April 23, 1981
Subject:
Savings and Loan Associations; Selling of Charter by an association that is not opened for business.
Requested By:
Mr. W. L. Cole, Administrator Savings and Loan Division
Question:
May a State-chartered stock-owned savings and loan association that has not opened for business sell its charter?
Conclusion:
No.
Stock-owned savings and loan associations are created under and governed by Chapter 54A of the General Statutes. The charter granted by the State under that Act is the association’s franchise of corporate existence.
The general rule is that a corporation cannot, without express authority from the legislature, transfer its franchise to be a corporation since this would result in the creation of a corporation without the consent of the legislature and thus this primary franchise cannot be the subject of sale or transfer in the absence of a positive provision of law. 18 Am. Jur. 2d, Corporations § 68 (1965); 6A Fletcher Cycl. Corp. § 2962 (1962).
Although G.S. 54-12(7) provides that a savings and loan association may sell its assets to another association, the primary franchise of a corporation is not considered as an asset of the corporation. As stated in 18 Am. Jur. 2d Corporations § 68 (1965),
The primary franchise of corporate existence is generally said to be vested in the individuals who compose it, and not in the corporation itself. The corporation has no power to dispose of the franchise of its members, which may survive in the mere fact of corporate existence, after the corporation has parted with all its property and special franchises . . .
In James v. R.R., 121 N.C. 523, 28 S.E. 537 (1897) the North Carolina Supreme Court held that a corporation could not sell or transfer its charter applying the general principles stated above. In the opinion of this Office the courts would apply the holding of that case to stock-owned savings and loan associations.
Rufus L. Edmisten Attorney General
Lucien Capone, III Assistant Attorney General