, § 41A-1402, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1988, p. 1494, § 1; Ga. L. 1995, p. 673, § 15.

Cross references.

Substitution of parties to contract generally, § 13-4-20 .

Impossibility as excuse for non-performance, § 13-4-21 .

U.S. Code.

The National Housing Act, referred to in paragraph (3) of this Code section, is codified generally as 12 U.S.C. § 1701 et seq.

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, § 622.

C.J.S.

9 C.J.S., Banks and Banking, § 656.

ALR.

Trust company’s agreement to repay in cash principal of trust fund investment as ultra vires, 96 A.L.R. 453 .

Dealings between bank or trust company and itself acting as executor, administrator, or trustee, 112 A.L.R. 780 .

7-1-312. Nonfiduciary investments.

A trust company which is not a bank may, apart from its fiduciary activities, invest in stock and investment securities, except that it may not acquire or hold its own stock otherwise than pursuant to paragraphs (8) and (9) of Code Section 7-1-261.

History. Code 1933, § 41A-1403, enacted by Ga. L. 1974, p. 705, § 1.

7-1-313. Collective investment funds.

  1. As used in this Code section, the term “collective investment fund” shall include a common trust fund and any other type of collective investment fund.
  2. A trust company may establish and maintain collective investment funds for the investment or reinvestment of property which:
    1. Is contributed by the trust company in a capacity in which it is authorized to act pursuant to Code Section 7-1-310; and
    2. Is eligible for contribution to a collective investment fund under this Code section.
  3. Property shall be eligible for contribution whenever the instrument, judgment, decree, or order under which the trust company holds the property does not prohibit investment in the type of collective investment fund involved, provided that, if the trust company holds the property under circumstances limiting it to investing the property in legal investments for fiduciaries, then it may invest the property only in a collective investment fund limited to assets authorized as legal investments for a fiduciary.
  4. The department shall regulate the establishment, operation, and maintenance of collective investment funds. Such regulations of the department shall comply with the general standards for exercise of the regulatory power of the department under this chapter and, in addition, shall be designed to assure:
    1. Ratably equal treatment of the participants in a fund by imposing minimum requirements for the method and frequency of valuation of participations in the fund, for the time and method of admission or withdrawals of participations in the fund, and for the determination of interests of participants in the assets and income of the fund; and
    2. The competitive equality between trust companies and national banks exercising fiduciary powers with respect to the authority to establish and maintain collective investment funds to the extent compatible with the general purposes of this chapter.
  5. No mistake made in good faith and in the exercise of due care in connection with the administration of a collective investment fund shall be deemed a violation of this Code section or of any other duty of the trust company if, promptly after discovery of the mistake, the trust company takes whatever action may be practicable in the circumstances to remedy the mistake.
  6. Any other trust company or national bank with trust powers which is a member of an affiliated group (as defined in Section 1504 of the Internal Revenue Code) with a trust company maintaining collective investment funds may participate in one or more such funds as though they were maintained by the participating trust company. Such participation may be made pursuant to agreement providing for reasonable compensation for the trust company maintaining the fund or funds.
  7. A trust company, in any capacity in which it may act under Code Section 7-1-310, may invest property collectively in accordance with the specific terms upon which it receives such property, without regard to the restrictions of this Code section.

History. Ga. L. 1943, p. 442, §§ 2, 3, 6, 8, 13, 14; Ga. L. 1972, p. 816, §§ 2, 3; Code 1933, § 41A-1404, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1987, p. 191, § 9.

Editor’s notes.

Ga. L. 1987, p. 191, § 10, not codified by the General Assembly, provided that this Act is applicable to taxable years ending on or after March 11, 1987, and that a taxpayer with a taxable year ending on or after January 1, 1987, and before March 11, 1987, may elect to have the provisions of that Act apply.

Ga. L. 1987, p. 191, § 10, not codified by the General Assembly, also provided that tax, penalty, and interest liabilities and refund eligibility for prior taxable years shall not be affected by that Act.

Ga. L. 1987, p. 191, § 10, not codified by the General Assembly, also provided that provisions of the federal Tax Reform Act of 1986 and of the Internal Revenue Code of 1986 which as of January 1, 1987, which were not yet effective become effective for purposes of Georgia taxation on the same dates as they become effective for federal purposes.

U.S. Code.

Section 1504 of the Internal Revenue Code, referred to in subsection (f) of this Code section, is codified as 26 U.S.C. § 1504 .

7-1-314. Purchase in fiduciary capacity of securities underwritten by syndicate including institution.

A trust company or a financial institution with fiduciary powers may, in its fiduciary capacity, purchase securities underwritten by a syndicate which includes the financial institution or an affiliate of the financial institution, provided such purchase is otherwise prudent, not prohibited by the instrument governing the fiduciary relationship, and not otherwise inconsistent with regulations issued by the department.

History. Code 1981, § 7-1-314 , enacted by Ga. L. 1983, p. 602, § 10; Ga. L. 1989, p. 1249, § 7.

7-1-315. Satisfaction of fiduciary obligations respecting investment of funds awaiting investment or distribution and charging of fees.

  1. A trust company complying with this Code section will be deemed to have satisfied its fiduciary obligations and duties with respect to:
    1. The investment of fiduciary funds awaiting investment or distribution;
    2. The charging of fees in connection therewith; and
    3. The disclosure of policies, procedures, and fees in connection therewith.
  2. A trust company may invest fiduciary funds awaiting investment or distribution in short-term, trust-quality investment vehicles, through the medium of a collective investment fund or otherwise. A trust company may also place fiduciary funds awaiting investment or distribution in deposits of the commercial department of such trust company, in the case of a trust company which is also a bank, or in deposits of an affiliate bank; provided, however, that the rate of interest paid on such deposits shall be at least equal to the rate paid by such department or affiliate bank on deposits of similar terms and amounts. A fiduciary shall have complied with this Code section if cash awaiting investment or distribution in excess of $1,000.00 is invested or deposited within 30 days of receipt or accumulation thereof. The provisions of this subsection shall apply notwithstanding any other law or rule restricting or limiting the investments of fiduciaries.
  3. In addition to any other compensation to which it may be entitled, a trust company may, without necessity of obtaining the approval of any person or court, charge a reasonable fee for the temporary investment of fiduciary funds awaiting investment or distribution, which fee may be calculated upon the amount of such funds actually invested and upon the income produced thereby.
  4. A trust company shall have complied with its duty to disclose fees and practices in connection with the investment of fiduciary funds awaiting investment or distribution if the trust company’s periodic statements set forth the trust company’s practice and method of computing fees.
  5. This Code section shall be construed as a codification of existing law concerning the fiduciary duties of trust companies and not as a change in such law.

History. Code 1981, § 7-1-315 , enacted by Ga. L. 1988, p. 1494, § 2.

7-1-316. Irrevocable letter of credit or pledge of securities for receivership contingency.

    1. A trust company shall provide an irrevocable letter of credit or pledge securities acceptable to the department to defray the costs of a liquidation of the trust company in the event it should be placed into receivership.
    2. The amount of the securities or the letter of credit required in this Code section shall be determined by the department as appropriate to defray the costs associated with receivership, provided that such amount shall be no less than $500,000.00.
    3. Any letter of credit shall be:
      1. Made payable to the department and issued by a Federal Home Loan Bank or a federally insured financial institution, approved by the department and authorized to do business in this state;
      2. In a form and with terms acceptable by the department; and
      3. Obtained from an entity in which the trust company has no financial interest.
    4. Any pledged securities shall be held at a bank authorized to do business in this state, and any fees associated with holding such securities shall be the responsibility of the trust company.
  1. If a trust company is placed in receivership, the department may, without regard to any priorities, preferences, or adverse claims, reduce the pledged securities or the letter of credit provided by a trust company to cash and, as soon as practicable, utilize the cash to defray the costs associated with receivership.

History. Code 1981, § 7-1-316 , enacted by Ga. L. 2017, p. 193, § 8/HB 143.

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur.2d, Banks and Financial Institutions, §§ 259, 1092 et seq.

10 C.J.S., Bills and Notes

Letters of Credit, § 370 et seq.

7-1-317. Minimal amount of capital.

  1. The department may require, based on safety and soundness, that a trust company maintain a minimum amount of capital, provided that such amount shall in no event be less than $3 million. The department may alter the amount of capital required to be maintained by a trust company from time to time as may be necessary for the safe and sound operation of such trust company.
  2. The department may consider the following in establishing the minimum amount of capital:
    1. The nature and type of business to be conducted;
    2. The nature and liquidity of assets to be held;
    3. The amount of fiduciary assets to be under management of the trust company;
    4. The type of fiduciary assets to be held and the depository for such assets;
    5. The complexity of fiduciary duties and degree of discretion to be undertaken;
    6. The competence and experience of management;
    7. The extent and adequacy of internal controls;
    8. The presence or absence of annual unqualified audits by an independent certified public accountant;
    9. The reasonableness of business plans for retaining or acquiring additional equity capital;
    10. The existence and adequacy of insurance to protect the clients, beneficiaries, and grantors of the trust company;
    11. Any history of operating losses;
    12. Any history of loss in relation to fiduciary or custodial accounts; and
    13. The amount of support from the trust company’s parent or affiliate.

History. Code 1981, § 7-1-317 , enacted by Ga. L. 2017, p. 193, § 8/HB 143.

Administrative rules and regulations.

Minimum capital requirements for trust companies, Official Compilation of the Rules and Regulations of the State of Georgia, Department of Banking and Finance, Trust Companies, Rule 80-13-1-.02.

7-1-318. Prohibition on pledging or creating a lien by trust companies; void actions.

  1. No trust company shall pledge or create a lien on any of its assets except to secure:
    1. The repayment of money borrowed; or
    2. Trust accounts administered by the trust company.
  2. An act, deed, conveyance, pledge, or contract in violation of this Code section shall be considered void.

History. Code 1981, § 7-1-318 , enacted by Ga. L. 2017, p. 193, § 8/HB 143.

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, § 23.

PART 4A Affiliate Transfers

7-1-320. Definitions.

As used in this part, the term:

  1. “Affiliate transfer” means a transfer by which a bank or trust company delegates, assigns, or transfers to an affiliated trust company or to an affiliated bank which has received the required approvals from the appropriate regulatory authorities to exercise trust powers all of its rights, powers, privileges, accounts, and designations with respect to one or more of its various capacities as fiduciary.
  2. “Affiliated trust company” means a trust company which is affiliated with a bank.  A trust company shall be considered an affiliate with a bank in accordance with the definition of such term set forth in paragraph (1) of Code Section 7-1-4. For the purposes of this part, the term affiliated trust company shall also include an affiliated bank which has received the required approvals from the appropriate regulatory authorities to exercise trust powers.
  3. “Bank” means a corporation as defined in either paragraph (7) or (23) of Code Section 7-1-4 and having its principal place of business in Georgia.
  4. “Fiduciary” means a bank or trust company acting in such capacity as set forth in paragraph (20) of Code Section 7-1-4 or as further defined by regulations of the department.
  5. “Trust company” means a corporation as defined in paragraph (40) of Code Section 7-1-4 or a national bank having:
    1. Authority to conduct business only to the extent of its trust powers as provided in 12 U.S.C. Section 92a; and
    2. A principal place of business in Georgia.

History. Code 1981, § 7-1-320 , enacted by Ga. L. 1986, p. 1244, § 1; Ga. L. 1993, p. 915, § 1.

Law reviews.

For note on 1993 amendment of this Code section, see 10 Ga. St. U.L. Rev. 9 (1993).

7-1-321. Affiliate transfers authorized; powers and duties of affiliated trust company transferees.

  1. Any bank authorized by law to engage in the business of acting as a fiduciary is authorized and empowered to make an affiliate transfer whether or not each governing instrument expressly provides for or contemplates an affiliate transfer or whether or not the fiduciary capacity was created by will, indenture, trust, court order, agreement, or other means.  No affiliate transfer shall constitute:
    1. A resignation or disqualification of the bank as fiduciary; or
    2. A relinquishment of trust powers by the bank making the affiliate transfer.

      Upon execution of an instrument effecting an affiliate transfer by a bank, the affiliated trust company shall, as of the date specified in the instrument, have all of the rights, powers, privileges, appointments, accounts, and designations of the bank regarding each fiduciary capacity so transferred and shall have title to all property, real, personal, and mixed, and all debts due on whatever account, and all other choses in action, and each and every other interest of or belonging to or due to the bank as fiduciary shall be taken and deemed to be transferred to and vested in the affiliated trust company as fiduciary without further act or deed. The affiliated trust company shall file a certificate of transfer with the department setting forth its name, a copy of its governing instrument, a list of the banks with which it is affiliated, a statement of the facts which establish the affiliate relationship, and such other information as may be appropriate.

  2. Upon an affiliate transfer by a bank, the affiliated trust company, in each fiduciary capacity transferred, shall thenceforth be responsible for the performance of all of the duties, responsibilities, and obligations of the bank in such fiduciary capacity, and any claim existing or action or proceeding pending by or against the fiduciary may be prosecuted as if the affiliate transfer had not taken place and the affiliated trust company, as fiduciary, may be substituted in place of the bank, as fiduciary. Neither the rights of creditors to nor any liens upon the property held in any fiduciary capacity shall be impaired by any affiliate transfer.

History. Code 1981, § 7-1-321 , enacted by Ga. L. 1986, p. 1244, § 1; Ga. L. 1994, p. 1780, § 1.

7-1-322. Effect of affiliate transfer on bank; abandonment of transfer; substituted fiduciary.

  1. Notwithstanding the provisions of Code Section 7-1-321, no affiliate transfer shall relieve the bank of any liability with respect to any of its acts and doings as fiduciary, and the bank shall remain liable and responsible to all affiliate transfer beneficiaries and other parties at interest with respect to all actions of the affiliated trust company as if performed by the bank itself.
  2. The bank shall be relieved of any claims, liabilities, or actions arising after the affiliate transfer where such affiliate transfer is expressly authorized by the terms of the instrument governing the fiduciary capacity.
  3. Upon application by an interested party, the bank shall within 30 days either abandon the affiliate transfer subject to such application or proceed to have a successor fiduciary appointed as provided by law.
  4. Nothing in this Code section shall be construed to impair any right of the grantor or beneficiaries of any fiduciary relationship under applicable instruments or otherwise to secure or provide for the appointment of a substituted fiduciary.

History. Code 1981, § 7-1-322 , enacted by Ga. L. 1986, p. 1244, § 1.

7-1-323. Appointment of affiliated trust company as agent for bank; liability of bank for actions of agent.

In addition to and not in limitation of the other powers provided in this part, any bank shall be entitled and empowered to designate an affiliated trust company as its agent for the performance of all acts, obligations, and responsibilities of the bank with respect to any fiduciary capacity. In such event, the bank shall remain fully responsible and liable with respect to all actions of the affiliated trust company as if performed by the bank itself. No such agency relationship shall:

  1. Be deemed an impermissible delegation of responsibility or duty by the bank; or
  2. Constitute a resignation or disqualification of the bank as fiduciary or a relinquishment of trust powers by the bank.

History. Code 1981, § 7-1-323 , enacted by Ga. L. 1986, p. 1244, § 1; Ga. L. 1992, p. 6, § 7.

7-1-324. Designation of affiliate trust company as successor fiduciary.

Upon any affiliate transfer, the affiliate trust company may be designated in any deed, trust, agreement, filing, instrument, notice, certificate, pleading, or other document as successor fiduciary pursuant to this part.

History. Code 1981, § 7-1-324 , enacted by Ga. L. 1986, p. 1244, § 1.

7-1-325. Other banking laws unaffected by part.

Except as expressly provided, nothing in this part shall be construed to amend or modify in any way the laws of the State of Georgia with respect to the establishment of banks, trust companies, branch banks, or bank holding companies or the conduct of the banking business or any part thereof.

History. Code 1981, § 7-1-325 , enacted by Ga. L. 1986, p. 1244, § 1.

PART 5 Fiduciary Investment Companies

7-1-330. Definitions.

As used in this part, the term:

  1. “Fiduciary investment company” means a corporation which is an investment company as defined by the act of Congress entitled “Investment Company Act of 1940” and is incorporated in accordance with Chapter 2 of Title 14 so as to constitute a medium for the investment of funds held by trust institutions and foreign trust institutions in a fiduciary capacity, either alone or with one or more cofiduciaries.
  2. “Foreign trust institution” means any state banking institution or trust company organized under the laws of any state other than Georgia or any national banking association incorporated under the laws of the United States and having its principal office in some state other than Georgia which has trust powers and is authorized to act in a fiduciary capacity under the laws under which it was incorporated.
  3. “Investment adviser” of a fiduciary investment company means:
    1. Any trust institution which, pursuant to contract with a fiduciary investment company possessing the qualifications provided by this part, regularly furnishes advice to such investment company with respect to the desirability of investing in, purchasing, or selling securities or other property or is empowered to determine what securities or other property shall be purchased or sold by such investment company; and
    2. Any person or corporation other than a trust institution, who, pursuant to contract with such trust institution, regularly performs substantially all of such duties undertaken by such trust institution.
  4. “Trust institution” means any trust company or any national bank with its principal office located in this state, authorized to act as a fiduciary.

History. Ga. L. 1970, p. 515, § 1; Ga. L. 1971, p. 639, §§ 1, 2; Ga. L. 1973, p. 549, § 1; Code 1933, § 41A-1501, enacted by Ga. L. 1974, p. 705, § 1.

U.S. Code.

The Investment Company Act of 1940, referred to in paragraph (1) of this Code section, is codified as 15 U.S.C. § 80 a-1 et seq.

RESEARCH REFERENCES

Am. Jur. 2d.

45 Am. Jur. 2d, Investment Companies and Advisers, §§ 2, 14, 20.

7-1-331. Organization; approval by department.

Any one or more trust institutions may cause a fiduciary investment company or companies to be organized and incorporated, but no trust institution or foreign trust institution may own an interest in more than seven fiduciary investment companies. A fiduciary investment company shall not begin business, except to select an investment adviser, until it is approved by the department.

History. Ga. L. 1970, p. 515, § 2; Ga. L. 1971, p. 639, § 3; Code 1933, § 41A-1502, enacted by Ga. L. 1974, p. 705, § 1.

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, § 23.

C.J.S.

9 C.J.S., Banks and Banking, § 652.

7-1-332. Incorporation.

Any such fiduciary investment company shall be incorporated under and subject to Chapter 2 of Title 14. The incorporators shall be persons who are officers or directors of the trust institution or institutions causing such fiduciary investment company to be incorporated; and the articles of incorporation shall set forth the name of each trust institution participating in such incorporation and the amount of stock originally subscribed for by each, together with such other facts as are required by Chapter 2 of Title 14.

History. Ga. L. 1970, p. 515, § 3; Code 1933, § 41A-1503, enacted by Ga. L. 1974, p. 705, § 1.

7-1-333. Limitations on investments.

Trust institutions and foreign trust institutions, as defined by this part, acting in a fiduciary capacity and for fiduciary purposes, if exercising due care as a prudent investor, and with the consent of any cofiduciary, may invest and reinvest funds held in such fiduciary capacity in the shares of stock of one or more fiduciary investment companies, except where the will, trust indenture, or other instrument under which such trust institution or foreign trust institution acts prohibits such investment, provided that the fiduciary investment company, by its articles of incorporation issued and granted in conformity with Chapter 2 of Title 14, shall have and possess the corporate powers required by this part and be subject to the limitations set forth by this part; provided, further, that no such trust institution or foreign trust institution shall invest in the stock of a fiduciary investment company on behalf of any estate, trust, or fund administered by such trust institution or foreign trust institution a sum or amount which would result in such estate, trust, or fund having a total investment in such stock in excess of the maximum amount or percentage that might be invested by such estate, trust, or fund, under the regulations of the department in effect at the time of such investment, in any common trust fund having total assets equal to the total assets of the fiduciary investment company as increased by the proposed investment; and no trust institution or foreign trust institution shall invest in the stock of a fiduciary investment company if, immediately after such investment and as a consequence thereof, it would own more than 25 percent of the voting securities of such fiduciary investment company which would then be outstanding.

History. Ga. L. 1970, p. 515, § 4; Ga. L. 1971, p. 639, § 4; Ga. L. 1973, p. 549, § 2; Code 1933, § 41A-1504, enacted by Ga. L. 1974, p. 705, § 1.

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, § 23.

C.J.S.

9 C.J.S., Banks and Banking, § 652.

7-1-334. Corporate powers; limitations and restrictions.

Every fiduciary investment company in which a trust institution or foreign trust institution is authorized by this part to own and hold corporate stock or shares, in order to qualify for such investments, shall have such corporate powers as may be granted by Chapter 2 of Title 14 by virtue of its incorporation under those chapters and shall, in addition, have the following corporate powers under its articles of incorporation and, by its articles of incorporation or its bylaws, be subject to the limitations and restrictions set forth in this Code section:

  1. The stock of any such fiduciary investment company shall be owned and held only by trust institutions and foreign trust institutions acting as fiduciaries or cofiduciaries but may be registered in the name of the nominee or nominees of any such trust institution or foreign trust institution. Such stock shall not be subject to transfer or assignment except to the trust institution or foreign trust institution on whose behalf the stock is held by any such nominee or nominees or to a fiduciary or cofiduciary which becomes successor to the shareholder and which is also a trust institution or foreign trust institution qualified to hold such stock.
  2. A fiduciary investment company shall have no less than five directors, who need not be shareholders but shall be officers or directors of trust institutions or foreign trust institutions holding stock in such fiduciary investment company; provided, however, that no more than two directors shall be officers or directors of any one trust institution or foreign trust institution if the fiduciary investment company has been organized and incorporated by three or more trust institutions.
  3. In acquiring, investing, reinvesting, exchanging, selling, and managing its assets, every fiduciary investment company shall exercise the judgment and care under the circumstances then existing which men of prudence, discretion, and intelligence exercise in the management of their own affairs, not in regard to speculation but in regard to the permanent disposition of their funds, considering the probable income as well as the safety of their capital. Within the foregoing limitations, a fiduciary investment company may acquire and retain every kind of investment, specifically including (but not by way of limitation) bonds, debentures, and other corporate obligations and corporate stocks, preferred or common, which men of prudence, discretion, and intelligence acquire or retain for their own account, provided that a fiduciary investment company shall not at any time:
    1. Invest in real estate, commodities, or commodity contracts;
    2. Participate on a joint or joint and several basis in any securities trading account;
    3. Invest in companies for the purpose of exercising control or management;
    4. Make loans to any person or persons, except that the purchase of a portion of an issue of debt securities, convertible debt securities, debt securities with warrants, rights, or options attached, or other similar securities when originally issued or thereafter, of a character commonly distributed publicly, shall not be considered the making of a loan;
    5. Purchase or retain the securities of any issuer if immediately after such acquisition and as a result thereof the following requirements would not be met: at least 75 percent of the total assets in the fiduciary investment company taken at market value are represented by cash and cash items, securities issued or guaranteed by the United States or an instrumentality thereof, and other securities which, as to any one issuer, do not represent more than 10 percent of the value of the total assets of the fiduciary investment company;
    6. Purchase or otherwise acquire the securities of any other investment company as that term is defined in the act of Congress entitled “Investment Company Act of 1940”;
    7. Act as underwriter of the securities of other issuers;
    8. Borrow money; or
  4. A fiduciary investment company may acquire, purchase, or redeem its own stock and may, by means of contract or by its bylaws, bind itself to acquire, purchase, or redeem its own stock; but it shall not vote shares of its own stock theretofore redeemed.
  5. A fiduciary investment company shall not be responsible for ascertaining the investment powers of any fiduciary who may purchase its stock, shall not be liable for accepting funds from a fiduciary in violation of restrictions of the will, trust indenture, or other instrument under which such fiduciary is acting in absence of actual knowledge of such violation, and shall be accountable only to the department and the fiduciaries who are the owners of its stock.
  6. Every fiduciary investment company subject to the supervision and regulation of the comptroller of the currency of the United States shall comply with all applicable rules and regulations of that agency to the extent that such rules and regulations are in addition to or in conflict with rules and regulations promulgated by the department.
  1. Engage in margin transactions or short sales or write put or call options for the purchase or sale of securities.

History. Ga. L. 1970, p. 515, § 5; Ga. L. 1971, p. 639, § 5; Ga. L. 1973, p. 549, §§ 3, 4; Ga. L. 1974, p. 598, §§ 1, 2; Code 1933, § 41A-1505, enacted by Ga. L. 1974, p. 705, § 1.

U.S. Code.

The Investment Company Act of 1940, referred to in subparagraph (3)(F) of this Code section, is codified as 15 U.S.C. § 80 a-1 et seq.

RESEARCH REFERENCES

C.J.S.

9 C.J.S., Banks and Banking, § 660 et seq.

ALR.

Statute regulating banks and trust companies as special or class legislation, as denying the equal protection of the laws, 111 A.L.R. 140 .

7-1-335. Rules and regulations; examinations.

Without limitation on the authority conferred by Article 1 of this chapter, the department shall have authority to adopt and issue reasonable and uniform rules and regulations to govern the conduct and management of all fiduciary investment companies. The department shall not examine fiduciary investment companies subject to regular examination by the comptroller of the currency of the United States or the Board of Governors of the Federal Reserve System but shall otherwise have full power to examine fiduciary investment companies and enforce laws concerning them as though they were financial institutions.

History. Ga. L. 1970, p. 515, § 6; Ga. L. 1973, p. 549, § 5; Code 1933, § 41A-1506, enacted by Ga. L. 1974, p. 705, § 1.

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, § 23. 45 Am. Jur. 2d, Investment Companies and Advisers, § 4.

7-1-336. Advertisement of participation; financial reports.

Except as may be specifically authorized by rule or regulation of the department, no trust institution or foreign trust institution holding stock in a fiduciary investment company may advertise or publicize its participation in such fiduciary investment company, provided that any trust institution or foreign trust institution holding stock in a fiduciary investment company shall furnish the annual or periodic financial reports of such fiduciary investment company, on request, to any person having a beneficial interest therein and the fact of the availability of such material may be given publicity in connection with the promotion of the fiduciary services of such trust institution or foreign trust institution.

History. Ga. L. 1970, p. 515, § 7; Ga. L. 1971, p. 639, § 6; Code 1933, § 41A-1507, enacted by Ga. L. 1974, p. 705, § 1.

RESEARCH REFERENCES

Am. Jur. 2d.

45 Am. Jur. 2d, Investment Companies and Advisers, § 4.

7-1-337. Investment advisers.

No person shall serve or act as investment adviser of a fiduciary investment company except pursuant to a written contract which has been approved by the vote of a majority of the outstanding voting securities of such fiduciary investment company and which:

  1. Precisely describes all compensation to be paid thereunder;
  2. Shall continue in effect for a period more than two years from the date of its execution only so long as such continuance is specifically approved at least annually by the board of directors or by vote of a majority of the outstanding voting securities of such company;
  3. Provides, in substance, that it may be terminated at any time, without the payment of any penalty, by the board of directors of such company or by vote of a majority of the outstanding voting securities of such company on not more than 60 days’ written notice to the investment adviser; and
  4. Provides, in substance, for its automatic termination in the event of its assignment by the investment adviser.

History. Ga. L. 1970, p. 515, § 8; Code 1933, § 41A-1508, enacted by Ga. L. 1974, p. 705, § 1.

RESEARCH REFERENCES

Am. Jur. 2d.

45 Am. Jur. 2d, Investment Companies and Advisers, §§ 14, 20.

7-1-338. Prohibition on refusing participation.

No fiduciary investment company shall refuse participation to any trust institution or foreign trust institution, as defined in this part, which is otherwise qualified to engage in a fiduciary investment program.

History. Ga. L. 1970, p. 515, § 9; Ga. L. 1971, p. 639, § 7; Code 1933, § 41A-1509, enacted by Ga. L. 1974, p. 705, § 1.

PART 6 Deposits, Safe-Deposit Agreements, and Money Received for Transmission

RESEARCH REFERENCES

Am. Jur. Pleading and Practice Forms.

4A Am. Jur. Pleading and Practice Forms, Banks, § 36 et seq.

ALR.

Duty of bank to one primarily liable to apply his deposit to an indebtedness owing from him to the bank, 9 A.L.R. 181 .

Liability of bank for loss of Liberty bonds, 17 A.L.R. 1217 ; 31 A.L.R. 703 ; 40 A.L.R. 899 .

Levy upon or garnishment of contents of safety deposit box, 19 A.L.R. 863 ; 39 A.L.R. 1215 .

Right in absence of statute to preference in respect of deposit of public funds in insolvent bank, 51 A.L.R. 1336 ; 65 A.L.R. 690 ; 90 A.L.R. 184 ; 103 A.L.R. 621 ; 167 A.L.R. 640 .

Right of one indebted to insolvent bank to setoff deposits which he has made as trustee, 55 A.L.R. 822 .

Funds accepted by bank “for safe-keeping” as a special deposit, 59 A.L.R. 448 .

Examination of account, passbook, or canceled checks by bank depositor, 67 A.L.R. 1121 ; 103 A.L.R. 1147 .

Trust in proceeds of collections made by charging debtor’s account in collecting bank, 77 A.L.R. 473 .

Right to set off deposit in insolvent bank against indebtedness to bank, 82 A.L.R. 665 ; 97 A.L.R. 588 .

Constitutionality, construction, and effect of legislation for protection of bank depositors or relief of banks or building and loan associations in need of cash or cash resources, 82 A.L.R. 1025 .

Personal liability of directors, officers, or employees of bank interfering with payment of checks or otherwise preventing or discouraging withdrawal of deposit, 97 A.L.R. 315 .

Negligence in failing to discover insolvency of bank as equivalent of knowledge, or substitute therefor, as regards criminal responsibility of bank officer or employee for receiving deposit after insolvency, 98 A.L.R. 615 .

Presumption and burden of proof, in action or proceeding against bank or its liquidator, as to reasons or justification for failure to return subject of special deposit on demand, 119 A.L.R. 831 .

Liability for loss of contents of safe-deposit box, 133 A.L.R. 279 .

Credit by bank or loan association to borrower as an incident of loan transaction as a “deposit” within statute specifically taxing deposits, 135 A.L.R. 1480 .

Deposit of fund belonging to depositor in bank account in name of himself and another, 149 A.L.R. 879 .

Parol evidence rule as applied to deposit of funds in name of depositor and another, 33 A.L.R.2d 569.

Presumption of payment as applicable to bank deposit, 69 A.L.R.3d 1311.

Liability of bank to joint depositor of savings account for amounts withdrawn by other joint depositor without presentation of passbook, 35 A.L.R.4th 1094.

Liability of bank or safe-deposit company for its employee’s theft or misappropriation of contents of safe-deposit box, 39 A.L.R.4th 543.

Bank’s liability to customer for imposing allegedly excessive service charges, 73 A.L.R.4th 1028.

7-1-350. Notice of rules governing deposits.

