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TO THE HOUSE OR REPRESENTATIVES

The Committee on Commerce to which was referred House Bill H.374, entitled "AN ACT RELATING TO BANKING REGULATION"

respectfully report that they have considered the same and recommend that the bill be amended by striking all after the enacting clause and inserting in lieu thereof the following:

Sec. 1. Part 1 of Title 8 is amended to read:

PART 1. General Administrative Provisions *[Relating to Banking and Insurance]*

CHAPTER 1. *[MISCELLANEOUS]* POLICY AND ADMINISTRATION

§ 10. DECLARATION OF POLICY

It is declared to be the policy of the state of Vermont that:

(1) the business of organizations that offer financial services and products shall be supervised by the commissioner in a manner to assure the solvency, liquidity, stability and efficiency of all such organizations, to assure reasonable and orderly competition, thereby encouraging the development, expansion and availability of financial services and products advantageous to the public welfare and to maintain close cooperation with other supervisory authorities;

(2) the organizations that provide health care in this state shall be supervised by the commissioner in a manner to assure that high quality health care is available to Vermonters at reasonable cost; and

(3) all such organizations shall be supervised in such a way as to protect consumers against unfair and unconscionable practices and to provide consumer education.

§ 11. DEPARTMENT

(a) General. The department of banking, insurance, securities, and health care administration created by section 212 of Title 3, shall have jurisdiction over and shall supervise:

(1) Financial institutions, credit unions, licensed lenders, mortgage brokers, insurance companies, insurance agents, broker-dealers, investment advisors and other similar persons subject to the provisions of this title and chapters 59, 61 and 131 of Title 9.

(2) The administration of health care, including oversight of the quality and cost containment of health care provided in this state, by conducting and supervising the process of health facility certificates of need, hospital budget reviews, health care data system development and maintenance, and funding and cost containment of health care as provided in chapter 221 of Title 18.

(b) Conflicts of Interest.

(1) Neither the commissioner nor any employee of the department shall, during his or her term of office or while employed by the department, be an officer, director, organizer, employee of or attorney for any institution subject to supervision or regulation by the department.

(2) The commissioner and employees of the department shall not, during their terms of office, receive directly or indirectly any payment or gratuity from any institution subject to supervision or regulation by the department or be engaged in the negotiation of loans for others with any such institution. The prohibitions contained in this subdivision shall not be construed as prohibiting a person from being a depositor, equity interest owner or member in any financial institution, or an insurance pol icyholder or equity interest owner, on the same terms as are available to the public generally.

(3) If the commissioner, or any employee of the department or the spouse of any of them or the son or daughter of any of them residing at their respective homes obtains a loan from or holds an equity interest in any financial institution subject to supervision or regulation by the department, the fact of the loan or of the holding, together with the appropriate terms and conditions, shall be disclosed immediately to the commissioner in writing by the person obtaining the loan or holding.

(4) A record of the indebtedness or holding described in subdivision (3) of this subsection (b) shall be kept on file in the department and shall be open to inspection by the public.

(5) The commissioner shall investigate the loan or equity interest to insure that no preferential treatment has been given the department employee in the process of granting the loan or issuing the interest and that the loan or interest will not compromise the employee's effectiveness in carrying out his or her departmental duties. Where the loan has been obtained by or where the interest is held by the commissioner, the investigation shall be conducted by the state treasurer.

(c) Retention of documents. The commissioner shall keep on file for a reasonable period of time such instruments, papers and documents required by law to be filed with the commissioner.

§ 12. COMMISSIONER

The department shall be administered by a commissioner of banking, insurance, securities, and health care administration who shall be appointed by the governor biennially, in the month of February, with the advice and consent of the senate. Commissioner, as used in this title, shall mean the commissioner of banking, insurance, securities, and health care administration.

§ 13. POWERS AND PENALTIES

(a) In addition to any other penalties, and in order to enforce this title, chapter 131 of Title 9, Title 9A and Title 18, chapter 221, the commissioner may issue subpoenas, examine persons, administer oaths and require production of papers and records. Any subpoena or notice to produce may be served by registered or certified mail or in person by an agent of the commissioner. Service by registered or certified mail shall be effective three business days after mailing. Any subpoena or notice to pr oduce shall provide at least six business days' time from service within which to comply, except that the commissioner may shorten the time for compliance for good cause shown. Any subpoena or notice to produce sent by registered or certified mail, postage prepaid, shall constitute service on the person to whom it is addressed. Each witness who appears before the commissioner under subpoena shall receive a fee and mileage as provided for witnesses in civil cases in superior courts; provided, however, any p erson subject to regulation under this title shall not be eligible to receive fees or mileage under this section.

(b) A person who fails or refuses to appear, to testify or to produce papers or records for examination before the commissioner, upon properly being ordered to do so, may be assessed an administrative penalty by the commissioner of banking, insurance, securities, and health care administration of not more than $2,000.00 for each day of noncompliance and proceeded against as provided in the Administrative Procedure Act, and that person's authority to do business may be suspended for not more than six months.

§ 14. ANNUAL REPORT AND DISTRIBUTION OF ANNUAL REPORT

(a) The commissioner shall report annually, on or before June 1, to the governor as to the conditions of persons regulated by the banking division and as to the conditions of all insurance companies chartered by or doing business in this state. The reports may be separate and shall contain statements as to the financial condition of each institution, and any other information or recommendations which the commissioner deems appropriate. The report shall also contain a review of the rules of the depa rtment, regardless of the process for adopting such rules, at a frequency such that each rule is reviewed at least every five years for efficiency and effectiveness in carrying out the policies and goals of this state relating to financial institutions, insurance mechanisms and the sale of investments.

(b) The annual report of the commissioner required by this section shall contain a listing of subsidiary and affiliate organizations formed or owned by a Vermont financial institution for the purpose of engaging in any of the powers authorized by section 14106 of this title. The report shall also contain a listing of the amount of a Vermont financial institution's loans and assets invested in such organizations.

(c) The commissioner shall cause the annual report to be published for general distribution, and shall distribute them to each member of the house commerce and senate finance committees of the general assembly, to other members of the general assembly under section 20 of Title 2 and to others as the commissioner deems appropriate. Such distribution may be effected electronically or by other similar means.

§ 15. RULES, ORDERS AND ADMINISTRATIVE INTERPRETATIONS

(a) In addition to other powers conferred by this title and Title 18, chapter 221, the commissioner may adopt rules and issue orders as shall be authorized by or necessary to the administration of this title and Title 18, chapter 221, and to carry out the purposes of such titles.

(b) The commissioner may, whether or not requested by any person, issue written advisory interpretations of Part 5 of this title and regulations issued under it, including interpretations of the applicability of any provision of this title and regulations issued under it. Such interpretations shall be presumed to be correct unless found to be clearly erroneous by a court of competent jurisdiction. The commissioner may make public all or a portion of an advisory interpretation.

§ 16. JUDICIAL REVIEW

Any person aggrieved and directly affected by an order of the commissioner may appeal to the supreme court of Vermont, except as otherwise expressly provided in this title. The filing of an appeal for review or injunctive relief shall not stay enforcement of an order, but the court may order a stay on such terms as it deems proper. The court may affirm the order of the commissioner, may direct him or her to take the action withheld or may reverse or modify the order if it:

(1) was issued pursuant to unconstitutional statutory provisions;

(2) was in excess of statutory authority;

(3) was issued on unlawful procedure; or

(4) is not supported by substantial evidence in the record.

§ 17. LIABILITY FOR ACTS

A person serving in any official capacity under this title, including the commissioner and any officer, employee or agent of the department, shall not be liable in any civil action for damages for any act done or omitted in good faith in performing the functions of his or her office. No person may be subjected to any civil or criminal liability for any act or omission to act done in good faith in reliance on a subsisting order, regulation or rule of the commissioner, notwithstanding a subsequent deci sion by a court invalidating the order, regulation or rule.

§ 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, 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 or investigated. A review subject to this section shall include, but not be limited to, a review of any application, rate filing or form filing submitted under this title. In unusual circumstances, the commissioner may waive reimbursement for the costs and expenses of any review in the interests of ju stice. 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 section 11501(a) of this title or for services for which such fees under section 19(a) of this title have been paid.

§ 19. FEES AND DEPARTMENTAL EXPENSES

(a) The commissioner shall charge each financial institution or financial institution applicant for department services rendered. Charges for department services shall be billed as follows:

(1) New financial institution application, $5,000.00;

(2) Interim reorganization application, $1,000.00;

(3) Merger or other reorganization, $1,000.00;

(4) Conversion of a charter, $2,000.00;

(5) Establishment of a branch, $500.00;

(6) Establishment of a remote service unit, $250.00. Where more than one remote service unit performing identical services on single premises are petitioned at the same time, the total charge shall be $250.00;

(7) Relocation of main office, branch, or remote service unit, $150.00;

(8) For trust powers subsequent to the granting of the authority as financial institution, $500.00;

(9) Sale of branch, $500.00;

(10) Sale, lease or exchange of all an institution's assets, $1,500.00;

(11) Voluntary dissolution or liquidation of an institution, $5,000.00;

(12) Establishment of a special purpose financial institution $5,000.00;

(13) Establishment of a temporary agency $ 150.00;

(14) Activity at a school $ 250.00;

(15) Establishment of a loan production office, $ 750.00;

(16) Permit a foreign exchange activity, $500.00;

(17) Purchase or establish a subsidiary or service corporation, $2,500.00;

(18) Certificate (Good Standing), $50.00;

(19) Establish a development credit corporation, $100.00;

(20) Any other corporate organizational changes not covered above,

$250.00 plus expenses. No petition or application shall be considered by the commissioner until payment for the enumerated charge has been received.

(b) Those institutions subject to assessment under subsection (d) of this section will not be billed for examinations performed under 11501(a) of this title.

(c) Each person, except as otherwise provided in subsection (d) of this section, within 30 days of notification, shall pay the department fees as prescribed by section 18 of this title, which fees shall be billed when they are incurred.

(d) Semiannually on or before February 15 and August 15, the commissioner shall apportion the expenses allowed under the title "department of banking" in the annual appropriation bill among the several financial institutions directly regulated under this title, including the operations in Vermont of any such entity organized in another jurisdiction and credit unions, after first deducting all monies received by the banking division. The commissioner shall notify each entity of the amount s o apportioned to it, which shall be paid into the state treasury within 30 days after receipt of that notice.

(1) Financial institutions that accept deposits and credit unions will be assessed in proportion to the amount of their average deposits held in this state for the preceding six-month period ending December 31 and June 30.

(2) In the case of merchant banks established under section 12603 of this title, the assessment shall be based on assets in this state on the last day of December and June preceding.

(3) In the case of special purpose financial institutions that are not permitted to accept deposits, except merchant banks established under section 12603 of this title, and independent trust companies organized or operating under chapter 77 of this title, the assessment will be based on assets under management in this state on the last day of December and June preceding.

(e) If any entity fails to pay fees or expenses as provided in this section or section 18 of this title, within 45 days after notice from the department of the amount due, the commissioner may issue an execution against the property of the delinquent for an amount equal to 150 percent of the amount of the overdue payment. Such execution shall be enforced as an execution of the court.

(f) There is hereby created a fund to be known as the banking supervision fund for the purpose of providing the financial means for the commissioner of banking, insurance, securities, and health care administration to administer chapters 71, 73, 77, 133 and 200-210 of this title, Part 1 and Part 3 of Title 9, and Title 9A. All fees and assessments received by the department pursuant to such administration shall be deposited in this fund.

(g) All payments from the banking supervision fund for the maintenance of staff and associated expenses, including contractual services as necessary, shall be disbursed from the state treasury only upon warrants issued by the commissioner of finance and management after receipt of proper documentation regarding services rendered and expenses incurred.

(h) Any entity, subject to the assessment under subsection (d) of this section, that converts or relinquishes its state charter or closes all of its branches or offices in this state will be responsible for a pro rata share of the assessment made under subsection (d) of this section for the final period it was authorized to conduct business under this title.

§ 20. UNIFORM COMMERCIAL CODE

(a) All commercial transactions of financial institutions doing business in this state shall be governed by and conducted in accordance with Title 9A.

(b) In any conflict between the provisions of Title 9A and any other provisions of law, including organizational documents of financial institutions, dealing with the same subject matter, Title 9A shall prevail unless otherwise specifically provided by law.

§ 21. APPLICABILITY OF LAWS GOVERNING BUSINESS

ORGANIZATIONS

Depending on the permitted type of organizational form, the provisions of Titles 11, 11A and 11B, relating to corporations, limited liability companies, limited liability partnerships, limited partnerships, partnerships, mutual and cooperative organizations and other organizations, shall apply to business organizations regulated under this title. In the case of a conflict and to the extent that such provisions may be inconsistent with the provisions of Titles 11, 11A and 11B, the provisions of this t itle shall control.

Sec. 2. Part 5 of Title 8 is added to read:

PART 5. FINANCIAL AND RELATED INSTITUTIONS

CHAPTER 200. CONSUMER PROTECTION

Subchapter 1. General Provisions

§ 10101. APPLICATION OF CONSUMER PROTECTION CHAPTER

Except as otherwise provided in this chapter, the provisions of this chapter shall apply to all financial institutions, as defined in subdivision 11101(32), licensed lenders, mortgage brokers, sales finance companies and credit unions doing or soliciting business in this state, in addition to any other applicable consumer protection or remedy section not contained in this chapter, unless such consumer protection or remedy section is expressly made exclusive.

§ 10102. PENALTIES

The provisions of chapter 201, subchapter 6 of this title shall apply to any violation of this chapter, unless the section or subchapter that is the subject of the violation contains its own penalty. The procedures in chapter 201, subchapter 6 of this title shall apply to any penalty imposed for a violation of this chapter.

Subchapter 2. Financial Privacy

§ 10201. STATEMENT OF POLICY ON FINANCIAL PRIVACY

It is the policy of this state to protect the privacy of customers of financial

institutions without unduly inhibiting the free flow of commerce or legitimate law enforcement activities.

§ 10202. DEFINITIONS

As used in this subchapter:

(1) "Account verification service" means any person which, for monetary fees, dues, or on a cooperative nonprofit basis, regularly engages in whole or in part in the practice of

(A) assembling information on the frequency and location of depository account openings or attempted openings by a consumer, or forced closings by a depository institution of accounts of a consumer; or

(B) authenticating or validating Social Security numbers or addresses; for the purpose of reporting to third parties for use in fraud prevention. Mailing such information to a customer to the address provided by such customer shall not be prohibited by this subchapter.

(2) "Credit reporting agency" means any person who, for monetary fees, dues, or on a cooperative nonprofit basis, regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information or other information on consumers for the purpose of reporting to third parties on the credit rating or creditworthiness of any consumer.

(3) "Customer" means, for purposes of this subchapter, any person who deposits, borrows or invests with a financial institution, including a surety or a guarantor on a loan.

(4) "Financial information" means an original or copy of, or information derived from:

(A) a document that grants signature authority over a deposit or share account;

(B) a statement, ledger card or other record of a deposit or share account that shows transactions in or with respect to that deposit or account;

(C) a check, clear draft or money order that is drawn on a financial institution or issued and payable by or through a financial institution;

(D) any item, other than an institutional or periodic charge, that is made under an agreement between a financial institution and another person's deposit or share account;

(E) any information that relates to a loan account or an application for a loan; or

(F) evidence of a transaction conducted by electronic or telephonic means.

(5) "Financial institution" means a financial institution as defined in subdivision 11101(32), and a credit union, financial institution subsidiary, licensed lender, mortgage broker or sales finance company organized or regulated under the laws of this state, the United States or any other state or territory.

(6) "Mercantile agency" means any person, which for monetary fees, dues, or on a cooperative nonprofit basis, regularly engages in whole or in part in the practice of assembling or evaluating business credit information or other information on businesses for the purpose of reporting to third parties on the credit rating or creditworthiness of any business.

§ 10203. DISCLOSURE OF FINANCIAL RECORDS PROHIBITED

Except as otherwise expressly provided in this subchapter, a financial institution, its officers, employees, agents and directors shall not disclose to any person any financial information relating to a customer. Financial institutions shall adopt reasonable procedures to assure compliance with this subchapter.

§ 10204. EXCEPTIONS

This subchapter does not prohibit any of the activities listed in this section. This section shall not be construed to require any financial institution to make any disclosure not otherwise required by law. This section shall not be construed to require or encourage any financial institution to alter any procedures or practices not inconsistent with this subchapter. This section shall not be construed to expand or create any authority in any person or entity other than a financial institution.

(1) Disclosure of information to the customer after proper identification.

(2) Disclosure authorized by the customer, provided the disclosure is limited to the scope and purpose that the customer authorizes.

(3) Disclosure of information sought by the office of child support services pursuant to its authority and obligations under section 115 and chapter 41 of Title 33, or by an agency of similar function of another state, pursuant to similar authority.

(4) Disclosure of information sought by the department of social welfare pursuant to its authority and obligations under 33 V.S.A. § 112.

(5) Disclosure sought by the Vermont student assistance corporation pursuant to its authority and obligations under 16 V.S.A. chapter 87.

(6) The preparation, examination, handling or maintenance of financial records by any officer, employee, or agent of a financial institution that has custody of the records.

(7) The examination of financial records by a certified public accountant while engaged by the financial institution to perform an independent audit.

(8) The disclosure of information to a collection agency, its employees or agents, or to any person engaged by the financial institution to assist in recovering an amount owed to the financial institution, if such disclosure is made in the furtherance of recovering such amount.

(9) The examination of financial records by, or the disclosure of financial records to, any officer, employee or agent of a regulatory agency for use only in the exercise of that person's duties as an officer, employee or agent.

(10) The publication of information derived from financial records if the information cannot be identified to any particular customer, deposit or account.

(11) The making of reports, disclosures or returns required or permitted by federal or state law.

(12) The disclosure of any information permitted to be disclosed under the laws governing dishonor of negotiable instruments.

(13) The exchange, in the regular course of business, of credit information between a financial institution and a credit reporting agency, provided such exchange is in compliance with the Vermont Fair Credit Reporting Act, 9 V.S.A. chapter 63, subchapter 3, and the federal Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq.

(14) The exchange, in the regular course of business, of information between a financial institution and an account verification service, provided such exchange is in compliance with the Vermont Fair Credit Reporting Act, 9 V.S.A. chapter 63, subchapter 3, and the federal Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq.

(15) The exchange, in the regular course of business, of information between a financial institution and a mercantile agency, provided such exchange is solely for the purpose of reporting to third parties on the credit rating or creditworthiness of any business, and is in compliance with the Vermont Fair Credit Reporting Act, 9 V.S.A. chapter 63, subchapter 3, and the federal Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq.

(16) The exchange of loan information that specifically affects a sale, foreclosure or loan closing, provided such exchange is for the purpose of accomplishing such sale, foreclosure or loan closing.

(17) The disclosure to civil or criminal law enforcement authorities for use in the exercise of such authority's duties, or the sharing of information, within an industry network, of suspected criminal activities.

(18) Disclosures requested pursuant to a summons for trustee process under Rule 4.2 of the Vermont Rules of Civil Procedure.

(19) Disclosure requested pursuant to subpoena, provided that no disclosure shall be made until ten days after the financial institution has notified the customer that financial information has been requested by subpoena. Such notice shall be served by first class mail to the customer at the most recent address known to the financial institution. The provisions of this subdivision shall not apply where the subpoena is issued by or on behalf of a regulatory, criminal or civil law enforcement agency.

(20) Disclosure required by order of court.

(21) Disclosure of customer financial information among directors, officers, employees or agents of affiliated financial institutions, provided that such disclosure is limited to information necessary or appropriate to the fulfillment of any such persons' duties and responsibilities to the financial institution or institutions, and provided further that such disclosure is made in compliance with the Vermont Fair Credit Reporting Act, 9 V.S.A. chapter 63, subchapter 3, and the federal Fair Credit Repo rting Act, 15 U.S.C. § 1681 et seq.

(22) Disclosure of customer financial information of one financial institution to another financial institution in connection with a proposed merger, consolidation, acquisition or other reorganization transaction involving such institution, provided that no further disclosure is made except in compliance with this subchapter, and provided further that such disclosure is made in compliance with the Vermont Fair Credit Reporting Act, 9 V.S.A. chapter 63, subchapter 3, and the federal Fair Credit Report ing Act, 15 U.S.C. § 1681 et seq.

(23) Disclosure in accordance with rules adopted by the commissioner, provided that the commissioner may permit disclosure by temporary order, until such time as rules under this subdivision are adopted.

(24) Disclosure sought by the department of taxes of this state pursuant to its authority and obligations under Title 32.

§ 10205. PENALTIES

In addition to the authority provided under sections 11601, 11602 and 11603 of this title, the commissioner may impose an administrative penalty of not more than $1,000.00 for each violation of this subchapter resulting from willful conduct, or from a failure by a financial institution to reasonably supervise its employees to prevent violations of this subchapter.

Subchapter 3. Disclosures and Reports

§ 10301. COMMUNITY REINVESTMENT REPORTS

Every financial institution subject to the Federal Community Reinvestment Act of 1977 (12 U.S.C. § 2901) as amended shall provide to the commissioner a copy of any report issued with respect to such financial institution under that act. If the financial institution is not a Vermont financial institution, then the requirements of this section shall only apply to reports that relate to its business in this state. The commissioner shall make such reports available for public inspection and copying .

§ 10302. AUTOMATED TELLER MACHINES

(a) The owner of an automated teller machine or other remote service unit, including a cash dispensing machine, located or employed in this state shall disclose at the location of each such machine the identity, address and telephone number of the owner and the availability of consumer assistance. The owner shall also disclose to the consumer the amount of the fees or charges which the owner will assess to the consumer for the use of that machine. The commissioner shall approve the form, content, ti ming and location of such disclosures and any amendments thereto prior to use. The commissioner shall act on any submission made under this section within 30 days of receipt. If the commissioner determines that any disclosures do not provide adequate consumer protection, the commissioner may by order or by rule specify minimum disclosure standards, including the form, content, timing and location of such disclosures. The commissioner may impose on the owner of an automated teller machine or other remote service unit an administrative penalty of not more than $1,000.00 for each day's failure of the owner to apply to the commissioner for approval of disclosures required under this section, for each day's failure of the owner to use disclosures approved by the commissioner or for each day's continuing violation of an order of the commissioner relating to the disclosures required by this section.

(b) In addition to an automated teller machine or other remote service unit owned by a financial institution or credit union, the provisions of this section shall apply to any automated teller machine or other remote service unit not owned by a financial institution or credit union, except it shall not include a point-of-sale terminal owned or operated by a merchant who does not charge a fee for the use of the point-of-sale terminal. The activities of an automated teller machine or other remote serv ice unit whose owner is not a financial institution shall be limited to cash dispensing or the offer or sale of nonbanking services and products.

Subchapter 4. Lending Reports, Disclosures and Standards

§ 10401. REPORTS AND PUBLICATION OF INTEREST RATES

(a) Interest rates. On a periodic basis, the commissioner shall collect and distribute to the news media information as to prevailing interest rates, expressed in annual percentage rates, which are charged by a representative sampling of Vermont financial institutions and licensed lenders.

(b) Report and publication of bank credit card rates and charges.

(1) The general assembly finds that competition among providers of financial services is beneficial to the consumers of this state, but that such competition is most likely to occur and be effective only if consumers have accurate, timely and periodic comparisons of the prices and charges for the cost of such services. It is therefore the purpose of this section to foster competition and benefit Vermont consumers through disclosure and publication of rates and charges for bank credit cards.

(2) Any financial institution, which is authorized to do business in this state, may issue bank credit cards only if it reports quarterly to the commissioner of banking, insurance, securities, and health care administration, on a form prepared by the commissioner, the current rate of interest together with all other charges imposed upon cardholders. Quarterly, the commissioner shall publish the rates and charges of all financial institutions reporting under this section.

§ 10402. LENDING REPORTS, DISCLOSURES AND STANDARDS

An entity subject to this chapter shall be subject to and comply with the provisions of chapter 4 of Title 9.

