Chap. 386.—An ACT to amend the Code of Virginia by adding in Title 37A en-
titled “Loan and Financing Organizations” (added to the Code by Chapter
370, Acts 1944), a new chapter numbered 166A 2 entitled “Virginia Building
and Loan Law” consisting of 62 new sections numbered 4168-b 1 through
4168-b 61, to provide generally for the conduct of what is commonly known
as building and loan business and for the authorization, regulation and super-
vision of everyone proposing to engage or engaging in such business; and to
such end, to recodify the laws governing what are commonly known as build-
ing and loan associations; to provide for the administration of the laws gov-
erning the conduct of the business; to provide for punishment of, or penalties
upon any person conducting such business without warrant of law, and also of
or upon anyone for violations of certain provisions thereof or of lawful rules
issued, orders entered or actions taken in the administration thereof; to pro-
vide for consolidation or merger of two or more such associations, for con-
version from a State to a Federal association and vice versa, and for the re-
spective rights, obligations and other consequences arising thereupon; to re-
peal certain specific designated act or acts relating to the same subject matter;
and to repeal all other pertinent acts or parts of acts insofar as irreconcilably
inconsistent. (S Bl

Approved March 29, 1946

Be it enacted by the General Assembly of Virginia:

1. That the Code of Virginia of nineteen hundred nineteen be
amended by adding, in Title Thirty-seven A entitled ‘Loan and Financ-
ing Organizations” (added to the Code by chapter three hundred seventy,
Acts of the General Assembly of nineteen hundred forty-four), a new
chapter entitled “Virginia Building and Loan Law’, numbered one hun-
dred sixty-six A two, consisting of sixty-two new sections numbered
forty-one hundred sixty-eight-b one through forty-one hundred sixty-
eight-b sixty-one, as follows: OS -
Section 4168-b 1. Short Title-—The short title of the law embraced
in this chapter of the Code is Virginia Building and Loan Law.

Section 4168-b 2. Definitions——As used in the law embraced in
this chapter of the Code, unless a different meaning or construction be
clearly required by the context or otherwise, (1) “the law”, “this law”
means the Virginia Building and Loan Law as now or hereafter em-
braced in this chapter of the Code; (2) “person” includes individuals,
co-partnerships, associations, trusts, corporations, and all other legal
and commercial entities; (3) “Commission” means the State Corpora-
tion Commission; (4) “Commissioner” means the Commissioner of
Banking; (5) the word “association’”’ and the expression “such associa-
tion” mean a building and loan association, incorporated and doing busi-
ness in Virginia; (6) the meaning ascribed to the singular form applies
also to the plural and vice versa and the masculine includes the feminine
and neuter.

Section 4168-b 3. Meaning of terms “building and loan’’, “build-
ing and loan association”, “building association”, “savings and loan asso-
ciation”; plans of payment.—The terms “building and loan”, “building
and loan association”, “building association”, “savings and loan asso-
ciation” as used in this law apply to and include every corporation or-
ganized for the purpose primarily of enabling its members or sharehold-
ers to borrow its funds upon giving security therefor by first mortgages
or first deeds of trust upon real estate, for purchasing, making improve-
ments, or removing encumbrances on real estate, and for the accumulation
of savings to be returned to members or shareholders who do not obtain
advances for such purposes, when the savings of such members amount
to a certain sum per share. Any such corporation may operate under the
permanent plan, or the serial plan or the optional payment plan, or under
a plan combining features of these plans, as its charter, constitution or
by-laws provide.

Section 4168-b 4. Mutual building and loan association defined.—
All building and loan associations which are organized and operated ex-
clusively for the mutual benefit of their shareholders or members, and
which derive their capital primarily from payments on shares made to
them by their shareholders or members, and which make loans primarily
only to their shareholders or members in amounts not exceeding the par
value of shares pledged therewith, and which derive their income pri-
marily from the interest and premiums on the loans made by them to their
shareholders or members, secured by recorded liens upon real estate,
or on loans made on their own shares, and whose shareholders of each
class of stock respectively participate on substantially the same basis in
the earnings of the association, shall, for all purposes under the laws of
Virginia, be deemed to be mutual building and loan associations doing
business on a purely mutual plan.

Section 4168-b 5. Associations included under provisions of this
law.—The provisions of this law embrace, include and govern, as appli-
cable, all chartered building and loan associations organized under any
law of this State and all building and loan associations of other states
that attempt to engage in business in this State.

Section 4168-b 6. Effect of this law as to pre-existing associations.
—The powers, privileges, duties and restrictions conferred and imposed
upon any building and loan association existing and doing business under
the laws of this State on the effective date of this law are hereby abridged,
enlarged or modified, as each particular case requires to conform to the
provisions of this law, but nothing in this law shall affect the legality of
any investment heretofore made or transaction heretofore had under
authority of any provisions of law in force when such investment was
made or transaction had.

Section 4168-b 7. Restrictions and prohibitions upon conduct of
building and loan business.—No person, except corporations which are
chartered and are already conducting the building and loan business under
authority of the laws of this State, or corporations which are hereafter in-
corporated under the laws of this State for such purpose, shall engage in
what is commonly known as building and loan association business in this
State; but nothing in this law shall prevent any person from lending
money on real estate or personal security or collateral, or from guarantee-
ing the payment of bonds, notes, bills and other obligations, or from pur-
chasing or selling stocks and bonds. No building and loan association shall
be incorporated in this State with authority to conduct its business out-
side of this State, nor shall any building and loan association incorporated
under the laws of any other state be authorized to do business in this
State. .

Section 4168-b 8.- Use of certain terms prohibited; exceptions ;
penalty—(a) No person not lawfully engaged in the business of a build-
ing and loan association in this State under the provisions of this law,
shall make use of any office or other sign having thereon any artificial
or corporate name or other words indicating that the place or office is the
place or office of a building and loan association; nor shall any such per-
son make use of or circulate any letterheads, billheads, blank notes, blank
receipts, certificates, circulars or any written, painted or printed material
whatever, having thereon any artificial or corporate name or word or
words indicating that the business of such person is that of a building and
loan association.