A bank which has adopted rules governing deposits or withdrawal of deposits shall give notice of the rules and all changes therein to each customer whose deposits are affected by such rules, either by delivery of a copy to such customer or by posting them in a conspicuous area in the main office and in all branch offices of the bank. If such rules are stated on a signature card or other contract signed by the customer, the bank shall be deemed to have given notice of the rules for purposes of this provision even if such signature card or contract is returned to the bank.

History. Ga. L. 1919, p. 135, art. 19, § 47; Code 1933, § 13-2047; Code 1933, § 41A-1601, enacted by Ga. L. 1974, p. 705, § 1.

JUDICIAL DECISIONS

Failure to give notice not constructive fraud. —

Even though a bank had a duty to notify the bank’s customer of a change in the bank’s signature verification procedures, since there was no evidence that the bank refrained from informing the bank’s customers in order to induce the customers to take or refrain from taking any certain action, there was no showing of constructive fraud. Eason Publications, Inc. v. Nationsbank, 217 Ga. App. 726 , 458 S.E.2d 899 , 1995 Ga. App. LEXIS 587 (1995).

RESEARCH REFERENCES

C.J.S.

9 C.J.S., Banks and Banking, §§ 224, 635.

ALR.

Status of “Christmas club” deposits, 21 A.L.R. 1128 .

Crediting amount to depositor’s account as precluding recovery back of money paid to bank by mistake, 25 A.L.R. 129 .

Liability of correspondent bank to depositor in forwarding bank for breach of duty as to collection of paper, 58 A.L.R. 764 .

What amounts to a deposit within statute in relation to civil or criminal liability for accepting deposit when bank is unsafe or insolvent, 76 A.L.R. 1320 .

Trust in proceeds of collections made by charging debtor’s account in collecting bank, 77 A.L.R. 473 .

Right of depositor to rescind or claim a trust in respect of a deposit because of insolvency of bank when it is made, 81 A.L.R. 1078 .

Validity, construction, application, and effect of agreement for, or condition of, indemnity to bank in event of payment to savings bank depositor who cannot produce passbook, 81 A.L.R. 1150 .

Agreement by depositors to prevent closing, or to assist in opening, of bank as affecting their rights or priorities in respect of their deposits, 88 A.L.R. 1009 .

Sufficiency of notice to bank of assignment of deposit, 115 A.L.R. 328 .

Effect on bank depositor’s rights and those of bank, of printed rules in passbook not expressly accepted, 60 A.L.R.2d 708.

7-1-351. Minors’ deposits and safe-deposit agreements.

  1. A bank may receive deposits from:
    1. A minor who is at least 16 years of age; or
    2. One or more minors jointly with one or more adults, as party to and with the same effect as a multiple-party account under Article 8 of this chapter.
  2. A bank may use electronic means, including, but not limited to, wire and mobile application software, to provide access to and facilitate the movement of money in such deposit account.
  3. A bank or trust company may rent a safe-deposit box or other receptacle for safe deposit of property to, and receive property for safe deposit from:
    1. A minor who is at least 16 years of age; or
    2. One or more minors jointly with one or more adults.
  4. A bank or trust company may deal with a minor who is at least 16 years of age with respect to a deposit account or safe-deposit agreement covered by paragraph (1) of subsection (a) or paragraph (1) of subsection (c) of this Code section without the consent of a parent or guardian and with the same effect as though the minor were an adult. A parent or guardian shall not have any right in that capacity to interfere with any such transaction. Any action of the minor with respect to such deposit account or safe-deposit agreement shall be binding on the minor with the same effect as though the minor were an adult.
  5. Nothing in this Code section shall be deemed to require a bank or trust company to provide deposit accounts or safe-deposit agreements authorized by this Code section.

History. Ga. L. 1919, p. 135, art. 19, § 41; Code 1933, § 13-2041; Code 1933, § 41A-1602, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1977, p. 730, § 4; Ga. L. 2017, p. 193, § 9/HB 143.

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, §§ 650, 841.

ALR.

Insurance of bank or trust company against loss by burglary or robbery as covering contents of safety deposit boxes rented to customers, 30 A.L.R. 623 .

Liability for loss of contents of safe deposit box, 42 A.L.R. 1304 ; 133 A.L.R. 279 .

Presumption as to ownership of property in safe deposit box, 101 A.L.R. 832 .

7-1-352. Deposit by agent, trustee, or other fiduciary.

  1. Whenever any agent, administrator, executor, guardian, trustee, either express or implied, or other fiduciary, whether bona fide or mala fide, shall deposit any money in any bank to his credit as an individual, or as such agent, trustee, or other fiduciary, whether the name of the person or corporation for whom he is acting or purporting to act be given or not, such bank shall be authorized to pay the amount of such deposit, or any part thereof, upon the order of such agent, administrator, executor, guardian, trustee, or other fiduciary, signed with the name in which such deposit was entered, without being accountable in any way to the principal, cestui que trust, or other person or corporation who may be entitled to or interested in the amount so deposited.
  2. Nothing contained in this Code section shall prevent the person or corporation claiming the beneficial interest in or to any deposit in any bank from resorting to the courts to claim such deposit, provided such action is brought and served before such deposit is paid out and in accordance with the requirements of Code Section 7-1-353.

History. Ga. L. 1919, p. 135, art. 19, § 42; Code 1933, § 13-2042; Code 1933, § 41A-1605, enacted by Ga. L. 1974, p. 705, § 1.

JUDICIAL DECISIONS

Section protects bank against breaches by corporate agent. —

Once account was properly set up by a corporation, former Code 1933, § 13-2042 (see now O.C.G.A. § 7-1-352 ) protects bank from liability if the bank was without knowledge of the breach of duty of the agent withdrawing funds. Trust Co. v. Nationwide Moving & Storage Co., 235 Ga. 229 , 219 S.E.2d 162 , 1975 Ga. LEXIS 839 (1975).

Purpose of O.C.G.A. § 7-1-352 is to protect a bank from liability in the event that an agent or fiduciary misappropriates funds of an owner in breach of the agency or trust without the bank’s knowledge, and the statute protects a bank from liability for embezzlement by a signatory on a corporate bank account if the person setting up the account had the authority to do so and if the bank was without knowledge of the embezzlement. Atlanta Sand & Supply Co. v. Citizens Bank, 276 Ga. App. 149 , 622 S.E.2d 484 , 2005 Ga. App. LEXIS 1188 (2005).

Former Code 1933, § 13-2042 (see now O.C.G.A. § 7-1-352 ) can be read to include an agent with authority or implied agency to make deposits. Trust Co. v. Nationwide Moving & Storage Co., 235 Ga. 229 , 219 S.E.2d 162 , 1975 Ga. LEXIS 839 (1975).

Corporate officer’s authority. —

Because a company’s corporate resolution authorized one of the corporation’s officers to make deposits to and withdrawals from an account maintained at a bank, and the officer, in the process of making deposits to the account, illegally took cash back from the deposits for the officer’s personal use, the bank was shielded from liability for conversion by O.C.G.A. § 7-1-352 because the corporate resolution, as well as a signature card bearing the officer’s signature, gave the officer authority to deal with the account. Atlanta Sand & Supply Co. v. Citizens Bank, 276 Ga. App. 149 , 622 S.E.2d 484 , 2005 Ga. App. LEXIS 1188 (2005).

Account in a fictitious name is recognized in Georgia. National Factor & Inv. Corp. v. State Bank, 224 Ga. 535 , 163 S.E.2d 817 , 1968 Ga. LEXIS 846 (1968).

Account can be opened in any name and bank may pay checks signed in accounts when the bank has no knowledge of a fraudulent purpose for the account. National Factor & Inv. Corp. v. State Bank, 224 Ga. 535 , 163 S.E.2d 817 , 1968 Ga. LEXIS 846 (1968).

Banks not required to scrutinize every check written by a fiduciary or agent. —

Former Code 1933, § 13-2042 is designed to protect the bank from liability when the agent or fiduciary misappropriates funds of the owner in breach of agency or trust without bank’s knowledge. The bank is not required to scrutinize every check written by a fiduciary or agent to see if the check is written in compliance with the agent’s authority. Trust Co. v. Nationwide Moving & Storage Co., 235 Ga. 229 , 219 S.E.2d 162 , 1975 Ga. LEXIS 839 (1975).

Former Code 1933, § 13-2042 was designed to protect the bank from liability when an agent or fiduciary misappropriates funds of the owner in breach of agency or trust without bank’s knowledge. The bank is not required to scrutinize every check written by a fiduciary or agent to see if the check is written in compliance with the agent’s authority. Flo-Control, Inc. v. Northeast Bank, 150 Ga. App. 880 , 258 S.E.2d 695 , 1979 Ga. App. LEXIS 2407 (1979); National Bank v. Weiner, 180 Ga. App. 61 , 348 S.E.2d 492 , 1986 Ga. App. LEXIS 2060 (1986).

If agent has authority to open account and issue checks, bank is protected. —

If agent was proven to have had either authority or inherent agency power to open an account, then the bank can rely on the protection of former Code 1933 § 13-2042 if the agent also had authority to issue checks. Trust Co. v. Nationwide Moving & Storage Co., 235 Ga. 229 , 219 S.E.2d 162 , 1975 Ga. LEXIS 839 (1975).

Bank was protected from liability for conversion of checks deposited into a corporate account since the agent who made the deposits and later withdrew the deposits had presented documents to the bank, including a certificate bearing the corporate seal and naming the agent as an officer of the corporation, which appeared to give the agent very broad authorization. Service Lines v. Trust Co. Bank, 189 Ga. App. 891 , 377 S.E.2d 872 , 1989 Ga. App. LEXIS 50 (1989).

General manager may have authority or inherent agency to arrange for handling of corporate funds. Trust Co. v. Nationwide Moving & Storage Co., 235 Ga. 229 , 219 S.E.2d 162 , 1975 Ga. LEXIS 839 (1975).

Trust company cannot rely solely on general manager’s position. —

Trust company does not have the right to rely solely on the general manager’s position as general manager for power to set up a corporate bank account and to withdraw corporate funds without a proper corporate resolution. Trust Co. v. Nationwide Moving & Storage Co., 235 Ga. 229 , 219 S.E.2d 162 , 1975 Ga. LEXIS 839 (1975).

Corporate resolution is not exclusive method for conferring authority. —

While a bank could easily protect the bank’s interests by requiring a proper corporate resolution showing an agent’s authority to act for the corporation, that method is not the exclusive one for establishing the existence either of authority or of inherent agency power to open a bank account for the corporation. Trust Co. v. Nationwide Moving & Storage Co., 235 Ga. 229 , 219 S.E.2d 162 , 1975 Ga. LEXIS 839 (1975).

Chief executive officer’s authority. —

When evidence showed that a chief executive officer had the inherent agency power to open accounts and withdraw deposited funds, the bank was not liable for alleged conversions of funds by the officer on the basis that the bank did not require a corporate resolution or certificate of authority to open the accounts. Family Partners Worldwide, Inc. v. Suntrust Bank, 242 Ga. App. 618 , 530 S.E.2d 742 , 2000 Ga. App. LEXIS 289 (2000).

This section does not violate U.S. Const., amend. 14, Sec. 1, or Ga. Const. 1983, Art. I, Sec. I, Para. II. —

Former Code 1933, § 13-2042 (see now O.C.G.A. § 7-1-352(a) ) was not unconstitutional under U.S. Const., Art. XIV, Sec. I, and Ga. Const. 1976, Art. I, Sec. II, Para. III (see now Ga. Const. 1983, Art. I, Sec. I, Para. II) as violating equal protection and impartial protection of property, nor did the statute violate Ga. Const. 1976, Art. I, Sec. I, Para. VII (see now Ga. Const. 1983, Art. I, Sec. I, Para. X) prohibitions against grants of special privileges or immunities. National Factor & Inv. Corp. v. State Bank, 224 Ga. 535 , 163 S.E.2d 817 , 1968 Ga. LEXIS 846 (1968).

Former Code 1933, § 13-2042 was not unconstitutional as a special law enacted in derogation of a general law. National Factor & Inv. Corp. v. State Bank, 224 Ga. 535 , 163 S.E.2d 817 , 1968 Ga. LEXIS 846 (1968).

Circumstances required to charge bank with notice of misappropriation. —

See National Factor & Inv. Corp. v. State Bank, 224 Ga. 535 , 163 S.E.2d 817 , 1968 Ga. LEXIS 846 (1968).

Mere fact that a fiduciary deposits in bank to the fiduciary’s individual account a check drawn by the fiduciary in a fiduciary capacity, or transfers funds by check from an account in the bank in the fiduciary’s own name as a fiduciary to a personal account in the bank, will not of itself charge the bank with knowledge or notice that the fiduciary is misappropriating or will misappropriate such funds. Citizens Bank v. Middlebrooks, 209 Ga. 330 , 72 S.E.2d 298 , 1952 Ga. LEXIS 480 (1952).

Trust funds. —

Under O.C.G.A. § 7-1-352 , a bank incurs no liability for the uses to which trust funds are applied after the funds are withdrawn. On the other hand, the statute contains no language protecting the bank against liability for honoring forged or otherwise improper checks or endorsements. Trust Co. Bank v. Henderson, 258 Ga. 703 , 373 S.E.2d 738 , 1988 Ga. LEXIS 493 (1988).

O.C.G.A. § 7-1-352 did not apply when the claim against the bank was based on the bank’s acceptance for deposit into an employee’s personal checking account of checks made payable to the employer, and the employee knowingly signed and presented the checks so as to give the appearance of authority from the employer. Trust Co. Bank v. Henderson, 185 Ga. App. 367 , 364 S.E.2d 289 , 1987 Ga. App. LEXIS 2508 (1987), aff'd, 258 Ga. 703 , 373 S.E.2d 738 , 1988 Ga. LEXIS 493 (1988).

While O.C.G.A. § 7-1-352 protects banks from liability when allowing withdrawals and paying accounts ordered to be paid by the persons who have previously deposited such money, it is not applicable when the amount ordered to be transferred was not initially deposited by a temporary administratrix but instead was deposited by the deceased. Kelly v. Citizens & S. Nat'l Bank, 160 Ga. App. 405 , 287 S.E.2d 343 , 1981 Ga. App. LEXIS 3131 (1981).

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am Jur. 2d, Banks, § 504.

ALR.

Deposit to individual account of checks or notes drawn or endorsed by agent or fiduciary, as charging bank with notice of misappropriation, 64 A.L.R. 1404 ; 106 A.L.R. 836 ; 115 A.L.R. 648 .

Trust or preference in assets of insolvent bank in respect of money deposited or left on deposit pursuant to agreement of bank to purchase bonds or make other investments for depositor, 82 A.L.R. 1292 ; 105 A.L.R. 516 .

Liability of guardian for loss of funds deposited in bank in form which discloses trust or fiduciary character, 90 A.L.R. 641 .

Payee’s and drawer’s right of recovery, in conversion under pre-1990 UCC § 3-419, or post-1990 UCC § 3-420, for money paid on unauthorized endorsement, 91 A.L.R.5th 89.

7-1-353. Adverse claims to deposits and property held in safe deposit.

  1. Except as provided in subsections (b) and (c) of this Code section, a bank or trust company shall not be required to deny control over or access to a deposit account or property held in safe deposit (whether by the bank or trust company or in a safe-deposit box or other receptacle leased to a customer) to:
    1. The customer in whose name the account or property is held by the bank or trust company (including one of two depositors or lessees entitled to such control or access by virtue of their contract with the bank or trust company); or
    2. A person or group of persons who is authorized to draw on or control the account or property pursuant to a certified corporate resolution or other written arrangement with the customer currently on file with the bank or trust company.
  2. A bank shall be entitled to act and rely upon:
    1. A court order, distraint, levy, garnishment, or other effective legal process;
    2. An agreement of the parties concerning an adverse claim; or
    3. A claim of the type described in subsection (a) of this Code section accompanied by a bond or other indemnity adequate to protect the bank or trust company from loss as a consequence of recognizing an adverse claim.
  3. Nothing in this Code section shall impair the effect of a discharge which a bank or trust company would be entitled to under Code Section 11-3-602.

History. Code 1933, § 41A-1606, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1984, p. 22, § 7; Ga. L. 1997, p. 143, § 7; Ga. L. 2016, p. 390, § 7-8/HB 811.

Cross references.

Disposition of property held in safe deposit box or held for safekeeping by financial institution for which department acts as receiver, § 7-1-172 .

JUDICIAL DECISIONS

IRS levy. —

Bank did not violate O.C.G.A. § 7-1-353 by denying a depositor control over the depositor’s bank account when the bank surrendered money in the depositor’s account pursuant to an IRS levy. Dean v. NationsBank, 226 Ga. App. 370 , 486 S.E.2d 647 , 1997 Ga. App. LEXIS 609 (1997).

RESEARCH REFERENCES

Am. Jur. 2d.

11 Am. Jur. 2d, Banks and Financial Institutions, §§ 1005 et seq., 1012.

C.J.S.

93 C.J.S. (Rev), Warehousemen and Safe Depositaries, § 141.

ALR.

Levy upon or garnishment of contents of safety deposit box, 11 A.L.R. 225 ; 19 A.L.R. 863 ; 39 A.L.R. 1215 .

Crediting amount to depositor’s account as precluding recovery back of money paid to bank by mistake, 25 A.L.R. 129 .

Insurance of bank or trust company against loss by burglary or robbery as covering contents of safety deposit boxes rented to customers, 30 A.L.R. 623 .

Liability for loss of contents of safe-deposit box, 42 A.L.R. 1304 ; 133 A.L.R. 279 .

Duty of bank to sureties or endorsers as to application of general deposit by principal, 70 A.L.R. 339 .

Right of bank to charge depositor’s indebtedness against deposit account without first exhausting collateral, 96 A.L.R. 1240 .

Presumption as to ownership of property in safe deposit box, 101 A.L.R. 832 .

Garnishment of bank deposit as affected by bank’s right, or waiver of right, to set off depositor’s indebtedness to it against deposit or apply deposit to such indebtedness, 106 A.L.R. 62 ; 110 A.L.R. 1268 .

Conflict of laws as to disposition of and relative rights to bank deposits in the names of more than one person, 25 A.L.R.2d 1240.

7-1-354. Money received for transmission.

  1. A bank or trust company which receives money for transmission shall give the customer a receipt setting forth:
    1. The date of receipt of the money;
    2. The amount of the money in dollars and cents; and
    3. If the money is to be transmitted to a foreign country in the currency of such country, the amount of the money in such currency.
  2. In an action by a customer against a bank or trust company for recovery of money delivered for transmission, the burden of proof of delivery of the money in accordance with the instructions of the customer shall be on the bank or trust company; but an affidavit by an agent or correspondent of the bank or trust company that the money was delivered in accordance with the customer’s instructions shall be prima-facie evidence of the delivery of the money in accordance with the customer’s instructions.

History. Code 1933, § 41A-1607, enacted by Ga. L. 1974, p. 705, § 1.

Cross references.

Persons, corporations, and others engaging in business of receiving cash from patrons as payment of obligations owed by such patrons to third parties, § 10-6-100 et seq.

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, §§ 782, 792.

C.J.S.

9 C.J.S., Banks and Banking, §§ 474 et seq., 515.

ALR.

Liability of correspondent bank to depositor in forwarding bank for breach of duty as to collection of paper, 58 A.L.R. 764 .

Trust or preference in respect of money used to purchase exchange or to be transmitted, 84 A.L.R. 1470 ; 93 A.L.R. 938 ; 101 A.L.R. 631 .

Agreement by bank to transmit excess of deposit over specified amount as giving rise to a trust or preference in event of insolvency of bank, 89 A.L.R. 1287 .

Bank depositor’s act in seeking restitution from third person to whom, or for benefit of whom, the bank has paid out the deposit, as election of remedy precluding action against bank, 144 A.L.R. 1440 .

7-1-355. Agreements concerning safe deposits.

A bank, trust company, or savings and loan association may receive property for safe deposit and rent out receptacles and safe-deposit boxes on the terms and conditions prescribed by it; but such terms and conditions shall not bind any customer to whom the bank, trust company, or savings and loan association does not give notice thereof either by delivery of a copy or by posting in its offices where such receptacles or safe-deposit boxes are located, or who does not otherwise agree to such terms and conditions.

History. Code 1933, § 41A-1608, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1978, p. 1717, § 4; Ga. L. 2016, p. 390, § 7-4/HB 811; Ga. L. 2017, p. 774, § 7/HB 323.

RESEARCH REFERENCES

Am. Jur. 2d.

11 Am. Jur. 2d, Banks and Financial Institutions, §§ 1002, 1007, 1008.

C.J.S.

93 C.J.S. (Rev), Warehousemen and Safe Depositaries, §§ 138, 139.

ALR.

Insurance of bank or trust company against loss by burglary or robbery as covering contents of safety deposit boxes rented to customers, 30 A.L.R. 623 .

Liability for loss of contents of safe-deposit box, 42 A.L.R. 1304 ; 133 A.L.R. 279 .

Presumption as to ownership of property in safe deposit box, 101 A.L.R. 832 .

7-1-356. Procedures on death or incompetence of safe depositor.

  1. Any financial institution contracting with a person for the use of a safe-deposit box or receiving property from a person for safekeeping, upon presentation of satisfactory proof of the death or legal incompetence of such person, shall permit any person named in an order granted by the probate court having jurisdiction of such person’s estate to open and examine the contents of any safe-deposit box leased by the decedent or legally incompetent person or to examine the property left by such person for safekeeping, in the presence of an officer of the financial institution. The financial institution, if so requested by such person, shall deliver:
    1. Any writing purporting to be a will of the decedent to the probate court having jurisdiction of the decedent’s estate;
    2. Any writing purporting to be a deed to a burial plot or to give burial instructions to the person named in such order;
    3. Any document purporting to be an insurance policy on the life of the decedent to the beneficiary named therein;

      but no other contents shall be removed pursuant to this Code section.

  2. Within five banking days after the order of the court is presented to the financial institution, the financial institution shall permit the person named in such order to inventory the contents of any safe-deposit box leased or rented to the decedent or legally incompetent person or the property left by such person for safekeeping. The inventory shall be conducted in the presence of an officer or employee of the financial institution by the person named in such order. The inventory shall be signed by such persons, and a copy thereof shall be retained by the financial institution and may be filed with the probate court.
  3. The financial institution shall be free from all liability with respect to any action, claim, or demand of whatever nature asserted by any heir, legatee, distributee, creditor, administrator, executor, guardian, trustee, or other fiduciary or by any person whomsoever when acting pursuant to such letters of authority.
  4. Upon presentation of a certified copy of his letters of authority, the financial institution shall grant the personal representative access to any safe-deposit box or property in safekeeping in the sole name of a decedent or legally incompetent person to permit him to remove from such box or place of safekeeping any part or all of the property therein without liability.

History. Ga. L. 1972, p. 437, §§ 1-4; Code 1933, § 41A-1609, enacted by Ga. L. 1974, p. 705, § 1.

Cross references.

Opening of safe deposit box on authorization of fiduciary, § 53-7-5 .

RESEARCH REFERENCES

Am. Jur. 2d.

11 Am. Jur. 2d, Banks and Financial Institutions, §§ 1003, 1006, 1012.

C.J.S.

93 C.J.S. (Rev), Warehousemen and Safe Depositaries, §§ 141, 142.

ALR.

Insurance of bank or trust company against loss by burglary or robbery as covering contents of safety deposit boxes rented to customers, 30 A.L.R. 623 .

Liability for loss of contents of safe deposit box, 42 A.L.R. 1304 ; 133 A.L.R. 279 .

Presumption as to ownership of property in safe deposit box, 101 A.L.R. 832 .

7-1-357. [Reserved] Payment of deposit of deceased depositor; deposit by nursing home of moneys left in its possession upon death of resident.

History. Repealed by Ga. L. 1983, p. 661, § 2, effective July 1, 1983.

Editor’s notes.

The former Code section was based on Ga. L. 1919, p. 135, art. 19, § 48; Ga. L. 1927, p. 195, § 11; Code 1933, § 13-2048; Ga. L. 1943, p. 253, § 1; Ga. L. 1952, p. 189, § 1; Ga. L. 1955, p. 202, § 1; Code 1933, § 41A-1610, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 21; Ga. L. 1976, p. 1388, § 3; Ga. L. 1981, p. 848, § 1.

Code Section 7-1-357 was repealed by Ga. L. 1983, p. 661, § 2, effective July 1, 1983. For present provisions as to payment of large deposits of deceased intestate depositors, see Code Section 7-1-239.

7-1-358. Dormant accounts.

In accordance with and subject to the limitation of such regulations as the department may prescribe, a bank may, from time to time, charge a dormant account a reasonable service charge.

History. Code 1933, § 13-2067, enacted by Ga. L. 1966, p. 590, § 10; Code 1933, § 41A-1611, enacted by Ga. L. 1974, p. 705, § 1.

JUDICIAL DECISIONS

Dormant checks, money orders, and drafts deemed “dormant accounts.” —

O.C.G.A. § 7-1-358 and a related regulation do not allow assessment of service charges only against dormant deposit accounts; thus, charges against dormant checks, money orders, and drafts qualified as “lawful charges” and were properly withheld from the Department of Revenue when funds were remitted under the Unclaimed Property Act, O.C.G.A. § 44-12-190 et seq. First Union Nat'l Bank v. Collins, 221 Ga. App. 442 , 471 S.E.2d 892 , 1996 Ga. App. LEXIS 389 (1996), cert. denied, No. S96C1460, 1996 Ga. LEXIS 958 (Ga. Sept. 5, 1996).

OPINIONS OF THE ATTORNEY GENERAL

Repeals contrary provision in Disposition of Unclaimed Property Act. — Ga. L. 1974, p. 705, § 1 (see now O.C.G.A. § 7-1-358 ) repealed by implication the prohibition against the imposition of a service charge on dormant bank accounts contained in the Disposition of Unclaimed Property Act (see now O.C.G.A. § 44-12-190 et seq.). 1975 Op. Att'y Gen. No. 75-128.

7-1-359. Fee prohibited for conducting search of dormant, abandoned, or unclaimed deposit accounts; commission or finder’s fee allowed.

No person shall charge a fee or solicit any other form of compensation for the purpose of conducting a search for dormant, abandoned, or unclaimed deposit accounts or other abandoned properties whether held by a financial institution or escheated to any governmental agency. Notwithstanding the foregoing, a commission or finder’s fee not to exceed 10 percent of actual sums recovered by the owner of such accounts may be agreed to by the parties. All moneys and properties located by a person to be compensated by the payment of such a commission or finder’s fee shall be paid directly to the owner and may not be paid over to the person to receive the commission or finder’s fee whether pursuant to a duly executed power of attorney or otherwise.

History. Code 1981, § 7-1-359 , enacted by Ga. L. 1989, p. 1211, § 6.

7-1-360. Third-party claims; notification of disclosure by third party to depositor; motion to quash disclosure.

  1. No financial institution shall be required to recognize the claim of any third party to any deposit, or withhold payment of any deposit to the depositor or to his order, unless and until the financial institution is served with citation, order, or other appropriate process issuing out of a court of competent jurisdiction in connection with a suit instituted by such third party for the purpose of recovering or establishing an interest in such deposit. Neither shall any financial institution be required to disclose or produce to third parties, or permit third parties to examine any records pertaining to a deposit account, loan account, or other banking relationship except:
    1. Where the financial institution itself is a proper or necessary party to a proceeding in a court of competent jurisdiction;
    2. Where the records of accounts or other customer records are requested through subpoena or other administrative process issued by a state, federal, or local administrative agency having competent jurisdiction over the depositor or other customer or where such records are requested pursuant to Georgia or federal law governing civil practice or procedure in conjunction with an ongoing civil action in a Georgia state or federal court of competent jurisdiction;
    3. Where the records of accounts or other customer records are requested in conjunction with an ongoing criminal or tax investigation of the depositor or other customer by a state or federal grand jury, taxing authority, or law enforcement agency; or
    4. Where the records of accounts or other customer records are requested by any state or federal regulatory agency having jurisdiction over the financial institution.
  2. Unless directed otherwise by a court of competent jurisdiction, before disclosure, production, or examination of records produced under paragraph (1) or (2) of subsection (a) of this Code section, the agency or other party seeking the disclosure or production of the records shall provide notification to the depositor or other customer of such request. Notification of the depositor or other customer under circumstances set forth in paragraphs (3) and (4) of subsection (a) of this Code section shall not be made without the consent of the requesting authority. For purposes of ascertaining whether or not proper notice has been given or whether or not the depositor or other customer may be notified, the financial institution may rely upon appropriate certification or written assurances from the requesting party and in doing so shall be relieved of any liability which might be asserted in connection with such disclosures.
  3. Each customer or depositor to whom notice of an order, subpoena, or request for disclosure, examination, or production of records was lawfully given may, prior to the date specified therein for disclosure, examination, or production, file in the court issuing an order or subpoena for the records or in the Georgia or federal court where the civil matter is being heard or, in the absence of such a court, in the superior court of the county in which the financial institution is located a motion to quash the order, subpoena, or request or for a protective order and shall serve such motion on the party requesting disclosure and the financial institution as may be otherwise provided by law for similar motions.  Failure to file and serve such motion to quash or for protection shall constitute consent for all purposes to disclosure, production, or examination made pursuant to this Code section.

History. Code 1981, § 7-1-360 , enacted by Ga. L. 1989, p. 1211, § 6; Ga. L. 2005, p. 826, § 8/SB 82.

JUDICIAL DECISIONS

Section not intended to hinder discovery as to fair market value. —

O.C.G.A. § 7-1-360 is intended to protect confidential banking records. It is not intended to hinder proper discovery in a lawsuit concerning the fair market value of taxable property, especially when the documents sought may contain evidence, including admissions by the taxpayer, as to the value of the property. Clayton County Bd. of Tax Assessors v. Lake Spivey Golf Club, Inc., 207 Ga. App. 693 , 428 S.E.2d 687 , 1993 Ga. App. LEXIS 277 (1993), overruled in part, General Motors, LLC v. Buchanan, No. S21G1147, 2022 Ga. LEXIS 163 (Ga. June 1, 2022).

Relevance of financial condition. —

Trial court did not err in admitting banking records for accounts belonging to the defendant, as evidence of the defendant’s financial condition was admissible regarding the defendant’s reason for stabbing the victim, a fellow soldier, and grabbing for the victim’s money; accordingly, the defendant’s argument that the admission of defendant’s bank records was improper pursuant to O.C.G.A. § 7-1-360 had to be rejected since that statute merely discussed the right of financial institutions to provide certain financial information to third parties when the records were requested by certain individuals or entities for certain purposes. Stogisavlijevic v. State, 259 Ga. App. 306 , 577 S.E.2d 18 , 2003 Ga. App. LEXIS 507 (2003).

