CHAPTER 444

FORMERLY

SENATE BILL NO. 495

AS AMENDED BY SENATE AMENDMENT NOS. 1 AND 4

AN ACT TO AMEND TITLE 5 OF THE DELAWARE CODE BY PROVIDING FOR RULES FOR THE CONDUCT OF BUSINESS BY, AND TAXATION OF, FOREIGN BANKS IN DELAWARE.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF DELAWARE (three- fifths of all mcmbcrs elected to cach Housc thcreof concurring therein):

Scction 1. This Act may be referred to as the "Forcign Banking Dcvclopmcnt Act."

Scction 2. Amend Scction 101, Title 5, Dclaware Code, by deleting subscction (7) thcrcof in its entirety and substituting in licu thcrcof thc following and by adding new subscction (11), (12), (13) and (14) as follows:

"(7) ' Banking organization' mcans:

(a) A bank or bank and trust company organizcd and existing undcr thc laws of this Statc;

(b) A national bank organized and existing as a national banking association pursuant to thc National Bank Act, t2 U.S.C. §21 ct scq„ and maintaining it principal officc in this Statc;

(c) An Edgc At corporation organizcd pursuant to §25 (a) of thc Fcdcrai Rcscrve Act, 12 U.S.C. §61t g seq., or a state chartcrcd corporation exercising thc powcrs grantcd thcrcundcr pursuant to an agrccmcnt with thc Board of Govcmors of thc Fcdcrai Rcscrve Systcm, and maintaining an officc in this Statc;

(d) A federal branch or agcncy licensed pursuant to §4 and §5 of thc International Banking Act of 1978, 12 §3101 ct seq., to maintain an officc In this State; or

(c) A forcign bank agcncy organizcd pursuant to Chaptcr 13 of this Titlc.

(11) 'Forcign bank' mcans any company organizcd undcr thc laws of a forcign country, a tcrritory of thc Unitcd Statcs, Pucrto Rico, Guam, American Samoa or thc Virgin Islands, which cngagcs in thc business of banking, or any subsidiary or affiliate, organized undcr such laws, of any such company. The tcrm "foreign bank" includes, without limitation, forcign commercial banks, forcign mcrchant banks and othcr forcign institutions that cngagc in banking activitics usual in conncction with thc business of banking in thc countries whcrc such forcign companies arc organizcd or operating.

(12) 'Forcign bank agcncy' mcans an officc in this Statc of a forcign bank that is exercising thc powcrs authorized by §1304 of this 'Mk.

(13) 'Forcign country' mcans any country othcr than thc Unitcd States, and includes any colony, dependency, or posscssion of any such country.

(14) 'Representative office means an officc in this Statc of a forcign bank that is exercising the powcrs authorlzcd by §1323 of this Title."

Section 3. Amend Scction 941. Titlc 5, Dclawarc Codc, by deleting subsection (1) thcrcof in its entirety and substituting in Ilcu thcrcof thc following:

"(I) 'Bank' means any bank or bank and trust company organizcd undcr this Titlc or any othcr law or laws of this Statc, any dcpository institution organized undcr thc authority of thc Unitcd States and having iu principal placc of business in this State and any forcign bank agency."

Scction 4. Amend Chapter II, Title 5, Dclaware Codc, by deleting the phrases "bank, trust company and national bank," "bank, trust company or national bank," "bank, national bank and every trust company," and "bank or trust company" wherever thcy appcar in such Chaptcr and substituting in licu thercof thc tcrm "banking organization", and by deleting the phrases "banks, trust companies and national banks", "banks, trust companies or national banks" and "banks and trust companies and national banks" wherever they appcar in such Chaptcr and substituting in licu thcreof thc tcrm "banking organizations."

Section 5. Amend Scction 1 101 (b), Title 5, Delaware Code, by adding thereto the following:

defined in §101 (7) of this Title) shall be treated as if it were a corporation. The Commissioner shall prescribe such rules and regulations as may be deemed necessary in order that the tax liability of any foreign bank agency or federal branch or agency under this subsection (b) may be returned, determined, computed, assessed, collected, and adjusted, in such manner as to clearly reflect the tax liability and the various factors necessary for the determination of such liability, and in order to prevent avoidance of such tax liability.

