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H.149

AN ACT RELATING TO CREDIT UNIONS

It is hereby enacted by the General Assembly of the State of Vermont:

Sec. 1.  8 V.S.A. part 6 is added to read:

Part 6.  Credit Unions

CHAPTER 220.  Supervision AND Regulation

Subchapter 1.  Definitions

§ 30101.  Definitions

As used in this part:

(1)  “Chief executive officer” means the person appointed by the governing body to be in charge of the operations of the credit union, regardless of the title given to such person.

(2)  “Commissioner” means the commissioner of banking, insurance, securities, and health care administration.

(3)  “Community development credit union” means a credit union that serves predominantly low income members, as defined by the commissioner, or a credit union that meets the requirements of a community development financial institution as defined in the Community Development Banking and Financial Institutions Act of 1994, 12 U.S.C. § 4702(5).

(4)  “Corporate credit union” means a credit union organized under subchapter 7 of chapter 221 of this title whose field of membership consists primarily of other credit unions.

(5)  “Credit union” means any Vermont credit union, state credit union, or federal credit union.

(6)  “Credit union service organization” or “CUSO” means an entity, organized under subchapter 7 of chapter 222 of this title or organized under state or federal law, whose services are closely related to credit union business, are convenient and useful to credit union business, are reasonably related to the operations of a credit union, or are financial in nature, as determined by the commissioner.

(7)  “Department” means the Vermont department of banking, insurance, securities, and health care administration.

(8)  “Director” means a member of the governing body of a credit union.

(9)  “Executive committee” means the committee, if any, established by the governing body under section 31303 of this title.

(10)  “Federal credit union” means a credit union organized pursuant to the Act of Congress, entitled the “Federal Credit Union Act,” 12 U.S.C. Chapter 14, as amended.

(11)  “Financial institution” means a financial institution as defined in subdivision 11101(32) of this title.

(12)  “Governing body” means the body that oversees the affairs of a credit union.  The governing body may also be referred to as the “board of directors,” “board of trustees,” or “board of managers,” depending upon the organizational structure of the credit union.

(13)  “Home state” means, for a federal credit union, the state in which the main office of the federal credit union is deemed to be located, and for a state credit union, the state by which the credit union is chartered.

(14)  “Host state” means a state, other than the home state of a credit union, in which the credit union maintains or seeks to establish and maintain an office.

(15)  “Immediate family member” means persons related by blood, marriage, or civil union and includes foster children, stepchildren, and adopted children, as well as surviving spouses of persons who were members in good standing at the time of their death.

(16)  “Insider” means a director, an executive officer, a member of a governing‑body‑appointed committee, a member of an elected committee, a member of senior management, or any person identified by the governing body as someone who participates or has authority to participate in the major policy making functions of the credit union.

(17)  “Member” means a person or entity within the credit union’s field of membership who has been duly admitted as a member, has paid any required entrance or membership fee, has paid in one or more shares, and has complied with such other requirements as the organizational documents specify.

(18)  “Member business loan” means any loan, line of credit, or letter of credit, the proceeds of which will be used by the member for the following purposes, subject to rules adopted by the commissioner:

(A)  commercial;

(B)  corporate;

(C)  agricultural; or

(D)  other business investment property or venture.

(19)  “Net worth” means the retained earnings balance of the credit union at quarter end as determined under generally accepted accounting principles.  Only undivided earnings, including any segregated allocations of undivided earnings, are included in net worth.  For community development credit unions, net worth also includes secondary capital accounts that are uninsured and subordinate to all other claims. 

(20)  “Organizational document” means the credit union’s charter, certificate of organization, articles of incorporation, articles of association, articles of organization, bylaws or other internal governance documents, operating agreement, partnership agreement, or any other similar document pertaining to the credit union.

(21)  “Regular reserve account” means the account established and maintained in accordance with section 31502 of this title for the purpose of absorbing losses that exceed undivided earnings and other appropriations.

(22)  “Reserves” means all reserves, including the allowance for loan and lease losses account, undivided earnings or surplus, and accumulated gain or loss on available for sale securities.

(23)  “Retained earnings” means undivided earnings, regular reserves, and any other appropriations designated by management or by state or federal regulatory authorities.

(24)  “State credit union” means a credit union organized under the laws of a state other than Vermont or by special act of the legislature of a state other than Vermont and is regulated in its home state in an equivalent manner, as determined by the commissioner, to a Vermont credit union.  Nothing in this definition shall be deemed to be a grant of authority to any person to operate as a credit union unless otherwise authorized under law.

(25)  “Supervisory committee” means the committee established in accordance with the standards and procedures established in section 31306 of this title.

(26)  “Vermont credit union” means a credit union organized under the laws of the state of Vermont.

Subchapter 2.  Administration

§ 30201.  Administration

Any state‑chartered credit union organized or operating in Vermont shall be under the supervision of the commissioner of banking, insurance, securities, and health care administration.

§ 30202.  Fees and Department Expenses

The provisions of sections 18 and 19 of this title shall apply to credit unions in the same manner as they apply to financial institutions.  Except for fees related to the formation of a credit union, formation of a credit union service organization, and formation of a corporate credit union, credit unions with less than $30 million in assets shall not be charged more than $100.00 per service for the services described in subsection 19(a) of this title.

§ 30203.  Rules and Regulations

The commissioner may issue rules and regulations as may be necessary for the proper conduct of credit unions organized or operating under chapters 220‑226 of this title.

Subchapter 3.  Office Hours and Emergencies

§ 30301.  Office Hours

(a)  A credit union shall establish the days and hours its offices are open for business.  The credit union’s governing body is responsible for determining the scope of operations of each office, including the services to be provided and the days and hours of operation.

(b)  A credit union shall post the days and hours of operation at or near the public entrances to its offices and shall provide customers with reasonable advance notice of reduction in services or hours of operation.

(c)  Any act authorized, required, or permitted to be performed at, by, or with respect to any credit union on a day the credit union is closed may be performed on the next succeeding day the credit union is open for business, and liability or loss of rights of any kind to such credit union shall not result from this delay.

(d)  A copy of such schedule of office hours shall be filed with the commissioner.

§ 30302.  Closing for cause

A credit union may temporarily close any of its offices for reasons that include, but are not limited to, good cause, extreme weather conditions, and community events.  If a credit union temporarily closes any of its offices for all or any part of a day it is normally open for business, the credit union shall post a conspicuous notice of the closing at all points of public access to the closed offices.  A closing may not become effective until such notice is posted at the office to be closed.  Posting this notice relieves the credit union from liability for failure to perform any of the business of the credit union at the closed offices.  The commissioner may adopt rules governing the form and content of the notice required under this section and may require dissemination of the notice of closing by any other reasonable means.

§ 30303.  Emergency closing by credit union

If an emergency arises or is so imminent and immediate as to interfere with or threaten the conduct of normal business transactions or the safety and welfare of a credit union’s plant, assets, or personnel, the credit union officer or official in charge of any office open to the public may determine not to open the office so threatened or close the same, if open.  The credit union shall notify the commissioner of the emergency closing as soon as reasonably possible.

Subchapter 4.  Records

§ 30401.  Preservation of records

(a)  A Vermont credit union and any state‑chartered credit union with an office in this state shall keep such books, accounts, and records relating to all of its transactions that will enable the commissioner to ensure full compliance with the laws of this state.  Each such credit union shall retain its business records for such periods as prescribed by the commissioner by regulation.

(b)  Any such credit union may dispose of any record which has been retained for the period prescribed by or in accordance with the regulation for retention of records of its class, and thereafter shall be under no duty to produce the record in any action or proceeding.

(c)  Records required to be preserved and retained by law or regulation may be maintained in paper, photograph, microprocess, magnetic, digital, mechanical, or electronic media, or in or by any other information storage device or process which forms a durable medium providing reasonable assurances against tampering and degradation of any reproduction of the original record, and which can be accurately transferred to paper in a legible written form within a reasonable time.  Records maintained in a computer‑based format shall be archival in nature only, so as to preclude the possibility of alteration of the content of the record by computer once the record has been transferred to that format.  Any record reproduced from a record maintained in compliance with this subsection shall have the same force and effect as the original thereof and may be admitted in evidence equal to the original.

Subchapter 5.  Reports

§ 30501.  Financial reports

(a)  The commissioner shall require each credit union to submit a quarterly report of its condition within 30 days of the end of each calendar quarter in such manner and on such forms as the commissioner may require.  Reports shall be verified to be true, correct, and complete by the oath of the person preparing the report.

(b)  The commissioner may require a credit union to file additional reports or special reports at such frequency and within such time periods as the commissioner may require in his or her discretion.  The commissioner may require that such additional or special reports include such information and be in such format as the commissioner may direct.

(c)  Promptly following the completion of any annual audit, any verification of member accounts, or any other verification or examination performed by or at the request of the supervisory committee, the supervisory committee shall file a copy of such written report with the governing body.

(d)  Each credit union shall forward to the commissioner a copy of all reports required by the National Credit Union Administration, or any successor thereof.

(e)  If any report is not filed by the date it is due, a fine of not more than $100.00 for each day the report remains in arrears may be levied against the offending credit union.  If the report is not filed within 15 days of the due date, the commissioner may, after written notice to the chief executive officer of the credit union of its intention to do so, suspend or revoke the certificate of approval, issue a cease and desist order, take possession of the business and property of the credit union, order its liquidation in accordance with section 36101 of this title, or take any other action permitted by law or regulation.

(f)  The commissioner, in his or her discretion, may accept reports filed with other regulators for purposes of the requirements of this section.

§ 30502.  Periodic reports from state credit unions with

                an office or activity in this state

(a)  The commissioner may require periodic reports from any state‑chartered credit union that has established and maintains an office in this state or that conducts any activity in this state.

(b)  Any reporting requirements prescribed by the commissioner under this section shall be:

(1)  consistent with the reporting requirements applicable to credit unions incorporated under the laws of this state; and

(2)  appropriate for the purpose of enabling the commissioner to carry out his or her responsibilities under the laws relating to branching, offices, or activities.

§ 30503.  Exemption from annual report to secretary of

                state

Vermont credit unions shall not be required to make any annual report to the Vermont secretary of state.

Subchapter 6.  Examinations

§ 30601.  Examinations

(a)  The commissioner shall conduct a regular examination of the condition of each Vermont credit union at least once every three years or more frequently as the commissioner deems prudent.

(b)  The commissioner may at any time conduct a special examination or may expand the scope of any regular examination.  An entity examined pursuant to this subsection shall be responsible for examination fees and expenses as provided in sections 18 and 19 of this title.

(c)  The commissioner shall be given access to all the files, books, accounts, securities, and assets of the credit union and any person under contract with it to perform services for the credit union that the commissioner deems material to the financial condition of the credit union and shall be afforded every reasonable facility for making an examination of the affairs of the credit union and such person under contract.

(d)  Whenever the commissioner deems it necessary, the commissioner may examine any company which is owned in whole or in part by a Vermont credit union or which is found by the commissioner to be controlled by a Vermont credit union.

(e)  A report of the examination shall be forwarded to the chairperson of the credit union’s governing body after the completion of the examination.  The report shall contain comments relative to the management of the affairs of the credit union and also as to the general condition of its assets.  Within 30 days of the receipt of the report, a general meeting of the directors and committee members shall be called to consider matters contained in the report.  Upon request of the credit union, a representative of the department shall attend the meeting.

§ 30602.  Confidentiality of investigation and

                 examination reports

(a)  Regardless of source, all records of investigations, including information pertaining to a complaint by or for a consumer, and all records and reports of examinations by the commissioner, whether in the possession of a supervisory agency or another person, shall be confidential and privileged, shall not be made public, and shall not be subject to discovery or introduction into evidence in any private civil action.  No person who participated on behalf of the commissioner in an investigation or examination shall be permitted or required to testify in any such civil action as to any findings, recommendations, opinions, results, or other actions relating to the investigation or examination.  The commissioner may, in his or her discretion, disclose, publish, or authorize the disclosure or publication of any such record or report or any part thereof to civil or criminal law enforcement authorities for use in the exercise of such authority’s duties, in such manner as the commissioner may deem proper.

(b)  For the purposes of this section, records of investigations and records and reports of examinations shall include joint examinations by the commissioner and any other supervisory agency.  When such records are considered confidential by such agency or foreign government and the records are in the possession of the commissioner, records of investigations and reports of examinations shall also include records of examinations and investigations conducted by:

(1)  any supervisory agency; and

(2)  the supervisory agency of any foreign government with jurisdiction over any credit union.

§ 30603.  Examinations by federal regulatory agencies;

                departmental participation

Where an examination is normally conducted by the department jointly with a federal regulatory authority, the commissioner, at such times as the commissioner deems necessary or appropriate because of departmental fiscal restraints, may reduce or eliminate the department’s participation in such examination.  Where the commissioner determines such reductions are necessary or appropriate, the commissioner is authorized to rely on the examination report of the federal regulatory authority as the basis for exercising his or her powers and discharging his or her responsibilities under this title.

§ 30604.  Examinations; cooperative agreements

(a)  To the extent consistent with section 30605 of this title, the commissioner may make such examinations of any office established and maintained in this state by a state credit union as the commissioner may deem necessary to determine whether the office is being operated in compliance with the laws of this state and in accordance with safe and sound practices.  The provisions of sections 18, 19, 30601, 30602, and 30603 of this title shall apply to such examinations.

(b)  The commissioner may enter into contracts with any credit union supervisory agency that has concurrent jurisdiction over a Vermont credit union or a state credit union maintaining an office or location in this state to engage the services of such supervisory agency’s examiners, or to provide the services of the commissioner’s examiners to such supervisory agency.

(c)  The commissioner may enter into joint examinations or joint enforcement actions with other supervisory agencies having concurrent jurisdiction over any activity engaged in by a credit union in Vermont, over any office or location established and maintained in this state by a state credit union, or any office or location located in any host state that is established and maintained by a Vermont credit union; provided that the commissioner may at any time take such actions independently if the commissioner deems such actions to be necessary or appropriate to carry out his or her responsibilities under this title or to ensure compliance with the laws of this state; but provided further, that in the case of a credit union that has its principal place of business in a state other than this state, the commissioner shall recognize the authority of the home state regulator over organizational governance matters and the primary responsibility of the home state regulator with respect to safety and soundness.

§ 30605.  Cooperative and other agreements

(a)  The commissioner may enter into cooperative, coordinating, and information-sharing agreements with any other governmental agency or any organization affiliated with or representing one or more governmental agencies with respect to the periodic examination or other supervision of any activity, office, or location in this state of a state credit union, or any activity or office of a Vermont credit union located in any host state.  Such agreements may be used to resolve conflicts arising from inconsistent regulatory requirements and to specify the manner in which any application process under section 33102 or 33103 of this title shall be coordinated.

(b)  Agreements under this section may also be entered with any other regulatory agencies on matters affecting any credit union organized or doing business in this state.

Subchapter 7.  Enforcement

§ 30701.  Enforcement powers of commissioner  

(a)  The commissioner may:

(1)  Restrict the withdrawal of share or deposit accounts from a Vermont credit union or a Vermont office of a state‑chartered credit union when the commissioner finds that extraordinary circumstances make the restriction necessary for the proper protection of members in the affected credit union.

(2)  Order any person to cease violating this title, a lawful regulation, or order of the commissioner issued under it, or to cease engaging in any unsafe or unsound practice.

(3)  Except as provided in subdivision (4) of this subsection, impose an administrative penalty of not more than $15,000.00 upon any credit union or any person who, for each violation of this title, a lawful regulation, or order of the commissioner issued under it:

(A)  knowingly violates this title or a lawful regulation or order issued under it;

(B)  has knowingly engaged or participated in any materially unsafe or unsound practice in connection with a credit union; or

(C)  has knowingly committed or engaged in any act, omission, or practice which constitutes a breach of fiduciary duty to the credit union, including, but not limited to, violations of section 31313 of this title.

(4)  Impose an administrative penalty of not more than $100.00 per day on any person who fails without good cause to file any report or other filing under this title when due.

(5)  Remove from a Vermont credit union or state credit union regulated under this title any director, officer, committee member, employee, agent of the credit union, or other person who:

(A)  knowingly violates this title or a lawful regulation or order issued under it;

(B)  is convicted of a crime involving dishonesty;

(C)  has knowingly engaged or participated in any materially unsafe or unsound practice in connection with the credit union;

(D)  has knowingly committed or engaged in any act, omission, or practice which constitutes a breach of fiduciary duty to the credit union; or

(E)  is not eligible for bond coverage or who loses his or her ability to be covered by a bond.

(b)  In determining the amount of any administrative penalty assessed pursuant to this section, the commissioner shall consider the following factors:

(1)  the appropriateness of the administrative penalty with respect to the financial resources and good faith of the person or credit union charged;

(2)  the gravity of the violation or practice;

(3)  the history of previous violations or practices of a similar nature;

(4)  the economic benefit, if any, derived by any person from the violation or practice;

(5)  whether the credit union has suffered or probably will suffer financial loss or other damage;

(6)  whether the interest of members could be seriously prejudiced by such violation, practice, or breach of fiduciary duty; or

(7)  other factors as justice may require.

(c)  The commissioner shall provide notice of any enforcement order proposed pursuant to this section and the grounds therefore by mail to the credit union and to any person named as a party to the enforcement proceeding.  The credit union or any person so served may, within 30 days of service on the credit union, request that the commissioner hold a hearing.  If no hearing is requested, the proposed order shall become final 30 days after service on the credit union or such person.  The provisions of chapter 25 of Title 3 and any applicable department regulations shall govern any hearing held by the commissioner under this section.  An appeal under this section shall be filed within 30 days of the date of the commissioner’s decision, and shall be to the Washington superior court.

(d)  The hearing on a removal order shall be private unless the commissioner determines that a public hearing is necessary to protect the public interest.  If the commissioner deems it necessary to assure the continued safety and soundness of the credit union, the commissioner may, in his or her discretion, order an immediate suspension of any person pending completion of further administrative proceedings on his or her removal.