Discovery compelled by court of competent jurisdiction. —

Compliance with Fed. R. Bankr. P. 2004(c) satisfies the requirement of O.C.G.A. § 7-1-360 that discovery of records of a financial institution be compelled by a court of competent jurisdiction. In re Bennett, No. 07-77463, 2008 Bankr. LEXIS 1742 (Bankr. N.D. Ga. Apr. 15, 2008).

Chapter 7 trustee’s motion for a Fed. R. Bankr. P. 2004 examination of a law firm as to documents relating to the real estate closing to which the debtors were parties was granted with the requirement that the trustee subpoena the firm because the trustee was not required to serve the motion, which could be granted ex parte, on the debtors under Fed. R. Bankr. P. 9013 and compliance with Fed. R. Bankr. P. 2004(c) satisfied the requirement of O.C.G.A. § 7-1-360 that discovery of records of a financial institution be compelled by a court of competent jurisdiction. In re Bennett, No. 07-77463, 2008 Bankr. LEXIS 1742 (Bankr. N.D. Ga. Apr. 15, 2008).

Judgment creditor may review bank records of debtor’s spouse. —

Judgment creditor was authorized to seek bank records of the debtor’s spouse in post-judgment discovery because the creditor was entitled to seek information that would lead to any property or other sources of income of the debtor; further, the spouse had begun paying the debtor’s country club dues from the spouse’s bank accounts after the judgment was entered. Hickey v. RREF BB SBL Acquisitions, LLC, 336 Ga. App. 411 , 785 S.E.2d 72 , 2016 Ga. App. LEXIS 193 (2016).

RESEARCH REFERENCES

ALR.

Bank’s liability, under state law, for disclosing financial information concerning depositor or customer, 81 A.L.R.4th 377.

PART 7 Banking Depositories, Reserves, and Remissions

7-1-370. Deposits by financial institutions.

  1. Subject to the restrictions of subsection (b) of this Code section and of Code Section 7-1-371 in regard to reserve funds, a financial institution may deposit its funds in any depository which is:
    1. Selected by, or in any manner authorized by, its directors;
    2. Authorized by law to receive deposits; and
    3. In the case of a depository located in the United States, one which has deposit insurance issued by a federal public body to depositories of the type involved.
  2. If a director of the financial institution has a relationship to a depository as either:
    1. An officer or director; or
    2. An owner of 5 percent or more of the shares of the depository,

      the depository shall be approved by a majority of the directors other than the director who has such relationship.

History. Code 1933, § 41A-1701, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1981, p. 1366, § 10; Ga. L. 1997, p. 485, § 14; Ga. L. 2016, p. 390, § 2-4/HB 811.

OPINIONS OF THE ATTORNEY GENERAL

This section is broad enough to cover a savings and loan account as a deposit. — Former Code 1933, § 41A-1309 (see now O.C.G.A. § 7-1-288 ) was directed at a bank’s long-term investment in capital stocks and securities in the bank’s own name, while former Code 1933, § 41A-1701 (see now O.C.G.A. § 7-1-370 ) was directed at a bank’s short-term deposits in other financial institutions. The language of former Code 1933, § 41A-1701 was broad enough to cover a savings and loan account as a deposit, therefore, former Code 1933, § 41A-1309 was inapplicable to deposits in mutual savings and loan associations and former Code 1933, § 41A-1701 permitted banks to deposit the bank’s funds in these associations. Since the Georgia Supreme Court has not ruled on the question of whether such a deposit was equivalent to the purchase of shares in a corporation, federal law will not permit a state bank member of the federal reserve to make deposits in a Georgia building and loan association; however, there was no reason why a state bank which is not a member of the federal reserve cannot deposit the bank’s funds in a state association. 1978 Op. Att'y Gen. No. 78-66.

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, §§ 45, 53, 54.

11 Am. Jur. 2d, Banks and Financial Institutions, §§ 1086, 1087.

7-1-371. Legal reserve requirements; notice of deficiency; penalty; effect of deficiency.

  1. For the purposes of the reserve requirement imposed by subsection (c) of this Code section and the composition of the required reserve fund under subsection (d) of this Code section, the term:
    1. “Demand deposits” means the aggregate of deposits which can be required to be paid on demand or within less than 30 days after demand;
    2. “Reserve agent” means a depository of a financial institution selected as provided in Code Section 7-1-370 for the deposit of funds included in the required reserve fund.
  2. A financial institution which is governed by 12 C.F.R. 204 shall maintain, at all times, a reserve fund in accordance with the applicable federal requirements.
  3. A financial institution which is not governed by 12 C.F.R. 204 shall maintain, at all times, a reserve fund in an amount fixed by regulation of the department, but in no case shall such reserve be required in excess of the aggregate of 15 percent of demand deposits and 5 percent of other deposits.

    The amount of the required reserve for each day shall be computed on the basis of average daily deposits covering such biweekly or shorter periods as shall be fixed by regulation of the department.

  4. In the case of a financial institution which is not governed by 12 C.F.R. 204, such portion of the reserve fund against deposits as shall be fixed by regulation of the department shall consist of United States coin and currency on hand or on deposit, subject to call without notice, in a reserve agent. The balance of such reserve fund shall be kept in obligations of:
    1. General obligations of the United States or of a subsidiary corporation of the United States government fully guaranteed by such government, or to obligations issued by the Federal Land Bank, Federal Home Loan Banks, Federal Intermediate Credit Bank, Bank for Cooperatives, Federal Farm Credit Banks regulated by the Farm Credit Administration, Federal Home Loan Mortgage Corporation, or Federal National Mortgage Association;
    2. Obligations of the State of Georgia or any instrumentality of this state; or
    3. Other issuers whose obligations are marketable and approved by regulation of the department for the purpose of this Code section.
  5. All assets which are part of the reserve fund required by this Code section shall be owned absolutely by the financial institution and shall not be pledged, assigned, or hypothecated in any manner or subject to setoff. The value of all securities which constitute a part of a financial institution’s reserve fund shall be computed at the current market value thereof.
  6. A financial institution shall give written notice to the department, in the manner prescribed by the department for such notice, of any deficiency in the amount or form of the reserve fund required by this Code section within three business days after the close of any scheduled averaging period during which such deficiency occurs.
  7. Immediately following the closing of any scheduled averaging period during which a deficiency in the required reserve occurs, the financial institution will take immediate action to restore the deficiency; and, until such deficiency is restored, the financial institution shall not make any new loans or discounts other than by discounting or purchasing bills of exchange at sight; nor shall any dividend be declared out of the profits of such financial institution. Any financial institution failing to restore its reserve to the required amount within 30 days after the closing of the averaging period in which the deficiency occurs may have its business and assets taken over by the department as provided in Part 7 of Article 1 of this chapter.

History. Ga. L. 1919, p. 135, art. 19, §§ 27, 28; Ga. L. 1920, p. 102, § 1; Code 1933, §§ 13-2027, 13-2028; Ga. L. 1939, p. 360, §§ 1, 2; Ga. L. 1966, p. 692, § 50; Ga. L. 1967, p. 798, §§ 1, 2; Ga. L. 1969, p. 126, § 1; Ga. L. 1973, p. 526, §§ 6, 7; Code 1933, § 41A-1702, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 22; Ga. L. 2016, p. 390, § 2-5/HB 811.

Administrative rules and regulations.

Legal reserves, Official Compilation of the Rules and Regulations of the State of Georgia, Rules of Department of Banking and Finance, Banks, Chapter 80-1-7.

RESEARCH REFERENCES

C.J.S.

9 C.J.S., Banks and Banking, § 24.

ALR.

Rights and preference in respect of assets of insolvent bank or trust company as affected by its division into departments, 89 A.L.R. 1218 ; 114 A.L.R. 680 .

7-1-372. Collection charge; service charge.

A commercial bank may deduct a reasonable collection charge covering its actual expenses from the remittance for any check forwarded to it for collection and remittance as a special collection item and may impose a service charge as authorized by Code Section 44-12-196, relating to when an instrument on which a banking or financial organization is directly liable is presumed abandoned.

History. Ga. L. 1919, p. 135, art. 19, §§ 27, 28; Ga. L. 1920, p. 102, § 1; Code 1933, §§ 13-2027, 13-2028; Ga. L. 1939, p. 360, §§ 1, 2; Ga. L. 1966, p. 692, § 50; Ga. L. 1967, p. 798, §§ 1, 2; Ga. L. 1969, p. 126, § 1; Ga. L. 1973, p. 526, §§ 6, 7; Code 1933, § 41A-1703, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1995, p. 1368, § 2; Ga. L. 2016, p. 390, § 2-6/HB 811.

Cross references.

Bank deposits and collections generally, T. 11, Art. 4.

JUDICIAL DECISIONS

Preempted by federal law. —

Since the court found that O.C.G.A. §§ 7-1-239.5 and 7-1-372 were in direct conflict with 12 U.S.C. § 24 and 12 C.F.R. § 7.4002(a) under the National Bank Act, 12 U.S.C. § 21 et seq., the state statutes were preempted, and the court granted the bank’s Fed. R. Civ. P. 56 motion. Bank of Am., N.A. v. Sorrell, 248 F. Supp. 2d 1196, 2002 U.S. Dist. LEXIS 26371 (N.D. Ga. 2002).

“Lawful charges” against dormant checks, money order, and drafts. —

O.C.G.A. § 7-1-358 and a related regulation do not allow assessment of service charges only against dormant deposit accounts; thus, charges against dormant checks, money orders, and drafts qualified as “lawful charges” and were properly withheld from the Department of Revenue when funds were remitted under the Unclaimed Property Act, O.C.G.A. § 44-12-190 et seq. First Union Nat'l Bank v. Collins, 221 Ga. App. 442 , 471 S.E.2d 892 , 1996 Ga. App. LEXIS 389 (1996), cert. denied, No. S96C1460, 1996 Ga. LEXIS 958 (Ga. Sept. 5, 1996).

OPINIONS OF THE ATTORNEY GENERAL

This title does not restrict how banks treat items for collection. — Neither former Code 1933, Title 41A nor Title 109A (see now O.C.G.A. Title 7 nor Title 11) restricted in any way a bank’s freedom to decide how the bank will treat any particular collection item, whether it be a check or a credit union share draft. 1977 Op. Att'y Gen. No. 77-2.

Banks not required to process credit union share drafts as cash items, rather than as drafts for collection. 1977 Op. Att'y Gen. No. 77-2.

RESEARCH REFERENCES

ALR.

Priority as between checks simultaneously presented to drawee bank for payment, 61 A.L.R. 960 .

Liability of bank which diverts checks or drafts drawn to its order to a use other than that of the drawer, 82 A.L.R. 1372 .

Discharge of drawer or endorser of check by holder’s acceptance therefor of something other than money, 87 A.L.R. 442 .

Duty and liability of bank in respect of a depositor’s check drawn upon and payable to the bank, 138 A.L.R. 853 .

Constitutionality, construction, and application of statutes requiring clearance of checks at par, 174 A.L.R. 869 .

PART 8 Incorporation of Banks and Trust Companies

Cross references.

Incorporation of Secretary of State corporations generally, § 14-4-21 et seq.

JUDICIAL DECISIONS

Editor’s notes.

In light of the similarity of the statutory provisions, decisions under former Ga. L. 1919, p. 135 are included in the annotations for this part.

Trust company not a chartered bank within penal laws. —

Trust company incorporated under provisions of Ga. L. 1919, p. 135 is not a chartered bank, within the meaning of the penal laws of this state relating only to such banks. Dunn v. State, 13 Ga. App. 314 , 79 S.E. 170 , 1913 Ga. App. LEXIS 138 (1913), (decided under former Ga. L. 1919, p. 135).

7-1-390. Incorporators.

One or more natural persons 18 years of age or over may act as incorporators of a bank or trust company.

History. Ga. L. 1898, p. 78, § 1; Civil Code 1910, § 2815; Ga. L. 1919, p. 135, art. 8, § 1; Ga. L. 1920, p. 102, § 1; Ga. L. 1927, p. 195, § 7; Ga. L. 1931, p. 156, § 1; Code 1933, §§ 13-901, 109-101; Ga. L. 1935, p. 101, § 1; Ga. L. 1941, p. 312, § 1; Ga. L. 1943, p. 249, § 1; Ga. L. 1965, p. 501, § 1; Ga. L. 1966, p. 463, § 1; Ga. L. 1966, p. 692, § 7; Ga. L. 1972, p. 384, § 1; Ga. L. 1972, p. 727, § 1; Code 1933, § 41A-1801, enacted by Ga. L. 1974, p. 705, § 1.

RESEARCH REFERENCES

Am. Jur. 2d.

18A Am. Jur. 2d, Corporations, §§ 183, 184.

C.J.S.

9 C.J.S., Banks and Banking, §§ 19, 735.

7-1-390.1. Organization of bank or trust company as limited liability company; promulgation of rules and regulations governing.

  1. Subject to the requirements and restrictions of this chapter including, but not limited to, deposit insurance requirements where applicable, a bank or trust company may organize as a limited liability company pursuant to Chapter 11 of Title 14.
  2. The department shall have the authority to promulgate rules and regulations in accordance with Code Section 7-1-3 specifying the conditions under which a bank or trust company may organize as a limited liability company.
  3. To the extent the provisions of Chapter 11 of Title 14 are consistent with and not in conflict with the provisions of this chapter and the rules and regulations of the department, such provisions shall apply to a bank or trust company that has organized as a limited liability company.

History. Code 1981, § 7-1-390.1 , enacted by Ga. L. 2003, p. 843, § 4.

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, § 109 et seq.

7-1-391. Prohibition of promoters’ fees.

  1. A bank or trust company shall not pay any fee, compensation, or commission for promotion in connection with its organization or apply any money received on account of shares or subscriptions, selling shares, or other services in connection with its organization, except legal fees, commissions or fees to disinterested third parties for sale of bank stock to others, and other usual and ordinary expenses necessary for its organization.
  2. A majority of incorporators shall file with the department at the time of filing of the articles an affidavit:
    1. Setting forth all expenses incurred or to be incurred in connection with the organization of the bank or trust company, subscription for its shares, and sale of its shares; and
    2. Stating that no fee, compensation, or commission prohibited by subsection (a) of this Code section has been paid or incurred.
  3. In the event of a violation of this Code section the department may disapprove the articles on account of such violation.

History. Code 1933, § 41A-1802, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1999, p. 674, § 7.

RESEARCH REFERENCES

Am. Jur. 2d.

18 Am. Jur. 2d, Corporations, §§ 98, 99.

C.J.S.

18 C.J.S., Corporations, § 148.

7-1-392. Articles of incorporation; advertisement of articles or notice of application; naming registered agent.

  1. The articles of incorporation shall be signed by each of the incorporators and shall set forth in the English language:
    1. The name of the bank or trust company;
    2. The street address and county where the main office will be located;
    3. For institutions chartered after July 1, 1998, the name of the initial registered agent;
    4. The street address where its initial registered office will be located;
    5. A brief statement of the purpose or purposes for which it is incorporated, that it is incorporated under this chapter, and whether it shall be solely a bank, solely a trust company, or both a bank and trust company;
    6. The term for which it is to exist, which shall be perpetual unless otherwise limited;
    7. The aggregate number of shares which the bank or trust company shall have authority to issue, and:
      1. If the shares are to consist of one class only, the par value of each of the shares; or
      2. If the shares are to be divided into classes, the number of shares of each class, the par value of each share of each class, a description of each class, and a statement of the preferences, redemption provisions, qualifications, limitations, restrictions, and the special or relative rights granted to or imposed upon the shares of each class;
    8. The name, place of residence, and post office address of each incorporator;
    9. The name, occupation, citizenship, place of residence, and post office address of each of the first directors, which number shall not be less than five; and
    10. Any provision not inconsistent with law which the incorporators may choose to insert for the regulation of the internal affairs and business of the bank or trust company.
  2. It shall not be necessary to set forth in the articles any of the corporate or operational powers set forth in this chapter.
  3. The incorporators shall file with the department the articles, together with the fee required by Code Section 7-1-862. Such filing shall constitute an application for a certificate of incorporation. Immediately upon the filing of the articles, the department shall certify a copy thereof and return it to the applicants, who shall, in conformity with Code Section 7-1-7 and on the next business day following the filing of the articles, transmit for publication a copy of the articles or, in lieu thereof, a statement in substantially the following form:

    “An application for a certificate of incorporation of a (bank, trust company, or bank and trust company) to be known as the _______________ and to be located at _______________ in _______________ County, Georgia, will be made to the Secretary of State of Georgia by (names and addresses of incorporators) in accordance with Chapter 1 of Title 7 of the Official Code of Georgia Annotated, the ‘Financial Institutions Code of Georgia.’ A copy of the articles of incorporation of such proposed (bank, trust company, or bank and trust company) and the application have been filed with the Department of Banking and Finance. The following persons have been proposed as the initial directors: (names and addresses of proposed directors).”

    to the newspaper which is the official organ of the county where the main office will be located. The articles or statement must be published once a week for two consecutive weeks with the first publication occurring within ten days of receipt by the newspaper of the articles or statement.

  4. A registered agent shall be named for each financial institution that is a corporation, and each financial institution shall inform the department and the Secretary of State of its current registered agent.

History. Ga. L. 1898, p. 78, §§ 1, 2; Civil Code 1910, §§ 2815, 2816; Ga. L. 1919, p. 135, art. 8, §§ 1-3; Ga. L. 1920, p. 102, § 1; Ga. L. 1927, p. 195, § 7; Ga. L. 1931, p. 156, § 1; Code 1933, §§ 13-901, 13-902, 13-903, 109-101, 109-102; Ga. L. 1935, p. 101, § 1; Ga. L. 1941, p. 312, § 1; Ga. L. 1943, p. 249, § 1; Ga. L. 1952, p. 193, § 1; Ga. L. 1965, p. 501, § 1; Ga. L. 1966, p. 463, § 1; Ga. L. 1966, p. 692, §§ 7-9; Ga. L. 1972, p. 384, § 1; Ga. L. 1972, p. 727, § 1; Code 1933, § 41A-1803, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1989, p. 1257, § 5; Ga. L. 1998, p. 795, § 15; Ga. L. 2015, p. 344, § 9/HB 184.

Code Commission notes.

Pursuant to Code Section 28-9-5, in 1989, “have been filed” was substituted for “has been filed” in the next to last sentence of the form in subsection (c).

Pursuant to Code Section 28-9-5, in 1998, a colon was added at the end of paragraph (a)(7).

JUDICIAL DECISIONS

Writ of mandamus may lie to compel issuance of certificate of incorporation upon compliance with statutory requirements. Manley v. McLendon, 158 Ga. 659 , 124 S.E. 138 , 1924 Ga. LEXIS 322 (1924).

Corporation did not have power to act as trustee. —

Probate court did not err by appointing a successor trustee pursuant to O.C.G.A. §§ 15-9-127 and 53-12-170 as even if a corporation had not rejected the trust property, the corporation did not have the power to act as a trustee in Georgia as the corporation had not received approval from the Georgia Department of Banking and Finance to act as a trust company; a county board of commissioners was properly appointed as the successor trustee in spite of the corporation’s speculation over a possible future event that might result in a conflict of interest. Chattowah Open Land Trust, Inc. v. Jones, 281 Ga. 97 , 636 S.E.2d 523 , 2006 Ga. LEXIS 839 (2006).

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, § 176 et seq.

C.J.S.

18 C.J.S., Corporations, § 84 et seq., 18A C.J.S., Corporations, §§ 250 et seq., 323.

7-1-393. Additional filings with department; fees.

The incorporators shall also file with the department:

  1. Information desired by the department in order to evaluate the proposed institution which shall be made available in the form specified by the department;
  2. The affidavit required by Code Section 7-1-391;
  3. A certificate of the Secretary of State showing that the proposed name of the bank or trust company has been reserved pursuant to Code Section 7-1-131; and
  4. Applicable fees established by regulation of the department to defray the expense of the investigation required by Code Section 7-1-394.

History. Ga. L. 1919, p. 135, art. 8, § 4; Code 1933, § 13-904; Ga. L. 1955, p. 201, § 1; Ga. L. 1964, p. 689, § 1; Ga. L. 1966, p. 692, § 10; Ga. L. 1972, p. 727, § 2; Code 1933, § 41A-1804, enacted by Ga. L. 1974, p. 705, § 1.

7-1-394. Investigation; approval or disapproval by department; abbreviated procedures.

  1. Upon receipt of the articles and the filings and fees from the incorporators as required by Code Section 7-1-393, the department shall conduct such investigation as it may deem necessary to ascertain whether it should approve the proposed bank or trust company. The department shall approve the bank or trust company if and only if it determines in its discretion that:
    1. The articles and supporting items satisfy the requirements of this chapter;
    2. The convenience and needs of the public will be served by the proposed bank or trust company;
    3. There is a reasonable promise of adequate support for the bank or trust company in the light of:
      1. The competition offered by existing banks and trust companies and other financial institutions;
      2. The previous financial history of the community as to banks, trust companies, and other financial institutions;
      3. As to banks, the opportunities for profitable employment of bank funds as indicated by the average demand for credit, the number of potential depositors, the volume of bank transactions, and the businesses and industries of the community with particular regard to their stability, diversification, and size; and
      4. As to trust companies, the opportunities for profitable employment of fiduciary or other representative services;
    4. The character and fitness of the incorporators, of the directors, and of the proposed officers are such as to command the confidence of the community and to warrant the belief that the business of the proposed bank or trust company will be honestly and efficiently conducted;
    5. There has not been any material violation of Code Section 7-1-391, so that approving the articles would, in the opinion of the department, impair the policy manifested by that provision;
    6. The capital structure of the proposed bank or trust company is adequate in relation to the amount and character of the anticipated business of the bank or trust company and the safety of prospective depositors;
    7. In the case of trust companies, the proposed company will have sufficient personnel with adequate knowledge and experience to administer fiduciary accounts;
    8. In the case of trust companies, the incorporators, directors, and proposed officers have satisfactory results from a fingerprint record check report conducted by the Georgia Crime Information Center and the Federal Bureau of Investigation. The department shall be authorized to obtain conviction data with respect to any person who is an incorporator, director, or proposed officer of the proposed trust company. Each incorporator, director, or proposed officer of a trust company shall provide express written consent to the department to conduct the criminal background check and to use all information necessary to run such check, including, but not limited to, a classifiable set of fingerprints. The proposed trust company shall be responsible for all fees associated with the performance of such criminal background check; and
    9. In the case of trust companies, the incorporators, directors, and proposed officers have demonstrated financial responsibility, character, and general fitness. The department shall be authorized to obtain personal history and work experience and other information, including, but not limited to, independent credit reports obtained from a consumer reporting agency described in the federal Fair Credit Reporting Act, 15 U.S.C. Section 1681a(f), with respect to any person who is an incorporator, director, or proposed officer of the proposed trust company.
  2. Within 90 days after receipt of the articles and the filings and fees from the incorporators as required by Code Section 7-1-393, the department shall approve or disapprove the proposed bank or trust company. In giving approval, the department may impose conditions to be satisfied prior to the issuance of a permit to do business under Code Section 7-1-396. If the department, in its discretion, shall approve the proposed bank or trust company with or without conditions, it shall deliver its written approval of the articles to the Secretary of State and notify the incorporators of its action, provided that if the approval of a federal public body is also required with respect to the bank or trust company, then the department may, at its option, withhold its written approval from the Secretary of State until such approval is given and may, at its option, withdraw its approval if the federal public body refuses to grant its approval to the bank or trust company. If the department, in its discretion, shall disapprove the proposed bank or trust company, it shall notify the incorporators of its disapproval and state generally the unfavorable factors influencing its decision. The decision of the department shall be conclusive, except that it may be subject to judicial review as provided in Code Section 7-1-90.

    (b.1) The procedure and criteria used in the review of a request to establish an additional banking location pursuant to Code Sections 7-1-601 and 7-1-602 may be streamlined and abbreviated as provided by departmental rule, regulation, or written policy.

  3. Nothing contained in this Code section, Code Section 7-1-608, or Code Section 7-1-622 shall limit the authority of the department to approve the organization of a special purpose bank or trust company which does not do a general banking business with the public but is organized for the purpose of conducting a limited banking business which facilitates the economic, commercial, or export-import trade growth of this state. The department may establish, by rule or by condition to its approval of articles of incorporation of any special bank or of any credit card bank incorporated under the provisions of Chapter 5 of this title, such special provisions concerning distribution of ownership, composition of the board of directors, bylaws, or the conduct of corporate affairs for any such special purpose bank or credit card bank incorporated under the provisions of Chapter 5 of this title as it determines to be consistent with the special nature of such charters and their efficient operation and safe and sound banking practice; provided, however, that in no event shall fewer than a majority of the directors of such special purpose bank or credit card bank be residents of this state.
  4. The department may utilize in its investigation process such reports from other bank supervisory agencies as are pertinent to the requirements of state law.

History. Ga. L. 1925, p. 119, § 1; Code 1933, § 13-905; Ga. L. 1949, p. 308, § 1; Ga. L. 1951, p. 287, § 1; Ga. L. 1966, p. 692, § 11; Code 1933, § 41A-1805, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1983, p. 602, § 11; Ga. L. 1989, p. 1211, § 7; Ga. L. 1989, p. 1257, § 6; Ga. L. 1990, p. 8, § 7; Ga. L. 1993, p. 511, § 1; Ga. L. 1996, p. 848, § 6; Ga. L. 1998, p. 795, § 16; Ga. L. 2017, p. 193, § 10/HB 143; Ga. L. 2019, p. 828, § 6/HB 185; Ga. L. 2019, p. 1056, § 7/SB 52; Ga. L. 2020, p. 493, § 7/SB 429.

The 2019 amendments. —

The first 2019 amendment, effective July 1, 2019, deleted “and” from the end of paragraph (a)(6), substituted a semicolon for the period at the end of paragraph (a)(7), and added paragraphs (a)(8) and (a)(9). The second 2019 amendment, effective May 12, 2019, part of an Act to revise, modernize, and correct the Code, substituted “provided, however, that in no event” for “provided, however, in no event” near the end of the last sentence of subsection (c).

The 2020 amendment, effective July 29, 2020, part of an Act to revise, modernize, and correct the Code, substituted “any person who” for “any person that” in the middle of the second sentence of paragraph (a)(8); and substituted “Section 1681a(f), with respect to any person who” for “Section 1681a(f) with respect to any person that” in the middle of the second sentence of paragraph (a)(9).

Cross references.

Unlawful acquisitions by bank holding companies, § 7-1-608 .

Provisions applicable to interstate acquisitions or mergers by bank holding companies, § 7-1-622 .

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, § 179.

7-1-395. Issuance of certificate of incorporation.

If the Secretary of State shall receive, with respect to the proposed bank or trust company:

  1. The written approval of the department with a copy of the articles of incorporation attached;
  2. An affidavit executed by the duly authorized agent or publisher of the newspaper in which publication of the articles or a summary statement relating thereto is required by Code Sections 7-1-7 and 7-1-392 stating that the articles or the summary statement have been published as required by those Code sections;
  3. All fees and charges required by law and if, in addition, the name of the proposed bank or trust company continues to be reserved or is available,

    the Secretary of State shall immediately issue to the incorporators a certificate of incorporation. The Secretary of State shall retain on file in his office a copy of the certificate, the articles, the department’s approval, and the publisher’s certificate.

History. Ga. L. 1898, p. 78, § 2; Civil Code 1910, § 2816; Ga. L. 1919, p. 135, art. 8, §§ 6, 7; Code 1933, §§ 13-906, 13-907, 109-102; Ga. L. 1952, p. 193, § 1; Ga. L. 1966, p. 692, §§ 12, 13; Code 1933, § 41A-1806, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1989, p. 1257, § 7.

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, § 179.

7-1-396. Effect of certificate of incorporation; permit to begin business.

  1. As of the issuance of the certificate of incorporation by the Secretary of State, the corporate existence of the bank or trust company shall begin and those persons who subscribed for shares prior to filing of the articles, or their assignees, shall be shareholders in the bank or trust company; provided, nevertheless, that the department shall have full authority to regulate and supervise the activities of promoters, incorporators, initially named directors, subscribers for shares, and all persons soliciting offers to subscribe for shares in any bank in formation under this chapter even though the corporate existence of the bank may not have officially begun and the bank in formation shall be considered a “bank” for those purposes. Persons named in the articles of incorporation and approved by the department as initial directors of the bank in formation shall not be considered agents or broker-dealers within the meaning of paragraphs (1) and (3) of Code Section 10-5-2.
  2. The certificate of incorporation shall be conclusive evidence of the fact that the bank or trust company has been incorporated; but proceedings may be instituted by the state to dissolve, wind up, and terminate a bank or trust company in accordance with Code Section 7-1-92 and other applicable provisions of this chapter.
  3. Until receipt of a permit to begin business issued by the department, a bank or trust company shall not transact any business except such business as is incident to its organization or to the obtaining of subscriptions and payment for its shares and other securities.
  4. The department shall issue to a bank or trust company a permit to begin business when:
    1. Capital stock of the bank or trust company shall have been fully paid in, in cash, and in no event in an amount less than the minimum capital stock for banks or trust companies under Code Section 7-1-410, and, in addition, there shall have been paid in:
      1. Paid-in capital in an amount not less than 20 percent of the capital stock; and
      2. The proceeds of subordinated securities, if any, which were considered part of the capital structure of the bank or trust company by the department under Code Section 7-1-419 in giving its approval of the proposed institution;
    2. All of the directors have taken the oath or affirmation required by Code Section 7-1-484;
    3. The bylaws of the bank or trust company have been filed with the department;
    4. The bank or trust company has designated its registered agent and registered office pursuant to Code Section 7-1-132;
    5. The bank or trust company has been organized and is ready to begin the business for which it was incorporated;
    6. All conditions imposed by the department in giving its approval of the proposed bank or trust company under Code Section 7-1-394 have been satisfied; and
    7. The department has received an affidavit signed by the president or secretary and by at least a majority of the directors of the bank or trust company to the effect that all of the foregoing requirements of this subsection have been satisfied.

History. Ga. L. 1919, p. 135, art. 8, §§ 7, 8; Code 1933, §§ 13-908, 13-909; Ga. L. 1963, p. 511, §§ 1, 2; Ga. L. 1966, p. 692, §§ 14, 16; Code 1933, § 41A-1807, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 23; Ga. L. 1977, p. 730, § 5; Ga. L. 1987, p. 1586, § 6; Ga. L. 1991, p. 94, § 7; Ga. L. 1998, p. 795, § 17; Ga. L. 2008, p. 381, § 4/SB 358; Ga. L. 2019, p. 828, § 7/HB 185; Ga. L. 2020, p. 493, § 7/SB 429.

The 2019 amendment, effective July 1, 2019, added “and” at the end of subparagraph (d)(1)(A); deleted former subparagraph (d)(1)(B), which read: “An expense fund in an amount fixed by the department which shall not be less than 5 percent of the capital stock; and”; and redesignated former subparagraph (d)(1)(C) as present subparagraph (d)(1)(B).