Section 6. Amend Title 5, Delaware Code, by adding a new Chapter 13 as follows:

"CHAPTER 13. FOREIGN BANKS

Subchapter I. Foreign Bank Agencies

§1301. Scope; Construction

This subchapter deals with conditions under which foreign banks may transact business in this State; it shall not be construed to limit the powers granted to any bank in this State to conduct its business.

§1302. When Foreign Banks May Transact Business in this State

(a) No foreign bank shall transact a banking business or maintain in this State an office for carrying on such business or any part thereof unless such foreign bank has:

(1) Been authorized by the laws under which it was organized and by its charter to carry on such business;

(2) Furnished to the Commissioner such proof as to the nature and character of its business and as to its financial condition as the Commissioner may require; and

(3) Filed with the Commissioner an application containing the information required by §1303 of this Title and received a certificate of authority duly issued to it by the Commissioner as provided in $1303 of this Title.

(b) This section shall not be construed to prohibit foreign banks which do not maintain an office in this State for the transaction of business from (1) making loans or issuing letters of credit in this State secured by mortgages on real property, nor from contracting in this State with a banking organization to acquire from or through such banking organization a part interest or the entire interest in a loan or evidence of debt which such banking organization has heretofore or hereafter made, purchased or acquired, for its own account or otherwise, together with a like interest in any security or in any security instrument proposed to be given or heretofore or hereafter given to secure or evidence such loan or evidence of debt; (2) enforcing in this State obligations heretofore or hereafter acquired by it in the transaction of business outside of this State, or in the transaction of any business authorized by this section; (3) acquiring, holding, leasing, mortgaging, contracting with respect to, or otherwise protecting or conveying property in this State heretofore or hereafter assigned, transferred, mortgaged or conveyed to it as security for, or in whole or part satisfaction of a loan or loans made by it or obligations made by it or obligations acquired by it in the transaction of business outside of this State, or in the transaction of any business authorized by this Section; or (4) issuing letters of credit or otherwise guaranteeing the obligations of the State of Delaware or any agency or political subdivision thereof.

§1303. Application; Approval by Commissioner

(a) The application of a foreign bank to procure a certificate of authority to establish and maintain a foreign bank agency shall state:

(1) The name of the foreign bank and the country under the laws of which it was organized.

(2) The date of its incorporation and the period of its duration.

(3) The address of its principal office in the country under the laws of which it was organized.

(4) the names of other states and countries in which it is admitted or qualified to transact business and the nature of the worldwide business conducted by the foreign bank.

(5) The amount of its capital stock actually paid in cash and the amount subscribed for and unpaid. one illion

dolla(r6s)inTgc:scstialirsairribl'igtitir ant," eatzcgrfnptliCt e for Vt111:43 whiche :RugrtlalecUicondition as

of a date within 120 days prior to the date of such application or such other date as the Commissioner may determine.

(7) The location by street and post office address and county where its business is to be

transacted in this State and the name of the person who shall be in charge of the business and affairs of the proposed foreign bank agency.

(8) The address of its proposed registered office in this State, and the name of its proposed registered agent In this State at that address for service of any paper, notice or legal process upon the applicant in connection with matters arising out of this Chapter.

(9) Such additional information as shall enable the Commissioner to determine whether such foreign bank is entitled to a certificate of authority.

(b) At the time any such application is submitted to the Commissioner, such foreign bank shall also submit a duly authenticated copy of its charter and bylaws, or an equivalent thereof satisfactory to the Commissioner.

(c) No certificate of authority to establish and maintain a foreign bank agency shall be granted to a foreign bank unless such foreign bank agrees in its application to be bound by the following conditions:

(I) Such foreign bank will have no more than a single office located in this State open to the general public for the conduct of a banking business; and

(2) Such foreign bank agency will operate in a manner and at a location that is not likely to attract customers from the general public in this State to the substantial detriment of existing banking organizations located in this State; provided that such foreign bank agency may be operated in a manner likely to attract and retain customers with whom such foreign bank has had business relations.

(d) Any application under this section shall be accompanied by a filing fee in the amount of 52,000 for the use of the State.