§ 10403. PROHIBITION ON DISCRIMINATION BASED ON SEX, MARITAL STATUS, RACE, COLOR, RELIGION, NATIONAL ORIGIN, AGE, SEXUAL ORIENTATION OR HANDICAPPING CONDITION

(a) No financial institution shall discriminate against any applicant for credit services on the basis of the sex, marital status, race, color, religion, national origin, age, sexual orientation or handicapping condition of the applicant, provided the applicant has the legal capacity to contract.

(b) The department of banking, insurance, securities, and health care administration shall prescribe rules and regulations necessary to carry out the provisions of this section.

(c) Definitions. As used in this section:

(1) "Adverse action" means denial, revocation, or termination of credit services. The term does not include a change in the terms of an account expressly agreed to by an applicant, nor any action or forbearance relating to an account taken in connection with inactivity, default, or delinquency as to that account.

(2) "Applicant" means any person who applies to a financial institution directly for an extension, renewal, or continuation of credit, or applies to a financial institution indirectly by use of an existing credit plan for an amount exceeding a previously established credit limit.

(3) "Application" means an oral or written request for an extension of credit that is made in accordance with procedures established by a financial institution for the type of credit requested. The term does not include the use of an account or line of credit to obtain an amount of credit that is within a previously established credit limit. A completed application means an application in connection with which a financial institution has received all the information that the financial ins titution regularly obtains and considers in evaluating applications for the amount and type of credit requested (including, but not limited to, credit reports, any additional information requested from the applicant, and any approvals or reports by governmental agencies or other persons that are necessary to guarantee, insure, or provide security for the credit or collateral). The financial institution shall exercise reasonable diligence in obtaining such information.

(4) "Credit services" means credit cards, personal loans, mortgage loans, and commercial loans.

(5) "Financial institutions" means Vermont financial institutions, credit unions, and licensed lenders.

(6) "Handicapping condition" applied to an applicant means a handicapped individual as defined in section 495d(5) of Title 21. For the purposes of this section, an applicant with a handicapping condition does not include an alcoholic or drug abuser who, by reason of current alcohol or drug use, constitutes an unacceptable credit risk.

(7) "Person" means a natural person, a corporation, government or governmental subdivision or agency, trust, estate, partnership, cooperative, association, or other entity.

(d) Notification requirements:

(1) Within 30 days of reaching a decision on a completed application, a financial institution shall notify the applicant of its decision on the application.

(2) Each applicant against whom adverse action is taken shall receive a written statement of reasons for such action from the financial institution.

(3) For commercial credit only, a statement of reasons meets the requirements of this section only if it contains the specific reasons for the adverse action taken, and cites the specific documentation or business judgment which supports the adverse decision on the application. Consumer credit shall be governed by the Equal Credit Opportunity Act (15 U.S.C.

§ 1691 et seq.) and regulations adopted thereunder.

(4) Financial institutions shall be required to maintain a copy of all "statements of reasons" and the documentation upon which the decision was based for 24 months after the date of issuance.

(e) Civil enforcement. A financial institution that discriminates against an applicant in violation of this section shall be liable to the applicant for punitive damages, actual damages sustained by the applicant as a result of the discrimination and for costs and a reasonable attorney's fee as determined by the court.

§ 10404. HOME LOAN ESCROW ACCOUNTS

(a) For purposes of this section:

(1) "Borrower" means one or more natural persons who are obligated to make escrow account payments under the terms of a loan agreement secured by residential real estate occupied by the borrower.

(2) "Escrow account" means an account into which a borrower is required under the terms of a residential real estate loan agreement to make periodic payments of property taxes, insurance premiums or other similar charges.

(3) "Lender" means a person who services or holds the beneficial interest in a loan secured by residential real estate located in this state and who requires periodic payments by a borrower into an escrow account in accordance with the provisions of a residential real estate loan agreement.

(b) A lender shall pay into an escrow account for the benefit of the borrower interest on funds deposited into the account under the same conditions as the lender's regular savings account, if offered, and otherwise at a rate not less than the prevailing market rate of interest for regular savings accounts offered by local financial institutions, calculated on the basis of the average monthly balance in the account and credited on the first day of each quarter. This subsection shall not apply when a lender requires payment into an escrow account because a borrower has failed, within the past year, to make timely payments for property taxes and insurance in accordance with the provisions of the loan agreement.

(c) A lender shall not require a borrower to deposit into an escrow account any greater sum than is sufficient to pay taxes, insurance premiums and other charges with respect to the residential real estate, subject to the following additional charges:

(1) A lender may require aggregate annual deposits no greater than the reasonably estimated total annual charges plus one-twelfth of such total; and

(2) A lender may require monthly deposits no greater than one-twelfth of the reasonably estimated total annual charges plus an amount needed to maintain an additional account balance no greater than one-twelfth of such total.

(d) A lender shall make timely payments of all charges with respect to the residential real estate payable from the escrow account.

(e) The lender shall maintain escrow account funds in a federally insured depository institution.

(f) With respect to borrowers who have maintained escrow accounts in accordance with the provisions of the loan agreement, the lender shall be primarily obligated for the payment of any municipal or county taxes, insurance premiums or other similar charges with respect to the residential real estate, and any penalties attributable to the lender's late payment of such charges.

(g) The lender shall provide annually, or upon request of the borrower, financial statements relating to the borrower's escrow account in a manner and on a form approved by the commissioner. The lender shall not charge the borrower for the preparation and transmittal of such statements.

(h) A borrower aggrieved by a violation of the provisions of this section, or a rule adopted by the commissioner in connection with this section, may bring an action for injunctive relief, three times the amount of any interest unpaid in violation of this section, other damages, costs and reasonable attorneys' fees. The commissioner may bring an action in the superior court of Washington County for injunctive relief, restitution and any administrative costs and attorneys' fees incurred as a result of a violation of this section.

Subchapter 5. Bank Products; Prohibitions

§ 10501. BASIC BANKING

It is the public policy of this state to promote the economic viability and prosperity of its residents and to promote, attract and encourage savings. The legislature finds and declares that access to basic banking services for basic depository transactions is necessary for the payment of monthly expenses and for the encouragement of thrift by Vermont consumers. The legislature further finds and declares that reasonable cost basic banking services promote savings on the part of young, elderly and lo w income consumers, and provides, through means of payment by check, draft, negotiable order of withdrawal, or similar instrument, a viable alternative for cash transactions which is essential to all Vermont consumers. Therefore, it is the purpose of this chapter to ensure that basic banking services remain available to all Vermont consumers.

§ 10502. DEFINITIONS RELATING TO BASIC BANKING

For the purposes of sections 10501 through 10504, the following terms shall have the following meanings:

(1) "Basic checking account" means a deposit account on which the consumer is permitted to make payments or transfers by check, money order or other negotiable instruments and which is maintained by such person for personal, family or household purposes.

(2) "Basic savings account" means a savings account or statement savings which is maintained by such person for personal, family or household purposes.

(3) "Consumer" means a natural person.

§ 10503. QUARTERLY SURVEY ON BASIC BANKING

The commissioner, on a quarterly basis, shall survey all depository institutions doing business in this state, to determine the cost and availability of basic checking and savings account services in the results of any two consecutive surveys. The basic checking account services survey shall include an index of the annual cost of services typically used by a basic banking customer. The survey shall also include each surveyed banking institution's returned check charge and charge for cashing noncusto mer government checks. The commissioner shall release the results of these quarterly surveys to the news media and may take other actions he or she deems appropriate to make the survey information available to the general public. The commissioner shall include an analysis regarding the cost and availability of basic banking services in his or her annual report required by section 14 of this title.

§ 10504. BASIC BANKING RULES

The commissioner may adopt rules to require financial institutions with their principal place of business in this state to offer basic checking and savings accounts if the commissioner finds a material deterioration in the availability and cost of basic checking and savings account services in the results of any two consecutive surveys. The rule promulgated by the commissioner under this section shall assure that any required basic banking will not impair the safety and soundness of any affected fina ncial institution and that any such rules shall not adversely affect other consumers of banking services.

§ 10505. RETURNED CHECK CHARGES

No depository institution shall assess a returned check charge or similar charge against a depositor for the costs of processing a check received by that depositor and returned for nonsufficient funds by the institution upon which it was drawn.

§ 10506. UNSOLICITED DISTRIBUTION OF CASH ADVANCE CONTRACTS AND NOTES

No person shall distribute by mail, or in any other manner, to a Vermont resident, an unsolicited cash advance contract or note in furtherance of that contract. A person who violates this section shall also be subject to the provisions of subchapter 6 of chapter 201 of this title. This section does not apply to (i) any communication by a lender with a borrower pursuant to a preexisting credit relationship, including the furnishing on an unsolicited basis of any check, card, plate or other means of a ccessing a preexisting loan or line of credit; or (ii) any unsolicited firm offer of credit made in compliance with the rules of the Federal Trade Commission relating to prescreening, as in effect from time to time.

CHAPTER 201. SUPERVISION; DEFINITIONS

Subchapter 1. Definitions

§ 11101. DEFINITIONS

Except as otherwise specifically provided elsewhere in this title, and subject to such definitions as the commissioner may promulgate pursuant to regulations hereafter, the following terms have the following meanings for purposes of Parts 1, 2 and 5 of this title, unless the context clearly indicates otherwise.

(1) "Affiliate" means any company or person that, directly or indirectly, controls, is controlled by or is under common control with another company.

(2) "Automated teller machine" or "ATM" means an electronic device at which a natural person may make deposits to an account by cash or check and perform other account transactions. Point-of-sale terminals, machines that only dispense cash, night depositories and lobby deposit boxes are not automated teller machines.

(3) "Bank or bank and trust company" means any financial institution organized under the prior laws of this state that is authorized to exercise the powers and subject to the conditions and limitations on the exercise of those powers as set forth in chapter 204 of this title.

(4) "Bank credit card" means a card, plate or other credit device issued by a bank or financial institution to a cardholder for the purpose of obtaining money, property, labor or services on credit. The term "bank credit card" shall not be deemed to include a debit card; provided, however, that a credit card may include features of a debit card.

(5) "Bank holding company" shall have the same meaning as in 12 U.S.C. § 1841(a) and shall include a financial holding company as defined in 12 U.S.C. § 1841(p).

(6) "Banking day" shall mean each day that a financial institution is open to the public for the transaction of substantially all of its banking functions and shall be deemed a banking day for the purposes of all transactions with the financial institution under this title, Title 9A, as applied to financial institutions, and all other provisions of law applicable to financial institutions and the business of banking in this state.

(7) "Billing date" means the cycle date on the financial institution books and statements, which statements shall be mailed four days after the closing of the cycle.

(8) "Billing period" means the time interval between periodic statement dates. A billing period shall be considered a month or monthly if the last day of each billing period is on the same day of each month or does not vary by more than four days each month.

(9) "Borrower" means any person who is named as a borrower or debtor in a loan or extension of credit, including a drawer, endorser or guarantor who is deemed a borrower under section 14301(d) of this title.

(10) "Branch" means any office of a financial institution at which deposits are received, checks paid, or money lent. A branch may include a messenger service, mobile branch, temporary facility, night depository (drop box), drive-in facility or a seasonal agency. A branch does not include:

(A) a remote service unit;

(B) an office which does not permit members of the public to have physical access for purposes of making deposits, paying checks or borrowing money;

(C) an office which is located at the site of, or is an extension of, an approved main or branch office;

(D) a loan production office; or

(E) deposit production office.

(11) "Business of banking", "business of financial institutions" or "banking business" means soliciting, receiving or accepting money or its equivalent on deposit and the loaning of money as a regular business by any person.

(12) "Capital", for purposes of determining statutory limits that are based on the amount of a bank's or financial institution's capital or surplus,

(A) means the sum of the amount of common stock outstanding and unimpaired, the amount of perpetual preferred stock outstanding and unimpaired, and the amount of capital surplus and undivided profits, for financial institutions organized as corporations;

(B) means the sum of members' or partners' contributions and undistributed earnings of the company or partnership, for financial institutions organized as limited liability companies, limited partnerships or limited liability partnerships; or

(C) means the sum of capital deposits, surplus and undivided earnings for all other financial institutions.

For purposes of evaluating a Vermont depository institution's financial condition and safety and soundness, "capital" shall be determined in accordance with applicable federal regulations and interagency guidelines issued jointly by the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, and the Office of Thrift Supervision.

(13) "Charter" means the grant of authority to a financial institution under state or federal law to operate as a financial institution.

(14) "Closely related activities" mean those activities that are part of the business of banking, are closely related to the business of banking, are convenient and useful to the business of banking, are reasonably related to the operation of a financial institution or are financial in nature or incidental to such financial activity. Closely related activities include, but are not limited to, business and professional services, data processing, courier and messenger services, credit-relate d activities, consumer services, real estate-related services, insurance and related services, securities brokerage, investment advice, securities underwriting, mutual fund activities, financial consulting, tax planning and preparation, community development and charitable activities and any activities reasonably related or incidental to these activities. A "closely related activity" shall include:

(A) any activity that may be authorized from time to time for financial institutions or their service corporations or subsidiaries, including financial subsidiaries as defined in Section 5136A(g)(3) of Chapter One of Title XLII of the Revised Statutes of the United States, to engage in pursuant to statutes administered by the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, or the Office of Thrift Supervision; and

(B) any additional activities that the commissioner by rule or order determines to be a "closely related activity."

(15) "Commercial bank" means a bank or bank and trust company organized under prior law of this state or the laws of the United States, another country or state, but does not include a special purpose financial institution or similar entity.

(16) "Commissioner" means the commissioner of banking, insurance, securities, and health care administration.

(17) "Control" means that a person, directly or indirectly or acting through one or more other persons or through one or more subsidiaries, owns, controls, or has power to vote 25 percent or more of any class of equity interest of a financial institution; the person controls in any manner the election of a majority of the directors of the financial institution; or that the person directly or indirectly exercises a controlling influence over the management or policies of the financial instit ution. For depository institutions, control determinations may be made under the federal Bank Holding Company Act of 1956, 12 U.S.C. §§ 1841 et seq., or the federal Change in Bank Control Act, 12 U.S.C.

§ 1817(j), or the Home Owners Loan Act, 12 U.S.C. § 1467a, as applicable in the circumstances. For institutions that are not depository institutions, control may be determined by the commissioner.

(18) "Cooperative financial institution" means any financial institution organized pursuant to chapter 203 in which the earnings and net worth of the institution inure to the ultimate benefit of the members.

(19) "Day" means a calendar day unless otherwise expressly provided.

(20) "Debit card" means a card, plate or other device issued by a bank or financial institution to a depositor for the purpose of drawing funds from a deposit account, and which does not include any credit features other than (i) provisions to maintain a minimum deposit account balance, or (ii) protection against deposit account overdrafts.

(21) "Department" means the Vermont department of banking, insurance, securities, and health care administration.

(22) "Deposit production office" means any place of business of a financial institution at which information is distributed or assistance provided in connection with the opening of new deposit accounts, provided that any initial deposit of funds is made at the main office or an authorized branch of the financial institution and not at such office.

(23) "Depositors" of a financial institution, solely for the purposes of chapter 210 of this title, include the holders of its regular savings accounts, other savings accounts, NOW accounts, certificates of deposit and other deposits having a fixed maturity, and all other accounts except noninterest bearing demand deposits.

(24) "Depository institution" shall mean an insured depository institution within the meaning of 12 U.S.C. § 1813(c)(2).

(25) "Director" means a member of the governing body of a financial institution.

(26) "Electronic banking" means conducting the business of banking and any closely related activity electronically.

(27) "Equity interest" means common stock, preferred stock, members' or partners' interests or any other type of capital instrument that entitles the holder to vote pursuant to the financial institution's organizational documents; provided, however, that this definition shall not be deemed to prohibit or impair the creation of nonvoting classes of stock or other ownership interests in a financial institution.

(28) "Executive officer" shall have the same meaning as in Regulation O of the Federal Reserve Board, 12 C.F.R. Part 215.

(29) "Federal association" means a savings and loan association, savings bank or other financial institution organized pursuant to the Act of Congress entitled "Home Owners' Loan Act of 1933", as amended.

(30) "Federal Deposit Insurance Corporation" or "FDIC" shall have the same meaning as in 12 U.S.C. § 1811.

(31) "Fiduciary capacity" means every capacity specified in section 14401 of this title and every other capacity in which a financial institution acts or may act through its trust department pursuant to chapter 204, subchapter 4 of this title, including, without limitation, trusteeship with respect to common trust funds.

(32) "Financial institution" means any Vermont financial institution, state financial institution and national financial institution.

(33) "Financial institution holding company" means any company which has control over any financial institution or has control over any company which controls any financial institution and shall include bank holding companies as defined in subdivision (5) of this section and savings and loan holding companies as defined in 12 U.S.C. § 1467a.

(34) "Foreign bank" means any company organized under the laws of a foreign country, a territory of the United States, Puerto Rico, Guam, American Samoa or the Virgin Islands that engages directly in the banking business. "Foreign bank" includes foreign commercial banks, foreign merchant banks and other foreign institutions that engage in usual banking activities in connection with the banking business in the countries where the foreign institutions are organized or operating.

(35) "Governing body" means the body that oversees the affairs of a financial institution. The governing body may also be referred to as the "board of directors," "board of trustees," "board of managers," "partners' committee" or "managing partners' committee," depending upon the ownership structure of the financial institution.

(36) "Home state" means, for a national financial institution, the state in which the main office of the national financial institution is deemed to be located; for a state financial institution, the state by which the financial institution is chartered; and for a foreign bank the state of the United States that the foreign bank has designated as its home state as determined in accordance with 12 U.S.C. § 3103(c).

(37) "Host state" means a state, other than the home state of a bank or financial institution, in which the bank or financial institution maintains or seeks to establish and maintain a branch.

(38) "Investor" means any person who has an equity interest in a financial institution and is entitled to vote under the institution's organizational documents, provided, however, that this definition shall not be deemed to prohibit or impair the ownership rights of the holders of nonvoting classes of stock or other ownership interests in a financial institution.

(39) "Investor-owned institution" means a financial institution organized under chapter 202 of this title.

(40) "Loan production office" means any place of business of a financial institution at which loans or loan contracts are originated, but not approved.

(41) "Mutual financial institution" or "mutual institution" means any financial institution organized pursuant to chapter 203 of this title, in which the earnings and net worth of the institution inure to the ultimate benefit of the depositors.

(42) "Mutual holding company" means, solely for the purposes of chapter 210 of this title, the corporation that continues in the mutual form as the corporate parent of a stock financial institution resulting from the reorganization of a mutual financial institution pursuant to chapter 210 of this title.

(43) "Mutual holding company subsidiary financial institution" means, for purposes of chapter 210 of this title, an investor-owned financial institution organized under chapter 202 of this title to receive the assets and liabilities of a reorganizing mutual financial institution in accordance with the provisions of chapter 210 of this title, and which will be a subsidiary of the mutual holding company upon consummation of a reorganization under chapter 210 of this title.

(44) "Mutual voter" means a corporator of a mutual financial institution or member of a cooperative financial institution.

(45) "National bank" means a commercial banking association or limited purpose banking association organized pursuant to the Act of Congress entitled "The National Bank Act", as amended, or any subsequent Act of Congress relating thereto.

(46) "National financial institution" means national bank as defined in subdivision (45) or federal association as defined in subdivision (29) of this section.

(47) "National trust company" means a national bank with powers generally limited to trust or fiduciary matters.

(48) "Nondepository trust company" means any Vermont financial institution with powers generally limited to trust or fiduciary matters or any national trust company, organized for the purpose of consolidation or reorganization of trust operations pursuant to section 12602 of this title or organized as a trust company under prior law.

(49) "Officer" means a person who has been given managerial or other high-level duties by the governing body or organizational documents of the financial institution. Depending upon the ownership structure of the institution, an officer may include, but is not limited to, a person with the title of chair, president, secretary, vice-president, treasurer, manager, managing partner or partner. For organizations that are not corporate in nature, the term secretary shall refer to the person to whom the governing body has delegated responsibility for the custody of the minutes of the meetings of the governing body and the equity interest holders, and for authenticating records of the organization.

(50) "Operating subsidiary" means an entity which is owned in whole or in part by a Vermont financial institution and whose activities are limited to the business of banking and closely related activities and in which a financial institution or financial institution holding company directly or indirectly holds more than 50 percent of the equity interests, but not including any equity interest

(A) taken in satisfaction of a debt previously contracted; or

(B) held in a fiduciary capacity.

(51) "Organizational document" means the charter, certificate of organization, articles of incorporation, articles of association, articles of organization, certificate of limited liability partnership, bylaws or other internal governance documents, operating agreement, partnership agreement or any other similar document required to be filed with and approved by the commissioner pursuant to section 12101 or 13101 of this title.

(52) "Principal" means, with respect to a trust account, the individual or entity to whom the financial institution ordinarily furnishes statements of account and other customer communications regarding such trust account.

(53) "Proprietary interests" of the depositors of a mutual or cooperative financial institution refer to the proportionate inchoate interests that such depositors have in the net worth of such financial institution, such interests maturing and being realized upon the financial institution's liquidation and after the claims of all creditors (including those of depositors as creditors) have been satisfied. "Proprietary interests" of the depositors of a subsidiary financial institut ion refer to the proportionate inchoate interests that such depositors have in the net worth of the mutual holding company of which such financial institution is a subsidiary, such interests maturing and being realized upon the mutual holding company's liquidation and after the claims of all creditors have been satisfied.

(54) "Real estate-related services" means real estate investment and development, including maintenance and management of improved real estate; real estate appraising; real estate settlement services; real estate brokerage activities with respect to properties owned by a financial institution authorized to do business in this state, a bank holding company, or subsidiaries thereof, regardless of how the property is acquired or for what purpose; or any real estate-related service authorized b y this title or by rule or order of the commissioner or any real estate-related service authorized for any financial institution chartered by or otherwise subject to the jurisdiction of the federal government.

(55) "Remote Service Unit" or "RSU" means an automated, unstaffed banking facility, such as an automated teller machine, cash dispensing machine, point-of-sale terminal or other remote electronic facility, at which deposits are received, cash disbursed or money lent.

(56) "Savings and loan association," "association," "cooperative savings and loan association" or "foreign building and loan association" means a

financial institution organized under the prior laws of this state that is authorized to exercise the powers and subject to the conditions and limitations on those powers set forth in chapter 204 of this title.

(57) "Savings bank" means a financial institution organized under the prior laws of this state that is authorized to exercise the powers and subject to the conditions and limitations on those powers set forth in chapter 204 of this title.

(58) "Service corporation" means a corporation substantially all the activities of which consist of originating, purchasing, selling and servicing loans and participation interests therein; or clerical, bookkeeping, accounting and statistical or similar functions related to a financial institution or real estate activities; or management, personnel, marketing or investment counseling related to a financial institution or real estate activities; or any activity authorized by the commissioner by rule or order that has not been prohibited by federal law for service corporations.

(59) "Special purpose financial institution" means an institution authorized and operating pursuant to chapter 202, subchapter 6 of this title or other entity with the same or similar functions by whatever name that was established prior to the effective date of this section.

(60) "State financial institution" means a bank, bank and trust company, commercial bank, industrial loan corporation that is a depository institution with insurance by the Federal Deposit Insurance Corporation, limited or special purpose bank, special purpose financial institution, savings and loan association, savings bank, trust company, nondepository trust company and universal financial institution or other entity with the same or similar functions by whatever name that is organized un der the laws of a state other than Vermont or by special act of the legislature of a state other than Vermont and is regulated by its home state in an equivalent manner to a Vermont financial institution; however, trust company as used in this subsection shall not include an entity which is regulated by its home state in an equivalent manner to an independent trust company as defined in chapter 77 of this title. Nothing in this definition shall be deemed to be a grant of authority to any person to operate as a financial institution unless otherwise authorized under law.

(61) "State trust company" means a trust company that is organized under the laws of a state other than Vermont and whose business is limited to trust or fiduciary powers as those powers are set forth in chapter 204, subchapter 4 of this title.

(62) "Subsidiary" means an organization owned or controlled by a financial institution or financial institution holding company.

