NY Banking Law, Article 12, limited liability investment company

S 507. Limited liability investment companies. 1. Investment companies which (a) do not accept or maintain credit balances or deposits in the United States, (b) do not engage in any business activity in the United States except as an incident to their international or foreign business or operations, and (c) conduct business in compliance with the provisions of this chapter, may be formed and operated as limited liability investment companies. Such limited liability investment companies shall be formed in accordance with, shall operate in compliance with, and shall meet all of the requirements of the limited liability company law and this chapter, except that to the extent any provision of the limited liability company law shall be inconsistent with the provisions of this chapter, the provisions of this chapter shall govern; provided, however, that limited liability investment companies shall not have perpetual existence. 2. Notwithstanding any other provision of this chapter, a limited liability investment company shall dissolve and its affairs shall be wound up upon the occurrence of any event specified in section seven hundred one of the limited liability company law. Upon such a dissolution, the provisions of this chapter shall govern the winding up of the affairs of the limited liability investment company and the distribution of its assets. Further, upon such a dissolution, if the members of a limited liability investment company wish to continue the existence of the company and meet the requirements of section seven hundred one of the limited liability company law, they shall apply for and may receive the approval of the superintendent for a new articles of organization and new authorization certificate. 3. For a period of one year following the effective date of this section, investment companies which have been formed and are operating pursuant to this article and article fifteen of this chapter on the effective date of this section, and which meet the requirements of subdivision one of this section, may convert into limited liability investment companies provided they meet all of the other requirements of this chapter as if they were newly formed companies and subject to the approval of the banking board. 4. The superintendent is hereby authorized and empowered to make such general rules and regulations as may be necessary and proper to effectuate the provisions of this chapter relating to the formation and operation of limited liability investment companies. S 508. General powers. In addition to the powers conferred by article fifteen of this chapter, an investment company may, subject to the restrictions and limitations contained in this article, have the following powers: 1. To borrow and lend money, with or without real or personal security; as principal or agent, to purchase, discount, acquire, invest in, sell and dispose of bills of exchange, drafts, notes, acceptances and other choses in action and obligations for the payment of money; and, as principal or agent, to purchase, acquire, invest in, service, sell and dispose of, and make loans upon the security of, bonds and mortgages on real property situated in this state or outside this state. 2. To accept bills of exchange or drafts drawn upon it payable on demand or on time not exceeding one year from the date of acceptance; to issue letters of credit authorizing the holders thereof to draw upon it or its correspondents at sight or on time; and to buy and sell coin, bullion and exchange. 3. With the approval of the banking board, and subject to such conditions as the banking board shall impose, (a) To act as financial agent of the United States government and as depositary of public money of the United States (including, without being limited to, revenues and funds of the United States, and any funds the deposit of which is subject to the control or regulation of the United States or any of its officers, agents, or employees); and to perform all such reasonable duties as depositary of such public money and as financial agent of the United States government as may be required of it; and to pledge assets or furnish other security, satisfactory in form and amount to the secretary of the treasury of the United States, for the safekeeping and prompt payment of such public money deposited with it and for the faithful performance of its duties as financial agent of the United States government. (b) To engage in the business of receiving deposits outside this state. (c) To receive money for transmission and to transmit the same from the United States to any foreign country and from any foreign country to the United States. 4. To establish branches pursuant to the provisions of article two of this chapter; provided, however, that an investment company to which the provisions of subdivision two of section thirty-six of this chapter are inapplicable may establish branches, without applying and obtaining authorization therefor under the provisions of article two of this chapter, but such investment company shall not open any such branch until it shall have notified the superintendent in writing of the place where such branch is to be located. 5. To purchase, acquire, invest in and hold all or any of the stocks of any corporation, domestic or foreign, and to sell and dispose of all or any such stocks owned by it. 6. To exercise, subject to such regulations as may be issued from time to time by the banking board, through any branch office opened and occupied outside the states of the United States and the District of Columbia with the approval of the superintendent and the banking board as provided in article two of this chapter, such further powers as may be usual, in connection with the transaction of the business permitted by this article, in the place where such branch office shall transact business; provided that no such branch office shall engage in the general business of producing, distributing, buying or selling goods, wares, or merchandise. The grant of powers to investment companies by or pursuant to this section shall not be deemed to limit or restrict any other corporations, heretofore or hereafter organized, in the exercise of their lawful powers. S 509. Restrictions on powers of investment companies. An investment company shall not: 1. Exercise within this state the powers conferred by subdivision two of section five hundred eight of this chapter, unless it shall have a paid-up capital stock of at least two million dollars. 