The 2020 amendment, effective July 29, 2020, part of an Act to revise, modernize, and correct the Code, revised punctuation near the end of subsection (a).

7-1-397. Organizational meetings.

  1. After the issuance of the certificate of incorporation by the Secretary of State, a first meeting of the shareholders may be held within this state at the call of the shareholders who were the incorporators, or a majority of them, for the purpose of adopting bylaws or for such other purposes as shall be stated in the notice of the meeting.
  2. After the issuance of the certificate of incorporation by the Secretary of State, an organizational meeting of the board of directors named in the articles shall be held within this state at the call of a majority of the directors for the purpose of adopting bylaws and of electing officers and for transaction of such other business as may come before the meeting. The directors who call the meeting shall give to each director named in the articles at least three days’ written notice of the meeting.

History. Code 1933, § 41A-1808, enacted by Ga. L. 1974, p. 705, § 1.

RESEARCH REFERENCES

Am. Jur. 2d.

18A Am. Jur. 2d, Corporations, § 213 et seq.

7-1-398. Liability for premature business.

Incorporators and other persons who organize a bank or trust company which transacts business before its capital stock and paid-in capital have been paid in shall be jointly and severally liable to depositors and other creditors to make good the amounts not paid in by subscribers or otherwise deficient. Such liability shall be deemed as an asset of the bank or trust company and may be enforced by it, its successors or assignees, or by a shareholder suing derivatively, or by a receiver appointed under this chapter.

History. Ga. L. 1919, p. 135, art. 18, § 6; Code 1933, § 13-1906; Code 1933, § 41A-1809, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2019, p. 828, § 8/HB 185.

The 2019 amendment, effective July 1, 2019, substituted “capital stock and paid-in capital” for “capital stock, paid-in capital, and expense fund as required by Code Section 7-1-396” in the first sentence of this Code section.

RESEARCH REFERENCES

Am. Jur. 2d.

18 Am. Jur. 2d, Corporations, §§ 126, 127.

C.J.S.

18 C.J.S., Corporations, § 89 et seq.

19 C.J.S., Corporations, §§ 640 et seq., 707.

ALR.

False representation by officers or directors of bank or building and loan association that impairment of capital has been made good, as basis of action against them, 144 A.L.R. 1498 .

Validity, construction, and effect of statutory provisions concerning capital requisites of state incorporation of bank, 79 A.L.R.3d 1190.

PART 9 Financial Structure

Cross references.

Applicability of security-registration requirements to securities issued by or guaranteed by banks or trust companies, § 10-5-8.

OPINIONS OF THE ATTORNEY GENERAL

Charter may not be amended to provide authorized but unissued shares. — Regulated certificated bank is not authorized by law to amend the bank’s charter to provide for authorized but unissued shares of common stock. 1974 Op. Att'y Gen. No. 74-149.

7-1-410. Minimum capital stock.

  1. Except as provided in subsections (b) and (c) of this Code section, the minimum capital stock of a de novo bank or trust company shall be $3 million. An established bank or trust company no longer in de novo status shall maintain a minimum capital stock of $3 million or such greater amount as the department may require based on a proportion of capital to total assets.
  2. A de novo bank or trust company whose main office is located in a county with a population of less than 200,000, according to the last official United States census, shall have a minimum capital stock of $2 million. An established bank or trust company located in such county shall maintain a minimum capital stock of $2 million or such greater amount as the department may require based on a proportion of capital to total assets.
  3. A bank or trust company existing on July 1, 1989, with a capital stock of less than that required by subsections (a) and (b) of this Code section shall not be required to increase its capital stock above the amount outstanding on July 1, 1989, except as otherwise provided by law.

History. Ga. L. 1898, p. 78, § 1; Civil Code 1910, § 2815; Ga. L. 1919, p. 135, art. 8, § 1; Ga. L. 1920, p. 102, § 1; Ga. L. 1927, p. 195, § 7; Ga. L. 1931, p. 156, § 1; Code 1933, §§ 13-901, 109-101; Ga. L. 1935, p. 101, § 1; Ga. L. 1941, p. 312, § 1; Ga. L. 1943, p. 249, § 1; Ga. L. 1965, p. 501, § 1; Ga. L. 1966, p. 463, § 1; Ga. L. 1966, p. 692, § 7; Ga. L. 1972, p. 384, § 1; Ga. L. 1972, p. 727, § 1; Code 1933, § 41A-1901, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1989, p. 1211, § 8; Ga. L. 1998, p. 795, § 18; Ga. L. 2003, p. 843, § 5.

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, §§ 285, 287.

C.J.S.

9 C.J.S., Banks and Banking, § 49.

ALR.

Validity, construction, and effect of statutory provisions concerning capital requisites of state incorporation of bank, 79 A.L.R.3d 1190.

7-1-411. [Reserved] Paid-in capital and appropriated retained earnings.

History. Ga. L. 1974, p. 705, § 1; repealed by Ga. L. 2019, p. 828, § 9/HB 185, effective July 1, 2019.

Editor’s notes.

Ga. L. 2019, p. 828, § 9/HB 185 repealed and reserved this Code section, effective July 1, 2019.

7-1-412. [Reserved] Beginning business expense fund.

History. Ga. L. 1974, p. 705, § 1; repealed by Ga. L. 2019, p. 828, § 10/HB 185, effective July 1, 2019.

Editor’s notes.

Ga. L. 2019, p. 828, § 10/HB 185 repealed and reserved this Code section, effective July 1, 2019.

7-1-413. Classes of shares.

A bank or trust company may have one or more classes of common or preferred shares, all of which shall be shares with par value of not less than $1.00 and any or all of which may, subject to the restrictions of this chapter, consist of shares with full, limited, multiple, fractional, or no voting rights and such designations, preferences, qualifications, privileges, limitations, redemption provisions (in the case of preferred shares), options, conversion rights, and other special rights as shall be stated in the articles. Except as otherwise stated in the articles, this chapter, or other applicable laws, each share shall be equal in all respects to every other share.

History. Ga. L. 1919, p. 135, art. 8, § 1; Ga. L. 1920, p. 102, § 1; Ga. L. 1927, p. 195, § 7; Ga. L. 1931, p. 156, § 1; Code 1933, § 13-901; Ga. L. 1935, p. 101, § 1; Ga. L. 1941, p. 312, § 1; Ga. L. 1943, p. 249, § 1; Ga. L. 1965, p. 501, § 1; Code 1933, § 13-912, enacted by Ga. L. 1966, p. 590, § 3; Ga. L. 1966, p. 692, § 7; Ga. L. 1968, p. 1045, § 1; Ga. L. 1969, p. 958, § 1; Ga. L. 1972, p. 727, § 1; Code 1933, § 41A-1904, enacted by Ga. L. 1974, p. 705, § 1.

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, §§ 285, 287.

C.J.S.

18A C.J.S., Corporations, § 214 et seq.

7-1-414. Purchase, redemption, and convertibility of shares and debt securities.

  1. Any preferred shares subject to redemption shall be redeemable only pro rata or by lot or by such other equitable method as is selected by the board of directors, except as otherwise provided in the articles.
  2. With the written approval of the department and the votes of directors and shareholders required to authorize an increase in the capital stock of the institution under Code Section 7-1-511:
    1. Preferred stock may be convertible to common stock; and
    2. Subordinated securities may be convertible to common stock.
  3. With the written approval of the department and a resolution of the board of directors, a bank or trust company may acquire issued shares of its own common stock, which will then be considered treasury shares. The department shall consider whether the acquisition has a legitimate corporate purpose, whether any capital impairment would result, and whether the price of the shares reflects fair market value.

History. Code 1933, § 13-912, enacted by Ga. L. 1966, p. 590, § 3; Ga. L. 1968, p. 1045, § 1; Ga. L. 1969, p. 958, § 1; Code 1933, § 41A-1905, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1999, p. 674, § 8; Ga. L. 2018, p. 214, § 7/HB 780.

The 2018 amendment, effective May 3, 2018, substituted “department and a resolution of the board of directors,” for “department, a resolution of the board of directors, and a two-thirds’ affirmative vote of the shares entitled to vote,” in the first sentence of subsection (c). See Editor’s notes for applicability.

Editor’s notes.

Ga. L. 2018, p. 214, § 26(b)/HB 780, not codified by the General Assembly, provides that: “It is not the intent of the General Assembly to affect the law applicable to litigation pending as of March 9, 2018.”

RESEARCH REFERENCES

Am. Jur. 2d.

18 Am. Jur. 2d, Corporations, §§ 211, 276.

C.J.S.

18A C.J.S., Corporations, § 257 et seq.

7-1-415. Consideration for shares.

  1. Except as provided in subsection (b) of this Code section and in the case of a distribution of shares under subsection (e) of Code Section 7-1-488 or incident to a merger, consolidation, or other corporate reorganization or rehabilitation authorized by this chapter, shares of a bank or trust company may be issued only for cash in an amount which shall be at least the aggregate par value of the share, unless otherwise approved by the department with the demonstration of good cause.
  2. Where a bank or trust company issues shares in exchange for or in order to convert other shares or obligations which have been issued by it, the consideration for such shares shall be:
    1. The cash originally received for the shares or obligations surrendered or converted;
    2. The additional cash received incident to the exchange or conversion;
    3. The other amounts, if any, transferred to capital stock incident to the exchange or conversion.

      In any such case the consideration shall be not less than the minimum amount specified in subsection (a) of this Code section. Any amount by which capital stock may be reduced upon an exchange or conversion shall be transferred to paid-in capital.

History. Ga. L. 1898, p. 78, § 1; Civil Code 1910, § 2815; Ga. L. 1919, p. 135, art. 8, § 7; Code 1933, §§ 13-908, 109-101; Ga. L. 1963, p. 511, § 1; Code 1933, § 13-912, enacted by Ga. L. 1966, p. 590, § 3; Ga. L. 1966, p. 692, § 14; Ga. L. 1968, p. 1045, § 1; Ga. L. 1969, p. 958, § 1; Ga. L. 1972, p. 384, § 1; Code 1933, § 41A-1906, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2012, p. 795, § 1/HB 945; Ga. L. 2019, p. 828, § 11/HB 185.

The 2019 amendment, effective July 1, 2019, deleted “, plus such amounts, if any, necessary to assure that after issuance of the shares the bank or trust company will have the paid-in capital required by Code Section 7-1-411 and, in the case of a new bank or trust company, the expense fund required by Code Section 7-1-396” following “good cause” at the end of subsection (a).

Law reviews.

For annual survey on business corporations, see 64 Mercer L. Rev. 61 (2012).

RESEARCH REFERENCES

Am. Jur. 2d.

18A Am. Jur. 2d, Corporations, §§ 489, 490.

C.J.S.

9 C.J.S., Banks and Banking, § 56.

7-1-416. Method of issuance.

  1. Unless more restrictive procedures are stated in the articles, the board of directors may, by resolution duly adopted, issue from time to time, in whole or in part, common or preferred shares authorized by the articles.
  2. With the consent of the department, a bank or trust company may withdraw any offer to sell its common or preferred shares, whether issued pursuant to its articles or pursuant to subsection (a) of this Code section; and such shares may be held as authorized shares subject to future issuance in accordance with subsection (a) of this Code section.
  3. A bank or trust company may not, directly or indirectly, extend credit for the purpose of financing the original purchase of capital stock or capital debt issued by it or by a bank holding company to which it is affiliated.

History. Code 1933, § 13-912, enacted by Ga. L. 1966, p. 590, § 3; Ga. L. 1968, p. 1045, § 1; Ga. L. 1969, p. 958, § 1; Code 1933, § 41A-1907, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1981, p. 1366, § 11; Ga. L. 1995, p. 673, § 16.

RESEARCH REFERENCES

Am. Jur. 2d.

18 Am. Jur. 2d, Corporations, § 19. 18A Am. Jur. 2d, Corporations, §§ 480, 481.

C.J.S.

18A C.J.S., Corporations, § 194 et seq.

7-1-417. Share certificates and debt security instruments.

  1. A bank or trust company shall not deliver any share certificate until the share or shares represented thereby are fully paid. Each subscriber, upon payment in full for his shares, shall be entitled to a certificate or certificates certifying the number of shares owned by him in the bank or trust company.
  2. Unless otherwise provided in the articles or the bylaws, the shares of a bank or trust company shall be represented by certificates signed by the president or a vice-president and the secretary or an assistant secretary of the bank or trust company and may be sealed with the seal of the bank or trust company or a facsimile thereof. The signatures of such officers upon a certificate may be facsimiles if the certificate is countersigned by a transfer agent, or registered by a registrar, other than the bank or trust company itself or any employee of the bank or trust company.
  3. Each certificate representing shares shall set forth upon the face thereof:
    1. The name of the bank or trust company;
    2. That the bank or trust company is organized under the laws of this state;
    3. The name or names of the person or persons to whom issued;
    4. The number and class of shares such certificate represents;
    5. The par value of each share represented by such certificate;
    6. If the shares represented thereby are nonvoting shares, a statement or notation to that effect; and
    7. If the shares represented thereby are subordinate to shares of any other class with respect to dividends or amounts payable on liquidation, a brief statement to that effect.
  4. Each certificate representing shares issued by a bank or trust company which is authorized to issue shares of more than one class shall set forth or fairly summarize upon the face or back of the certificate, or shall state that the bank or trust company will furnish to any shareholder upon request and without charge, a full statement of the designations, preferences, limitations, and relative rights of the shares of each class authorized to be issued.
  5. In the event of a change in the capital structure of a corporation, it shall not be necessary to recall any previously issued share certificate for either the addition or deletion of the statement required by paragraph (7) of subsection (c) of this Code section to be set forth upon the face of such certificate or for revision of the information placed upon the face or back of the certificate pursuant to subsection (d) of this Code section.
  6. The signatures of the officers of a bank or trust company and the seal of the bank or trust company upon any bond, debenture, or other debt security issued by the bank or trust company may be facsimiles if the instrument is authenticated or countersigned by a trustee or transfer agent, or registered by a registrar, other than the bank or trust company itself or any employee of the bank or trust company.
  7. In case any officer who has signed or whose facsimile signature has been placed upon a share certificate or upon a bond, debenture, or other debt security as provided in this Code section shall have ceased for any reason to be such officer before such certificate or instrument is issued, it may be issued by the bank or trust company with the same effect as if he were such officer at the date of its issue.
  8. Nothing in this Code section shall be construed to invalidate any share certificate validly issued and outstanding on April 1, 1975.

History. Code 1933, § 41A-1908, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1982, p. 3, § 7.

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, § 301.

C.J.S.

9 C.J.S., Banks and Banking, § 57.

7-1-418. Issuance and transfer of fractional shares or scrip.

  1. A bank or trust company may, but shall not be obliged to, issue certificates for fractional shares in order to effect share transfers, share distributions or reclassifications, mergers, consolidations, or reorganizations which shall entitle the holder, in proportion to his fractional holdings, to exercise voting rights, to receive dividends thereon, and to participate in any of the assets of the bank or trust company in the event of liquidation.
  2. As an alternative, a bank or trust company may pay in cash the fair value of fractional shares as determined by the board of directors as of a time fixed by the board. In the absence of bad faith, all acts of the board pursuant to this subsection shall be conclusive.
  3. As an alternative, the board of directors may issue scrip in registered or bearer form over the manual or facsimile signature of an officer of the bank or trust company or of its agent, exchangeable as therein provided for full shares; but such scrip shall not entitle the holder to any rights of a shareholder except as therein provided. The board of directors may cause such scrip to be issued subject to the condition that it shall become void if not exchanged for certificates representing full shares before a specified date, or subject to the condition that the shares for which such scrip is exchangeable may be sold by the bank or trust company and the proceeds thereof distributed to the holders of such scrip, or subject to any other conditions which the board of directors may deem advisable. If a bank or trust company issues scrip, it shall provide reasonable opportunity for persons entitled thereto to sell such scrip or to purchase such additional scrip as may be needed to acquire a full share.
  4. A corporation may provide reasonable opportunity for persons entitled to fractional shares to sell such fractional shares or to purchase such additional fractional shares as may be needed to acquire a full share, or may sell fractional shares or scrip for the account of such persons.

History. Code 1933, § 41A-1909, enacted by Ga. L. 1974, p. 705, § 1.

7-1-419. Subordinated securities.

  1. A bank or trust company may issue notes, debentures, or other obligations in the form of “subordinated securities,” provided that they:
    1. Are subordinated in right of payment, in the event of insolvency or liquidation of the bank or trust company, to the prior payment of all deposits of the bank or trust company and of all claims of other creditors of the bank or trust company except the holders of securities on a parity therewith and the holders of securities expressly subordinated thereto;
    2. Are authorized by the same votes of directors as those required for authorization of an increase in capital stock or any instrument convertible into capital stock of the bank or trust company;
    3. Contain provisions for amortization, serial maturities, transfers to a sinking fund, allocation of reserves, or other provisions sufficient to pay or to have paid at maturity all amounts due thereon;
    4. Furnish disclosures to investors of the risks associated with the subordinated securities prior to investment; and
    5. Include notice that, if the bank or trust company becomes subject to a regulatory action, then the bank or trust company may be prohibited from paying or retiring the subordinated securities.
  2. The aggregate amount of the obligations of a bank or trust company in the form of subordinated securities shall at no time exceed 50 percent of the sum of the unimpaired capital stock and unimpaired paid-in capital of the bank or the trust company.
  3. If at or after the payment or retirement of the subordinated securities of a bank or trust company there is or would be a deficiency in the capital stock of the bank or trust company, such fact shall be reported to the department in advance of the payment or retirement. The department may, upon receipt of such report, order a restoration of capital stock or take other appropriate remedial measures under this chapter.
  4. Subordinated securities shall not be considered in determining the amount of ad valorem taxes payable by the bank or trust company.

History. Code 1933, § 13-2025.1, enacted by Ga. L. 1965, p. 494, § 1; Ga. L. 1968, p. 1045, §§ 6, 7; Code 1933, § 41A-1910, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2017, p. 193, § 11/HB 143; Ga. L. 2019, p. 828, § 12/HB 185.

The 2019 amendment, effective July 1, 2019, substituted “capital stock and unimpaired paid-in capital” for “capital stock, unimpaired paid-in capital, and appropriated retained earnings” near the end of subsection (b).

Cross references.

Order of payment of liabilities of financial institution which is liquidated or dissolved and whose assets are insufficient to pay in full all liabilities, § 7-1-202 .

Administrative rules and regulations.

Borrowed money, Official Compilation of the Rules and Regulations of the State of Georgia, Department of Banking and Finance, Banks, Chapter 80-1-9.

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, § 498.

ALR.

Trust or preference in assets of insolvent bank in respect of funds intended to aid bank in financial difficulty, 88 A.L.R. 996 .

Trust or preference in respect of funds deposited by executors, administrators, testamentary trustees, or guardians, 101 A.L.R. 602 .

Rights and preferences in respect of assets of insolvent bank as affected by its division into departments, 114 A.L.R. 680 .

PART 10 Shareholders

Law reviews.

For comment, “A Snapshot of Dual-Class Share Structures in the Twenty-First Century: A Solution to Reconcile Shareholder Protections with Founder Autonomy,” see 68 Emory L.J. 337 (2018).

RESEARCH REFERENCES

ALR.

Duty and liability of bank under agreement to remit money, 69 A.L.R. 673 .

Am. Jur. Pleading and Practice Forms.

4A Am. Jur. Pleading and Practice Forms, Banks, § 9 et seq.

7-1-430. Liability of subscribers and shareholders.

  1. Except as otherwise provided in this Code section, a holder of or subscriber to shares of a bank or trust company shall be under no obligation to the bank or trust company or its creditors with respect to such shares or subscription other than the obligation to pay the full consideration remaining due to the company upon such shares or subscription. Such obligation may be enforced by the bank or trust company and its successors or assigns, or by a shareholder suing derivatively, or by a receiver appointed under this chapter.
  2. Every subscriber for shares not fully paid and every original holder of shares not fully paid which were issued contrary to Code Section 7-1-417 and every transferee or assignee of a subscription for shares or of shares with knowledge or notice that the shares are not fully paid and were issued contrary to Code Section 7-1-417 shall continue personally liable thereon as provided in subsection (a) of this Code section, notwithstanding any transfer or assignment of such shares or subscription for such shares.
  3. Any person becoming a transferee or assignee of shares or of a subscription for shares in good faith and without knowledge or notice that the full consideration therefor has not been paid shall not be personally liable thereon for any unpaid portion of such consideration.
  4. An executor, administrator, conservator, guardian, trustee, assignee for the benefit of creditors, receiver, or other fiduciary shall not be personally liable to the bank or trust company or its creditors as a holder of or subscriber for its shares; but the estate and funds in his hands or under his control shall be so liable. Nothing in the foregoing shall relieve any fiduciary from liability for a breach of trust.
  5. No bailee or nominee and no pledgee or other holder of shares as collateral security shall be personally liable as a shareholder, but the bailor or real party in interest or pledgor or other person transferring such shares as collateral shall be considered the holder thereof for purposes of liability under this Code section.
  6. No liability under this Code section shall be asserted against a subscriber or shareholder more than six years after the date on which the shares for which payment is sought were to have been fully paid pursuant to the contract of sale or subscription agreement or, if no such date is provided for in the contract of sale or subscription agreement, more than six years from the date of the contract of sale or subscription agreement, whether or not such contract or agreement is under seal.
  7. The subscription agreement or contract of sale may prescribe other penalties for failure to make payments when due; but no penalty working a forfeiture of a subscription, or of the amounts paid thereon, shall be declared as against any subscriber unless the amount due thereon shall remain unpaid for a period of 20 days after written demand has been made therefor. The delinquent subscriber or his legal representative shall be entitled to be paid the excess of the sale proceeds realized from the sale by the bank or trust company of such subscribed shares over the sum of:
    1. The amount due and unpaid on the subscription; and
    2. The reasonable expenses incurred in selling the shares;

      but in no event shall the delinquent subscriber or his legal representative be entitled to be paid an amount greater than the amount paid by said subscriber on his subscription.

  8. The board of directors shall have power to compromise, on such terms and conditions as the board may prescribe, any claim, dispute, or action arising out of a subscription for shares when in the judgment of the board it is in the best interests of the bank or trust company to do so.

History. Ga. L. 1919, p. 135, art. 18, §§ 1, 4; Ga. L. 1925, p. 119, § 1; Code 1933, §§ 13-1901, 13-1904; Ga. L. 1935, p. 103, § 1; Ga. L. 1937, p. 429, § 1; Code 1933, § 41A-2001, enacted by Ga. L. 1974, p. 705, § 1.

JUDICIAL DECISIONS

Editor’s notes.

In light of the similarity of the statutory provisions, decisions under Ga. L. 1919, p. 135, Art. 18, § 2, and former Code 1933, § 13-1902 have been included in the annotations for this Code section.

Trustees are exempt personally from liabilities as stockholders; but the estates and funds in the trustees’ hands are made liable in like manner and to the same extent as persons interested in such trust funds would be if the stock stood in their own name. State Banking Co. v. Hinton, 178 Ga. 68 , 172 S.E. 42 , 1933 Ga. LEXIS 20 (1933) (decided under Ga. L. 1919, p. 135, Art. 18, § 2); Griffin v. Securities Inv. Co., 53 Ga. App. 396 , 186 S.E. 232 , 1936 Ga. App. LEXIS 133 (1936) (decided under former Code 1933, § 13-1902).

RESEARCH REFERENCES

Am. Jur. 2d.

18A Am. Jur. 2d., Corporations, § 855 et seq.

C.J.S.

9 C.J.S., Banks and Banking, §§ 70, 75, 79, 86 et seq.

ALR.

Payments by stockholders applicable upon double liability, 56 A.L.R. 527 ; 83 A.L.R. 147 ; 120 A.L.R. 511 .

Statutory added liability of holders of bank stock or other corporate stock the issue of which was ultra vires, invalid, or irregular, 86 A.L.R. 816 .

Conclusiveness of assessment of statutory liability of stockholders of national banks, 90 A.L.R. 1063 .

Statutory liability of stockholder of bank or other corporation as affected by change in or renewal of corporation’s obligation, 97 A.L.R. 630 .

Liability on stock held by one as trustee or in other fiduciary capacity, 97 A.L.R. 1250 ; 117 A.L.R. 655 .

Liability on stock held by one as trustee or in other fiduciary capacity, 117 A.L.R. 655 .

State laws regarding superadded liability of stockholders in state banks as affected by federal legislation, 169 A.L.R. 942 .

7-1-431. Preemptive rights.

  1. Except as provided in subsection (b) of this Code section or in the articles, a bank or trust company shall issue shares, option rights, or securities having conversion or option rights by first offering them to shareholders of the same class in proportion to their holdings of shares of such class.
  2. Except as provided in the articles, there shall be no preemptive right to:
    1. Shares issued as a share dividend;
    2. Fractional shares;
    3. Shares issued pursuant to share plans authorized by subsection (e) of Code Section 7-1-488;
    4. Shares issued pursuant to acquisition of substantially all of the assets of another bank or trust company;
    5. Shares released by waiver from their preemptive right by the affirmative vote or written consent of the holders of two-thirds of the shares of the class to be issued. Any such vote or consent shall be binding on all shareholders and their transferees for the time specified in such vote or consent up to but not exceeding one year from the date thereof and shall protect the bank or trust company, its management, and all persons who may within such time acquire the shares so released;
    6. Shares which have been offered to shareholders to satisfy their preemptive right but not purchased by them within the prescribed time and which are thereafter issued or sold to any other person or persons at a price not less than the price at which they were offered to such shareholders.
  3. Unless otherwise provided in the articles, no holder of shares of any class shall have any preemptive right with respect to shares of any other class which may be issued or sold by the bank or trust company.
  4. Nothing in this Code section shall impair any cause of action or remedy which any shareholder may have for a breach of duty by the board of directors relating to the sale or other disposition by the bank or trust company of shares or securities not subject to the preemptive rights under this Code section or under the articles.
  5. The holders of shares entitled to the preemptive rights shall be given prompt notice setting forth the time within which and the terms and conditions upon which such shareholders may exercise their preemptive rights. Such notice shall be given at least 30 days prior to the expiration of the period during which the rights may be exercised.

History. Ga. L. 1919, p. 135, art. 9, § 9; Ga. L. 1920, p. 102, § 1; Code 1933, § 13-1009; Ga. L. 1965, p. 496, § 1; Ga. L. 1966, p. 590, § 5; Ga. L. 1968, p. 1045, § 5; Code 1933, § 41A-2002, enacted by Ga. L. 1974, p. 705, § 1.

RESEARCH REFERENCES

Am. Jur. 2d.

18A Am. Jur. 2d, Corporations, § 520 et seq.

C.J.S.

18A C.J.S., Corporations, § 201 et seq.

ALR.

Character of banks or banking companies within constitutional or statutory provision imposing additional liability on stockholders, 82 A.L.R. 1356 .

7-1-432. Meetings of shareholders.

    1. Except as provided in paragraph (3) of this subsection, meetings of the shareholders of a bank or trust company shall be held in person at such place within or without the state as shall be fixed by the bylaws or by the board of directors pursuant to the bylaws or, if not so fixed, at the main office of the bank or trust company.
    2. Shareholders may participate and vote remotely at meetings of the shareholders if the bylaws of the bank or trust company explicitly provide an option for remote participation and voting. If the bylaws so provide, the board of directors shall:
      1. Implement reasonable measures to:
        1. Provide shareholders a reasonable opportunity to remotely participate in such meetings. Such measures may include, but are not limited to, audio webcast or other broadcast of the meeting but, in every instance, shall provide shareholders the ability to communicate substantially concurrently with the proceedings;
        2. Enable shareholders to vote or grant proxies at such meetings by means of electronic communication. Such measures may include, but are not limited to, telephonic or internet voting; and
        3. Verify that each person deemed present and permitted to vote remotely is a shareholder of record in order to ensure the integrity of the vote;
      2. Provide the option for remote participation and voting at no cost to shareholders; and
      3. Keep a record of remote attendance by shareholders and any vote or other action taken by a shareholder participating remotely.
    3. In the event of a proclaimed emergency pursuant to Code Section 7-1-111, the board of directors may apply to the department for authorization to conduct a meeting of the shareholders solely through remote participation. If such application is approved by the department, the board of directors shall comply with the requirements in paragraph (2) of this subsection.
  1. There shall be at least one meeting of the shareholders in each calendar year for the election of directors. In addition, any matter relating to the bank or trust company, whether or not stated in the notice of meeting, may be brought up for action, except matters which this chapter requires to be stated in the notice of meeting. The time of such annual meeting shall be fixed by the bylaws or by the board of directors pursuant to the bylaws. If the annual meeting shall not be called and held during any calendar year, the principal court may, after notice to the bank or trust company, order a substitute annual meeting to be held upon the application of any shareholder. The principal court may issue such orders as may be appropriate, including, without limitation, orders designating the time and place of such meeting, the record date for determination of shareholders entitled to vote, and the form of notice of such meeting.
  2. Special meetings of the shareholders or a special meeting in lieu of the annual meeting of the shareholders may be called by the president, the chairman of the board of directors, the board of directors, or such other officers or persons as may be provided in the articles or bylaws or, in the event there are no officers or directors, then by any shareholder. Special meetings of the shareholders or a special meeting in lieu of the annual meeting of the shareholders shall be called by the bank or trust company upon the written request of the holders of not less than 25 percent of the outstanding shares of the bank or trust company entitled to vote in an election of directors.
  3. Notice of annual and special meetings shall be given to shareholders of record pursuant to Code Section 7-1-6. But when a meeting is adjourned to another time or place, it shall not be necessary, unless the bylaws require otherwise, to give any notice of the adjourned meeting if the time and place to which the meeting is adjourned are announced at the meeting at which the adjournment is taken; and at the adjourned meeting any business may be transacted that might have been transacted on the original date of the meeting. If, however, after the adjournment the board fixes a new record date for the adjourned meeting, a notice of the adjourned meeting shall be given each shareholder of record on the new record date entitled to vote at such meeting.
  4. Any action required by this chapter to be taken at a meeting of the shareholders of a bank or trust company, or any action which may be taken at a meeting of the shareholders, may be taken without a meeting if written consent setting forth the action so taken shall be signed by all the shareholders entitled to vote with respect to the subject matter thereof. Such consent shall have the same force and effect as a unanimous vote of shareholders and may be stated as such in any articles or document filed with the Secretary of State or the department under this chapter.

History. Ga. L. 1898, p. 78, § 6; Civil Code 1910, § 2818; Ga. L. 1917, p. 62, § 1; Ga. L. 1919, p. 191, art. 19, § 1; Code 1933, §§ 13-2001, 109-103; Ga. L. 1947, p. 476, § 1; Ga. L. 1947, p. 480, § 1; Ga. L. 1966, p. 590, § 6; Code 1933, § 41A-2003, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1998, p. 795, § 19; Ga. L. 2021, p. 323, § 5/HB 111; Ga. L. 2022, p. 352, § 7/HB 1428.