(63) "Supervisory agency" means:

(A) The banking department or equivalent agency of a state;

(B) The Federal Deposit Insurance Corporation;

(C) The National Credit Union Administration;

(D) The Federal Reserve Board;

(E) The Office of Thrift Supervision;

(F) The Office of the Comptroller of the Currency;

(G) Any successor agency to any of the agencies enumerated in this section.

(64) "Universal financial institution" means an investor-owned institution or a mutual or cooperative financial institution authorized by its organizational documents to exercise all the powers granted in chapter 204 of this title and includes any bank, bank and trust company, commercial bank, savings bank, savings and loan association established prior to the effective date of this section, pursuant to this title or by special act of the legislature.

(65) "Vermont financial institution" means a special purpose institution or universal financial institution organized under the laws of the state of Vermont.

Subchapter 2. Business Days and Emergencies

§ 11201. BUSINESS DAYS

(a) For purposes of this title, unless otherwise provided under other state or federal law applicable to a Vermont or state financial institution which is a depository institution, a business day is a calendar day other than the following:

(1) Saturday and Sunday;

January 1, New Year's Day;

The 3rd Monday in January, Martin Luther King, Jr. Day;

February 12, Lincoln's birthday

The 3rd Monday in February, President's Day;

The first Tuesday in March, Town Meeting Day;

The last Monday in May, Memorial Day, but if the United States government designates May 30 as the date of observance of Memorial Day, then May 30;

July 4, Independence Day;

August 16, Bennington Battle Day;

The first Monday of September, Labor Day;

The 2nd Monday in October, Columbus Day;

November 11, Veterans' Day;

The 4th Thursday in November, Thanksgiving Day; and

December 25, Christmas Day.

(2) A legal holiday which falls on a Saturday may be observed on the preceding Friday and a legal holiday which falls on a Sunday may be observed on the following Monday.

(b) A Vermont financial institution may choose to remain open or to close any of its banking offices on any of the days enumerated in subsection (a) of this section.

§ 11202. BANKING DAY

(a) Each Vermont and state depository institution shall be open not less than five banking days each week, except for the days enumerated in subsection 11201(a) of this title, or except as otherwise provided in this chapter.

(b) In addition to the hours of each banking day established by an institution under subsection (a) of this section, a Vermont or state depository institution may, at its discretion, establish days and hours for its offices, including opening offices for business on days that are not defined as business days in section 11201 of this title. The financial institution's governing body is responsible for determining the scope of operations of each branch, including the services to be provided and the da ys and hours of operation.

(c) A Vermont or state depository institution shall post the days and hours of operation at or near the public entrances to its banking offices and shall provide customers with reasonable advance notice of reduction in services or hours of operation.

(d) Any act authorized, required or permitted to be performed at, by or with respect to any Vermont or state depository institution on a day not defined as a business day or on a day the institution is closed pursuant to section 11204 or 11205 of this title, may be performed on the next succeeding business day and liability or loss of rights of any kind to such financial institution shall not result from this delay.

§ 11203. SPECIAL HOURS

In addition to the hours of each banking day under section 11202(a), a Vermont or state depository institution may have special hours on banking or other than banking days when it is open in a limited capacity for certain definite and stated transactions or purposes only, constituting substantially less than all of its banking functions. A copy of such schedule of special hours shall be filed with the commissioner. The payment, certification or acceptance of a check or other negotiable instrument or any other transaction by such financial institution, shall be valid notwithstanding it was done or performed during such special hours on other than a banking day. A Vermont or state depository institution with special hours on other than a banking day shall not constitute such day a "banking day", for the purpose of notice, presentment, protest, notice of protest or the time requirements for any act or action or notice to perfect or preserve rights accorded under Article 4 of Title 9A.

§ 11204. CLOSING FOR CAUSE

A Vermont or state depository institution 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 Vermont or state depository institution temporarily closes any of its offices for all or any part of a banking day, the institution 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 offi ce to be closed. Posting this notice relieves the institution from liability for failure to perform any of the business of the financial institution at the closed offices. The commissioner may, by adopting rules, establish standards 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.

§ 11205. EMERGENCY CLOSING BY FINANCIAL INSTITUTION

(a) If an emergency arises or is so imminent and immediate as to interfere with or threaten the conduct of normal banking transactions or the safety and welfare of a Vermont or state depository institution's plant, assets or personnel, the financial institution 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 financial institution shall notify the commissioner of the emergency closing, as soon as reason ably possible. In no case, however, shall the office or offices closed under this section, remain closed for more than two consecutive business days commencing the day following closure, except as otherwise provided by law, unless the governor or commissioner shall expressly authorize and sanction the same.

(b) An emergency closing pursuant to this section including the hours of any extension sanctioned by the governor or commissioner shall be lawful and the time of such closing, including any partial day before a closing, shall be considered a holiday and not a banking day. Nevertheless, the transaction of any banking business shall be valid and have the same effect as if performed during special hours on other than a banking day in accordance with section 11203 of this title.

Subchapter 3. Records

§ 11301. PRESERVATION OF RECORDS

(a) A Vermont financial institution, and a state financial institution with a branch in this state, shall keep those 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 financial institution shall retain its business records for such periods as prescribed by the commissioner by regulation.

(b) Any such financial institution 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 comp uter- 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 equally with the original.

Subchapter 4. Reports

§ 11401. FINANCIAL REPORTS

(a) The commissioner shall require each Vermont financial institution to submit at least quarterly in each calendar year a report of its condition in such manner and as of such dates as the commissioner may fix. Only summary reports and examinations shall be required with respect to fiduciary activities which are subject to court accountings. The commissioner may accept reports filed with other regulators for purposes of the requirements of this section.

(b) The commissioner may require special reports to include special information as the commissioner may direct.

§ 11402. INTERNAL AUDITS

(a) The governing body shall cause internal audits of the Vermont financial institution to be performed. The internal audit shall be reported in writing to the governing body at least once in six months if made by a committee of the governing body and at least once a year if made by a certified or registered public accountant. Any committee of the governing body shall consist of at least three persons. At the request of the commissioner a copy of the report shall be made available to the commissio ner.

(b) Prior to declaration of any dividend or other distribution, the governing body of a Vermont financial institution shall determine that the institution will continue to meet the capital requirements under section 14104 of this title as established by the commissioner after payment of the proposed dividend or other distribution.

§ 11403. PERIODIC REPORTS FROM STATE FINANCIAL

INSTITUTIONS WITH A BRANCH, OFFICE OR ACTIVITY IN THIS STATE

(a) The commissioner may require periodic reports from any state financial institution that has established and maintains a branch in this state pursuant to section 15202 of this title.

(b) The commissioner may require periodic reports from any state financial institution that has established and maintains an office or conducts an activity pursuant to section 15204 of this title.

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

(1) consistent with the reporting requirements applicable to financial institutions 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.

§ 11404. REPORTS REQUIRED UNDER CONSUMER PROTECTION CHAPTER

A financial institution shall file with the commissioner reports as required by chapter 200 of this title on the following:

(1) interest rates;

(2) credit cards interest rates and charges;

(3) community reinvestment activities; and

(4) basic banking.

§ 11405. EXEMPTION FROM ANNUAL REPORT TO SECRETARY OF STATE

Vermont financial institutions shall not be required to make any annual report to the secretary of state.

Subchapter 5. Examinations

§ 11501. EXAMINATIONS

(a) The commissioner shall conduct a regular examination of the condition of each Vermont financial institution at least once every three years or more frequently as the commissioner determines it to be 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 provided in section 18 of this title and collected as provided in subsections (c) and (e) of section 19 of this title.

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

(d) Whenever the commissioner deems it necessary, the commissioner may examine any company, the majority of the stock of which is owned by a Vermont financial institution, or which is found by the commissioner to be controlled by a Vermont financial institution. In addition, whenever the commissioner deems it necessary in the conduct of the exercise of the commissioner's supervisory authority over a financial institution, the commissioner may review the records of any person that controls a Vermont financial institution. In furtherance of the conduct of the exercise of the commissioner's supervisory authority over a Vermont financial institution, to the extent not prohibited by federal law, and upon the request of the commissioner, a person that controls a financial institution shall furnish to the commissioner copies of reports filed with the Federal Reserve Board or the Office of Thrift Supervision. Such person shall also consent to the request by the commissioner to the Federal Reserve Board or t he Office of Thrift Supervision for any other information pertaining to such person. The commissioner shall not disclose any information obtained pursuant to this section which is treated as confidential by the Federal Reserve Board or the Office of Thrift Supervision. Nothing in this section shall be construed to grant any additional examination, supervisory or regulatory authority over any person that controls a Vermont financial institution.

§ 11502. 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, shall not be subject to discovery or introduction into evidence in any private civil action, and no person who participated on behalf of the commissioner in an investigation or exa mination 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 or 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 investigation and records and reports of examinations shall include joint examinations by the commissioner and any other supervisory agency. Records of investigation and reports of examinations shall also include records of examinations and investigations conducted by any supervisory agency, and by the supervisory agency of any foreign government with jurisdiction over any financial institution, which are considered confidential by such agency or fore ign government and which are in possession of the commissioner.

§ 11503. 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.

§ 11504. EXAMINATIONS; COOPERATIVE AGREEMENTS

(a) To the extent consistent with subsection 11505(a) of this title, the commissioner may make such examinations of any branch established and maintained in this state pursuant to chapter 205 of this title by a state financial institution as the commissioner may deem necessary to determine whether the branch is being operated in compliance with the laws of this state and in accordance with safe and sound banking practices. The provisions of sections 18, 19, 11501, 11502 and 11503 of this title shall apply to such examinations.

(b) The commissioner may enter into contracts with any financial institution supervisory agency that has concurrent jurisdiction over a Vermont financial institution or a state financial institution maintaining a branch, agency, 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 branch, agency, office, or location established and maintained in this state by a state financial institution or any branch, agency, office, or location located in any host state that is established and maintained by a Vermont financial institution; 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 financial institution that has its principal place of business in a state other than this state, the commissioner shall recognize the exclusive authority of the home state regulator over organizational governance matters and the primary responsibility of the home state regulator with respect to safety an d soundness matters.

§ 11505. 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, branch, agency, office or location in this state of a state financial institution, or any activity or branch of a Vermont financial institution located in any host state. Such agreements may be used to resol ve conflicts arising from inconsistent regulatory requirements and to specify the manner in which any application process under section 15201 or 15202 of this title shall be coordinated.

(b) Agreements under this section may also be entered with non-bank regulatory agencies on matters affecting financial institutions organized or doing business in this state.

Subchapter 6. Enforcement

§ 11601. ENFORCEMENT POWERS OF COMMISSIONER

(a) The commissioner may:

(1) Restrict the withdrawal of deposits from a Vermont financial institution, a state financial institution or a branch of a foreign bank licensed under this title when the commissioner finds that extraordinary circumstances make the restriction necessary for the proper protection of depositors in the affected institution.

(2) Order the holders of equity interests in a Vermont financial institution or financial institution regulated under this title to refrain from voting on any matter if the commissioner finds that the order is necessary to protect the institution against reckless, incompetent or careless management, safeguard the funds of depositors, or prevent the willful violation of this act or of any lawful order issued under it, and in such a case the equity interests of such a holder shall not be counted in det ermining the existence of a quorum or a percentage of the outstanding interests necessary to take any action by the financial institution.

(3) 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.

(4) Except as provided in subdivision (5), impose an administrative penalty of not more than $15,000.00 for each violation of this title, a lawful regulation or order of the commissioner issued under it, upon any person:

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

(B) who has knowingly engaged or participated in any materially unsafe or unsound practice in connection with a financial institution; or

(C) who has knowingly committed or engaged in any act, omission, or practice which constitutes a breach of fiduciary duty to the financial institution, including, but not limited to violations of section 14110 of this title.

(5) Impose an administrative penalty of not more than $1,000.00 per day on any person who fails without good cause to file any report or other filing under chapters 73, 77 and 200 through 210 of this title when due.

(6) Remove from a Vermont financial institution or state financial institution regulated under this title any person:

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

(B) who is convicted of a crime involving dishonesty;

(C) who has knowingly engaged or participated in any materially unsafe or unsound practice in connection with the financial institution; or

(D) who has knowingly committed or engaged in any act, omission, or practice which constitutes a breach of fiduciary duty to the financial institution.

(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 financial institution 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 financial institution has suffered or probably will suffer financial loss or other damage;

(6) whether the interest of depositors 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 therefor by mail to the financial institution and to any affected person. The financial institution or any person so served may, within 30 days of service on the financial institution, request that a hearing be held by the commissioner. If no hearing is requested, the proposed order shall become final 30 days after service on the financial institution. The provisions of chapter 25 o f Title 3 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 it is deemed necessary to assure the continued safety and soundness of the financial institution, the commissioner may order an immediate suspension of any person pending completion of further administrative proceedings on his or her removal.

(e) An executive officer, director or holder of principal equity interests who fails to comply with a standard established by section 14110(a) of this title shall be subject to the civil penalties established by 12 U.S.C. sections 504, 505 and 506, as amended, as if he or she had violated Regulation O directly.

§ 11602. POWER OF COMMISSIONER TO IMPOSE CORRECTIVE ACTION

(a) The commissioner may, in addition to any other power exercisable by the commissioner under the provisions in this title, require a Vermont financial institution or state financial institution with a branch in this state to:

(1) Maintain its accounts in accordance with such regulations as he or she may prescribe having regard to the size of the organization;

(2) Observe methods and standards which he or she 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 the financial institutions' investment policy or 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 financial institution 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; and

(9) Maintain adequate insurance against such other risks as the commissioner may deem necessary and appropriate for the protection of depositors and the public.

(b) Any order of the commissioner issued under this section shall be subject to subsection (c) of section 11601 of this title.

§ 11603. CRIMINAL PENALTIES

(a) It shall be a criminal offense, punishable by a fine of not more than $1,000.00 or a year in prison, or both, for any person to knowingly violate any existing order of the commissioner, or, after receipt of a removal order, or an order assessing a penalty, to knowingly perform any duty or exercise any power of or on behalf of any financial institution until the penalty has been satisfied, or otherwise satisfactorily resolved between the parties, or the removal or penalty order is vacated by the c ommissioner 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 a year in prison, or both, for any person to willfully violate any existing order of the commissioner, or, after receipt of a removal order, or an order assessing a penalty, to willfully perform any duty or exercise any power of or on behalf of any financial institution 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 holder of a principal equity interest of a financial institution subject to the laws of this state under this title who, in violation of a standard established by section 14110 of this title, willfully misapplies any of the moneys, funds or credits of such financial institution, or any of the moneys, funds, assets or securities entrusted to the care or custody of such financial institution, or to the care or custody of such executive officer, director or holder o f a principal equity interest, shall be fined not more than $100,000.00 or imprisoned not more than five years, or both.

§ 11604. INDEMNIFICATION

A financial institution shall not indemnify any person for any penalty or fine imposed under this title.

§ 11605. 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 financial institution and, to the extent practicable, shall consult and cooperate with the home state regulator in pursuing and resolving such enforcement action.

Subchapter 7. Application Process

§ 11701. APPLICATION OF SUBCHAPTER

(a) An application required to be filed under chapters 202, 203, 206, 207 or 210 of this title for the approval of the commissioner, including but not limited to an application for a charter, merger, acquisition, conversion 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 204 or 205 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 11703 of this title. If the commissioner finds that the application promotes the general good, a certificate of general good 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.

(d) Notwithstanding the provisions of subsections (a), (b) and (c) of this section, a financial institution shall notify the commissioner of its intention to amend its organizational documents and may proceed as provided in the notice unless the commissioner objects in writing within 30 days; provided, however, no advance notice for a bylaw amendment is required. If the commissioner objects, the financial institution shall file an application in accordance with this subchapter.

§ 11702. 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 shal l 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 Title 1 chapter 5 shall be removed before public inspection of the file is permitted.

§ 11703. 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 a 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 general good, if required and one has not already been issued, and 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 financial institution shall commence operations, open a branch, or effectuate a merger, share exchange, acquisition, conversion, reorganization, dissolution or other similar request 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) Bases for meeting general good standards. 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, corporators and incorporators of a new financial institution;

(2) The adequacy of capital and financial resources of the institution or institutions concerned;

(3) The competitive abilities and future prospects of the institution or institutions concerned;

(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 customers;

(7) If an existing financial institution, whether the proposed transaction contributes to the financial strength and success of the financial institution or institutions concerned;

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

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

CHAPTER 202. ORGANIZATION AND MANAGEMENT

OF INVESTOR-OWNED FINANCIAL INSTITUTIONS

Subchapter 1. Organization and Commencing Business

§ 12101. APPLICATION

(a) Application. A corporation, limited liability company, limited partnership, limited liability partnership or the organizers of the entity shall file with the commissioner an application for permission to conduct business as an investor owned financial institution. The application shall contain the following information:

(1) The name by which the financial institution is to be known;

(2) The purpose for which it is to be formed, including whether a certificate of general good is sought to conduct business as a universal financial institution or special purpose financial institution;

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

(4) The proposed amount of its initial capital;

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

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

(A) A copy of the organizational documents of the applicant.

(B) The names, addresses and occupations of the organizers of the institution and the names, addresses and occupations of the directors who will be voted on at the initial meeting, together with a statement as to the character, reputation, and financial responsibility of each. 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, any committees and the executive offi cers; a statement as to the character, reputation, financial responsibility and competence and experience in banking and business of such persons and such disclosure and conflict of interest statements as required.

(C) A financial plan which includes a three-year projection of the initial operating results anticipated and a description of the proposed method of marketing the plan, and a statement as to the sources of initial capital as well as any other sources of funding.

(7) The reasons why an institution of the type specified in subdivision (a)(2) of this section is needed in the proposed location.

(8) Copies of any application filed with any other supervisory agency.

(9) Any additional information the commissioner may require. The commissioner may waive any requirements that do not apply.

(b) Publication of Notice. After determining that the application required by subsection (a) of this section is complete, the commissioner shall advise the organization or the organizers of the entity to publish or give any notice that will be required by the commissioner under section 11702 of this title.

§ 12102. ISSUANCE OF CERTIFICATE OF GENERAL GOOD; REFUSAL TO ISSUE CERTIFICATE OF GENERAL GOOD

(a) Certificate of general good. The commissioner shall determine whether or not a certificate of general good shall be granted to organize a financial institution under this chapter and shall make the decision in accordance with the requirements of subchapter 201, subchapter 7 of this chapter.

(b) Conditions. A grant of a certificate of general good may be made subject to such terms and conditions as the commissioner determines necessary. The certificate of general good shall be submitted to the secretary of state with the organizational documents that are required to be filed with the secretary of state. The conditions may include, but are not limited to, conditions regarding the organizational form of the financial institution under this chapter.

(c) Effect of refusal to issue certificate of general good. If the commissioner refuses to issue a certificate of general good, a new application may be filed by the applicant after one year from the date of the refusal.

§ 12103. REQUIREMENTS TO COMMENCE BUSINESS; PAID-IN MINIMUM CAPITAL; EXAMINATION; CERTIFICATE OF AUTHORITY

(a) At the time the certificate of general good is issued, the commissioner shall issue an order granting permission to organize which shall set forth the minimum amount of paid-in capital that the financial institution will be required to have to begin business, which in no event shall it be less than $250,000.00.

(b) The commissioner may set different minimum paid-in capital requirements for different types of financial institutions, and in determining such amounts may consider such factors as the population of the area where the proposed financial institution is to be located, competition among financial institutions 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 depositors and other creditors of the instit ution.

(c) All capital contributions shall be in the form of cash, unless otherwise approved by the commissioner.

(d) An organization that has received a certificate of general good to conduct business as a financial institution may not commence business until the commissioner certifies in writing that the required minimum capital has actually been paid in and that all other terms and conditions contained in the certificate of general good have been satisfied.

(e) When the entire paid-in capital of a financial institution has been received by the financial institution, a complete list of the investors with the name and post office address of each and the portion of ownership interest held by each shall be filed with the commissioner, who shall thereupon cause an examination to be made. If, after the examination, it appears to the commissioner that the required capital has been paid in, the commissioner shall issue a certificate under seal authorizing the financial institution to commence business, and this certificate shall be filed with the secretary of state. A financial institution shall not commence business until that certificate is issued and filed. 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.

§ 12104. FAILURE TO COMMENCE BUSINESS

(a) If a financial institution authorized to commence business under this chapter does not commence business within two years from the filing of its organizational documents in the office of the secretary of state, its right to do business shall lapse.

(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 institution setting forth the reasons for the extension filed before the expiration of the time period established in subsection (a) of this section. If an extension is granted by the commissioner, the commissioner shall notify the secretary of state.

§ 12105. CONTINUANCE OF ORGANIZATION

The organizational documents shall provide for continuance of a financial institution despite the death, dissolution, departure or incapacity of any investor.

Subchapter 2. Governing Body

§ 12201. MEETINGS

(a) The governing body of a Vermont financial institution shall meet at least monthly, except as otherwise provided in this section. A governing body that has appointed an executive committee which meets during the months in which the governing body does not meet, shall meet at least six times a year, including once each quarter. Minutes of executive committee meetings shall be ratified by the governing body.

(b) At least once each month and at each regular meeting, the treasurer shall prepare a financial statement showing the condition of the financial institution, which shall be recorded in a book kept for that purpose, and at all times shall be open to the inspection by the governing body and the commissioner. A record shall be made at each meeting of the transactions of the governing body and the names of the directors present.

(c) Conveyances, leases, assignments, releases, transfers of stock certificates and registered bonds, and all other written instruments authorized or required by law or vote of the directors, may be executed by an executive officer or other official authorized and empowered by the internal governance documents of the institution or by a vote of the governing body which is duly recorded in the minutes of the institution.

Subchapter 3. Bonds and Insurance

§ 12301. BONDS AND INSURANCE

(a) The governing body of a Vermont financial institution shall direct and require good and sufficient fidelity bonds on all active officers, employees and agents, whether or not they draw salary or compensation, which bonds shall provide for indemnity to the financial institution on account of any losses sustained by it as the result of any dishonest or fraudulent act committed or any omission by them acting independently or in collusion or combination with any person or persons. The bonds may be i n individual, schedule or blanket form, and the premiums therefor shall be paid by the financial institution.

(b) The governing body shall also direct and require suitable insurance protection to the financial institution against burglary, robbery, theft and other similar insurable hazards to which the financial institution may be exposed in the operation of its business on the premises or elsewhere.

(c) The governing body shall be responsible for prescribing at least once in each year the amount or penal sum of those bonds or policies and the sureties or underwriters thereon, after giving due and careful consideration to all known elements and factors constituting the risk or hazards. That action shall be recorded in the minutes of the governing body. The commissioner may require a financial institution to furnish an attested duplicate of the bonds and policies required by this section.

(d) The commissioner may require a Vermont financial institution to secure additional bonds or insurance.

Subchapter 4. Dividends, Distributions and Withdrawals

§ 12401. LIMITATION; FORM

(a) A Vermont financial institution may not authorize dividends, distributions or withdrawals that reduce capital below the higher of the amount required under the certificate of general good or section 14104 without the prior approval of the commissioner.

(b) Dividends, distributions, and withdrawals shall be in cash or as otherwise authorized by the commissioner.

Subchapter 5. Voluntary Dissolution

§ 12501. VOLUNTARY DISSOLUTION; PROCEDURE; CRITERIA

(a) An investor-owned Vermont financial institution shall submit to the commissioner for approval a plan of dissolution or wind-up prior to filing its articles of dissolution under Title 11A or winding up its business under Title 11. The plan shall contain the following items:

(1) Pro forma financial statements that demonstrate that the financial institution will, upon dissolution or during its wind-up, discharge or make provision for discharging its liabilities;

(2) A method to distribute all remaining assets among its investors according to their interests;

(3) The process of and resources dedicated to the oversight of the dissolution or winding up of the financial institution;

(4) The plan to transfer to any of its affiliates or any other financial institution its deposit, loan and trust accounts, including escheat of all remaining deposit accounts to the state of Vermont;

(5) The procurement or continuation of insurance or the provision of other security as the commissioner deems necessary;

(6) An acknowledgment that, before the articles of dissolution are filed or the wind-up begins, there will be no distributions or equity interest repurchases without the commissioner's prior written approval; and

(7) Such other information or assurances as the commissioner may require.