(b) The use of any of these terms in the name of any corporation
or in connection with any other business is not prohibited when the con-
‘ext or remaining words show clearly and definitely that the corporation is
not, or the business is not that of, a building and loan association and that
he business proposed to be or being conducted is not and will not be the
-onduct of business in the manner of what is commonly known as build-
ng and loan association business.

(c) Any person violating the provisions of this section, either in-
lividually or as an interested party in any co-partnership or corporation,
shall be guilty of a misdemeanor.

Section 4168-b 9. Corporate name—what required and not re-
uired.—Every such association hereafter incorporated under the laws
of this State must have as a part of its corporate name or title the words
“building and loan’, or ‘‘building association”, or “savings and loan as-
sociation”, which shall not be used disjunctively, but no association need
have as a part of its corporate name the words “corporation” or “incor-
porated”’.

Section 4168-b 10. Examination of books, et cetera, of persons be-
lieved to be doing business of such an association without authority.—The
Commission is authorized and directed when facts before it are found to
justify such course to examine the accounts, books and papers of any per-
son, who it has reason to believe is doing the business of a building and
loan association within the intent of this law without legal authority so
to do, in order to ascertain whether such person is conducting a building
and loan business without authority of law and whether or not such per-
son has violated or is violating any provisions of this law, and the re-
fusal to submit such accounts, books and papers shall be prima facie evi-
dence of the fact of operation without authority of law.

Section 4168-b 11. Conduct of business of an association without
authority, how punished—Every person, who knowingly does the busi-
ness of a building and loan association, without authority of law, and
every officer and agent who knowingly participates therein shall be guilty
of a misdemeanor and upon conviction shall be confined in jail not less
than thirty days nor more than six months, or fined not less than one hun-
dred nor more than five hundred dollars, or both and each day of con-
duct of such business will constitute a separate offense.

Section 4168-b 12. Incorporation, et cetera, certain powers.—Any
number of persons, not less than five, may hereafter form a building and
loan association for the purpose of encouraging industry, frugality, saving
and home ownership among its members, upon being incorporated as
provided in chapter one hundred forty-eight of the Code of Virginia,
nineteen hundred nineteen. Building and loan associations heretofore
or hereafter formed thereunder or under any other general or under any
special act, shall have the right to lend to their shareholders or to other
persons the money accumulated from time to time, and the right to pur-
chase land or erect houses, and to sell, convey, lease or mortgage the same
at their discretion, when previously approved by the Commission, to their
shareholders or others for the benefit of their shareholders.

Section 4168-b 13. Additional powers.—Such associations may
(1) acquire, hold, convey, and encumber all or any property, real or per-
sonal, acquired by them in the due course of business, (2) secure the pay-
ment of loans and the performance of the conditions upon which loans
are made, and the payment of the purchase money for any property sold
by taking personal security, or by mortgage or deed of trust upon real
or personal property and by a transfer and pledge of its shares, (3) es-
tablish and maintain by their officers and agents, branch offices for the
transaction of their business at such places as desired, but no association
shall establish more than one office nor maintain branches other than
those already established, except with the approval of the Commission,
previously had in writing.

Section 4168-b -14. Additional powers.—Every association may
fix by its by-laws the premiums or bonus at which it will dispose of the
money in its treasury to its shareholders, and award or lend to any mem-
ber or shareholder the par value of any share standing in his name,
less such premium or bonus, and the mode of making the disposal, loan
or award shall be fixed by the by-laws, and to charge and receive the
premium in advance, or in installments, or in default of application for
such money by its shareholders or members, any such association may
lend money to other persons on such terms as are agreed upon, and in
such manner as fixed by the by-laws; provided, that when the associa-
tion lends its funds, taking as security any order or assignment of the
wages of the debtor, tangible personal property, or any security except
real estate or the shares of stock or other evidences of indebtedness of the
association, upon which there has been actually paid a sum equal to or
greater than the amount of the loan, the laws of this State and the ordi-
nances of the cities and towns thereof in reference to the conduct of the
business of lending money and the rates to be charged therefor shall ap-
ply to such associations as to other persons.

Section 4168-b 15. Direct periodic reduction of loans.—Direct re-
duction of principal loans may be made by any association upon resolu-
tion of the board of directors permitting borrowing members to repay
their mortgage indebtedness by the periodic reduction of principal meth-
od and in every such case the borrower shall! in writing make such agree-
ment with the association relative to repayment of the loan as is required
by the directors. Every such agreement shall contain the stipulation
that the borrower shall make periodic payments not less frequently than
once each month until the mortgage indebtedness, advances, if any, made
by the association for payment of taxes, assessments, insurance premiums,
et cetera, as have accrued or as do accrue with interest, or with interest
and premium, same to be computed monthly, quarterly or semi-annual-
ly have been fully paid. The balance of each loan account under such di-
rect reduction of principal method shall be determined monthly, quarterly
or semi-annually in order to ascertain the amount then necessary to satisfy
in full the mortgage obligation.

Section 4168-b 16. Calculation of periodic balances.—Regardless of
any provisions or restrictions now in the charter or by-laws of any asso-
ciation to the contrary, it shall be lawful in calculating such periodic
balances for any association permitting such a method of repayment to
adopt a plan by which the interest or interest and premiums are to be
computed monthly on the preceding monthly balance, and such interest
or interest and premium shall be added to that balance, together with any
and all advances for taxes, insurance and premiums, and such other
charges as are lawful debts of the borrower to the association since the
preceding balance, and then deducting any payment or payments made by
the borrower on the loan accruing during such current period.

Section 4168-b 17. Application of payments; original agreements
not affected by agreement for direct reduction.—All payments made on a
loan under any such plan of direct periodic reduction of principal must
be applied first to such interest or interest and premium as have thereto-
fore accrued. Shares pledged on any loan which is being repaid on the
direct reduction of principal method shall be automatically reduced in
even shares as the loan 1s repaid, and the obligation evidencing such loan
or advance and the mortgage or other security given to secure same shall
not in anywise be prejudiced by the making of the written agreement
hereinbefore referred to, whether the terms of the written agreement
or the cancellation of shares be provided for in the obligation evidencing
the loan and advance and the mortgage securing same or not.