§ 30702.  Power of commissioner to impose corrective

                action

(a)  The commissioner may, in addition to any other powers exercisable by the commissioner under the provisions of this title, require a Vermont credit union or state credit union with an office in this state to:

(1)  maintain its accounts in accordance with such regulations as the commissioner may prescribe having regard to the size of the organization;

(2)  observe methods and standards which the commissioner may prescribe for determining the value of various types of assets;

(3)  charge off or sell the whole or part of an asset which was acquired in violation of:

(A)  the credit union’s investment policy;

(B)  the credit union’s loan policy; or

(C)  an order of the commissioner;

(4)  write down an asset to its market value;

(5)  record liens and other interests in property;

(6)  obtain a financial statement from a borrower to the extent that the credit union can do so;

(7)  obtain insurance against damage to real estate taken as security;

(8)  search, or obtain insurance of, the title to real estate taken as security;

(9)  maintain adequate insurance against such other risks as the commissioner may deem necessary and appropriate for the protection of members and the public; and

(10)  maintain such additional policies and procedures as the commissioner may require.

(b)  Any order of the commissioner issued under this section shall be subject to subsection 30701(c) of this title.

§ 30703.  Criminal penalties

(a)  It shall be a criminal offense, punishable by a fine of not more than $1,000.00 or imprisonment of not more than one year, or both, for any person to violate any existing order of the commissioner, or, after receipt of a removal order or an order assessing a penalty, to perform any duty or exercise any power of or on behalf of any credit union until the penalty has been satisfied, or otherwise satisfactorily resolved between the parties, or the removal or penalty order is vacated by the commissioner or by a court of competent jurisdiction.

(b)  It shall be a criminal offense, punishable by a fine of not more than $10,000.00 or imprisonment of not more than one year, or both, for any person to violate willfully any existing order of the commissioner, or, after receipt of a removal order, or an order assessing a penalty, to perform willfully any duty or exercise any power of or on behalf of any credit union until the penalty has been satisfied, or otherwise satisfactorily resolved between the parties, or the removal or penalty order is vacated by the commissioner or by a court of competent jurisdiction.

(c)  An executive officer, director, or an appointed or elected member of a credit union committee subject to the laws of this state under this title who willfully misapplies any of the moneys, funds, or credits of such credit union, or any of the moneys, funds, assets, or securities entrusted to the care of such credit union, or to the care or custody of such executive officer, director, or member, shall be fined not more than $100,000.00 or imprisoned not more than five years, or both.

§ 30704.  Indemnification

A credit union shall not indemnify any person for any penalty or fine imposed under this title.

§ 30705.  Commissioner’s coordination of enforcement

                and corrective action with home state

The commissioner shall promptly give notice to the home state supervisory agency of each enforcement or corrective action proposed to be undertaken against a state credit union and, to the extent practicable, shall consult and cooperate with the home state regulator in pursuing and resolving such enforcement action.

Subchapter 8.  Application Process

§ 30801.  Application of subchapter

(a)  An application required to be filed under chapters 221, 224, or 225 of this title for the approval of the commissioner, including but not limited to an application for a charter, merger, acquisition, conversion, change in bylaws, change in organizational documents, or other similar request, shall be submitted to and considered by the commissioner in accordance with the provisions of this subchapter.

(b)  An application required to be filed under chapter 222 or 223 of this title for the approval of the commissioner shall be filed on a form prescribed by the commissioner and considered in accordance with the standards in section 30803 of this title.  If the commissioner finds that the application promotes the general good, a certificate of approval may be issued in summary fashion.  No further approval shall be required.

(c)  Nothing in this subchapter shall prevent the commissioner from issuing a certificate of approval for any application that the commissioner finds may be approved as filed without further process.

§ 30802.  Applications

(a)  Upon receipt of an application subject to this section in the form prescribed by the commissioner, the commissioner shall determine whether the application is complete.  The commissioner shall have the power to request modifications in, and additional information relating to, any application prior to certifying its completeness.

(b)  As soon as the application is deemed substantially complete, the commissioner may order the applicant to provide notice of the application in the manner and form as he or she may prescribe.

(c)  Any person may submit written comments on the proposed application to the commissioner.  If the commissioner orders publication or other notice to be given, he or she shall establish a deadline for receipt of written comments on the application which shall be no less than five business days following the completion of publication or other notice.  The commissioner may, but shall not be compelled to, consider written comments filed after the close of the written comment period.  All comments shall be maintained in the public files of the department.

(d)  Applications accepted by the commissioner shall be placed on public file at the office of the department and shall be made available for public inspection or copying, at cost; provided that any information that is exempt from public inspection under chapter 5 of Title 1 shall be removed before public inspection of the file is permitted.

§ 30803.  Hearings on applications; decisions; general

                 good standard

(a)  The commissioner may conduct public hearings on any application subject to this subchapter in his or her discretion.

(b)  After consideration of all relevant matters presented in the application, in any written comments, in any department investigation, and at any hearing, the commissioner shall issue a decision approving or disapproving the application.

(c)  If the commissioner’s decision is favorable, a certificate of approval shall issue with the decision.  If the commissioner’s decision is not favorable, the commissioner shall provide the reasons for the disapproval.

(d)  No credit union shall commence operations; open an office; or effectuate a merger, acquisition, conversion, reorganization, or dissolution; amend its bylaws or organizational documents; or take any other similar action without first securing a certificate of approval.

(e)  The commissioner shall approve an application if he or she determines that the proposed transaction promotes the general good of the state of Vermont.

(f)  In determining whether the proposed transaction promotes the general good of the state of Vermont, the commissioner may consider the following factors:

(1)  The character, ability, and overall sufficiency of the management, including directors or organizers of the credit union;

(2)  The adequacy of capital and financial resources of the credit union;

(3)  The competitive abilities and future prospects of the credit union;

(4)  The convenience and needs of the market area or areas to be served;

(5)  The competitive effect of the proposed transaction on the price, availability, and quality of services in the market area or areas to be served;

(6)  The effect on the applicant’s members;

(7)  If an existing credit union, whether the proposed transaction contributes to the financial strength and success of the credit union;

(8)  The fairness and equities involved in any conversion, merger, or acquisition;

(9)  Whether the credit union’s proposal conforms to Vermont law; and

(10)  Such other aspects of the proposed transaction as the commissioner deems advisable.

§ 30804.  Notification of approval or denial of

                application

(a)  Within 60 days after the filing of a completed application, the conclusion of any public hearing, and the conclusion of any public comment period, the commissioner shall notify the applicant of the approval or denial of the application.

(b)  The commissioner may extend the period to notify the applicant of the approval or denial of the application for an additional 30-day period by providing notice to the applicant within the time period specified in subsection (a) of this section that the commissioner intends to extend the time period.

§ 30805.  Review of denial of application

(a)  If the application is denied, the applicant may request that the commissioner reconsider the application by making such request in writing, within 15 days of the denial, responding specifically to the commissioner’s stated reason or reasons for denial.  The commissioner shall reconsider the application in light of the response stated in the applicant’s request for reconsideration.

(b)  The commissioner shall notify the applicant of the approval or denial of the applicant’s request for review of denial within 60 days of the filing of the request. 

(c)  The applicant may request review by the superior court in Washington County upon action brought in the usual form by an aggrieved party within 15 days after written notice of the denial of the request for reconsideration.

Subchapter 9.  Taxation

§ 30901.  Taxation

Any credit union organized under this or any other credit union statute and all shares and deposits therein shall be exempt from all taxation imposed by this jurisdiction before or after the enactment of this section or any taxing authority within this jurisdiction, and no law which taxes corporations in any form, or the shares or deposits thereof, or the accumulations thereon, shall apply to any credit union, except that any real property and any tangible personal property owned by any credit union shall be subject to taxation to the same extent as other similar property is taxed.  However, this exception shall not permit the imposition of any sales or use taxes on the credit union.  The shares of any credit union shall not be subject to transfer taxes, either when issued or when transferred from one member to another.  The participation by a credit union in any government programs providing unemployment, Social Security, old age pension, or other benefits shall not be deemed a waiver of the taxation exemption hereby granted.

Chapter 221.  Organization And Management

Of Credit Union

Subchapter 1.  Organization and Commencing Business

§ 31101.  Application to organize

(a)  Application.  Seven or more individuals, all of whom are within the proposed field of membership to be served by the credit union and all of whom are of legal age, may agree in writing to associate themselves for the purpose of forming a credit union pursuant to this chapter, and those persons shall be considered as the “organizers” of the applicant.  The organizers shall file with the commissioner a written application for permission to organize a credit union.  The application shall contain the following:

(1)  The name by which the credit union will be known, which name shall be in compliance with the requirements of section 31202 of this title;

(2)  The purpose for which it is to be formed;

(3)  The city or town within this state where the credit union’s principal office is to be located;

(4)  The par value of the shares of the credit union, which must be at least $5.00, but not greater than $25.00;

(5)  The names, addresses, and occupations of the organizers of the credit union, together with a statement as to the character, reputation, financial responsibility, and competence of such persons;

(6)  Documents which set forth the proposed credit union’s organizational structure and business plan, including but not limited to:

(A)  A copy of the organizational and governing documents;

(B)  The names of the people who are to serve as the directors of the credit union until the initial meeting of the members or until their successors are elected and qualified, and the names, addresses, and occupations of the directors who will be voted on by the members at the initial meeting, together with a statement as to the character, reputation, and financial responsibility of each; 

(C)  A business plan, including a three-year financial projection;

(D)  A list of the names, addresses, and official positions of the persons who are to be responsible for the conduct of the affairs of the applicant, including all members of the governing body, all members of any committees, and the executive officers; a statement as to the character, reputation, financial responsibility, and competence and experience in financial services and business of such persons, and such disclosure and conflict of interest statements as required by sections 31310 and 31313 of this title;

(7)  The proposed field of membership, specified in detail;

(8)  A survey of the demographic makeup of potential members which demonstrates that the potential members within the proposed field of membership are sufficient to support the likely success of the proposed credit union;

(9)  Copies of any application filed with any other supervisory agency; and

(10)  Any additional information the commissioner may require.

(b)  Fees.  At the time of making the application, the applicant shall pay to the commissioner the charter fee required by section 30202 of this title.  The commissioner may charge the applicant for other services in accordance with section 30202.

(c)  Publication of notice.  After determining that the application required by this section is complete, the commissioner shall advise the organization or the organizers of the entity to publish any notice that will be required by the commissioner under subchapter 8 of chapter 220 of this title.

§ 31102.  Issuance of certificate of approval; refusal to

                issue certificate of approval

(a)  Certificate of approval.  The commissioner shall determine whether a certificate of approval shall be granted to organize a credit union and shall make the decision in accordance with the requirements of subchapter 8 of chapter 220 of this title.

(b)  Conditions.  A grant of a certificate of approval may include such terms and conditions as the commissioner determines necessary.  These may include, but are not limited to, conditions regarding the organizational form of the credit union under this chapter.

(c)  Effect of refusal to issue certificate of approval.  If the commissioner refuses to issue a certificate of approval, the organizers may file a new application after one year from the date of the refusal.

§ 31103.  Requirements to commence business; minimum

                initial share deposits; certificate of authority

(a)  At the time the certificate of approval is issued, the commissioner shall issue an order granting permission to organize which shall set forth the minimum amount of share deposits that the credit union will be required to have to commence business, which in no event shall be less than $25,000.00.

(b)  The commissioner may, in particular cases, require different minimum share deposit requirements for different credit unions, and in determining the minimum amount of share deposits for a proposed credit union, may consider such factors as the population of the area where the proposed credit union is to be located, the field of membership for the proposed credit union, competition in that locale, the projected volume and type of business to be conducted, the inherent risks in the business to be conducted, and the need to protect members and other creditors of the credit union.

(c)  All share deposits shall be in the form of cash or pledges, unless otherwise approved by the commissioner.

(d)  Upon receipt of a certificate of approval pursuant to section 31102 of this title, the organizers set forth in the application for permission to organize shall hold the credit union’s charter until such time as the requirements of this subchapter are met or the commissioner determines that said requirements have not been met.

(e)(1)  Within 30 days of receipt of a certificate of approval pursuant to section 31102 of this title, the first meeting of the organizers of the credit union shall be called by a notice signed by the organizer or organizers, if any were designated in the application for that purpose, or by a majority of the organizers.  Such notice shall state the time, place, and purposes of the meeting.  A copy of the notice shall be given to each organizer at least three days before the date appointed for the meeting, or left at each organizer’s residence or usual place of business, or deposited in the post office and addressed to such organizer at that organizer’s residence or usual place of business, and another copy thereof, together with an affidavit of one of the organizers that the notice has been duly served, shall be recorded with the records of the credit union.  If all the organizers, in writing indorsed upon the application to organize, waive such notice and fix the time, place, and purposes of the meeting, no notice is required.

(2)  At such meeting or at any adjournment thereof, the organizers shall by ballot select a temporary secretary, adopt the organizational documents of the credit union and, in such manner as the internal governance document or the law provides, elect directors and officers.  All persons so elected shall qualify for their offices as provided in subchapter 3 of this chapter.

(3)  The temporary secretary shall make and attest to a record of the proceedings until the secretary has been chosen and sworn, including a record of such choice and qualification.

(4)  The secretary shall file copies of the organizational documents with the commissioner within 10 days after their adoption.  Within 15 business days of receipt, the commissioner shall, after examining such organizational documents for conformance with the requirements of this title and other applicable law, approve or disapprove the filed documents.

§ 31104.  Submission to secretary of state

Following the meeting required under subdivision 31103(e)(1) of this title and approval of the organizational documents by the commissioner under subdivision 31103(e)(4) of this title, the directors so elected shall submit to the secretary of state an attested copy of the credit union’s organizational documents as required by Title 11B.  The secretary of state shall determine whether such organizational documents satisfy the requirements of Title 11B.  If such requirements are met, the secretary of state shall file the organizational documents according to the provisions of law.  The filing of the organizational documents by the secretary of state shall not authorize the transaction of business by the credit union until all conditions of this subchapter are satisfied.

§ 31105.  Payment of share deposits

(a)  A credit union organized under this chapter shall not commence business until the minimum share deposits required by the order granting permission to organize have been deposited in cash to the credit of the credit union in a depository designated by the governing body.  Share deposits taken as pledges pursuant to subsection 31103(c) of this title must be converted to cash and deposited to the credit of the credit union to be included in the minimum share deposit requirement of this subsection.

(b)  At such time as the credit union has received in cash the minimum share deposits required in section 31103 of this title, a complete list of the share depositors, with the name, address, occupation, and the amount of the share deposited by each shall be filed with the commissioner, which list shall be verified by an officer and the secretary of the credit union.  Such deposits shall be handled by the credit union in accordance with subchapter 5 of this chapter.

§ 31106.  Certificate to commence business; Insurance;

                 Bond

(a)  Upon receipt of the statement required in subsection 31105(b) of this title, the commissioner shall cause an examination to be made to determine if the minimum share deposits have been credited to the account of the credit union, and that all requirements of this section and other provisions of law have been met.

(b)  Upon completion of the examination, and if it appears to the commissioner that the whole of the required share deposits has been paid in, the commissioner shall issue a certificate under seal authorizing the credit union to commence business, and this certificate shall be filed with the secretary of state.

(c)  The certificate of authority to commence business shall be conclusive of the facts stated therein, and it shall be unlawful for any credit union to begin transacting business until a certificate of authority to commence business has been granted.

(d)  A credit union shall not commence business until its shares and deposits are insured by the National Credit Union Administration (NCUA) or its successor agency as required by section 31601 of this title.

(e)  A credit union shall not commence business until it has acquired such bonds and insurance as required by section 31602 of this title. 

(f)  In the case of a violation of this provision, the officers and directors assenting thereto shall be personally liable for all debts incurred before the certificate is issued and filed.

§ 31107.  Failure to commence business

(a)  The proposed credit union’s certificate of approval and its right to do business shall lapse if the credit union fails to commence business as a credit union within two years after receiving a certificate of approval under section 31102 of this title.

(b)  Notwithstanding the time limitation in subsection (a) of this section, the commissioner may extend the period in which business shall be commenced for a period not to exceed six months upon written application by the proposed credit union setting forth the reasons for the extension, filed before the expiration of the time period established by subsection (a) of this section.  The commissioner shall notify the secretary of state of any such extension granted by the commissioner.

(c)  Upon the expiration of the time periods set forth in subsections (a) and (b) of this section, the contributors of initial share deposits of such proposed credit union shall be entitled to the return of any amounts which they have paid to the credit union, and all expenses incurred in the organization of the proposed credit union shall be borne by the original organizers who were named in the application for permission to organize.

§ 31108.  Amendment to articles of incorporation

(a)  The articles of incorporation, or comparable organization document as applicable to the credit union, may be amended as provided in the bylaws.  Notwithstanding the provisions of the bylaws, however, written notice of the meeting and text of the proposed amendment shall be given to each director at least seven days prior to the meeting and to each member in accordance with section 31408 of this title.

(b)  The credit union shall file with the commissioner within ten days after its adoption one copy of any proposed amendment.  The credit union shall not amend its articles or comparable organizational document without the written approval of the commissioner.

(c)  Following the commissioner’s approval of the amendment, the credit union shall submit the amendment to the secretary of state for filing as required by Title 11B. 

Subchapter 2.  Bylaws and Name

§ 31201.  Bylaws; Amendment of Bylaws

(a)  The organizers applying for the organization of a credit union shall adopt bylaws that prescribe the manner in which the business of the credit union shall be conducted.  The bylaws shall include at least the following:

(1)  the name of the credit union, which name shall comply with the requirements of section 31202 of this title;

(2)  the field of membership of the credit union and the qualifications for membership;

(3)  the par value of shares;

(4)  the number of directors, supervisory committee members, and advisory directors, if applicable, the length of terms they serve, and the permissible term length of any interim director or supervisory committee member and procedures for election or appointment;

(5)  any qualification for eligibility to serve on the credit union’s governing body or supervisory committee;

(6)  the frequency of regular meetings of the board and the supervisory committee, and the manner in which members of the board and supervisory committee are to be notified of meetings;

(7)  the powers and duties of board officers;

(8)  the manner in which a credit committee, credit manager, loan officer, or any combination thereof shall be responsible for the credit functions of the credit union;

(9)  the timing and manner of conducting the annual membership meeting and the provisions for voting;

(10)  the manner in which members may call a special membership meeting;

(11)  the manner in which members are to be notified of membership meetings;

(12)  the number of members constituting a quorum at a membership meeting;

(13)  conditions for payment on, receipt of, or withdrawal of shares and deposits;

(14)  provisions, if any, for the indemnification of directors, supervisory committee members, officers, employees, and others by the credit union, if not included in the articles of incorporation; and

(15)  any other provision which is not inconsistent with this chapter and such other matters as the governing board deems necessary.

