Dividends and other capital distributions.

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§412:3-403 Dividends and other capital distributions. (a) No Hawaii stock financial institution shall declare or pay any dividends or make any other capital distribution to its shareholders except pursuant to its articles of incorporation, this section, and section 414-111; provided that if section 414-111 is inconsistent with this section, the provisions of this section shall control.

(b) In this section, "capital distribution" means:

(1) A distribution of cash or other property by any Hawaii stock financial institution to its owners made on account of that ownership, but excluding any dividends consisting only of shares of the capital stock of the financial institution or rights to purchase such shares;

(2) A payment by any stock financial institution to repurchase, redeem, retire, or otherwise acquire any of its shares or other ownership interest, including any extensions of credit to finance an affiliated company's acquisition of those shares or interests; or

(3) A transaction that the commissioner determines, by order or rule, to be in substance a distribution of capital to the owners of the financial institution.

(c) A Hawaii stock financial institution shall not make any capital distribution in an amount greater than its retained earnings then on hand or if after such capital distribution the financial institution shall not have the minimum paid-in capital and surplus required by this chapter. For purposes of this section the amount of retained earnings on hand, capital and surplus shall be determined in accordance with generally accepted accounting principles, except that:

(1) All loans and extensions of credit on which interest has been delinquent for one year or more, or upon which a final judgment has been unsatisfied for more than one year and interest has been delinquent for one year or more, unless and to the extent the same are well secured or in the process of collection shall have been charged down;

(2) All assets which the commissioner may have required to be charged down pursuant to section 412:3-109, shall have been charged down; and

(3) Any loss sustained or charge made by a Hawaii financial institution as provided in this subsection shall be netted first against any reserve established therefor, then charged to retained earnings, then to surplus, and then to capital.

(d) Before making any capital distribution, each Hawaii stock financial institution, except for a nondepository financial services loan company, shall, until its capital and surplus equal at least one hundred thirty-three per cent of its initial minimum capital and surplus required under section 412:3-209, transfer to surplus from its retained earnings at least twenty-five per cent of its net profits from the preceding fiscal year. [L 1993, c 350, pt of §1; am L 2002, c 40, §19]


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