Section 4168-b 18. Direct reduction loan shares authorized to be
issued ; effect of holding same.—A class of shares known as direct reduc-
tion loan shares with a fluctuating dues or installments payment as re-
quired is authorized to be issued to members contracting to repay their
real estate mortgage by a direct periodic reduction of principal method,
and the owner of any such shares shall be considered to have waived all
participation in the profits of the association and instead shall receive the
benefits of membership through the application of all the dues or install-
ments paid on such shares to the direct reduction of the principal amount
of the loan as provided.

Section 4168-b 19. Mutual associations ; membership in; rights of
members.— Notwithstanding anything in this law to the contrary, mutual
building and loan associations may exercise fully the powers conferred
hereby and if they exercise such powers or any of them shall be consid-
ered and treated for all purposes as mutual building and loan associa-
tions; in such event any such association may provide that any person
who borrows any money from it, shall, if not already a shareholder, be
and be constituted a member of the association and be entitled to one vote
at all meetings of shareholders.

Section 4168-b 20. Issuance of series, classes or kinds of shares.—
Every association is authorized to issue as many series or classes and
Kinds of shares and at such stated periods as provided in its charter and

y-laws.

Section 4168-b 21. Issuance of “paid-up’’, et cetera and install-
ment shares; transfer from kind to kind.—Shares may be issued to be
paid for in a single lump sum (these being of the class of shares usually
designated “fully paid” or “paid-up” shares), or by installment payments
upon one or more plans of installment payments. These shares, any or all
may be issued to participate in the earnings of the association upon the
same basis as pledged shares; or, if desired, the fully paid or paid-up
shares, and the installment shares, either or both, or classes of any of
all may be issued to bear a fixed rate or rates of earnings or dividends,
but such fixed rate shall not exceed the legal rate of interest in this State;
and the issue of such shares shall not, by reason of the different dividend
rates, disqualify the association as a mutual association doing business on
a purely mutual plan. Shares may be reduced or transferred from one
class to another class by agreement in writing between the holder and the
association.

Section 4168-b 22. Application of payments to loans; issuance and
surrender and transfer of shares.—In the case of pledged shares, the
amount to the credit of the borrower may be applied to the loan secured
and a new balance established on which the borrower shall pay according
to the plan agreed upon, whether it be the direct reduction loan or share
reducing fund plan. From and after the passage of this law, all fully-
CH. 386] ACTS OF ASSEMBLY 7355

paid stock issued by any building and loan association now or hereafter
incorporated, shall be issued only by issuing to the subscriber, in the
manner and form prescribed by this law, a numbered certificate of stock.
Each such certificate of stock shall have (1) the corporate name of the
association printed thereon, (2) the date of issue, (3) the name of the
person or persons, firm or corporation in whose name the stock 1s issued,
(4) the number of shares, and (5) the par value. Upon the repurchase
of any such fully-paid stock, the certificate shall be surrendered to the
association which shall preserye it for not less than ten years. In order
to have the transfer thereof made on the books of the association to a
purchaser, the certificate of stock duly assigned shall likewise be sur-
rendered to the association and preserved as in case of repurchase.

Section 4168-b 23. Repayments of loans upon shares.—A borrower
from any such association may anticipate the payment of the loan at any
time; but in case of repayment before maturity the borrower shall pay
such an amount for the privilege as has been agreed upon or is provided
for in the by-laws, but in no event to exceed a sum equal to one per cent.
of principal then due; and there shall be refunded to such borrower, in
the case the premium has been deducted in advance, such proportion of
the premium bid as the by-laws provide.

Section 4168-b 24. Levy, assessments and collection of dues and
payments and fines.—Every association may levy, assess and collect: (1)
from its shareholders dues or payments upon every share, the amount,
time, and manner of payment of same to be fixed by the by-laws, and the
shares may be repurchased and retired as the by-laws direct; and (2)
from members to whom loans have been made interest upon the unpaid
balance of the amount loaned. No fine shall be levied, assessed or col-
lected from such borrower for any purpose.

Section 4168-b 25. Insurance of secured indebtedness and shares,
et cetera, under federal laws.—Every such association is empowered to
take such action and perform such acts as are necessary to have indebted-
ness secured by mortgages and deeds of trust insured by any duly con-
stituted agency of the United States of America.

Section 4168-b 26. Applicability of certain general corporation laws.
—The provisions of chapter one hundred forty-seven, of the Code of
Virginia, nineteen hundred nineteen, and of all amendments thereto, shall
apply to all building and loan associations, incorporated under the laws
of Virginia, in all cases in which not inconsistent with the provisions of
this law.

Section 4168-b 27. Minimum requirements for authority for an
association to commence business.—Before any association may begin
business, it must obtain from the Commission a certificate of authority
to do so; and prior to the issuance of such certificate, the Commission
through the Commissioner, or one of his assistants, shall ascertain that :
(1) all applicable provisions of law have been complied with; (2) the
required amount of capital stock has actually been subscribed ; (3) a sum
equal to at least five per centum of the minimum authorized capital stock
has been actually paid into the treasury of the association in cash; (4)
regulations governing directors of the association have been complied
with; (5) in his opinion, there is public need for building and loan facili-
ties or additional such facilities in the community where the building and
loan association 1s proposed to be located; (6) the officers and directors
of the proposed association are of (i) moral fitness, (11) financial re-
sponsibility, and (iii) business ability; and (7) other circumstances
deemed pertinent are satisfactory. The Commission shall not issue any
such certificate of authority: (1) when or where there is no public nec-
essity for the facilities of the proposed association; (2) when it has rea-
son to believe that the corporation is formed for any other than legitimate
building and loan business; or (3) when it has reason to believe that (1)
the moral fitness, (ii) financial responsibility, or (iii) business qualifica-
tions of the persons named as officers and directors are not such as to
command the confidence of the community in which the building and
loan association 1s proposed to be located.