(b) Upon approval of the plan, the financial institution may file its articles of dissolution under Title 11A and proceed with its dissolution or may proceed with the windup and dissolution under Title 11, as provided by law.

(c) During its wind-up, a dissolved or dissolving entity shall not transact any further banking business after its deposit insurance has terminated.

Subchapter 6. Special Purpose Financial Institutions

§ 12601. CERTAIN SPECIAL PURPOSE FINANCIAL INSTITUTIONS AUTHORIZED

(a) In addition to universal financial institutions authorized under subchapters 1-5 of this chapter and under chapter 203 of this title, special purpose financial institutions may be established in this state, subject to the conditions and limitations imposed under this subchapter.

(b) Any person who, directly or indirectly, controls a special purpose financial institution established under this subchapter shall be subject to the supervision of the commissioner, unless that person is a bank holding company regulated by the Federal Reserve Board or savings and loan holding company regulated by the director of the Office of Thrift Supervision. In exercising the supervisory powers under this subchapter, the commissioner may require such examination and reports, including copies o f reports filed with federal regulatory agencies, of the special purpose financial institution and any person that controls it as the commissioner deems necessary to protect the interests of depositors, borrowers or other parties in interest.

(c) Any material change in business plan by a special purpose financial institution authorized to do business under this subchapter shall be submitted to the commissioner for prior approval, unless the provisions of this title require the financial institution to file an application with the commissioner.

§ 12602. NONDEPOSITORY TRUST COMPANIES

(a) Except as provided in this section or to the extent inconsistent with this section or with the general purpose of a nondepository trust company, a nondepository trust company has all the powers, duties and obligations of a financial institution under this title. In the exercise of its powers and the conduct of its business, the nondepository trust company shall be subject to all the same fiduciary duties and obligations as a financial institution operating a trust department under chapter 204, s ubchapter 4 of this title.

(b) A nondepository trust company shall not have the power to solicit, receive or accept money or its equivalent on deposit as a regular business within the meaning of section 11101(11) of this title; shall not be required to obtain federal deposit insurance; shall not have the power to lend money, except in transactions reasonably related to and deriving from its service as fiduciary or its conduct of trust business; and shall not conduct any other business except that which is incidental to its tru st business and which is otherwise consistent with the exercise of its fiduciary duties.

(c) No nondepository trust company, other than a national trust company authorized to engage in a trust business in this state, shall engage in a trust business in this state without first obtaining a certificate of authority from the commissioner pursuant to this section and sections 11703, 12103 and 14403 of this title.

(d) Notwithstanding section 15101 of this title, without the prior approval of the commissioner, a nondepository trust company that is authorized to do business in this state may open and occupy a trust office at any one or more locations in this state at which its financial institution holding company parent or any affiliate financial institution has an office, whether a main office or a branch office.

(e) Any other trust office of a nondepository trust company organized as a Vermont financial institution shall be established in this state only with the prior approval of the commissioner as provided in section 11701(c) of this title.

(f) The establishment of trust offices by a nondepository trust company organized as a national trust company shall be governed by applicable federal law.

(g) The organizational documents of a nondepository trust company organized as a Vermont financial institution that are filed with the secretary of state shall contain the following statement: "This organization is subject to the Vermont law on nondepository trust companies, 8 V.S.A. § 12602, and does not have the power to solicit, receive or accept money or its equivalent on deposit or to lend money except for lending reasonably related to and deriving from its service as fiduciary or its conduct of trust business." This statement in the organizational documents of a nondepository trust company may not be amended.

(h) All of the outstanding equity interests of a nondepository trust company shall be owned directly, or indirectly through one or more subsidiaries, by a financial institution holding company.

(i) A nondepository trust company organized as a Vermont financial institution shall maintain minimum capital in accordance with this chapter and section 14104 of this title, except the commissioner may by order or rule apply standards for the minimum capital required for a nondepository trust company that are different from those requirements for a universal financial institution organized under this title, based on the nature of the business.

(j) Funds received or held by a nondepository trust company organized as a Vermont financial institution while awaiting investment or distribution shall not be used by the nondepository trust company or any affiliate financial institution in the conduct of its business or deposited in such financial institution, except to the same extent, and subject to the same conditions and limitations, as would be otherwise permitted under this title if the nondepository trust company and affiliated financial ins titution were one and the same corporate entity. The account shall be held either in the name of the trust to which the cash belongs or in the name of the nondepository trust company and shall be composed entirely of cash belonging to trust accounts, the respective contributions of which are reflected in the books and records of the nondepository trust company.

(k) A nondepository trust company organized as a Vermont financial institution shall include as a part of its name the word "trust" unless otherwise approved by the commissioner for good cause shown.

(l) A nondepository trust company organized as a Vermont financial institution shall be subject to regular examination and supervision by the commissioner to the same extent as any other financial institution chartered under Vermont law.

(m) A nondepository trust company organized as a Vermont financial institution may convert to any other type of investor-owned financial institution pursuant to chapter 206 of this title.

(n)(1) At any time or times following the grant to a nondepository trust company of permission to engage in the trust business by the commissioner, or in the case of a national trust company by its federal supervisory agency, the nondepository trust company may file a petition in the probate court of the probate district in which its main office is located requesting that it be substituted, except as may be specifically excluded in such petition, in every fiduciary capacity for any one or more of its affiliate financial institutions specified in the petition. The petition may be made ex parte and need not list the fiduciary capacities in which substitution is made. A copy of the petition shall be furnished to the commissioner prior to filing with the probate court and the commissioner shall have standing to appear and object to the petition. Upon a finding that (A) the nondepository trust company has been granted permission to engage in the trust business by the commissioner, or the federal superviso ry agency if the nondepository trust company is a national trust company, and (B) each of the affiliate financial institutions for which the nondepository trust company seeks to be substituted as fiduciary has complied with the notification requirements in subdivision (2) of this subsection, the court shall enter an order substituting the nondepository trust company in every fiduciary capacity for each of its specified affiliate financial institutions, except as otherwise specified in the nondepository trus t company's petition. If the court determines that the commissioner's objection has merit, the court shall issue an appropriate order to address the commissioner's objection. The petition made pursuant to this section shall be considered in a summary fashion by the court, and the court shall act on the petition within 30 days of filing. Upon entry of the court's substitution order, the nondepository trust company shall, without further act, be deemed substituted by operation of law in every such fiduciary capacity, except as may be specifically excluded in such petition. The substitution shall be evidenced by filing a copy of the order with the clerk of the Vermont probate court in each probate district in which the affiliate financial institutions served in a fiduciary capacity prior to the entry of the order. The order shall be accompanied by written notification to the court of each fiduciary appointment previously made by the court that is affected by the substitution order, and evidence of compliance with subdivision (5) of this subsection. The order of substitution shall be indexed in the records of the courts in the manner in which substitutions of fiduciaries are indexed.

(2) At least 30 days before the filing of the petition referred to in subdivision (1) of this subsection, but after regulatory approval under subsection (c) of this section has been granted, each of the affiliate financial institutions for which the nondepository trust company seeks to be substituted shall mail written notice of the proposed substitution to the principals of each trust account affected. The form of notice required by this subdivision shall be approved by the commissioner and shall i nclude a statement that the nondepository trust company is affiliated with its affiliate financial institutions, but is not a part of them, and shall include the name, mailing address and telephone number of one or more officers, employees or agents of the affiliate financial institution available during regular business hours to answer customer questions regarding the proposed substitution. The affiliate financial institution shall furnish an affidavit of the mailing of the notice to the probate court in conjunction with the filing of the nondepository trust company's petition referred to in subdivision (1) of this subsection, and the affidavit shall constitute the affiliate financial institution's compliance with this subdivision of this subsection. Following the mailing of the notice and prior to the effective date of the substitution order, each of the affiliate financial institutions shall furnish a copy of the notice to each prospective trust customer of the financial institution before the customer a nd the financial institution enter into a trust account relationship.

(3) Within 30 days after the entry of the substitution order referred to in subdivision (1) of this subsection, the nondepository trust company shall mail written notice of the substitution to the principals of each trust account affected. The notice shall specify that the nondepository trust company is affiliated with its affiliate financial institutions, but is not a part of them, and shall include the name, mailing address and telephone number of one or more officers or employees of the nondeposi tory trust company available during regular business hours to answer customer questions regarding the substitution.

(4) Each designation in a will, trust or other instrument executed before or after the entry of an order of substitution, naming an affiliate financial institution as fiduciary, shall be deemed by operation of law to be a designation of the nondepository trust company, substituted pursuant to this section, without further act or amendment of the will, trust or other instrument, unless the will, trust or other instrument is executed after the date of entry of the order of substitution and specifically negates application of this section.

(5) If any affiliate financial institution for which the nondepository trust company has been substituted pursuant to this section has given bond in any fiduciary capacity, the nondepository trust company shall be required to furnish to the court or authority making the appointment a substitute bond in like amount and terms before the affiliate financial institution shall be released from liability on its bond.

(6) Any affiliate financial institution, for which the nondepository trust company has been substituted pursuant to this section, shall account jointly with the nondepository trust company for the accounting period during which the effective date of the substitution occurs. Upon substitution pursuant to this section, the affiliate financial institution shall deliver to the nondepository trust company all assets addressed in the substitution order held by the affiliate financial institution as fiduci ary and upon the substitution all the assets shall become the property of the nondepository trust company as fiduciary without the necessity of any instrument of transfer or conveyance.

(7) Upon substitution of the nondepository trust company pursuant to subdivision (1) of this subsection, the nondepository trust company shall pay fair consideration to each affiliate financial institution for which it has been substituted as fiduciary for the trust business it has acquired from the affiliate as a result of the substitution.

(o) To the extent not inconsistent with this section or with the limited scope of the banking powers of a nondepository trust company as contemplated in subsection (b) of this section, a nondepository trust company organized as a Vermont financial institution shall be subject to the laws of this state generally applicable to investor owned financial institutions organized pursuant to chapter 202 of this title; provided, however, that the provisions of this chapter governing substitution of the nondep ository trust company as fiduciary shall be exclusive and chapters 206, 207 and 208 of this title shall not apply to the substitution.

(p) A depository institution organized as a Vermont financial institution or a national financial institution, which is authorized by its supervisory agency to exercise trust powers, may be substituted as a fiduciary for any of its affiliate financial institutions under the same procedures, and the substitution shall be subject to the same conditions specified in this section, other than the prohibition against deposit-taking and the provisions of subsection (k) of this section, with respect to the s ubstitution as fiduciary of a nondepository trust company for any of its affiliate financial institutions. The substitution procedures shall be exclusive and chapters 206, 207 and 208 of this title shall not apply to the substitution.

§ 12603. MERCHANT BANKS

(a) A merchant bank is a financial institution organized under the provisions of this title whose activities are generally limited to lending and investing. Deposit activity is prohibited. Unless otherwise indicated in this chapter, a merchant bank has all the powers, duties and obligations of a financial institution under this title. As one of the purposes of merchant banks is to provide needed capital or investments to businesses that may be impermissible or imprudent for depository financial in stitutions, its lending and investment activities are less restricted. Except as provided in this section, a merchant bank has all the powers of and is entitled to engage in the business of a financial institution, including, without limitation, powers with respect to investments, loans and transactions.

(b) A merchant bank may not solicit, receive or accept money or its equivalent on deposit as a regular business within the meaning of section 11101(11) of this title or engage in deposit-like activities as determined by the commissioner. A merchant bank may deposit cash, whether constituting principal or income, in any financial institution, whether within or without this state, if the account is held either in the name of the customer to which the cash belongs or in the name of the merchant bank and is composed entirely of cash belonging to the customer, the respective contributions of which are reflected in the books and records of the merchant bank.

(c) A merchant bank may issue drafts drawn on itself in the form of treasurer's or cashier's checks.

(d) No merchant bank shall engage in business as a merchant bank in this state without first obtaining a certificate of authority from the commissioner pursuant to this section and sections 11703 and 12103 of this title.

(e) The organizational documents of a merchant bank that are filed with the secretary of state shall contain the following statement: "This organization is subject to the Vermont law on merchant banks, 8 V.S.A. § 12603, and does not have the power to solicit, receive or accept money or its equivalent on deposit." This statement in the organizational documents of a merchant bank may not be amended.

(f) The minimum amount of initial capital for a merchant bank is $10,000,000, of which at least $5,000,000 shall be common stock or equity interest. The balance may be composed of qualifying subordinated or similar debt.

(g) A merchant bank shall maintain minimum capital in accordance with section 14104 of this title. The commissioner may establish different standards for merchant banks than for other financial institutions organized under this title. The minimum capital standards for a merchant bank may not be less than a level equal to 150 percent of the tier 1 risk-based capital and 150 percent of total risk-based capital established from time to time by the Board of Governors of the Federal Reserve System for a well-capitalized bank.

(h) A merchant bank may convert to any other type of investor-owned financial institution pursuant to chapter 206 of this title.

(i) Notwithstanding section 14103 of this title, a merchant bank may use as a part of its name the word or words "bank," "banker" or "banking" or the plural of or any abbreviations of those words.

(j) At least 30 days prior to the establishment of any office for the transaction of its business, a merchant bank shall notify the commissioner.

(k) The following provisions of this title are inapplicable to merchant banks: sections 12201, 14110, 14301(d), chapters 203, 205, and subchapter 2 of chapter 204.

(l) Prior to making a loan, the terms of any loans by a merchant bank to or investments by a merchant bank shall be disclosed to the governing body of the merchant bank when the loan is to any of the following:

(1) A person who owns 25 percent of more of the merchant bank's common stock or similar equity capital;

(2) A member of the governing body of the merchant bank;

(3) An executive officer or manager of the merchant bank; or

(4) A company 25 percent of the voting shares or other similar voting equity of which is owned by a person or entity listed in subdivisions (1) through (3) of this subsection.

(m) Any acquisition or change in control of five percent or more of the equity interests in a merchant bank shall be subject to the prior approval by the commissioner. The acquiring person shall file an application with the commissioner for approval. The application shall be subject to the provisions of subchapter 7 of chapter 201 of this title.

(n) The commissioner may examine the merchant bank and any person who controls it to the extent necessary to determine the soundness and viability of the merchant bank.

(o) A merchant bank shall include on all its advertising a prominent disclosure that deposits are not accepted by a merchant bank.

§ 12604. UNINSURED BANKS

(a) An uninsured bank is a financial institution that only accepts deposits for which insurance of deposits by the FDIC is not required. For purposes of this section, uninsured banks may accept deposits from a depositor which, when added to the deposits already held for the depositor, if any, exceed the maximum insured amount then permitted to be insured by the Federal Deposit Insurance Corporation for insured deposits. An uninsured bank may be organized pursuant to this section and subchapters 1 t hrough 5 of this chapter. Unless otherwise indicated in this chapter, an uninsured bank has all the powers, rights, duties and obligations as a financial institution under this title. An uninsured bank is not a nondepository trust company nor is it a merchant bank.

(b) No uninsured bank shall engage in business as an uninsured bank in this state without first obtaining a certificate of authority from the commissioner pursuant to sections 11703, 12103 and this section.

(c) The organizational documents of an uninsured bank that are filed with the secretary of state shall contain the following statement: "This organization is subject to the Vermont law on uninsured banks, 8 V.S.A. § 12604, and does not have the power to solicit, receive or accept retail deposits." This statement in the organizational documents of an uninsured bank may not be amended.

(d) An uninsured bank shall maintain capital in accordance with section 14104 of this title, except that the commissioner may establish different capital requirements for uninsured banks from those required for insured financial institutions.

(e) An uninsured bank may convert to any other type of investor-owned financial institution pursuant to chapter 206 of this title.

(f) The commissioner may establish by rule or order reserve requirements for uninsured banks.

(g) An uninsured bank's lending limit is governed by section 14301(d) of this title, except that loans or extensions of credit to a person are limited to 15 percent of total capital.

(h) An uninsured bank shall display conspicuously at each window or place where deposits are usually accepted a sign stating that deposits are not insured by the FDIC.

(i) An uninsured bank shall either include in boldface conspicuous type on each signature card, or instrument evidencing a deposit the following statement: "This deposit is not insured by the FDIC" or require each depositor to execute a statement that acknowledges that the initial deposit and all future deposits at the bank are not insured by the FDIC. The bank shall retain this acknowledgment as long as the depositor maintains any deposit with the bank.

(j) An uninsured bank shall include on all its deposit-related advertising a prominent disclosure that deposits are not insured by the FDIC.

CHAPTER 203. ORGANIZATION AND MANAGEMENT OF MUTUAL AND COOPERATIVE FINANCIAL INSTITUTIONS

Subchapter 1. Organization and Commencing Business

§ 13101. APPLICATION TO ORGANIZE

(a) Application. Two or more persons all of whom shall reside in or reside proximate to the geographic area to be served by the institution, may agree in writing to associate themselves for the purpose of forming a mutual or cooperative financial institution pursuant to this chapter, and those persons shall be considered as the organizers of the applicant. The organizers shall file with the commissioner an application for permission to organize a mutual or cooperative financial institution, which a pplication shall contain the following:

(1) The name by which the financial institution will be known;

(2) The purpose for which it is to be formed, including whether a certificate of general good is sought to conduct business as a mutual financial institution or a cooperative financial institution;

(3) The city or town within this state where the financial institution's principal office is to be located;

(4) The proposed minimum amount of initial capital contributions to be deposited and a statement by each organizer setting forth his or her name, address and occupation, together with the amount of initial capital that such organizer shall deposit, which statement shall be subscribed by the organizer;

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

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

(A) A copy of the organizational documents.

(B) The names of the organizers of the institution who are to serve until the initial meeting of the members or corporators 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 or corporators at the initial meeting, together with a statement as to the character, reputation, and financial responsibility of each. A list of the names, addresses, and official positions of the persons who are to be responsible f or the conduct of the affairs of the applicant, including all members of the governing body, any committees and the executive officers; a statement as to the character, reputation, financial responsibility and competence and experience in banking and business of such persons and such disclosure and conflict of interest statements as required.

(C) A financial plan which includes a three-year projection of the initial operating results anticipated and a description of the proposed method of marketing the plan, and a statement as to the sources of initial capital as well as any other sources of funding.

(7) The reasons why an institution of the type specified in subdivision (2) of this subsection is needed in the proposed location.

(8) Copies of any application filed with any other supervisory agency.

(9) Any additional information as the commissioner may require.

(b) 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 section 11702(c) of this title.

§ 13102. ISSUANCE OF CERTIFICATE OF GENERAL GOOD; REFUSAL TO ISSUE CERTIFICATE OF GENERAL GOOD

(a) Certificate of general good. The commissioner shall determine whether or not a certificate of general good shall be granted to organize a financial institution and shall make the decision in accordance with the requirements of chapter 201, subchapter 7 of this title.

(b) Conditions. A grant of a certificate of general good 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 financial institution under this chapter.

(c) Effect of refusal to issue certificate of general good. If the commissioner refuses to issue a certificate of general good, a new application may be filed by the organizers after one year from the date of the refusal.

§ 13103. REQUIREMENTS TO COMMENCE BUSINESS; MINIMUM INITIAL CAPITAL CONTRIBUTION DEPOSITS; EXAMINATION; CERTIFICATE OF AUTHORITY

(a) At the time the certificate of general good is issued, the commissioner shall issue an order granting permission to organize which shall set forth the minimum amount of capital deposits that the mutual or cooperative financial institution will be required to have to commence business, which in no event shall be less than $250,000.00.

(b) The commissioner may set different minimum capital deposit requirements for different types of financial institutions, and in determining the minimum amount of capital deposits for a financial institution, may consider such factors as the population of the area where the proposed institution is to be located, competition among financial institutions 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 depositors and other creditors of the institution.

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

(d) Upon receipt of a certificate of general good pursuant to section 13102 of this title, the organizers set forth in the application for permission to organize shall hold the institution's franchise 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 general good pursuant to section 13102 of this title, the first meeting of the organizers of the financial institution shall be called by a notice signed by that organizer who was 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, o r left at each organizer's residence or usual place of business, or deposited in the post office and addressed to such an 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 institution. 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 the first meeting and thereafter, the organizers of a mutual financial institution shall be known as the "corporators" and the organizers of a cooperative financial institution shall be known as the "incorporators."

(3) At such meeting or at any adjournment thereof, the corporators or incorporators shall by ballot select a temporary secretary, adopt the organizational documents of the institution 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 subchapters 4 and 5 of this chapter.

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

(5) The secretary shall file copies of the organizational documents with the commissioner within 10 days of 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 of the filed documents.

§ 13104. SUBMISSION TO SECRETARY OF STATE

Following the meeting required under subdivision 13103(e)(1) and approval by the commissioner under subdivision 13103(e)(5) of this title, the directors so elected shall submit to the secretary of state an attested copy of each of the institution's organizational documents required by Title 11 or 11A, as the case may be. The secretary of state shall determine whether such organizational documents satisfy the requirements of Title 11 or 11A. If such requirements are met, the secretary of stat e 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 financial institution until all conditions of this subchapter are satisfied.

§ 13105. PAYMENT OF CAPITAL DEPOSITS

(a) A financial institution organized under this chapter shall not commence business until the minimum capital deposits required in its permission to organize have been deposited to the credit of the financial institution in a depository designated by the governing body.

(b) At such time as the institution has received to its credit the minimum capital deposits required in section 13103 of this title, a complete list of the capital depositors, with the name, address, occupation and the amount of capital deposited by each shall be filed with the commissioner, which list shall be verified by an officer and the secretary of the institution. Such deposits shall be handled by the institution in accordance with subchapter 2 of this chapter.

§ 13106. CERTIFICATE TO COMMENCE BUSINESS

(a) Upon receipt of the statement required in section 13105 of this title, the commissioner shall cause an examination to be made to determine if the minimum capital deposits have been credited to the account of the institution 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 capital deposits has been paid in, the commissioner shall issue a certificate under seal authorizing the financial institution to commence business, and this certificate shall be filed with the secretary of state. 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 fil ed. Such certificate shall be conclusive of the facts stated therein and it shall be unlawful for any such mutual or cooperative financial institution to begin transacting business until such a certificate has been granted.

§ 13107. FAILURE TO COMMENCE BUSINESS

(a) As to any mutual or cooperative financial institution that fails to commence business as a financial institution within two years after receiving a certificate of general good under section 13102 of this title, its certificate of general good and its right to do business shall lapse.

(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 institution setting forth the reasons for the extension, filed before the expiration of the time period established by subsection (a) of this section. If an extension is granted by the commissioner, the commissioner shall notify the secretary of state.

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

Subchapter 2. Organizational Finance

§ 13201. INITIAL CAPITAL DEPOSITS; CAPITAL RESERVES

(a) The initial capital deposits required under section 13105 of this title for commencing business shall be paid into an account of the institution known as the "capital reserve" account.

(b) The institution shall record on its books the amount which each capital depositor has contributed to such capital reserve and such amounts shall be evidenced by a certificate issued to the contributor thereof.

(c) Dividends or interest may be paid upon the amounts standing to the credit of each owner of a proportionate interest in the capital reserve, in accordance with the terms of the deposit agreement, but in no event shall such dividends or interest be in excess of the maximum rate paid on shares or accounts of the institution for the same period.

(d) The capital reserve established pursuant to this section shall be used as a guarantee against losses, contingencies and impairments of capital, and all losses and expenses not otherwise absorbed shall be charged against it until such time as the conditions in section 13202 of this title are met; provided that the amount credited to each contributor shall be reduced only by the contributor's proportionate share of such losses or expenses.

(e) The capital reserve shall be subordinate to all other deposits or share accounts of the institution.

(f) The capital contribution standing to the credit of each capital depositor in the capital reserve of the institution shall be transferable, together with any interest or dividends credited thereon, subject to the conditions and restrictions of this section.

