When authorized by the commissioner as provided in Chapter 3 (commencing with Section 1040) a corporation may be formed by one or more persons in accordance with the laws of this state for the purpose of conducting a commercial banking business or a trust business, or both of them. The qualification requirements of the Corporate Securities Law of 1968 shall not apply to the offer and sale of securities issued by and representing an interest in or a direct obligation of a bank or trust
company incorporated under the laws of this state if the securities are offered and sold pursuant to the commissioner’s authorization described in Section 1201 or the securities are exempt from authorization pursuant to Section 1202, or by a regulation or order of the commissioner.
Chapter 1General Provisions
Section § 1000
This law explains that with permission from the commissioner, people can start a corporation for commercial banking or trust business in California. The usual rules for offering and selling corporate securities do not apply to banks or trust companies if they have the commissioner's authorization or if they fall under certain exemptions.
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Section § 1001
This section simply states that this set of laws is referred to as the "Banking Law." It's just naming the division.
This division is known, and may be cited, as the “Banking Law.”
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Section § 1002
This law states that banks in California cannot operate as close corporations. A close corporation is a type of business structure with fewer shareholders and less regulatory oversight compared to regular corporations. This structure is defined in another section of the Corporations Code.
No bank shall be a close corporation (as defined in Section 158 of the Corporations Code).
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Section § 1003
This law applies to a range of entities involved in banking and trust activities. It covers corporations engaged in commercial and industrial banking, as well as trust businesses. It also includes national banking associations operating in California, as long as state rules don't conflict with federal laws. Other corporations and individuals might fall under this law if they choose to follow its provisions or if they violate any of its rules and face penalties.
Except where explicitly stated or the context provides otherwise, this division is applicable to the following:
(a)CA Financial Code § 1003(a) All corporations engaging in commercial banking, industrial banking, or the trust business.
(b)CA Financial Code § 1003(b) All national banking associations authorized to transact business in this state to the extent that the provisions of this division are not inconsistent
with and do not infringe paramount federal laws governing national banking associations.
(c)CA Financial Code § 1003(c) All other corporations that subject themselves to the special provisions and sections of this division.
(d)CA Financial Code § 1003(d) All other persons, associations, copartnerships, or corporations who, by violating any of its provisions, become subject to the penalties provided for in this division.
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Section § 1004
This law section explains how California state banks are incorporated and what legal provisions apply to them. A state bank must be set up under specific sections of the Corporations Code and approved by the commissioner to conduct commercial or industrial banking business. Regular banks follow general corporation laws, but if any banking-specific rule conflicts with these, the banking rule takes precedence. Public banks, which might be nonprofit, follow nonprofit corporation laws, but if there's a conflict between nonprofit laws and public banking laws, the latter rule.
Public banks are defined according to another legal section, cited here for reference, meaning they must meet specific criteria under government regulations.
(a)CA Financial Code § 1004(a) A California state bank is a corporation incorporated under Division 1 (commencing with Section 100) of Title 1 of the Corporations Code or, in the case of a public bank, a corporation incorporated under Part 2 (commencing with Section 5110) or Part 3 (commencing with Section 7110) of Division 2 of Title 1 of the Corporations Code, that is, with the approval of the commissioner, incorporated for the purpose of engaging in, or that is authorized by the commissioner to engage in, the commercial or industrial banking business.
(b)Copy CA Financial Code § 1004(b)
(1)Copy CA Financial Code § 1004(b)(1) All provisions of law applicable to corporations generally, including, but not limited to, the General Corporation Law (Division 1 (commencing with Section 100), Title 1 of the Corporations Code) shall apply to a
bank that is not a public bank. However, whenever any provision of this division or any regulation or order issued under any provision (other than this section) of this division applicable to banks is inconsistent with any provision of law applicable to corporations generally, that provision of this division or that regulation or order shall apply and the provision of law applicable to corporations generally shall not apply.
(2)CA Financial Code § 1004(b)(2) All provisions of law applicable to nonprofit corporations generally, including, but not limited to, the Nonprofit Corporation Law (Division 2 (commencing with Section 5000), Title 1 of the Corporations Code) shall apply to public banks. Whenever a provision of Division 5 of Title 5 of the Government Code applicable to public banks is inconsistent with a provision of law applicable to nonprofit mutual benefit corporations or nonprofit public benefit corporations generally, the provision of Division 5 of Title 5 of the
Government Code applicable to public banks shall apply, and the inconsistent provision of law applicable to nonprofit mutual benefit corporations or nonprofit public benefit corporations generally shall not apply to a public bank.
(c)CA Financial Code § 1004(c) As used in this section, public bank has the same meaning as defined in Section 57600 of the Government Code.
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Section § 1005
In California, it's illegal for individuals or businesses to engage in commercial banking, industrial banking, or trust operations unless they are a corporation specifically formed for that purpose.
It shall be unlawful for any person, corporation, limited liability company, partnership, firm, or any other form of business entity allowed by law, to engage in or transact commercial banking business, industrial banking business, or trust business within this state except by means of a corporation duly organized for that purpose.
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Section § 1006
This law states that no new corporation can be set up in California to operate as a commercial bank, industrial bank, or trust company, unless it's done according to the rules laid out in this specific chapter of the law.
No corporation shall hereafter be organized under the laws of this state to transact the business of a commercial bank, industrial bank, or trust company, except as provided in this chapter.
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Section § 1007
This law ensures that any existing or potential legal claims against banks, trust companies, or their leaders remain valid even if the financial code changes. Basically, if a bank or its people did something wrong, they can still be held accountable regardless of changes to the law.
Neither the enactment of this code nor the amendment or repeal thereof, nor the repeal of any statute affected thereby, shall take away or impair any liability or cause of action existing or incurred against any bank or trust company, or the shareholders, directors, or officers thereof.
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Section § 1008
This law clarifies that for corporations set up as public banks, words like 'share', 'shareholder', or 'stockholder' are related to 'membership' or 'member' in the public bank. It's about terminology translation when talking about public banks.
When applicable to a corporation organized as a public bank, as defined in Section 57600 of the Government Code, references in this division to share, shareholder, or stockholder shall mean membership or member in the public bank, as applicable.
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