Section 4168-b 28. Directors, their number, qualifications, election ;
vacation of office and filling of vacancy.—The affairs of every such as-
sociation shall be managed by a board of directors to consist of not less
than five persons, the majority of whom shall be citizens of this State.
Every director shall be the owner in his own name, and have in his
personal possession or control, shares of stock in the association of
which he is a director and for which has been paid into the treasury of
the association not less than one hundred dollars, and such shares must be
unpledged and unencumbered at the time of his becoming a director and
during the whole of his term as such. The office of any director violating
the provisions of this section shall immediately become vacant, and the
remaining directors may proceed forthwith to fill the vacancy. The di-
rectors shall be elected at the annual meeting of the shareholders, sub-
ject to the charter, constitution and by-laws, and all directors shall hold
office for the term prescribed in the certificate of incorporation, constitu-
tion or by-laws, and shall remain in office until their successors are elected
and have qualified.

Section 4168-b 29. By-laws and articles of government.—Every
association shall adopt by-laws for its government and for the manage-
ment of its business not inconsistent with the laws of Virginia, and shall
file a copy of its by-laws and every amendment thereto, as soon as adopt-
ed, with the Commission through the Commissioner.

Section 4168-b 30. Bonds of officers and employees.—The board
of directors shall require bonds from all of the active officials and em-
ployees of the association, and shall annually examine all such bonds and
pass on their sufficiency and it may require new or additional bonds at
any time, provided that in lieu thereof a blanket bond with corporate
surety covering all active officers and employees of the association may
be executed upon approval of the board of directors.

Section 4168-b 31. Membership; liability—-The members of any
such association shall be only those persons who have subscribed for its
shares or to whom its shares have been issued or transferred and such
other persons as are constituted members under the provisions of this
law in accordance with the provisions of its by-laws; provided that
unless prohibited by the by-laws, corporations may become shareholders
and members in the same manner as natural persons. Membership shall
continue until such shares have been matured and paid, repurchased,
transferred, retired or forfeited. The payments made to an association
upon installment shares issued by it shall be called “dues”, “payments”
or “share payments”.

Section 4168-b 32. Capital defined; disability of shareholders.—
The capital of every such association shall consist of the accumulated pay-
ments actually made upon the shares and the dividends credited thereto,
either individually or by series. For any losses, which the capital is not
sufficient to satisfy, the members of the association shall not be responsi-
ble, beyond the amounts paid in by them on their shares and the shares
shall not be subject to further assessment.

Section 4168-b 33. Commissions and promotion expenses, limita-
tions of; initiation and membership fees, disposition of, et cetera.—It is
unlawful for any such association to charge an entrance, initiation or mem-
bership fee, or to make any charges as a condition precedent to becom-
ing a member or shareholder in excess of one per centum of the par value
of the share or shares of stock subscribed for or issued, or, in any case, in
excess of one dollar ($1.00) a share, unless the entire amount of any
such excess is passed to the surplus or reserve fund of the association and
no part of any such excess shall be used to pay commissions on sale of new
stock or promotion expenses of any kind. When any fee is charged,
it shall be paid in cash at the time of the subscription, and a written re-
ceipt therefor shall be given to the subscriber, and all such fees so paid
shall be credited to the general profit account of the association. Any
building and loan association violating the provisions of this section shall
be liable to a fine of not less than one hundred dollars nor more than
one thousand dollars.

Section 4168-b 34. Rules governing withdrawal, relationship of
shareholder to association.—Every such association shall have the right
to establish rules governing withdrawals of shares of every kind, or the
payment of matured shares, and may from time to time fix the period of
notice required to be given for withdrawal, and in emergency the notice
period may be extended by the directors. The relation existing between
the association and its shareholders, as to all the shares subscribed to,
shall, except as otherwise herein provided, be such as usually exists be-
tween a corporation and its shareholders, and in event of emergency pre-
venting payment in usual course, upon demand for withdrawal of shares,
the shareholder, as to such shares, shall not be privileged to claim and
establish a debtor-creditor relation in lieu of the usual privileges and
responsibilities of a shareholder.

Section 4168-b 35. Shares issued in trust for another; to a minor.
—Whenever any shares in any such association have heretofore been
issued or are hereafter issued to any person in trust for another, and no
other or further notice of the existence and terms of the trust have been
given by act of the trustee alone, and, in the event of the death of the
trustee, the amount due on the shares, or any part, together with the
profits, earnings or interest thereon, shall be the sole property of the
person for whose benefit the shares were issued, and may be paid to such
person if of the age of eighteen years and upwards, or to the guardian
of such person if under the age of eighteen years, and any amount due
on shares held by a minor may in like manner be paid to such minor if
of the age of sixteen years.

Section 4168-b 36. Purchase, et cetera, of shares by fiduciaries—
A personal representative, guardian, trustee, or other fiduciary may in
such capacity acquire and hold shares in any such association subject to
supervision and actually supervised by the Commission, and in any
Federal Savings and Loan Association lawfully authorized to do busi-
ness in this State and subject to supervision and actually supervised by
a comparable federal agency, and shall have the same rights and be sub-
ject to the same obligations and limitations as other shareholders and the
shares shall be withdrawable by them on the same terms as by other
shareholders. The shares of such State and Federal associations shall be
legal forms of investment for the funds of such fiduciaries.

Section 4168-b 37. Virginia corporations authorized to invest in
shares of associations, et cetera, under certain conditions.—Any Virginia
corporation, except banks, trust companies, credit unions, and industrial
loan associations may invest in shares in any Virginia building and loan
association and in shares of any Federal Savings and Loan Association
lawfully engaged in business in this State, under the supervision of the
Commission, or of corresponding federal authority.

Section 4168-b 38. Minimum proportion of loans and investments
required to be in certain securities; revocation of certificate of authority
to do business for failure to comply.—No corporation shall do business in
this State as such an association unless at least two-thirds of the amount
of its loans and investments, not including loans made upon credits on its
own shares, are secured by or are in recorded liens upon real estate of
dignity prior to any other recorded lien except taxes, or bonds or other
securities of the United States, or of the State of Virginia, or of any
political subdivision of the State of Virginia and if at any time it appears
from the report made by any association, or it be otherwise made to ap-
pear, that such proportion of its loans and investments are not so secured,
the Commission shall issue a rule against it to show cause why the li-
cense to do business should not be revoked, and if it appear at the hearing
that the provisions of this section have been violated, the Commission
shall revoke its certificate of authority to do business unless within such
reasonable time as the Commission prescribes the provisions of this sec-
tion be complied with; and upon a second finding by the Commission
that the association has again violated the provisions of this section, its
certificate of authority may be absolutely revoked and the issuance of a
certificate of authority may be thereafter refused.