§ 13202. RETURN OF INITIAL CAPITAL DEPOSIT

The initial capital deposits, together with any dividends or interest credited thereon, may be returned, pro rata, to the contributors, or their heirs, executors, administrators or assigns, subject to the following conditions and limitations:

(1) Prior to return of all or part of the initial capital reserve, the institution shall obtain the commissioner's approval for such return;

(2) A return of all or part of the capital reserve may not reduce the institution's capital below the greater of the total initial capital contributions or the minimum amount prescribed by the commissioner in accordance with section 14104 of this title;

(3) Upon release and return, the contributor's proportionate share of the amount to be returned shall be credited in his or her name to a share account or deposit in such institution, and the contributor shall then be entitled to all rights and privileges, and shall be subject to all duties and liabilities, connected with such share account or deposit;

(4) In the event of the liquidation of an institution before such contributions have been repaid in full, any portion of such contributions not required for the repayment of the expenses and the payment of creditors and other depositors in full, pursuant to subchapter 3 of chapter 209 of this title, may be repaid pro rata to the capital depositors.

§ 13203. CAPITAL NOTES OR DEBENTURES AS CAPITAL

RESERVE

Subject to prior approval of the commissioner, a financial institution may issue capital notes or debentures, the proceeds from the sale of which may be used in lieu of capital deposits to establish part of the capital reserve required in section 13201 of this title, provided that:

(1) Such capital notes or debentures are issued pursuant to the organization's borrowing powers;

(2) Such notes or debentures are subject to conditions governing the repayment of principal and interest which are comparable to the requirements governing return of initial capital deposits as set forth in section 13202 of this title; and

(3) Repayment of the principal amount of such capital notes or debentures issued pursuant to this section shall have priority over the return of any capital deposits in the capital reserve.

Subchapter 3. Corporators and Members

§ 13301. CORPORATORS OF MUTUAL FINANCIAL INSTITUTIONS

(a) Persons named in the organizational documents constitute the original board of corporators of a mutual financial institution. Membership on this board continues until terminated by death, resignation or disqualification as provided in this section.

(b) All corporators shall be residents of the geographic area that the financial institution serves or an area proximate to this geographic area. A person may not continue as a corporator after ceasing to be a resident of the financial institution's geographic area or an area proximate to this geographic area.

(c) Any corporator failing to attend the annual meeting of the board of corporators for two successive years ceases to be a member of the board unless reelected by a vote of the remaining corporators.

(d) The number of corporators may be fixed or altered by the internal governance documents of the financial institution, and vacancies may be filled by election at any annual meeting.

§ 13302. MEMBERS OF A COOPERATIVE FINANCIAL INSTITUTION; QUALIFICATIONS AND VOTING RIGHTS

(a) The members of a cooperative financial institution organized pursuant to this chapter shall be those in whose names accounts are established and persons borrowing from or assuming or obligated upon a loan held by such institution or purchasing property and assuming the secured loan held by such institution.

(b) A single membership in a cooperative financial institution may be held by two or more persons, and a joint and survivorship relationship and successor relationship, whether investors or borrowers, constitutes a single membership.

(c) Each member 18 years of age or over is entitled to one vote at any meeting of the cooperative financial institution, regardless of the number of accounts standing in that member's name, provided that only one vote is allowed on an account held by two or more persons. The internal governance documents may prohibit voting by persons who have become members within six months of the date when the vote is cast. When accounts or shares are pledged, the pledgor may vote the accounts or shares so pledg ed.

(d) Profits and losses shall be distributed at least annually among the members. On each annual closing day after payment or provision for all expenses and appropriate transfers to reserves, the remainder of net earnings for the annual period shall be credited to an undivided profits account. At each annual period, the governing body shall declare a distribution of earnings. Dividends may also be declared monthly or quarterly. Interim dividends may be paid at the rate most recently declared by the governing body. Payments of net earnings to members may be referred to as dividends or interest.

(e) Membership terminates when the amount of a member's accounts have been paid in full to that member, or when the transfer of membership to other persons has been recorded on the books of the financial institution, or when that member's status as a borrower from the institution terminates.

§ 13303. POWERS AND DUTIES OF CORPORATORS AND MEMBERS

(a) Corporators or members shall hold regular annual meetings, at a time fixed in the internal governance documents of the institution, for the purpose of electing directors of the institution and for the transaction of any other business which may properly be brought before such meeting.

(b) Special meetings of the corporators or members may be called at any time by an executive officer of the institution, or in any other manner provided for in the internal governance documents.

(c) Notice of the annual meeting or any special meeting shall be given by public advertisement in a newspaper or newspapers of general circulation in the county or counties where each office of the institution is located, or in such other newspapers as the commissioner may designate; provided that corporators shall also be sent notice by mail at their last known address. The notice shall be published on at least two different days and in such manner as to be reasonably conspicuous. The last publica tion of notice shall be at least seven days prior to such annual or special meeting. Notice of any special meeting shall state the purpose for which such meeting is called.

(d) The internal governance documents shall prescribe the number of corporators or members that constitute a quorum at any annual or special meeting. The internal governance documents may also provide for voting by proxy.

(e) Meetings of the corporators or members shall be held at the institution's principal office, or at such other place in the area of this state served by the institution as the notice shall designate.

Subchapter 4. Governing Body

§ 13401. DIRECTORS: NUMBER, ELECTION, QUALIFICATIONS AND TERM

(a) The number of directors on the governing body of a mutual or cooperative financial institution may not be less than five, all of whom shall be residents of the financial institution's geographic area or an area proximate to that geographic area.

(b) The initial governing body shall be elected at the first meeting of the corporators or the organizers as provided for in section 13103 of this title, and the governing body shall be elected by a vote of the corporators or members at each annual meeting thereafter; provided that the organizational documents or internal governance documents may provide for classification of directors in accordance with Title 11 or 11A, depending on the form of organization.

(c) Vacancies on the governing body occurring during the year may be filled by the governing body until the next annual meeting of the corporators or members. A director so elected shall fill such position for the remainder of the term. Any vacancy which causes the number of directors to fall below the minimum required in subsection (a) of this section or in the institution's internal governance documents shall be filled promptly.

(d) The compensation of directors, which may include provision for payment of medical, surgical and hospital expenses due to accident or illness in the same manner as provided for officers and employees, may be fixed by the corporators or members at any legal meeting thereof, or, subject to the written approval of the commissioner, such may be fixed by the governing body.

§ 13402. MEETINGS OF THE GOVERNING BODY

(a) The governing body shall hold at least six meetings each year at a time fixed in the internal governance documents, which shall be held at least once each quarter. In any month in which the governing body does not meet, the executive committee permitted under section 13403(c) of this title shall meet and a record of the meeting of the executive committee shall be ratified at the next meeting of the governing body.

(b) A quorum at any meeting shall consist of not less than a majority of the governing body, but less than a quorum shall have power to adjourn from time to time until the next duly called meeting.

(c) At least once each month and at each regular meeting, the treasurer shall prepare a financial statement, showing the condition of the financial institution, which shall be recorded in a book kept for that purpose, and at all times shall be open to the inspection of the governing body and the commissioner. A record shall be made at each meeting of the transactions of the governing body and the names of the directors present.

(d) Full and complete records of all meetings of the governing body shall be kept and maintained.

§ 13403. POWERS AND DUTIES OF THE GOVERNING BODY

(a) The governing body may exercise any and all powers of an institution not expressly reserved to the corporators or members by this title or by the institution's organizational documents or internal governance documents.

(b) The governing body shall see that all funds of the institution are invested only in accordance with section 14107 of this title.

(c) The governing body may, in its discretion and so far as is consistent with its duties, appoint an executive committee from its members, such committee to conduct the business of the institution between meetings of the governing body; provided that all transactions of such executive committee shall be reported to the governing body at its next meeting and incorporated into the records of such meetings.

(d) Bonds. The governing body shall require security for the fidelity and faithful performance of duties by the officers, employees and agents of the financial institution, in such amount as the governing body shall deem necessary or as the commissioner may require. Such security shall consist of a bond executed by one or more surety companies authorized to transact business in this state. The commissioner may increase such amount from time to time as circumstances may require. The expense of suc h bond shall be assumed by the institution.

(e) The governing body shall also direct and require suitable insurance protection to the financial institution against burglary, robbery, theft and other similar insurable hazards to which the financial institution may be exposed in the operation of its business on the premises or elsewhere.

(f) The governing body shall be responsible for prescribing at least once in each year the amount or penal sum of those bonds or policies and the sureties or underwriters thereon, after giving due and careful consideration to all known elements and factors constituting the risk or hazards. That action shall be recorded in the minutes of the governing body. The commissioner may require a financial institution to furnish an attested duplicate of the bonds and policies required by this section.

(g) The commissioner may require a Vermont financial institution to secure additional bonds or insurance.

Subchapter 5. Officers and Employees

§ 13501. OFFICERS

(a) Election. Unless another manner for election is provided in the internal governance documents, the governing body shall elect annually from its members a chair, and from its members or otherwise, an executive officer, a secretary, a treasurer and such other officers as it may consider advisable. The terms of officers so elected shall be for not more than one year, but such officers may be reelected and shall continue in office until their successors are elected and qualified. If any office bec omes vacant during the year, the governing body may immediately fill the same for the period remaining until the next annual meeting for election of officers.

(b) Compensation. The compensation of officers shall be fixed by the governing body.

(c) Powers of Officers. Each officer shall have such powers as the internal governance documents may provide or as may be delegated by the governing body. In addition, an officer may exercise the powers set forth below:

(1) The chairman of the governing body shall preside at all meetings of the corporators or members and the governing body, unless otherwise provided in the internal governance documents.

(2) An executive officer shall preside, in the absence of a chairman of the governing body, at all meetings of the corporators or members and the governing body unless otherwise provided in the internal governance documents.

(3) The secretary shall exercise the following powers.

(A) The secretary shall record or cause to be recorded the proceedings and actions of all meetings of the corporators, members or governing body, and give or cause to be given all notices required by law or action of the governing body for which no other provision is made. If no person is elected to this office, the treasurer, or in his or her absence another officer of the institution designated by the directors, shall be ex officio secretary of the institution and of the directors.

(B) Within 30 days after the annual meeting of the governing body for election of officers, the secretary shall file a copy of a list of officers and directors with the commissioner, which list shall be kept on file in the commissioner's office for public inspection.

(C) The secretary, in the absence of a provision in the internal governance documents to the contrary, shall perform the functions of secretary in accordance with Title 11 or 11A.

(4) Conveyances, leases, assignments, releases, transfers of stock certificates and registered bonds, and all other written instruments authorized or required by law or vote of the directors, may be executed by an executive officer or other official authorized and empowered by the internal governance documents of the institution or by a vote of the governing body which is duly recorded in the minutes of the institution.

Subchapter 6. Voluntary Dissolution

§ 13601. VOLUNTARY DISSOLUTION; PROCEDURE; CRITERIA

(a) A mutual or cooperative financial institution shall submit to the commissioner for approval a plan of dissolution prior to filing its articles of dissolution under Title 11A. The plan shall contain the following items:

(1) Pro forma financial statements that demonstrate that the financial institution will, upon dissolution, discharge or make provision for discharging its liabilities;

(2) A method to distribute all remaining assets among its depositors or members according to their interests;

(3) The process of and resources dedicated to the oversight of the dissolution of the financial institution;

(4) The plan to transfer to any other financial institution its deposit, loan and trust accounts, including escheat of all remaining deposit accounts to the state of Vermont;

(5) The procurement or continuation of insurance or the provision of other security as the commissioner deems necessary;

(6) An acknowledgment that, before the articles of dissolution are filed, there will be no distributions to depositors or members, without first providing for the obligations of the dissolving entity; and

(7) Such other information or assurances as the commissioner may require.

(b) Upon approval of the plan, the financial institution may file its articles of dissolution with the secretary of state under Title 11A and proceed with the dissolution as provided by law.

(c) During its wind-up, a dissolved entity shall not transact any further banking business after its deposit insurance has terminated.

CHAPTER 204. POWERS OF FINANCIAL INSTITUTIONS

Subchapter 1. General Powers

§ 14101. APPLICABILITY OF CHAPTER

The provisions of this chapter set forth the powers granted to all financial institutions organized pursuant to chapters 202 and 203 of this title and branches of any state or foreign financial institution authorized under section 15202 or 15203 of this title. The powers, privileges, duties and restrictions conferred and imposed in the organizational documents or act of incorporation of any commercial bank, savings bank, savings and loan association, bank and trust company or trust subsidiaries, orga nized under the prior laws of this state are abridged, enlarged or modified so that each such charter or act of incorporation conforms to this title. Notwithstanding anything in a charter or act of incorporation of such an institution, every such institution possesses the powers, rights and privileges and is subject to the duties, restrictions and liabilities conferred and imposed by this title.

§ 14102. GENERAL ORGANIZATIONAL POWERS

(a) A Vermont financial institution shall have all of the powers enumerated in Title 11 or 11A, depending on the organizational form of the institution.

(b) Unless otherwise prohibited or limited by parts 1, 2 or 5 of this title, a Vermont financial institution has and may exercise all powers necessary or convenient to effect the purposes for which the financial institution is organized or to further the businesses in which the financial institution is or may be lawfully engaged. Such powers shall include:

(1) establishing, acquiring, investing or participating in or utilizing a service corporation;

(2) engaging, directly or indirectly through an operating subsidiary, in closely related activities as defined in section 11101(14) of this title; and

(3) investing or participating in an entity that engages in closely related activities but is not an operating subsidiary, with the commissioner's approval; provided, however, the commissioner may require that closely related activities be conducted through a subsidiary whenever the commissioner determines that a limitation on the Vermont financial institution's direct financial risk is prudent. A Vermont financial institution shall keep such records as may be required by the commissioner relative t o the activities permitted by this subsection. Service corporations and operating subsidiaries shall be subject to regulation and supervision under this title.

(c) A Vermont financial institution may engage in electronic banking.

(d) Any Vermont financial institution may amend its organizational documents to provide for the separation of its corporate franchises into separate departments according to the nature of its business. In that event, it shall equitably apportion its assets between those departments in such manner as the commissioner shall approve and thereafter shall maintain a segregation of the assets and obligations of those departments. Depositors shall be notified of the segregation and of the department to wh ich their deposits are assigned. In case of liquidation or the imposition of restrictions upon the payment of deposits, at any time more than six months after such notice, the depositors of each of the departments shall be entitled to receive payment of deposits out of the assets of the department to which their deposits have been assigned in priority to all depositors in the other department, and to creditors who become such after the segregation, except as those obligations to creditors are properly allo cated to a department at the time the obligations are created. The assets of the trust department shall be devoted first to meeting the obligations of the financial institution to the beneficiaries of its trusts according to their respective rights.

(e) A Vermont financial institution shall have the power to join the Federal Reserve System or any cooperative league or other entity organized for the purpose of protecting and promoting the welfare of financial institutions and their depositors; and to comply with all conditions of membership therein. A Vermont financial institution which is a member of the Federal Reserve Bank is by this subsection vested with all powers conferred upon member banks of the federal reserve system by the terms of th e Federal Reserve Act as fully and completely as if those powers were specifically enumerated and described in this subsection, and all those powers shall be exercised subject to all restrictions and limitations imposed by the Federal Reserve Act or by regulations of the Federal Reserve Board made pursuant thereto. A member financial institution under this subsection shall continue to be subject to the supervision and examinations required by the laws of this state, except that the Federal Reserve Board an d the Federal Deposit Insurance Corporation shall have the right, if deemed necessary, to make examinations. The authorities of this state having supervision over the financial institution may disclose to the Federal Reserve Board or to the Federal Deposit Insurance Corporation or to their duly appointed examiners, all information in reference to the affairs of any financial institution which has become or desires to become a member.

(f) Subject to the approval of the commissioner, a Vermont financial institution may contract with another financial institution or financial institutions for branch or agency services or to provide those services to the customers of that financial institution or financial institutions.

Notwithstanding the foregoing sentence, any Vermont financial institution subsidiary of a bank holding company may receive deposits, renew time deposits, close loans, service loans, and receive payments on loans and other obligations as an agent for an affiliate depository institution or contract to receive such services without such approval.

§ 14103. ADVERTISING; DOING BUSINESS OR USING NAME UNLAWFULLY

No person shall advertise or put forth any sign as a bank, banking association, or trust company, or in any way solicit or receive deposits or transact business as a bank, banking association, financial institution or trust company, or use the words "bank", "banking association", or "trust company" or other similar sounding word or name unless it is a financial institution reporting to and under the supervision of the commissioner, is authorized to conduct such business i n this state under federal law, or unless the commissioner approves the activity or word or name used in writing after giving due consideration for whether the activity, word or name will confuse or mislead the public as to the nature of the business of the entity. However, this section shall not prevent an individual, as such, from acting in a trust capacity.

§ 14104. CAPITAL OR SURPLUS REQUIREMENTS

(a) Every Vermont financial institution shall establish and maintain adequate levels of capital or surplus pursuant to standards established by the commissioner.

(b) Any issuance considered as capital under subsection (a) of this section shall be submitted to the commissioner for review and approval at least 10 days prior to issuance and include such documentation as the commissioner deems necessary.

(c) Notwithstanding the provisions of subsections (a) and (b) of this section, the commissioner may permit the formation of a Vermont financial institution without capital or surplus to be merged with or into or consolidated with an existing financial institution for the purpose of facilitating a reorganization or acquisition transaction, including a triangular merger transaction, involving such existing financial institution.

§ 14105. PARTICIPATION IN PUBLIC AGENCIES

A financial institution has the power to participate in a public agency created under the laws of this state or of the United States, the purpose of which is to afford advantages or safeguards to financial institutions, depositors or investors and to comply with all requirements and conditions imposed upon such participants except to the extent limited by rule or order of the commissioner.

§ 14106. EXPANDED POWERS OF VERMONT FINANCIAL INSTITUTIONS

In addition to all other powers permitted under these statutes, any Vermont financial institution shall have the powers conferred under federal law administered by the Federal Reserve Board, the Office of the Comptroller of the Currency or the Office of Thrift Supervision upon national financial institutions or their subsidiaries.

§ 14107. INVESTMENTS

(a) A Vermont financial institution may invest its assets prudently in accordance with the best judgment of its governing body in a manner consistent with this section.

(b) A Vermont financial institution may not acquire more than five percent of the equity interest of any Vermont financial institution or of a Vermont bank holding company without the prior approval of the commissioner.

(c) Notwithstanding any other provision of law to the contrary, a financial institution may invest its funds, operate a business, manage or deal in property, or take any other action over whatever period of time may reasonably be necessary to avoid loss on an investment or loan previously made or an obligation created in good faith.

(d) A Vermont financial institution'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.

(e) A Vermont financial institution shall not acquire a lien on its equity interests as collateral for any extension of credit or other obligation nor acquire title to such collateral except to prevent loss upon a loan or investment previously made or an obligation created in good faith. If a Vermont financial institution acquires such a lien upon its equity interest or acquires title to such equity interest under the exception in this subsection, it shall not permit the lien to continue for more th an two years, nor shall it hold title to the equity interest for more than one year, without the consent of the commissioner.

(f) Except as otherwise provided in subsection (e) of this section, and subject to chapter 202, subchapter 4, and chapter 203, subchapter 2 of this title, a Vermont financial institution may repurchase or redeem its own equity interests.

§ 14108. PROHIBITED MERGERS AND ACQUISITIONS

(a) No depository institution may by merger, consolidation or other form of acquisition come to hold in excess of 30 percent of the total time and demand deposits held in Vermont by depository institutions. For the purposes of this section, the total deposits of a depository institution shall consist of all time and demand deposits held in Vermont by such depository institution and all of its affiliates.

(b) Notwithstanding subsection (a) of this section, the commissioner may waive the deposit concentration limit set forth in subsection (a) of this section if the commissioner determines that any financial institution to be merged, consolidated or acquired is not adequately capitalized, or is subject to a conservation, receivership or dissolution order under this title or applicable federal law, and the waiver is otherwise in the best interest of depositors.

§ 14109. PROHIBITED MANAGEMENT INTERLOCKS

A director or officer of a Vermont financial institution shall not at the same time be a director or officer of another financial institution engaged in the business of banking in the state of Vermont or a state contiguous to Vermont. The terms of this section shall not apply to:

(1) A financial institution which is in liquidation, receivership, conservatorship or similar proceedings;

(2) The Federal Reserve Bank of Boston;

(3) An financial institution affiliated by reason of common ownership or control of at least 25 percent of the voting interests of such affiliated financial institutions; or

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

§ 14110. DUTIES OF EXECUTIVE OFFICERS, DIRECTORS AND PERSONS WHO CONTROL PRINCIPAL EQUITY INTERESTS IN FINANCIAL INSTITUTIONS; OFFICERS MAY NOT RECEIVE FEES; CONFLICT OF INTEREST POLICY

(a) All executive officers, directors and holders of principal equity interest of a Vermont or state financial institution subject to the laws of this state under this title, shall comply with the standards for member banks established by Regulation O of the Federal Reserve Board, 12 C.F.R., Part 215, as amended.

(b) An officer, director or employee of a Vermont or state financial institution shall not corruptly solicit or demand for the benefit of any person, or corruptly accept or agree to accept (i) any fee, present, benefit or commission, directly or indirectly, from a borrower or applicant for a loan or from anyone negotiating securities at the financial institution of which he or she is an officer, director or employee; (ii) any fee, present, benefit or commission, directly or indirectly, for signing wi th another as accommodation maker, surety or endorser, or for a loan made or securities bought or sold by the financial institution, except for the benefit or profit he or she may derive in common with other depositors or stockbrokers, and the compensation allowed by the financial institution, for services and expenses.

Subchapter 2. Deposits in General

§ 14201. DEPOSIT POWERS

(a) Applicability. This subchapter governs deposits or accounts in financial institutions.

(b) General deposit powers.

(1) A financial institution may receive money on deposit and may establish the terms and conditions of each deposit contract. A financial institution may receive demand deposits subject to withdrawal or to payment upon the depositor's check, order, or other authorization.

(2) At the time of opening a deposit account, a financial institution shall provide the depositor a statement containing the existing terms and conditions of the deposit contract. The statement may be set forth on the depositor's signature card. Depositors and any other owners of interests in a deposit account shall be bound by changes made by the financial institution in their deposit contracts. Financial institutions shall provide advance notice of changes in accordance with 12 U.S.C. § 430 1 et seq.

(3) A financial institution, in its sole discretion, may refuse deposits and at any time may return all or part of a deposit.

(4) For any period during which funds are on deposit, a financial institution may pay interest.

(c) Insurance of deposits or accounts. Except as permitted by subchapter 6 of chapter 202 of this title, a Vermont financial institution that accepts deposits or a branch of a state financial institution authorized to do business in this state shall not accept deposits in this state unless the financial institution is insured by the Federal Deposit Insurance Corporation.

(d) Cash reserve on deposits and accounts. A financial institution shall maintain reserves on deposits or accounts as required from time to time by the Federal Reserve Act, as amended, and any regulations promulgated under it.

§ 14202. PAYMENT OF DEPOSITS TO ADMINISTRATORS FROM ANOTHER STATE OR COUNTRY

(a) When a deposit is made in a financial institution by a person residing in another state or country, the deposit, or any part thereof, with the interest thereon, may be paid to the administrator or executor appointed in the state or country where the depositor resided at the time of death, provided an administrator or executor has not been appointed in this state at the time of such payment.

(b) An action shall not be maintained against a financial institution for the recovery of a deposit or any part thereof, with the dividend or interest thereon, made by a person residing in another state or country who has deceased, payment of which has been made to the executor or administrator appointed in the state or country where the depositor resided at the time of death, before the appointment of an executor or administrator in this state.

§ 14203. TRUST DEPOSITS; PAYMENT ON DEATH OF TRUSTEE

When a deposit is made in a financial institution 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. When other notice of the existence and terms of a legal trust is not given in writing to the financial institution, at the death of the trustee, or if there is more than one trustee, at the death of the surviving trustee, the depos it 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.

