(1) Each member shall initially subscribe shares of the capital stock of the Bank.
The initial subscription of each member shall consist of an equal number of paid-up and callable shares. The initial number of shares to be subscribed by a State which acquires membership in accordance with paragraph (1) of Article 64 of this Agreement, shall be that set forth in its respect in annex A to this Agreement, which shall form an integral part thereof. The initial number of shares to be subscribed by other members shall be determined by the Board of Governors.
(2) In the event of an increase of the capital stock for a purpose other than solely to provide for an initial subscription of a member, each member shall have the right to subscribe, on such uniform terms and conditions as the Board of Governors shall determine, a proportion of the increase of stock equivalent to the proportion which its stock theretofore subscribed bears to the total capital stock of the Bank.
No member, however, shall be obligated to subscribe to any part of such increased stock.
(3) A member may request the Bank to increase its subscription on such terms and conditions as the Board of Governors may determine.
(4) Shares of stock initially subscribed by States which acquire membership in accordance with paragraph (1) of Article 64 of this Agreement shall be issued at par. Other shares shall be issued at par unless the Board ofGovernors by a majority of the total voting power of the members decides in special circumstances to issue them on other terms.
(5) Liability on shares shall be limited to the unpaid portion of their issue price.
(6) Shares shall not be pledged nor encumbered in any manner. They shall be transferable only to the Bank.
PAYMENT OF SUBSCRIPTIONS Drajl prepared by the Payment of subscriptions (Article 7) Committee oj Nine
(I) (al Payment of the amount initially subscribed to the paid-up capital stock of the Bank by a member which acquires membership in accordance with paragraph (1) of Article 65, shall be made in six instalments, the first of which shall be five per cent, the second thirty-five per cent, and the remaining four instalments each fifteen per cent of that amount.
(b) The first instalment shall be paid by the Government concerned on or before the date of the deposit of the instrument of acceptance or ratification of this Agreement on its behalf in accordance with paragraph (I) of Article 65. The second instalment shall become due on the last day of a period of six months from the entry into force of this Agreement or on the day of the said deposit, whichever is the later day. The third instalment shall become due on the last day of a period of eighteen months from the entry into force of this Agreement, The remaining three instalments shall become due successively each on the last day of a period of one year immediately following the day on which the preceding instalment becomes due.
(2) Payment of the amounts initially subscribed by the members of the Bank to the paid-up capital stock shall be made in gold or convertible currency. The Board of Governors shall determine the mode of payment of other amounts sub-scribed by the members to the paid-up capital stock.
(3) The Board of Governors shall determine the dates for the payment of amounts subscribed by the members of the Bank to the paid-up capital stock to which the provisions of paragraph (1) of this Article do not apply.
(4) (a) Payment of the amounts subscribed to the callable capital stock of the Bank shall be subject to call only as and when required by the Bank to meet its obligations incurred, pursuant to paragraph I (b) and (d) of Article l4, on borrowing of funds for inclusion in its ordinary capital resources or guarantees chargeable to such resources.
(b) In the event of such calls, payment may be made at the option of the mem-ber concerned in gold, convertible currency or in the currency required to discharge the obligation of the Bank for the purpose of which the call is made.
(c) Calls on unpaid subscriptions shall be uniform in percentage on all callable shares.
(5) The Bank shall determine the place for any payment under this Article provided that, until the Bank comes into existence the payment of the first instalment referred to in paragraph(I) of this Article shall be made to the Trustee referred to in Article 67.
Explanatory notes submitted by the
Committee oj Nine
I. (a) The Article deals in paras. (1) to (3) with payment of subscriptions to paid-up capital; in para. (4), with callable capital; and in para. (5) with the place(s) of payment for all payments under the Article. As regards the other lending agencies, see !BRD, Art. II (7) and (8); IFe, Art. II (2) (c); IDA, Art. II (2); IADB, Art. II (4).
(b) Para. (I) applies to initial subscriptions of members which acquire mem-bership in accordance with para. (1) of Art. 65. Para. (2) deals with the mode of payment of other subscriptions to the paid-up capital stock;
para. (3) with the dates of payment for such stock.
2. Paragraph (I) (a): The paid-up part of the initial subscriptions of members acquiring membership in accordance with para. (I) of Art. 65 shall be paid in six instalments. Their "time-table" is co-ordinated with Arts. 64 to 66 relating to the
-
106-signature of the Agreement, its ratification and acceptance, its entry into force, and the acquisition of membership, which provide, in effect, that
The Agreement shall remain open for signature until 31 December 1963;
The instruments of ratification or acceptance must be deposited before I July 1965;
The Agreement shall enter into force when twelve Governments whose initial subscriptions amount to not less than 65 per cent of the Bank's authorized capital have deposited such instruments but, in any event, not before I January 1964, nor after 30 June 1965 (see especially notes 1-3 to Art. 65).
It will be noted that the Agreement may enter into force before a number of signatory Governments have deposited their respective instruments of ratification or acceptance.
Thus, the payment of the instalments shall proceed as follows:
(i) The first instalment - amounting to 5 per cent - should be paid at or before the deposit of the instrument of ratification or acceptance;
(ii) The second instalment - 35 per cent - should be paid at the end of a period of six months from the entry into force of the Agreement or at the said deposit, whichever is the later. For no Government may be expected to pay an instalment beforeits ratification or accept-ance;
(iii) The third instalment - 15 per cent - should be paid at the end of a period of 18 months from the entry into force - i.e. not before 30 June 1965, by which time each signatory Government must have deposited its instrument if it is to comply with the provisions of Art. 65 (I) (a); and
(iv) The remaining three instalments - 15 per cent each - should be paid at yearly intervals thereafter - the last being payable four and a half years after the entry into force of the Agreement.