Section 4168-b 39. Shares in names of more than one person.—
When shares are issued in the names of two or more persons, payable to
either or any one of them, or payable to either, or any of them or the sur-
vivor, any person so named, whether the other or others be living or not,
may withdraw from the association and receive the amount payable on
withdrawal in the same manner and on the same terms allowed by law
or the by-laws in case of any other shareholder, and the receipt of or ac-
ceptance by the person so paid shall be a valid and sufficient release and
discharge of the association for any payment so made.
Section 4168-b 39-a. Payment of small credit balances to next of
kin of decedent.—When the credit balance of a deceased person in any
association, upon whose estate there shall have been no qualification,
shall not exceed three hundred dollars, it shall be lawful for such asso-
ciation, after one hundred twenty days from the death of said person, to
pay said balance to his next of kin, whose receipt therefor shall be a full
discharge and acquittance to such association to all persons whomsoever
on account of such balance.

Section 4168-b 40. Supervision by Commission; examination by
Commissioner ; financial statements to be furnished.—The Commission
shall have supervision over all such associations whether incorporated
under the laws of this State or any other State. The Commissioner shall
not less than once in each and every year, and at such other times as in
his discretion he deems necessary, examine or cause to be examined each
and every such association whether incorporated under the laws of this
State or any other state.

Every such association shall furnish the Commission at such times
as it requires statements of its financial condition on forms supplied by
the Commissioner.

The provisions of sections forty-one hundred sixty-eight-b thirty
and forty-one hundred sixty-eight-b forty through forty-one hundred
sixty-eight-b forty-five shall not apply to any association which does not
in any one year after this law goes into effect accept from persons, other
than its own officers and directors, more than twenty thousand dollars
in payment for stock; provided, that payments made on stock subscribed
at the time of making a loan, by the borrower, for the purpose of maturing
said stock for the repayment of such loan, shall not be counted in making
up such total of twenty thousand dollars.

Every association doing business in this State shall, on the thirtieth
day of June of each year after this law goes into effect, make to the Com-
mission, on forms to be furnished by the Commission, a statement, sworn
to by its secretary, showing the total amount received by it during the
preceding year in payment for shares of stock (other than for the retire-
ment of loans as set forth above). If from such statement it shall appear
that during such preceding year any association has received in payment
for shares more than twenty thousand dollars from persons other than its
officers and directors and for such repayment of loans, then all of the pro-
visions of sections forty-one hundred sixty-eight-b thirty and forty-one
hundred sixty-eight-b forty through forty-one hundred sixty-eight-b for-
ty-five, shall apply to such association for the succeeding year in which
such excess of twenty thousand dollars, was received, as set forth above.

Sections 4168-b 41. Fees for examinations.—For the purpose of
defraying expenses of such supervision and examination the Commission
shall on the first day of July of each and every year, assess against every
such association fees as follows: For the examination of building and
loan associations for a period of one year, a minimum fee of twenty-five
dollars ($25.00) which shall cover the first fifty thousand dollars of
assets or less, to which shall be added in the case of each association, ac-
cording to its total assets, as shown by its statement of financial condi-
tion made to the Commission as of the next preceding December thirty-
one, additional fees as follows: for the amount by which its total assets
exceed fifty thousand dollars and do not exceed one million dollars, two
dollars fifty cents on each ten thousand dollars or fraction thereof ; for the
amount by which its total assets exceed one million dollars and do not
exceed three million dollars, one dollar on each ten thousand dollars or
fraction thereof; and for all assets over three million dollars, one dollar on
each twenty thousand dollars or fraction thereof. Every building and
loan association having a branch or branches shall be assessed twenty-
five dollars per year for each branch. |

All such fees shall be assessed against such building and loan associa-
tions by the Commission on the first day of July of each year and shall
be paid into the State treasury on or before the thirty-first day of July
following. All fees so assessed shall be a lien on the assets of the building
and loan association, and if not paid within thirty davs from the date the
assessment is made, may be recovered by action brought in the name of
the State Corporation Commission in any court having original jurisdic-
tion of civil cases in the county or city in which the building and loan
association is located. The Commission shall mail the assessment to each
building and loan association on or before the first day of July of each
year, and give notice thereof to the Comptroller, and it shall be the duty of
the Comptroller to furnish the Commission promptly with a list of the
building and loan associations which fail to pay the assessment on or be-
fore July thirty-first.

Section 4168-b 42. Associations required to furnish access to books,
et cetera, for purposes of examinations; powers of persons making ex-
aminations.—In making such examinations as are required under the
provisions of this law, the officers, directors and employees of every such
association shall, upon the demand of the person or officer designated to
make the examination, give to the examiner full access to all money,
books, papers, notes, bills and other evidences of debt of the association
and shall disclose fully and truly all of its indebtedness and liability, and
shall furnish the Commissioner with all information which he deems nec-
essary to a full investigation into the affairs of the association; and the
Commissioner is empowered (1) to examine under oath any and all of
the directors, officers, clerks and employees of the association touching
any matter or thing connected with the operation of the association, (2)
to administer oaths to the persons examined, and (3) to require the
building and loan association to furnish to him a mathematical calcula-
tion or chart showing in detail the plan of the operation or investment
carried on, for the purpose of determining whether or not same is finan-
cially and mathematically sound, and the contracts or obligations issued
or assumed are possible of fulfillment.

