12 U.S.C. § 56
Prohibition on withdrawal of capital; unearned dividends
No association, or any member thereof, shall, during the time it shall continue its banking operations, withdraw, or permit to be withdrawn, either in the form of dividends or otherwise, any portion of its capital. If losses have at any time been sustained by any such association, equal to or exceeding its undivided profits then on hand, no dividend shall be made; and no dividend shall ever be made by any association, while it continues its banking operations, to an amount greater than its undivided profits, subject to other applicable provisions of law. But nothing in this section shall prevent the reduction of the capital stock of the association under section 59 of this title.
Notes of Decisions
Cited in 8
cases, 1928–2015 · leading case: Watters v. Wachovia Bank, N. A.
Watters v. Wachovia Bank, N. A. (2007)
“, 12 U.S.C. §§ 56 , 60, 84, 371d, "[t]he results of operations of operating subsidiaries are consolidated with those of its parent.”
Deitrick v. Greaney (1940)
“§ 5204, 12 U.S.C. § 56 . Any bank whose capital has become impaired is required under direction of the Comptroller to make up the deficiency by assessment of its shareholders and in the event of its failure to do so a receiver may be appointed to wind up its business, R.”
Federal Deposit Ins. Corporation v. Mason (1940)
“§ 5204, 12 U.S.C.A. § 56 ). Personal liability is imposed upon the directors if they “knowingly” violate the Act (R.”
United States v. Armstrong (1928)
“When a corporation is solvent, -the theory that its capital is a trust fund upon whieh there is any lien for the payment of its debts has in fact very little foundation.”
Nettles v. Childs (1939)
“§ 56 , forbade any national bank during the continuance of its banking operations to withdraw or permit to be withdrawn in the form of dividends or otherwise, any portion of its capital; but the court held that a shareholder who in good faith receives a dividend paid out of…”
Schlener v. Davis (1935)
“Since under 12 USCA §§ 56 and 60 the dividends could have been declared only from earnings after charging off bad debts and other losses, and since the stock was saleable for $250 per share, the bank’s condition must be presumed to have been good.”
Fidelity-Philadelphia Trust Co. v. Philadelphia-Girard Nat. Bank (1929)
“(12 USCA § 56). The act of the bank which offended the statute occurred of course before the appointment of a receiver.”
Herring Bancorp, Inc. C.C. Burgess And C. Campbell Burgess v. John Mikkelsen, Acting Solely in His Capacity as Trustee o (2015)
“h the Bank will strengthen its capital structure to meet the Bank's needs; (e) contingency plans that identifY alternative methods should the primary source(s) under (d) above not be available; and (f) a dividend policy that permits the declaration of a dividend only: (i) when…”
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