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Whatever restrictions are placed upon these corporations by the statutes, such restrictions must evidently be of little avail in the cases of those companies which are inclined to evade the law, unless means be provided of keeping the State officials acquainted with the way in which their business is being conducted. The natural ways of accomplishing this result are by means of frequent reports and of examinations. The value of reports is of course in direct ratio to the honesty and frankness of the officials of the company making such report, and their usefulness. therefore becomes slight when made by dishonest officers. It is a matter of common knowledge that reports may be easily "doctored" so as to make an insolvent institution appear very prosperous, and that the last reports published by defunct companies usually indicate a sound condition. But if the requirement of reports be made in connection with frequent examinations which reveal the truthfulness or untruthfulness of the reports, they serve a useful purpose.

The laws now require trust companies to furnish reports in over forty of the States and Territories. The frequency of such reports varies from one to five times per annum; and in the States having the most carefully prepared laws on the subject, special reports may be called for at any time by the State official to whom the reports are made. In Tennessee the reports are not made to any official, but are merely published in a newspaper. A number of the States designate the character of the information to be given in the reports, and some of them specify in detail and at some length the exact form required for such reports, the form in a few States requiring a complete list of all investments, and a description of the property held in trust. The completeness of these reports is in striking contrast with the meagreness of those which satisfy the requirements of the law in some of the States, where the provisions on the subject are most unsatisfactory. Most of the States which require reports provide that they must be published in a local newspaper.

Trust companies are liable to some sort of an examination by State officials in about forty of the States; but in about one-fourth of these the examinations need not be made periodically, but only at the discretion of an official who very probably has little time or inclination for the work, so that companies may go for years without examination. In all of the States the courts probably have the right to investigate a trust company's handling of trusts committed to them by such courts to the same extent as though the trusts were committed to individuals. This right is specifically mentioned in a majority of the States. A few States also provide that the books of the company shall be open to inspection by persons interested in any trust held by the company.

Where periodical examinations are required, their frequency is either once or twice per annum, with special examinations at any time at the discretion of the examining official.

The State officials under whose supervision trust companies are placed in the different States vary greatly. Where a State banking department. is in existence, the head of that department has supervision of trust companies. In a few States this duty is entrusted to the State Insurance Commissioner. In other States it is exercised by the State Auditor, the State Treasurer, or the Secretary of State. In the District of Columbia the Comptroller of the Currency has supervision of trust companies.

In over a dozen States trust companies are under practically the same regulations regarding reports, examinations, etc., as the State banks.

The principle of State supervision of banks, insurance companies and other financial institutions is pretty thoroughly established in this country, although there are those whose strong objections to "paternalism" in government lead them to look with disfavor upon such supervision. The excellent record of the National banking system certainly affords strong argument for Government supervision of banks. This is perhaps not the place to discuss the general question; but if the principle of supervision is accepted, as in the writer's opinion it ought to be, there is certainly great room for improvement in the laws of most of the States and Territories in the regulation and supervision of trust companies. Less than one-half of them can be said to have satisfactory statutes for the control of such institutions.

On the other hand, it may be said with much truth that great progress has been made, and that, considering the short time that trust companies have been a factor in the financial world, the progress has been quite remarkable. It took many years to develop our banking systems out of the chaotic conditions of the first half of the nineteenth century. Then, too, the attitude of the trust companies themselves promises much for rapid advancement in legislation regarding them. The great majority of the leading companies welcome the placing of greater safeguards about the business. In a number of instances legislation designed to regulate trust companies has come through the agitation of the subject by the trust companies themselves. Many trust companies in States. where the laws do not require examinations are in the habit of having their business thoroughly examined by expert accountants.



The aim in the preparation of this summary has been to include the essential facts, greatly condensed, of the laws of the several States and Territories specifically relating to trust companies. Effort has been made to have it correct as far as it goes, and to include the latest legislation on the subject. The scope of the work is, however, limited to a summary of statutes specifically relating to trust companies, and no effort has been made to include reference to all corporation or banking laws that might be construed as applying to trust companies.

The writer wishes to acknowledge his indebtedness to officials of the various States and Territories for copies of State and Territorial laws on the subject and for information furnished; and also to E. A. Feasel, Librarian of the Cleveland Law Library, for courtesies extended in the use of the library, without which the preparation of this summary would have been impossible.



HREE or more persons may incorporate for the purpose of carrying on any lawful business, under the Business Corporation Act, section 16 of which defines the powers of banks and trust companies doing a banking business. The powers specified are to do a regular banking business, including discounting; to make loans of all kinds; to issue bills to circulate as money, upon the terms prescribed in the Constitution of the State; to become trustees for any purpose; to be appointed and to act as executors, administrators, guardians and receivers; and to "do any business and exercise any powers incident to the business of trust companies doing a banking business." Married women and children may control their own deposits. Stockholders are not subject to double liability. Stockholders have the right of access to the books and records at reasonable and proper times. Trust companies may consolidate with other banks or trust companies.