(b)  The bylaws may be amended as provided in the bylaws.  Written notice of the meeting and text of the proposed amendment, or a summary of the proposed amendment with a notice that a copy of the proposed amendment is available upon request, shall be hand‑delivered or mailed to each director at least seven business days prior to any directors’ meeting to approve such amendment and shall be given to each member in the manner set forth in section 31408 of this title.  Notice to a director may be given electronically if the director has specifically requested or consented to electronic notification of meetings.

(c)  The credit union shall file with the commissioner, within ten days after its adoption, one copy of any proposed amendment.  Any amendment to the bylaws of a credit union shall become effective only upon the written approval of the commissioner. 

§ 31202.  Credit union name

(a)  The name of every credit union organized under this title shall include the phrase “credit union.”  No credit union may adopt a name either identical to the name of any other credit union or entity doing business in this state or so similar to the name of any other credit union or entity doing business in this state as to be misleading or to cause confusion.

(b)  No person, other than a credit union incorporated under this title, the acts of other states, the Federal Credit Union Act, an association of credit unions, or an organization or corporation, whose membership or ownership is limited to credit unions or credit union organizations, may use a name or title containing the phrase “credit union” or any derivation thereof, or may represent itself as a credit union or conduct business as a credit union.

Subchapter 3.  Governing Body, Officers, and Committees

§ 31301.  Number and Election of Directors

(a)  The governing body of a credit union shall consist of an odd number of directors, at least five in number.  The initial governing body shall be elected at the organizational meeting of the credit union as provided in subsection 31103(e) of this title, and thereafter by the members of the credit union at the annual meeting.

(b)  Each director shall hold office for the term provided in the bylaws as long as the director is qualified to serve and until the director’s successor has qualified.  The term of a director may not exceed three years.  A director may serve more than one term.  If directors are elected for terms in excess of one year, their terms of office shall be staggered so that, insofar as possible, an equal number expires each year.

§ 31302.  Duties of Governing Body

The governing body shall have authority for the general management of the credit union and, among other things, the governing body shall:

(1)  Have the authority and responsibility for directing the operations, funds, and records of the credit union.

(2)  Act upon applications for membership or appoint an executive committee, a membership committee, or one or more membership officers from among the members of the credit union, other than the treasurer, an assistant treasurer, the chief executive officer, an assistant chief executive officer, or a loan officer, who may be authorized by the governing body to approve applications for membership under such conditions as the governing body may prescribe; except that the membership committee or membership officers so authorized shall submit to the governing body or to the executive committee, if applicable, at each monthly meeting a list of approved or pending applications for membership received since the previous monthly meeting, together with such other related information as the bylaws or the governing body may require.

(3)  Provide a blanket fidelity bond covering the directors, officers, employees, members of official committees, attorneys at law, and other agents as required by subsection 31602(a) of this title.

(4)  Fill vacancies on the governing body until successors elected at the next annual meeting have qualified.

(5)  Establish personnel policies, including policies for the compensation of employees.

(6)  Authorize the employment and compensation of the chief executive officer and the treasurer.

(7)  Authorize the employment of such person or persons as may be necessary to carry on the business of the credit union or delegate such authorization to the chief executive officer who shall hire such other persons necessary to carry on the business of the credit union, or contract with persons or organizations as may be necessary to carry on the operations of the credit union.

(8)  Determine the number of shares and the amount of deposits that may be owned by a member, the limitations to apply alike to all members.

(9)  Approve an annual operating budget for the credit union.

(10)  Authorize the conveyance of property.

(11)  Have the power to borrow or lend money to carry on the functions of the credit union.

(12)  Have the power to appoint any special committees deemed necessary.

(13)  Determine, from time to time, the interest rates not in excess of that allowed by law that shall be charged on loans to members, and authorize interest refunds, if any, to members in proportion to the interest paid by them on loans, or, at the discretion of the governing body, delegate to the executive committee or the chief executive officer the authority to establish interest rates pursuant to policies and guidelines adopted by the governing body.

(14)  Establish lending policies and, within any limitations set forth in the credit union’s bylaws, fix a maximum amount that may be lent with and without security to a member.

(15)  Have the authority to review a loan application denied by a loan officer or denied by the credit committee, as applicable.

(16)  Declare dividends on share accounts at a credit union and determine the interest rate which will be paid on deposits at a community development credit union, or, at the discretion of the governing body, delegate to the executive committee or the chief executive officer the authority to establish dividend rates and interest rates that will be paid on share accounts and on deposits pursuant to policies and guidelines adopted by the governing body.

(17)  Establish investment policies and invest credit union funds, except that the governing body may designate an investment committee or any qualified individual or entity responsible for making investments under policies established by the governing body.

(18)  Review and approve or reject loans to other credit unions that are not members if surplus funds warrant it, and review and approve or reject loans to members of the supervisory and credit committees.

(19)  Suspend or remove any or all officers, or any or all members of the credit, supervisory, membership, or other committees from their positions on the committees for failure to perform their duties.

(20)  Establish and maintain a system of internal controls consistent with applicable laws and regulations.

(21)  Review and ratify all written policies of the credit union at least annually.

(22)  Perform such other duties as the members from time to time direct, and perform or authorize any action not inconsistent with this part and not specifically reserved by the bylaws to the members.

(23)  Establish other policies as the governing body deems reasonable or prudent, and such policies as required by law, by regulation, or by the commissioner.

§ 31303.  Executive Committee

(a)  The executive committee, if one is appointed by the governing body, shall consist of an odd number of no fewer than three directors of the credit union.

(b)  The executive committee shall meet in accordance with section 31304 of this title and as often as necessary, and shall act for the governing body between meetings of the governing body in all other matters except for approval of policies and amendments to the organizational documents or bylaws, subject to such conditions and limitations as prescribed by the governing body.

(c)  The executive committee shall keep complete minutes of all of its actions, copies of which shall be submitted to the governing body at its next meeting.

§ 31304.  Meetings of Governing Body

(a)  The governing body of a credit union shall meet as often as necessary and at least monthly, provided, that if the governing body delegates its authority to an executive committee, the executive committee shall meet during the months in which the governing body does not meet.  The governing body shall meet at least six times a year, including once each quarter.  The governing body and the executive committee, if appointed, shall keep complete minutes of all of their meetings, which minutes shall include the names of all persons present at each meeting.  Minutes of the executive committee meetings shall be ratified by the governing board.

(b)  Unless the bylaws provide otherwise, the governing body may permit any and all directors to participate in all except one meeting per year of the governing body through the use of any means of communication by which all directors participating in the meeting may simultaneously hear each other and communicate during the meeting.  A director participating in a meeting by this means is deemed to be present at the meeting.

(c)  At the meeting of the governing body following the annual meeting of members, the governing body shall elect officers of the governing board as provided in section 31305 of this title. 

(d)  Unless a greater number is required by the bylaws, a majority of the governing body shall constitute a quorum.  The act of a majority of the directors present at a meeting at which a quorum is present shall be the act of the governing body unless the act of a greater number is required by this part or the bylaws of the credit union.

§ 31305.  Officers

(a)  At the first regularly scheduled meeting of the entire governing body at which a quorum is present following the organizational meeting and thereafter following each annual meeting, but in no event more than 30 days after such organizational meeting or annual meeting of the members, as applicable, the directors shall elect from their own number a chairperson of the governing body, and one or more vice chairpersons, a treasurer, and a secretary.  Only the treasurer and the secretary may be the same individual.

(b)  Unless sooner removed, the terms of the officers shall be one year, or until their successors are chosen and have duly qualified. 

(c)  The duties of the officers shall be prescribed in the bylaws.

(d)  The governing body shall appoint a person to act as the chief executive officer of the credit union and to be in charge of its operations.

(e)  A credit union may use any titles it chooses for the officials holding the positions described in this section, provided such titles are not misleading.

(f)  Any person elected to fill a vacancy caused by death, resignation, or removal of an officer shall be appointed by the governing body to serve for the unexpired term of such office until his or her successor is duly elected and qualified.

§ 31306.  Supervisory Committee

(a)  The supervisory committee shall consist of no fewer than three members of the credit union, none of whom shall simultaneously serve as a director, serve on the credit committee, serve as an officer of the credit union, and be otherwise regularly employed by such credit union.  Supervisory committee members shall be members of the credit union in good standing.

(b)  Supervisory committee members shall be appointed by the directors at the first regularly scheduled meeting of the entire governing body at which a quorum is present following the annual meeting of the members.  Supervisory committee members shall hold office for the term provided in the bylaws, as long as such supervisory committee member remains qualified to serve, and until the committee member’s successor has been duly appointed and qualified.  The term of a supervisory committee member shall not exceed three years.  A supervisory committee member may serve more than one term.  If the supervisory committee members are appointed for terms in excess of one year, their terms of office shall be staggered so that, insofar as possible, an equal number expires each year.

(c)  The supervisory committee shall be responsible for ensuring that members of senior management and directors meet required financial reporting objectives and establish practices and procedures sufficient to safeguard members’ assets.  To meet its responsibilities, the supervisory committee shall determine whether internal controls are established and effectively maintained, accounting records and financial reports are promptly prepared and accurate, relevant plans, policies, and procedures established by the governing body are properly administered, and the governing body’s plans, policies, and control procedures are sufficient to safeguard against error, carelessness, conflict of interest, self-dealing, and fraud.

(d)  The supervisory committee shall have the sole authority to engage or terminate outside and internal auditors.  The supervisory committee may engage any assistance necessary for the performance of its duties, including having any audit, examination, or verification required by law, regulation, or bylaw.  Any agreement between the supervisory committee and an outside auditor shall be documented by an engagement letter that specifies the terms, conditions, and objectives of the engagement or statement of agreed‑upon procedures in accordance with this subsection and shall permit access by the commissioner to the work papers of the auditor.

(e)  The supervisory committee shall make or cause to be made a comprehensive annual audit of the books and affairs of the credit union, including its assets, liabilities, capital, income, expense accounts, and the minutes of all governing body and governing‑body-appointed committee meetings.  Such audit shall cover the period elapsed since the last audit.  The annual audit shall include an assessment of internal controls and security measures in place covering the credit union’s electronic information processing and its electronic commerce systems, if any.  Any compensated outside auditors performing audits for the supervisory committee shall be independent of any management employee, any member of the governing body, any member of a governing‑body-appointed committee, the credit manager, any loan officer, and any member of the immediate families of any of these.  The annual audit shall meet the following minimum guidelines:

(1)  A credit union with total assets of $100 million or more shall have an opinion audit of the credit union’s financial statement performed by an independent licensed certified public accountant; and

(2)  A credit union with total assets of less than $100 million shall have:

(A)  An opinion audit of its financial statements performed by an independent licensed certified public accountant; or

(B)  An opinion audit of its balance sheet performed by an independent licensed certified public accountant; or

(C)  An agreed‑upon procedures engagement performed by a person having adequate technical training and proficiency as an auditor commensurate with the level of sophistication and complexity of the credit union under audit, provided if such engagement is not comprehensive, the supervisory committee shall satisfy any remaining requirements of a comprehensive audit in accordance with this subsection and which, in any event, shall meet the minimum standards and guidelines established by regulation of the National Credit Union Administration (NCUA); or

(D)  A comprehensive audit performed by the supervisory committee or the credit union’s internal auditors or the internal auditor of another credit union, which audit shall meet the minimum standards and guidelines established by regulation of the NCUA.

(f)  The supervisory committee shall perform or cause to be performed a verification of members’ accounts at least once every two years through:

(1)  Verification of share and loan accounts of all members; or

(2)  Statistical sampling of member share and loan accounts done in connection with an opinion audit of the financial statements performed by an independent licensed certified public accountant.

(g)  The supervisory committee shall make any additional audits and supplemental verifications and examinations of the affairs of the credit union that it deems appropriate or that the governing body or commissioner requires.

(h)  Promptly following the completion of an audit or other verification or examination, the supervisory committee shall:

(1)  file a written report at the main office of the credit union;

(2)  present the report to the governing body at its next meeting;

(3)  provide a summary of the results of the audit to the members of the credit union, orally or in writing, at the next annual meeting, and if the audit was not performed by the supervisory committee, the outside auditor shall provide the written or oral summary thereof; and

(4)  file a copy of the written report and any written summary with the commissioner.

(i)  The supervisory committee shall provide related working papers, policies, and procedures concerning the annual audit, internal audit, examination, and verification to the commissioner upon the commissioner’s request, and shall require any independent licensed or certified public accountant, internal auditor, or any other auditor to provide such related working papers, policies, and procedures concerning the annual audit, internal audit, examination, and verification to the commissioner upon the commissioner’s request.  The governing body shall require that the auditor submit to the governing body a signed report of the audit or examination showing the condition of the credit union within a reasonable period of time from the effective date of the audit or examination.

(j)  At any time that the supervisory committee discovers any operating practices of the credit union that it deems unsafe which have not been corrected by the governing body, the supervisory committee shall give notice to all credit union members of a special meeting of members to be held for the purpose of receiving the report of the supervisory committee of such operating practices.  The membership of the credit union shall have the authority to accept or reject the report of the supervisory committee.

(k)  The supervisory committee shall meet as often as necessary and at least annually and shall keep complete minutes of all of its meetings, including the names of those members present.

(l)  If the supervisory committee or its independent auditor or other person fails to comply with requirements of this section or the terms of an engagement letter required by this section, the commissioner may: 

(1)  reject the audit report and provide a reasonable opportunity to correct deficiencies;

(2)  impose the remedies available in subsection (m) of this section, provided any of the conditions specified therein are present; and

(3)  seek formal administrative sanctions against the supervisory committee or its independent auditor, or both.

(m)  The commissioner may compel a credit union to obtain an audit which meets the minimum requirements of subdivision (e)(1) or (2)(A) of this section for any fiscal year in which any of the following three conditions are present:

(1)  the supervisory committee has not obtained or performed an audit;

(2)  the supervisory committee had obtained or performed an audit which does not meet the requirements of this section; or

(3)  the credit union has experienced serious and persistent recordkeeping deficiencies.

(n)  The commissioner may compel a credit union to obtain an opinion audit of its financial statement performed in accordance with generally accepted auditing standards by an independent person who is licensed by the state of Vermont, even if such audit is not required by subsection (e) of this section, for any fiscal year in which the credit union has experienced serious and persistent recordkeeping deficiencies.

(o)  For purposes of this section, a recordkeeping deficiency is “serious” if the commissioner reasonably believes that the governing body and the management of the credit union have not met financial reporting objectives in a timely manner and established practices and procedures sufficient to safeguard members’ assets.  A serious recordkeeping deficiency is “persistent” when it continues beyond a usual, expected, or reasonable period of time.

§ 31307.  Credit Committee; Credit Manager

(a)  Except as provided in section 31313 of this title, the governing body may delegate, in accordance with its bylaws, all or part of its lending authority to a credit committee, a credit manager, one or more loan officers, or any combination thereof, who shall review and act on all applications for extensions of credit, or for release or substitution of collateral, in accordance with the loan policy prescribed by the governing body.

(b)  If the bylaws of a credit union provide for a credit committee, such committee shall consist of an odd number of three or more members of the credit union and may be appointed by the governing body or elected by the members, as provided in the bylaws.

(c)  No member of the credit committee shall simultaneously serve on the supervisory committee or on the governing body, and all such credit committee members shall be members of the credit union in good standing.

(d)  The credit committee, if any, shall meet as often as necessary, but at least monthly.  All actions by the committee shall be by majority vote of those members present at any meeting at which a quorum is present.  A majority of the credit committee shall constitute a quorum.  The credit committee shall keep complete minutes of all of its meetings, including the names of those present.

(e)  The credit manager or loan officer shall provide to the governing body or the credit committee, if any, on at least a monthly basis, a complete listing of all applications for extensions of credit or for release or substitution of collateral that were reviewed and acted upon or, alternatively, inform the governing body that such information is available upon request.

(f)  A credit manager or loan officer shall not disburse the funds of the credit union for any extension of credit approved by such credit manager or loan officer.

(g)  An applicant for an extension of credit or release or substitution of collateral that has been disapproved by a credit manager or loan officer may appeal to the credit committee or, in the absence of a credit committee, to the governing body.  In those instances where the credit committee made the initial denial of an applicant’s request for an extension of credit or release or substitution of collateral, the applicant may appeal to the governing body.  Any such appeal to the credit committee or the governing body, as applicable, shall be acted upon at the next regular meeting of the credit committee or governing body.  If the initial denial of the loan application has not been reviewed by the credit committee or governing body, as applicable, the notice of loan denial given to the member shall include a notice that the member has a right, upon written request, to appeal the loan denial to the credit committee or the governing body, as applicable.

§ 31308.  Duties of officers, directors, and committee

                members

(a)  All officers, directors, and members of the supervisory or credit committees of a credit union subject to the laws of this state under this title shall comply with the standards for such officers, directors, and committee members established by the National Credit Union Administration (NCUA), as amended.

(b)  In addition to any applicable state fines and penalties, an officer, director, or member of the supervisory or credit committee who fails to comply with the standards established by this section shall be subject to the civil penalties established by 12 U.S.C. § 1786(k)(2) and (3), as amended, as if he or she had directly violated the standards established by the NCUA.

(c)  All executive officers, directors, and committee members shall comply with the conflict of interest standards established pursuant to section 31313 of this title.