Section 4168-b 43. What must or may be done if it be found upon
examination that the law is not being observed, or if other unsatisfactory
conditions be found to exist; receivership.—lIf, upon examination of any
such association, the Commission ascertains (1) that the laws of this
State are not being fully observed, or (2) that any irregularities are be-
ing practiced, or (3) that the capital stock of the association has been
impaired or is in danger of being impaired, or (4) that the interests of
the public are not being properly protected, the Commission shall give
immediate notice thereof to the officers and directors of the association
and if deemed necessary in order to conserve the assets of the associa-
tion or to protect the interests of members and credits, or either, the
Commission is empowered to exercise any or all of the following pow-
ers, to-wit, it may: (1) temporarily close the association, for a period
not exceeding sixty days, which period may be further extended for like
period or periods as the Commission deems necessary; (2) require the
officers and directors of the association to liquidate in so far as is re-
quired its outstanding loans; (3) require that the impairment of the
capital stock be made good; (4) require that all irregularities be prompt-
ly corrected; (5) require the association to make reports daily or at such
other times as required to the Commission as to the results achieved in
carrying out its orders; (6) without examination, close, for such period
or periods as the Commission deems necessary, any association facing an
eniergency due to withdrawal of funds or otherwise, or without closing
the association grant to it the right to suspend or limit the payment of in-
debtedness by it, however evidenced, for such period as the Commission
determines; and during this period no court shall entertain any suit or
action therefor against the association. The powers enumerated in (1),
(2) and (6) may be exercised by the Commission only upon request of
the directors of the association. If any such association fails or refuses
to comply with any such order or orders of the Commission, or if the
Commission determines that a receiver should be appointed, it may close
the doors of the association and apply to the proper court for the appoint-
ment of a receiver to take charge of its business affairs and assets, and
to wind up its affairs; provided that the capital stock shall not be deemed
impaired, or in danger of being impaired within the terms of this law
unless it has been reduced by amount equal to at least fifteen per centum
of the credits to its members or shareholders.

Section 4168-b 44. Financial statements to be made by associa-
tions; penalty for failure—Every such association shall make the state-
ments required by the preceding section to the Commission, upon re-
quest, general or special, and for a failure so to do for a period of thirty
days after request, the association shall be fined not less than one hundred
nor more than one thousand dollars by the Commission, unless, in answer
to a rule for that purpose, good cause be shown to the contrary,

Section 4168-b 45. False statements by officers or agents; penalty.
—Any officer or agent of such an association who knowingly makes a
false statement of the condition of the association to the Commission shall,
upon conviction thereof, be fined not less than one hundred nor more than
one thousand dollars, or be confined in the penitentiary not less than one
nor more than ten years, or both.

Section 4168-b 46. Election of trustees; powers of trustees; ap-
plicability of rules to federal and converted associations.—(a) Any as-
sociation, the conduct of whose business requires a trustee or trustees, is
empowered to elect such trustee or trustees at such time and for such
term of office as prescribed by the charter or by-laws, and to continue to
elect such trustee or trustees as the term (s) of office successively expire
during the existence of the association; and all the rights, titles, duties
and obligations which are imposed upon such trustee or trustees by rea-
son of holding such office or which come to him or them by or through
any deed or other instrument of writing, or otherwise howsoever, shall,
at the expiration of his term of office, pass to the successor or successors
in office and all the rights of the association required to be exercised by or
through such trustee or trustees, whether it be the sale of property or
some other act or acts, shall be done, enforced and carried out by the
trustee or trustees in office at the time when such rights are exercised by
the association. All sales or conveyances heretofore or hereafter made
by a trustee or trustees appointed in the manner designated above shall
be as valid and binding as though the sale or sales, conveyance or con-
veyances had been made by the trustee or trustees named in the deed or
deeds of trust.

(b) In the absence of one or more of the trustees in office, a ma-
jority of the trustees are empowered to conduct sales and make convey-
ances in pursuance thereof, with the same force and effect as though all
the trustees had conducted same, and when there are two trustees either
one of them may so act.

(c) The provisions of this section shall apply equally to all Federal
Savings and Loan Associations heretofore or hereafter organized either
by direct charter or by conversion under the laws of the United States
and all trustees of State chartered institutions which have heretofore con-
verted or hereafter convert to federal charters shall be vested with all
the authority and obligations, under the new jurisdiction, theretofore
exercised by them pursuant to the laws of the State of Virginia the same
as though the conversion had not taken place.

Section 4168-b 47. Reserve fund requirements; undivided profits;
investments of reserve and undivided profits—(a) Every such associa-
tion shall set aside, for protection against losses, a reserve fund of not
less than five per centum, and not more than fifteen per centum, of its
total resources; and for the purpose of building up and maintaining this
reserve it shall set aside, annually or semi-annually, a sum of not less
than three per centum, nor more than fifteen per centum, of its annual
net earnings for every year that the reserve carried is less than the mini-
mum reserve herein required.

(b) Every such association is authorized to hold in its fund of
undivided profits such sum as the board of directors, from time to time,
deems necessary or wise.

(c) The board of directors is empowered to invest all reserve funds
and undivided profit funds in the same manner and in the same class of
securities as is provided in this law for all other funds of the association.

Section 4168-b 48. Reduction of liability to members or share-
holders.—W henever the losses of any building and loan association, re-
sulting from depreciation in value of its securities or otherwise, exceed its
contingent reserve fund, undivided profits and current earnings, so that
the estimated value of its assets is less than the total amount due its mem-
bers or shareholders, the Commission, upon its petition may order a re-
duction of its liability to its members or shareholders in such manner as to
distribute the loss equitably among the members or shareholders.
Section 4168-b 49. Voluntary liquidation and settlement; pro-
cedure; limitation upon receivership.—Any association may, if the
holders of two-thirds of the voting shares in force, provided the two-
thirds represent at least fifty-one per centum of the capital paid into the
association, deem it advisable, go into liquidation, and for the purpose
of so doing may, at any regular or called meeting of the shareholders,
adopt a resolution declaring that the association intends to go into liquida-
tion and discontinue business as a building and loan association. A copy
of the resolution, duly certified by the president and secretary of the
association and under its seal, shall be transmitted to the Commission
within ten days after the passage thereof, together with a filing fee of
one dollar, and thereupon the Commission shall issue its certificate re-
citing that the resolution has been filed, and that the association is in
liquidation. After the filing of the notice, it shall not be lawful for the
association to issue stock, or to loan or advance its money to members
or to any other person or persons, or to receive any further dues on un-
pledged stock, but all of the income and receipts of the association, in
excess of the actual expense of managing same, shall be applied, first, to
pay the indebtedness and, second, to redeem stock of the association, the
same to be paid pro rata. The board of directors of any association in
liquidation may adopt such rules and make such orders as are just and
equitable for the sale and disposition of all property held by it, the assess-
ment to meet the losses, if any, and for the division of the profits of the
association. Proceedings for the appointment of a receiver of a building
and loan association shall not be entertained by any court except on the
written recommendation of the Commission.