Reports according to a form prescribed by him must be made to the State Treasurer not less than twice each year, such reports to be as of any past day specified by the Treasurer. They must be published in a local paper. The State Bank Examiner, who is under the direction of the State Treasurer, must examine each company at least once a year, without previous notice, and oftener if so directed by the State Treasurer. The capital required is $25,000 in towns of less than 5,000 inhabitants; $75,000 in cities of from 5,000 to 30,000; $100,000 in larger cities. The reserve required is 15 per centum, of which two-fifths must be in cash in vaults. Loans may not be made to officers or employees "without good security." Loans to one party may not exceed 10 per centum of the capital, surplus and undivided profits, unless amply secured by good collateral or approved by a majority of the board of directors.

Prior to the passage of the above-named Act, in 1903, trust companies were chartered by special acts of the Legislature, and such charters usually grant ample powers.

(General Laws 1903, Nos. 395 and 522; Laws 1907, No. 213.)


Trust companies are incorporated under the general incorporation law, under which any number of persons may associate for incorporation "for the transaction of any lawful business." The trust company law is found in the Acts of 1903, No. 31. Powers specified, to act as executor, administrator, guardian, trustee, or guardian of the estate of a lunatic, idiot, minor, "or to act in any other fiduciary capacity as if it were a natural person." The articles of incorporation must authorize such powers. The courts are given power to make such appointments. Such courts or officers making appointments may require the company to give such security as they deem proper, and to make orders regarding the trusts committed to them and to require all accounts that they might require of a natural person acting in the same capacity. Trust companies are forbidden to make loans on their capital stock, or to purchase same except to prevent losses on debts previously contracted. They must report to the Auditor of the Territory, who is ex-officio Bank Comptroller, annually. The Comptroller must examine each company annually or oftener, and after each examination report their condition to the Attorney-General.

(Code 1901, paragraphs 130, 131, 764. Acts 1903, No. 31. Acts 1907, No. 96.)


Three or more persons may associate under the provisions of the general incorporation law to be incorporated as a trust company. Articles of association shall state the face value of the shares, but same may not be more than $1,000. The capital, paid up, must be not less than $100,000 in counties whose population exceeds 50,000; not less than $75,000 in counties whose population is from 40,000 to 50,000; and in no event less than $50,000. Powers specified, to receive moneys in trust, and to accumulate same; to allow interest at not exceeding the highest rate allowed, by law; to accept and execute all such trusts and perform such duties of every description as may be committed to them by State or United States courts; to hold real or personal estate or trusts created in accordance with the laws of the State, and execute legal trusts in regard to same; to execute or guarantee any bonds required to be given in proceedings in law or equity in the courts of the State, but no such bond shall exceed one-half the paid-up capital of the company; to act as agent for the investment of money for other persons, and as registrar or transfer agent; to execute trusts for married women in respect to their separate property, real or personal, and as agent in the management of

same, "and generally to have and exercise such powers as are usually had and exercised by trust companies;" to act as administrator, receiver of any estate, guardian or curator of any infant or insane person or bis estate; to conduct fidelity insurance and title insurance business; to loan money on real estate and collateral security; to issue its debentures or notes and to pledge its mortgages upon real estate and collateral securities as security therefor; to buy and sell Government, State, municipal and other bonds, negotiable and non-negotiable papers, stocks and other investment securities. "In all other respects such corporations shall be governed by the laws of the State governing banks, and subject to such examinations as banks are now, or hereafter may be, subjected to by the laws of this State." Any trust company now existing may avail itself of this act, if its capital be such as required hereby. (Laws of 1903, Act 135. Laws of 1907, Act 208.)


Trust companies are organized under the provisions of the general incorporation law. Number of corporators required, three or more. (Civil Code, 1906, Paragraph 287). Such companies are regulated and governed by the provisions of an act approved April 6, 1891 (chapter 264, Laws 1891)-(as since amended). Powers specified, to act as executor, administrator, guardian (of estate only, not of person), assignee,. receiver, depositary, trustee. In these capacities their compensation shall not exceed that allowed to natural persons for like services. Courts are authorized to make these appointments. Courts may permit persons. holding like trusts to deposit their funds with a trust company, and have the amount of their bonds reduced. Such corporation shall not be required to give bond or security other than the deposit with the State,. but shall be responsible for funds handled same as a natural person. The paid-in capital must always equal at least ten per centum of the total deposits and amount due creditors, the surplus being reckoned as a part. of the capital. But the maximum capital required by this provision shall not exceed $1,000,000.

A trust company may not act in fiduciary capacities unless it has a capital of at least $100,000, of which $100,000 is paid in cash. Interest must be paid on all moneys held in trust. The company must deposit with the Treasurer of the State, before accepting any trust above mentioned, or deposits of trust money, the sum of $100,000 in bonds of the United States, the State of California, or any county, city or school district thereof, or in first-lien mortgages on improved and productive real estate in the State, worth at least twice the amount loaned thereon. Such securities shall be registered in the name of the Treasurer of the State, and may be exchanged from time to time. The company shall receive the income from same, so long as it is solvent and conforms to the law. If the paid-up capital of the company exceeds $250,000, it may mortgage any improved and productive real estate owned by it to the StateTreasurer, and have same counted as a part of the deposit.

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