Barister's Brain
As a regular feature in Quarterly Interest, our advice columnist, Barry Barrister, will answer a legal question the OSBC has received that we think would be of interest to bankers. Even though he's a fictional lawyer (arguably the best kind), Barry has insisted we include the caveat that the advice he dispenses is general in nature, and is not intended as a substitute for obtaining specific legal advice from counsel when necessary.
Dear Barry,
We are preparing to pay a dividend, and our internal auditor has found a statute that we were not previously aware even existed. It's K.S.A. 9-911, Declaration of Dividends. Is this a new provision? Are we in trouble?
- Blissfully Unaware Banker Brenda
Dear Brenda:
Well, this is no new provision. In fact, it has been part of the banking code since well before 1947! In a nutshell, the statute requires that before paying a dividend from undivided profits the bank must transfer 25% of its net profits since the last preceding dividend to its surplus fund, until the surplus fund equals the total capital stock. And, don't forget, if you have issued preferred stock, that stock is included in "total capital stock" as well. As far as whether you are in trouble if you have failed to make this transfer in the past, my sources tell me you should contact your friendly review examiner at the OSBC for guidance on how to correct the violation.
Lawfully yours,
Barry