(e) In determining whether to approve any application under this section and to issue a certificate of authority to such applicant, the Commissioner shall consider:

(I) The financial and managerial resources of the foreign bank;

(2) The future prospects of the foreign bank and its proposed activity in this State;

(3) The financial history of the foreign bank;

(4) Whether the establishment of the proposed foreign bank agency may result in undue concentration of resources or substantial lessening of competition in this State; and

(5) The convenience and needs of the public of this State.

(f) A certificate of authority issued in accordance with this Section shall remain in effect until surrendered or revoked.

§1304. RI; is and Privile es of Forel Bank old Certificate of Authori Certa Prohibitions

(a) A foreign bank holding a certificate of authority pursuant to this subchapter may establish and maintain a foreign bank agency in this State at the location stated therein and may engage in a general banking business thereat; provided, however, that such foreign bank agency shall not:

(I) engage in the business of accepting deposits, provided that such foreign bank may maintain for the account of others credit balances incidental to, or arising out of, the exercise of its lawful powers including, but not limited to, balances arising out of the conduct of a travellers' check business or the exercise of any similar power and may accept deposits from persons or entitles which are neither citizens nor residents of the United States; or

(2) have the power to act as a fiduciary of any sort including, but not limited to, an executor, administrator, guardian, trustee by will Or other instrument, receiver or attorney-in- fact.

For purposes of this 51344, the term "credit balances" shall include funds placed in an account which (1) are derived from the exercise of other lawful banking powers; (2) are to serve a specific purpose; (3) are not solicited from the general public; (4) are not used to pay operating expenses; (5) are withdrawn within a reasonable period of time after the specific purpose for which they were placed there has been accomplished; and (6) are drawn upon in a manner reasonable in relation to the size and nature of the account.

(b) The Commissioner may adopt such rules and regulations as may be deemed necessary governing the extent to which and the conditions, in addition to those set forth in this subchapter and including appropriate reserves, upon which deposits may be established, maintained and paid out by a foreign bank agency Notwithstanding anything to the contrary in subparagraph (a) hereof, a foreign bank agency

may. if authorized by regulations adopted by the Commissioner, accept any deposit, or exercise any other power, which it could accept or exercise if it were operating in this State as a federal agency pursuant to the International Banking Act of 1978, 12 U.S.C. §3101 et seq.. as amended.

§1305. Maintenance of Assets in This State

(a) Each foreign bank holding a certificate of authority pursuant to this subchapter shall hold in this State currency, bonds. notes. debentures, drafts, bills of exchange or other evidence of indebtedness. including loan participation agreements or certificates, or other obligations payable in the United States or in United States funds or. with the prior approval of the Commissioner. in funds freely convertible into United States funds, or such other assets as the Commissioner shall by rule or regulation permit, in an amount which shall bear such relationship as the Commissioner shall by regulation prescribe to liabilities of such foreign bank payable at or through its foreign bank agency. including acceptances, but excluding (without duplication) (1) accrued expenses. (2) amounts due and other liabilities to other offices, agencies or branches of. and wholly- owned (except for a nominal number of directors' shares) subsidiaries of, such foreign bank. (3) liabilities maintained on the books of an international banking facility located at such foreign bank agency, and (4) such other liabilities as the Commissioner shall determine. For the purposes of this subparagraph (a), the Commissioner shall value marketable securities at principal amount or market value, whichever is lower, shall have the right to determine the value of any non-marketable bond, note, debenture, draft. bill of exchange, other evidence of indebtedness, including loan particpation agreements or certificates, or of any other asset or obligation held by or owed to the foreign bank or its agency within this State, and in determining the amount of assets for the purpose of computing the above ratio of assets to liabilities, shall have the power to exclude in whole or in part any particular asset. lf, by reason of the existence or the potential occurrence of unusual and extraordinary circumstances, the Commissioner deems it necessary or desirable for the maintenance of a sound financial condition. the protection of depositors, creditors and the public interest, and to maintain public confidence in the business of the foreign bank agency, such foreign bank may be required, subject to such terms and conditions as the Commissioner may prescribe. to deposit the assets required to be held in this State pursuant to this subparagraph (a) with such banks or trust companies or national banks located in this State as the Commissioner may designate.

