Banking Interpretations

NYSBL 143-b

September 30, 1983

Robert A. Altman, Esq.
Clifford & Warnke
815 Connecticut Avenue
Washington, D.C. 20006

Re: [ ]

Dear Mr. Altman:

This is in reply to your letter of September 16, 1983 as supplemented by our telephone conversation of September 27, 1983.

You have asked the Department to concur in your opinion that a certain proposed capital injection into [ ], the indirect parent of [ ], will not necessitate an application to the Banking Board under Banking Law §143-b.

[ ] is a privately held company whose shareholders' interests were passed upon by the Banking Board in 1982. In the course of raising additional capital, [ ] may sell shares to existing share- holders, lifting one or more such persons to an ownership position in excess of 10% of the company's outstanding shares. Alternatively, a new shareholder may be admitted to an extent exceeding 10%. Under Section 143-b there is a presumption of control at the 10% level which presumption is rebuttable.

As we are aware, the ownership of [ ] is held by a group of Middle East passive investors who are not involved in any significant way in the operating policies of the company or its New York bank subsidiary, [ ], which bank is directed by an American board consisting of bankers and related professionals.

To the extent that such investors can be said to constitute a control group, the existing members thereof, including in particular those whose shareholdings do not currently exceed 10%, can be said to have, been subsumed within the Banking Board's action and would not require reapproval to exceed 10% in the absence of substantial factors suggesting a change in practical control of the company.

Similarly, the introduction of a new passive shareholder, who would not become the largest shareholder, although his holdings might exceed 10%, would generally not be deemed to effect either a change in control or to reconstitute the control group to a material extent requiring reapplication.

As we also understand, the Federal Reserve Board, operating under an admittedly different regulatory scheme, will not require reapplication under the facts as you have represented them.

For the foregoing reasons, it does not appear that the capi- tal infusion envisaged in your letter of September 16, 1983 must be preceded by an application under Banking Law §143-b. You have, however, committed to advise the Department of the identity of such new investors as the capital plan is implemented.

Very truly yours,

Arthur A. Gelman
First Assistant Counsel