§ 31309.  Oaths of office; certificate of election

(a)  Within ten days after election to any position, each person so elected or appointed shall execute an oath of office by which he or she agrees to accept, and diligently and faithfully to carry out, the duties and responsibilities of the position to which he or she has been elected and not negligently or willfully to violate, or permit to be violated, any provision of this title or the bylaws of the credit union.

(b)  The chairperson of the governing body and the secretary shall execute a certificate of election, which shall set forth the names and addresses of the officers, directors, and committee members elected or appointed.

(c)  The oath of office and the certificate of election shall be executed on forms prepared by the department, and one copy of each shall be filed with the department within 15 days after the election or appointment.

§ 31310.  Prohibited management interlocks

(a)  Except with the commissioner’s prior written approval, a director, officer, or employee of any other credit union or financial institution shall not at the same time be a director, officer, or employee of a credit union with a place of business or doing business in the state of Vermont.

(b)  The terms of this section shall not apply to:

(1)  A credit union which is in liquidation, receivership, conservatorship, or similar proceedings;

(2)  A corporate credit union;

(3)  A credit union service organization affiliated by reason of common ownership or control of at least 25 percent of the voting interest of such affiliated credit union service organization; or

(4)  Any other relationship otherwise permitted under guidelines or regulations of federal supervisory authorities or the commissioner adopted from time to time, relating to management interlocks.

§ 31311.  Suspension and Removal

(a)  The governing body of a credit union shall have the power to remove, by a two-thirds vote of its members at a regular or special meeting, a director or a governing‑body‑appointed committee member:

(1)  who fails, without good cause, to attend three consecutive meetings of the governing body or committee or one-half of such meetings held during a calendar year;

(2)  who is no longer qualified to serve; or

(3)  for any of the causes enumerated and in accordance with subsection (b) of this section.

(b)  The governing body of a credit union shall have the power to suspend at any time, by a two-thirds’ vote of its members, at a regular or special meeting, any director, member of a governing‑body‑appointed committee, officer, or agent for good cause, including, but not limited to:

(1)  a violation of any statute, regulation, or order applicable to such credit union;

(2)  the participation in any unsafe or unsound practice in connection with such credit union;

(3)  the commission of or participation in a crime which is punishable by imprisonment for a term exceeding one year under state or federal law, as charged in any information, indictment, or complaint, and if continued service or participation by such director, member of a governing‑body‑appointed committee, officer, or agent may pose a threat to the interests of the members of such credit union;

(4)  the failure of such person to perform his or her duties or breach of his or her fiduciary duty;

(5)  the use of his or her official position in a manner contrary to the interests of the credit union or its members; and

(6)  the breach of a written agreement with the commissioner.

(c)  The suspension shall take effect immediately, and the commissioner shall be notified promptly of such suspension.  Within seven business days after the effective date of the suspension, the governing body shall cause notice to be given to all members of the credit union of a special meeting of members to be held for the purpose of hearing the report of the governing body regarding the suspension and voting on removal, provided such notice shall not be given if the director, member of a governing‑body‑appointed committee, officer, or agent who is subject to suspension resigns.  The special meeting shall be held no more than 21 business days after the effective date of the suspension.  The membership of the credit union shall have, by majority vote, the authority to accept or reject the report of the governing body.  If such action involves removal, the credit union shall promptly notify the commissioner of such removal.

(d)  If any person required to be bonded by this part or by applicable regulation shall cease to be bonded or shall lose his or her ability to be bonded, such person shall be suspended and removed immediately, and the commissioner shall be notified promptly of such suspension and removal.

(e)  The supervisory committee shall have the power to suspend at any time, by a two-thirds’ vote of its members at a meeting called for that purpose, any director, member of a governing‑body‑appointed committee, officer, or agent for cause.  The suspension shall take effect immediately, and the commissioner shall be notified promptly of such suspension.  Not later than seven business days after the effective date of the suspension, the supervisory committee shall cause notice to be given to all members of the credit union of a special meeting of members to be held for the purpose of hearing the report of the supervisory committee regarding the suspension and voting on removal, provided such notice shall not be given if the person who is subject to suspension resigns.  The special meeting shall be held no more than 21 business days after the date of suspension.  The membership of the credit union shall have the authority to accept or reject the report of the supervisory committee.  The supervisory committee shall take any action with respect thereto as the members deem necessary.  If such action involves removal, the credit union shall promptly notify the commissioner of such removal.

§ 31312.  Vacancies

A vacancy on the governing body, the supervisory committee, or any other governing‑body‑appointed or member‑elected committee that exists due to the death, resignation, or removal of a director or committee member shall be filled by majority vote of the remaining directors, regardless of whether the remaining directors constitute a quorum.  A director or committee member appointed by the governing body to fill a vacancy on a committee where the members elect the members of such committee shall hold office until the next annual meeting, at which time the members of the credit union shall vote to fill the remainder of the unexpired term.

§ 31313.  Conflict of Interest

(a)  The governing body of a credit union shall adopt a written conflict of interest policy that includes provisions addressing transactions with insiders, employees, volunteers, and their immediate family members, and other persons having a common ownership, investment, or other pecuniary interest in a business enterprise with such insiders and immediate family members of such persons.

(b)  An extension of credit to an insider, other than a residential real estate loan secured by a first lien on property that is owned or will be owned by the insider as a primary residence, shall require the approval of the governing body if such insider is the debtor, guarantor, endorser, or cosigner of the extension of credit.  If the insider is a member of the governing body, an extension of credit shall require the approval of the supervisory committee as well as the approval of the noninterested members of the governing body.  Notwithstanding the foregoing, a loan to an insider that, when aggregated with the amount of all other extensions of credit to such insider and to all related interests and all related persons of such insider, would not exceed five percent of the credit union’s unimpaired capital and surplus or $25,000.00, whichever is less, may be approved solely by a majority of the noninterested members of any one of the following committees: 

(1)  the credit committee, if any;

(2)  the supervisory committee; or

(3)  the governing body.

(c)  An insider of a credit union, or a professional retained by a credit union, shall not, directly or indirectly, participate in any decision affecting such person’s pecuniary interest or the pecuniary interest of any immediate family member, or any corporation, partnership, or association other than the credit union in which such person is directly or indirectly interested.

(d)  An insider, an immediate family member of such insider, or any other person having a common ownership, investment, or other pecuniary interest in a business enterprise with an insider or immediate family member of such insider shall not obtain an extension of credit from the credit union with preferential rates, terms, or conditions, or act as guarantor or endorser thereon, and shall not be involved in the appraisal or valuation of assets which are to be used as collateral for an extension of credit to such person.

(e)  No insider or immediate family member of such insider shall receive, directly or indirectly, any commission, fee, or other compensation, except those of a nominal value, in connection with any extension of credit by the credit union.  Notwithstanding the foregoing, this subsection:

(1)  shall not prohibit payment by a credit union of:

(A)  salaries to employees;

(B)  incentives or bonuses to employees based on the credit union’s overall financial performance;

(C)  incentives or bonuses to employees, other than a member of senior management, in connection with an extension of credit, provided the governing body establishes written policies and internal controls in connection with such incentives or bonuses and monitors compliance with such policies and controls at least annually;

(D)  fees to an insider or immediate family member of such insider for the performance of title searches, loan closings, and collections, provided the credit union has complied with subsection (k) of this section prior to engaging such insider or immediate family member of such insider; and

(2)  shall not prohibit a director, member of a governing‑body‑appointed committee, or employee who is not a member of senior management or an immediate family member of such director, committee member, or employee, from receiving compensation from a person unrelated to the credit union for a service or activity performed unrelated to the credit union, provided no referral has been made by the credit union or the director, committee member, employee, or immediate family member of such director, committee member, or employee.

(f)  No insider or his or her immediate family members or an employee of a credit union shall receive anything of value in connection with the making of an investment or deposit of credit union funds by the credit union, unless the governing body determines that the involvement of the insider, his or her immediate family member, or the employee does not present a conflict of interest and includes such determination in its minutes.  The prohibition contained in this subsection shall not prohibit the credit union from paying salaries, incentives, and bonuses to employees in connection with the making of such investments or deposits.  An insider shall conduct all transactions that are not prohibited under this subsection at arm’s length and in the best interests of the credit union.

(g)  No insider or his or her immediate family members shall receive any direct or indirect compensation or benefit in connection with the credit union’s insurance or group purchasing activities for members and employees.  The prohibition contained in this subsection shall also apply to any employee not otherwise covered if the employee is directly involved in insurance or group purchasing activities, unless the governing body determines that the employee’s involvement does not present a conflict of interest and includes such determinations in its minutes.  An insider and his or her immediate family member shall conduct all transactions that are not prohibited under this subsection at arm’s length and in the best interests of the credit union.

(h)(1)  A credit union shall not buy, lease, or otherwise acquire premises from any of the following without the prior approval of the governing body, such approval to be included in the governing body’s minutes:

(A)  An insider or his or her immediate family member;

(B)  a corporation in which an insider or immediate family member is an officer or director or has an ownership interest of ten percent or more; or

(C)  a partnership in which any insider or his or her immediate family member is a general partner or a limited partner with an interest of ten percent or more.

(2)  The prohibition contained in this subsection shall also apply to any employee not otherwise covered if the employee is directly involved in investments in fixed assets, unless the governing body determines that the employee’s involvement does not present a conflict of interest and includes such determinations in its minutes.

(i)  No insider, employee, or any immediate family member of such insider or employee shall purchase, directly or indirectly, any of the assets of the credit union for an amount less than the current market value thereof without the prior approval of the governing body, which approval shall include a determination that the transaction is in the best interests of the credit union.  Such approval and determination shall be included in the governing body’s minutes.

(j)  With the prior written approval of the commissioner, a credit union may have as an employee or director a person who serves as an officer, employee, or director of any other financial institution.

(k)  When a credit union retains an insider or his or her immediate family member to render services to the credit union, the hiring shall be approved by the noninterested members of the governing body, and the governing body shall document in its minutes that such hiring was at arm’s length, was in the best interests of the credit union, and was in accordance with the competitive bidding and appropriate due diligence process as provided in the credit union’s conflict of interest policy.

(l)  The directors, committee members, members of senior management, and the immediate family members of such persons that have outstanding loans or investments in a credit union service organization shall not receive any salary, commission, investment income, or other income or compensation from such credit union service organization, either directly or indirectly, or from any person being served through the credit union service organization.  This provision shall not prohibit:

(1)  such credit union insiders or the immediate family members of such persons from assisting in the operation of such credit union service organization, provided such persons are not compensated by the credit union service organization; and

(2)  reimbursement to the credit union for the services provided by such directors, committee members, or senior management members if the credit union service organization pays in full the amounts due to the credit union at least quarterly.

(m)  A credit union shall not grant a member business loan if any additional income received by the credit union or senior management of the credit union is tied to the profit or sale of the business or commercial endeavor for which the loan is made.

§ 31314.  Compensation; Insurance; Expenses 

(a)  No officer of the governing body, no director, nor any committee member, other than the treasurer, may be compensated for services as such.  However, providing reasonable health, accident, and similar insurance protection shall not be considered compensation.

(b)  A credit union may, with the approval of a majority of the governing body, provide personal liability or indemnity insurance coverage for its directors and other committee members.

(c)  Directors, officers of the governing body, and committee members may be reimbursed for necessary expenses incidental to the performance of official business of the credit union.

(d)  Notwithstanding the foregoing, directors, officers of the governing body, and committee members may be compensated for services, other than duties performed as such director, officer of the governing body, or committee member, in accordance with the conflict‑of‑interest provision set forth in section 31313 of this title.

Subchapter 4.  Membership

§ 31401.  Field of Membership

(a)(1)  Except as provided in subdivision (2) of this subsection, the field of membership of a credit union is limited to:

(A)  a single common bond membership;

(B)  a multiple common bond membership;

(C)  persons or organizations within one or more well-defined communities, neighborhoods, municipalities, or counties; or

(D)  any combination of subdivisions (A), (B), or (C).

(2)  Within the field of membership of a credit union, members may include:

(A)  members of the immediate family or household of all members of the credit union included under subdivisions (1)(A), (B), (C), or (D) of this subsection;

(B)  organizers and employees of such credit union;

(C)  the surviving spouse or party to a civil union of a deceased member of such credit union; and

(D)  notwithstanding any change in employment, occupation, residence, or other condition initially controlling the eligibility for membership in any credit union, any person properly admitted to membership in a credit union who may continue membership therein during such person’s lifetime.

(3)  The field of membership may include associations and organizations of individuals, the majority of whom are eligible for membership in such credit union, partnerships in which the majority of the partners are individuals who are eligible for membership in such credit union, corporations in which the majority of shareholders are individuals who are eligible for membership in such credit union, and such entities in which a majority of the employees are individuals who are eligible for membership in such credit union.

(b)(1)  The commissioner may approve an amendment to the bylaws of a credit union to expand its field of membership if the commissioner finds that:

(A)  the credit union has not engaged in any material unsafe or unsound practice during the one-year period preceding the date on which the proposed amendment is filed with the commissioner;

(B)  the credit union maintains its net worth in accordance with subchapter 5 of this chapter; and

(C)  the credit union has the administrative capability to serve the proposed membership group and the financial resources to meet the need for additional staff and assets to serve the new membership group.

(2)  The commissioner may approve an amendment to the bylaws of a credit union to change its field of membership whenever the commissioner determines that continued operation of the credit union without the proposed amendment may result in liquidation or merger of such credit union.

§ 31402.  Membership Application

The governing body shall act upon applications for membership as prescribed in its bylaws.  The governing body may delegate its authority to act on applications for membership as provided in subdivision 31302(2) of this title.  A person denied membership by a membership officer or membership committee may appeal the denial to the governing body.

§ 31403.  Liability of Members

The members of the credit union shall not be personally or individually liable for the acts, debts, liabilities, or obligations of the credit union or the payment of the credit union’s debts solely by virtue of their membership in the credit union.

§ 31404.  Membership Termination

(a)  Any member may withdraw from a credit union at any time upon giving notice of withdrawal as required by the bylaws. 

(b)  Any member may be expelled by a majority vote of the members present at any regular membership meeting or a special membership meeting called to consider the matter at which a quorum is present, but only after the member has been given an opportunity to be heard.

(c)  The governing body may expel a member by a majority vote of a quorum of directors, pursuant to a written policy adopted by the governing body.  Any member may be expelled if he or she violates the membership agreement, any policy or procedure adopted by the governing body, the bylaws of the credit union, or if the member is physically or verbally abusive to credit union members or staff.  If such a policy is adopted, written notice of the policy as adopted and the effective date of such policy shall be mailed to each member of the credit union at the member’s current address appearing on the records of the credit union no fewer than 30 days prior to the effective date of such policy.  In addition, each new member shall be provided written notice of any such policy prior to or upon applying for membership.  Copies of such policies shall be available to members upon request.  Any person expelled by the governing body shall have the right to request a hearing before the governing body to reconsider the expulsion.

(d)  A person whose membership has been terminated, whether by withdrawal or expulsion, shall have no further rights in the credit union, but is not released from any obligation owed to the credit union.

(e)  A member who has been expelled as provided in this section may not be readmitted to membership except upon approval by a majority vote of the governing body after application and proof that the applicant remains within the credit union’s field of membership, has adequately explained, addressed, or remedied the conditions leading to expulsion, and will abide by the terms and conditions of membership.  Not more than one such application for readmission may be made within any 12-month calendar period.

§ 31405.  Suspension of Services

A credit union may suspend or limit the use of services to credit union members who have caused a loss to the credit union, who have violated the membership agreement or any policy adopted by the governing body, or who are physically or verbally abusive to credit union members or staff.  Members with suspended or limited services may maintain a share account and may continue to vote at annual and special membership meetings.

§ 31406.  Meetings of Members

(a)  The annual meeting and any special meetings of the members of the credit union shall be held in accordance with the bylaws.

(b)  On all questions and elections brought to the membership for a vote, each member shall have one vote, regardless of the member’s shareholdings.  No member may vote by proxy, but a member may vote by early voter absentee ballot, mail ballot, or other method if the bylaws of the credit union so provide.

(c)  The bylaws may establish a minimum age, not greater than the age of majority as defined in section 173 of Title 1, as a qualification of eligibility to vote at meetings of the members.  A minor, as defined in section 173 of Title 1, may not be a voting member of the governing body, the supervisory committee, or any other appointed or elected committee.

(d)  An organization having membership in the credit union may be represented and have its vote cast by an officer of the organization or its designated agent so authorized by the organization’s governing body as evidenced by a certified copy of such authorization provided to the credit union before the vote is cast.

§ 31407.  Special Membership Meetings

(a)  The supervisory committee by a majority vote may call a special meeting of the members to consider any violation of this part, any other law or regulation applicable to the credit union, the credit union’s articles of incorporation or bylaws, or any practice of the credit union deemed unsafe or unauthorized by the supervisory committee.

(b)  The bylaws may also prescribe the manner in which a special meeting of the members may be called by the members or by the governing body, or both.

§ 31408.  Notice to Members of Annual and Special

                Meeting

(a)  Notice of any annual or special meeting shall be given in accordance with the requirements of the Vermont Nonprofit Corporation Act, Title 11B, Vermont Statutes Annotated.  Notice may be given electronically if the member has specifically requested or consented to electronic notification of meetings.

(b)  Notice of any special meeting shall state the purpose for which it is to be held, and no business other than that related to the purpose set forth in the notice shall be transacted at the special meeting.

Subchapter 5.  Net Worth; Reserves; Dividends

§ 31501.  Net Worth

Every Vermont credit union shall establish and maintain adequate levels of net worth pursuant to standards established by the commissioner, as amended from time to time. 

§ 31502.  Regular Reserve Account

(a)  Every credit union shall accumulate and maintain a regular reserve account which shall be held to meet losses until the credit union is dissolved, when it may be distributed among the members.  The regular reserve account shall be accumulated and regulated pursuant to standards established by the commissioner, as the same may be amended from time to time.