The 2021 amendment, effective July 1, 2021, designated the existing provisions of subsection (a) as paragraph (a)(1); in paragraph (a)(1), substituted “Except as provided in paragraph (3) of this subsection, meetings of the” for “Meetings of the” at the beginning and inserted “in person”; and added paragraphs (a)(2) and (a)(3).

The 2022 amendment, effective May 2, 2022, part of an Act to revise, modernize, and correct the Code, substituted “Code Section” for “Code section” in paragraph (a)(3).

RESEARCH REFERENCES

Am. Jur. 2d.

18A Am. Jur. 2d, Corporations, § 927 et seq.18B Am. Jur. 2d, Corporations, § 1408.

C.J.S.

18A C.J.S., Corporations, § 442 et seq.

7-1-433. Closing of transfer books or fixing record date.

  1. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purpose, the board of directors of a bank or trust company may provide that the stock transfer books shall be closed for a stated period not to exceed, in any case, 70 days. If the stock transfer books shall be closed for the purpose of determining shareholders entitled to notice of or to vote at a meeting of shareholders, such books shall be closed for at least ten days immediately preceding such meeting.
  2. In lieu of closing the stock transfer books, the bylaws or, in the absence of an applicable bylaw, the board of directors may fix in advance a date as the record date for any such determination of shareholders, such date in any case to be not more than 70 days and, in case of a meeting of shareholders, not less than ten days prior to the date on which the particular action requiring such determination of shareholders is to be taken.
  3. If the stock transfer books are not closed and no record date is fixed for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders or shareholders entitled to receive payment of a dividend, the date on which notice of the meeting is mailed, or the date on which the resolution of the board of directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of stockholders.
  4. When a determination of shareholders entitled to vote at any meeting of shareholders has been made, as provided in this Code section, such determination shall apply to any adjournment thereof, unless the board of directors fixes a new record date under this Code section for the adjourned meeting.

History. Code 1933, § 41A-2004, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2005, p. 826, § 9/SB 82.

RESEARCH REFERENCES

Am. Jur. 2d.

18A Am. Jur. 2d, Corporations, §§ 934, 942.

C.J.S.

18A C.J.S., Corporations, § 455 et seq.

7-1-434. Voting list.

  1. The officer or agent having charge of the stock transfer books for shares of a bank or trust company shall make a complete list of the shareholders entitled to vote at a meeting of shareholders or any adjournment thereof, arranged in alphabetical order, showing the address of each shareholder and the number and class, if any, of shares held by each shareholder. Such list shall be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting for the purposes thereof. Such list shall be prima-facie evidence of who is a shareholder of record; but, in the event of challenge, the record of shareholders required by Code Section 7-1-439 shall control.
  2. If the requirements of this Code section have not been substantially complied with, the meeting shall, on the demand of any shareholder in person or by proxy, be adjourned until the requirements are complied with.
  3. If no such demand is made, failure to comply with the requirements of this Code section shall not affect the validity of any action taken at such meeting.
  4. Notwithstanding subsections (a) through (c) of this Code section, it shall not be necessary to prepare or produce a list of shareholders in any case where the record of shareholders is presented and readily shows, in alphabetical order or by alphabetical index and by classes, if any, the names of the shareholders entitled to vote, with the address of and the number of shares held by each.

History. Code 1933, § 41A-2005, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1977, p. 730, § 6.

7-1-435. Quorum of shareholders.

  1. Except as provided in subsection (d) of this Code section or the articles or in bylaws adopted by the shareholders, a majority of the shares entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of shareholders.
  2. If a quorum is present, the affirmative vote of the majority of the shares represented at the meeting and entitled to vote on the subject matter shall be the act of the shareholders, unless the vote of a greater number, or voting by classes, is required by this chapter, or the articles, or bylaws.
  3. When a quorum is once present to organize a meeting, the shareholders present may continue to do business at the meeting or at any adjournment thereof, notwithstanding the withdrawal of enough shareholders to leave less than a quorum.
  4. If a meeting cannot be organized for lack of a quorum, those present may adjourn the meeting to such time and place as they may determine. In the case of a meeting for the election of directors which is twice adjourned for lack of a quorum, those present at the second of such adjourned meetings, of which notice has been given in writing to shareholders pursuant to Code Section 7-1-6, shall constitute a quorum for the election of directors without regard to the other quorum requirements of this Code section, the articles, or bylaws.

History. Code 1933, § 41A-2006, enacted by Ga. L. 1974, p. 705, § 1.

RESEARCH REFERENCES

Am. Jur. 2d.

18A Am. Jur. 2d, Corporations, § 971 et seq.

C.J.S.

18A C.J.S., Corporations, § 452 et seq.

7-1-436. Voting of shares.

  1. Unless otherwise provided in the articles, each outstanding share entitled to vote, regardless of class, shall be entitled to one vote on each matter submitted to a vote at a meeting of shareholders. A subscriber shall not be entitled to vote the share subscribed for until such shares have been fully paid.
  2. Treasury shares shall not be voted at any meeting nor counted in determining the total number of outstanding shares at any given time.
  3. The chairman of the board, chief executive officer, president, any vice-president, the secretary, or the treasurer of a corporation which is the holder of record of shares of a bank or trust company shall be deemed by the bank or trust company to have authority to vote such shares and to execute proxies and written waivers and consents in relation thereto, whether such shares are held in a fiduciary capacity or otherwise, unless, before a vote is taken or a waiver of consent is acted upon, it is made to appear by a certified copy of the bylaws or resolution of the board of directors or executive committee of the corporation holding such shares that such authority does not exist or is vested in some other officer or person. In the absence of such certification, a person executing any such proxies, waivers, or consents or presenting himself or herself at a meeting as one of such officers of a corporate shareholder shall, for the purposes of this Code section, be prima facie deemed to be duly elected, qualified, and acting as such officer and to be fully authorized; and, in the case of conflicting representation, the corporate shareholder shall be deemed to be represented by its senior officer in the order first stated in this subsection.
  4. Shares held by an administrator, executor, guardian, or conservator may be voted by him, either in person or by proxy, without a transfer of such shares into his name. Shares standing in the name of a trustee may be voted by him, either in person or by proxy; but no trustee shall be entitled to vote shares held by him without a transfer of such shares into his name or the name of his nominee. Shares standing in the name of a person as life tenant may be voted by him, either in person or by proxy, unless the record of shareholders shows that he is not entitled to vote such shares.
  5. Shares standing in the name of a receiver may be voted by such receiver; and shares held by or under the control of a receiver may be voted by such receiver without a transfer thereof into his name if authority to do so is contained in an order of the court by which such receiver was appointed.
  6. If a share or shares stand of record in the names of two or more persons, whether fiduciaries, joint tenants, tenants in common, tenants in partnership, or otherwise, or if two or more persons have the same fiduciary relationship respecting the same share or shares, then unless the instrument or order appointing them or creating the tenancy otherwise directs and such instrument or order or a copy thereof is filed with the secretary of the bank or trust company, their acts with respect to voting shall have the following effect:
    1. If only one votes, in person or by proxy, his act binds all;
    2. If more than one votes, in person or by proxy, the act of the majority so voting binds all;
    3. If more than one votes in person or by proxy but the votes are evenly split on any particular matter, each faction is entitled to vote the share or shares in question proportionally;
    4. If the instrument or order so filed shows that any such tenancy is held in unequal interest, a majority or even-split for purposes of this subsection shall be a majority or even-split in interest;
    5. The principles of this subsection shall apply, insofar as possible, to execution of proxies, waivers, consents, or objections and for the purpose of ascertaining the presence of a quorum.
  7. A shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, or a nominee of the pledgee; and thereafter the pledgee or his nominee shall be entitled to vote the shares so transferred.
  8. Notwithstanding subsections (a) through (g) of this Code section, a corporation shall be protected from liability in relying on and treating the persons in whose names shares stand on the record of shareholders as the owners thereof for all purposes.
  9. When notice of redemption of redeemable shares has been mailed to the holders thereof and a sum sufficient to redeem such shares has been set aside to pay the redemption price to shareholders, such shares shall not be entitled to vote in any manner and shall not be deemed to be outstanding shares.

History. Code 1933, § 41A-2007, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2016, p. 390, § 7-9/HB 811.

RESEARCH REFERENCES

Am. Jur. 2d.

18B Am. Jur. 2d, Corporations, §§ 996, 997, 1020 et seq., 1015, 1016, 1022, 1038 et seq.

C.J.S.

18A C.J.S., Corporations, § 455 et seq.

ALR.

Voting power of corporation stock as confined to issued and outstanding stock to exclusion of authorized unissued stock or stock which has been reacquired by the corporation, 90 A.L.R. 315 .

7-1-437. Proxies.

  1. Unless otherwise unlawful, a person or corporation who is entitled to attend a shareholders’ meeting, to vote thereat, or to execute consents, waivers, or releases may be represented at such meeting or vote thereat, and execute consents, waivers, and releases, and exercise any of his or her other rights, by one or more agents, who may be either an individual or individuals or any domestic or foreign corporation, authorized by a written proxy or electronic transmission of proxy executed by such person or by his or her attorney in fact.
  2. No proxy shall be valid after the expiration of 11 months from the date thereof unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the person executing it, except as otherwise provided in this Code section.
  3. Subject to the limitation of subsection (b) of this Code section, any proxy duly executed is not revoked and continues in full force and effect until an instrument revoking it, or a duly executed proxy bearing a later date, is received by the secretary of the bank or trust company. A proxy is not revoked by the death or incapacity of the maker unless, before the vote is counted or the authority is exercised, written notice of such death or incapacity is received by the secretary of the bank or trust company. Notwithstanding that a valid proxy is outstanding, the powers of the proxyholder are suspended, except in the case of a valid proxy which is by law irrevocable and which states on its face that it is irrevocable, if the maker is present at the meeting and elects to vote in person.
  4. If a proxy for the same shares confers authority upon two or more persons and does not otherwise provide, a majority of them present at the meeting or, if only one is present, then that one may exercise all the powers conferred by the proxy; but, if the proxyholders present at the meeting are divided as to the right and manner of voting in any particular case and there is no majority, the voting of said shares shall be prorated.
  5. If a proxy expressly provides, any proxyholder may, unless otherwise unlawful, appoint in writing a substitute to act in his or her place.
  6. A shareholder shall not sell his or her vote or issue a proxy to vote to any person for any sum of money or anything of value, except as permitted in this Code section and in Code Section 7-1-438, relating to shareholders’ agreements.
  7. To be irrevocable, a proxy must be entitled “IRREVOCABLE PROXY,” must state that it is irrevocable, must not otherwise be unlawful, and must be held by any of the following or by a nominee of any of the following:
    1. A pledge or other person holding a security interest in the shares;
    2. A person who has purchased or agreed to purchase the shares;
    3. A creditor or creditors of the bank or trust company who extend or continue credit to the bank or trust company in consideration of the proxy, if the proxy states that it was given in consideration of such extension or continuation of credit, the amounts thereof, and the name of the person extending or continuing credit;
    4. A person who has contracted to perform services as an officer of the bank or trust company, if a proxy is required by the contract of employment and if the proxy states that it was given in consideration of such contract of employment, the name of the employee, and the period of employment contracted for;
    5. A person designated by or under an agreement under Code Section 7-1-438, relating to shareholders’ agreements.
  8. Notwithstanding a provision in a proxy stating that it is irrevocable, the proxy becomes revocable after the pledge or security interest is redeemed, or the debt of the bank or trust company is paid, or the period of employment provided for in the contract of employment has terminated, or the agreement under Code Section 7-1-438, relating to shareholders’ agreements, has terminated; and, in a case provided for in paragraph (3) or (4) of subsection (g) of this Code section, a proxy becomes revocable three years after the date of the proxy or at the end of the period, if any, specified therein, whichever period is less, unless the period of irrevocability is renewed from time to time by the execution of a new irrevocable proxy as provided in this Code section. This subsection does not affect the duration of a proxy under subsection (b) of this Code section.
  9. A proxy may be revoked, notwithstanding a provision making it irrevocable, by a purchaser of shares without knowledge of the existence of the provision unless the existence of the proxy and its irrevocability are noted conspicuously on the face or back of the certificate representing such shares.

History. Code 1933, § 41A-2008, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 24; Ga. L. 2007, p. 502, § 3/SB 70; Ga. L. 2010, p. 878, § 7/HB 1387.

RESEARCH REFERENCES

Am. Jur. 2d.

18B Am. Jur. 2d, Corporations, § 1044 et seq.

C.J.S.

18A C.J.S., Corporations, § 468 et seq.

7-1-438. Shareholders’ agreements.

  1. Unless otherwise unlawful, an agreement between two or more shareholders, if in writing and signed by the parties thereto and if a copy thereof is delivered to the department and approved by the department when, in its discretion, such agreement is in the best interest of the bank and the public, may provide that in exercising any voting rights the shares held by them shall be voted as therein provided, or as they may agree, or as determined in accordance with a procedure agreed upon by them. Nothing herein shall impair the right of the bank or trust company to treat the shareholders of record as entitled to vote the shares standing in their names.
  2. The duration of any agreement permitted by subsection (a) of this Code section shall not exceed 20 years. Failure to state a period of duration or stating a period of duration in excess of 20 years shall not invalidate the agreement, but in either such case the period of duration of the agreement shall be 20 years. Any such agreement shall be renewable at any time before the expiration of such 20 year period by agreement of all the shareholders bound thereby at the date of renewal.
  3. A transferee of shares in a bank or trust company whose shareholders have entered into an agreement authorized by subsection (a) of this Code section shall be bound by such agreement or any renewal of such agreement authorized by subsection (b) of this Code section if he takes the shares with notice thereof. A transferee shall be deemed to have notice of any such agreement or any renewal if the existence thereof is noted on the face or back of the certificate or certificates representing such shares.

History. Code 1933, § 41A-2009, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 25.

RESEARCH REFERENCES

Am. Jur. 2d.

18 Am. Jur. 2d, Corporations, § 24. 18B Am. Jur. 2d, Corporations, § 1085 et seq.

C.J.S.

18A C.J.S., Corporations, § 459.

7-1-439. Books and records.

  1. Each bank and trust company shall keep correct and complete books and records of account and shall keep minutes of the proceedings of its shareholders, board of directors, and committees of directors; and each bank and trust company shall keep at its registered office or main office or at the office of its transfer agent or registrar a record of its shareholders, giving the names and addresses of all shareholders and the number, class, and series, if any, of the shares held by each.
  2. The department may, by regulation, prescribe the minimum disclosure of corporate records and reports which must be made by the bank or trust company to its shareholders at each annual meeting. In issuing such regulations, the department shall consider the legitimate rights of a shareholder to sufficient information to evaluate the management and use of his investment and to elect qualified directors for the bank or trust company as well as the rights of customers of the bank or trust company to maintain the confidentiality of their business affairs.
  3. Nothing in this Code section shall impair the power of any court of competent jurisdiction, upon proof by a shareholder of proper purpose, irrespective of the period of time during which such shareholder shall have been a shareholder of record and irrespective of the number of shares held by him, to compel the production or examination by such shareholder of the books and records of account, minutes, and record of shareholders of a bank or trust company.

History. Ga. L. 1919, p. 135, art. 19, § 4; Code 1933, § 13-2004; Code 1933, § 41A-2010, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 26; Ga. L. 1998, p. 795, § 20; Ga. L. 2004, p. 631, § 7.

JUDICIAL DECISIONS

“Proper purpose” to compel production of records not shown. —

Minority shareholders did not show the requisite “proper purpose” to compel production of corporate books and records since the shareholders, who sought to place one of their number on the board of directors, failed to show that the shareholders could not achieve the shareholders’ purported purposes through resort to the records that had been previously furnished to the shareholders. Stewart v. Bank of Lumber City, 193 Ga. App. 188 , 387 S.E.2d 366 , 1989 Ga. App. LEXIS 1396 (1989).

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, §§ 314 et seq., 321.

C.J.S.

18 C.J.S., Corporations, § 153 et seq. 19 C.J.S., Corporations, § 671.

ALR.

Admissibility of computerized private business records, 7 A.L.R.4th 8.

7-1-440. Derivative actions by shareholders; when proper.

A derivative action may be brought by a shareholder in the right of the bank or trust company to procure a judgment in its favor against directors, officers, or other representatives of the bank or trust company, or shareholders, or third parties, or any combination thereof, whenever the bank or trust company has a claim or cause of action which the representatives of the bank or trust company, in violation of their duties, have failed to enforce, including a claim or cause of action against such representatives for their failure in this respect.

History. Code 1933, § 41A-2011, enacted by Ga. L. 1974, p. 705, § 1.

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, § 313. 19 Am. Jur. 2d, Corporations, §§ 2231 et seq., 2312.

C.J.S.

9 C.J.S., Banks and Banking, §§ 478, 479. 18A C.J.S., Corporations, § 479 et seq.

ALR.

Standard of Review in Shareholder Derivative Action on Appeal in Federal Court, 38 A.L.R. Fed. 3d Art. 3.

7-1-441. Derivative actions by shareholders.

  1. In a derivative action involving a right which a bank or trust company may have properly asserted, but which its representatives wrongfully failed to enforce that has been brought by one or more shareholders of a bank or trust company to procure a judgment in its favor, the complaint shall be verified and shall allege that the plaintiff is a shareholder of record at the time of bringing the action. It shall further allege:
    1. That the plaintiff had purchased his or her shares or was a shareholder of record at the time of the transaction of which he or she complains or that his or her shares thereafter devolved on him or her through one or more transfers by operation of law from one who was a holder of record or member at such time; or
    2. That the plaintiff is the holder of record of shares which at the time of the transaction of which he or she complains were held of record by a trustee of a trust in which the plaintiff held a beneficial interest or in which a beneficial interest was held by one from whom the shares have devolved upon the plaintiff through one or more transfers by operation of law.
  2. In any such action the complaint shall also allege with particularity the efforts of the plaintiff to secure the initiation of such action by the board of directors or comparable authority, or the reasons for not making such effort.
  3. Such action shall not be discontinued, compromised, or settled without the approval of the court having jurisdiction of the action. If the court shall determine that the interests of the members or of the shareholders of any class or classes will be substantially affected by such discontinuance, compromise, or settlement, the court shall direct that notice, by publication or otherwise, of the action and the proposed discontinuance, compromise, or settlement thereof be given to the members or to the shareholders of the class or classes whose interests it determines will be so affected; if notice is so directed to be given, the court may determine which one or more of the parties to the action shall bear the expense of giving the same in such amount as the court shall determine and find to be reasonable in the circumstances.
  4. If such action is successful, in whole or in part, or if anything is received by the plaintiff or plaintiffs as the result of the judgment or compromise or settlement of the action, the court may award the plaintiff or plaintiffs reasonable expenses, including reasonable fees of attorneys, and shall direct him or them to account to the bank or trust company for the remainder of the proceeds so received by him or them.
  5. In any such action, the court having jurisdiction, upon final judgment and a finding that the action was brought without reasonable cause, may require the plaintiff or plaintiffs to pay to the parties named as defendants the reasonable expenses, including fees of attorneys, incurred by them in the defense of such action; and such damages as the court may assess shall be paid to the bank or trust company for damages such bank or trust company may have sustained due to adverse publicity brought about as a result of action brought without reasonable cause.

History. Code 1933, § 41A-2012, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 27; Ga. L. 2016, p. 390, § 7-10/HB 811.

RESEARCH REFERENCES

Am. Jur. 2d.

19 Am. Jur. 2d, Corporations, §§ 2238 et seq., 2261 et seq., 2289, 2312, 2423 et seq., 2469 et seq., 2475.

C.J.S.

18A C.J.S., Corporations, § 477 et seq.

ALR.

Standard of Review in Shareholder Derivative Action on Appeal in Federal Court, 38 A.L.R. Fed. 3d Art. 3.

PART 11 Dividends, Distributions, and Preferred Share Acquisition

Law reviews.

For comment, “A Snapshot of Dual-Class Share Structures in the Twenty-First Century: A Solution to Reconcile Shareholder Protections with Founder Autonomy,” see 68 Emory L.J. 337 (2018).

7-1-460. Restrictions on payment of dividends; limitation of actions for dividends or distributions.

  1. The board of directors of a bank or trust company may, from time to time, declare and the bank or trust company thereupon shall pay dividends on its outstanding shares in cash, property, or its own shares, except when the bank or trust company is insolvent or when the payment thereof would render the bank or trust company insolvent or when the declaration or payment thereof would be contrary to any restrictions contained in the articles, and subject to the following provisions:
    1. Dividends may be declared and paid in cash or property only out of the retained earnings of the bank or trust company unless otherwise approved in advance by the department on terms consistent with standards of safety and soundness;
    2. The department may approve the payment of dividends by a bank or trust company, prior to the time such bank or trust company achieves cumulative profitability:
      1. For the purpose of providing the shareholders of a Subchapter S bank with a source of funds to pay federal and state income taxes on the Subchapter S bank’s income that is taxable to those shareholders; or
      2. If a bank or trust company is profitable on an annual basis and the payment of such dividend is consistent with standards of safety and soundness;
    3. Dividends may not be paid without the prior approval of the department in excess of specified amounts as may be fixed by regulations of the department to assure that banks and trust companies maintain an adequate capital structure;
    4. Dividends may be declared and paid in lawfully held treasury shares or in authorized but unissued shares, provided that, in the case of a dividend of authorized but previously unissued shares, there shall be transferred to capital stock an amount equal to the aggregate par value of the shares distributed; and
    5. No dividends payable in shares of any class shall be paid in respect to shares of any other class unless the articles so provide or unless such payment is authorized by the affirmative vote or the written consent of the holders of a majority of the outstanding shares of the class in which the payment is to be made.
  2. A split or division of the issued shares of any class into a greater number of shares of the same class without increasing the capital stock of the bank or trust company shall not be construed to be a share dividend within the meaning of this Code section.
  3. If a bank or trust company has declared a cash dividend on any shares or any other distribution payable in cash or has sold fractional shares or scrip for the account of a shareholder and has mailed to a shareholder, at his address appearing on the records of the bank or trust company, a valid check in the amount of the dividend or other distribution or the proceeds of such sale to which such shareholder is entitled and, if such check would have been honored if duly presented to the bank on which it is drawn, no action for the recovery of such dividend or other distribution or for the amount thereof shall be brought by the shareholder or other person entitled thereto more than seven years after the date of mailing the check.
  4. If a bank or trust company has declared a dividend payable in its own shares or any other distribution payable in its own shares or in other than cash and has mailed to a shareholder, at his address appearing on the records of the bank or trust company, a certificate representing such shares or a notice setting forth the time and manner in which a distribution in other than its own shares or cash shall be paid, no action for the recovery of such dividends or other distribution or for the amount thereof shall be brought by the shareholder or other person entitled thereto more than seven years after the mailing of the share certificate or certificates or, in the case of a distribution in other than the shares of the bank or trust company or in cash, the time specified in the notice for the payment thereof.
  5. When the statute of limitations provided for in this Code section has run with respect to any unclaimed dividend, other unclaimed distribution, or unclaimed proceeds of the sale of fractional shares or scrip, the cash or property represented thereby shall thenceforth be treated as an asset of the bank or trust company.

History. Ga. L. 1919, p. 135, art. 19, §§ 29, 30; Code 1933, §§ 13-2029, 13-2030, 13-2031, 13-2032; Code 1933, § 41A-2101, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2009, p. 86, § 6/HB 141; Ga. L. 2012, p. 795, § 2/HB 945; Ga. L. 2019, p. 828, § 13/HB 185; Ga. L. 2020, p. 320, § 2/HB 781.

The 2019 amendment, effective July 1, 2019, substituted “The” for “Dividends may not be declared or paid at any time that the bank or trust company does not have the paid-in capital and appropriated retained earnings required by Code Section 7-1-411, except the” at the beginning of paragraph (a)(2); and deleted “and, after payment of the dividend, the bank or trust company continues to maintain the paid-in capital and appropriated retained earnings required by Code Section 7-1-411” following “shares distributed” near the end of paragraph (a)(4).

The 2020 amendment, effective January 1, 2021, rewrote paragraph (a)(2), which read: “The department may approve the payment of dividends by a Subchapter S bank, prior to cumulative profitability, for the sole purpose of providing its shareholders with a source of funds to pay federal and state income taxes on the Subchapter S bank’s income that is taxable to those shareholders;”.

JUDICIAL DECISIONS

Former Code 1933, § 41A-2011 (see now O.C.G.A. § 7-1-460 ) was not unconstitutional as an unlawful delegation of legislative authority. Commercial Bank v. Department of Banking & Fin., 244 Ga. 172 , 259 S.E.2d 435 , 1979 Ga. LEXIS 1160 (1979).

Violation of regulations enforced by suspension or cancellation of license. —

General Assembly did not provide that violation of regulations policing the industry and requiring certain acts to be performed in a specified manner would be a misdemeanor. In every instance, reasonable rules and regulations promulgated for administrative purposes or for policing the industry may be enforced as to licensees either by suspension or cancellation of a license. Commercial Bank v. Department of Banking & Fin., 244 Ga. 172 , 259 S.E.2d 435 , 1979 Ga. LEXIS 1160 (1979).

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, § 249.

C.J.S.

9 C.J.S., Banks and Banking, § 62.

ALR.

Duty and remedy as regards deferring payment of dividends from assets of insolvent bank or other insolvent corporation while there are undetermined claims or preferences, 88 A.L.R. 1301 .

7-1-461. Distribution upon reduction of capital stock or paid-in capital.

  1. Upon the decrease of capital stock of a bank or trust company pursuant to amendment of its articles as provided in this chapter, the board of directors, subject to restrictions of the articles, may distribute to the shareholders of the bank or trust company an amount in cash equal to all or part of the amount of the decrease in capital stock, if immediately after such distribution the bank or trust company would have the capital stock required by this chapter.
  2. Any portion of the amount of a decrease in capital stock which is not distributed to shareholders in accordance with this Code section shall be transferred to paid-in capital.
  3. A bank or trust company, by resolution of its board of directors, may distribute to its shareholders amounts representing a reduction in its paid-in capital, provided that such distribution shall first be approved in writing by the department.

History. Code 1933, § 41A-2102, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2019, p. 828, § 14/HB 185.

The 2019 amendment, effective July 1, 2019, deleted “and would have the paid-in capital and appropriated retained earnings required by Code Section 7-1-411” following “chapter” at the end of subsection (a); and deleted “provided that after such distribution the institution shall continue to have the paid-in capital and appropriated retained earnings required by Code Section 7-1-411 and” following “paid-in capital,” in the middle of subsection (c).

7-1-462. Dividends and distributions must be authorized by chapter.

The directors of a bank or trust company shall not declare dividends or authorize or ratify the distribution of any part of its assets to shareholders by purchase of its shares or otherwise, except as authorized by this chapter.

History. Code 1933, § 41A-2103, enacted by Ga. L. 1974, p. 705, § 1.

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, §§ 248, 293.

7-1-463. Preferred share acquisition.

  1. Unless otherwise provided in its articles, a bank or trust company, by resolution of its board of directors and with the prior approval of the department, may redeem or otherwise acquire preferred shares. In determining whether or not to give its approval under this subsection, the department shall give primary consideration to the question of whether or not, after the cancellation of the preferred shares, the capital accounts of the bank or trust company would be adequate to support its anticipated deposit or trust business.
  2. Preferred shares which are redeemed or otherwise acquired shall be canceled and shall not be reissued without prior approval of the department.

History. Code 1933, § 41A-2104, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2019, p. 828, § 15/HB 185.

The 2019 amendment, effective July 1, 2019, deleted “, if immediately after the redemption or other acquisition the bank or trust company would have the paid-in capital and appropriated retained earnings required by Code Section 7-1-411” following “shares” at the end of the first sentence of subsection (a).

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, §§ 248, 293.

C.J.S.

9 C.J.S., Banks and Banking, § 243.

PART 12 Management

RESEARCH REFERENCES

Am. Jur. Pleading and Practice Forms.

4A Am. Jur. Pleading and Practice Forms, Banks, § 20 et seq.

7-1-480. Board of directors.

  1. Administration of the business and affairs of a bank or trust company shall be the responsibility of a board of directors.
  2. Seventy-five percent of the directors shall be citizens of the United States and at least a majority shall:
    1. Reside in Georgia; or
    2. Reside within 40 miles of any banking location authorized to offer a complete banking or trust service.
  3. The residency requirements of paragraphs (1) and (2) of subsection (b) of this Code section shall not apply to banks having branches in states other than Georgia, provided that the residency of directors is consistent with the bank’s articles of incorporation and bylaws.
  4. The department may waive or modify the requirements of subsection (b) of this Code section relating to the residency requirements in the State of Georgia.
  5. Notwithstanding other provisions of this Code section, directors who were legally qualified to serve on April 1, 1975, may continue to serve for such time as they are continuously members of the board of directors of their bank or trust company.

History. Ga. L. 1898, p. 78, § 4; Civil Code 1910, § 2818; Ga. L. 1917, p. 62, § 1; Ga. L. 1919, p. 135, art. 19, §§ 1, 2; Ga. L. 1927, p. 195, § 8; Code 1933, §§ 13-2001, 13-2002, 109-103; Ga. L. 1943, p. 249, § 3; Ga. L. 1947, p. 476, § 1; Ga. L. 1947, p. 480, § 1; Ga. L. 1949, p. 378, § 1; Ga. L. 1959, p. 323, § 1; Ga. L. 1961, p. 196, § 1; Ga. L. 1966, p. 590, § 6; Ga. L. 1973, p. 811, § 1; Code 1933, § 41A-2201, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1986, p. 458, § 6; Ga. L. 1987, p. 1586, § 7; Ga. L. 1997, p. 485, § 15; Ga. L. 2000, p. 174, § 9; Ga. L. 2001, p. 970, § 4; Ga. L. 2020, p. 320, § 3/HB 781.

The 2020 amendment, effective January 1, 2021, inserted “that” in subsection (c) and substituted “relating to the residency requirements in the State of Georgia” for “with respect to special purpose banks organized pursuant to subsection (c) of Code Section 7-1-394” in subsection (d).

Code Commission notes.

Pursuant to Code Section 28-9-5, in 2000, “bank’s” was substituted for “banks” in subsection (c).

Law reviews.

For article discussing limitations on the establishment and transaction of international banking in Georgia, see 27 Mercer L. Rev. 629 (1976).

For article, “Business Associations,” see 53 Mercer L. Rev. 109 (2001).

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, §§ 329 et seq., 476.

C.J.S.

9 C.J.S., Banks and Banking, §§ 99, 104 et seq., 111.

7-1-481. Adopting, amending, and repealing bylaws.