2. Deposit any of its funds with any other moneyed corporation unless such other corporation has been designated as such depositary by a vote of a majority of the directors of the investment company, exclusive of any director who is an officer, director or trustee of the depositary so designated; provided, however, that this limitation shall not apply to the deposit of funds by an investment company with another moneyed corporation, which owns all or a majority of the capital stock of such investment company. 3. Be the holder of any shares of its own capital stock unless such stock shall have been taken to prevent loss upon a debt previously contracted in good faith, and stock so acquired shall, within six months from the time of its acquisition, be sold or disposed of at public or private sale; nor shall it, either directly or indirectly, make any discount to any person for the purpose of enabling him to pay for or hold shares of its stock either subscribed for or purchased by him. Any investment company making any such discount shall forfeit to the people of the state twice the amount of such discount. 4. Except as provided in section five hundred eight of this article, engage in the business of receiving deposits; provided, however, that nothing contained in this article shall prevent an investment company from maintaining for the account of others credit balances incidental to, or arising out of, the exercise of its lawful powers, but the banking board shall have power to prescribe, by specific or general regulation, the extent to which, and the conditions upon which, such credit balances may be established, maintained and paid out. S 510. Restrictions as to entries in books. 1. No investment company shall by any system of accounting or any device of bookkeeping, directly or indirectly enter any of its assets upon its books in the name of any other individual, partnership, unincorporated association or corporation, or under any title or designation that is not truly descriptive thereof. 2. Every investment company shall conform its methods of keeping its books and records to such orders in respect thereto as shall have been made and promulgated by the superintendent pursuant to the provisions of article two of this chapter. Any investment company that refuses or neglects to obey such order shall be subject to a penalty of one hundred dollars for each day it so refuses or neglects. S 510-a. Rate of interest; effect of usury. 1. No investment company shall take, receive, reserve or charge on any loan or discount made, or upon any note, bill of exchange or other evidence of debt, interest at a rate greater than the rate prescribed by the banking board pursuant to section fourteen-a of this chapter, or, if no rate has been so prescribed, six per centum per annum, as computed pursuant to this section, or two dollars if the interest so computed is less than that amount. Such interest may be taken in advance, reckoning the days for which the note, bill or evidence of debt has to run. The knowingly taking, receiving, reserving or charging a greater rate of interest shall be held and adjudged a forfeiture of the entire interest which the note, bill of exchange or other evidence of debt carries with it, or which has been agreed to be paid thereon. If a greater rate of interest has been paid, the person paying the same or his legal representatives may recover twice the entire amount of the interest thus paid from the investment company. The purchase, discount or sale of a bona fide bill of exchange, note or other evidence of debt payable at another place than the place of such purchase, discount or sale at not more than the current rate of exchange for sight draft, or a reasonable charge for the collection of the same, in addition to the interest, shall not be considered interest for the purpose of any law regulating the maximum rate of interest which may be charged, taken or received. Anything contained in this subdivision to the contrary notwithstanding, the charging of interest or discount on a loan or discount made outside this state at a rate allowed by the laws of the jurisdiction where such loan is made, or the acquisition by an investment company of a part interest or the entire interest in any loan or discount heretofore or hereafter made outside this state by a bank or trust company or any other banking institution, shall not be a violation of this section. 2. Upon advances of money repayable on demand to an amount not less than five thousand dollars made upon warehouse receipts, bills of lading, certificates of stock, certificates of deposit, bills of exchange, bonds or other negotiable instruments, pledged as collateral security for such repayment, any investment company may receive or contract to receive and collect as compensation for making such advances any sum which may be agreed upon by the parties to such transaction. S 511. Change of location; change of designation of principal office. Any investment company may make a written application to the superintendent, such application to be accompanied by an investigation fee of four hundred fifty dollars, for leave to change its place or one of its places of business to another place or for leave to change the designation of its principal office to a branch office and to change the designation of one of its branch offices to its principal office. The application shall state the reasons for such proposed change, and shall be accompanied by a copy of a resolution authorizing the making of the application, certified by a