§ 14204. JOINT DEPOSITS

(a) Payment. When a deposit has been made in a financial institution in the names of two or more persons, payable to any one of them, or payable to the survivors or any one of the survivors, such deposit or any part thereof, or any interest or dividend thereon may be paid to any one of such persons, whether the others are living or not, and the receipt or acquittance of the person so paid shall be a valid and sufficient release and discharge of the financial institution for any payment so made.< /P>

(b) Evidence of joint deposit. The recital of the words "payable to either or to the survivor" or words of like effect in the order creating such account and signed by the person or persons who furnish the funds for such deposit shall be conclusive evidence, as between the payees and their legal representatives, of the creation of an absolute joint account. However, nothing herein shall prevent the proof of fraud, undue influence, or incapacity, to defeat such joint interests.

§ 14205. PAYABLE ON DEATH ACCOUNTS

(a) A "payable-on-death account" is created by a deposit in a financial institution in the name of an account holder or several joint account holders with a designation that the account is payable on death to one or more payees, known as "P.O.D. payees". On the death of the sole account holder or the last surviving joint account holder, any remaining balance in a payable-on-death account, including interests or dividends, shall vest solely in the surviving P.O.D. payee or equally and severally in the then surviving P.O.D. payees. Ninety days later, unless prevented as provided in subsection (c) of this section, the financial institution may pay the remaining balance to the new owner or owners or their legal representatives without further liability for the amount or amounts paid. If no P.O.D. payee is surviving 90 days after the last surviving account holder dies, the balance of the account shall be payable to the personal representative of that account holder.

(b) Recital of the words "payable-on-death," the abbreviation "P.O.D.," or words of like effect in the order creating the account, signed by the person or persons furnishing the funds for the deposit, shall be conclusive evidence, as between the legal representatives of account holders and the payable-on-death payees or their legal representatives, of the creation of an absolute payable-on-death account, except as provided in subsection (c) of this section. However, nothing in thi s section shall prevent proof of fraud, undue influence, or incapacity to defeat a payable-on-death interest.

(c) If other assets of the probate estate of the last surviving account holder are insufficient to pay debts and expenses, including statutory allowances and assignments to the surviving spouse, a payable-on-death account shall not transfer to P.O.D. payees sums needed for that purpose. A P.O.D. payee who receives payment from a payable-on-death account after the death of the last surviving account holder shall be liable to the account holder's personal representative for the amount of payment to th e extent necessary to discharge debts and expenses remaining unpaid after application of the decedent's estate. No proceeding shall be commenced later than two years after the death of the decedent. Sums recovered by the personal representative shall be administered as part of the decedent's estate. This section shall not affect the right of a financial institution to make payment from a payable-on-death account to a P.O.D. payee 90 days after the death of the last surviving account holder or make a fina ncial institution liable to the personal representative of the estate of a deceased account holder unless before making payment the financial institution is served with process in a proceeding brought by the personal representative or with an order from the probate court prohibiting payment.

§ 14206. DEPOSITS OF MINORS; EXEMPTION FROM TRUSTEE PROCESS

(a) Payment. The governing body of a financial institution, in its discretion, may accept deposits from a minor and may pay to a minor such sum as is deposited to the credit of such person, and is due, as if such minor were of age. The check and receipt or acquittance of such minor shall be a full discharge for the amount for which it is given.

(b) Minor's deposits exempt from trustee process.

A financial institution shall not be chargeable as trustee on account of funds deposited to the credit of a minor, provided such funds are earned by or belong to such minor.

§ 14207. PROVISIONS WHEN TITLE TO DEPOSIT IS LITIGATED

(a) Multiple claims. In actions against a financial institution by one spouse to recover for moneys deposited by the other spouse in the latter's own name, the depositing spouse may be a witness. In actions against such financial institution to recover for money on deposit, if there is a person, whether married or not, claiming the same fund, who is not a party to the action, the court, on the petition of such financial institution and on such notice as it considers proper to the plaintiff and such claimant, may order the proceedings to be amended by making such claimant a party defendant. The court shall thereupon hear and determine the rights and interests of the parties to such action in and to such fund.

(b) Litigated deposits; payment into court; costs. The deposits which are the subject of such action may remain with such financial institution upon the same interest as other deposits of like amount, until final judgment therein, and the same shall be paid by such financial institution in accordance with the order of the court; or the deposits may be paid into court to await the final determination of the action. When so paid into court, the financial institution shall no longer be a party to such action, and its liability for such deposit shall cease. The costs in such action shall be in the discretion of the court and may be charged upon the fund affected thereby.

§ 14208. SECURITY FOR DEPOSITS

No Vermont or state financial institution may pledge, hypothecate or deliver any of its assets of any description whatsoever as security for a deposit of private funds, or for the purpose of indemnifying any person, as surety for the financial institution, or as surety for any other person. However, a Vermont financial institution or state financial institution may so secure a deposit to the credit of the United States, of the state of Vermont or of any political subdivisions of the state, either dir ectly or indirectly.

§ 14209. EXAMINATION OF ACCOUNTS

Each Vermont financial institution shall annually cause a sampling of its loans and deposit accounts to be verified by the account holder. The verification shall be under the direction of an outside auditor or the internal auditor of the Vermont financial institution. The auditor shall report the results directly to the governing body. The verification methodology and results shall be available to the commissioner upon request.

§ 14210. REAL ESTATE TRUST AND ESCROW

(a) In accordance with its schedule for similar remittances, any financial institution in which a pooled real estate trust or escrow account has been established under 26 V.S.A. § 2214(c) shall remit the interest accumulated on the account to the Vermont housing finance agency established under chapter 25 of Title 10 to be used in the agency's single family home mortgage programs.

(b) A financial institution may deduct a reasonable remittance fee for transferring funds to the housing finance agency under this section.

§ 14211. CLAIMS NOT CLEARLY CONSISTENT

If any claim not clearly consistent with the terms of any applicable authority on file with a financial institution is made to any deposit, safe deposit box, property held in safekeeping, security, obligation, or other property in the financial institution's possession or control, in whole or in part, by any person, including any depositor, individual, or group of individuals, whether or not authorized to draw on or exercise any right or control with respect to the property, the financial institution is not required to recognize the claim without one of the following:

(1) A court order, issued by a court of competent jurisdiction and served on the financial institution, enjoining or restraining the financial institution from taking any action with respect to the property or instructing the financial institution to pay the balance of the account, provide access to the safe deposit box, or deliver the property as provided in the order; or

(2) A bond in the form and amount and with sureties satisfactory to the financial institution, indemnifying the financial institution against any liabilities, loss, and expenses it might incur because of its recognition of the claim or because of its refusal, due to the claim, to honor or recognize any right with respect to the property.

Subchapter 3. Loans

§ 14301. LOAN AUTHORITY

(a) General loan authority. Unless otherwise prohibited by state law, a Vermont financial institution may make, sell, purchase, arrange, participate in, invest in or otherwise deal in loans or extensions of credit for any lawful purpose.

(b) Written loan policy.

(1) A financial institution's governing body shall establish a written loan policy, which shall be reviewed and ratified at least annually, that addresses 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 banking practices and appropriate to the size of the institution and nature and scope of its operations.

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

(d) Limitations. A Vermont financial institution may not make loans or extensions of credit outstanding at one time to a borrower in excess of 20 percent of its capital. Total loans or other extensions of credit in excess of 10 percent of capital shall be approved by a majority of the governing body or the executive committee of that institution or organization.

(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 where 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) Loaned 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 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 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 clearing house association;

(F) Indebtedness secured to the extent thereof by the cash surrender value of life insurance evidenced by policies of insurance validity 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 insured by the Federal Deposit Insurance Corporation, 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 financial institution 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; and

(K) That portion of a loan or extension of credit sold as a participation by a financial institution 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.

§ 14302. REAL ESTATE LOANS

(a) Clear title. All loans secured by mortgages on real estate shall be supported by written evidence satisfactory to the financial institution 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 and with all of the owner's rights and options under the lease, are collaterally assigned to the financial institution as security, or a mortgage upon lands impressed with a public use, sometimes kn own 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 federally related transaction entered into by a financial institution shall comply with the regulations of the Federal Deposit Insurance Corporation, as amended and codified at 12 C.F.R. Part 323. The appraisal of real estate securing a nonfederally related transaction entered into by a financial institution shall comply with the federal supervisory agencies' interagency guidelines, as amended.

(c) Servicing of loans. A financial institution may contract with another financial institution, 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 financial institution shall not lose or suffer any impairment of any right of deduction or offset it might have against any one liable for the mortgage debt.

(d) Home loan escrow accounts. Any financial institution 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 mann er 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.

§ 14303. BANK CREDIT CARDS

(a) General authority. Any financial institution which is authorized to do a lending business in this state may issue bank credit cards.

(b) No discrimination. No financial institution shall discriminate against any applicant for a bank credit card on the bases set forth in section 10403 of this title. Nothing in this section shall be taken to prohibit the establishment of separate credit card accounts for husband and wife.

(c) Statements of account. Issuers of bank credit cards shall promptly furnish a statement of each cardholder's account as of the end of each monthly period (which need not be a calendar month) in which there is any unpaid balance thereunder, which statement shall include the following information, not necessarily in the order stated:

(1) The unpaid balance of the account at the beginning of the period;

(2) The amount of cash advances, if any, during the period;

(3) Unless furnished by the seller or tax department to the cardholder by sales slip, memorandum or otherwise, information in the statement of account sufficient to allow the cardholder to reasonably identify the transaction, or delinquent taxes paid as permitted by 32 V.S.A. § 3109(c) during the period, the cash price and the date of each purchase or tax payment;

(4) The payments and other credits applied to the cardholder's account during the period;

(5) The balance at the billing date for cash advances, property, and services subject to finance charge;

(6) The amount and rate of the finance charge imposed;

(7) The balance at the billing date for property, labor or services purchased or delinquent taxes paid during the billing period, if any, and the date by which it may be paid to avoid any finance charge.

(d) Finance charges; annual fees; ATM fee.

(1) As to that part of an account balance which shall result from cash advances, if any, the finance charge shall be applied to the average daily balance of the cash advances in the account for the billing period. An issuer of a bank credit card account may provide for an annual fee. Except for cash advances, no finance charge shall be imposed on items in the account for property, labor and services purchased during the billing period to the extent that they are paid for not later than 25 days from the financial institution's billing date therefor. No change in the terms of a bank credit card agreement which might require such credit cardholder to pay an annual fee shall take effect unless:

(A) at least 60 days prior to the effective date of the change, a written notice has been mailed or delivered to the cardholder that clearly and conspicuously describes the annual fee, and contains a return stamped response addressed to the issuer with instructions to the cardholder to return the response to the issuer within 30 days, signed by the cardholder and indicating a preference, expressed in the response, for either of the following options:

I accept the change as notified.

I do not accept, and hereby cancel my card.

The notice shall further state that the incurrence by the cardholder or another authorized person of any further indebtedness under the plan to which the agreement relates on or after the effective date of such change specified in the notice shall constitute acceptance of such annual fee, and

(B) either the credit cardholder agrees in writing to such annual fee or the credit cardholder or another authorized person incurs such further indebtedness on or after the effective date of the change stated in such notice.

(2) A credit transaction effected by the use of an automated teller machine (ATM) may be subject to a transaction fee in addition to any finance charges permitted by this section.

(e) Payments.

(1) Sections 45 and 47 of Title 9 shall apply with respect to prepayment and application of payments to cardholder accounts. With respect to transactions in Vermont charged to a bank credit card account established by a Vermont financial institution, the defenses preserved by section 2455 of Title 9, shall be available to the cardholder as against the financial institution in any action or proceeding to enforce collection of said account by a financial institution.

(2) In the case of a bank credit card account, except for a loan or extension of credit secured by a lien against real estate, the periodic billing shall be no less than 1/48th of the balance as of the last advance.

(f) Quarterly Reports. Any financial institution which is authorized to do business in this state, may issue bank credit cards only if it reports quarterly to the commissioner pursuant to section 10401(b) of this title on its rates and charges on its bank credit card products.

Subchapter 4. Trust Powers

§ 14401. TYPES OF TRUST FUNCTIONS

(a) With the prior approval of its governing board, a financial institution may act, alone or with others as (1) fiduciary, (2) custodian of property, (3) agent or attorney in fact, (4) registrar or transfer agent of securities, (5) trustees under corporate mortgages, trust deeds or similar indentures, or (6) fiscal agent of the United States, a political subdivision thereof, a body politic, a corporation or an individual.

(b) With that approval, a financial institution may also be appointed and act as executor or coexecutor of a will, codicil or writing testamentary, as administrator or co-administrator with the will annexed, as administrator or co-administrator of a person deceased, as receiver, assignee, trustee, alone or with others, or as guardian or co-guardian or a person subject to guardianship, and with that approval may relinquish the fiduciary office, under the same circumstances, in the same manner and subj ect to the same control by a court having jurisdiction, as a natural person legally qualified.

§ 14402. NATIONAL FINANCIAL INSTITUTIONS; STATE FINANCIAL INSTITUTIONS

(a) To the same extent that the laws of the United States permit, a national financial institution located and doing business in this state may act, alone or with others, as specified in section 14401 this title.

(b) Subject to the provisions of chapter 15 of Title 11A and subchapter 10 of chapter 21 of Title 11, except that section 15.06 of Title 11A and section 3136 of Title 11 shall not apply to any financial institution, including a state trust company, a financial institution with trust powers with its principal place of business not in Vermont may act, alone or with others, as specified in section 14401 of this title, and may establish one or more places of business in this state for the conduct of such trust business, provided that:

(1) it is a direct or indirect subsidiary of a bank holding company that has a direct or indirect financial institution subsidiary that has an office in this state at which deposits are accepted; or

(2) the law of the state in which it is located or domiciled would allow a Vermont financial institution or national financial institution, whose principal place of business is located in Vermont, with trust powers, to establish one or more places of business in such state for the conduct of trust activities.

(c) As a condition precedent to its right to act in the capacities specified in this section, it shall file a stipulation with the commissioner of taxes, in which it shall agree that any funds, securities or property held by it under any appointment under this subchapter, shall be taxed in the same manner and to the same extent as funds of the same character held by a Vermont financial institution.

(d) A state financial institution with trust powers, including a state trust company, shall obtain the commissioner's written approval before establishing a place of business in this state pursuant to section 11701(b) of this title. Before issuing such approval, the commissioner must find that it is adequately staffed, equipped and able to furnish trust services in this state. The commissioner may examine its activities in this state at any time deemed necessary to ensure its continued safety and so undness, ability to furnish trust services, and compliance with the laws of this state. It shall make its books and records pertaining to its business in this state available to the commissioner for such examination. Each state financial institution shall pay fees and assessments as prescribed by sections 18, 19 and 11501 of this title.

§ 14403. APPROVAL OF COMMISSIONER

No financial institution, not otherwise expressly authorized by its respective supervisory agency under state or federal law, may exercise the powers provided in this chapter until it has applied for and obtained approval of the commissioner to do so under section 11701(b) of this title. The commissioner shall conduct inquiry into the affairs of the financial institution applying for those powers to determine if the financial institution is staffed, equipped and able to furnish those services.

§ 14404. SECURITY

The capital of a financial institution exercising trust powers shall be held as security for the faithful discharge of the duties undertaken thereby as well as for the claims of other creditors. The financial institution shall furnish to the authority making the appointment a good and sufficient bond for a sum not less than 25 percent of the amount of the trust fund, conditioned for the faithful discharge of the duties undertaken by virtue of section 14401 of this title. However, when the bond would not exceed $2,000.00, a financial institution shall be relieved of furnishing it.

§ 14405. POWERS AND DUTIES OF OFFICERS

In proceedings in the probate court or elsewhere, connected with authority exercised as executor, administrator, receiver, assignee, trustee or guardian, all accounts, returns and other papers may be signed and sworn to in behalf of such a financial institution exercising trust powers by any officer thereof duly authorized by it. The answers and examinations of that officer, under oath, shall be received as the answers and examinations of the financial institution. The court may order and compel any and all officers of the financial institution to answer and attend the examinations, in the same manner as if they, personally, were parties to the proceeding or inquiry. Such a financial

institution shall not be required to receive or hold any property or money or to execute any trust contrary to its own desire.

§ 14406. SEGREGATION OF TRUST FUNDS; EXCEPTION

All moneys, property or securities received or held by a financial institution in the capacity of executor, administrator, receiver, assignee, trustee or guardian shall be kept separate and distinct from its general business and shall not be mingled with the investments of its assets or be liable for its debts or obligations. However, a financial institution exercising trust powers, in good faith, may deposit temporarily in its commercial or savings departments any money so held in trust awaiting dis tribution or investment and may also deposit in its savings department as an investment for any one trust an amount insurable and insured by the Federal Deposit Insurance Corporation. All such deposits in either department shall be in the name of the trust or in the name of the financial institution as trustee of the trust. If the security afforded by virtue of this section and section 14404 of this title is insufficient to fully satisfy any claim growing out of the holding or management of moneys, proper ty and securities so received and held, the unsatisfied balance shall then be satisfied as are demands of the general creditors of the financial institution.

§ 14407. COLLECTIVE INVESTMENT FUNDS

(a) A Vermont financial institution may invest assets that it holds as a fiduciary in the following collective investment funds:

(1) A fund maintained by the financial institution, or by one or more affiliated financial institutions, exclusively for the collective investment and reinvestment of money contributed to the fund by the financial institution, or by one or more affiliated financial institutions, in its capacity as trustee,

executor, administrator, guardian, or custodian under the uniform gift to minors act;

(2) A fund consisting solely of assets of retirement, pension, profit sharing, stock bonus or other trusts that are exempt from federal income taxation under the Internal Revenue Code; and

(3) A fund consisting of any other assets held as a fiduciary, to the extent not prohibited by applicable law.

(b) In addition to any other rules which the commissioner finds necessary or desirable for the administration of this section, the commissioner may promulgate regulations on the following:

(1) The requirements for a written plan for the establishment, maintenance and operation of collective investment funds;

(2) The method and frequency of valuation of such fund's assets;

(3) The admission and withdrawal of accounts;

(4) Standards on self-dealing and conflicts of interest;

(5) Permissible management fees;

(6) The requirements for audits and financial reports of collective investment funds; and

(7) The requirements for the establishment, maintenance and operation of other investments permitted by subdivision (a)(3) of this section, including the treatment of exemptions from the provisions of this section.

(c) A Vermont financial institution administering a collective investment fund shall have exclusive management thereof, except as a prudent person might delegate responsibilities to others.

(d) Each participating account in a collective investment fund shall have a proportionate interest in all the fund's assets.

(e) A Vermont financial institution administering a collective investment fund may charge reasonable expenses incurred in operating the fund, but not expenses associated with establishing or reorganizing a collective investment fund.

(f) A Vermont financial institution may not advertise any collective investment fund except in connection with the advertisement of the general fiduciary services of the institution.

(g) A Vermont financial institution shall not issue any certificate representing an interest in a collective investment fund, except to provide a withdrawing account with an interest in a segregated investment.

§ 14408. REGISTRATION AND SALE OF SECURITIES

A Vermont or state financial institution owning or holding stocks or other securities in any fiduciary capacity may cause the same to be registered in the name of a nominee. The word "nominee" shall be construed to include one or more natural persons, a partnership, a corporation or similar entity. Any such securities jointly held in a fiduciary capacity by a financial institution and another, individual or corporate, may be registered in the name of a nominee mutually satisfactory to the co-fiduciaries. Any fiduciary acting jointly with a financial institution may authorize and direct the financial institution in writing to register securities provided herein. An individual or corporate fiduciary may deliver any such securities to a financial institution as custodian and may authorize and direct the financial institution in writing to register such securities in the name of a nominee. A financial institution having caused securities to be registered in the name of a nominee as provided h erein and wishing or being required by the terms of its fiduciary agreement to deliver them to one legally entitled thereto shall first cause them to be transferred into the name of the one to receive delivery. Sales of any such securities made by a financial institution under its fiduciary authority may be completed by delivery of the security, endorsed by the nominee without the necessity of transfer through a joint fiduciary, the trust-creator or the beneficiary.

§ 14409. DISPOSITION OF SECURITIES UPON COURT ORDER;

LIABILITY FOR ACTS OF NOMINEE

Any fiduciary financial institution may dispose of any security under an order or decree of any court of competent jurisdiction by delivery of the security endorsed by the nominee as above provided in the case of sales. Any fiduciary financial institution shall be absolutely liable for any loss occasioned by the acts of the nominee or the financial institution with respect to any securities registered in the nominee's name. Both legal and equitable ownership of all securities in the financial nomine e's possession or subject to the financial nominee's control shall be fully revealed by the financial institution's records.

§ 14410. FIDUCIARY INVESTMENTS

(a) In the absence of an express prohibition in the instrument, judgment, decree, power, order or other writing creating a trust or other fiduciary relationship, a financial institution acting as fiduciary may invest and reinvest funds held by it in a fiduciary capacity in the securities of an open-end or closed-end investment company or investment trust registered under 15 U.S.C. § 80a-l to 80a-64 (Investment Company Act of 1940), as that act exists now or as amended in the future.

(b) The investments authorized in subsection (a) of this section may be made even if the financial institution, or an affiliate thereof, is providing services to the investment company and is receiving reasonable compensation for such services as an advisor, manager, sponsor, administrator, broker, distributor, custodian, shareholder servicing agent, transfer agent, registrar or any related services. At least annually, the financial institution shall disclose in a clear and conspicuous manner to th e principal of each fiduciary account the fees it has charged or received from the investment company, or an affiliate thereof, for such services and the basis upon which compensation is calculated, expressed either in a specific amount or as a percentage of asset value.

Subchapter 5. Safe Deposit Boxes

§ 14501. FAILURE TO PAY RENT; REMOVAL OF CONTENTS

(a) If the amount due for the use of any safe or box in the vaults of a financial institution is not paid for one year, or such other period as may be fixed in the contract of renting of such safe or box, the financial institution, at the expiration thereof, may cause to be sent to the person in whose name the safe or box stands on its books, a notice in writing that if the amount then due for the use of the safe or box is not paid within 60 days from the date of the notice, the financial institution will then cause the safe or box to be opened in the presence of an officer duly authorized by the governing body and of a notary public not an officer or in the employ of the financial institution, and the contents thereof, if any, will be sealed up by the notary in a package upon which the notary will distinctly mark the name and address of the person in whose name such safe or box stands upon the books of the financial institution and the estimated value thereof. The package so sealed and addressed, whe n marked for identification by the notary, will be placed by the notary in one of the general safes or boxes of such financial institution. The notice shall be sent in a postage prepaid registered letter directed to that person at his or her post office address as recorded upon the books of the financial institution, and at his or her last known address.

(b) The proceedings of the notary shall be fully set forth in the notary's own handwriting and official seal in a book to be kept by the financial institution for that purpose. After such contents have been so placed in general safes or boxes, the financial institution shall be required to use only the degree of care required of a bailee for the sole benefit of the bailor notwithstanding the contract of renting requires a higher degree of care during the period of renting.

CHAPTER 205. BRANCHES

Subchapter 1. Intrastate Branching

§ 15101. ESTABLISHMENT OF VERMONT BRANCHES

A Vermont financial institution shall not establish or maintain any branch in this state for the general transaction of its business without the approval of the commissioner. The commissioner shall approve the application for a branch under this section if the commissioner finds that, based on an application filed under section 11701(b) of this title, the application meets the general good of the state as determined under section 11703 of this title. A Vermont financial institution may establish and maintain offices or facilities that do not constitute a branch, without the approval of the commissioner; provided, however, that establishment of a remote service unit by a Vermont financial institution shall be subject to payment of the fee provided in subdivision 19(a)(6) of this title.

Subchapter 2. Interstate Branching and Activities

§ 15201. ESTABLISHMENT OF BRANCHES OUTSIDE VERMONT

(a) A Vermont financial institution may establish a branch in any state other than this state by merger, consolidation, acquisition or as otherwise permitted by and in accordance with the laws of such host state and applicable federal financial institution laws.

(b) A merger or consolidation pursuant to this section shall be in accordance with and subject to the provisions of chapter 207 of this title.

