45-2-208 - Capital notes and debentures.
45-2-208. Capital notes and debentures.
(a) Any bank, after obtaining the prior approval of the shareholders owning two thirds (2/3) of the stock of the bank entitled to vote and after obtaining the prior approval of the commissioner, may issue and sell its convertible or nonconvertible capital notes or debentures. Capital notes or debentures that are by their terms convertible into stock may be converted into shares of common or preferred stock in accordance with the provisions therefor as may be made in the capital notes or debentures with the approval of the commissioner.
(b) Capital notes and debentures issued by banks shall be unsecured indebtedness of the bank and shall be subordinate to the claims of all depositors and of all other creditors of the bank, regardless of whether the claims of the depositors arose before or after the issuance of the capital notes or debentures. In order to secure the payment of the capital notes or debentures, however, provisions for sinking funds may be made. In the event of liquidation, all depositors and all other creditors of the bank shall be entitled to be paid in full before payment shall be made on account of principal or interest on the capital notes or debentures. No payment shall be made at any time on account of the principal thereof unless following the payment the aggregate of the capital, surplus and undivided profits and capital notes or debentures thereafter outstanding shall be at least equal to the aggregate immediately before the original issuance of the capital notes or debentures, or as may otherwise be expressly authorized by the commissioner. The claims of holders of capital notes or debentures shall, however, be superior to the claims of stockholders for dividends or other claims on account of shares of capital stock held by them.
(c) The amount of outstanding capital notes and debentures issued and outstanding by any bank shall be, subject to the approval of the commissioner, treated as capital for the purpose of computing the loan limits prescribed by § 45-2-1102(a) and for the purpose of computing investment limits prescribed by § 45-2-607(a)(9).
[Acts 1969, ch. 36, § 1 (3.302); 1973, ch. 294, § 6; T.C.A., § 45-208.]