principal officer of the investment company to have been adopted by vote of a majority of its entire board of directors. If the proposed place of business is within the limits of the village, borough or city, if in a city not divided into boroughs, in which the place of business sought to be changed is located, such change may be made upon the written approval of the superintendent; if beyond such limits, notice of intention to make such application, signed by a principal officer of the corporation, shall be published once a week for two successive weeks in a newspaper to be designated by the superintendent for the purpose, in accordance with the provisions of article two of this chapter. If the superintendent shall grant his certificate authorizing the change of location, as provided in article two of this chapter, the investment company may, upon or after the day specified in the certificate, remove its property and effects to the location designated therein. Anything contained in this chapter to the contrary notwithstanding, an investment company to which the provisions of subdivision two of section thirty-six of this chapter are inapplicable may change the location of its place or one of its places of business to another place or may change the designation of its principal office to a branch office and change the designation of one of its branch offices to its principal office, without applying or obtaining authorization therefor under the provisions of this section or article two of this chapter, but no such change shall be made by an investment company until it shall have notified the superintendent in writing of the new location or of the change of designation of its principal office. If the newly designated principal office be in a different county than the county in which the principal office is located immediately prior to the change, the superintendent shall file in the office of the clerk of each such county a certificate stating that such change has been made by the investment company. S 512. Communications from banking department must be submitted to directors and noted in minutes. Every official communication as defined in article two of this chapter directed to an investment company or to any officer thereof shall be submitted, by the officer receiving it, to the board of directors at the next meeting of such board, and duly noted in the minutes of the meetings of such board. S 513. Reports to superintendent. On or before the first day of April in each year, every investment company shall make a written report to the superintendent of banks which shall contain a statement of its condition on the morning of the first day of January in said year and shall be in the form and contain the matters prescribed by the superintendent. The superintendent may, however, in his discretion accept from an investment company which has branches in a foreign country or countries, a report containing a statement of its condition as of a date not later than the first day of January and not earlier than the first day of November in the preceding year. Every such report shall be subscribed and affirmed as true under the penalties of perjury, according to the best of their knowledge and belief, by the two principal officers of the investment company at the time of such subscription, and shall state that the usual business of the investment company has been transacted at the location or locations required by this article and not elsewhere. Every such investment company shall also make such other special reports to the superintendent as he may from time to time require, which shall be in such form and filed at such date as may be prescribed by the superintendent and shall, if required by him, be subscribed and affirmed as true under the penalties of perjury. S 514. Liability of investment company for assessments by superintendent. When the superintendent, pursuant to the powers conferred on him by article two of this chapter, shall have levied any assessment upon any investment company and shall have duly notified such investment company of the amount thereof, the amount so assessed shall become a liability of and shall be paid by such investment company to the superintendent. S 515. Preservation of records of investment company. Every investment company shall preserve all its records of final entry, including cards used under the card system and deposit tickets, for a period of at least six years from the date of making the same or from the date of the last entry thereon; provided, however, that preservation of photographic reproduction thereof or records in photographic form shall constitute compliance with the requirements of this section. S 516. Restrictions on officers, directors and other employees. No officer, director, clerk or other employee of any investment company, and no person in any way interested or concerned in the management of its affairs, shall as individuals discount, or directly or indirectly, make any loan upon any note or other evidence of debt, which he shall know to have been offered for discount to such corporation, and to have been refused. Every person violating the provisions of this subdivision, shall, for each offense, forfeit to the people of the state twice the amount of the loan which he shall have made. No executive officer or director of any investment company shall borrow, directly or indirectly, from such investment company any sum of money if the transaction would not be permissible pursuant to subdivision eight of section one hundred three of this chapter in the case of an executive officer or director, as the case may be, of a bank or trust company. Vacancies in the board of directors occasioned by resignations, deaths or other cause shall be reported by each investment company to the superintendent within ten days after the event; and the investment company shall likewise report each election by the board to fill such vacancy with the name, address and occupation of the person elected and the name of the person whose place he fills.