(b) In the event that any of the deposits received within this State by a foreign bank are insured by the Federal Deposit Insurance Corporation, the Commissioner shall specify what reasonable percentage of deposit liabilities may be excluded in determining the aggregate amount of liabilities of such foreign bank for deposits received within this State for purposes of subparagraph (a) of this section by reason of the fact that all or a part of such deposit liabilities are insured by the Federal Deposit Insurance Corporation.

§1306. Reports of a Foreign Bank; Penalties

(a) Every foreign bank holding a certificate of authority pursuant to this subchapter shall at such times and in such form as the Commissioner shall prescribe. make written reports to the Commissioner under the oath of one of its officers. managers or agents transacting business in this State, showing the amount of its assets and liabilities and containing such other matters as the Commissioner shall prescribe. If any such foreign bank shall fail to make such report as directed by the Commissioner, or if any such report shall contain any false statement knowingly made. the same shall be grounds for revocation of the foreign bank's certificate of authority.

(b) Each foreign bank holding a certificate of authority pursuant to this subchapter shall cause to be kept. at its place of business in this State. correct and complete books and records of account of its business operations transacted by such foreign bank agency. and shall make such records available to the Commissioner, upon request, at any time during regular business hours of the foreign bank agency. Such foreign bank agency shall also make available to the Commissioner. upon request, current copies of the charter and bylaws of the foreign bank, and minutes of the proceedings of its directors or committees relative to the operations of the agency. Any failure to keep such records as aforesaid or any refusal to produce such records or other documents upon request by the Commissioner shall be grounds for revocation of the foreign bank's certificate of authority.

§1307. Rules, Regulations, Orders

In addition to any other authority granted under this Title. the Commissioner may adopt rules and regulations and issue orders under this subchapter for the following purposes:

(I) To prescribe information or forms required in connection with an application pursuant to §1308(a) of this Title;

(2) To authorize permissible activities of foreign bank agencies pursuant to 11304(b) of this Title:

pursuant to §1305 of this Title and to establish procedures governing the determination thereof;

(4) To establish procedures in connection with approvals pursuant to §§1303 and 1308 of this Title and the filing of required reports pursuant to §1306 of this Title; and

(5) To issue orders units' §1310 of this Title and establish procedures governing such issuances.

§I308. Change of Location. Name or Business

Any foreign bank holding a certificate of authority pursuant to this subchapter may make a written application to the Commissioner for leave to do one or more of the following:

(I) To change its place of business from the place designated in the certificate of authority to another place in this State. An application for such change shall be accompanied by a filing fee of ;500.

(2) To change its corporate name or the duration of its corporate existence if such change has been effected under the taws under which it was organized.

§1309. Termination of Existence

In the event a foreign bank holding a certificate of authority pursuant to this subchapter is dissolved or its authority or existence is otherwise terminated or cancelled under the laws under which it was organized, a certificate of the official responsible for maintaining records of banks of the jurisdiction of organization of such foreign bank attesting to the occurrence of any such event, or a certified copy of an order or decree of a court of such jurisdiction directing the dissolution of such foreign bank, the termination of its existence or the cancellation of its authority shall be delivered to the Commissioner. The filing of the certificate, order or decree shall have the same effect as the revocation of its certificate of authority under §1310 of this Title. The Commissioner shall continue as agent of the foreign bank upon whom process against it may be served in connection with matters out of this subchapter prior to the filing of such certificate, order or decree.

§1310. Revocation of Certificate of Authority

(a) Upon the determination of the Commissioner that any foreign bank holding a certificate of authority pursuant to this subchapter (1) is engaging in any activity not permitted by §1304 of this Title; (2) is engaging in a manner of business activity constituting a violation of §1303(c) of this Title; or (3) is not in a safe and satisfactory condition; then. in any such event, the Commissioner may issue an order to such foreign bank requiring it by a date certain to take the steps set forth in such order to cure such violation.

