Required amount of earned surplus; limits on obligations; restrictions on deposits and loans.
1. The corporation shall set apart as an earned surplus all of its net earnings in each year until the earned surplus equals 50 percent of the stockholders’ equity then outstanding. The earned surplus must be held in cash, invested in United States government bonds, or as provided in the corporation’s bylaws, and be kept and used to meet losses and contingencies of the corporation, and whenever the amount of earned surplus becomes impaired, it must be built up again to the required amount in the manner provided for its original accumulation.
2. At no time may the total obligations of the corporation exceed ten times the amount of its stockholders’ equity, not including therein the earned surplus, or $50 million, whichever is greater.
3. The corporation shall not deposit any of its money in any financial institution unless the financial institution has been designated as a depository by a vote of the majority of all of the directors of the corporation, exclusive of any director who is an officer or director of the designated depository. The corporation shall not receive money on deposit or make any loans directly or indirectly to any of its officers or to any firms in which any of its officers is a member or officer.
Last modified: February 26, 2006