(b)  Any sums recovered on items previously charged to the regular reserve account shall be credited to the regular reserve account.
(c)  Except as permitted under subsection 31506(b) of this title, the governing body of a credit union shall not transfer any part of the regular reserve account to the undivided earnings account without the prior written approval of the commissioner.
§ 31503.  Allowance for loan and lease loss
(a)  An allowance for loan and lease loss account shall be established and maintained in an amount that represents the current estimated loss on loans and leases.  The allowance for loan and lease loss account requirement shall be computed and adjusted through the provision for loan and lease loss expense account prior to the payment of dividends.  This account shall be calculated in accordance with standards established by the commissioner, as the same may be amended from time to time.
(b)  Any sums recovered on items previously charged to allowance for loan and lease loss account shall be credited to the allowance for loan and lease loss account.
§ 31504.  Unrealized gain or loss on available for sale 
                securities
(a)  An unrealized gain or loss on available for sale securities account shall be established and maintained in an amount that represents the current estimated gain or loss on investments. 
(b)  Changes to the allowance for unrealized gain or loss on securities account resulting from appreciation or depreciation in the value of shares or securities acquired in accordance with the provisions of this chapter shall be accounted for in accordance with standards established by the commissioner, as the same may be amended from time to time.

§ 31505.  Additional or special reserves

If the commissioner determines that any reserve account is inadequate for any reason, he or she may require the establishment of such additional or special reserves as he or she deems necessary for the protection of the members.

§ 31506.  Dividends to shareholders; conditions 
                precedent
(a)  The governing body of any credit union may declare a dividend from the credit union’s current period undivided earnings, which dividend shall be calculated as provided in this subchapter for any period determined by the governing body.
(b)(1)  The governing body may declare a dividend from the undivided earnings of a prior period of the credit union without the prior approval of the commissioner if, following such distribution, the remaining net worth of the credit union will be more than a two‑percent margin above the greatest of:
(A)  the minimum net worth required by this subchapter or by standards established by the commissioner;
(B)  the net worth ratio requirement of a well‑capitalized credit union as defined under the prompt corrective action guidelines of the National Credit Union Administration; or
(C)  such other net worth requirement as established for the credit union by the commissioner.
(2)  Any other distribution of earnings from a prior period of the credit union may be made only with the prior written approval of the commissioner.
(c)(1)  Earnings from all sources for the period for which a dividend is to be paid, except as provided in sections 31502, 31503, 31504, and 31505, may be credited to the profit and loss account of the credit union, and the following items shall be charged against such account in the determination of the amount available for dividends to shareholders:
(A)  All operating expenses paid or incurred by the credit union in the management of its affairs, the collection of its debts, or the transaction of its business;
(B)  The interest paid or accrued on debts owed by the credit union;
(C)  All losses projected or incurred on loans and leases in excess of the allowance for loan and lease loss account; and
(D)  All losses projected or incurred on investments according to generally accepted accounting principles.
(2)  The credit balance of the profit and loss account as thus determined shall constitute the current period net earnings of the credit union at the close of such period, and shall be applicable to the payment of dividends except as provided in subsection (d) of this section.
(d)  No dividend shall be credited or paid without the prior approval of the commissioner, unless the credit union has: 
(1)  Made good any existing impairment of its net worth below the standards established by the commissioner.
(2)  Carried to its reserve account such part of its net earnings as may be required by the standards established by the commissioner, as the same may be amended from time to time.
(3)  Carried to its allowance for loan and lease loss account such part of its earnings as is required by section 31503 of this title.
(4)  Carried to its special reserve account such part of its earnings as is required by section 31505 of this title.
(e)  Dividends may be paid on shares and share certificates at various rates with due consideration of the conditions that pertain to each type of account such as minimum balance, notice, and time requirements.
(f)  Subject to the liability and standards set forth in 11B V.S.A. § 8.33, other than subdivision 8.33(b)(2), when any dividend shall be declared in excess of the amount available for dividends as determined in accordance with the provisions of this section, the directors voting for such dividend may be held jointly and severally liable to the credit union for the amount of the excess so declared, unless specifically permitted and approved by the commissioner.  The provisions of 11B V.S.A. § 8.33(b)(2) shall not apply to dividends declared by the directors.
§ 31507.  Standards
For purposes of this subchapter, in the absence of standards otherwise prescribed by the commissioner, a credit union shall follow the standards established by the National Credit Union Administration (NCUA).  In the event standards promulgated by the NCUA require the credit union to accumulate or maintain accounts in an amount in excess of the standard established by the commissioner, the credit union shall accumulate and maintain such accounts in a manner sufficient to satisfy the requirements of the NCUA.

Subchapter 6.  Bonds and Insurance

§ 31601.  Share insurance

(a)  Every credit union authorized to do business in this state under this title shall insure its members’ shares with the National Credit Union Administration (NCUA) or the successor to that federal agency.

(b)  A credit union insured under this section shall have the duty and power to comply with all statutes and regulations governing insurance of shares by the NCUA; provided that nothing contained in this section shall be construed as repealing, modifying, or impairing any powers, duties, rights, or responsibilities of the commissioner, or the credit union so insured, under the provisions of this title.

§ 31602.  Bonds and Insurance

(a)  Every credit union authorized to do business in this state under this title shall acquire and maintain a blanket fidelity bond covering the directors, officers, employees, members of official committees, attorneys at law, and other agents with protection against loss caused by dishonesty, burglary, robbery, larceny, theft, holdup, forgery or alteration of instruments, misplacement or mysterious disappearance, and for faithful performance of duty in an amount not less than the amount prescribed by the commissioner.  The department shall prescribe in its rules the amount of minimum bond coverage required for all credit unions according to their asset categories.

(b)  Every credit union authorized to do business in this state under this title shall acquire and maintain suitable insurance to protect the credit union against burglary, robbery, theft, and other insurable hazards to which the credit union may be exposed.

(c)  To the extent not otherwise covered by subsections (a) and (b) of this section, every credit union authorized to do business in this state under this title shall acquire and maintain such bonds and insurance to the extent the same is required by 12 C.F.R. Part 713, as amended from time to time.

(d)  The commissioner may require a credit union authorized to do business in this state under this title to secure additional bonds and insurance.

Subchapter 7.  Corporate Credit Unions

§ 31701.  General Application

(a)  Any corporate credit union chartered by the commissioner shall be subject to such rules, regulations, and orders as the commissioner deems appropriate and, except as otherwise specifically provided in such rules, regulations, or orders, shall be vested with or subject to the same rights, privileges, duties, restrictions, penalties, liabilities, conditions, and limitations that would apply to all Vermont state‑chartered credit unions.

(b)  A corporate credit union shall be federally insured by the National Credit Union Administration (NCUA), or its successor, and shall be subject to such rules, regulations, and orders as the NCUA or its successor deems appropriate.  In the event state laws or regulations are inconsistent with the regulations of the NCUA or its successor, the federal regulations will supersede.

§ 31702.  Organization

(a)  Application to form a corporate credit union shall be made in writing to the commissioner.  A corporate credit union shall be organized and operated under the provisions of this part, except to the extent such provisions are not consistent with this subchapter.

(b)  A corporate credit union shall use the word “corporate” in its name.

§ 31703.  Membership

(a)  Membership in the corporate credit union may consist of Vermont‑chartered credit unions, any other state‑chartered credit union, any federally chartered credit union, organizations or associations of credit unions, and such other organizations provided for in the articles of incorporation.

(b)  A member of the corporate credit union shall designate one person to be its authorized representative to attend meetings of the corporate credit union and to vote on behalf of the member.  A credit union member of the corporate credit union may only designate a member of its own credit union as its authorized representative.  No person may serve as the authorized representative of more than one member of the corporate credit union.

§ 31704.  Purposes

A corporate credit union is a credit union whose members consist primarily of other credit unions and whose purposes are to:
(1)  Accumulate and prudently manage the liquidity of its member credit unions through interlending and investment services;
(2)  Act as an intermediary for credit union funds between members and other corporate credit unions;
(3)  Obtain liquid funds from other credit union organizations, financial intermediaries, and other sources;
(4)  Foster and promote in cooperation with other state, regional, and national corporate credit unions and credit union organizations or associations the economic security, growth, and development of member credit unions; and
(5)  Perform such other financial services of benefit to its members that are authorized by the commissioner.
§ 31705.  Powers
A corporate credit union shall enjoy the powers and privileges of any other credit union incorporated under this part in addition to those powers enumerated in this subchapter, notwithstanding any limitation or restrictions found elsewhere in this part.  The commissioner may adopt such rules and regulations concerning the establishment and operation of corporate credit unions as he or she deems necessary and proper.  Subject to such regulations, a corporate credit union may:
(1)  Accept shares or deposits in any form from its members, from other state, regional, or national corporate credit unions, and from credit union organizations and associations;
(2)  Make loans to its members, to other credit unions, and to other state, regional, and national corporate credit unions, organizations, and associations of credit unions;
(3)  Establish lines of credit for members and participate with other credit unions in making loans to its members under the terms and conditions determined by the board of directors;
(4)  Invest in the shares of or make deposits in credit unions;
(5)  Borrow money, accept demand deposits, and issue notes or debentures; 
(6)  Acquire or sell the assets and assume the liabilities of a member; and
(7)  Enter into agreements with credit unions to discount or purchase loans made pursuant to government-guaranteed loan programs, real estate loans made by members, or any obligations of the United States or any agency thereof held by members.

§ 31706.  Reserves

Each corporate credit union shall maintain such reserves and accounts as required by the rules and regulations of the National Credit Union Administration, or its successor, as amended from time to time.

Chapter 222.  POWERS

Subchapter 1.  General Powers

§ 32101.  Applicability of chapter

The provisions of this chapter set forth the powers granted to all credit unions organized pursuant to this part and offices of any state‑chartered credit union authorized to do business in Vermont under this title.  The powers, privileges, duties, and restrictions conferred and imposed in the articles of association of any credit union organized under the prior laws of this state are abridged, enlarged, or modified to conform the articles of association to this title.  Notwithstanding anything in the articles of association of such a credit union, every such credit union possesses the powers, rights, and privileges and is subject to the duties, restrictions, and liabilities conferred and imposed by this title.

§ 32102.  General powers

(a)  Subject to applicable laws and regulations, a Vermont credit union may exercise the following powers:

(1)  Make contracts;

(2)  Sue and be sued;

(3)  Adopt and use a common seal and alter such seal at pleasure;

(4)  Purchase, hold, and dispose of property necessary or incidental to its operations;

(5)  Establish, acquire, invest or participate in, or utilize a credit union service organization;

(6)  Subject to the approval of the commissioner, contract with another credit union or credit unions for office or agency services or to provide those services to the customers of that credit union;

(7)  Subject to the approval of the commissioner, purchase the assets of another credit union or sell all or substantially all of its assets to another credit union;

(8)  Offer related financial services to its members, including, but not limited to, electronic financial services, safe deposit boxes, negotiable instruments, leasing, and correspondent arrangements with other financial institutions, and charge a reasonable fee for such services;

(9)  Hold membership in other credit unions organized under the laws of this state, the laws of the United States, or the laws of another state or territory of the United States and in associations and organizations;

(10)  Make reasonable contributions to any nonprofit civic, charitable, or service organization;

(11)  Require the payment of an entrance fee or annual membership fee, or both, of any person admitted to membership, pursuant to resolution of the governing body;

(12)  Receive savings from its members in the form of shares and honor requests for withdrawals or transfers of all or any part of member share accounts, in any manner approved by the governing body;

(13)  Lend funds to its members;

(14)  Subject to rules adopted by the commissioner, sell at a discount any obligations owed to the credit union;

(15)  Invest surplus funds, subject to the provisions of section 32104 of this title;

(16)  Invest in shares of other credit unions and make deposits in other financial institutions, provided such credit union or financial institution is federally insured;

(17)  Assess fees and charges to members subject to applicable laws and regulations, for failure to meet promptly their obligations to the credit union;

(18)  Declare and pay dividends on various types of share accounts, pay interest on deposit accounts held by a community development credit union, and pay interest refunds to borrowers;

(19)  Subject to applicable state and federal laws and regulations, including applicable insurance laws, act as the agent for any fire, life, accident, health, credit life, disability or other insurance company, other than a title insurance company, authorized by the state of Vermont, by soliciting and selling insurance and collecting premiums on policies issued by such company; and receive for services so rendered such fees or commissions as may be agreed upon by the credit union and the insurance company for which it may act as agent; provided, however, that no such credit union shall in any case assume or guaranty the payment of any premium on insurance policies issued through its agency by its principal; and provided further that the credit union shall not guaranty the truth of any statement made by an insured in filing his or her application for insurance;

(20)  Purchase and maintain insurance on behalf of any person who is or was a director, officer, employee, or agent of the credit union, or who is or was serving at the request of the credit union as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise, against any liability asserted against such person and incurred by such person in any such capacity or arising out of such person’s status as such, whether the credit union would have the power to indemnify such person against such liability;

(21)  Enter into lease agreements, lease contracts, and lease-purchase agreements with members;

(22)  Indemnify and limit the personal liability of volunteers;

(23)  Enter into marketing arrangements and joint ventures to facilitate its members’ voluntary purchase of goods, insurance, and other services from third parties.  A credit union may be compensated for services so provided;

(24)  Borrow an aggregate amount not exceeding 20 percent of its assets, and borrow amounts in excess of 20 percent, but not in excess of 50 percent of its assets, if prior written approval has been given by the commissioner;

(25)  With the approval of the commissioner, maintain one or more offices other than the principal place of business as may be necessary to conduct the affairs of the credit union;

(26)  Accept payment for any electric, electric distribution, gas, water, or telephone company or other utility company operating within this state in receiving money due such company for utility services furnished by it;

(27)  Provide loan processing, loan servicing, member check and money order cashing services, disbursement of share withdrawals and loan proceeds, money orders, internal audits, automated teller machine services, and other similar services to other Vermont credit unions, federal credit unions, and out‑of‑state credit unions;

(28)  Exercise other powers and actions as authorized under this part of this title or as authorized by regulation of the commissioner.

(b)  The expressed powers for a credit union authorized under this section do not preclude the exercise of additional powers deemed to be incidental to the transaction of a general credit union business pursuant to this part.

(c)  Subject to the limitations of this part and other applicable laws and regulations, a Vermont credit union may exercise the powers granted nonprofit corporations under Title 11B.  In the event of any conflict between the provisions of Title 11B and this title, the provisions of this title shall govern.

§ 32103.  Expanded powers of Vermont credit unions

(a)  Subject to the requirements of this section, in addition to all other powers permitted under these statutes, a credit union may exercise any of the powers or engage in any activity conferred upon a federal credit union chartered under the laws of the United States of America.

(b)  Prior to engaging in such power or activity, the credit union shall notify the commissioner of its intent to engage in the activity or power conferred upon a federal credit union.  The notification shall identify the power or activity, shall identify the specific federal law or regulation that permits such power or activity, shall identify any Vermont law or regulation that may prohibit or restrict such power or activity, and shall provide such additional information as the commissioner may request. 

(c)  If the commissioner determines that such power or activity is permitted by federal law or regulation, that such power or activity would not adversely affect the safety or soundness of such credit union, and that such power or activity is not prohibited or restricted by any other applicable Vermont law or regulation, the commissioner shall issue a written letter of nonobjection to the credit union’s engaging in such power or activity.  A credit union shall not engage in such power or activity without first obtaining a written letter of nonobjection from the commissioner. 

(d)  The commissioner shall respond to the credit union’s notification within the time frame set forth in section 30804 of this title. 

(e)  In the event the commissioner objects to the credit union’s proposed power or activity, the credit union shall have the reconsideration and appeal rights set forth in section 30805 of this title.

§ 32104.  Investments

(a)  A Vermont credit union may invest its assets prudently in accordance with the best judgment of its governing body, subject to the limitations set forth in this section and in the credit union’s adopted investment policy.

(b)  A Vermont credit union’s governing body shall establish a written investment policy, which it shall review and ratify at least annually, that addresses, at a minimum, the following:

(1)  Investment quality parameters;

(2)  Investment mix and diversification;

(3)  Investment maturities; and

(4)  Delegation of authority to officers and committees responsible for administering the portfolio.

(c)  Funds not used in loans to members may be invested:

(1)  In loans to or in shares or deposits of other credit unions and central credit unions, corporate credit unions, or a central liquidity facility established under state or federal law;

(2)  In the capital shares, obligations, or preferred stock issues of any agency or an association organized either as a stock company, mutual association or membership corporation; provided the membership or stockholdings, as the case may be, of such agency or association are primarily confined or restricted to credit unions or organizations of credit unions, and provided the purposes for which the agency or association is organized are designed primarily to service or otherwise assist credit union operations;

(3)  In shares of a cooperative society organized under the laws of this state or of the laws of the United States in the total amount not exceeding ten percent of the shares, deposits, and surplus of the credit union; or

(4)  In loans to any credit union association or corporation, national or state, of which the credit union is a member, except that the investments shall be limited to two percent of the assets of the credit union.

(5)  In any investment legal for financial institutions as they are defined in subdivision 11101(32) of this title, but in no event common stock.

Subchapter 2.  Deposits in General

§ 32201.  Deposit powers

(a)  The provisions of subsection 14201(b) of this title governing deposit accounts shall apply to credit unions in the same manner as they apply to financial institutions as defined in subdivision 11101(32) of this title.

(b)  Insurance.  A Vermont credit union that accepts deposits or an office of a state‑chartered credit union authorized to do business in this state shall not accept deposits in this state unless the credit union has insurance with the National Credit Union Administration or the successor to that federal agency.

(c)  Cash reserve on deposits and accounts.  A credit union shall maintain reserves on deposits or accounts as required from time to time by the Federal Reserve Act, as amended, and any regulations adopted thereunder.

§ 32202.  Payment of deposits to administrators from

                another state or country

The provisions of section 14202 of this title governing the payment of deposits to administrators from another state or country shall apply to credit unions in the same manner as they apply to financial institutions as defined in subdivision 11101(32) of this title.

§ 32203.  Trust deposits; payment on death of trustee

(a)  When a deposit is made in a credit union by one or more persons in trust for another, the name and residence of the person for whom the deposit is made shall be disclosed, and the deposit shall be credited to the depositor or depositors as trustee for such person.