(c) Not later than the date on which the required application is filed with the responsible federal supervisory agency, the applicant in the establishment of a branch under this section shall file an application on a form prescribed by the commissioner. If the commissioner finds that the proposed transaction will not be detrimental to the safety or soundness of the applicant and the applicant has obtained and provided the commissioner with copies of all other required approvals, the commissioner sha ll approve the application and the operation of the branch outside of this state.

(d) A branch of a Vermont financial institution which is located in another state may conduct any activity that is permissible for a branch in that state of a financial institution incorporated under the laws of such state. In order to engage in trust activities in an out-of-state branch, a Vermont financial institution shall have previously obtained the commissioner's approval to engage in trust activities under section 14403 of this title.

§ 15202. ESTABLISHMENT OF BRANCHES IN VERMONT BY

FINANCIAL INSTITUTIONS

(a) A state financial institution, foreign bank or national bank may establish a branch in this state pursuant to this section and in accordance with applicable state and federal financial institution laws.

(b) The establishment of a branch in this state under this section shall be accomplished by:

(1) a merger, or consolidation with, or the purchase of all or substantially all of the assets of, a financial institution or acquisition of a branch located in this state; or

(2) establishment of a branch; provided, however, that the law of the home state of any state financial institution or national financial institution proposing to establish one or more de novo branches in this state must expressly authorize, under conditions no more restrictive than those imposed by the laws of this state as determined by the commissioner, the financial institution whose home state is this state to engage in interstate branch establishment of de novo branches in that state. A financ ial institution, which is not a Vermont financial institution and is establishing a branch in this state, shall file a copy of the branch application, with any amendments thereto, with

the commissioner at the time the application is filed with any supervisory agency.

(c) A merger or consolidation pursuant to this section involving a Vermont financial institution shall be in accordance with and subject to the provisions of chapter 207 of this title, except that the application requirement shall be treated as a notice requirement and the commissioner may file an objection with the applicable supervisory agency with jurisdiction over the transaction if the transaction fails to comply with law. Approval of the commissioner under chapter 207 of this title shall not be required.

(d) Any merger, consolidation or acquisition pursuant to this section shall be subject to the provisions of section 14108 of this title.

(e) A state financial institution that establishes a branch in this state shall comply with the provisions of chapter 15 of Title 11A, subchapter 10 of chapter 21 of Title 11, except that section 15.06 of Title 11A and section 3136 of Title 11 shall not apply to any financial institution. Notwithstanding section 14103 of this title, a branch in this state of a state financial institution may engage in the activities permitted of a financial institution organized under the laws of this state, and may use the words "bank", "banking association", or "trust company" when engaged in such activities. The organizational name of such financial institution shall not be deceptively similar to any name in use by a person authorized to do business in this state.

(f) A branch of a state financial institution located in this state shall comply with the laws of this state, including laws regarding community reinvestment, consumer protection, fair lending, and the establishment of intrastate branches, to the same extent as such laws apply to a branch in this state of a Vermont financial institution. A branch in this state of a state financial institution may conduct any activity that is permissible for a branch in this state of a Vermont financial institution, but may not conduct any activity that is not permissible for a branch in this state of a Vermont financial institution. If Vermont law requires a Vermont financial institution or any branch of such financial institution to obtain the commissioner's approval to engage in an activity, then a branch of a state financial institution shall obtain the commissioner's approval in the same manner as a Vermont financial institution.

(g) A branch of a national financial institution located in this state shall comply with the laws of this state, including laws regarding community reinvestment, consumer protection, fair lending, and establishment of intrastate branches, to the same extent as such laws apply to a national financial institution whose principal place of business is in this state.

(h) A national or state financial institution that maintains a branch in this state pursuant to this section may establish and operate one or more remote service units in this state, without the approval of the commissioner. Any remote service unit established pursuant to this subsection shall be subject to the provisions of section 10302 of this title. Nothing in this section shall be deemed to authorize any other person or entity to establish or operate any remote service unit in this state that accepts deposits or that transfers funds between accounts.

§ 15203. FOREIGN BRANCHES

(a) A foreign bank not licensed by federal authorities to establish a federal branch in this state may transact business in this state only at a branch which is licensed by the commissioner. The commissioner may, upon receipt of an application of the foreign bank to establish a branch, issue a license to a foreign bank to conduct such business in compliance with the laws of this state if the commissioner finds that:

(1) the foreign bank and its management are of good character and sound financial standing;

(2) the management of the foreign bank and proposed management of the branch are adequate;

(3) that the convenience and needs of the persons to be served by the proposed branch will be promoted; and

(4) the foreign bank satisfies such other standards as the commissioner may establish.

(b) The application required under this section shall be on a form approved by the commissioner and shall contain a copy of all applicable federal approvals. Except as otherwise provided in this section, subsections 15202(b) and (d) of this title, the license, application and operations of a branch licensed under this section shall be subject to the requirements imposed on the establishment and operation of branches of financial institutions organized under the laws of this state. Except as otherwis e provided in federal law, this title or by rule or order of the commissioner, the operations of a foreign bank at a branch in this state shall be conducted with the same rights, privileges and powers as a financial institution incorporated under the laws of this state at the same location and shall be subject to all the same duties, restrictions, penalties, liabilities and conditions, and limitations that would apply under the laws of the state to a financial institution incorporated under the laws of this state. The commissioner may impose conditions or restrictions on the operations of a branch of a foreign bank in this state.

§ 15204. OTHER ACTIVITIES

(a) Subject to subsection (b) of this section, a financial institution having its principal office in a jurisdiction other than Vermont may maintain or conduct the following offices or activities in this state:

(1) a temporary agency;

(2) an office used solely for internal operations of the institution to which the public is not admitted for the conduct of financial institution business;

(3) an automated teller machine owned by other than a Vermont financial institution; provided, however, that it does not accept deposits or transfer funds between accounts;

(4) a loan production office;

(5) foreign exchange services; or

(6) any other financial institution related office or activity which the commissioner determines may be maintained or conducted in this state.

(b) A financial institution shall obtain the commissioner's written approval prior to maintaining any office or conducting any activity described in subsection (a) of this section. The commissioner may condition approval on the existing availability of the activity in the state.

(c) Nothing in this section shall be deemed to permit a financial institution to solicit or accept deposits, pay checks or loan money within this state, unless it is otherwise authorized to engage in such activity in this state;

(d) Notwithstanding section 14103 of this title, a financial institution authorized to engage in the activities permitted under this section may use the words "bank", "banking association", "national association", "financial institution" or "trust company" when engaged in the activities permitted under this section. A financial institution that is authorized to engage in loan production in this state, but not authorized to approve loans in this state , shall disclose in any printed material and advertising that it is engaged in loan production. The organizational name of such financial institution shall not be deceptively similar to any name in use by an authorized financial institution doing business in this state.

Subchapter 3. Branch Sales, Closings and Change of Control

§ 15301. BRANCH SALES, CLOSINGS AND CHANGE OF CONTROL

(a) Sales. A Vermont financial institution that proposes to sell one or more of its branches shall file an application for a certificate of approval on a form prescribed by the commissioner. Notwithstanding sections 11701(b) and 11703 of this title, the commissioner shall approve the application upon finding that the proposed sale will not be detrimental to the safety and soundness of the applicant.

(b) Closings. Any state financial institution which intends to close a branch located in this state shall provide the commissioner with the same notice required to be provided to the appropriate federal financial institution supervisory agency pursuant to 12 U.S.C. § 1831r-1.

(c) Notice of subsequent change of control. Each state financial institution that has established and maintains a branch in this state pursuant to this chapter shall give at least 30 days' prior written notice (or, in the case of an emergency transaction, such shorter notice as is consistent with applicable state or federal law) to the commissioner of any merger, consolidation or other transaction that would cause a change of control with respect to such state financial institution or any bank hold ing company that controls such financial institution, with the result that an application would be required to be filed pursuant to the federal Change in Financial Institution Control Act of 1978, as amended, 12 U.S.C.

§ 1817(j), or the federal Bank Holding Company Act of 1956, as amended, 12 U.S.C. § 1841 et seq., or the Home Owners Loan Act, 12 U.S.C. § 1467a or any successor statutes thereto.

CHAPTER 206. CONVERSIONS

§ 16101. CONVERSIONS

(a) General. The provisions of this chapter shall apply whenever a national financial institution seeks to convert to a Vermont financial institution or whenever a Vermont financial institution seeks to convert or amend its charter in order to change its chartering authority, the nature or scope of its organizational authority or to a different form of ownership; provided, however, that conversion from a Vermont financial institution into a national financial institution shall be as permitted in fe deral law, shall not require the commissioner's approval and 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 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, into an investor owned financial institution or into a credit union under chapter 71 of this title;

(6) Conversion of a credit union under chapter 71 of this title into a mutual financial institution; or

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

(c) Manner of conversion. Any Vermont financial institution may convert under this chapter in the following manner:

(1) The governing body of the financial institution shall approve the plan of conversion by at least a majority vote, unless a higher percentage is required by the institution'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 financial institution shall be submitted to the commissioner for approval pursuant to the requirements and procedures of subchapter 7 of chapter 201 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 the investors or mutual voters of the institution, as the case may be, for their approval at an annual meeting or at a special meeting called for that purpose as provided in subsections (e), (f) and (g) of this section; and

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

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

(1) The name of the institution and its location;

(2) The type of the institution that the resulting institution 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 financial institution to a national financial institution;

(6) A statement that the conversion is subject to approval of the institution's investors or mutual voters, as the case may be;

(7) In the case of a conversion involving a mutual or cooperative financial institution, the plan shall ensure that the interests of depositors and account holders in the net worth of the institution are treated equitably; and

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

(e) Notice to investors or mutual voters. Notice of the meeting shall be published at least once a week for three successive weeks in at least one newspaper of general circulation in the county where the institution's principal office is located or in other newspapers as the commissioner may designate. The notice shall be mailed to each investor of record or mutual voter at the address on the books of the institution at least 30 days prior to the date of the meeting.

(f) Voting requirements. A majority of each class of equity interest, or a majority of the mutual voters of the institution casting votes, unless a higher percentage is required by the institution's organizational documents, is necessary to approve the plan of conversion at the meeting. An affirmative vote constitutes approval of the adoption of any amendments to the organizational documents of the institution that are necessary to effectuate the transaction.

(g) Rights of dissenting investors. For investor owned institutions that are converting under this chapter, the rights of investors dissenting to the conversion are those specified in Title 11 or 11A, depending upon the organizational form of the institution; provided, however, the rights of dissenting investors in a national financial institution shall be governed by federal law. To the extent that dissenters' rights are not addressed in Title 11 or 11A or the rights contained in those titles are less beneficial to the dissenting investors than those rights listed in the institution's organizational documents, the organizational documents shall govern.

(h) Finalizing the plan of conversion. Except as provided in subsection (i) of this section, the financial institution shall effect its conversion as follows:

(1) Upon approval by the investors or mutual voters of the institution, as the case may be, the institution shall submit the executed conversion plan to the commissioner, together with all necessary amendments to the institution's organizational documents, each certified by an officer of the institution.

(2) The commissioner shall issue to the resulting institution a certificate specifying the name of the converting institution and the name and organizational structure of the resulting institution. The resulting institution 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 certificat e may be filed in any land records office to evidence the new name in which property of the converting institution 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 institution shall terminate automatically. The commissioner may file or order any financial institution to file conforming documents with the secretary of state.

(i) Completion of conversion into national financial institution. Upon completion of a conversion into a national financial institution, the national financial institution 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 financial institution shall terminate automatically upon issuance of the national financial institution charter.

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

(k) Authority for expedited conversion. Notwithstanding any other section of law or any organizational document of the financial institution, the commissioner may order that a charter conversion become effective immediately when the commissioner finds it is necessary for the protection of depositors, investors or the public.

CHAPTER 207. MERGER, SHARE EXCHANGE,

CONSOLIDATIONS AND ACQUISITIONS

Subchapter 1. Applicability of Chapter; Approval

§ 17101. GENERAL PROVISIONS ON MERGERS, SHARE

EXCHANGES, CONSOLIDATIONS AND ACQUISITIONS

(a) The provisions of this chapter and Titles 11 and 11A govern mergers, consolidations, acquisition of assets or assumption of liabilities undertaken by financial institutions subject to the laws of this state. References in this chapter to mergers shall be deemed to include share exchanges, as applicable in the circumstances.

(b) Commissioner's approval. Following approval by a majority vote of the governing body of each participating institution, unless a higher percentage is required by either institution's organizational documents, the plan of merger, consolidation, acquisition or assumption, together with certified copies of the authorizing resolutions adopted by the governing body of each participating institution, shall be forwarded to the commissioner for approval pursuant to chapter 201, subchapter 7 of this titl e; provided, however, the approval of the commissioner shall not be required for any transaction in which the resulting institution will be a national financial institution. If the commissioner disapproves the plan, the commissioner shall state the reasons for the disapproval in writing and furnish them to the participating institutions. The institutions shall be given an opportunity to amend the plan to eliminate the reasons for disapproval.

(c) Vote of investors or mutual voters. The plan of merger or consolidation, as approved by the commissioner, shall be submitted to the investors or mutual voters of the participating institutions for their approval at an annual meeting or at a special meeting called for that purpose in the following manner:

(1) Unless a greater percentage is required by the organizational documents of either financial institution, the plan of merger, consolidation, acquisition or assumption must be approved by the investors or mutual voters by each voting group entitled to vote separately on the plan by a majority of all votes entitled to be cast on the plan by that voting group at the meeting called for this purpose. The vote constitutes the adoption of the organizational documents of the resulting institution, includ ing amendments, contained in the merger, or consolidation agreement.

(2) The rights of investors dissenting to the merger, or consolidation are those specified in Title 11 or 11A, depending upon the organizational form of the institution. To the extent that dissenters' rights are not addressed in Title 11 or 11A or these rights are less beneficial to the dissenting investors than those rights listed in the institution's organizational documents, the organizational documents govern.

(3) The rights of dissenting investors in a national financial institution shall be governed by federal law.

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

(1) Upon approval by the investors or mutual voters of the participating institutions, an executive officer and the secretary of each institution shall submit the executed plan of merger or consolidation to the commissioner, together with the certified record of the vote of the investors or mutual voters approving it, each certified by these officers.

(2) Upon receipt of the items in subdivision (1) of this subsection and evidence that the participating institutions have complied with all applicable federal law and regulations, the commissioner shall issue to the resulting institution a certificate specifying the name of each participating institution and the name of the resulting institution. The resulting institution shall file a copy of the certificate with the secretary of state for record. This certificate is conclusive evidence of the mer ger or consolidation and of the correctness of all proceedings relating to the merger or consolidation 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 participating institutions is to be held.

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

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

(e) Chapter 208 of this title applies to mergers, consolidations, and acquisitions made pursuant to this chapter.

(f) Authority of expedited mergers and consolidations. Notwithstanding any other provision of law, or any organizational document of any participating institution, following approval of the plan of merger or consolidation by a majority vote of the governing body of each participating institution and receipt by the commissioner of certified copies of the authorizing resolutions adopted by the governing body of each participating institution, the commissioner may order that the merger of the consolida tion become effective immediately if the commissioner believes that the action is necessary for the protection of depositors or the public.

Subchapter 2. Mergers and Consolidations; Investor-owned Institutions

§ 17201. MERGERS AND CONSOLIDATIONS; INVESTOR-OWNED

INSTITUTIONS

(a) General. Any two or more investor-owned institutions may merge, or consolidate into one investor-owned Vermont financial institution in accordance with the procedures, and subject to the conditions and limitations, set forth in this subchapter.

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

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

(2) With respect to the resulting institution: the name and location of its principal office, branch offices and facilities; the name, address and occupation of each director who is to serve until the next annual meeting of the investors; the name and address of each officer;

(3) The amount of capital, the number and the par value of each class of equity interest and provisions governing the manner and basis of converting the equity interests of the participating institutions into equity interests or other securities of the resulting institution and, if any equity interests of any of the participating institutions are not to be converted solely into equity interests or other securities of the resulting institution, provisions governing the amount of cash, property, rights or securities of any other institution or corporation that is to be paid or delivered to the holders of the equity interests in exchange for or upon surrender of the equity interests. The cash, property, rights or securities of any other institution or corporation may be in addition to or in lieu of the equity interests or securities of the resulting institution;

(4) The amendments required to be made to the resulting institution's organizational documents;

(5) A statement that the agreement is subject to approval of the commissioner and of the investors of each participating institution;

(6) Provisions, if applicable, governing the manner of disposing of equity interests of the resulting institution not taken by dissenting investors of the participating institutions;

(7) The anticipated effective date of such merger or consolidation; and

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

(c) Commissioner's approval. The commissioner shall approve the plan of merger, or consolidation in accordance with subsection 17101(b).

(d) Vote of investors. The plan of merger, or consolidation, as approved by the commissioner, shall be submitted to the investors of the participating institutions for their approval at an annual meeting, or at a special meeting called for that purpose, in accordance with subsection 17101(c) of this title. Notice of the proposed transaction and of dissenters' rights, if any, shall be given in accordance with applicable provisions of the charter and bylaws of the participating institutions and applic able provisions of Title 11 or 11A.

(e) Executed plan; certificate; effective date. The executed plan certificate and effective date shall be in accordance with section 17101(d) of this title.

(f) National financial institution as participant. If one of the parties to a merger, or consolidation with a Vermont financial institution is an investor-owned national financial institution, the participants shall comply with all requirements imposed by federal law for such merger, share exchange, or consolidation in addition to the requirements contained in this title and shall provide evidence of such compliance to the commissioner.

§ 17202. MERGER OF INVESTOR-OWNED INSTITUTION WITH

NATIONAL FINANCIAL INSTITUTION

(a) Nothing contained in the law of this state restricts the right of a financial institution organized under chapter 202 of this title to merge or consolidate into a resulting national financial institution. The corporate action to be taken by the investor-owned institution and its rights and liabilities and those of its investors are the same as those prescribed in section 17201, except that approval of the commissioner is not required.

(b) Upon the effective date of the merger or consolidation, the authority of the participating investor-owned Vermont financial institution shall terminate automatically. The resulting national financial institution shall notify the secretary of state of the termination.

Subchapter 3. Mergers and Consolidations; Mutual or

Cooperative Financial Institutions

§ 17301. MERGERS AND CONSOLIDATIONS; MUTUAL OR

COOPERATIVE FINANCIAL INSTITUTIONS

(a) General. Two or more mutual or cooperative financial institutions may merge or consolidate into one financial institution organized under chapter 203 of this title in accordance with the procedures and subject to the conditions and limitations set forth in this subchapter.

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

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

(2) With respect to the resulting institution: the name and location of its principal office, branch offices and facilities; the name, address and occupation of each director who is to serve until the next annual meeting of the mutual voters; the name and address of each officer;

(3) The amount of capital and the manner of converting deposits, accounts or shares of such institution into deposits, accounts or shares of the resulting institution;

(4) The amendments required to be made to the resulting institution's organizational documents;

(5) A statement that the agreement is subject to approval of the commissioner and of the eligible account holders of each participating institution;

(6) The mode for carrying the plan into effect;

(7) The anticipated effective date of such merger or consolidation; and

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

(c) Commissioner's approval. The commissioner shall approve the plan of merger or consolidation in accordance with subsection 17101(b) of this title.

(d) Vote of mutual voters. The plan of merger or consolidation, as approved by the commissioner, shall be submitted to the mutual voters of the participating institutions for their approval at an annual meeting, or at a special meeting called for that purpose, in accordance with the organizational documents of the institution and applicable law.

(e) Executed plan; certificate; effective date. The executed plan, certificate and effective date shall be in accordance with section 17101(d) of this title.

Subchapter 4. Mergers and Consolidations; Investor-Owned

and Mutual Financial Institutions

§ 17401. MERGERS AND CONSOLIDATIONS; INVESTOR-OWNED

AND MUTUAL OR COOPERATIVE FINANCIAL

INSTITUTIONS

(a) Resulting mutual or cooperative financial institution. An investor-owned financial institution may be merged into or consolidated with a mutual or cooperative financial institution organized under the laws of this state in accordance with the procedures and subject to the conditions and limitations set forth in this subchapter and provided:

(1) The resulting mutual or cooperative financial institution shall comply with the requirements of section 17301(a), (b), (c) and (d) of this title except that the plan of merger or consolidation shall state the amount the institution will pay for the equity interests in the investor-owned institution to be acquired and additional information the commissioner considers appropriate.

(2) The investor-owned institution to be merged or consolidated shall comply with section 17201(b) through (f) of this title.

(b) Resulting investor-owned institution. Except as the commissioner may authorize pursuant subsection 17101(f) of this title to a mutual or cooperative financial institution may not merge into an investor-owned institution organized under the laws of this state without first converting into an investor owned institution under section 16101 of this title.

Subchapter 5. Acquisition of Assets; Assumption of Liabilities.

§ 17501. ACQUISITION OF ASSETS

(a) General. A Vermont financial institution may acquire the assets of, or assume the liabilities of, any other financial institution authorized to do business in this state. When the value of an acquisition or assumption is worth 25 percent or more of the assets as of the proposed effective date of the acquiring, assuming or transferring entity, the transaction shall be subject to and in accordance with the procedures, and subject to the conditions and limitations, set forth in this subchapter.

(b) Adoption of plan. The governing body of the acquiring or assuming institution and the governing body of the transferring institution shall adopt by majority vote a plan for acquisition, assumption or sale on terms that are mutually agreed upon. The plan shall include:

(1) The names and types of the institutions involved;

(2) A statement setting forth the material terms of the proposed acquisition, assumption or sale, including, if applicable, the plan for disposition of all assets and liabilities not subject to the plan;

(3) A statement that the entire transaction is subject to written approval of the commissioner and, if the transaction involves all or substantially all of the assets or liabilities of the transferring institution, the approval of the transferring institution's investors or mutual voters;

(4) If an investor-owned institution is the transferring institution and the proposed sale is not for cash, a clear and concise statement that investors of the institution voting against the proposed sale are entitled to rights set forth in subdivision 17101(c)(2) of this title; and

(5) The proposed effective date of the acquisition, assumption or sale and all other information and provisions that are necessary to execute the transaction or that are required by the commissioner.

(c) Commissioner's approval. The commissioner shall approve the plan of merger or consolidation in accordance with subsection 17101(b) of this title.

(d) Vote of investors or mutual voters. If the transaction involves all or substantially all of the assets or liabilities of the transferring institution or if the transferring institution's organizational documents require, the plan of acquisition, assumption or sale shall be presented to the investors or mutual voters of the transferring institution for their approval, and their approval shall be obtained in accordance with subsection 17101(c) of this title. If the approval of investors is requir ed, then investors dissenting to the transaction have the rights set forth in subdivision 17101(c)(2) of this title.

(e) Executed plan; certificate; effective date.

(1) If the plan is approved by the investors or mutual voters of the transferring institution, an executive officer and the secretary of such institution shall submit the executed plan to the commissioner, together with a copy of the resolution of the investors or mutual voters approving it, each certified by these officers.

(2) Upon receipt of the items set forth in subdivision (1) of this subsection and evidence that the participating institutions have complied with all applicable federal law and regulations, the commissioner shall certify, in writing, to the participants that the plan has been approved and is in compliance with the provisions of this title.

(3) Notwithstanding approval of the investors or mutual voters or certification by the commissioner, the transferring institution's governing body may, in its discretion, abandon such a transaction without further action or approval by the investors or mutual voters, subject to the rights of third parties under any contracts relating to the transaction.

(f) National financial institution as participant. If one of the participants in a transaction under this section is a national financial institution, all participants shall comply with such requirements as may be imposed by federal law for such an acquisition, assumption or sale and provide evidence of such compliance to the commissioner; provided that if the purchasing or assuming institution is a national financial institution, approval by the commissioner is not required.

(g) Investor-owned institution acquiring mutual or cooperative financial institution. A mutual or cooperative financial institution may not sell all or substantially all of its assets to an investor-owned institution without prior approval by the commissioner of a plan that provides fair and equitable treatment of the depositors or members in the sale of the assets and distribution of the proceeds.

(h) Applicability to transactions in ordinary course of business. This subchapter does not apply to a transfer of assets of a financial institution in the ordinary course of business that does not include any assumption of deposit liabilities.

