SECTION 21.91. Acquisition and Retention of Shares as Treasury Stock

(a) Permitted acquisition of treasury stock. Pursuant to Finance Code, §§182.103, 184.101, and 184.102, a trust company may acquire its own shares to be held as treasury stock, if prior notice of the proposed transaction is filed with the banking commissioner pursuant to subsection (b) of this section and the plan of acquisition has not been disapproved by the banking commissioner pursuant to subsection (d) of this section.

(b) Notice filing. A trust company that desires to effect a treasury stock transaction shall file notice of its intention to enter into a plan of acquisition with the banking commissioner, setting forth or including as exhibits the following:

(1) consistent with subsection (g) of this section, the pro forma effects of the plan of acquisition on the trust company's liquidity and restricted and secondary capital, and disclosure of the basis for the calculations, including:

(A) the price or price range per share at which the shares will be acquired;

(B) the number of shares sought to be acquired, expressed as a maximum; and

(C) the source of funds for the acquisition;

(2) the date by which the plan of acquisition will be completed;

(3) a certified copy of a resolution duly adopted by the board of directors, approving the plan of acquisition; and

(4) a current draft of the securities offering document or other disclosure materials proposed to be delivered to shareholders considering the sale of the trust company's shares to the trust company.

(c) Consummation of plan of acquisition. If a notice of intention to acquire treasury stock filed under this section is not disapproved by the banking commissioner on or before the 30th day after the notice is complete and accepted for filing, the transaction may be consummated in the manner and in accordance with the terms set forth in the plan of acquisition. The banking commissioner may, before the expiration of the 30-day period, impose conditions on the plan of acquisition, including limitations on the number of shares to be acquired, the source of funds for the acquisition, or a condition that the transaction be consummated as of a specified date. A notification by the banking commissioner under this section may be by registered or certified mail, return receipt requested, and is complete when the notification is deposited in the United States mail postage prepaid, return receipt requested, addressed to the address furnished in the notice.

(d) Disapproval. The banking commissioner may disapprove the proposed plan of acquisition if the banking commissioner concludes that the trust company's plan of acquisition:

(1) will result in an acquisition of treasury stock at an aggregate cost in excess of its undivided profits,

(2) may threaten the adequacy of the trust company's liquidity and the requirements of Finance Code, §184.101(b);

(3) may threaten the adequacy of the trust company's equity capital or its restricted capital, or could result in a trust company failing to maintain the minimum required level in restricted capital set forth in Finance Code, §182.103; or

(4) could otherwise place the trust company in an unsafe or unsound condition.

(e) Compliance with securities law.

(1) An issuer's purchase of its own shares is a transaction subject to the antifraud provisions of federal securities law, see 15 United States Code, §78j, 17 Code of Federal Regulations, §240.10b-5, and Spector v. L Q Motor Inns, Inc., 517 F.2d 278 (5th Cir. 1975), cert. denied, 423 U.S. 1055 (1976). Such a transaction is also subject to the antifraud provisions of state securities law, see Texas Civil Statutes, Article 581-33(B). Potential liability of the trust company to the selling shareholder can therefore arise if the trust company withholds or misrepresents material facts that the seller would have considered important in making the decision to sell.

(2) Any transaction consummated under subsection (c) of this section does not constitute a determination by the banking commissioner that the trust company has complied with applicable securities law.

(f) Retention of treasury stock. The banking commissioner may require a trust company to cancel and retire all or part of shares held as treasury stock to the status of authorized and unissued shares if the banking commissioner concludes that holding treasury stock in the amount held by the trust company creates safety and soundness or other regulatory concerns.

(g) Accounting for treasury stock. A trust company shall account for the acquisition and retention of treasury stock in accordance with generally accepted accounting principles under either the cost method or the par value method (see Accounting Research Bulletin Number 43), although use of the cost method may avoid the reduction in restricted capital that would be required under the par value method. The method used for accounting for treasury stock must be clearly reflected in the trust company's accounting records.

(h) Status of treasury stock. Shares held by a trust company as treasury stock may not be voted, directly or indirectly, at any meeting of shareholders, and may not be counted in determining the total number of outstanding shares at any given time.

Source Note: The provisions of this §21.91 adopted to be effective December 31, 1998, 23 TexReg 13039; amended to be effective September 5, 2002, 27 TexReg 8203; amended to be effective July 10, 2008, 33 TexReg 5277