S 517. How net earnings credited for dividend purposes, credits to surplus fund and to undivided profits, dividends to stockholders. When the net earnings of an investment company having preferred shares issued and outstanding have been determined at the close of a dividend period, if the surplus fund does not equal twenty per centum of the investment company`s capital, one-tenth of such net earnings shall be credited to the surplus fund, or so much thereof, less than one-tenth, as will make such fund equal twenty per centum of such capital. The balance of such net earnings, or the entire amount thereof if such fund equals such twenty per centum, may be credited to the investment company`s profit and loss account; or, if its expenses and losses for such dividend period exceed its gross earnings, such excess shall be charged to its profit and loss account. The credit balance of such account shall constitute the undivided profits at the close of such dividend period, which undivided profits shall be available for dividends. The directors of any investment company may annually, semi-annually or quarterly, but not more frequently, declare such dividends as they shall judge expedient from such undivided profits; provided, however, that the directors of any such company may declare a dividend in the last month of the fiscal year of such company, in lieu of any other semi-annual or quarterly declaration in the same fiscal year. No investment company shall declare any dividends to its stockholders until it shall have made good any existing impairment of its capital and any existing encroachment on its reserves required to be maintained against deposits. S 518. Payment of claims by investment companies where adverse claim is asserted; effect of claims or advices originating in, and statutes, rules or regulations purporting to be in force in occupied territory. 1. Notice to any investment company of an adverse claim to a credit standing on its books to the account of any person, or of an adverse claim to securities or other property held for the account of any person, shall not be effectual to cause said investment company to recognize said adverse claimant unless said adverse claimant shall also either procure a restraining order, injunction or other appropriate process against said investment company from a court of competent jurisdiction in the United States in a cause therein instituted by him wherein the person to whose account the credit stands, or for whose account the securities or other property are held, or his executor or administrator is made a party and served with summons, or shall execute to said investment company, in form and with sureties acceptable to it a bond, indemnifying said investment company from any and all liability, loss, damage, costs and expenses, for and on account of the payment of or delivery pursuant to such adverse claim or the dishonor of the order of the person to whose account the credit stands on the books of said investment company or for whose account the securities or other property are held by said investment company. 2. (a) An investment company need not recognize or give any effect to (1) any claim to a credit standing on its books to the account of, or any claim to securities or other property held by it for the account of, any corporation, firm or association in occupied territory or (2) any advice, statute, rule or regulation purporting to cancel or to give notice of the cancellation of the authority of any person at the time appearing on the books of such investment company as authorized to withdraw or otherwise dispose of cash, securities or other property of such corporation, firm or association, unless such investment company is required so to do by appropriate process procured against it in a court of competent jurisdiction in the United States in a cause therein instituted by or in the name of such corporation, firm or association, or unless the person making such claim or giving such advice or invoking such statute, rule or regulation, as the case may be, shall execute to such investment company, in form and with sureties acceptable to it, a bond indemnifying it from any and all liability, loss, damage, costs and expenses for and on account of recognizing or giving any effect to such claim, advice, statute, rule or regulation. (b) For the purposes of this subdivision (1) the term "occupied territory" shall mean territory occupied by a dominant authority asserting governmental, military or police powers of any kind in such territory, but not recognized by the United States as the de jure government of such territory, and (2) the term "corporation, firm or association in occupied territory" shall mean a corporation, firm or association which has, or at any time has had, a place of business in territory which has at any time been occupied territory. (c) The foregoing provisions of this subdivision shall be effective only in cases where (1) such claim or advice purports or appears to have been sent from or is reasonably believed to have been sent pursuant to orders originating in, such occupied territory during the period of occupation, or (2) such statute, rule or regulation appears to have emanated from such dominant authority and purports to be or to have been in force in such occupied territory during the period of occupation. (d) The foregoing provisions of this subdivision shall apply to claims, advices, statutes, rules or regulations made, given or invoked either prior to, or on or subsequent to the effective date of this act. 3. An investment company need not recognize or give any effect to a claim of authority to order the payment or delivery of