(b) The advantages of such a scheme is not only that each signatory Government willpay its first instalment as an earnest token of its resolution to become a member of the Bank, but also that a substantial portion (40 per cent) will be paid in the first year so as to provide the Bank with adequate means to begin its activities. This scheme is similar to that adopted in IADB, Art. II (4) (a), which, however, provided for three instalments of 20,40, 40 per cent, spread over approximately two years.
(c) It should be noted that:
In the case of the !BRD, the initial two per cent of the full share price were payable within sixty days from the date on which the Bank began its ope-rations (with certain facilities in case of post-war difficulties) and the re-mainder "as and when required by the Bank" subject to a minimum of eight per cent payable within a year (Art. II (8»; and
[n the case of the IFC the full initial subscription was payable within thirty days from the beginning of operations or the date of acquisition of mem-bership, whichever was the later (Art. II (3) (c».
3. Paragraph (2) provides that all members must pay the paid-up portion of their initial subscription in gold or convertible currency. The mode of payment of other parts of the subscription to the paid-up capital stock (in the event of an increase of the capital) shall be determined by the Board of Governors, while the mode of payment of the callable portion is governed by para. (4) (b) of Art. 7. As regards the mode of payment of subscriptions, see the special note by the Executive Secretary onThe currency of the equity capital of the Bank (E/CN. !4/FMAB/8, pAl.
4. Paragraph (3) is also based on the principle that it is the responsibility of the Board of Governors to decide the technical conditions governing the admission of new members and any increase in the authorized capital. These are powers which the Board may not delegate (see Art. 29 (2».
Amendments proposed by governments and by international organizations
Final text adopted by the Conference
5. (a) Paragraph (4) (a) follows the pattern of the relevant proVISIOnS of the lBRD and IADB. It is expressly designed to exclude calls on callable shares in respect of obligations of the Bank originating in connexion with the special funds. As to the latter and the definition of the Bank's ordinary capital resources, see Arts. 8 to 11.
(b) In providing that payment of the callable portion of the subscription may be made - at the member's option - in anyone of three media, the Agreement follows the examples of !BRD, Art. 1I (7) (ii), and IADB, Art. II (4) (a) (ii); see also the special note on The currency of the equity capital of the Bank referred to in 3 above.
6. The power to determine the place of payment provided in paragraph (5) is a power of the "Bank" and may be exercised - by delegation by the Board of Governors - by the Board of Directors. In its proviso, paragraph (5) deals with the technical difficulty that, at the time of payment of the first instalment by most signatory Governments, the Bank will not yet exist in law. In Art. 67 it is proposed that the Governments should, at the time of signature of the Agreement, conclude a protocol designating a Trustee - possibly, an appropriate international organiza-tion or agency - to receive payments. The protocol would come into force upon signature as it does not create new obligations on behalf of the signatories. To be fully effective, it should also be signed on behalf of the Trustee. (U nder the lAD B, the relevant payments were payable to the Organization of American States acting as trustee for the future Bank - see Art. XV (I) (c); see also IBRD, Art.
XI (2) (d).)
Tanganyika: Paragraph (2): The phrase "Payment of the amounts initially subscribed" may need closer definition to show whether reference is made to the first or to all instalments.
IBRD: Paragraph (5): This provision uses the term "until the Bank comes into existence". This term is not used anywhere else in the Agreement. See Articles 66 and 67 which speak in terms of "entry into force" and of "commencement of operations". Presumably what was meant by the drafters was "until this Agree-ment shall have entered into force".
ARTICLE 7
PAYMENT OF SUBSCRIPTION
(1) (a) Payment of Ihe amount initially ,ubscribed to the paid-up capital stock of the Bank by a member which acquires membership in accordance with paragraph (I) of Article 64, shall be made in six instalments, the first of which shall be five per cent, the second thirty-five per cent, and the remain-ing four instalments each fifteen per cent of that amount.
(b) The first instalment shall be paid by the Government concerned on or before the date of deposit, on its behalf, of the instrument of ratification or acceptance of this Agreement in accordance with paragraph (I) of Article 64. The second instalment shall become due on the last day of a period of six months from the entry into force of this Agreement or on the day of the said deposit, whichever is the later day. The third instal-ment shall become due on the last day of a period of eighteen months from the entry into force of this Agreement. The remaining three instal-ments shall become due successively each on the last day of a period of one year immediately following the day on which the preceding instalment becomes due.
(2) Payments of the amounts initially subscribed by the members of the Bank to the paid-up capital stock shall be made in gold or convertible currency. The Board of Governors shall determine the mode of payment of other amounts sub-scribed by the members to the paid-up capital stock.
(3) The Board of Governors shall determine the dates for the payment of amounts subscribed by the members of the Bank to the paid-up capital slock to which the provisions of paragraph (I) of this Article do not apply.
-
108-(4) (a) Payment of the amounts subscribed to the callable capital stock of the Bank shall be subject to call only as and when required by the Bank to meet its obligations incurred, pursuant to paragraph (I) (b) and (d) of Article 14, on borrowing of funds for inclusion in its ordinary capital resources or guarantees chargeable to such resources.
(b) In the event of such calls, payment may be made at the option of the mem-ber concerned in gold, convertible currency or in the currency required to discharge the obligation of the Bank for the purpose of which the calI is made.
(c) Calls on unpaid subscriptions shaH be uniform in percentage on all callable shares.
(5) The Bank shall determine the place for any payment under this Article provided that, until the first meeting of its Board of Governors provided in Article 66 of this Agreement, the payment of the first instalment referred to in paragraph (I) of this Article shall be made to the Trustee referred to in Article 66.
Draft prepared by the Committee of Nine
Explallatory lIotes submitted by the Committee of Nine