Section 4168-b 50. Consolidation or merger of two or more as-
sociations; elimination of doubtful assets; reduction of capital stock.—
Any two or more associations may consolidate or merge subject to the ap-
proval of the Commission, according to the applicable provisions of the
Code of Virginia providing generally for merger or consolidation and
when so consolidating or merging they may eliminate from their assets
any such as are considered worthless or of doubtful value. When so
eliminated from the admitted assets, a sufficient amount may be deducted
from the undivided profits and surplus of any or all of the associations so
consolidating or merging to make good such losses; and when the un-
divided profits and surplus are insufficient, an amount sufficient may be
eliminated from the capital stock or payments on shares, and when so
deducted from the shares of a borrowing member his payments made on
shares to that extent, shall not be regarded as payments or curtails on his
loan obligations to the association. When the capital stock or shares are
so reduced, the reduction shall be ratably effective on all shares of capital
stock in force at the time of the consolidation or merger.

Section 4168-b 51. Conversion of State association into a federal
savings and loan association; procedure; effect; validation of certain
prior conversions.—Any such association hereinafter referred to in this
section and in several succeeding sections of this law as a “‘State associa-
tion” may convert itself into a federal savings and loan association, here-
inafter referred to in this and several succeeding sections as a “Federal
764 ACTS OF ASSEMBLY [va., 1946

association” by following the procedure hereinafter outlined, to-wit: (1)
at any regular or special meeting of the shareholders of any State associa-
tion, called and held in accordance with the laws of Virginia to consider
such action the sk&reholders by an affirmative vote of those holding and
voting two-thirds of the voting shares in force, provided such two-thirds
represent at least fifty-one per centum of the capital paid into the associa-
tion, present in person or by proxy, may declare by resolution the deter-
mination to convert the association into a Federal association; (2) a
copy of the minutes of the meeting duly certified by the president or vice-
president and the secretary of the State association under its seal, shall
be transmitted to the Commission within ten days after the passage
thereof; (3) within a reasonable time and without any unnecessary delay
after the adjournment of the meeting of shareholders, the State associa-
tion shall take such action as necessary to make it a Federal association;
(4) within ten days after receipt of the Federal charter or authorization
as a Federal association, there shall be filed with the Commission a copy
of the charter issued to it by the Federal Home Loan Bank Board, duly
certified by or on behalf of the board, or a certificate of the board showing
the organization of the State association as a Federal association. Upon
the filing of this instrument the association shall cease to be a State as-
sociation and thereafter be a Federal association.

Section 4168-b 52. Effect of conversion of a State into a Federal
association.—At the time when any such conversion becomes effective
as hereinbefore provided, the State association shall cease to be supervised
by this State and all of its property, including all of its rights, title and
interest in and to all property of every kind and character shall 1m-
mediately by operation of law and without necessity of any conveyance OF
transfer or of any further act or deed, continue to be vested in the ass0-
ciation under its new name and style as a Federal association and undef
its new jurisdiction; and the Federal association shall have, hold and et
joy the same in its own right as fully and to the same extent as the same
was possessed, held and enjoyed by it as a State association; and the
Federal association at the time of the taking effect of the conversion shall
become and continue responsible for all of the obligations of the State 35°
sociation including liabilities created by law or incurred by it before be
coming a Federal association, taxes imposed by the laws of this State UP
to the date of its conversion into the Federal association in proportion t0
the time which has elapsed since the next preceding payment therefor,
and assessments, penalties and forfeitures imposed or incurred under tt
laws of the State up to the date of becoming a Federal association, to
same extent as though the conversion had not taken place; it being ©
pressly declared that the Federal association shall be merely a continU®
tion of the State association under a new name and new jurisdiction ¥"
such revision of its corporate structure as considered necessary fof !
proper operation under the new jurisdiction. all

Section 4168-b 53. Conversions heretofore made confirmed-—~.
State associations which heretofore have converted into Federal asso
tions under the provisions of the Federal Home Owners’ Loan At °
nineteen hundred thirty-three, as amended, and have received chatte®
from the Federal Home Loan Bank Board as Federal associations, shall
hereafter be recognized as Federal associations and their Federal charters
shall be given full credence by this State to the same extent as if the con-
version had taken place under the provisions of this law, provided the pro-
visions of this law relating to the recordation of the charter or certificate
are complied with. All such conversions are hereby ratified and con-
firmed and all of the obligations of State associations which have so con-
verted shall continue as valid and subsisting obligations of such Federal
associations and the title to all the property of such State associations
shall pass by operation of law to such Federal associations as fully and
completely as if a valid transfer were executed, delivered, and recorded,
and as to such Federal associations supervision by this State is hereby
relinquished.

Section 4168-b 54. Conversion of federal savings and loan asso-
ciations into State associations; procedure; effect—Any Federal asso-
ciation organized under the laws of the United States and doing business
in this State may become a State association with all the powers and
subject to all the obligations and duties imposed by the provisions of this
law, provided such Federal association has authority by virtue of any
law of the United States to dissolve its organization as a Federal asso-
ciation. A federal association desiring to become a State association shall
comply with the following requirements: (1) It shall take such action, in
the manner prescribed or authorized by the laws of the United States, as
will make certain its dissolution as a Federal association effective at a spe-
cified future date; (2) The required number of its directors shall there-
after and before the time when its dissolution becomes effective, organize
a corporation according to the provisions of chapter one hundred forty-
eight of the Code and to the provisions of this law with the same officers
and directors as those of the Federal association; (3) application for a
certificate of authority to do business under section forty-one hundred
sixty-eight-b twenty-seven must be made attaching thereto, as a part
thereof, (i) a statement of its financial condition, on forms prescribed
by the Commission, as of the close of business the day preceding the date
of the application, (11) copies of the written authority of stockholders or
shareholders, (iii) copies of the resolutions fixing the date on which the
dissolution as a Federal association will become effective, .(iv) proper
verification of such documentary matters by the affidavit of the president
or of a vice-president of the Federal association.