any funds or other property standing on its books to the credit of, or held by it for the account of, any person, corporation, unincorporated association or partnership, which claim conflicts with a claim of authority of which the investment company had prior notice, unless the person or persons asserting such subsequent claim shall procure a restraining order, injunction or other appropriate process against said investment company from a court of competent jurisdiction in the United States, or, in lieu thereof, at the option of said investment company, shall execute to said investment company, in form and with sureties acceptable to it, a bond, indemnifying it for any and all liability, loss, damage, costs and expenses for or on account of any payment or delivery of such property by it pursuant to such subsequent claim of authority on for or on account of the dishonor of any draft or other order of any person or persons asserting the claim of authority of which such investment company already had notice at the time the subsequent conflicting claim of authority is asserted by the person or persons furnishing such bond. S 519. Acquisition of control of investment companies. 1. Subject to such regulations as the superintendent may prescribe, prior to the acquisition of control of an investment company by means of the acquisition of the capital stock or equity interests in such investment company or in any company which directly or indirectly controls such investment company, the acquiring company shall make written application to the superintendent for permission to acquire such control. Such application shall be in such form and shall contain such information as the superintendent may require and such applicant, at the time of making such application, shall pay to the superintendent the sum of one thousand dollars as an investigation fee. The superintendent shall disapprove the proposed exercise of control of an investment company if, after notice to and an opportunity to be heard by the applicant and such investment company, he finds the acquisition of control therein contrary to law or determines that disapproval is reasonably necessary to protect the interests of the people of this state. In making such determination, the superintendent shall only consider (a) whether the character, responsibility and general fitness of the company which seeks to control such investment company are such as to command confidence and warrant belief that the business of such investment company will be honestly and efficiently conducted in a manner consistent with the public interest, the interests of depositors and creditors of such investment company, and (b) whether the exercise of control may impair the safe and sound conduct of the business of such investment company, the conservation of its assets or public confidence in its business. Unless the superintendent shall have denied such application in writing within ninety days of the filing thereof, or shall have advised the applicant in writing before the expiration of ninety days of his determination to extend such period an additional sixty days, such application shall be deemed approved. As used in this subdivision one, the term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person, whether by means of the ownership of the voting stock or equity interests of such person or of one or more persons controlling such person, by means of a contractual arrangement, or otherwise. Control shall be presumed to exist if any company, directly or indirectly, owns, controls or holds with the power to vote ten per centum or more of the voting stock of any investment company or of any company which owns, controls or holds with power to vote ten per centum or more of the voting stock of such investment company, but no person shall be deemed to control an investment company solely by reason of his being an officer or director of such investment company. The superintendent may in his discretion, upon the application of an investment company or any company which, directly or indirectly, owns, controls or holds with power to vote or seeks to own, control or hold with power to vote any voting stock of such investment company, determine whether or not the ownership, control or holding of such voting stock constitutes or would constitute control of such investment company for purposes of this section. The provisions of this subdivision shall not apply to (1) a company which has submitted a plan of acquisition to the superintendent pursuant to subdivision two of this section or (2) any action taken pursuant to article thirteen of this chapter. 2. Any company, whether or not it is in control of the business of an investment company as provided in subdivision one of this section, which desires to acquire all, or substantially all of the capital stock of an investment company shall, together with such investment company, submit in duplicate to the superintendent a written plan of acquisition of such stock together with such other information as the superintendent may determine. Such plan shall be in form satisfactory to the superintendent, shall specify each investment company the stock of which is to be acquired by the company and shall prescribe the terms and conditions of the acquisition and the mode of carrying it into effect, including the manner of exchanging the shares of the investment company for shares or other securities or cash of the company. Any such plan may provide for the payment of cash in lieu of the issuance of fractional shares of the company. At the time of submission to the superintendent of the written plan of acquisition of stock, an investigation fee of one