The board of directors shall have the power to adopt, amend, or repeal bylaws as specified in paragraph (4) of Code Section 7-1-260 unless such power is reserved exclusively to the shareholders by the articles or in bylaws previously adopted by the shareholders; but any bylaws adopted by the board of directors may be altered, amended, or repealed and new bylaws adopted by the shareholders. The shareholders may prescribe that any bylaw or bylaws adopted by them shall not be altered, amended, or repealed by the board of directors. Copies of the bylaws and any change, addition, or amendment thereto shall be filed with the department immediately upon adoption by the directors or the shareholders.

History. Ga. L. 1898, p. 78, § 5; Civil Code 1910, § 2819; Code 1933, § 109-104; Code 1933, § 41A-2202, enacted by Ga. L. 1974, p. 705, § 1.

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, §§ 632, 633.

C.J.S.

9 C.J.S., Banks and Banking, § 48.

7-1-482. Number, term, and compensation of directors; effect of failure to maintain at least five directors.

  1. The articles or bylaws of any bank or trust company may fix the number of directors of its policy-making board at not less than five nor more than 25 and may provide that the board may, within such limitation, increase or decrease the number of directors by not more than two in any one year, provided that nothing in this subsection shall require a bank with a board of directors of less than five on July 1, 1972, to increase its board to five members. The failure of a bank or trust company to maintain at least five directors at any time does not exculpate the remaining directors from their obligations and liabilities associated with the actions and decisions made as directors of the financial institution, nor does it in any way void any actions taken or decisions made by the board of directors during any such time that there were less than five directors.
  2. Except as otherwise provided in this chapter, each director shall be elected by the shareholders for a term of one year or for staggered terms as provided in Code Section 14-2-806 and shall serve until he or she resigns, is removed, or becomes disqualified or until his or her successor shall have been duly elected and qualified.
  3. Except as otherwise provided in the articles or bylaws, the board of directors may fix the compensation for directors; and a director may be a salaried officer of the bank or trust company.
  4. Notwithstanding the requirements of this Code section, the board of directors of a bank may appoint one or more nonpolicy-making regional boards of directors to consist of a number of persons to be determined by the board. The members of such regional boards may not set bank policy but may exercise certain powers, duties, and responsibilities as delegated by the board. Such regional board members shall have the same status as nonpolicy-making officers of the bank. All such delegations shall be documented in detail in the minutes of the board.

History. Ga. L. 1898, p. 78, § 4; Civil Code 1910, § 2818; Ga. L. 1917, p. 62, § 1; Ga. L. 1919, p. 135, art. 19, § 1; Code 1933, §§ 13-2001, 109-103; Ga. L. 1947, p. 476, § 1; Ga. L. 1947, p. 480, § 1; Ga. L. 1966, p. 590, § 6; Code 1933, § 41A-2203, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2000, p. 174, § 10; Ga. L. 2011, p. 518, § 3/HB 239.

Code Commission notes.

Pursuant to Code Section 28-9-5, in 2001, a comma was deleted following “Code Section 14-2-806” in subsection (b).

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, §§ 330, 334.

C.J.S.

9 C.J.S., Banks and Banking, §§ 99, 104 et seq., 119.

7-1-483. Meetings of board; quorum; committees; acting without meeting.

  1. The board of directors shall hold regular meetings at such times as may be fixed by the bylaws and shall at all times be subject to call by the chairman of the board, by the president, or by any two members of the board. The board shall meet at least once in ten different months of each calendar year unless an alternative schedule is approved in writing by the department, but in no event shall the board meet less frequently than once in each calendar quarter.
  2. Unless otherwise provided in the articles or bylaws:
    1. A majority of all the directors in office shall constitute a quorum for the transaction of business; and actions of a majority of those present at a meeting at which a quorum is present shall be actions of the board;
    2. The board of directors may designate three or more of its number to constitute an executive committee or other committees which, to the extent provided in such resolution, shall have and exercise the authority of the board of directors in regard to the business of the bank or trust company;
    3. Any action which may be taken at a meeting of the directors or of the members of an executive or other committee may be taken without a meeting if a consent or consents in writing setting forth the action shall be signed by all of the directors or all of the members of the executive or other committee and filed with the secretary of the bank or trust company; and
    4. The board of directors may determine that a meeting of such board will be held, in whole or in part, by any means of communication by which all directors participating may simultaneously hear each other during the meeting. A director participating in a meeting by this means shall be considered to be present in person at the meeting.

History. Ga. L. 1898, p. 78, § 4; Civil Code 1910, § 2818; Ga. L. 1917, p. 62, § 1; Ga. L. 1919, p. 135, art. 19, § 4; Code 1933, §§ 13-2004, 109-103; Ga. L. 1947, p. 476, § 1; Code 1933, § 41A-2204, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 28; Ga. L. 1988, p. 296, § 1; Ga. L. 2021, p. 323, § 6/HB 111.

The 2021 amendment, effective July 1, 2021, in subsection (b), deleted “and” at the end of paragraph (b)(2), substituted “; and” for a period at the end of paragraph (b)(3), and added paragraph (b)(4).

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, § 350.

C.J.S.

9 C.J.S., Banks and Banking, § 98.

7-1-484. Oath of directors; liability of persons who have not subscribed to such oath.

  1. Each director, before assuming office, shall take an oath or affirmation that he will diligently and honestly perform his duties in the administration of the affairs of the bank or trust company, that he will not permit a willful violation of law by the bank or trust company, and that he meets the eligibility requirements of this chapter and of the articles and bylaws.
  2. A copy of the oath shall be signed by each director and shall be placed into the minutes of the meetings of the directors. No director shall be authorized to participate in the affairs of the board or receive any compensation for service as a director until the oath has been executed by such director. Any person seeking to act in the capacity of a director before subscribing to the oath and otherwise qualifying for service pursuant to the bylaws of the bank or the laws and regulations governing the operations of the bank shall be fully liable for his actions to the same extent as if that person had qualified to serve as a bank director.
  3. The oath shall not modify in any manner the legal duties of or the standard of care for directors in the exercise of such duties.

History. Ga. L. 1919, p. 135, art. 19, § 3; Code 1933, § 13-2003; Code 1933, § 41A-2205, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1981, p. 1366, § 12; Ga. L. 1990, p. 8, § 7; Ga. L. 2018, p. 214, § 8/HB 780.

The 2018 amendment, effective May 3, 2018, added subsection (c). See Editor’s notes for applicability.

Editor’s notes.

Ga. L. 2018, p. 214, § 26(b)/HB 780, not codified by the General Assembly, provides that: “It is not the intent of the General Assembly to affect the law applicable to litigation pending as of March 9, 2018.”

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, § 338.

C.J.S.

9 C.J.S., Banks and Banking, § 103.

7-1-485. Removal of directors; vacancies.

  1. The entire board of directors or an individual director may be removed without cause by the vote of shareholders entitled to cast at least a majority of the votes which all shareholders would be entitled to cast at an annual election of directors.
  2. The board may remove a director from office if:
    1. The director is adjudicated an incompetent by a court or is convicted of a felony;
    2. The director does not, within 60 days after his or her election or such longer time as the bylaws may specify, accept the office in writing or by attendance at a meeting and fulfill other requirements for holding the office;
    3. The director fails to attend regular meetings of the board for six successive monthly meetings or two successive quarterly meetings, if quarterly meetings have been approved by the department, without having been excused by the board;
    4. The director was an employee or duly elected officer of the bank or trust company and was discharged or resigned at the request of the board for reasons relating to performance of duties as an employee or officer of the bank or trust company;
    5. The director has been indicted for any crime involving moral turpitude, dishonesty, or breach of trust; or
    6. The director has failed to make payments on a loan or other extension of credit which causes a loss to a financial institution.
  3. Vacancies in the board of directors, whether caused by removal or otherwise and including vacancies resulting from an increase in the number of directors, may be filled by the remaining members of the board, even though less than a quorum. Each director so elected shall be a director until his successor is elected by the shareholders, who shall make such election at the next annual meeting of shareholders or at any special meeting called for that purpose prior thereto.

History. Ga. L. 1919, p. 135, art. 19, § 1; Code 1933, § 13-2001; Ga. L. 1947, p. 480, § 1; Ga. L. 1966, p. 590, § 6; Code 1933, § 41A-2206, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1981, p. 1366, § 13; Ga. L. 1989, p. 1211, § 9; Ga. L. 2017, p. 193, § 12/HB 143.

Cross references.

Right of department to require immediate suspension from office of director, officer, or employee of financial institution who is found to be dishonest, incompetent, or otherwise unqualified, § 7-1-71 .

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, §§ 329 et seq., 476.

C.J.S.

9 C.J.S., Banks and Banking, §§ 99, 104, 105.

7-1-486. Honorary and advisory positions.

The board of directors of any bank or trust company may appoint an individual as an honorary director or director emeritus or member of an advisory board. An individual so appointed may be compensated but may not vote at any meeting of the board of directors or be counted in determining a quorum and shall not have any responsibility or be subject to any liability imposed upon a director, or otherwise be deemed a director.

History. Code 1933, § 41A-2207, enacted by Ga. L. 1974, p. 705, § 1.

7-1-487. Audits and financial reports.

  1. The board of directors shall at least once each year have made by independent certified public accountants an audit of the books and affairs of the bank or trust company, including such matters as may be required by the department and including, in the case of a trust company, accounts held in a fiduciary or other representative capacity. An audit of a bank holding company performed in accordance with this Code section may be made in lieu of individual audits of subsidiaries of the bank holding company. The department may by regulation establish minimum standards for audits and reports under this Code section.
  2. A report of the audit made under subsection (a) of this Code section shall be signed by the accountants who make it. A signed copy of the report shall be submitted to the board for approval or rejection and kept in the files of the bank or trust company. The bank or trust company shall submit the audit to the department in accordance with department regulations.

History. Code 1933, § 41A-2208, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1989, p. 1211, § 10; Ga. L. 1997, p. 485, § 16.

RESEARCH REFERENCES

C.J.S.

9 C.J.S., Banks and Banking, §§ 116, 117.

7-1-488. Officers, agents, and employees; employee share plans.

  1. A bank or trust company shall have a president, a secretary, and such other officers as the directors may from time to time designate. An individual may hold more than one office, except that the individual shall not be both president and secretary.
  2. Except as otherwise provided in the articles or bylaws, the board of directors shall elect the officers, fix their compensation, and fill vacancies, however occurring. An officer elected or appointed by the board may be removed by the board at any time, whenever in its judgment the best interests of the institution will be served thereby, without prejudice to any contract right of such officer. The department shall immediately be notified in writing when the individual holding the position of chief executive officer or president of the bank changes.
  3. The officers, as between themselves and the bank or trust company, shall have such authority and perform such duties as may be provided in the bylaws adopted by the board.
  4. A bank or trust company may also employ such agents or employees as may be required for the prompt and orderly discharge of its business.
    1. Except as otherwise provided in the articles, a bank or trust company may adopt and carry out a plan, approved by the directors and the affirmative vote of a majority of the shares entitled to vote thereon, for the sale of shares, or for the granting of options for shares, to some or all of the officers and employees of the bank or trust company or of any affiliate of the bank or trust company or to a trustee on behalf of such employees, upon such terms and conditions and in such manner as may be provided by the bylaws or by the board. In any such plan:
      1. Such shares may be sold or optioned upon terms (not less than the par value thereof) which are deemed advantageous to the bank or trust company by the directors other than directors who may benefit by their action or, if the number of directors who will not benefit by the action is fewer than three, by the shareholders; and
      2. In the absence of fraud in the transaction, the judgment of the board of directors or the shareholders as to the adequacy of the consideration received for any rights or options to purchase shares under the plan shall be conclusive.
    2. Such a plan may be adopted whether or not it qualifies for special tax treatment under the laws of the United States.

History. Ga. L. 1898, p. 78, § 5; Civil Code 1910, § 2819; Ga. L. 1919, p. 135, art. 19, § 9; Ga. L. 1922, p. 63, § 1; Code 1933, §§ 13-2009, 109-104; Code 1933, § 13-912, enacted by Ga. L. 1966, p. 590, § 3; Ga. L. 1968, p. 1045, § 1; Ga. L. 1969, p. 958, § 1; Code 1933, § 41A-2209, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1981, p. 1366, § 14; Ga. L. 1995, p. 673, § 17; Ga. L. 2016, p. 390, § 7-11/HB 811.

JUDICIAL DECISIONS

Evidence of stock option. —

When there was conflicting evidence as to the existence of a stock option, whether the plaintiff bank president was promised that the option would be submitted to the shareholders, and whether it was the plaintiff or the defendant bank who prevented the performance of a condition precedent, the trial court erred in granting the bank’s motion for summary judgment. Hammond v. Bank of Newnan, 217 Ga. App. 49 , 456 S.E.2d 678 , 1995 Ga. App. LEXIS 355 (1995).

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, §§ 329 et seq., 476.

C.J.S.

9 C.J.S., Banks and Banking, §§ 100, 104, 105, 119.

ALR.

Powers of bank president or vice president, 1 A.L.R. 693 ; 67 A.L.R. 970 .

Remedies for determining right or title to office in unincorporated private association, 82 A.L.R.2d 1169.

Liability, under National Banking Act (12 USCS § 93), of national bank directors for retaliation against officer or employee who discloses or refuses to commit banking irregularity, 101 A.L.R. Fed. 377.

7-1-489. Fidelity bonds.

Any director who is authorized to handle money or negotiable assets on behalf of a bank or trust company and all officers and employees of a bank or trust company shall be bonded by a regularly incorporated surety company authorized to do business in this state, and the bank or trust company may pay the cost of such fidelity bonds. The form, amount, and surety of such fidelity bonds shall be such as are approved by the board of directors; but the department may require an additional amount or new or additional surety.

History. Ga. L. 1919, p. 135, art. 19, § 10; Ga. L. 1920, p. 102, § 1; Ga. L. 1922, p. 63, § 1; Code 1933, § 13-2010; Code 1933, § 41A-2210, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2015, p. 344, § 10/HB 184.

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, §§ 344, 476.

C.J.S.

9 C.J.S., Banks and Banking, §§ 102, 261.

7-1-490. Responsibility of directors and officers; delegation of investment decisions.

  1. Directors and officers of a bank or trust company shall discharge the duties of their respective positions in good faith and with the degree of diligence, care, and skill which an ordinarily prudent person would exercise under similar circumstances.
  2. In performing his or her duties, a director or officer may be entitled to rely upon:
    1. Other officers, employees, or agents of the bank or trust company whom the director or officer reasonably believed to be reliable and competent in the functions performed; and
    2. Information, data, opinions, reports, or statements provided by other officers, employees, agents of the bank or trust company, legal counsel, public accountants, investment bankers, or other persons as to matters involving the skills, expertise, or knowledge reasonably believed to be reliable and within such person’s professional or expert competence.
  3. There shall be a presumption that the process directors and officers followed in arriving at decisions was done in good faith and that such directors and officers have exercised ordinary care; provided, however, that this presumption may be rebutted by evidence that such process constitutes gross negligence by being a gross deviation of the standard of care of a director or officer in a like position under similar circumstances.
  4. A bank, through its board of directors, may delegate to a correspondent bank the power to determine, within the limits set by law, the investments in which its assets, including reserve assets, may be held, provided that the bank must obtain the prior written approval of the department for such delegation.
  5. Nothing in this Code section shall:
    1. In any instance when fairness is at issue, such as consideration of the fairness of a transaction to the bank or trust company as evaluated under paragraph (3) of subsection (b) of Code Section 14-2-861, alter the burden of proving the fact or lack of fairness otherwise applicable;
    2. Alter the fact or lack of liability of a director or officer under the Official Code of Georgia Annotated, including Code Sections 7-1-492 and 7-1-494;
    3. Affect any rights to which the bank or trust company or its shareholders may be entitled under another law of this state or of the United States; or
    4. Deprive a director or officer of the applicability, effect, or protection of the business judgment rule.

History. Code 1933, § 41A-2211, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1977, p. 730, § 7; Ga. L. 1982, p. 3, § 7; Ga. L. 2017, p. 693, § 1/HB 192; Ga. L. 2019, p. 1056, § 7/SB 52.

The 2019 amendment, effective May 12, 2019, part of an Act to revise, modernize, and correct the Code, revised punctuation in the introductory language of subsection (b).

Editor’s notes.

Ga. L. 2017, p. 693, § 4/HB 192, not codified by the General Assembly, provides that: “This Act shall apply only to causes of action arising on or after July 1, 2017.”

Law reviews.

For article, “2013 Georgia Corporation and Business Organization Case Law Developments,” see 19 Ga. St. B.J. 28 (April 2014).

For annual survey on business associations, see 66 Mercer L. Rev. 15 (2014).

For article, “2014 Georgia Corporation and Business Organization Case Law Developments,” see 20 Ga. St. Bar. J. 26 (April 2015).

For annual survey of business associations, see 67 Mercer L. Rev. 15 (2015).

For article on the 2017 amendment of this Code section, see 34 Ga. St. U.L. Rev. 1 (2017).

For annual survey on trial practice and procedure, see 69 Mercer L. Rev. 321 (2017).

JUDICIAL DECISIONS

Judicial notice. —

After the FDIC brought claims against a bank’s former directors and officers for negligence, breach of fiduciary duty, and gross negligence, a court declined to take judicial notice of facts in the FDIC’s Officer of Inspector General’s Audit Report of the Bank and its Congressional testimony that the defendants alleged rebutted allegations that the defendants were negligent or grossly negligent because at the motion to dismiss stage, it was not for the court to weigh those facts against allegations of the complaint and determine, as a matter of law, whether the defendants breached the standard of care required under Georgia law. FDIC v. Adams, No. 1:12-cv-00726-JOF, 2013 U.S. Dist. LEXIS 165232 (N.D. Ga. Apr. 10, 2013).

Business judgment rule applies. —

FDIC’s claims against former officers and directors of a bank for ordinary negligence and breach of fiduciary duty were subject to the business judgment rule. The FDIC rebutted the business judgment presumption, and the FDIC’s claims could go forward, as the allegations of the complaint, taken together, painted a picture of the officers and directors failing to implement any safeguards and ignoring the ones actually put in place so that they could pursue a rapid growth strategy and accumulate large profits in a short period of time. FDIC v. Adams, No. 1:12-cv-00726-JOF, 2013 U.S. Dist. LEXIS 165232 (N.D. Ga. Apr. 10, 2013).

RESEARCH REFERENCES

C.J.S.

9 C.J.S., Banks and Banking, §§ 106, 107, 111.

ALR.

Powers of bank president or vice-president, 1 A.L.R. 693 ; 67 A.L.R. 970 .

Implied, apparent or ostensible, and presumed authority of bank cashier to surrender or waive some right of bank, 108 A.L.R. 713 .

Liability, under National Banking Act (12 USCS § 93), of national bank directors for retaliation against officer or employee who discloses or refuses to commit banking irregularity, 101 A.L.R. Fed. 377.

7-1-491. Financing involving directors or officers.

In addition to other provisions in this chapter and federal law, a bank or trust company shall not make loans or otherwise extend financing to any one of its directors or policy-making officers except on terms, rates, and conditions which are not preferential. Preferential terms, rates, and conditions shall be determined by comparison to those terms, rates, and conditions offered contemporaneously to other borrowers making substantially similar loan requests, having substantially similar credit histories, and offering substantially similar collateral. Such loans shall be made only after the application of prudent loan underwriting criteria normally applied to loan requests of a similar nature from applicants who are not directors and policy-making officers. Approval procedures for such loans should be designed to minimize any potential abuse by bank insiders.

History. Ga. L. 1919, p. 135, art. 19, §§ 11, 12; Ga. L. 1920, p. 102, § 1; Code 1933, §§ 13-2011, 13-2012; Ga. L. 1968, p. 329, § 1; Code 1933, § 41A-2212, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1978, p. 1717, § 5; Ga. L. 1983, p. 602, § 12; Ga. L. 1984, p. 949, § 5; Ga. L. 1995, p. 673, § 18.

Administrative rules and regulations.

Loans and discounts, Official Compilation of the Rules and Regulations of the State of Georgia, Department of Banking and Finance, Banks, Chapter 80-1-5.

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, § 450 et seq.

ALR.

Transactions by which officers or directors of banks realize on their deposits as unlawful preference, 84 A.L.R. 1493 .

Construction and application of criminal statutes relating to loans by bank to officers, directors, stockholders, or employees of bank or of banking department, 90 A.L.R. 509 .

Construction and application of statutes prohibiting or limiting loans to bank’s officers or directors, 49 A.L.R.3d 727.

7-1-492. Prohibitions applicable to directors, officers, and employees.

  1. No director, officer, or employee of a bank or trust company shall:
    1. Receive anything of value for procuring or attempting to procure any loan from or investment by the bank or trust company;
    2. Purchase, or directly or indirectly be interested in purchasing, from the bank or trust company for less than its face value any promissory note or other evidence of indebtedness issued by the bank or trust company;
    3. Purchase or sell any other asset to the bank or trust company except:
      1. Upon terms not less favorable to the bank or trust company than those offered to other persons or corporations; and
      2. With the prior approval of the board of directors or a committee thereof authorized to act for the board, unless the transaction is made in the regular course of business.
  2. No director shall be eligible to vote concerning any purchase or sale where he is or would be a party to the transaction.
  3. It shall be unlawful for any bank or trust company to lend to any officer, director, or employee any funds held in trust under powers granted in this chapter.

History. Code 1933, § 41A-2213, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1996, p. 848, § 7.

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, §§ 450, 454.

C.J.S.

9 C.J.S., Banks and Banking, § 497.

ALR.

Powers of bank president or vice-president, 1 A.L.R. 693 ; 67 A.L.R. 970 .

Transactions by which officers or directors of banks realize on their deposits as unlawful preference, 84 A.L.R. 1493 .

Implied, apparent or ostensible, and presumed authority of bank cashier to surrender or waive some right of bank, 108 A.L.R. 713 .

7-1-493. Actions against directors and officers.

  1. An action may be brought by any of the persons named in subsection (b) of this Code section against one or more directors or officers of a bank or trust company to procure for the benefit of the bank or trust company a judgment for the following relief:
    1. To compel the defendant to account for his or her official conduct, or to decree any other relief called for by his or her official conduct, in the following cases:
      1. The neglect of, failure to perform, or other violation of his or her duties in the management of the bank or trust company or in the disposition of corporate assets committed to his or her charge;
      2. The acquisition by himself or herself, transfer to others, loss, or waste of corporate assets due to any neglect of, failure to perform, or other violation of his or her duties;
      3. The appropriation, in violation of his or her duties, of any business opportunity of the bank or trust company;
    2. To enjoin a proposed unlawful conveyance, assignment, or transfer of corporate assets or other unlawful corporate transaction, where there is sufficient evidence that it will be made;
    3. To set aside an unlawful conveyance, assignment, or transfer of corporate assets, where the transferee knew of its unlawfulness and is made a party to the action.
  2. An action may be brought for the relief provided in this Code section and in Code Section 7-1-494, relating to the liability of directors in certain cases, by the bank or trust company, or by a receiver, trustee in bankruptcy, officer, director, or judgment creditor thereof, or by a shareholder in accordance with Code Sections 7-1-440 and 7-1-441, relating to derivative actions.
  3. No action shall be brought for the relief provided in this Code section more than four years from the time the cause of action accrued.
  4. This Code section shall not limit any liability otherwise imposed by law upon any director or officer or any third party, provided that after April 1, 1975, Code Section 14-4-65, relating to improper dividends and liability of officers, shall no longer be applicable to officers or directors of banks or trust companies.
  5. Notwithstanding the foregoing, a bank or trust company may provide in its articles of incorporation for the elimination or limitation of the personal liability of a director to the bank or trust company or its shareholders to the same extent as a business corporation incorporated under the provisions of Chapter 2 of Title 14.

History. Code 1933, § 41A-2214, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 29; Ga. L. 1987, p. 1586, § 8; Ga. L. 1993, p. 917, § 4; Ga. L. 2018, p. 214, § 9/HB 780.

The 2018 amendment, effective May 3, 2018, inserted “or her” throughout subsection (a); inserted “or herself” in subparagraph (a)(1)(B); and substituted the present provisions of subsection (e) for the former provisions, which read: “Notwithstanding the foregoing, a bank or trust company may provide through an amendment to its articles of incorporation for the elimination or limitation of the personal liability of a director to the shareholders of the bank or trust company to the same extent as a business corporation incorporated under the provisions of Chapter 2 of Title 14, provided that such an amendment to the articles of incorporation must be adopted by the affirmative vote of two-thirds of the total shares outstanding.” See Editor’s notes for applicability.

Editor’s notes.

Ga. L. 2018, p. 214, § 26(b)/HB 780, not codified by the General Assembly, provides that: “It is not the intent of the General Assembly to affect the law applicable to litigation pending as of March 9, 2018.”

Law reviews.

For article, “Statutes of Limitation: Counterproductive Complexities,” see 37 Mercer L. Rev. 1 (1985).

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, §§ 402 et seq., 416.

C.J.S.

9 C.J.S., Banks and Banking, §§ 510, 511.

ALR.

Constitutionality of statutes relating to personal liability of officers or directors of bank, 57 A.L.R. 888 .

False representation by officers or directors of bank or building and loan association that impairment of capital has been made good, as basis of action against them, 144 A.L.R. 1498 .

Liability, under National Banking Act (12 USCS § 93), of national bank directors for retaliation against officer or employee who discloses or refuses to commit banking irregularity, 101 A.L.R. Fed. 377.

Standard of liability applicable to action against directors or officers of failed depository institution pursuant to 12 USCS § 1821(k), 125 A.L.R. Fed. 435.

7-1-494. Liability of directors in certain cases.

  1. In addition to any other liabilities imposed by law upon directors of a bank or trust company:
    1. Directors of a bank or trust company who vote for or assent to the declaration of any dividend or other distribution of the assets of a bank or trust company to its shareholders which is not authorized by this chapter or is contrary to any restrictions contained in the articles shall be jointly and severally liable to the bank or trust company for the amount of such dividend which is paid or the value of such assets which are distributed in excess of the amount of such dividend or distribution which could have been paid or distributed without a violation of the provisions of this chapter or the restrictions in the articles to the extent that any depositor, creditor, or shareholder of the bank or trust company has suffered damage as a result thereof; and
    2. The directors of a bank or trust company who vote for or assent to any distribution of assets of a bank or trust company to its shareholders during the voluntary liquidation of the bank or trust company without the payment and discharge of, or making adequate provisions for, all known debts, obligations, and liabilities of the bank or trust company shall be jointly and severally liable to the bank or trust company for the value of such assets which are distributed, to the extent that such debts, obligations, and liabilities of the bank or trust company are not thereafter paid and discharged.
  2. A director of a bank or trust company who is present at a meeting of its board of directors at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless his dissent shall be entered in the minutes of the meeting or unless he shall file his written dissent to such action with the person acting as the secretary of the meeting before the adjournment thereof or shall forward such dissent by registered or certified mail or statutory overnight delivery to the secretary of the bank or trust company within 24 hours after the adjournment of the meeting. Such right to dissent shall not apply to a director who, being present at the meeting, failed to vote against such action.
  3. A director shall not be liable under subsection (a) of this Code section if he relied and acted in good faith upon financial information of the bank or trust company represented to him to be correct by the president or the officer of the bank or trust company having charge of its books of account or stated in a written report by an independent or certified public accountant or firm of such accountants to reflect fairly the financial condition of such bank or trust company; nor shall he be so liable if in good faith in determining the amount available for any such dividend or distribution he considered the assets to be represented fairly on the books of the bank.
  4. Any director against whom any claim shall be asserted under or pursuant to this Code section for the payment of a dividend or other distribution of assets of a bank or trust company and who shall be held liable thereon shall be entitled to contribution from the shareholders who, knowing such dividend or distribution to have been made in violation of this chapter, accepted or received any such dividends or assets in proportion to the amounts received by them respectively.
  5. Any director against whom any claim shall be asserted under or pursuant to this Code section shall be entitled to contribution from the other directors who voted for or assented to the action upon which the claim is asserted.
  6. No liability under this Code section shall be asserted more than six years from the time the cause of action accrued.

History. Code 1933, § 41A-2215, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2000, p. 1589, § 3.

Editor’s notes.

Ga. L. 2000, p. 1589, § 16, not codified by the General Assembly, provides that the amendment to this Code section is applicable with respect to notices delivered on or after July 1, 2000.

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, §§ 402 et seq., 416.

C.J.S.

9 C.J.S., Banks and Banking, §§ 106, 107, 111, 124 et seq., 219 et seq., 511.

ALR.

Constitutionality of statutes relating to personal liability of officers or directors of bank, 57 A.L.R. 888 .

Running of statute of limitations against action against bank directors or officers for making excessive or unauthorized loans, 83 A.L.R. 1204 .

Personal liability of officers or directors of bank in respect of trust funds illegally deposited in bank, 112 A.L.R. 1214 .

Construction and application of statutes relating to civil liability of directors, officers or employees of bank, in case of false reports or statements, 114 A.L.R. 472 .

Standard of liability applicable to action against directors or officers of failed depository institution pursuant to 12 USCS § 1821(k), 125 A.L.R. Fed. 435.

PART 13 Amendment of Articles

7-1-510. Authorized amendments; articles entirely restated; notice to Secretary of State.

  1. A bank or trust company may, in the manner provided in this part, amend its articles at any time in order to make any change therein which would then be authorized for inclusion in original articles under this chapter, including without limitation an amendment:
    1. To adopt a new name permitted to be used under this chapter;
    2. To renew the term for which it is to exist or to provide for perpetual duration;
    3. To change, add to, or diminish the statement of its purpose or purposes;
    4. To increase or diminish the aggregate number of shares which it has authority to issue or to reclassify the shares by changing the number, par value, designations, preferences, redemption provisions, or relative, participating, optional, or other special rights of the shares or the qualifications, limitations, or restrictions of such rights, either with or without an increase or decrease in the number of shares;
    5. To restate the articles in their entirety;
    6. To change its main office location to a new location; or
    7. In the case of a bank, to become a trust company and, in the case of a trust company, to become a bank, with or without retaining an existing capacity to engage in the banking or trust business as the case may be.
  2. Articles restated in their entirety shall state the street address and county of the current instead of the original main office of the bank or trust company and need not state the names or other information concerning the first directors or the incorporators.
  3. Articles need not be amended for the addition or change of a registered agent or the change of a registered office. The bank or trust company shall, however, notify in writing the department and the Secretary of State of such changes.