(b)(1)  The credit union may accept deposits:

(A)  in the name of a member in trust for a member beneficiary;

(B)  in the name of a member in trust for a nonmember beneficiary; or

(C)  in the name of a nonmember trustee for a beneficiary who is a member.

(2)  No beneficiary or trustee, unless a member in his or her own right, shall be permitted to vote, obtain loans, or hold office, or be required to pay an entrance or membership fee.

(c)  When other notice of the existence and terms of a legal trust is not given in writing to the credit union, at the death of the trustee, or if there is more than one trustee, at the death of the surviving trustee, the deposit or any part thereof, with the interest thereon, may be paid to the person for whom the deposit was made or to his or her estate.

§ 32204.  Joint deposits

(a)  The provisions of section 14204 of this title governing joint deposits shall apply to credit unions in the same manner as they apply to financial institutions as defined in subdivision 11101(32) of this title.

(b)  A single joint share account may hold more than one membership share, supporting membership for more than one member of the credit union.  If more than one joint owner seeks credit union membership through the joint account, the joint account must contain a membership share for each member.

§ 32205.  Payable on death accounts

The provisions of section 14205 of this title governing payable on death accounts shall apply to credit unions in the same manner as they apply to financial institutions as defined in subdivision 11101(32) of this title.

§ 32206.  Deposits of minors; exemption from trustee

                process

The provisions of section 14206 of this title governing deposits of minors and exemption from trustee process shall apply to credit unions in the same manner as they apply to financial institutions as defined in subdivision 11101(32) of this title.

§ 32207.  Provisions when title to deposit is litigated

The provisions of section 14207 of this title relating to when title to a deposit is litigated shall apply to credit unions in the same manner as they apply to financial institutions as defined in subdivision 11101(32) of this title.

§ 32208.  Real estate trust and escrow

The provisions of section 14210 of this title governing pooled real estate trust and escrow accounts shall apply to credit unions in the same manner as they apply to financial institutions as defined in subdivision 11101(32) of this title.

§ 32209.  Claims not clearly consistent

The provisions of section 14211 of this title governing claims not clearly consistent with the terms of any applicable authority on file with the credit union shall apply to credit unions in the same manner as they apply to financial institutions as defined in subdivision 11101(32) of this title.

§ 32210.  Lien; setoff 

The credit union shall have a lien on the shares, share certificates, deposits, deposit certificates, and accumulated dividends or interest of a member in an individual or joint account for any sum past due the credit union from said member or for any loan endorsed by such member.  The credit union shall also have a right of immediate setoff with respect to every such account.

§ 32211.  Applicability of other laws

The provisions of subsection 11501(c) (examination) and section 14212 (joint fiduciary accounts) of this title shall apply to credit unions in the same manner as they apply to financial institutions as defined in subdivision 11101(32) of this title.

Subchapter 3.  Loans

§ 32301.  Loan authority

(a)  Unless otherwise restricted by applicable law, rule, or regulation, a credit union may lend to its members for such purposes as prescribed by the governing body.  The governing body shall establish a written loan policy in accordance with the requirements of this section.

(b)  Every loan application shall be in writing upon a form approved by the governing body, which application shall state the purpose for which the loan is desired and the security, if any, offered for such loan.

(c)  Written loan policy.  A credit union’s governing body and credit committee shall establish a written loan policy.

(1)  The written loan policy shall address, at a minimum, the following:

(A)  Loan portfolio mix and diversification standards;

(B)  Prudent underwriting standards, including loan-to-value limits that are clear and measurable;

(C)  Loan administration procedures, including delegation and individual lending officer authority; and

(D)  Documentation and approval requirements to monitor compliance with lending policies.

(2)  The lending policies adopted pursuant to this section shall be consistent with safe and sound practices and appropriate to the size of the credit union and nature and scope of its operations.

(d)  Interest and charges on loans.  Credit unions may demand and receive interest and charges on their loans in accordance with chapter 4 of Title 9 or as otherwise provided by law.

(e)  Limitations.  The total direct or indirect liabilities of any one member, however incurred, to a credit union shall not exceed, at the time incurred, the greater of $200.00 or ten percent of the credit union’s total assets.

(1)  Loans or extensions of credit to one person will be attributed to another person, and each person shall be deemed a borrower as follows:

(A)  In the case of obligations of one person, the proceeds of a loan or extension of credit to a person will be deemed to be used for the direct benefit of another person and will be attributed to the other person when the proceeds or assets purchased with the proceeds are transferred to another person, other than a bona fide arm’s length transaction in which the proceeds are used to acquire property, goods, or services.

(B)  In the case of obligations of a partnership or association, the obligations of each general partner and of each member of the association.

(C)  In the case of obligations of a general partner or a member of an association, the obligations of the partnership or association.

(D)  In the case of obligations of a corporation, the obligations of any subsidiaries in which it holds, directly or indirectly, a controlling equity interest.

(E)  In the case of obligations of a limited liability company, the obligations of any subsidiaries in which it holds, directly or indirectly, a controlling equity interest.

(F)  In the case of obligations of a corporation or limited liability company, the amount of a loan made to any other person to the extent that the proceeds of the loan directly or indirectly are to be:

(i)  Lent to the corporation or limited liability company;

(ii)  Used for the acquisition from the corporation or limited liability company of any equity interest therein; and

(iii)  Transferred to the corporation or limited liability company without fair and adequate consideration; provided, however, that the discharge of an equivalent amount of debt previously incurred in good faith for value shall be deemed fair and adequate consideration.

(2)  The following shall not be counted as indebtedness subject to the limitation of this subsection:

(A)  Indebtedness evidenced by bills of exchange or drafts drawn against existing values and secured by a lien upon goods in transit with a shipper’s order, bills of lading, or comparable instruments attached.

(B)  Indebtedness evidenced by notes or other paper secured by readily marketable corporate stock having a fair market value of not less than 125 percent of the indebtedness.

(C)  Indebtedness evidenced by notes or other paper secured by an assignment of accounts receivable or of amounts due or to become due on open account or on a contract to the extent of not less than 125 percent of the indebtedness.

(D)  Indebtedness evidenced by notes or other paper secured by liens upon agricultural products, manufactured goods, or other chattels in storage in warehouses or elevators with warehouse or elevator receipts attached, or goods released on trust receipts, when the value of the security is not less than 125 percent of the indebtedness, and the financial institution’s interest therein is insured against loss by insurance policies or certificates of insurance attached.

(E)  Indebtedness arising out of the daily transaction of the business of any clearinghouse association.

(F)  Indebtedness secured to the extent thereof by the cash surrender value of life insurance evidenced by policies of insurance validly issued and assigned.

(G)  Indebtedness secured to the extent thereof by savings deposits or certificates of deposit of solvent financial institutions up to the amount federally insured by the Federal Deposit Insurance Corporation or the National Credit Union Administration, and duly assigned.

(H)  Any portion of any indebtedness which the United States government, or an agency or instrumentality of the United States, unconditionally agreed to purchase or has unconditionally guaranteed as to payment of both principal and interest, including loans insured or guaranteed under the National Housing Act or the Servicemen’s Readjustment Act of 1944, as amended.

(I)  Additional funds advanced for the benefit of a borrower by a credit union for payment of taxes, insurance, utilities, security, and maintenance and operating expenses necessary to preserve the value of real property securing the loan.

(J)  Amounts paid against uncollected funds in the normal process of collection.

(K)  That portion of a loan or extension of credit sold as a participation by a credit union on a nonrecourse basis; provided that the participation results in a pro rata sharing of credit risk proportionate to the respective interests of the originating and participating lenders.

§ 32302.  Real estate loans

(a)  Clear title.  All loans secured by mortgages on real estate shall be supported by written evidence satisfactory to the credit union that title to the security is marketable, and the lien is valid and enforceable.  A mortgage on lands subject to lease under which rents are reserved to the owner, with all of the owner’s rights and options under the lease collaterally assigned to the credit union as security or a mortgage upon lands impressed with a public use, sometimes known as lease, society, or glebe lands, but held under a durable lease, shall not be deemed to be subordinate to such lease or public use.

(b)  Appraised value.  The appraisal of real estate securing a real estate related transaction entered into by a credit union shall comply with Part 722 of the National Credit Union Administration rules and regulations, as amended from time to time.

(c)  Servicing of loans.  A credit union may contract with another credit union, corporation, or association whose transactions are in whole or in part the handling and servicing of mortgage loans to handle and service loans in its behalf.  Whenever such a contract is made, the credit union shall not lose or suffer any impairment of any right of deduction or offset it might have against anyone liable for the mortgage debt.

(d)  Home loan escrow accounts.  Any credit union which requires a home loan escrow account to be established and maintained by a borrower shall follow the provisions of section 10404 of this title.

(e)  Loans insured or guaranteed by federal law.  Any mortgage on real estate given to secure a loan insured or guaranteed by the federal housing commissioner, the administrator of veterans’ affairs, or the administrator of the Small Business Administration under the National Housing Act, the Servicemen’s Readjustment Act of 1944, or the Small Business Act, respectively, as amended, shall not be subject to the provisions of any law of this state prescribing the nature, amount, or form of security, or manner of repayment, or requiring security upon which loans or advances of credit may be made, or prescribing or limiting the period or principal amount of which loans may be made, or prescribing or limiting the interest which may be charged or other charges which may be made or taken upon any loan or advance of credit.

§ 32303.  Credit cards

The provisions of section 14303 of this title governing credit cards shall apply to credit unions in the same manner as they apply to financial institutions as defined in subdivision 11101(32) of this title.

Subchapter 4.  Member Business Loans

§ 32401.  Authority

No credit union shall make member business loans unless it has complied with the provisions of this subchapter and such rules adopted by the commissioner.

§ 32402.  Commissioner Approval

A credit union shall obtain the written approval of the commissioner prior to engaging in the business of making member business loans.

Subchapter 5.  Loan Participation

§ 32501.  Participation Loans

(a)  Subject to the provisions of this section, a credit union may participate in loans to credit union members jointly with other state or federally chartered credit unions, credit union organizations, or other federally insured financial institutions pursuant to written policies established by the credit union’s governing body.  For purposes of this section, “credit union organization” means any organization established primarily to serve the daily operational needs of its member credit unions.  The term does not include trade associations, membership organizations principally composed of credit unions, or corporations or other businesses that principally provide services to credit union members as opposed to corporations or businesses whose business relates to the daily in-house operations of credit unions.

(b)  No credit union shall obtain an interest in a participation loan if the sum of that interest and any other indebtedness owing to the credit union by the borrower exceeds the limitations set forth in this title and in rules adopted by the commissioner.

(c)  The credit union shall execute a written master participation agreement and shall retain the written master agreement in the credit union’s office.  The master agreement shall include provisions for identifying, either through a document that is incorporated by reference into the master agreement or directly in the master agreement, the participation loan or loans prior to their sale.

(d)  A credit union may sell to or purchase from any participant the servicing of any loan in which it owns a participation interest.

(e)  The credit union originating the loan shall:

(1)  Originate loans only to its members;

(2)  Retain an interest of at least ten percent in the face amount of the loan;

(3)  Retain the original or copies of the loan documents; and

(4)  Require the credit committee or loan officer to use the same underwriting standards for participation loans as are used for loans that are not being sold in a participation agreement, unless there is a participation agreement in place prior to the disbursement of the loan.  Where a participation agreement is in place prior to disbursement, either the credit union’s loan policies or the participation agreement shall address any variance from nonparticipation loan underwriting standards.

(f)  A participant credit union that is not the originating lender shall:

(1)  Participate only in loans it is empowered to grant, and shall have a participation policy in place that sets forth the loan underwriting standards prior to entering into a participation agreement.

(2)  Participate in participation loans only if made to its own members or members of another participating credit union; however, this subdivision shall not apply if the originating lender is a federally insured financial institution that is not a credit union.

(3)  Retain the original or a copy of the written participation loan agreement and a schedule of the loans covered by the agreement.

(4)  Obtain the approval of the governing body, such person or persons or such committee authorized by the governing body to act on participation loans, or the investment committee for the disbursement of proceeds to the originating lender in accordance with the credit union’s loan participation policy.

Subchapter 6.  Safe Deposit Boxes

§ 32601.  Failure to pay rent; removal of contents

The provisions of section 14501 of this title governing safe deposit boxes shall apply to credit unions in the same manner as they apply to financial institutions as defined in subdivision 11101(32) of this title.

Subchapter 7.  Credit Union Service Organizations (CUSO)

§ 32701.  Organization of a CREDIT UNION SERVICE

                ORGANIZATION

(a)  With the approval of the commissioner, a credit union may establish a credit union service organization (CUSO) by itself or jointly with one or more other Vermont credit unions, federal credit unions, state‑chartered credit unions, or other federally insured depository institutions within or outside this state.  The establishing credit union shall file an application with the commissioner, which application shall include a description of the services to be engaged in by the CUSO, an explanation of how the proposed services are related to credit union services, the application fee, and any other information that the commissioner may require.

(b)  A CUSO shall be organized as a corporation or as a limited liability company and the potential exposure of each credit union shall be no more than the amount of funds invested in or lent to the CUSO by such credit union.

§ 32702.  Expansion of Services

A CUSO shall not expand its services without the prior written approval of the commissioner.  A CUSO shall file a written notice with the commissioner setting forth its intention to expand its services, a description of the proposed expanded services, an explanation of how the proposed expansion is related to credit union services, and any other information that the commissioner may require.

§ 32703.  Records, Reports, and Examination

(a)  A CUSO shall:

(1)  account for all transactions in accordance with generally accepted accounting principles;

(2)  prepare quarterly financial statements and obtain an annual opinion audit by a licensed certified public accountant on its financial statements in accordance with generally accepted auditing standards;

(3)  preserve all of its books and records in accordance with regulations adopted by the commissioner applicable to credit unions;

(4)  provide the commissioner with complete access to its books, records, and internal controls for review, evaluation, and examination;

(5)  provide such additional audits and reports as requested by the commissioner; and

(6)  pay the actual cost of any review, evaluation, or examination conducted by the commissioner.

(b)  As frequently as the commissioner deems appropriate or necessary, the commissioner may conduct an examination of the records and books of a CUSO in which a credit union has invested or to which it has lent funds or which was organized by a credit union.

§ 32704.  Limitation on Loans to and Investments in a CUSO

(a)  A credit union may invest its funds in or make loans to a CUSO, provided the total of any such investment in or loan to any one CUSO does not exceed two percent of the total paid-in and unimpaired capital and surplus and share deposits as of its last calendar year‑end financial report of the credit union without regard to the amount derived from the profitability of such CUSO.

(b)  For purposes of subsection (a) of this section: 
(1)  Paid-in and unimpaired capital and surplus means shares plus postclosing, undivided earnings (this does not include regular reserves or special reserves required by law, regulation, or special agreement between the credit union and its regulator or share insurer); and
(2)  Total investments in and total loans to CUSO will be measured consistent with generally accepted accounting principles.

(c)  If the commissioner determines that a credit union’s investments in or loans to any CUSO exceed the limitations of this section or are otherwise not prudent for the credit union to maintain, the commissioner may require the credit union to divest such loans or investments.

§ 32705.  Investing in, lending to, or joining an existing

                credit union service organization

(a)  Subject to the limitations of section 32704 of this title, a credit union may invest its funds in, join, or lend to an existing CUSO.  The credit union shall file with the commissioner prior written notice of its intention to make such investment in or loan to an existing CUSO.

(b)  Prior to investing in or lending to an existing CUSO, a credit union shall:

(1)  obtain a written agreement that the CUSO will:

(A)  account for all transactions in accordance with generally accepted accounting principles;

(B)  prepare quarterly financial statements and obtain an annual opinion audit by a licensed certified public accountant on its financial statements in accordance with generally accepted auditing standards;

(C)  provide the commissioner with complete access to all books and records of the CUSO and with the ability to review CUSO internal controls, as the commissioner deems necessary; and

(D)  pay the actual cost of any examination conducted by the commissioner; and

(2)  obtain a written legal opinion that the CUSO is established as a corporation or a limited liability company and that the potential exposure of the credit union is limited to no more than the loss of funds invested in or lent to the CUSO.

§ 32706. Customer base 
A credit union may organize, invest in, or lend to a CUSO only if the credit union service organization primarily serves credit unions, its membership, or the membership of credit unions contracting with the CUSO.

§ 32707.  Bond

Each credit union service organization and each of its directors, officers, managers, general partners, employees, and authorized agent of a CUSO who has charge or possession of the funds, securities, or other assets of such CUSO shall be bonded by a surety company authorized to do business in this state.  Such bond shall be in favor of the CUSO and in such amount as is approved by the governing body of the CUSO.  The commissioner may require the amount of the bond to be increased.  A copy of each bond and any renewal thereof shall be promptly filed with the commissioner.

§ 32708.  Prohibited Activities

A CUSO shall not acquire control of, either directly or indirectly, another depository financial institution, nor invest in shares, stocks, or obligations of an insurance company, trade association, liquidity facility, or similar organization, corporation, or association.

§ 32709.  Separate Entities

(a)  A credit union and a CUSO shall be operated in a manner that demonstrates to the public the separate existence of the credit union and the CUSO.

(b)  At the request of the commissioner, the credit union shall provide to the commissioner a written legal opinion of counsel as to whether the CUSO is established in a manner that will limit potential exposure of the credit union to no more than the loss of funds invested in, or lent to, the CUSO.  The legal opinion shall address factors that have led courts to “pierce the corporate veil” such as inadequate capitalization, lack of separate corporate identity, common boards of directors and employees, control of one entity over another, and lack of separate books and records.  Independent legal counsel of the investing credit union or the CUSO may provide the legal opinion.

§ 32710. Suspension, Liquidation, Insolvency,

               Conservation, Involuntary Merger, And

               Appointment Of Directors And Managing Officers

               Of A Troubled Credit Union Service Organization

A CUSO shall be subject to chapter 226 of this title governing suspension, liquidation, insolvency, conservation, involuntary merger, and appointment of directors and managing officers of a troubled CUSO.