thousand dollars shall be paid to the superintendent. There shall be submitted, in duplicate, to the superintendent with the plan of acquisition of stock, a certificate of the president or secretary of the company, certifying that such plan has been approved by the board of directors or other governing body of his company by a majority vote of all the members thereof, and a certificate of the president, secretary or cashier of the investment company, the acquisition of all the capital stock of which is provided for, certifying that such plan has been approved by the board of directors of his corporation by a majority vote of all the members thereof, and that such plan was thereafter submitted to the stockholders of such corporation at a meeting thereof held upon notice of at least fifteen days, specifying the time, place and object of such meeting and addressed to each stockholder at the address appearing upon the books of the corporation and published at least once a week for two successive weeks in one newspaper in the county in which such corporation has its principal place of business and that such plan has been approved at such meeting by the vote of the stockholders owning at least two-thirds in amount of the stock of such corporation. The superintendent shall approve or disapprove of a proposed plan of acquisition within one hundred twenty days after the submission of such plan of acquisition to him, and in determining whether or not to approve any such plan the superintendent shall take into consideration the declaration of policy contained in section ten of this chapter. If the superintendent shall approve such plan of acquisition, the superintendent shall file the plan, together with such certificates and the original of the approval of the superintendent, in the office of the superintendent. Upon such filing in the office of the superintendent the plan, and the acquisitions provided for therein, shall become effective, unless a later date is specified in the plan, in which event the plan and such acquisitions shall become effective upon such later date. Any stockholder of any such corporation, entitled to vote on such plan of acquisition, who does not assent thereto shall, subject to and by complying with section six thousand twenty-two of this chapter, have the right to receive payment of the fair value of his shares and the other rights and benefits provided by such section. The provisions of this subdivision shall not apply to any action taken pursuant to article thirteen of this chapter. 3. For a period of six months from the date of qualification thereof and for such additional period of time as the superintendent may prescribe in writing, the provisions of this section shall not apply to a transfer of control by operation of law to the legal representative, as hereinafter defined, of one who has control of an investment company. Thereafter, such legal representative shall comply with the provisions of subdivision one of this section. The provisions of subdivision one of this section shall be applicable to an application made under such section by a legal representative. The term "legal representative," for the purposes of this section, shall mean one duly appointed by a court of competent jurisdiction to act as executor, administrator, trustee, committee, conservator or receiver, including one who succeeds a legal representative and one acting in an ancillary capacity thereto in accordance with the provisions of such court appointment. 4. For purposes of this section the term "company" shall be given the same meaning as is contained in its definition in section one hundred forty-one of this chapter. 5. Notwithstanding the provisions of subdivision three of section two-a of this chapter, when applying this section to limited liability investment companies, the term "capital stock" shall mean the equity interest of a member as set forth in the company`s articles of organization or, in the absence of such a provision, the equity interest represented by a member`s right to a proportionate share of the profits of the company. S 520. Savings clause. Nothing in this article contained shall be deemed to require the reincorporation of any corporation heretofore organized under the provisions of article seven of chapter three hundred and sixty-nine of the laws of nineteen hundred fourteen, entitled "An act in relation to banking corporations, and individuals, partnerships, unincorporated associations and corporations under the supervision of the banking department," constituting chapter two of the consolidated laws, or under the provisions of said article seven of said chapter two of the consolidated laws, or under the provisions of said article seven of said chapter as amended, nor to alter or affect any rights, privileges, powers, benefits, or immunities granted to such corporations by the provisions of any law of this state. Such corporations shall have all of the rights, privileges, powers, benefits and immunities provided by any laws of this state with the same effect as if such corporations were referred to in such laws as organized under this article; and no further amendment to any such laws shall be required to give such corporations such rights, privileges, powers, benefits and immunities. Except as in this article otherwise provided such corporations shall be subject to all of the obligations and duties of investment companies organized under the provisions of this article, and such corporations shall have all of the rights, privileges, powers, benefits and immunities by this article granted to such companies.

New York Banking Law

Article 12, Limited Liability Investment Companies