(b) Upon the determination of the Commissioner, after due notice and an opportunity to be heard has been afforded, that any foreign bank holding a certificate of authority pursuant to this subchapter has failed to timely comply with any order issued under subsection (a) of this section, the Commissioner shall, by order effective no earlier than 10 nor later than 30 days after issuance. revoke such foreign bank's certificate of authority. Upon the effective date of such order, and so long as such order has net been suspended or set aside pursuant to subsection (c) of this section or withdrawn by the Commissioner, such foreign bank shall cease all- business activity of any kind conducted by such foreign bank agency.

(c) The Court of Chancery of the State shall have exclusive original jurisdiction of any judicial review of an order issued under subsection (b) of this section. any other provision of law notwithstanding. Such review may be sought by the foreign bank affected at any time within one year of the date of such order. Review of such an order shall be de novo and such order will be specifically enforced by the Court of Chancery upon a final determination that at the time of its issuance the order was valid In all respects. The Court of Chancery, may, in the exercise of its equitable jurisdiction in appropriate cases, suspend the operation of an order issued under subsection (b) of this section while judicial review of such order proceeds. An order issued under subsection (a) of this section shall not be subject to judicial review.

§1311. Applicability_st_Other Laws

Every foreign bank holding a certificate of authority pursuant to this subchapter shall be deemed and held to be subject to the provisions of this Title and any other law or laws of this State making provision for the regulation of banks and trust companies where the same are not inconsistent with the express provisions of this subchapter Including, without limitation, §131 and §132 of this Title. Notwithstanding the foregoing, every foreign bank holding a certificate of authority pursuant to this subchapter shall be exempt from the requirements of and any prohibitions contained in subchapter XV of Title 8 of the Delaware Code; and the prohibition of §901 of Title 5 shall not apply to a foreign bank holding a certificate of authority to this subchapter.

holding a certificate of authority pursuant to this subchapter by service thereof on the registered agent of such foreign bank, Whenever any foreign bank holding a certificate of authority fails to required or permitted by law to be served on a foreign corporation may be made on a foreign bank with respect to such change and the effective date thereof.

MI5. Service of Process Notice or Demand on Foreign Bank. Service on Registered A_Renti change its registered agent if the office of the registered agent becomes vacant for any reason or if its registered agent becomes disqualified or Incapacitated to act, or if it revokes the appointment of its registered agent. Any such change of registered office or registered agent may be effected by filing in the office of the Commissioner duplicate originals of a statement setting forth the details such foreign bank at its principal office as such is known to such resigning agent and directed to the the date of filing of said certificate.

office of the Commissioner a statement setting forth its resignation and the effective date thereof. on the foreign bank by the registered agent so resigning by registered or certified mall addressed to attention of the secretary or other comparable officer of such corporation at least 30 days prior to which shall not be less than 60 days after the date of filing. A copy of the statement shall be served and existing under the laws of the United States and which maintains an office in this State.

continuously maintain in this State:

§1312. Registered Office; Registered Agent; Changes

foreign bank holding a certificate of authority pursuant to this subchapter may be maintained by another foreign corporation or foreign bank or by a nonresident in the following cases only:

pursuant to this subchapter may be maintained by a resident of this State for any cause of action. For purposes of this paragraph (a), the term "resident of this State" shall include any corporation formed under any law of this State.

of authority pursuant to this subchapter shall maintain such suit, action or proceeding in like manner and subject to the same limitations as are applicable in the ease of a suit, action or proceeding maintainted by a domestic banking organization, except as otherwise prescribed by statute.

§1313. Actions Maintained Against Foreign Banks; Residents. Foreign Corporations. Foreign Banks

(a) Service of process in any suit, action or proceeding or service of any notice or demand

(c) A foreign bank may from time to time change the address of its registered office; and shah) transact business in this State having a business office identical with such registered office.

(b) A registered agent may at any time vacate its office as registered agent by filing in the
whose business office is identical with such registered office. or a corporation authorized to

(a) A foreign bank holding a certificate of authority pursuant to this subchapter shall have and

this State; and

(c) The limitations contained in subparagraph (b) hereof do not apply to a corporation formed this subchapter doing business in this State.

