June 20, 2011 | last updated June 1, 2012 10:20 am
FINANCIAL SENSE

State cuts some red tape in corporate, banking rules

State lawmakers have passed several laws that aim to streamline corporate and banking regulations, with the goal of making it easier for businesses to remain in or relocate to Connecticut.

Among the newly passed measures is a law that creates a mechanism for certain businesses to change their entity type or business form through mergers, conversions, and interest exchanges.

State Rep. William Tong (D-Stamford), who co-chairs the banking committee, said it has been difficult and expensive for Connecticut companies to change their corporate form. He said small businesses in particular that typically start out as limited liability companies or limited liability partnerships, experience tremendous difficulty and have to engage in multiple and expensive steps when they want to restructure into a new business entity as a result of an internal transition or acquisition.

That forces many in-state businesses to rely on other state's laws — particularly Delaware — to facilitate those transactions, which raises the prospects of them continuing to operate or remain domiciled in another state.

Connecticut's newly revised law, which is based on the national Model Entity Transactions Act, streamlines the process and allows for certain conversions that previously couldn't be accomplished in the state.

The new law, for example, will permit the conversion of a Connecticut corporation into a limited liability company by filing a certificate with the Secretary of the State's office and paying a filing fee.

"This bill will help out-of-state businesses that want to relocate to Connecticut by allowing them not to have to first dissolve and then re-form under state law," Tong said. "It will provide new flexibility to allow commerce to flow more realistically in this modern era."

Meanwhile, a separate new law will allow a Connecticut bank to merge with one or more of its non-bank affiliates, as long as the result of the merger is a Connecticut bank. The measure also streamlines the applications process for any investors seeking to acquire multiple failed financial institutions.

"We've reoriented the banks committee to think about job creation, recruitment and retention," Tong said.

Lawmakers also voted to establish a new e-business portal that aims to create a one-stop shop for information on business licenses, permits and taxes.

The law requires the commercial recording division in the Secretary of the State's office to establish an online portal for new businesses linking to various state and federal departments or agencies where additional licenses or permits may be required. Links will also identify state taxes and other revenue responsibilities and benefits, and provide information on relevant state financial incentives and programs for businesses.

Five banks on 'troubled' list

The number of troubled and problematic banks in Connecticut held steady at the end of the first quarter, although there was a bit of a shakeup in the institutions rated as financially weak by BauerFinancial, an independent bank analysis firm based in Florida.

Five out of the 54, or 9.3 percent, of Connecticut-based banks reviewed by BauerFinancial were rated as problematic, and all of those are located in Fairfield County.

They include Wilton Bank, Community's Bank in Bridgeport, the Connecticut Community Bank in Westport and Stamford-based Patriot National Bank. The Bank of Southern Connecticut, which has been experiencing financial losses and whose proposed merger with Naugatuck Valley Financial Corp. fell apart in 2010, was added the list of problematic banks in the first quarter.

The First Bank of Greenwich was taken off the list and labeled as financially "adequate." John H. Howland, who resigned earlier this year as president of New Haven's Southern Connecticut Bancorp, recently took over as CEO of the First Bank of Greenwich.

BauerFinancial rates banks on a zero-to-five-star system. Banks with two stars or less are considered troubled or problematic.

Wilton Bank had the lowest rating of zero stars.

Nationally, 12.1 percent of banks were listed as problematic by BauerFinancial. Even though that number is still high, it's down from 13.2 percent last quarter and 13.7 percent a year ago, which is a sign the industry is improving.

All banks in Greater Hartford were given at least satisfactory ratings. Among the best performing banks, according to BauerFinancial, are Rockville Bank, People's United Bank, Savings Institute Bank and Trust Co. in Willimantic, and Thomaston Savings Bank .

Local credit unions on list

On the credit union front, 12 of 134 Connecticut nonprofit cooperatives were listed as "troubled" or "problematic" in the first quarter, compared to 12 in the prior quarter.

The 9 percent of troubled credit unions included Achieve Financial Credit Union in Berlin and Workers Federal Credit Union in Stafford Spring. BauerFinancial bases its ratings on financial institutions capital ratios, income and nonperforming loans.

Greg Bordonaro writes the Financial Sense column every other week. Reach him at gbordonaro@HartfordBusiness.com.

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