Section 4168-b 55. When conversion effective and complete.—
Upon granting of a certificate of authority to do business in accordance
with the provisions of section forty-one hundred sixty-eight-b twenty-
seven, and as soon as its dissolution as a Federal association becomes ef-
fective, its corporate existence as a State association shall begin, but the
association shall transact no business as a State association other than
that relating to its organization until its certificate of authority to do
business has been granted.

Section 4168-b 56. Effect of conversion upon property rights, et
cetera.—At the time when the corporate existence of the State associa-
tion begins all the property of the Federal association, including all its
rights, title and interest in and to all property of whatsoever kind, and
every right, privilege, interest and asset of any conceivable value or bene-
fit then existing, belonging or pertaining to it, or which might inure to it,
shall immediately by act of law and without necessity of any conveyance
or transfer, or of any further act or deed, be vested in and become the
property of the State association, which shall have, hold and enjoy the
same in its own right as fully and to the same extent as same was pos-
sessed, held or enjoyed by the Federal association; and the State as-
sociation shall be deemed to be a continuation of the entity and of the
identity of the Federal association, operating under and pursuant to the
laws of this State, and all the rights, obligations and relations of the
Federal association to or in respect to any person, estate, or creditor, de-
positor, trustee or beneficiary of any trust and in or in respect to any
executorship or trusteeship or other trust or fiduciary function, existing
as of the date of conversion, shall remain unimpaired, and the State as-
sociation, as of the beginning of its corporate existence, shall by opera-
tion of this law succeed to all such existing rights, obligations, relations
and trusts, and the duties and liabilities connected therewith, and it shall
execute and perform each and every such existing trust and relation in
the same manner as if the State association had itself assumed the trust
or relation, including the obligations and liabilities connected therewith,
and if the Federal association be acting as administrator, co-administra-
tor, executor, co-executor, trustee, or co-trustee of or in respect to any
estate or trust being administered under the laws of this State, at the time
of such conversion such relation, as well as any other similar fiduciary
relation, and all existing rights, privileges, duties and obligations con-
nected therewith shall remain unimpaired and shall continue into and in
the State association, from and as of the beginning of its corporate ex-
istence. Neither the act of the Federal association, under subdivision (1)
of section forty-one hundred sixty-eight-b fifty-four in fixing the date of
or providing for its liquidation or dissolution nor its liquidation or disso-
lution under the Federal Home Owners’ Loan Act or amendments there-
of, nor any other thing done in connection with the change from a Fed-
eral association to a State association, shall, in respect to any such ex-
isting executorship, trusteeship or similar fiduciary relation, be deemed
to be or to effect, under the laws of this State, a renunciation or revoca-
tion of any letters of administration or letters testamentary pertaining to
such relation, nor a removal or resignation from any such executorship
or trusteeship nor shall such act or any other thing done be deemed to
be of the same effect as if the personal representative or trustee had died
or otherwise become incompetent to act.

Except as herein specifically provided, on and after the date of con-
version, the powers of such converted association shall be subject to the
limitations and restrictions imposed by section three of chapter five hun-
dred seven of the Acts of the Assembly of nineteen hundred twenty-eight,
approved March twenty-seven, nineteen hundred twenty-eight, known as
the Virginia Banking Act, as heretofore amended.

Section 4168-b 57. Who to be the directors of State association
upon conversion; powers, how long to serve.—The directors of the Fed-
eral association in office at the time of its dissolution shall be the direc-
tors of the State association created in pursuance hereof until its first
annual election of directors thereafter, and shall have power to take all
necessary measures to perfect its organization, and to adopt regulations
concerning its business and management as deemed proper and not in-
consistent with law.

Section 4168-b 58. Making or circulating derogatory statements
affecting such associations; how punished.—Whoever, directly or in-
directly, wilfully and knowingly makes or transmits, to another, circu-
lates, or counsels, aids, procures or induces another to make, transmit or
circulate any false or untrue statement, rumor or suggestion derogatory
to the financial condition, solvency or financial standing of any building
and loan association doing business in this State, or who knowingly
counsels, aids, procures or induces another to make, transmit or circulate,
any false or untrue statement, rumor or suggestion derogatory to the fi-
nancial condition, or of derogatory character with respect to the earnings
or management of the business of any such association, shall be guilty
of a misdemeanor and upon conviction, shall be sentenced to pay a fine of
not more than one thousand dollars, or to be confined in jail not more
than one year, or both.

Section 4168-b 59. Building and loan association authorized to join
Federal Home Loan Bank System.—Any building and loan association,
or savings and loan association or savings bank or any other corporation
or association that now or hereafter is eligible to become a member of any
Federal Home Loan Bank according to the terms of the Federal Home
Loan Bank Act as amended from time to time is empowered to subscribe
for, own and hold stock in any Federal Home Loan Bank, and become a
member thereof, and to borrow money from any Federal Home Loan
Bank pursuant to such act of Congress, as same may be amended, and to
invest in the bonds of any Federal Home Loan Bank and to give its obli-
gation and pledge securities and conform to the provisions of the Federal
Home Loan Bank Act and to the rules and regulations from time to time
fixed and prescribed either by the Federal Home Loan Bank Board or
the Federal Home Loan Bank, and to perform any acts and execute any
instruments authorized or required by such act of Congress, as amend-
ed from time to time, or by their respective rules and regulations.

Section 4168-b 60. Severability —If any provision of this law or its
application to any person or circumstance is held invalid such invalidity
shall not affect any other provision or application of this law which can
be given effect without regard to the provision or application so held to be
invalid, and to this end all provisions of this law are declared to be sever-
able.

Section 4168-b 61. General Repealer.—All acts and parts of acts
irreconcilably inconsistent with any provision of this law are repealed
to the extent only of such inconsistency.

2. Chapter one hundred two of the Acts of the General Assembly
of nineteen hundred thirty-two, approved March five, nineteen hundred
thirty-two, known as “The Virginia Building and Loan Association Act”,
and all amendments thereof; and chapter three hundred eighty of the
Acts of the General Assembly of nineteen hundred thirty-four, approved
March twenty-nine, nineteen hundred thirty-four; and chapter four of
the Acts of the General Assembly of nineteen hundred thirty-six, ap-
proved February four, nineteen hundred thirty-six, are repealed.

3. This law is to become effective July one, nineteen hundred forty-
Six.