State by a foreign bank holding a certificate of authority pursuant to this subchapter; action or proceeding is to affect the title of real property situated outside the State;

be performed within this State, or relating to property situated within this State at the time of the making of the contract;

(b) Except as otherwise provided in this subchapter, a suit, action or proceeding against a
(a) A suit, action or proceeding against a foreign bank holding a certificate of authority
In maintaining any suit, action or proceeding in this State, a foreign bank holding a certificate

Service on Commissioner

-Ii) a registered office which may be. but need not be, the same as its place of business In

(2) a registered agent. which agent may be either an Individual, resident in this State, (5) Where the defendant is a foreign bank holding a certificate of authority pursuant to

(4) Where the suit, action or proceeding is based on a liability for acts done within this

(3) Where the cause of action arose within this State, except where the object of the (2) Where the subject matter of the litigation is situated within this State;

(I) Where the action is brought to recover damages for the breach of a contract made or to as Non-Residents

§1312. Actions Maintained by a Foreign Bank

appoint or maintain a registered agent upon whom service of legal process or service of any such notice or demand may be had, or whenever such registered agent cannot with reasonable diligence be found at the registered office of such foreign bank, or whenever the certificate of authority of any such foreign bank is revoked, then in every such case the Conunissioner shall be irrevocably authorized as the agent and representative of such foreign bank to accept service of any process or

shall be made by delivering to and leaving with the Commissioner, or with any official having charge of the banking department of the Commissioner's office, duplicate copies of such process, notice or demand. If any process, notice or demand is served on the Commissioner, a copy thereof shall immediately be forwarded by registered mall addressed to such foreign bank at its principal office as the same appears on the Commissioner's records.

(b) Nothing in this subchapter limits or affects the right to serve any process, notice or demand required or permitted by law to be served Upon a foreign corporation in any other manner now or hereafter permitted by law.

(c) The Commissioner shall keep a record of all processes, notice and demands served pursuant to this section and shall record therein the time of such service and the action taken with reference thereto.

Subchapter II. Foreign Bank Representative Office

§1320. Scope; Construction

This subchapter deals with conditions under which foreign banks may operate representative offices in this State.

§1321. License Required

No person, co-partnershlp, association, corporation or other entity shall establish or maintain a representative office in this State on behalf of one or more foreign banks unless the foreign bank to be represented has obtained a license from the Commissioner.

§1322. Application for License; Fee; Findings Required for Issuance

(a) The application for a license shall contain information and be accompanied by a reasonable fee as determined by the Commissioner.

(b) The Commissioner shall issue a license to a foreign bank to establish and maintain a representative office if the Commissioner finds:

(1) The foreign bank does not hold a certificate of authority pursuant to subchapter I of this Chapter;

(2) The foreign bank and the proposed management of the representative office are each of good character and sound financial standing;

(3) The management of the foreign bank and the proposed management of the representative office are adequate; and

(4) The convenience and need.. of persons to be served by the proposed representative office will be promoted.

§1323. License Provisions

Any foreign bank holding a license pursuant to this subchapter may establish and maintain a representative office at the location stated therein and may engage thereat in representational functions on behalf of the foreign bank, but may not conduct a banking business. A license issued pursuant to this subchapter shall remain in effect until surrendered or revoked.

§1324. Records; Reports. Fee

(a) Each foreign bank which is licensed to establish and maintain a representative office shall make, keep and preserve at such office or at such other place as determined by the Commissioner, such books, accounts and other records relating to the business of such office as the Commissioner may required.

(b) Each foreign bank which is licensed to establish and maintain a representative office shall file such reports, accompanied by a reasonable fee, as required and determined by the Conunisioner.

§1325. Revocation of License

If the Commissioner finds:

(1) The licensee or its representative has violated any provision of this subchapter or any law, rule or regulation of this State; or

(2) Any fact or condition exists which, if it had existed at the time of the original application for such license, would have resulted in the Commissioner refusing to issue such license; then, after notice to the foreign bank and a reasonable opportunity to be heard, the Commissioner may revoke such license."

Section 7. If any provision of this Act or the application thereof to any person or circumstance is held invalid such invalidity shall not affect other provisions or applications of this Act that can be given effect without the invalid provision or application, and to that end the provisions of this Act are declared severable.

Section 8. This Act shall take effect immediately upon its adoption.

Approved July 7, 1986.