History. Ga. L. 1898, p. 78, § 7; Ga. L. 1910, p. 98, § 1; Civil Code 1910, § 2821; Ga. L. 1917, p. 81, § 1; Ga. L. 1919, p. 135, art. 9, § 1; Ga. L. 1919, p. 135, art. 10, § 1; Ga. L. 1920, p. 102, § 1; Ga. L. 1927, p. 344, §§ 5, 6; Code 1933, §§ 13-1001, 13-1101, 109-301, 109-302, 109-401, 109-505; Ga. L. 1943, p. 249, § 2; Ga. L. 1953, Jan.-Feb. Sess., p. 240, § 1; Ga. L. 1964, p. 75, § 1; Ga. L. 1965, p. 501, § 2; Ga. L. 1966, p. 692, §§ 28, 37; Ga. L. 1968, p. 1045, § 2; Code 1933, § 13-1201, enacted by Ga. L. 1969, p. 964, § 1; Ga. L. 1972, p. 727, § 4; Code 1933, § 109-302.1, enacted by Ga. L. 1973, p. 525, § 1; Code 1933, § 41A-2301, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1989, p. 1257, § 8; Ga. L. 1998, p. 795, § 21; Ga. L. 1999, p. 674, § 9.

OPINIONS OF THE ATTORNEY GENERAL

Editor’s notes. In light of the similarity of the statutory provisions, opinions under former Code 1933, § 41A-2305 are included in the annotations for this Code section.

Department cannot qualify approval of proposed articles of amendment. — Notice required under former Code 1933, § 41A-2305 must unqualifiedly state approval or disapproval by the Department of Banking and Finance of proposed articles of amendment in the form in which they are submitted and the department may not in the department’s approval modify articles or otherwise condition the department’s approval on a particular method of operation under approved articles; any attempt to qualify the department’s approval is beyond the jurisdiction of the department and therefore void. 1975 Op. Att'y Gen. No. 75-126 (decided under former Code 1933, § 41A-2305).

RESEARCH REFERENCES

C.J.S.

9 C.J.S., Banks and Banking, § 34.

7-1-511. Proposal and adoption of amendments.

  1. An amendment of the articles shall be proposed by adoption of a resolution by the board of directors directing that it be submitted to a vote at a meeting of shareholders.
  2. The resolution proposing an amendment or amendments shall contain the language of each amendment by setting forth in full the articles as they would be amended or any provision thereof as it would be amended or by setting forth in full any matter to be added to or deleted from the articles. A copy of the resolution or a summary thereof shall be included with the notice of the meeting required under Code Section 7-1-6.
  3. Except as provided in subsections (d) and (e) of this Code section, adoption of each amendment shall require the affirmative vote of the shareholders entitled to cast at least a majority of the votes which all shareholders are entitled to cast thereon and, if any class is entitled to vote thereon as a class, of the holders of at least a majority of the outstanding shares of such class.
  4. If a proposed amendment would:
    1. Make any change in the preferences, redemption provisions, qualifications, limitations, restrictions, or special or relative rights of the shares of any class adverse to such class;
    2. Increase or decrease the par value of the shares of any class;
    3. Increase the authorized number of shares of any class;
    4. Limit or deny the existing preemptive rights of the shares of any class; or
    5. Authorize a new class of shares or increase the number of authorized shares of any class, senior or superior in any respect to the shares of any class previously authorized,

      the holders of the outstanding shares of such class shall be entitled to vote as a class on such amendment regardless of any limitation stated in the articles on the voting rights of such class.

  5. Any amendment for the purposes set forth in paragraph (7) of subsection (a) of Code Section 7-1-510 shall require for its adoption the affirmative vote of at least two-thirds of all the shares entitled to vote thereon or of each class entitled to vote thereon where voting by class is required.

History. Ga. L. 1917, p. 81, § 2; Ga. L. 1919, p. 135, art. 9, §§ 1, 2; Ga. L. 1920, p. 102, § 1; Ga. L. 1927, p. 344, § 6; Code 1933, §§ 13-1001, 13-1002, 13-2101, 109-402, 109-507; Ga. L. 1943, p. 249, § 2; Ga. L. 1953, Jan.-Feb. Sess., p. 240, § 1; Ga. L. 1957, p. 501, § 1; Ga. L. 1963, p. 550, § 1; Ga. L. 1965, p. 501, § 2; Ga. L. 1966, p. 463, § 2; Ga. L. 1966, p. 692, § 29; Ga. L. 1968, p. 1045, §§ 1, 2; Code 1933, § 13-1201, enacted by Ga. L. 1969, p. 964, § 1; Ga. L. 1972, p. 727, §§ 3, 4; Code 1933, § 41A-2302, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1999, p. 674, § 10.

RESEARCH REFERENCES

C.J.S.

9 C.J.S., Banks and Banking, § 34.

7-1-512. Execution, contents, filing, and effect of articles of amendment.

  1. Upon the adoption of an amendment, articles of amendment shall be signed by two duly authorized officers of the bank or trust company under its seal and shall contain:
    1. The name of the bank or trust company;
    2. The street address and county of its main office;
    3. Whether it was incorporated with banking or trust powers or both;
    4. The time and place of the meeting of shareholders at which the shareholders approved the resolution of the board of directors, as originally proposed or as amended, and the kind and period of notice given to the shareholders;
    5. The number of shares entitled to vote on the amendment and, if the shares of any class are entitled to vote as a class, the number of shares of each such class;
    6. The number of shares voted for and against the amendment and, if shares of any class are entitled to vote as a class, the number of shares of each such class voted for and against the amendment; and
    7. The amendment adopted, which shall be set forth in full.
  2. The articles of amendment shall be filed with the department together with:
    1. The fee required by Code Section 7-1-862; and
    2. As soon as possible, a publisher’s affidavit as proof of publication of the advertisement required by Code Section 7-1-513.
  3. The filing of articles of amendment shall constitute an application for a certificate of amendment. If the articles of amendment involve a change in the name of a bank or trust company, it shall reserve the proposed new name under the procedures of Code Section 7-1-131.

History. Code 1933, § 41A-2303, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 30; Ga. L. 1981, p. 1366, § 15; Ga. L. 1983, p. 602, § 13; Ga. L. 1989, p. 1257, § 9; Ga. L. 1998, p. 795, § 22; Ga. L. 2015, p. 344, § 11/HB 184.

RESEARCH REFERENCES

C.J.S.

9 C.J.S., Banks and Banking, § 34.

7-1-513. Certification of articles of amendment; delivery to bank or trust company; publication of notice.

When the articles of amendment are filed, the department shall certify one of the copies thereof and deliver the same to the bank or trust company. The bank or trust company shall cause to be published in a publication as specified in the rules, regulations, or written policies of the department a copy of the articles of amendment or, in lieu thereof, a statement in substantially the following form:

NOTICE OF AMENDMENT An application for a certificate of amendment of its articles of incorporation has been made by (name of bank or trust company) by filing such application with the Department of Banking and Finance in accordance with the applicable provisions of Chapter 1 of Title 7 of the Official Code of Georgia Annotated, known as the “Financial Institutions Code of Georgia.” The (purpose) (purposes) of said articles of amendment (is) (are) (state the purpose of each amendment affected by the articles of amendment).

Click to view

The articles of amendment or the statement must be published once a week for two consecutive weeks with the first publication occurring within ten days of receipt by the newspaper of the articles of amendment or statement.

History. Ga. L. 1919, p. 135, art. 9, §§ 3, 4; Code 1933, §§ 13-1003, 13-1004; Ga. L. 1966, p. 692, §§ 30, 31; Code 1933, § 41A-2304, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1975, p. 445, § 31; Ga. L. 1989, p. 1257, § 10; Ga. L. 1998, p. 795, § 23.

7-1-514. Approval or disapproval of articles of amendment.

  1. Upon receipt of the articles of amendment, the department shall conduct such investigation as it may deem necessary to determine:
    1. That the articles of amendment and supporting items satisfy the requirements of this chapter;
    2. Where the amendment would grant new powers or status to a bank or trust company, that the criteria for the granting of such powers or status as an original matter have been satisfied;
    3. Where the amendment decreases the capital stock of the institution, that the remaining capital stock will be adequate to support its anticipated banking or trust business;
    4. Where the amendment provides for a change to a new location, that the criteria for establishing a banking office at the new location have been satisfied; and
    5. That the interests of the shareholders, depositors, and the public will not be impaired by the amendment.
  2. Within 60 days after receipt of the articles of amendment, the department, in its discretion, shall approve or disapprove the articles of amendment on the basis of its investigation and criteria set forth in subsection (a) of this Code section. If the department shall approve the articles of amendment, it shall deliver its written approval to the Secretary of State with a copy of the amendment attached and notify the bank or trust company of its action. If the department shall disapprove the articles of amendment, it shall give written notice to the bank or trust company and shall furnish to the bank or trust company a statement generally setting out the unfavorable factors influencing its decision. The decision of the department shall be conclusive, except that it may be subject to judicial review as provided in Code Section 7-1-90.

History. Ga. L. 1919, p. 135, art. 9, § 5; Code 1933, § 13-1005; Ga. L. 1966, p. 590, § 4; Ga. L. 1966, p. 692, § 32; Ga. L. 1968, p. 1045, § 4; Code 1933, § 41A-2305, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1989, p. 1257, § 11; Ga. L. 1999, p. 674, § 11.

OPINIONS OF THE ATTORNEY GENERAL

Notice must be unqualified. — Notice required under former Code 1933, § 41A-2305 must unqualifiedly state approval or disapproval by the Department of Banking and Finance of proposed articles of amendment in the form in which they are submitted and the department may not in the department’s approval modify articles or otherwise condition the department’s approval on a particular method of operation under approved articles; any attempt to qualify the department’s approval is beyond the jurisdiction of the department and therefore void. 1975 Op. Att'y Gen. No. 75-126.

RESEARCH REFERENCES

C.J.S.

9 C.J.S., Banks and Banking, § 34.

7-1-515. Issuance of certificate of amendment.

If all the fees and charges required by law have been paid and, in the case of a change of name, if the proposed new name of the bank or trust company continues to be reserved or is available on the records of the Secretary of State, upon the receipt by the Secretary of State of the written approval of the department and of proof of publication of the amendments as required by Code Section 7-1-513, the Secretary of State shall immediately issue to the bank or trust company a certificate of amendment and shall retain a copy thereof along with the approved articles of amendment, the written approval of the department, and the proof of publication.

History. Ga. L. 1919, p. 135, art. 9, § 7; Code 1933, § 13-1007; Ga. L. 1966, p. 692, § 34; Code 1933, § 41A-2306, enacted by Ga. L. 1974, p. 705, § 1.

7-1-516. Effect of certificate of amendment.

  1. As of the issuance of the certificate of amendment by the Secretary of State, each amendment shall become effective and the articles shall be deemed to be amended accordingly.
  2. The certificate of amendment shall be conclusive evidence of the performance of all conditions required by this chapter for amendment of articles, except as against the state.
  3. No amendment shall affect any existing cause of action in favor of or against the bank or trust company, any pending action in which the bank or trust company is a party, or existing rights of persons other than shareholders. If the amendment changes the name of the bank or trust company, no action by or against the institution shall be abated for that reason.

History. Code 1933, § 41A-2307, enacted by Ga. L. 1974, p. 705, § 1.

PART 14 Merger and Consolidation of State Banks and Trust Companies

JUDICIAL DECISIONS

Constitutionality of impairment of shareholders’ rights under part. —

Application of provisions dealing with merger and consolidation of state banks does not impair the shareholders’ rights in such a way as to offend the constitutional prohibition against retroactivity. Baugh v. Citizens & S. Nat'l Bank, 248 Ga. 180 , 281 S.E.2d 531 , 1981 Ga. LEXIS 911 (1981).

OPINIONS OF THE ATTORNEY GENERAL

Disclosure and approval requirements for mergers involving banks are generally more difficult than the same procedures for nonbank corporations. 1981 Op. Att'y Gen. No. 81-103.

Banks are “corporations” for purposes of § 10-5-9(12). — Banks should be considered to fall within the term “corporation” as that term is used in registration exemption in O.C.G.A. § 10-5-9(12) since bank shareholders, in merger transactions, are adequately protected by other statutory provisions which effectuate the investor protection purpose of O.C.G.A. T. 10, C. 5. In addition, banks should be considered “corporations” because banks are given similar corporate powers as nonbank corporations, thereby evidencing intent on the part of the General Assembly to treat banks as corporations for purposes of general corporate law. 1981 Op. Att'y Gen. No. 81-103.

RESEARCH REFERENCES

ALR.

Novation where bank transfers its assets to another bank which assumes its obligation, 79 A.L.R. 82 .

7-1-530. Authority to merge, consolidate, or exchange shares; requirements.

  1. Upon compliance with the requirements of this part and other applicable laws and regulations, including any branching and minimum age laws and regulations, banks or trust companies may merge or consolidate, provided that a trust company may merge or consolidate with a bank that is authorized to exercise trust powers so long as the resulting institution is a bank. Upon compliance with the requirements of this part and other applicable laws and regulations, including any branching and minimum age laws and regulations, a corporation other than a bank or trust company may acquire all of the outstanding shares of one or more classes or series of one or more banks or trust companies through a share exchange.
  2. A corporation or limited liability company other than a bank or trust company may be merged into or consolidated with, or may enter into a share exchange with, a bank or trust company, provided that:
    1. The resulting institution of the merger or consolidation is a bank or trust company;
    2. The resulting institution of the merger or consolidation, or the acquired bank or trust company in a share exchange, holds only assets and liabilities and is engaged only in activities which may be held or engaged in by a bank or trust company; and
    3. The merger, share exchange, or consolidation is not otherwise unlawful.
  3. A merger, share exchange, or consolidation pursuant to subsection (b) of this Code section shall be made by compliance with the requirements of this part. Title 14 shall not be applicable to such a merger, share exchange, or consolidation.
  4. A merger, share exchange, or consolidation across state lines shall also be subject to the provisions of Part 20 of this article.
  5. In the case of a merger of a Georgia state bank with any other bank or banks, with the Georgia bank as the resulting bank, any assets, lines of business, activities, or powers which may accrue to the resulting bank which would not be allowed for a Georgia state bank shall be provided for in the plan of merger. Such plan shall include the proposal for holding or disposal of such assets or the continuation or termination of such line of business, activity, or power. The department shall review the plan to determine whether, in the interest of safety and soundness and consistent with the other objectives of Code Section 7-1-3, the activity, power, asset, or line of business should be approved, denied, or phased out within a reasonable period of time, to be determined by the department.
  6. As used in this part, the term:
    1. “Bank” includes a national bank or trust company with its main office in this state if such national bank or trust company is merging with a Georgia state bank or trust company.
    2. “Share exchange” means a plan of exchange of all of the outstanding shares of one or more classes or series of shares in accordance with this part.
  7. Subject to the provisions of this part, this Code section does not limit the power of a corporation or limited liability company other than a bank or trust company to acquire all or part of the shares of one or more classes or series of a bank or trust company through a voluntary exchange of shares or otherwise.

History. Ga. L. 1919, p. 135, art. 13, § 1; Code 1933, § 13-1401; Ga. L. 1973, p. 278, § 1; Code 1933, § 41A-2401, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1996, p. 848, § 8; Ga. L. 1997, p. 485, § 17; Ga. L. 2000, p. 174, § 11; Ga. L. 2001, p. 970, § 5; Ga. L. 2003, p. 843, § 6; Ga. L. 2007, p. 502, § 4/SB 70; Ga. L. 2016, p. 390, § 2-7/HB 811; Ga. L. 2020, p. 320, § 4/HB 781; Ga. L. 2021, p. 323, § 7/HB 111; Ga. L. 2022, p. 220, § 8/HB 891.

The 2020 amendment, effective January 1, 2021, in the first sentence of subsection (a), substituted “a trust company” for “an institution exercising trust powers alone” and “with a bank that is authorized to exercise trust powers so long as the resulting institution is a bank” for “only with another such trust company”.

The 2021 amendment, effective July 1, 2021, deleted “involving one or more banks or trust companies” following “across state lines” in subsection (d); and rewrote subsection (f), which read: “As used in this part, the term ‘share exchange’ means a plan of exchange of all of the outstanding shares of one or more classes or series of shares in accordance with this part.”

The 2022 amendment, effective July 1, 2022, inserted “or limited liability company” in the introductory language of subsection (b) and in subsection (g).

Code Commission notes.

Pursuant to Code Section 28-9-5, in 1996, “article” was substituted for “chapter” in subsection (d).

Law reviews.

For article, “Business Associations,” see 53 Mercer L. Rev. 109 (2001).

OPINIONS OF THE ATTORNEY GENERAL

Former Code 1933, § 41A-2401 (see now O.C.G.A. § 7-1-530 ) clearly had the effect of modifying pro tanto former Code 1933, § 22-1006 (see now O.C.G.A. § 14-2-1108 ): in cases of clear conflict between statutes the later repeals the earlier by implication. Moreover, even if the two had been enacted together, § 41A-2401 would control former § 22-1006 because it is the more specific provision. 1978 Op. Att'y Gen. No. 78-36.

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, §§ 191 et seq., 234.

C.J.S.

9 C.J.S., Banks and Banking, §§ 158 et seq., 657.

7-1-531. Requirements for merger, share exchange, or consolidation plan; adoption of plan; modification of plan.

  1. The requirements for a merger, share exchange, or consolidation which must be satisfied by the parties thereto are as follows:
    1. The parties shall adopt a plan stating the method, terms, and conditions of the merger, share exchange, or consolidation, including the rights under the plan of the shareholders or members of each of the parties and any agreement concerning the merger, share exchange, or consolidation. Said plan shall specify:
      1. The name that such bank or trust company shall have upon and after such merger, share exchange, or consolidation, which may be the name of any one of the institutions or the combined names of two or more of the institutions or such other name as stated;
      2. The persons who shall constitute the board of directors of the bank or trust company after the merger, share exchange, or consolidation;
      3. In the case of a merger or consolidation, the manner and basis of converting the shares of each merged or consolidated institution into shares or other securities or obligations of the surviving bank or trust company and, if any shares of any of the merged or consolidated institutions are not to be converted solely into shares or other securities of the surviving bank or trust company, the amount of cash or securities of any other corporation, or combination of cash and such securities, which is to be paid or delivered to the holders of such shares in exchange for or upon the surrender of such shares, which cash or securities may be in addition to or in lieu of the shares or other securities of the surviving bank or trust company;
      4. In the case of a share exchange, the terms and conditions of the share exchange and the manner and basis of exchanging the shares to be acquired for shares, obligations, or other securities of the acquiring or any other corporation or for cash or other property in whole or in part; and
      5. Such other provisions with respect to the proposed merger or consolidation as are deemed desirable.
    2. Adoption of the plan by each party thereto shall require the affirmative vote of at least:
      1. A majority of the directors; and
      2. Unless the article or bylaws require a greater vote, the shareholders or members entitled to cast a majority of the votes which all shareholders or members are entitled to cast thereon and, if any class of shares is entitled to vote thereon as a class, the holders of a majority of the outstanding shares of such class, at a meeting of shareholders or members; provided, however, that approval from the shareholders or members of the surviving bank or trust company is not required if the conditions set forth in subsection (h) of Code Section 14-2-1103 are satisfied.
    3. If any party is a national bank, then the adoption of the plan shall comply with the applicable laws of such national bank’s chartering entity, including, but not limited to, any provisions related to the adoption of such plan by the shareholders or members and directors of the bank and to the dissenting rights of shareholders or members of the bank.
    4. Whenever a meeting of shareholders or members is called for the purpose of taking action on a plan, the notice for such meeting shall include a copy or summary of the plan and a full statement of the rights and remedies of dissenting shareholders or members, the method of exercising them, and the limitations on such rights and remedies.
  2. Any modification of a plan which has been adopted shall be made by any method provided therein or, in the absence of such provision, by the same vote as that required for adoption.

History. Ga. L. 1919, p. 135, art. 13, §§ 1, 2; Code 1933, §§ 13-1401, 13-1402; Ga. L. 1973, p. 278, § 1; Code 1933, § 41A-2402, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2007, p. 502, § 5/SB 70; Ga. L. 2018, p. 214, § 10/HB 780; Ga. L. 2021, p. 323, § 8/HB 111; Ga. L. 2022, p. 220, § 9/HB 891.

The 2018 amendment, effective May 3, 2018, in subparagraph (a)(2)(B), substituted “Unless the article or bylaws require a greater vote, the” for “The” at the beginning, substituted “a majority” for “two-thirds” near the middle, substituted “a majority” for “at least two-thirds” in the middle, and added the proviso at the end; and substituted “Whenever a meeting of shareholders is called for the purpose of taking action on a plan, the notice for such meeting” for “The notice” at the beginning of paragraph (a)(3). See Editor’s notes for applicability.

The 2021 amendment, effective July 1, 2021, redesignated former paragraph (a)(3) as present paragraph (a)(4) and added paragraph (a)(3).

The 2022 amendment, effective July 1, 2022, substituted “shareholders or members” for “shareholders” throughout this Code section.

Editor’s notes.

Ga. L. 2018, p. 214, § 26(b)/HB 780, not codified by the General Assembly, provides that: “It is not the intent of the General Assembly to affect the law applicable to litigation pending as of March 9, 2018.”

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, §§ 191 et seq., 234.

C.J.S.

9 C.J.S., Banks and Banking, §§ 158 et seq., 657.

7-1-532. Execution, contents, and filing of articles of merger, share exchange, or consolidation; notice; filing amendment.

  1. Upon adoption of the plan of merger, share exchange, or consolidation as provided in Code Section 7-1-531, the parties to the merger, share exchange, or consolidation shall file with the department articles of a merger, share exchange, or consolidation as required by this Code section, together with the fee required by Code Section 7-1-862.
  2. The articles of merger, share exchange, or consolidation shall be signed by two duly authorized officers of each party to the plan under their respective seals and shall contain:
    1. The names of the parties to the plan and of the resulting bank or trust company or the acquiring corporation in a share exchange;
    2. The street address and county of the location of the main office and registered agent and registered office of each;
    3. The votes by which the plan was adopted and the time, place, and notice of each meeting in connection with such adoption;
    4. The name and county of residence of each director of the resulting bank or trust company or each director of the acquired corporation in a share exchange;
    5. In the case of a merger, any amendment of the articles of the resulting bank or trust company;
    6. In the case of a consolidation, the provisions required in articles of a new bank or trust company by paragraphs (4), (5), (6), (7), and (10) of subsection (a) of Code Section 7-1-392; and
    7. The plan.
  3. Together with the articles of merger, share exchange, or consolidation, the parties shall deliver to the department a copy of the notice of merger, share exchange, or consolidation and an undertaking, which may appear in the articles of merger, share exchange, or consolidation or be set forth in a letter or other instrument executed by an officer or any person authorized to act on behalf of such bank or trust company, that the request for publication of a notice of filing the articles of merger, share exchange, or consolidation and payment therefor will be made as required by subsection (d) of this Code section.
  4. No later than the next business day after filing the articles of merger, share exchange, or consolidation with the department, the parties shall mail or deliver to the publisher of a newspaper which is the official organ of the county where the main office of each party is located a notice which shall contain a statement that the articles of merger, share exchange, or consolidation have been filed with the department, the names of the institutions which are parties to the proposed merger, share exchange, or consolidation, and in the case of a merger the proposed name of the surviving bank or trust company, and shall designate a place where a copy of the articles of merger, share exchange, or consolidation may be examined. Subsections (b) and (c) of Code Section 7-1-7 shall also apply to the notice.
  5. The notice shall be published once a week for two consecutive weeks commencing within ten days after receipt of the notice by the newspaper.
  6. In the event the plan is amended as provided in Code Section 7-1-531, the parties shall promptly file with the department an amendment to the articles of consolidation, share exchange, or merger reflecting such amendment of the plan.

History. Ga. L. 1922, p. 63, § 1; Code 1933, § 13-1403; Ga. L. 1972, p. 727, § 7; Code 1933, § 41A-2403, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1989, p. 1257, § 12; Ga. L. 1995, p. 673, § 19; Ga. L. 1998, p. 795, § 24; Ga. L. 1999, p. 81, § 7; Ga. L. 1999, p. 674, § 12; Ga. L. 2007, p. 502, § 6/SB 70; Ga. L. 2015, p. 344, § 12/HB 184; Ga. L. 2021, p. 323, § 9/HB 111.

The 2021 amendment, effective July 1, 2021, in paragraph (b)(4), substituted “The name and county of residence of each director” for “The names and addresses of the first directors” at the beginning, and substituted “each director” for “the directors” near the end; and deleted the former first sentence of subsection (e), which read: “The request for publication of the notice shall be accompanied by a check, draft, or money order in the proper amount in payment of the cost of publication.”

7-1-533. Additional filings with department.

The parties to the plan shall also file with the department:

  1. An application and information desired by the department in order to evaluate the proposed merger, share exchange, or consolidation, which shall be made available in the form specified by the department;
  2. Applicable fees established by regulation of the department to defray the expenses of the investigation required by Code Section 7-1-534; and
  3. If the merger, share exchange, or consolidation involves the adoption of a new name, a certificate of the Secretary of State reserving said name under Code Section 7-1-131.

History. Ga. L. 1919, p. 135, art. 13, §§ 2, 3; Code 1933, § 13-1404; Code 1933, § 41A-2404, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1978, p. 1717, § 6; Ga. L. 1989, p. 1257, § 13; Ga. L. 1995, p. 673, § 20; Ga. L. 2007, p. 502, § 7/SB 70.

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, § 234.

C.J.S.

9 C.J.S., Banks and Banking, §§ 158 et seq., 657.

7-1-534. Approval or disapproval by department; resulting bank or trust company not chartered by department.

  1. Upon receipt of the articles of consolidation, share exchange, or merger and the filings required by Code Section 7-1-533, the department shall conduct such investigation as it may deem necessary to ascertain whether:
    1. The articles of merger, share exchange, or consolidation and supporting items satisfy the requirements of this chapter;
    2. The plan and any modification thereof adequately protect the interests of depositors, other creditors, and shareholders;
    3. The requirements for a merger, share exchange, or consolidation under all applicable laws have been satisfied and the resulting bank or trust company or the acquired bank or trust company in a share exchange would satisfy the requirements of this chapter applicable to it; and
    4. The merger, share exchange, or consolidation would be consistent with adequate and sound banking or fiduciary practice and in the public interest on the basis of:
      1. The financial history and condition of the parties to the plan;
      2. The proposed business plan; and
      3. The character of their management.
      4. File with the department and the Secretary of State a certificate of the approval of the merger or consolidation by the appropriate regulator.
  2. Within 90 days after receipt of the articles of merger, share exchange, or consolidation, the notice of merger or share exchange, and the filings required by Code Section 7-1-533, or within an additional period of not more than 30 days after an amendment to the application is received within the initial 90 day period, the department shall, in its discretion, approve or disapprove the articles on the basis of its investigation and the criteria set forth in subsection (a) of this Code section. Except as provided in Code Section 7-1-535, the department shall give the Secretary of State written notice of its approval with a copy of the articles of merger, share exchange, or consolidation and a copy of the notice of merger or share exchange attached. The department shall also give the parties to the plan written notice of its decision and, in the event of disapproval, a statement in general of the reasons for its decision. The decision of the department shall be conclusive, except that it may be subject to judicial review as provided in Code Section 7-1-90.
    1. If a merger or consolidation would result in a bank or trust company that would not be chartered by the department, prior to the consummation of the merger or consolidation, the bank or trust company shall:
    2. Upon receipt of written confirmation from the department that the requirements of this subsection have been satisfied, each party to the merger or consolidation, except the resulting bank or trust company, shall cease to exist as a separate entity, as provided in subsection (c) of Code Section 7-1-536, and its articles shall automatically terminate.

(A) Notify the department of the proposed merger or consolidation;

(B) Provide such evidence of the adoption of the plan of merger or consolidation as the department may request;

(C) Notify the department of any abandonment or disapproval of the plan of merger or consolidation; and

History. Code 1933, § 41A-2405, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1989, p. 1257, § 14; Ga. L. 1995, p. 673, § 21; Ga. L. 1996, p. 6, § 7; Ga. L. 2007, p. 502, § 8/SB 70; Ga. L. 2021, p. 323, § 10/HB 111.

The 2021 amendment, effective July 1, 2021, substituted “The proposed business plan; and” for “Their prospects;” in subparagraph (a)(4)(B); substituted a period for “; and” at the end of subparagraph (a)(4)(C); deleted former subparagraph (a)(4)(D), which read: “The convenience and needs of the area primarily to be served by the resulting institution, or by the acquiring corporation and the acquired bank or trust company in a share exchange.”; and added subsection (c).

Cross references.

Requirement that department approve change in control of financial institutions generally, § 7-1-231 .

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, § 234.

7-1-535. Federal approval or disapproval; issuance of certificate of merger, share exchange, or consolidation.

  1. If the laws of the United States require the approval of the merger, share exchange, or consolidation by any federal agency, the department may elect to not act on the application until it receives notice of the decision of such agency.
  2. If all the taxes, fees, and charges required by law shall have been paid and if the name of the resulting bank or trust company in a merger or consolidation continues to be reserved or is available on the records of the Secretary of State, upon receipt of the written approval of the department, the Secretary of State shall issue to the resulting bank or trust company or the acquiring corporation or limited liability company in a share exchange a certificate of merger, share exchange, or consolidation with the approved articles of merger or consolidation attached thereto and shall retain a copy of such certificate, articles, and approval by the department.

History. Ga. L. 1922, p. 63, § 1; Code 1933, § 13-1403; Ga. L. 1972, p. 727, § 7; Code 1933, § 41A-2406, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1978, p. 1717, § 7; Ga. L. 2007, p. 502, § 9/SB 70; Ga. L. 2021, p. 323, § 11/HB 111; Ga. L. 2022, p. 220, § 10/HB 891.

The 2021 amendment, effective July 1, 2021, rewrote subsection (a), which read: “If the laws of the United States require the approval of the merger, share exchange, or consolidation by any federal agency, the department may, at its option, after its approval, retain its notice to the Secretary of State until it receives notice of the decision of such agency. If such agency shall refuse to give its approval, the department may, at its option, notify the parties to the plan that the department’s approval has been rescinded for that reason. If such agency gives its approval, the department shall deliver its written approval to the Secretary of State for issuance of a certificate of merger, share exchange, or consolidation by the Secretary of State and shall notify the parties to the plan.”

The 2022 amendment, effective July 1, 2022, inserted “or limited liability company” near the middle of subsection (b).

7-1-536. Effect of merger, share exchange, or consolidation.

