CO Code § 11-103-202 (2021)
2021 Colorado Code|Title 11 - Financial Institutions|Article 103 - Organization and Corporate Functions|Part 2 - Capital Requirements|§ 11-103-202. Inadequacy of Capital - Assessments

  If the banking board has reason to believe that the capital of any bank is inadequate under the rules of the banking board, the banking board may ascertain the facts and furnish the bank with a copy of its determination. If the banking board determines an inadequacy of capital based upon such determination, the commissioner, with the approval of the banking board, may direct the state bank to levy an assessment in a designated amount upon the holders of record of common stock to remedy an inadequacy of capital. Upon receipt of an order to levy an assessment, the directors shall cause to be sent to all holders of common stock, at their addresses, a copy of the order and a copy of this subsection (1). If an assessment is not paid within the time prescribed in the order or such shorter period as the directors decide, but not less than thirty days, the state bank may, within sixty days thereafter as the banking board may prescribe in its order, offer the shares of the defaulting stockholders for sale at public auction or private sale at a price that shall not be less than the amount of the assessment and the cost of the sale. Any excess shall be paid to the prior owners. Except under circumstances where section 11-103-203 applies, the method of collection provided in this section shall be the sole method of collecting assessments. If an assessment is not paid within ninety days after the date of the order to levy or at such other date as may be specified in the order, but in no event less than thirty days, the commissioner may, with the approval of the banking board, proceed pursuant to part 8 of this article; however, for good cause shown to the banking board by the affected bank, the banking board may extend the ninety-day limit.    If the banking board determines that the capital or reserves of any bank are inadequate, the banking board may order the bank not to make new loans or discounts.     History. Source: L. 2003: Entire article added with relocations, p. 1082, § 3, effective July 1.    Editor's note:   This section is similar to former § 11-3-104 as it existed prior to 2003.   ANNOTATION   Analysis     I. GENERAL CONSIDERATION.    II. ASSESSMENT FUNDS.    III. NO NEW LOANS.     I. GENERAL CONSIDERATION.   Annotator's note. Since § 11-103-202 is similar to repealed laws antecedent to CSA, C. 18, § 31, relevant cases construing those provisions have been included in the annotations to this section.   The purpose of this section is to make good impaired capital and to permit an action to enforce payment of the assessment if necessary. Allen v. McFerson, 77 Colo. 186 , 235 P. 346 (1925).   Purpose is also to protect depositors and the general public. An assessment which the bank commissioner orders, and which the directors of the bank levy, is made for the purpose of protecting the bank's depositors and in the interest of the public in general who might be induced to transact business with the bank. Lengel v. Commercial Bank, 87 Colo. 331 , 288 P. 174 (1930).   Fact that bank did make assessment is sufficient compliance with this section. Compliance with this section is sufficient where the pleadings and proof show that an assessment was in fact made by the officers of a bank. Allen v. McFerson, 77 Colo. 186 , 235 P. 346 (1925).   Incorrect reports of directors do not bar collection of assessments. The fact that reports which bank directors made as to the condition of the bank appeared a number of years later to be incorrect, and that certain notes listed as assets were uncollectible or had become worthless, does not create an estoppel which bars the bank from collecting assessments ordered by the bank commissioner, and which were levied by its board of directors, if the same was found to be necessary, as it was, to protect depositors and creditors, and the public at large. Lengel v. Commercial Bank, 87 Colo. 331 , 288 P. 174 (1930).   Claim of fraud in purchase of bank stock cannot be urged as defense in action to collect an assessment. The claim on the part of a stockholder who was sued for an assessment made upon his stock, that he purchased the stock through fraud on the part of the officers of the bank, cannot be urged in an action to recover on the stockholder's liability. Lengel v. Commercial Bank, 87 Colo. 331 , 288 P. 174 (1930).   Insufficient assessment does not alter stockholder's statutory liability. The fact that an assessment was insufficient for the purpose for which it was levied does not alter the stockholder's statutory liability. Broadbent v. McFerson, 80 Colo. 264 , 250 P. 852 (1926).   II. ASSESSMENT FUNDS.   Where assessment funds are not kept separate, etc., stockholders cannot claim a preference. Where the general finding of the court was that funds received by a bank from an assessment were not kept separate from other funds of the bank; that the funds were treated as other assets of the bank; that they were used as other money and property of the bank in the transaction of its daily business; and that it did not appear that any of that fund was used in the payment of the debts of the bank, the stockholders cannot claim a preference, nor that the assessment fund should be held available for the satisfaction of such claim. Neither should those stockholders, who paid their assessments, be given credit therefor on their statutory liability. Broadbent v. McFerson, 80 Colo. 264 , 250 P. 852 (1926).   This fund, when paid in, could not, by any process of reasoning, become a liability of the bank; neither could the bank commissioner, nor the officers of the bank, change the character of that fund from an asset to a liability by an entry on the books of the bank. Broadbent v. McFerson, 80 Colo. 264 , 250 P. 852 (1926).   Assessment fund due bank, not creditors. Where an assessment of 50% was made by the bank directors for the sole purpose of restoring the impaired capital of the bank, the fund was due to the bank, not to the creditors. Broadbent v. McFerson, 80 Colo. 264 , 250 P. 852 (1926).   III. NO NEW LOANS.   Commissioner has power to give notice when capital is impaired. The provisions of subsection (2) necessarily imply that the bank commissioner has power to give notice whenever there is an impairment of capital. Lengel v. Commercial Bank, 87 Colo. 331 , 288 P. 174 (1930).