22 Many Bank Holding Companies (BHCs) have shareholder agreements that limit voting rights, buy-sell, transfer of shares and other restrictive provisions. The creation and implementation of these agreements frequently occurred when BHCs could elect to be taxed as a subchapter S corporation (S Corp) Now is the Time for Bank Holding Companies to Review Shareholder Agreements By Michelle Fox, McGregor (Greg) Johnson, Adam Maier, and C. Robert Monroe, Stinson LLP Those Drafted in the Late 1990s May Be Near Termination in 1998. Many private BHCs held as C corporations may also contain such agreements, and banks not owned by a BHC could also have such agreements. An agreement involving the stock of a banking organization cannot be perpetual under the requirements of Regulation Y (Section 225.2(d)(1)). For such an agreement to avoid being considered a “company,” it must terminate within 25 years. Although traditional corporate law allows certain agreements to last indefinitely and be continuous, an agreement that controls or owns the stock of a banking organization cannot be everlasting. Thus, to preclude the conversion to a “company,” the shareholder agreement must end within 25 years.
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