§ 32711.  Rules and Regulations

The commissioner may adopt such additional rules and regulations governing CUSOs as the commissioner deems appropriate.

Chapter 223.  Offices, Out‑of‑State Offices,

and Offices of State Credit Unions

§ 33101.  Relocation of main office

(a)  With the approval of the commissioner, a Vermont credit union may relocate its main office anywhere within the state to serve effectively its members.

(b)  The commissioner, before granting an approval under subsection (a) of this section, shall consider:

(1)  The field of membership to be served by the proposed relocation of the main office;

(2)  The adequacy of the current main office;

(3)  The economic need for and cost of the proposed relocation; and

(4)  The convenience and necessity to the field of membership of the proposed relocation.

§ 33102.  In-state and out‑of‑state offices

(a)  A Vermont credit union shall not establish an office in this state or outside this state without the prior approval of the commissioner in accordance with subsection 30801(b) of this title.

(b)  Prior to approving the credit union’s application to establish an office in this state or outside this state, the commissioner must find that: 

(1)  Establishment of the proposed office is consistent with the safety and soundness of the credit union;

(2)  Establishment of the proposed office is consistent with the credit union’s field of membership;

(3)  The credit union has a record of compliance with the requirements of applicable state and federal laws, rules, and regulations; and

(4)  In the case of an out-of-state office, the laws of such other state authorize the establishment of such office.

§ 33103.  Offices of state‑chartered credit unions

(a)  A state credit union may, with the prior written approval of the commissioner, establish one or more offices in this state; provided the laws of its home state authorizes under conditions no more restrictive than those imposed by the laws of this state, as determined by the commissioner, a Vermont credit union to establish an office in that state.  Prior to approving the state credit union’s application to establish an office in this state, the commissioner must find that such state credit union:

(1)  Is financially solvent;

(2)  Maintains bonds and share insurance as required under subchapter 6 of chapter 221 of this title;

(3)  Is effectively examined and supervised by an official of the state in which it is chartered: and

(4)  Is in compliance with the requirements set forth in subsection 33102(b) of this title. 

(b)  The commissioner may examine and supervise the Vermont offices of any state credit union and may enter into agreements with other state credit union regulators concerning such examinations or supervision.

(c)  To the extent federal law does not preempt the same, no state credit union may conduct business in this state unless it:

(1)  Charges interest in compliance with the provisions of chapter 4 of Title 9 when making loans in this state;

(2)  Complies with the consumer protection statutes and rules applicable to Vermont credit unions; 

(3)  Agrees to furnish the commissioner with a copy of the examination report conducted by its regulatory agency or to submit to an examination by the commissioner; and

(4)  Designates and maintains an agent for the service of process in this state.

(d)  The commissioner may, after giving notice and an opportunity to be heard to any state credit union, revoke or suspend the approval given to such state credit union to establish an office in this state for any reason that would be sufficient grounds to deny an application to establish an office in this state.

(e)  The commissioner may revoke the approval of a state credit union conducting business in this state if the commissioner finds that:

(1)  The state credit union no longer meets the requirements of this section.

(2)  The state credit union has violated the laws of this state or lawful rules, regulations, or orders issued by the commissioner.

(3)  The state credit union has engaged in a pattern of unsafe or unsound credit union practices.

(4)  Continued operation by the state credit union is likely to have a substantially adverse impact on the financial, economic, or other interests of residents of this state.

(5)  The state credit union is prohibited from operating in its home state.

§ 33104.  Supervisory agreements; Costs of examinations

(a)  In implementing this chapter, the commissioner may cooperate with credit union regulators in other states or jurisdictions and may share with the regulators the information received by the commissioner to the extent necessary to supervise and regulate the credit union.

(b)  The commissioner may enter into supervisory agreements with a state credit union and its regulators to prescribe the applicable laws governing the powers and authorities of Vermont offices of the state credit union. 

(c)  The agreements may address, but are not limited to, corporate governance and operational matters.  The agreements may resolve any conflict of laws and specify the manner in which the examination, supervision, and application processes must be coordinated with the regulators.

(d)  The commissioner may adopt rules for the periodic examination and investigation of the affairs of a state credit union operating in this state.  The costs of examination and supervision must be fully borne by the state credit union.

Chapter 224.  Merger and Acquisition

§ 34101.  Mergers

(a)  General.  Any two or more credit unions may merge into one Vermont credit union in accordance with the procedures and subject to the conditions and limitations set forth in this chapter.

(b)  Adoption of plan.  The governing body of each participating credit union shall adopt, by a majority vote or higher if required by its organizational documents, a plan of merger on such terms as mutually agreed upon.  The plan shall include:

(1)  The names of the participating credit unions and their locations;

(2)  With respect to the continuing credit union:  the name and location of its principal office, offices, and facilities; the name, address, and occupation of each director who is to serve until the next annual meeting of the members; and the name and address of each officer;

(3)  The amount of capital, the number of outstanding shares, and provisions governing the manner and basis of converting deposits, accounts, or shares of such credit union into deposits, accounts, or shares of the continuing credit union;

(4)  The amendments required to be made to the continuing credit union’s organizational documents;

(5)  The resulting field of membership of the continuing credit union;

(6)  A statement that the agreement is subject to approval of the commissioner and of the members of each participating credit union;

(7)  Provisions, if applicable, governing the manner in which the continuing credit union will return accounts and shares, with interest to date, to dissenting members of the participating credit unions;

(8)  A business plan for the continuing credit union;

(9)  The anticipated effective date of such merger; and

(10)  Such other provisions and details as may be necessary to perfect the merger or as may be required by the commissioner.

(c)  Commissioner’s approval.  Following approval by a majority vote of the governing body of each participating credit union, unless a higher percentage is required by either credit union’s organizational documents, the plan of merger or assumption, together with certified copies of the authorizing resolutions adopted by the governing body of each participating credit union, shall be forwarded to the commissioner for approval pursuant to subchapter 8 of chapter 220 of this title; provided, however, the approval of the commissioner shall not be required for any transaction in which the continuing credit union will be a federal credit union.  If the commissioner disapproves the plan, the commissioner shall state the reasons for the disapproval in writing and furnish them to the participating credit unions.  The credit unions shall be given an opportunity to amend the plan to eliminate the reasons for disapproval.

(d)  Vote of members.  The plan of merger, as approved by the commissioner, shall be submitted to the members of each participating credit union for their approval at such credit union’s annual meeting or at a special meeting called for that purpose in the following manner.  Unless a greater percentage is required by the organizational documents of either credit union, the plan of merger or assumption must be approved by a majority vote of the members present at a meeting called for this purpose.  The vote constitutes the adoption of the organizational documents of the continuing credit union, including amendments, contained in the merger agreement.

(e)  Executed plan; certificate; effective date.  The following provisions apply to the executed plan, certificate, and effective date.

(1)  Upon approval by the members of each participating credit union, an executive officer and the secretary of each credit union shall submit the executed plan of merger to the commissioner, together with the certified record of the vote of the members approving it, each certified by these officers.

(2)  Upon receipt of the items in subdivision (1) of this subsection and evidence that the participating credit unions have complied with all applicable federal laws, state laws, and regulations, the commissioner shall issue to the continuing credit union a certificate specifying the name of each participating credit union and the name of the continuing credit union.  The continuing credit union shall file a copy of the certificate with the secretary of state for recording.  This certificate is conclusive evidence of the merger and of the correctness of all proceedings relating to the merger in all courts and places.  The certificate may be filed in the appropriate land records offices to evidence the new name in which property of each participating credit union is to be held.

(3)  Unless a later date is specified in the certificate, the merger is effective upon filing of the certificate as provided in subdivision (2) of this subsection, and the authority of all but the surviving credit union shall terminate automatically upon filing.  The commissioner may file or order any credit union to file conforming documents with the secretary of state.

(4)  Any plan of merger may contain a provision that, notwithstanding approval of the members or the commissioner, the plan may be abandoned at any time prior to the effective date of the merger by the governing body of any participating credit union, either at the absolute discretion of the governing body or upon the occurrence of any stated condition.

(f)  Federal credit union as participant.  If one of the parties to a merger with a Vermont credit union is a federal credit union, the participants shall comply with all requirements imposed by federal law for such merger in addition to the requirements contained in this title and shall provide evidence of such compliance to the commissioner.

(g)  Sections 34103 and 34104 of this title apply to mergers and acquisitions made pursuant to this chapter.

(h)  Authority for expedited mergers.  Notwithstanding any other provision of law or any organizational document of any participating credit union, following approval of the plan of merger by a majority vote of the governing body of each participating credit union and receipt by the commissioner of certified copies of the authorizing resolutions adopted by the governing body of each participating credit union, the commissioner may waive any requirement of subsection (b) of this section, may waive the requirements of subsection (d), and may order that the merger become effective immediately if the commissioner believes that the action is necessary for the protection of the members or the public.

§ 34102.  Merger of Vermont credit union with federal

                credit union

(a)  Nothing contained in the law of this state restricts the right of a credit union organized under this title to merge into a continuing federal credit union.  The corporate action to be taken by the Vermont credit union and its rights and liabilities and those of its members are the same as those prescribed in section 34101 of this title, except that approval of the commissioner is not required.

(b)  Upon the effective date of the merger, the authority of the participating Vermont credit union shall terminate automatically.  The continuing federal credit union shall notify the secretary of state of the termination.

§ 34103.  Effect of merger or conversion

(a)  Applicability.  From and after the effective date of a merger or conversion, under chapter 224 or 225 of this title, the continuing credit union may conduct business in accordance with the terms of the plan as approved and in accordance with this chapter.

(b)  Continuing entity.  Whenever the authority of any participating or converting credit union has been terminated, the continuing credit union shall be deemed to be a continuation of the entity of the participating or converting credit union such that all property of the participating or converting credit union, including rights, titles, and interests in and to all property of whatsoever kind, whether real, personal, or mixed, and things in action, and every right, privilege, interest, and asset of any conceivable value or benefit then existing, or pertaining to it, or which would inure to it, including appointments, designations, and nominations, and all rights and interests in any fiduciary capacity, shall immediately by act of law and without any conveyance or transfer and without further act or deed be vested in and continue to be that property of the continuing credit union; and such continuing credit union shall have, hold, and enjoy the same in its own right as fully and to the same extent as the same was possessed, held, and enjoyed by the participating or converting credit union, and such continuing credit union as of the time of the taking effect of such merger or conversion shall continue to have and succeed to all the rights, obligations, and relations of the participating or converting credit union.  Furthermore, unless the plan provides otherwise or the commissioner orders otherwise, the resulting field of membership of the continuing credit union shall be the combined field of membership of both participating credit unions, and the continuing credit union may continue to operate the offices of the other participating credit union.

(c)  Effect on judicial proceedings.  All pending actions and other judicial proceedings to which the participating or converting credit union is a party shall not be deemed to have been abated or to have been discontinued by reason of such merger or conversion, but may be prosecuted to final judgment, order, or decree in the same manner as if such merger or conversion had not been taken; and such credit union resulting from such merger or conversion may continue such action in its new name, and any judgment, order, or decree may be rendered for or against it which might have been rendered for or against the participating or converting credit union theretofore involved in such judicial proceedings.

(d)  Creditor’s rights.  The continuing credit union in a merger or conversion shall be liable for all obligations of the participating or converting credit union which existed prior to such merger or conversion, and the merger or conversion taken shall not prejudice the right of a creditor of the participating or converting credit union to have his or her debts paid out of the assets thereof, nor shall such creditor be deprived of or prejudiced in any action against the officers, directors, corporators, or members of a participating or converting credit union for any neglect or misconduct.

(e)  Powers and attributes of continuing organization.  Whenever credit unions merge, the surviving organization, except as provided in this chapter, shall have, possess, and own, but separately and distinguishably as provided by this chapter, all property, rights, powers, franchises, privileges, and appointments whether existing, contingent or future, corporeal or incorporeal, tangible or intangible of every nature whatsoever of each of the merging organizations.  If any of the merging organizations are acting or have been acting or have been nominated, appointed, delegated, or designated by any court, person, or otherwise to act in a fiduciary capacity, the continuing organization shall have, possess, and be vested with and succeed to all of the property, rights, powers, privileges, duties, and obligations appertaining to each such fiduciary capacity without further or additional appointment, obligation, or designation.  The continuing credit union shall be a continuation of the entity of each and all of the organizations so merged; each such entity, however, remaining separable and distinguishable to the extent provided in this chapter.  It may exercise the franchise of each of the organizations separably and distinguishably as well as the composite franchises of all.  Except as provided in this chapter, it shall hold, exercise, and perform all rights, powers, privileges, duties, and obligations appertaining to any and all representative or fiduciary relationships of each of the merged credit unions, and shall be liable for all of the debts, contracts, and obligations of each of the merged credit unions.  Any such debt, undertaking, or obligations of any merged credit union may be enforced against it as fully and effectively as it could have been against the merged credit union.

(f)  Disposal of property and assets.  The continuing credit union shall have the right to use, control, sell, or dispose of all real and personal estate, rights, or interests of the merged credit unions and convey the same by deed, assignment, endorsement, contract, or other conveyance, either in its own name or in the name of any merged credit unions as hereinafter provided, or in the names of both, as fully and effectively as the merged credit unions could have done; and may maintain suit in its own name or in the name of any such credit union, as provided in this subchapter, or in the names of both, to foreclose or recover any title, right, demand, or claim appertaining to the merged credit unions.  To this end and except as provided in the contract of merger, the existence of each of the merged credit unions shall be deemed and treated as having continued each separably and distinguishably for all purposes necessary or convenient to liquidate the assets of any merged credit unions.  Any receipt, assignment, endorsement, transfer, option, compromise, acquittance, release, or contract to sell, convey, or exchange may be executed in its name or in the name of the continuing credit unions, or both.  Any other thing may be done in either or both of these names which may be necessary or proper for the reduction to cash of any assets of a foreclosure, of any rights or titles, or the doing of any other acts or things appropriate to the winding up of the affairs of the merging organization as a separate entity.  Those contracts and agreements shall be executed, and those acts shall be done under the control of the directors of the continuing organization.

§ 34104.  Nonconforming activities; cessation

(a)  Applicability.  If, as a result of a merger or conversion pursuant to this title, the continuing credit union is to be of a different type or of a different character than any one or all of the participating or converting institutions, such continuing credit union shall be subject to the conditions and limitations as set forth in this chapter.

(b)  Plan for termination.  The plan of merger or conversion shall set forth the method and schedule for terminating those activities not permitted by the laws of this state for the continuing credit union, but which were authorized for any of the participating or converting institutions.

(c)  Effective date.  The plan of merger or conversion shall state that from the effective date of such action, the continuing credit union shall not engage in any nonconforming activities, except to the extent necessary to fulfill obligations existing prior to merger or conversion, pursuant to subsection (d) of this section.

(d)  Compliance with limitations.  If, as a result of such merger or conversion, the continuing credit union exceeds any lending, investment, or other limitations imposed by this title, it shall conform to such limitations within such period of time as shall be established by the commissioner.

(e)  Divestiture.  The commissioner may, as a condition to such merger or conversion, require a nonconforming activity to be divested in accordance with such additional requirements as he or she may deem appropriate under the circumstances.

Chapter 225.  Conversions

§ 35101.  Conversions

(a)  General.  The provisions of this chapter shall apply whenever a federal credit union seeks to convert to a Vermont credit union or whenever a Vermont credit union seeks to convert to a federal credit union; provided, however, that conversion from a Vermont credit union to a federal credit union shall be as permitted in federal law and shall not require the commissioner’s approval, and that federal law shall be controlling to the extent the laws of this state are inconsistent.

(b)  Types of conversions.  The types of conversions permitted under this chapter are as follows:

(1)  Conversion from a federal credit union to a Vermont credit union;

(2)  Conversion from a Vermont credit union to a federal credit union.

(c)  Manner of conversion.  Any credit union may convert under this chapter in the following manner:

(1)  The governing body of the credit union shall approve the plan of conversion by at least a majority vote, unless a higher percentage is required by the credit union’s organizational documents.

(2)  The approved plan of conversion, together with a certified copy of the authorizing resolution adopted by the governing body of the credit union, shall be submitted to the commissioner for approval pursuant to the requirements and procedures of subchapter 8 of chapter 220 of this title, except as provided in subsection (a) of this section.

(3)  The plan of conversion, as approved by the commissioner, shall be submitted to members of the credit union for their approval at an annual meeting or at a special meeting called for that purpose.

(4)  The approved plan shall be finalized as provided in subsection 35101(f) of this section.

(d)  Contents of plan of conversion.  The plan of conversion shall include:

(1)  The name of the credit union and its location;

(2)  The type of credit union that the resulting credit union is to be;

(3)  A method and schedule for terminating any nonconforming activities that would result from such conversion;

(4)  A statement of the competitive impact resulting from such conversion, including the loss of particular financial services in the market area resulting from such conversion;

(5)  A statement that the conversion is subject to approval of the commissioner, except for conversions from a Vermont credit union to a federal credit union;

(6)  A statement that the conversion is subject to approval of the credit union’s members;

(7)  Such additional information as the commissioner may require.

(e)  Member voting requirements.  A majority of the members of the credit union casting votes at a duly called and noticed meeting, unless a higher percentage is required by the credit union’s organizational documents, is necessary to approve the plan of conversion at the meeting.  For purposes of this section, written notice must be delivered in person to each member or mailed to each member at the address for such member appearing on the records of the credit union, not more than 30 days nor less than seven days prior to the date of the meeting.  Notice may be given electronically if the member has specifically requested or consented to electronic notification of meetings.  An affirmative vote constitutes approval of the adoption of any amendments to the organizational documents of the credit union that are necessary to effect the transaction.

(f)  Finalizing the plan of conversion.  Except as provided in subsection (g) of this section, the credit union shall effect its conversion as follows:

(1)  Upon approval by the members, the credit union shall submit the executed conversion plan to the commissioner, together with all necessary amendments to the credit union’s organizational documents, each certified by an officer of the credit union.