  1. As of the issuance of the certificate of merger, share exchange, or consolidation by the Secretary of State, the merger, share exchange, or consolidation shall be effective.
  2. The certificate of merger, share exchange, or consolidation shall be conclusive evidence of the performance of all conditions precedent to the merger, share exchange, or consolidation and of the existence or creation of the bank or trust institution, except as against the state.
  3. When a merger or consolidation becomes effective, each party to the plan, except the resulting bank or trust company, shall cease to exist as a separate entity but shall continue in, and the parties to the plan shall be, a single corporation which shall be the bank or trust company and which shall have, without further act or deed, all the property, rights, powers, trusts, duties, and obligations of each party to the plan. When a share exchange becomes effective, the shares of each acquired bank or trust company are exchanged as provided in the plan, and the former holders of the shares are entitled only to the share exchange rights provided in the plan of share exchange or to their rights under Code Section 7-1-537.
  4. The articles of the resulting bank or trust company shall be, in the case of a merger, the same as its articles prior to the merger with any change stated in the articles of merger or, in the case of a consolidation, the provisions stated in the articles of consolidation.
  5. The resulting bank or trust company, or the acquired bank or trust company in a share exchange, shall have the authority to engage only in such business and exercise only such powers as are then permissible upon original incorporation under this chapter and shall be subject to the same prohibitions and limitations as it would then be subject to upon original incorporation. It may, however, subject to permission of the department as set out in Code Sections 7-1-530 and 7-1-555, engage in any business and exercise any right that any bank or trust company which is a party to the plan could lawfully exercise or engage in immediately prior to the merger, share exchange, or consolidation.
  6. No liability of any party to the plan or of its shareholders, directors, or officers shall be affected nor shall any lien on any property of a party to the plan be impaired by the merger, share exchange, or consolidation. Any claim existing or action pending by or against any party to the plan may be prosecuted to judgment as if the merger, share exchange, or consolidation had not taken place or the resulting bank or trust company may be substituted in its place.

History. Ga. L. 1919, p. 135, art. 13, § 5; Code 1933, §§ 13-1406, 13-1407; Code 1933, § 41A-2407, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2001, p. 970, § 6; Ga. L. 2007, p. 502, § 10/SB 70.

JUDICIAL DECISIONS

Formal transfer not necessary. —

Clear purpose of O.C.G.A. § 7-1-536 is to eliminate the necessity of a formal transfer or assignment of the property of the constituent bank to the consolidated bank. State Bank & Trust Co. v. Newby, 170 Ga. App. 865 , 318 S.E.2d 738 , 1984 Ga. App. LEXIS 2066 (1984).

Because creditor bank’s claims, including the creditor’s claim for fraud against the debtor, became claims of the successor bank by operation of merger between banks under the National Banking Act and Georgia law regarding merger of banks and corporations, the successor bank had standing to bring a non-dischargeability action. Wells Fargo Bank, N.A. v. Lovett (In re Lovett), 560 Bankr. 372, 2016 Bankr. LEXIS 3877 (Bankr. M.D. Ga. 2016).

Assignment of judgment not required. —

Bank into which judgment creditor bank had merged did not have to produce evidence of assignment of judgment prior to instituting garnishment proceeding in that bank’s name. State Bank & Trust Co. v. Newby, 170 Ga. App. 865 , 318 S.E.2d 738 , 1984 Ga. App. LEXIS 2066 (1984).

Succession to trusteeship upon merger. —

When a utility corporation, as settlor, pursuant to former § 53-12-31 created an express trust, the purpose being to secure the corporation’s obligation to furnish water and sewerage services to the properties located in a subdivision, and the bank named as trustee merged with another bank under the authority of former §§ 13-1406 and 13-1407, the second bank succeeded by operation of law to the trusteeship upon the merger with the first bank. Smith v. Hawks, 182 Ga. App. 379 , 355 S.E.2d 669 , 1987 Ga. App. LEXIS 1701 (1987).

Name of corporate bank defendant in legal proceeding. —

In a suit brought by mortgagors against the mortgagor bank that was taken over by a successor bank, the appellate court erred in dismissing the successor bank’s appeal under O.C.G.A. § 9-11-25 for lack of standing based on the trial court’s failure to add or substitute it as the defendant because the two corporations were deemed the same entity under federal and state law by virtue of their merger; thus, the claims originally filed by and against the mortgagee bank could continue. Nat'l City Mortg. Co. v. Tidwell, 293 Ga. 697 , 749 S.E.2d 730 , 2013 Ga. LEXIS 781 (2013).

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, § 234.

C.J.S.

9 C.J.S., Banks and Banking, §§ 158 et seq., 657.

ALR.

Liability of guarantor of or surety for bank deposit as affected by reorganization, merger, or consolidation of bank, 78 A.L.R. 381 .

7-1-537. Rights of dissenting shareholders; surrender of certificates.

  1. A shareholder of a bank or trust company which is a party to a plan of proposed merger, share exchange, or consolidation under this part who objects to the plan shall be entitled to the rights and remedies of a dissenting shareholder as determined under Chapter 2 of Title 14, known as the “Georgia Business Corporation Code.”
  2. The bank or trust company into which the other or others have been merged or consolidated, or the acquiring corporation in a share exchange, as the case may be, shall have the right to require the return of the original certificates of stock held by each shareholder in each or either of the institutions and in lieu thereof:
    1. To issue to each shareholder new certificates for such number of shares of the institution into which the others shall have been merged or consolidated or of the acquiring corporation in a share exchange; or
    2. To cause to be paid or delivered to each shareholder the amount of cash or securities of any other corporation or combination of cash and such securities as, under the plan of merger, share exchange, or consolidation, the said shareholder may be entitled to receive.

History. Ga. L. 1919, p. 135, art. 13, §§ 4, 6; Code 1933, § 13-1405; Ga. L. 1973, p. 278, § 2; Code 1933, § 41A-2408, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1989, p. 946, § 68; Ga. L. 1989, p. 1257, § 15; Ga. L. 2007, p. 502, § 11/SB 70.

Editor’s notes.

The amendment to this Code section by Ga. L. 1989, p. 946, § 68, was superseded by the amendment by Ga. L. 1989, p. 1257, § 15, which was enacted later.

Law reviews.

For survey article on business associations, see 34 Mercer L. Rev. 13 (1982).

JUDICIAL DECISIONS

Former Code Section 14-2-251 (see now O.C.G.A. § 14-2-1320 et seq.) and O.C.G.A. § 7-1-537 make no provision for conditional dissent by a shareholder to a plan or proposed merger. Baugh v. Citizens & S. Nat'l Bank, 248 Ga. 180 , 281 S.E.2d 531 , 1981 Ga. LEXIS 911 (1981).

Corporation’s power to impair shareholders’ rights differs from state’s power over corporations created by it. —

There is a substantial difference between corporation’s attempting to reserve right to impair vested rights of the corporation’s shareholders through altering or amending the corporation’s internal structure and retention by state of power to modify or withdraw charters granted to corporations created by the state. Baugh v. Citizens & S. Nat'l Bank, 248 Ga. 180 , 281 S.E.2d 531 , 1981 Ga. LEXIS 911 (1981).

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, §§ 194, 198, 238.

C.J.S.

9 C.J.S., Banks and Banking, §§ 158 et seq., 657.

ALR.

Constitutionality of recent legislation relating to merger, consolidation, or reorganization of banks as affected by rights of dissenting creditors or stockholders, 92 A.L.R. 1337 ; 96 A.L.R. 1445 ; 104 A.L.R. 1203 .

PART 15 Conversions, Mergers, and Consolidations Involving National Banks

Cross references.

Requirement that department approve change in control of financial institutions generally, § 7-1-231 .

RESEARCH REFERENCES

ALR.

Novation where bank transfers its assets to another bank which assumes its obligation, 79 A.L.R. 82 .

Constitutionality of recent legislation relating to merger, consolidation, or reorganization of banks as affected by rights of dissenting creditors or stockholders, 96 A.L.R. 1445 ; 104 A.L.R. 1203 .

Constitutionality, construction, and application of federal statute relating to power of national bank to engage in trust business, 153 A.L.R. 410 .

7-1-550. Authority for national bank or federal savings bank conversions; requirements.

  1. Subject to this part and any applicable branching law or regulation, a national bank may convert to a bank or trust company upon:
    1. Compliance with the applicable laws of the United States, including any provisions thereof relating to approval of said conversion by the shareholders and directors of the national bank and to dissenting rights of shareholders in such national bank, and compliance with any other requirements prescribed by the department to protect the shareholders or members or the safety and soundness of the institution;
    2. Reserved;
    3. Approval of the conversion by the department as provided in this part; and
    4. Issuance of the appropriate certificate by the Secretary of State as provided in this part.
  2. Reserved.
  3. A federal savings bank may apply to the department to convert to a state charter. The provisions of Code Section 7-1-293 shall apply to the resulting bank, and the conversion procedure shall be the same as for national bank conversions.

History. Ga. L. 1953, Jan.-Feb. Sess., p. 73, §§ 3, 4; Code 1933, § 41A-2501, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1982, p. 3, § 7; Ga. L. 1996, p. 848, § 9; Ga. L. 1997, p. 485, § 18; Ga. L. 1999, p. 674, § 13; Ga. L. 2005, p. 826, § 10/SB 82; Ga. L. 2021, p. 323, § 12/HB 111.

The 2021 amendment, effective July 1, 2021, in subsection (a), substituted “a national bank may convert to a bank or trust” for “a national bank located in this state may convert into, merge or consolidate with, a bank or trust” at the end of subsection (a); deleted “, merger, or consolidation” following “approval of said conversion” in paragraph (a)(1); substituted “Reserved;” for the former provisions of paragraph (a)(2), which read: “Adoption of any plan of merger or consolidation by the directors and shareholders of any party thereto existing under the laws of this state as required by paragraph (2) of subsection (a) of Code Section 7-1-531;”; deleted “, merger, or consolidation” following “Approval of the conversion” in paragraph (a)(3); substituted “Reserved.” for the former provisions of subsection (b), which read: “A conversion, merger, or consolidation across state lines of any one or more national banks with a bank or trust company shall also be subject to the provisions of Part 20 of this article.”; and deleted “located in this state” following “A federal savings bank” in the first sentence of subsection (c).

Code Commission notes.

Pursuant to Code Section 28-9-5, in 1996, “article” was substituted for “chapter” in subsection (b).

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, §§ 191 et seq., 234, 238.

C.J.S.

9 C.J.S., Banks and Banking, §§ 527, 597, 598.

7-1-551. National bank to state bank or trust company conversions — Articles of conversion.

  1. The party or parties desiring to consummate a conversion authorized by Code Section 7-1-550 shall, upon requisite approval of the plan by their directors and shareholders, file with the department articles of conversion together with the fee required by Code Section 7-1-862.
  2. The articles of conversion shall be signed by two duly authorized officers of the national bank under its seal and shall contain:
    1. Its name and the name of the resulting bank or trust company;
    2. The street address and county of its main office;
    3. The name and initial registered agent and the street address where the initial registered office will be located;
    4. The votes by which the plan of conversion was adopted and the time, place, and notice of each meeting in connection with such adoption;
    5. The name and county of residence of each director of the resulting bank or trust company;
    6. The provisions required in articles of a new bank or trust company by paragraphs (5), (6), (7), and (10) of subsection (a) of Code Section 7-1-392; and
    7. The plan of conversion.

History. Ga. L. 1953, Jan.-Feb. Sess., p. 73, §§ 5, 6; Code 1933, § 41A-2502, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1989, p. 1257, § 16; Ga. L. 1999, p. 81, § 7; Ga. L. 1999, p. 674, § 14; Ga. L. 2015, p. 344, § 13/HB 184; Ga. L. 2021, p. 323, § 13/HB 111.

The 2021 amendment, effective July 1, 2021, in subsection (a), deleted “, merger, or consolidation” and “, merger, or consolidation,” following “conversion” twice; and, substituted “The name and county of residence of each director” for “The names and addresses of the first directors” at the beginning of paragraph (b)(5); and deleted former subsection (c), which read: “The articles of merger or consolidation shall be in the form specified by subsection (b) of Code Section 7-1-532.”

7-1-552. National bank to state bank or trust company conversions — Filings with department.

In the case of a conversion, the national bank shall file with the department:

  1. Information desired by the department in order to evaluate the proposed conversion, in the form specified by the department;
  2. Applicable fees established by regulation of the department to defray the expenses of its investigation under Code Section 7-1-553; and
  3. A certificate of the Secretary of State showing that the proposed name of the resulting bank or trust company has been reserved under Code Section 7-1-131.

History. Ga. L. 1953, Jan.-Feb. Sess., p. 73, § 9; Code 1933, § 41A-2503, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1995, p. 673, § 22; Ga. L. 2021, p. 323, § 14/HB 111.

The 2021 amendment, effective July 1, 2021, deleted former subsection (a), which read: “(a) In the case of a merger or consolidation, the parties shall make the filings and publication required by Code Sections 7-1-532 and 7-1-533.”; deleted the subsection (b) designation; deleted “also” following “the national bank shall” in the introductory paragraph; and deleted former subsection (c), which read: “(c) In the case of a conversion, the national bank shall publish, in the manner prescribed by Code Section 7-1-532, a notice of the proposed conversion, setting forth its name and the name it proposes to use as a bank or trust company and designating the place where a copy of the plan of conversion may be examined. The notice shall be published in the county of the main office of the national bank.”

7-1-553. National bank to state bank or trust company conversions — Approval or disapproval by department; federal approval or disapproval.

  1. In the case of a conversion, the department shall conduct such investigation as it may deem necessary to ascertain whether:
    1. The articles of conversion and supporting items satisfy the requirements of this chapter;
    2. The plan adequately protects the interests of depositors, other than creditors and shareholders; and
    3. The requirements for a conversion under all applicable laws have been satisfied and the resulting institution would satisfy the requirements of this chapter applicable to it.
  2. Within 90 days after receipt of the articles and the filings required by Code Section 7-1-552, the department shall, in its discretion, approve or disapprove the articles on the basis of its investigation and the criteria set forth in subsection (a) of this Code section. If the department shall approve the articles, it shall deliver its written approval with a copy of the articles attached to the Secretary of State and notify the national bank, and any other parties to the plan, of its action, provided that, if approval of any federal agency is required, the department may elect to not act on the application until such federal approval is given. If the department shall disapprove, at its option, the application, it shall give written notice to the national bank and any other parties to the plan of its disapproval and a statement to them generally of the reasons for its decision. The decision of the department shall be conclusive, except that it may be subject to judicial review under Code Section 7-1-90.

History. Code 1933, § 41A-2504, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1977, p. 730, § 8; Ga. L. 1989, p. 1257, § 17; Ga. L. 2021, p. 323, § 15/HB 111.

The 2021 amendment, effective July 1, 2021, rewrote subsection (a), which read: “The department shall conduct such investigation as it may deem necessary to ascertain whether:

“(1) In the case of a conversion:

“(A) The articles of conversion and supporting items satisfy the requirements of this chapter;

“(B) The plan adequately protects the interests of depositors, other than creditors and shareholders; and

“(C) The requirements for a conversion under all applicable laws have been satisfied and the resulting institution would satisfy the requirements of this chapter applicable to it; and

“(2) In the case of a merger or consolidation, the criteria stated in subsection (a) of Code Section 7-1-534 are satisfied.”; and, in subsection (b), substituted “may elect to not act on the application” for “may withhold, at its option, its approval from the Secretary of State” near the end of the second sentence and deleted the former third sentence, which read: “If required federal approval is not given, the department may, at its option, withdraw its approval for this reason.”

7-1-554. National bank to state bank or trust company conversions — Issuance of certificate of conversion.

If all the taxes, fees, and charges required by law shall have been paid and if the name of the resulting bank or trust company continues to be reserved or is available on the records of the Secretary of State, upon the receipt of the written approval of the department, the Secretary of State shall immediately issue to the resulting bank or trust company a certificate of conversion and shall retain a copy of such certificate, the articles, and the approval from the department.

History. Ga. L. 1953, Jan.-Feb. Sess., p. 73, § 6; Ga. L. 1972, p. 727, § 6; Code 1933, § 41A-2505, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2021, p. 323, § 16/HB 111.

The 2021 amendment, effective July 1, 2021, deleted “, consolidation, or merger” following “certificate of conversion” near the end.

7-1-555. National bank to state bank or trust company conversions — Effect of issuance of certificate.

Issuance of a certificate of conversion shall have the following effect:

  1. As of the issuance of the certificate of conversion by the Secretary of State, the conversion shall become effective;
  2. The certificate of conversion shall be conclusive evidence of the performance of all conditions required by this chapter for conversion of a national bank to a state bank or trust company, except as against the state;
  3. When a conversion becomes effective, the existence of the national bank shall continue in the resulting bank or trust company which shall have (except as provided in paragraph (2) of this subsection), without further act or deed, all the property, rights, powers, trusts, duties, and obligations of the national bank;
  4. The articles of the resulting institution shall be the provisions stated in the articles of conversion;
  5. The bank or trust company shall have the authority to engage only in such lines of business and activities and exercise only such powers or hold such assets as are then permissible upon original incorporation under this chapter and shall be subject to the same prohibitions and limitations as it would then be subject to upon original incorporation; provided, however, that if the converting institution owns or holds assets, engages in any business, or has powers that would not be allowed for a state bank, then the plan of conversion shall include a plan for holding or disposal of such nonconforming assets or the continuation or termination of such line of business, activity, or power. The department shall review the plan to determine whether, in the interest of safety and soundness and the other objectives of Code Section 7-1-3, the activity, power, asset, or line of business should be approved, denied, or phased out within a reasonable period of time, to be determined by the department; and
  6. No liability of the national bank or of its shareholders, directors, or officers shall be affected, nor shall any lien on any property of the national bank be impaired, by the conversion. Any claim existing or action pending by or against the national bank may be prosecuted to judgment as if the conversion had not taken place, or the resulting bank or trust company may be substituted in its place.

History. Ga. L. 1953, Jan.-Feb. Sess., p. 73, §§ 7, 12; Code 1933, § 41A-2506, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1998, p. 795, § 25; Ga. L. 2000, p. 174, § 12; Ga. L. 2001, p. 970, § 7; Ga. L. 2021, p. 323, § 17/HB 111.

The 2021 amendment, effective July 1, 2021, deleted former subsection (a), which read: “Issuance of a certificate of merger or consolidation shall have the same effect stated in Code Section 7-1-536.”; deleted the former subsection (b) designation; and substituted “national bank to a state bank” for “national bank into a state bank” in paragraph (2).

RESEARCH REFERENCES

ALR.

Liability of guarantor of or surety for bank deposit as affected by reorganization, merger, or consolidation of bank, 78 A.L.R. 381 .

7-1-556. State bank or trust company to national bank or federal savings institution conversions.

  1. A bank or trust company may convert to a national bank or a federal savings institution upon:
    1. Authorization by and compliance with the laws of the United States; and
    2. Adoption of a plan of conversion by the affirmative vote of at least:
      1. A majority of its directors; and
      2. The holders of two-thirds of each class of its shares at a meeting held upon not less than ten days’ notice to all shareholders.
  2. A state bank or trust company which converts to a national bank or a federal savings institution shall:
    1. Notify the department of the proposed conversion;
    2. Provide such evidence of the adoption of the plan of conversion as the department may request;
    3. Notify the department of any abandonment or disapproval of the plan; and
    4. File with the department and with the Secretary of State a certificate of the approval of the conversion by the appropriate federal regulator.
  3. Conversion of a state institution to a national banking association or a federal savings institution shall be effective upon completion of the requirements in subsection (b) of this Code section. Upon receipt of written confirmation from the department that the requirements of subsection (b) of this Code section have been satisfied, the institution’s articles as an institution existing under the laws of this state shall be automatically terminated.

History. Code 1933, §§ 13-1305, 13-1306, 13-1307, 13-1308, 13-1309, enacted by Ga. L. 1949, p. 536, § 1; Ga. L. 1953, Jan.-Feb. Sess., p. 67, § 1; Code 1933, § 41A-2507, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1999, p. 674, § 15; Ga. L. 2021, p. 323, § 18/HB 111.

The 2021 amendment, effective July 1, 2021, substituted “convert to a national bank” for “convert into, or merge or consolidate with, a national bank” in subsection (a); deleted “, merger, or consolidation” following “plan of conversion” in paragraph (a)(2); in subsection (b), substituted “converts to a national bank” for “converts into or merges or consolidates with a national bank” in the introductory paragraph; deleted “, merger, or consolidation” following “conversion” in paragraphs (b)(1), (b)(2), and (b)(4); and, in subsection (c), substituted “Conversion of a state institution to a national banking” for “Conversion, merger, or consolidation of a state institution into a national banking” at the beginning of the first sentence, and substituted “Code section. Upon receipt of written confirmation from the department that the requirements of subsection (b) of this Code section have been satisfied, the institution’s articles” for “Code section, and its articles” near the middle of the former first sentence.

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, §§ 191 et seq., 238.

C.J.S.

9 C.J.S., Banks and Banking, §§ 527, 597, 598.

7-1-557. [Repealed] Merger, consolidation, or share exchange of nonbank corporations into national banks.

History. Ga. L. 1974, p. 705, § 1; Ga. L. 2007, p. 502, § 12/SB 70; repealed by Ga. L. 2021, p. 323, § 19/HB 111, effective July 1, 2021.

PART 16 Sale and Other Disposition of Assets

RESEARCH REFERENCES

ALR.

Character as holder in due course of bank which takes over assets and assumes liabilities of another bank, 76 A.L.R. 1329 .

7-1-570. Secured transactions and other dispositions of assets not requiring shareholder approval.

  1. Unless the articles or bylaws otherwise provide, the board of directors may authorize any of the following transactions without any vote or consent of the shareholders:
    1. Any mortgage or pledge of, or creation of a security interest in, or conveyance of title to, all or any part of the property and assets of the bank or trust company of any description, or any interest therein, for the purpose of securing the payment or performance of any contract, note, bond, or other obligation of the bank or trust company; or
    2. Any sale, lease, exchange, or other disposition of less than substantially all the property and assets of the bank or trust company.
  2. Any transaction made as permitted by this Code section without any vote or consent of the shareholders may be upon such terms and conditions and for such consideration as the board may deem to be in the best interests of the bank or trust company.

History. Code 1933, § 41A-2601, enacted by Ga. L. 1974, p. 705, § 1.

RESEARCH REFERENCES

C.J.S.

18A C.J.S., Corporations, § 296 et seq.

7-1-571. Sale, lease, exchange, or other disposition of assets requiring shareholder approval.

A sale, lease, exchange, or other disposition of all, or substantially all, the property and assets, with or without the good will, of a bank or trust company, in all cases other than those dealt with in Code Section 7-1-570, regarding secured transactions, may be made upon such terms and conditions which are otherwise legal and which shall be authorized in the following manner:

  1. The board of directors shall adopt a resolution recommending such sale, lease, exchange, or other disposition, specifying, to the extent that the board sees fit, any or all of the terms and conditions thereof and the consideration to be received by the bank or trust company therefor and directing the submission thereof to a vote at a meeting of shareholders, which may be either an annual or a special meeting;
  2. Written notice shall be given to each shareholder of record, whether or not entitled to vote at such meeting, in the manner provided in Code Section 7-1-6, and, whether the meeting is an annual or a special meeting, shall state that the purpose, or one of the purposes, is to consider the proposed sale, lease, exchange, or other disposition. The notice shall fairly summarize the material features of the proposed transaction and shall contain, where applicable, a clear and concise statement that, if the sale, lease, exchange, or other disposition is effected, shareholders may claim the rights of dissenting shareholders under this chapter;
  3. At such meeting the shareholders may authorize such sale, lease, exchange, or other disposition and may approve or fix, or may authorize the board of directors to fix, any or all of the terms and conditions thereof and the consideration to be received by the bank or trust company therefor. Such authorization shall require the affirmative vote of the holders of a majority of the shares of the corporation entitled to vote thereon, unless any class of shares is entitled to vote thereon as a class, in which event such authorization shall require the affirmative vote of the holders of a majority of the shares of each class of shares entitled to vote thereon as a class and of the total shares entitled to vote thereon. Any class of shares shall be entitled to vote as a class if the resolution proposing the sale, lease, exchange, or other disposition contains any provision which, if contained in a proposed amendment to the articles, would entitle such class of shares to vote as a class;
  4. If the shareholders approve the proposed sale or other disposition, the bank or trust company shall make application to the department for approval thereof in such form as may be specified by the department. The department shall, in its discretion, approve the sale or other disposition if the proposal is in conformity with law and if the interests of the public, depositors, trust beneficiaries, and other creditors of the bank or trust company are adequately protected;
  5. After such authorization by a vote of shareholders and by the department, the board of directors, nevertheless, in its discretion, may abandon such sale, lease, exchange, or other disposition of assets, subject to the rights of third parties under any contracts relating thereto, without further action or approval by shareholders;
  6. In the case of a sale, lease, exchange, or other disposition of all, or substantially all, the property and assets of a bank or trust company, a notice shall be published in each county in which the bank or trust company has an office engaged in the banking or trust business in the manner prescribed by Code Section 7-1-532.

History. Code 1933, § 41A-2602, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 2021, p. 323, § 20/HB 111.

The 2021 amendment, effective July 1, 2021, substituted “prescribed by Code Section 7-1-532” for “prescribed by subsection (c) of Code Section 7-1-552” at the end of paragraph (6).

RESEARCH REFERENCES

C.J.S.

18A C.J.S., Corporations, § 296 et seq.

7-1-572. Right of shareholder to dissent.

A shareholder of a bank or trust company shall have the right to dissent from any sale, lease, exchange, or other disposition of all, or substantially all, the property and assets of a bank or trust company pursuant to Code Section 7-1-571, except for a sale wholly for cash pursuant to a plan by which all, or substantially all, of the net proceeds of the sale will be distributed to the shareholders in accordance with their respective interests within one year after the date of the sale. The shareholders’ right of dissent shall be exercised as provided in Chapter 2 of Title 14, known as the “Georgia Business Corporation Code.”

History. Code 1933, § 41A-2603, enacted by Ga. L. 1974, p. 705, § 1; Ga. L. 1989, p. 946, § 69; Ga. L. 1989, p. 1257, § 18; Ga. L. 2019, p. 828, § 16/HB 185.

The 2019 amendment, effective July 1, 2019, in the first sentence of this Code section, substituted “pursuant to a plan by which” for “where the shareholders’ approval thereof is conditional upon the distribution of”and inserted “will be distributed” in the middle.

Editor’s notes.

The amendment to this Code section by Ga. L. 1989, p. 946, § 69, was superseded by the amendment by Ga. L. 1989, p. 1257, § 18, which was enacted later.

RESEARCH REFERENCES

Am. Jur. 2d.

10 Am. Jur. 2d, Banks and Financial Institutions, §§ 194, 198, 238.

C.J.S.

18A C.J.S., Corporations, §§ 394 et seq., 431 et seq.

PART 17 Representative Offices and Registration

Editor’s notes.

Ga. L. 1995, p. 673, effective July 1, 1995, repealed the Code section formerly codified at this part and enacted the current part. The former part consisted of Code Section 7-1-590 and was based on Ga. L. 1981, Ex. Sess., p. 8 (Code enactment Act) and Ga. L. 1985, p. 246, § 1; Ga. L. 1986, p. 458, § 7; Ga. L. 1987, p. 3, § 7.

Administrative rules and regulations.

Applications, registrations and notifications, Official Compilation of the Rules and Regulations of the State of Georgia, Department of Banking and Finance, Banks, Chapter 80-1-1.

7-1-590. Definitions.

As used in this part, the term:

  1. “Bank” and “bank holding company” shall have the same meaning as in Part 18 of this article. A “banking business” is the business which a bank is authorized to do pursuant to this title. The power to receive deposits or the performance of any transaction directly or through an affiliate or agent relative to a deposit account shall be presumed to constitute a banking business.
  2. “Deposit production office” means a form of a representative office with the authority to solicit deposits, provide information about deposit products, and assist consumers to complete the application forms to open deposit accounts, provided that such office does not open deposit accounts, take deposits, or conduct any other banking business.
  3. “Domicile” means the home state as defined in paragraph (12) of Code Section 7-1-621 where a bank is chartered or where a bank holding company is incorporated.
  4. “Loan production office” is a form of a representative office, where the solicitation of loans or of leases of personal property may occur, but not the closing of loans, the disbursement of loan proceeds, nor any other banking business. It shall be established and registered as a representative office.
  5. “Representative office” is an office established by a bank, a bank holding company, or an agent or subsidiary of either for the purpose of conducting business activities other than a banking business and includes, but is not limited to, deposit production offices, loan production offices, and trust production offices. It shall not be considered to be a branch office or main office.
  6. “Trust production office” means a trust sales office of a qualifying individual or corporate fiduciary which office is not performing fiduciary activities. Sales activities shall consist primarily of marketing or soliciting in this state using mail, telephone, or electronic means or in person to act or propose to act as a fiduciary.

History. Code 1981, § 7-1-590 , enacted by Ga. L. 1995, p. 673, § 23; Ga. L. 1997, p. 485, § 19; Ga. L. 1999, p. 674, § 16; Ga. L. 2018, p. 214, § 11/HB 780; Ga. L. 2022, p. 220, § 11/HB 891.

The 2018 amendment, effective May 3, 2018, inserted “business activities” in the first sentence of paragraph (4). See Editor’s notes for applicability.

The 2022 amendment, effective July 1, 2022, added paragraph (2), redesignated former paragraphs (2) through (5) as paragraphs (3) through (6), inserted “closing of loans, the” in paragraph (4), added “and includes, but is not limited to, deposit production offices, loan production offices, and trust production offices” at the end of the first sentence in paragraph (5), and in paragraph (6), deleted the former second sentence, which read: “The trust institution desiring to establish such an office in this state must apply to the department on forms provided by the department, must be approved by the commissioner to engage in sales activities in this state, and must register and pay any fees required for a representative office under Code Section 7-1-593.”, deleted “outside of this state” from the end of the present second sentence, and deleted the former last sentence, which read: “The department shall be permitted to examine such trust production offices to ascertain whether they are limiting their activities as prescribed.”

Code Commission notes.

Pursuant to Code Section 28-9-5, in 1997, “means” was substituted for “shall mean” in the first sentence in paragraph (5).

Pursuant to Code Section 28-9-5, in 2022, a comma was added following “loan proceeds” in the first sentence of paragraph (4).

Editor’s notes.

Ga. L. 2018, p. 214, § 26(b)/HB 780, not codified by the General Assembly, provides that: “It is not the intent of the General Assembly to affect the law applicable to litigation pending as of March 9, 2018.”

7-1-591. Establishment of representative office by bank or bank holding company domiciled in state; out-of-state activities.

  1. A bank domiciled in this state and operating under the laws of this state or a subsidiary of such bank may establish a representative office anywhere in the state upon registering with the department. A bank holding company domiciled in this state and operating under the laws of this state or a nonbank subsidiary of such bank holding company may establish a representative office anywhere in this state upon registering with the department.
  2. Subject to any limitation or restrictions of the host state and upon registering the representative office with the department, a Georgia chartered bank may conduct any activities at any representative office outside Georgia that are authorized by Georgia law or that are permissible for a bank chartered by the host state where the representative office is located, except to the extent such activities are expressly prohibited by the laws of this state or by any regulation or order of the commissioner applicable to the Georgia chartered bank and except where the activity is one that requires approval from the department, in which case such approval must be secured; provided, however, that the commissioner may waive any prohibition or requirement for approval if he or she determines, by order or regulation, that the involvement of out-of-state representative offices of the Georgia chartered bank in particular activities would not threaten the safety or soundness of such bank.

History. Code 1981, §