(2)  The commissioner shall issue to the resulting credit union a certificate specifying the name of the converting credit union and the name and organizational structure of the resulting credit union.  The resulting credit union shall file one copy of the certificate issued by the commissioner with the secretary of state for recording.  The certificate shall be conclusive evidence of the conversion and the correctness of all proceedings relating to the conversion in all courts and places.  The certificate may be filed in any land records office to evidence the new name in which property of the converting credit union is to be held.

(3)  Unless a later date is specified in the conversion plan, the conversion becomes effective upon filing of the certificate as provided in subdivision (2) of this subsection, and the former charter of the converting credit union shall terminate automatically.  The commissioner may file or order any credit union to file conforming documents with the secretary of state.

(g)  Completion of conversion into federal credit union.  Upon completion of a conversion into a federal credit union, the federal credit union shall certify in writing to the commissioner and the secretary of state that the conversion has been completed under applicable federal law.  The charter of the converting credit union shall terminate automatically upon issuance of the federal credit union charter.

(h)  If the commissioner disapproves the conversion plan, the commissioner shall state the reasons for the disapproval in writing and furnish them to the credit union.  The credit union shall be given a reasonable opportunity to amend the plan to eliminate the reasons for disapproval.

(i)  Authority for expedited conversion.  Notwithstanding any other section of law or any organizational document of the credit union, the commissioner may order that a charter conversion become effective immediately when the commissioner finds it is necessary for the protection of members or the public.

(k)  Regulations of the commissioner.  The commissioner shall issue such regulations governing the conversion of a credit union organized under this chapter to a federal credit union and the conversion of a federal credit union to a credit union organized under this chapter as the commissioner deems necessary or appropriate. 

§ 35102.  Conversion of a credit union to a mutual

                financial institution or a cooperative financial

                institution 

(a)  In addition to the provisions of chapter 206 of this title, a credit union may convert to a mutual or cooperative financial institution if all of the following are met:

(1)  At least 30 days before the governing body votes on a plan of conversion under subdivision (2) of this subsection, the governing body shall give written notice to the members that it is considering a conversion.  The governing body shall mail the notice to the members and shall not include any other mailing with the notice.  The notice shall include all of the following:

(A)  A brief statement of why the governing body is considering the conversion.

(B)  A brief statement of the major positive and negative effects of the proposed conversion.

(C)  A request for members' written comments on the proposed conversion.

(2)  The governing body must approve of the plan of conversion and file the plan of conversion with the commissioner.  An affirmative vote of two‑thirds of the entire governing body is required to approve a plan of conversion.  The plan of conversion shall meet all of the following:

(A)  The conversion plan discloses to the members information concerning the advantages and disadvantages of the proposed conversion and contains a statement indicating any material differences in powers between a credit union and a mutual or cooperative financial institution.

(B)  The conversion is not intended to circumvent a pending supervisory action initiated by the commissioner or another regulatory agency because of a concern over the safety and soundness of the credit union.

(C)  The conversion plan does not provide any official of the converting credit union with any remuneration or other economic benefit in connection with the conversion.

(D)  After conversion, the mutual or cooperative financial institution is likely to be economically viable.

(3)  The governing body shall call a special meeting of the members to vote on the conversion plan and shall mail to each member a notice of the meeting and proposed conversion 60 days before the date of the special meeting.  The notice shall include all of the following:

(A)  A summary of the positive and negative effects of the proposed conversion.

(B)  A statement that the directors will not receive any remuneration or other economic benefit in connection with the conversion of the credit union.

(C)  A statement that any interested person may obtain more detailed information about the conversion from the credit union at its principal place of business or by any method approved in advance by the commissioner.

(D)  A statement that the governing body may substantively amend the proposed plan of conversion before the special meeting based on comments from regulatory authorities or any other reason, and that the governing body may terminate the proposed plan of conversion.

(E)  Instructions for obtaining a copy of the conversion plan.

(F)  The date of the special meeting and a statement that the vote on the conversion will close on that date.

(G)  Any other information required by the commissioner.

(4)  Thirty days before the special meeting of the members, the governing body shall mail a notice of the meeting and proposed conversion to each member.  The notice shall include all of the information described in subdivision (3) of this subsection for the 60-day notice and shall include the date, time, and place of the special member meeting, a ballot and postage-paid return envelope, and a summary of the methods permitted for casting votes.

(5)  If the governing body substantively amends the plan of conversion, at least 30 days before the vote of the members on the plan, the governing body shall mail a notice to each member.  The notice shall contain the information concerning the amended plan of conversion described in subdivision (3) of this subsection for a notice under that subdivision.

(6)  At the special meeting of members, the members, by a two-thirds vote of members voting, must approve of the conversion and the plan of conversion.  A member may vote in person or by mail.  With the prior approval of the commissioner, a credit union may accept member votes by an alternative method that is reasonably calculated to ensure each member has an opportunity to vote.

(7)  The credit union shall file with the commissioner all of the following:

(A)  Certified copies of records of all proceedings held by the governing body and members of the credit union.

(B)  Copies of member comments submitted to the credit union under subdivision (1)(C) of this subsection.

(C)  If such consent or approval is required, a certified copy of the consent or approval of any state or federal regulatory authority with jurisdiction over the mutual or cooperative financial institution after the conversion and, if a holding company is to be formed in connection with the conversion, the regulations of the federal reserve board of governors or of the office of thrift supervision applicable to holding companies.

(D)  Verification that deposits in the converted mutual or cooperative financial institution qualify for federal insurance.

(b)  If the requirements of this section are met and the commissioner determines that the notices to members were accurate, timely, and not misleading, and that conduct of the vote on the conversion plan was fair and lawful, the commissioner shall approve the conversion, and the conversion shall be effective.

(c)  Except as otherwise required by the commissioner, this section does not apply to a credit union that submitted to the commissioner a plan of conversion to a mutual or cooperative financial institution before the effective date of this part.

(d)  In the event of any conflict between the provisions of this section and the provisions of chapter 206 of this title, the provisions of this section shall govern.

§ 35103.  Conversion of a mutual financial institution or

                 a cooperative financial institution to a

                 credit union

Chapter 206 of this title shall govern the conversion of a mutual financial institution or a cooperative financial institution to a credit union.

Chapter 226.  Suspension, Liquidation, Insolvency, Conservation, Involuntary Merger, AND Directors and Managing Officers of a Troubled Credit Union

§ 36101.  Suspension, voluntary liquidation, and

                involuntary liquidation

(a)  Suspension.  If it appears that any credit union is bankrupt or insolvent or that it has willfully violated this chapter or is operating in an unsafe or unsound manner, the commissioner shall issue an order temporarily suspending the credit union’s operations for not more than 60 days.  The governing body shall be given notice by registered mail of the suspension, which notice shall include a list of the reasons for the suspension or a list of the specific violations of this chapter.  The commissioner shall also notify the insuring organization of any suspension.  Upon receipt of the suspension notice, the credit union shall immediately cease all operations.  The directors of the credit union shall then file with the commissioner a reply to the suspension notice, request a hearing to present a plan of corrective actions proposed if they desire to continue operations, or request that the credit union be declared insolvent and a liquidating agent appointed.  If the credit union fails to answer the suspension notice or request a hearing with the commissioner, the commissioner may then revoke the credit union’s charter, appoint a liquidating agent, and liquidate the credit union in accordance with subsection (d) of this section.

(b)  Voluntary liquidation.  At a meeting specially called to consider the matter, a majority of the entire membership may vote to dissolve the credit union, if a copy of the notice was mailed to the members of the credit union at least ten days prior thereto.  Any member not present at the meeting may within the next 20 days vote in favor of dissolution by signing a statement in a form approved by the commissioner, and the vote shall have the same force and effect as if cast at the meeting.  The credit union shall thereupon immediately cease to do business except for the purposes of liquidation, and the chairperson of the governing body and secretary shall, within five days following the meeting, notify the commissioner of the credit union’s intention to liquidate and shall include in the notification a list of the names and addresses of the directors and officers of the credit union.

(c)  Involuntary liquidation.  If the commissioner, after issuing notice of suspension and providing an opportunity for a hearing, rejects the credit union’s plan to continue operations, the commissioner may issue a notice of involuntary liquidation and appoint a liquidating agent.  The credit union may request a stay of execution of that action by appealing to the superior court of Washington County.  Involuntary liquidation may not be ordered before the suspension procedures outlined in subsection (a) of this section are completed.

(d)  Liquidating procedure.  The credit union shall continue in existence for the purpose of discharging its debts, collecting and distributing its assets, and doing all acts required in order to wind up its business and may sue and be sued for the purpose of enforcing those debts and obligations until its affairs are fully adjusted.  The governing body or, in the case of involuntary dissolution, the liquidating agent shall use the assets of the credit union to pay: first, expenses incidental to liquidation including any surety bond that may be required; second, any liability due nonmembers; third, deposits and savings club accounts as provided in this chapter.  Assets then remaining shall be distributed to the members proportionately to the shares held by each member as of the date liquidation was voted.  As soon as the governing body or the liquidating agent determines that all assets from which there is a reasonable expectancy of realization have been liquidated and distributed as set forth in this section, it shall execute a certificate of liquidation on a form prescribed by the commissioner and file it with the secretary of state.  The certificate shall, after filing or recording and indexing, be forwarded to the commissioner whereupon the credit union shall be dissolved.

(e)  NCUA as liquidating agent.  In the case in which the administrator of the National Credit Union Administration is appointed liquidating agent, the administrator shall have the right to be subrogated to the rights of the members of the liquidating credit union.

§ 36102.  Involuntary Merger of Credit Union

(a)  Notwithstanding any other provision of law, the commissioner may initiate the involuntary merger of a credit union which is insolvent or is in danger of insolvency or is operating in an unsafe or unsound manner with any other credit union or may authorize a credit union to purchase any of the assets of or assume any of the liabilities of any other credit union which is insolvent or in danger of insolvency or is operating in an unsafe or unsound manner if the commissioner is satisfied that:

(1)  An emergency requiring expeditious action exists with respect to such other credit union;

(2)  Other alternatives are not reasonably available; and

(3)  The public interest would best be served by approval of such merger, consolidation, purchase, or assumption.

(b)  The credit union may request a stay of the involuntary merger by appealing to the Washington superior court.

(c)(1)  Notwithstanding any other provision of law, the commissioner may authorize an institution whose deposits or accounts are insured to purchase any of the assets of or assume any of the liabilities of a credit union which is insolvent or in danger of insolvency or is operating in an unsafe or unsound manner; and

(2)  For purposes of the authority contained in this section, insured share and deposit accounts of the credit union may, upon consummation of the purchase and assumption, be converted to insured deposits or other comparable accounts in the acquiring institution, and the commissioner and the insuring organization shall be absolved of any liability to the credit union’s members with respect to those accounts.

(d)  Notwithstanding any other provision of law, the commissioner may waive the need for a membership vote of both the acquired and continuing credit union to approve the involuntary merger and may waive the requirement that the governing body of the acquired credit union approve the involuntary merger.

§ 36103.  Conservatorship

(a)  The commissioner may, ex parte without notice, appoint himself or herself or an insuring organization or any other person as conservator and immediately take possession and control of the business and assets of any credit union in any case in which:

(1)  The commissioner determines that such action is necessary to conserve the assets of any credit union or to protect the interests of the members of such credit union.

(2)  a credit union, by a resolution of its governing body, consents to such an action by the commissioner.

(3)  The attorney general notifies the commissioner in writing that a credit union has been found guilty of a criminal offense.

(4)  There is a willful violation of a cease and desist order which has become final.

(5)  There is concealment of books, papers, records, or assets of the credit union or refusal to submit books, papers, records, or affairs of the credit union for inspection to any examiner or to any lawful agent of the commissioner.

(6)  The credit union is significantly undercapitalized and has no reasonable prospect of becoming adequately capitalized.

(7)  The credit union is critically undercapitalized.

(b)  Not later than ten days after the date on which the commissioner takes possession and control of the business and assets of a credit union pursuant to subsection (a) of this section, such credit union may apply to the superior court of Washington County for an order requiring the commissioner to show cause why the commissioner should not be enjoined from continuing such possession and control.  Except as provided in this subsection, no court may take any action, except at the request of the commissioner by regulation or order, to restrain or affect the exercise of powers or functions of the commissioner as conservator.

(c)  Except as provided in subsection (b) of this section, the commissioner may maintain possession and control of the business and assets of such credit union and may operate such credit union until such time:

(1)  as the commissioner shall permit such credit union to continue business subject to such terms and conditions as may be imposed by the commissioner; or

(2)  as such credit union is liquidated in accordance with the provisions of section 36101 of this title.

(d)  The commissioner may appoint such agents as he or she considers necessary in order to assist the commissioner in carrying out his or her duties as a conservator under this subsection.

(e)  All expenses incurred by the commissioner in exercising his or her authority under this subsection with respect to any credit union shall be paid out of the assets of such credit union.

(f)  The conservator shall have all the powers of the members, the directors, the officers, and the committees of the credit union and shall be authorized to operate the credit union in its own name or to conserve its assets in the manner and to the extent authorized by the commissioner.

(g)  The authority granted by this subsection is in addition to all other authority granted to the commissioner under this title.

§ 36104.  Appointment of Director and Managing Officers

                 of Troubled Credit Unions

The commissioner shall approve any director elected or appointed to serve on the governing body and any person appointed as the managing officer of a troubled credit union, before the director or officer takes office.  For the purposes of this subsection, “troubled credit union” means any credit union that, in the opinion of the commissioner:

(1)  is insolvent or is in danger of becoming insolvent;

(2)  is not likely to be able to meet the demands of its members or to pay its obligations in the normal course of business or is likely to incur losses that may deplete all or substantially all of its capital; or

(3)  is being operated in an unsafe and unsound manner.

Sec. 2.  8 V.S.A. § 18 is amended to read:

§ 18.  Charges for examinations, applications, reviews,

          and investigations

Every person subject to regulation by the department shall pay the department the reasonable costs of any examination, review, or investigation that is conducted or caused to be conducted by the department of such person, or of any application or filing made by such person, or of any examination, review, or investigation of any order, decision, or certificate issued by the commissioner, at a rate to be determined by the commissioner.  The department may retain experts or other persons who are independently practicing their professions to assist in such examination, review, or investigation.  The department shall be reimbursed for all reasonable costs and expenses, including the reasonable costs and expenses of such persons retained by the department, by the person examined, submitting the application or filing reviewed , investigated, or subject to or under the jurisdiction of an order, decision, or certificate issued by the commissioner under this title or under Title 18.  An examination, review, or investigation subject to this section shall include, but not be limited to, an examination, review, or investigation of any application, information, rate filing, or form filing submitted, or any order, decision, or certificate issued under this title, or under Title 18.  In unusual circumstances, the commissioner may waive reimbursement for the costs and expenses of any review in the interests of justice.  Those institutions subject to assessment or fees for services provided under section 19 of this title shall not be billed for a regular examination performed under subsection 11501(a) or 30601(a) of this title or for services for which such fees under subsection 19(a) of this title have been paid.  The authority granted to the commissioner by this section is in addition to any other authority granted to the commissioner by law.

Sec. 3.  8 V.S.A. § 16101(b) is amended to read:

(b)  Types of conversions.  The types of conversions permitted under this chapter are as follows:

(1)  Conversion from a national financial institution to a Vermont financial institution;

(2)  Conversion from a Vermont financial institution to a national financial institution;

(3)  Conversion of a special purpose financial institution into a universal financial institution or into another form of special purpose financial institution;

(4)  Conversion of a universal financial institution into a special purpose financial institution;

(5)  Conversion of a mutual financial institution or a cooperative financial institution into an investor-owned financial institution or into a credit union under chapter 71 chapters 220 - 226 of this title;

(6)  Conversion of a credit union under chapter 71 chapters 220 - 226 of this title into a mutual financial institution or a cooperative financial institution; or

(7)  Conversion of an investor-owned financial institution into a mutual financial institution.

Sec. 4.  CHAPTER Repealed

8 V.S.A. chapter 71 is repealed as of the effective date of this act.

Sec. 5.  Rules Of The Department Of Banking, Insurance,

             Securities, And Health Care Administration

The rules of the Department of Banking, Insurance, Securities, and Health Care Administration adopted pursuant to the chapter repealed in Sec. 4 of this part shall continue in full force and effect until modified or repealed.

Sec. 6.  Transitional Provisions

(a)  This act, which enacts chapters 220 through 226 of Title 8 and repeals the chapter referred to in Sec. 4 of this act, applies to all credit unions in existence on its effective date that were organized under any general statute of this state relating to such entities or by special act of the Vermont general assembly.  Any credit unions validly in existence on the date of enactment are not required to obtain any additional approval to continue their existence and activities under this act.

(b)  Where any provision of a statute repealed by this act is substantially reenacted in this act, the law shall be deemed to have continued in force from the first enactment as if no enactment and repeal had taken place.  The provisions of this act, so far as they are the same as those of existing laws, shall be construed as a continuation of those laws and not as a new enactment.  The repeal by this act of any provisions of law shall not revive any law repealed or superseded before this act takes effect; nor shall the repeal affect any act done, liability incurred, or any right accrued or vested, or affect, abate, or prevent any suit or prosecution pending or to be instituted to enforce any right or penalty or punish any offense under the authority of the repealed laws; nor shall the repeal affect the validity of any contract to which the state or any agency of the state is a party in interest.

(c)  On or before July 1, 2006, any Vermont credit union that has not previously filed its articles of incorporation and any amendments thereto with the Secretary of State shall file such articles of incorporation and amendments thereto with the Secretary of State in accordance with Title 11, Title 11A, or Title 11B, as applicable.  The articles of incorporation and amendments shall be accompanied by a certificate from the Commissioner of the Department of Banking, Insurance, Securities, and Health Care Administration indicating that such articles and amendments have been previously approved by the department and indicating the date the department approved the initial articles of incorporation.  The filing of the articles of incorporation and amendments pursuant to this transitional provision shall not be deemed to affect the period of existence of any credit union in existence as of the effective date of this act.

Sec. 7.  Effective Date

This act shall take effect on July 1, 2005.



Published by:

The Vermont General Assembly
115 State Street
Montpelier, Vermont


www.leg.state.vt.us