(i) Authority for expedited acquisitions. Notwithstanding any other provision of law, or any organizational document of any participating institution, the commissioner may order that the acquisition of assets and assumption of liabilities become effective immediately if the commissioner determines that the action is necessary for the protection of depositors or the public. This action may be taken upon receipt of the following:

(1) Certified copies of the authorizing resolutions adopted by the respective governing bodies of the acquiring or assuming financial institution or financial institution holding company, and a copy of the plan of acquisition of assets and assumption of liabilities approved by a majority vote of the governing bodies of the acquiring or assuming financial institution or financial institution holding company and the transferring institution; or

(2) Notice, containing information required by the commissioner, from any other person of intent to acquire the assets and assume the liabilities of a financial institution or financial institution holding company.

(j) The applicant in any acquisition application filed with another supervisory agency by a financial institution holding company that controls a Vermont financial institution, or by a person that intends to acquire a Vermont financial institution or financial institution holding company shall file a copy of the application with the commissioner at the time the application is filed with the other supervisory agency. The applicant shall notify the commissioner of any amendments to the application by filing with the commissioner a copy of any amendments that are required to be filed with the other supervisory agency. A copy of any acquisition approval issued by the other supervisory agency shall be filed with the commissioner by the applicant within 30 days of its issuance. The commissioner shall not disclose any information obtained pursuant to this section which is treated as confidential by the other supervisory agency.

§ 17502. ASSUMPTION OF LIABILITIES

(a) Assumption of liabilities. Subject to the approval of the commissioner, any Vermont financial institution may, by contract, assume all or any part of the deposit and other liability of any other financial institution or financial institutions and may accept in payment or part payment for the obligations so assumed, all or any part of the assets of the other financial institution; or may so accept in payment or part payment, the notes or other undertakings of the other financial institution, secu red by a pledge to the assuming financial institution, or secured by any other lien or trust for its benefit, with respect to all or any part of the assets of the other financial institution or financial institutions, at least equal in value to the amount of the deposit liability assumed. Such contracts of assumption, notes, undertakings, liens or trust agreements may be in any form approved by the commissioner which provides for equality of treatment of all depositors and for the full payment of all assum ed deposits on demand. All depositors whose deposits are so assumed shall be notified by mail of the assumption and any depositor objecting thereto within 60 days of that notice shall be paid the full amount of the assumed deposit, with interest to the date of the objection, computed at the proportional part of the interest rate to be paid for that period by the Vermont financial institution on other deposits, or if no rate has been determined, at the rate for the interest period next preceding the notice, not to exceed the rate prescribed by the directors for the then current period, if a rate has been so prescribed for the period.

(b) Contracts for assumption of deposit liability. Contracts for the assumption of deposit liability may be entered into independently of merger of financial institutions or as a part of any such merger, and the commissioner may authorize under the provisions of chapter 205 of this title the assuming financial institution to establish a branch at any location at which the other financial institution might have conducted its business. However, such a contract shall not be valid unless the governing bodies of the signatory financial institutions have been authorized in regard thereto by a vote of the investors or mutual voters of the financial institutions. That authorization requires the affirmative vote, in the case of a mutual or cooperative financial institution, of a majority of the mutual voters, and in the case of an investor owned financial institution, requires the vote provided in its organizational documents for amending the charter and in any event, at least the affirmative vote of majorit y of the equity interests, as well as the affirmative vote of majority of each class of equity interest present and voting at the meeting. All classes of equity interests may vote on the question whether or not the rights of any class to vote generally have been suspended under the terms of the charter by reason of nonpayment of dividends.

Subchapter 6. Change in Control

§ 17601. CHANGE IN CONTROL

(a) The applicant in any acquisition application filed under the federal Bank Change in Control Act, the federal Savings and Loan Holding Company Act or the Bank Holding Company Act by a holding company that controls a Vermont financial institution, or by a person that intends to acquire a Vermont financial institution or financial institution holding company shall file a copy of the application with the commissioner at the time the application is filed with the appropriate federal supervisory agenc y. The applicant shall notify the commissioner of any amendments to the application by filing with the commissioner a copy of any amendments that are required to be filed with the appropriate federal supervisory agency. A copy of any acquisition approval issued by the appropriate federal supervisory agency shall be filed with the commissioner by the applicant within 30 days of its issuance. The commissioner shall not disclose any information obtained pursuant to this section which is treated as confident ial under federal law.

(b) Any other acquisition of a Vermont financial institution, or acquisition of 25 percent or more of the equity interests of a Vermont financial institution or a holding company controlling a Vermont financial institution subsidiary that is not included in subsection (a) of this section, shall be considered a change in control and subject to subsections (c), (d) and (e) of this section.

(c) Any person seeking to obtain control of a Vermont financial institution or financial institution holding company controlling a Vermont financial institution subsidiary shall be required to file an application with the commissioner on a form prescribed by the commissioner containing the following information:

(1) The name and address of each person by whom or on whose behalf

the acquisition of control is to be effected (hereinafter called "acquiring party"), and

(A) if such person is an individual, his or her principal occupation and all offices and positions held during the past five years, and any conviction of crimes other than minor traffic violations during the past ten years;

(B) if such person is not an individual, a report of the nature of its business operations during the past five years or for such lesser period as such person and any predecessors thereof shall have been in existence; an informative description of the business intended to be done by such person and such person's subsidiaries; and a list of all individuals who are or who have been selected to become directors or executive officers of such person, or who perform or will perform functions appropriate to such positions. Such list shall include for each such individual the information required by subdivision (1)(A) of this subsection.

(2) The source, nature and amount of the consideration used or to be used in effecting the acquisition of control, a description of any transaction wherein funds were or are to be obtained for any such purpose, and the identity of persons furnishing such consideration, provided, however, that where a source of such consideration is a loan made in the lender's ordinary course of

business, the identity of the lender shall remain confidential, if the person filing such statement so requests.

(3) Fully audited financial information as to the earnings and financial condition of each acquiring party for the preceding five fiscal years of each such acquiring party (or for such lesser period as such acquiring party and any predecessors thereof shall have been in existence), and similar unaudited information as of a date not earlier than 90 days prior to the filing of the statement.

(4) Any plans or proposals which each acquiring party may have to liquidate such financial institution, to sell its assets or merge or consolidate it with any person, or to make any other material change in its business or organizational structure or management.

(5) The number of shares of equity interests which each acquiring party proposes to acquire, and the terms of the acquisition, and a statement as to the method by which the fairness of the proposal was determined.

(6) The amount of each class of any equity interest which is beneficially owned or concerning which there is a right to acquire beneficial ownership by each acquiring party.

(7) A full description of any contracts, arrangements or understandings with respect to any equity interest in which any acquiring party is involved. Such description shall identify the persons with whom such contracts, arrangements or understandings have been entered.

(8) A description of the purchase of any equity interest during the twelve calendar months preceding the filing of the statement, by any acquiring party, including the dates of purchase, names of the purchasers, and consideration paid or agreed to be paid therefor.

(9) Copies of all agreements to acquire or exchange any equity interests.

(10) The terms of any agreement made with any broker-dealer and the amount of any fees, commissions or other compensation to be paid to any broker-dealer.

(11) Such additional information as the commissioner may prescribe.

(d) The commissioner, in his or her discretion, may accept all or part of a copy of an application filed with another supervisory agency that contains the information required by subsection (c) of this section.

(e) The application shall be subject to the provisions of chapter 201, subchapter 7 of this title.

CHAPTER 208. EFFECT OF MERGER, SHARE EXCHANGE, CONSOLIDATION, CONVERSION OR ACQUISITION; NONCONFORMING ACTIVITIES

Subchapter 1. Effect of Merger, Share Exchange,

Consolidation, Conversion or Acquisition

§ 18101. EFFECT OF MERGER, SHARE EXCHANGE,

CONSOLIDATION, CONVERSION OR ACQUISITION

(a) Applicability. From and after the effective date of a merger, including a share exchange, consolidation, conversion or acquisition, under chapters 205, 206 or 207 of this title, the resulting institution 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 institution has been terminated, the resulting institution shall be deemed to be a continuation of the entity of the participating or converting institution such that all property of the participating or converting institution, 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 conc eivable value or benefit then existing, or pertaining to it, or which would inure to it, including appointments, designations and nominations, and all other rights and interests as trustee, personal representative, guardian and conservator, and in every other 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 resulting institution; and such institution shall have, hold and enjoy the s ame in its own right as fully and to the same extent as the same was possessed, held and enjoyed by the participating or converting institution and such resulting institution as of the time of the taking effect of such merger, consolidation, conversion or acquisition shall continue to have and succeed to all the rights, obligations and relations of the participating or converting institution.

(c) Effect on judicial proceedings. All pending actions and other judicial proceedings to which the participating or converting institution is a party shall not be deemed to have been abated or to have been discontinued by reason of such merger, consolidation, conversion or acquisition, but may be prosecuted to final judgment, order or decree in the same manner as if such merger, consolidation, conversion or acquisition had not been taken; and such institution resulting from such merger, consolidati on, conversion or acquisition 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 institution theretofore involved in such judicial proceedings.

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

(e) Exception. In the event of an acquisition of assets pursuant to section 17501, the provisions of subsections (b), (c) and (d) of this section shall apply only to the assets acquired and the liabilities assumed by the resulting institution; provided that the transferring institution retains sufficient assets to satisfy all liabilities not assumed by the resulting institution.

(f) Powers and attributes of resulting organization. Whenever financial institutions merge or consolidate, the resulting organization, except as provided in this subchapter, shall have, possess and own, but separately and distinguishably as provided by this subchapter, 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 as trustee, attorney, agent, executor, administrator, receiver, assignee, guardian, or in any like capacity, the resulting 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, ob ligation or designation. The resulting financial institution 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 subchapter. 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 subchapter, it shall hold, exercise and perform all rights, powers, privileges, duties and o bligations appertaining to any and all trust, representative or fiduciary relationships of each of the merged financial institutions, and shall be liable for all of the debts, contracts and obligations of each of the merged financial institutions. Any such debt, undertaking or obligations of any merged financial institution may be enforced against it as fully and effectively as it could have been against the merged financial institution.

(g) Disposal of property and assets. The resulting financial institution shall have the right to use, control, sell or dispose of all real and personal estate, rights or interests of the merged financial institutions and convey the same by deed, assignment, endorsement, contract or other conveyance, either in its own name, or in the name of any merged financial institutions as hereinafter provided, or in the names of both, as fully and effectively as the merged financial institutions could have done ; and may maintain suit in its own name or in the name of any such financial institution, 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 financial institutions. To this end and except as provided in the contract of merger, the corporate existence of each of the merged financial institutions shall be deemed and treated as having continued each separably and distinguishably, for all purposes necessary or convenien t to liquidate the assets of any merged financial institutions. Any receipt, assignment, endorsement, transfer, option, contract to sell, convey or exchange, compromise, acquittance and release may be executed in its name or in the name of the resulting financial institutions 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 appropri ate 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 resulting organization.

Subchapter 2. Nonconforming Activities; Cessation

§ 18201. NONCONFORMING ACTIVITIES; CESSATION

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

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

(c) Effective date. The plan of merger, consolidation, conversion or acquisition shall state that from the effective date of such action, the resulting institution shall not engage in any nonconforming activities, except to the extent necessary to fulfill obligations existing prior to merger, consolidation, conversion or acquisition, pursuant to subsection 18201(d) of this title.

(d) Compliance with limitations. If, as a result of such merger, consolidation, conversion or acquisition, the resulting institution 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, consolidation, conversion or acquisition, require a nonconforming activity to be divested in accordance with such additional requirements as he or she may deem appropriate under the circumstances.

CHAPTER 209. CONSERVATION, LIQUIDATION AND INSOLVENCY

Subchapter 1. Applicability of Chapter; Payments Restrained to Preserve Assets or Protect Depositors

§ 19101. APPLICABILITY TO VERMONT FINANCIAL INSTITUTIONS;

INDEPENDENT TRUST COMPANIES; STATE FINANCIAL

INSTITUTIONS

(a) The provisions of subchapters 1 through 4 of this chapter apply to Vermont financial institutions. The provisions of subchapters 2, 3, and 4 of this chapter shall also apply to independent trust companies organized and regulated under chapter 77 of this title as if they were financial institutions.

(b) The provisions of subchapter 5 of this chapter shall apply to state financial institutions doing business in this state.

§ 19102. GOVERNOR'S PROCLAMATION

Whenever it appears to the governor that the public welfare and the equal protection of depositors in Vermont financial institutions doing business in this state require it, he or she may proclaim such bank holidays as in his or her judgment are necessary. Those holidays, except as otherwise provided in the proclamation, shall not be considered as business days for the transaction of all banking business, including the demand or payment of deposits, and shall have the incidents of a legal holiday for the purposes specified in Title 9A, Article 3.

§ 19103. BUSINESS RESTRICTED

During holidays and subject to the provisions of the proclamation, the commissioner, in addition to all other powers conferred by law, may order any Vermont financial institution to restrict all or any part of its business, and to limit or postpone for any length of time the payment of any amount or proportion of the deposits in savings, commercial, or any other department thereof, separate and distinct from the other, as the commissioner may deem necessary or expedient and may regulate further paymen ts therefrom as to time and amount, as the interest of the public or the financial institution or the depositors thereof may require.

§ 19104. RESTRICTIONS CONTINUED AFTER HOLIDAYS

After those holidays, the order may be continued in effect as to any particular financial institution if, in the opinion of the commissioner, circumstances warrant or require the continuance and the governor approves.

§ 19105. ORDERS AS TO DEPOSITS AND DEBTS DUE FINANCIAL

INSTITUTION

During those holidays and so long thereafter as the governor approves, the commissioner may issue such orders as to the receipt and payment of deposits by, and the creation and discharge of debts and obligations to or from a Vermont financial institution under the commissioner's supervision, as the commissioner may deem necessary for the protection and preservation of the public safety and convenience or the equal protection of those Vermont financial institution's depositors in view of then existing banking, business, or other pertinent conditions. Those orders may apply to any Vermont financial institution, as may be necessary for those purposes; and the orders may restrict or regulate all business or any part of the business of a financial institution affected thereby, including the time or manner or medium of payment, or limitations on the amount or percentages of payment of deposits or of debts or obligations, or the investment or the loaning of money, or the approval and acceptance of security fo r new loans. The orders may classify financial institutions or departments thereof or deposits or assets and liabilities and may vary with the different classes, as may be required for fulfilling the purposes of this section and sections 19102 through 19105 of this title.

§ 19106. WITHDRAWALS, RATEABLE SHARE OF DEPOSITOR'S

INTEREST

While restrictions are in force on the withdrawal of the deposits in a Vermont mutual or cooperative financial institution, except those imposed by the financial institution under the provisions of its internal governance documents, withdrawals shall be counted as a part of the rateable share of the withdrawing depositor's interest in the assets of a mutual or cooperative financial institution to which he or she was entitled at the time the restrictions were imposed if final liquidation of the financi al institution takes place before all those restrictions are removed.

§ 19107. PUBLICATION OF ORDERS

Orders under sections 19103 through 19106 of this title may be promulgated and notice thereof given in such manner as the commissioner determines and may be amended, modified, changed, expanded, or revoked in whole or in part whenever in his or her judgment circumstances warrant or require.

§ 19108. APPEAL; RECEIVER

The propriety and necessity of the orders issued by the commissioner under sections 19103 through 19107 of this title shall be open to review upon action brought in the usual form by an aggrieved party within ten days to the superior court of Washington county. No injunction may be issued without prior notice to the commissioner, and the court, on motion of the commissioner, may appoint a temporary receiver of a financial institution involved in those proceedings.

§ 19109. NEW COMMERCIAL OR SAVINGS DEPOSITS AUTHORIZED;

WITHDRAWALS

The commissioner, by order, may authorize Vermont financial institutions thereafter to receive new commercial deposits or new savings deposits, and the new deposits shall be special deposits and designated as new commercial deposits or new savings deposits, as the case may be, and shall be segregated from all other deposits. New commercial deposits shall also be segregated from new savings deposits. They may be invested only in assets approved by the commissioner as being sufficiently liquid to be a vailable when needed to meet any demands on account of those new deposits, which assets shall not be merged with other assets of the institution, but shall be held in trust for the security and payment of those new deposits, except that income from those assets, to the extent authorized by the commissioner, may be used by the financial institution for other proper purposes of the institution. The withdrawal of those new deposits shall not be subject in any respect to restriction or limitation under this se ction and sections 19102 through 19108 of this title.

§ 19110. COSTS AND EXPENSES

Costs and expenses incurred by the commissioner in the exercise of powers given under sections 19101 through 19109 of this title may be assessed by the commissioner against the Vermont financial institutions concerned and, when so assessed, shall be paid by those financial institutions.

Subchapter 2. Financial Institution Conservators

§ 19201. APPOINTMENT AND BONDING OF CONSERVATORS

Whenever the commissioner deems it necessary in order to conserve the assets of a Vermont financial institution for the benefit of the depositors and other creditors thereof, the commissioner may appoint a conservator for the financial institution and require of the conservator such bond and security as the commissioner deems proper.

§ 19202. CONSERVATION OF ASSETS

Under the direction of the commissioner, the conservator shall take possession of the books, records and assets of every description of the Vermont financial institution and take such action as may be necessary to conserve the assets thereof pending further disposition of its business as provided by law.

§ 19203. POWERS OF CONSERVATOR

The conservator shall have all the rights, powers and privileges possessed by receivers consistent with sections 19201 through 19210 of this title and shall be subject to the obligations and penalties to which receivers are subject.

§ 19204. RIGHTS OF INTERESTED PARTIES

During the time the conservator remains in possession of the Vermont financial institution, the rights of all parties with respect thereto, subject to the provisions of law, shall be the same as if a receiver had been appointed therefor.

§ 19205. FIDUCIARY POWERS; APPOINTMENT OF NEW TRUSTEE FOR TRUST ACCOUNTS

The conservator shall have the right to exercise all the fiduciary powers which the Vermont financial institution had been exercising. However, if all of the beneficiaries, named in any trust that the financial institution for which the conservator is appointed was trustee, desire another trustee appointed to administer and manage the trust, the probate court may appoint a new trustee for the trust.

§ 19206. EXPENSES; SALARY

All expenses of any such conservatorship shall be paid out of the assets of the financial institution and shall be a lien thereon which shall be prior to any other lien provided by law. The conservator shall receive as salary an amount to be fixed by the governor.

§ 19207. WITHDRAWALS

While the financial institution is in the hands of the conservator appointed by the commissioner, the commissioner may require the conservator to set aside and make available for withdrawal by depositors and payment to other creditors, on a rateable basis, such amounts as in the opinion of the commissioner may safely be used for this purpose. The conservator may borrow money on the assets of the financial institution to provide funds therefor.

§ 19208. DEPOSITS

In the commissioner's discretion, the commissioner may permit the conservator to receive deposits, but deposits received while the financial institution is in the hands of the conservator shall not be subject to any limitation as to payment or withdrawal, and those deposits shall be segregated and shall not be used to liquidate any indebtedness of the financial institution existing at the time that a conservator was appointed to it, or any subsequent indebtedness incurred for the purpose of liquidatin g any indebtedness of the financial institution existing at the time the conservator was appointed.

Deposits so received while the financial institution is in the hands of the conservator shall be kept on hand in cash, invested in the direct obligations of the United States, or deposited in financial institutions approved by the commissioner.

§ 19209. TERMINATION OF CONSERVATORSHIP

If the commissioner becomes satisfied that it may safely be done and that it would be in the public interest, in the commissioner's discretion, the commissioner may terminate the conservatorship and permit the financial institution to resume the transaction of its business subject to such terms, conditions, restrictions and limitations as the commissioner may prescribe.

§ 19210. NOTICE TO DEPOSITORS OF TERMINATION OF

CONSERVATORSHIP

In case the commissioner, in the exercise of the commissioner's discretion, is satisfied that it would be in the public interest to terminate the conservatorship either with or without reorganization, before the conservator shall turn back the affairs of the Vermont financial institution to its governing body, the commissioner shall cause to be published in a newspaper in the city, town, or county in which the financial institution is located, a notice in form approved by the commissioner stating the date on which the affairs of the financial institution will be returned to its governing body. On the date of the publication of that notice, the conservator shall immediately send to every person who is a depositor in the financial institution a copy of that notice by mail, addressed to the last known address of that person as shown by the records of the financial institution, and the conservator shall send similar notice in like manner to every person making a deposit in that financial institution under section 19208 of this title after the date of that newspaper publication and before the time when the affairs of the financial institution are returned to its governing body.

Subchapter 3. Receivership and Dissolution

§ 19301. APPLICATION FOR RECEIVER; PETITION TO DIVIDE

LOSSES

If the commissioner ascertains in any manner that a Vermont financial institution is insolvent or that it is unsafe for it to continue to transact business, the commissioner shall apply to the superior court of Washington County for the appointment of a receiver, unless, in case of a mutual or cooperative financial institution, the commissioner deems it advisable to join with the governing body in a petition to divide the losses among the depositors as hereinafter provided.

§ 19302. APPOINTMENT OF RECEIVER; NOTICE AND HEARING

The court shall thereupon issue a notice to the treasurer and executive officer of such Vermont financial institution to appear at a time and place therein named and show cause why a receiver should not be appointed. If sufficient cause is not shown, the court shall appoint a receiver to take charge of the property and effects of the financial institution, who shall be subject to the superior court.

§ 19303. BONDING OF RECEIVER

The receiver shall give bonds to the state with sufficient surety, in a sum fixed by the court, for the faithful discharge of his or her duties and for the due accounting of the moneys received by the receiver.

§ 19304. COMMISSIONER AS RECEIVER

The commissioner shall be appointed as such receiver unless the superior judge is satisfied that it would be inadvisable for the commissioner to act in that capacity. The commissioner and successors of the commissioner as receiver shall serve without compensation other than his or her stated compensation as commissioner, but the commissioner shall be allowed clerical and other expense necessary in the conduct of the receivership. The court may appoint the commissioner's successor in office as receiv er. However, if a change in the receivership, in the judgment of the superior judge, would be against the financial interest of those concerned, the court may continue the receiver in office at such reasonable compensation as the court may determine. If the deposits of the insolvent financial institution are insured by the Federal Deposit Insurance Corporation, the superior judge, in his or her discretion, may appoint as receiver of the financial institution the Federal Deposit Insurance Corporation to se rve without bonds and without compensation.

§ 19305. DUTIES AND RIGHTS OF RECEIVER

The receiver shall collect, sue and receive the debts and demands due and the property that belong to the Vermont financial institution and shall convert into cash its real and personal estate and, upon the approval of the superior judge, may borrow money and pledge any part or all of the assets of such financial institution as security for such loan and shall make report to the court of the condition of the trust at such times as the superior judge orders.

§ 19306. FEDERAL DEPOSIT INSURANCE CORPORATION

If the Federal Deposit Insurance Corporation shall have been appointed receiver of a closed Vermont financial institution, it may advance, with the consent and approval of the superior judge, moneys to pay insured deposits or for other proper purposes and shall have a lien upon all or any part of the assets of such financial institution as the court may direct for the repayment of such advances, which shall be deemed to be in the nature of a loan, but provision shall be made in such order to secure ul timately as large a percentage payment on account of uninsured deposits as would be finally available for such deposits if such assets were not so pledged. The Federal Deposit Insurance Corporation, whether or not acting as receiver, may become the purchaser of any assets of such Vermont financial institution which have been offered for public bids, under such terms and conditions as the superior judge may direct, provided that the purchase be approved by the superior judge after hearing held on such reaso nable notice by publication or otherwise as the superior judge may direct.

§ 19307. SUBROGATION

Whenever any Vermont financial institution shall have been closed, and the Federal Deposit Insurance Corporation shall pay the insured deposit liabilities of such closed institution, such corporation, whether or not it shall have become a receiver of such closed financial institution, shall be subrogated to the extent of such payment to all rights of the owners of such deposits against such closed financial institution. The superior judge shall by order define the manner and extent of such subrogation .

§ 19308. ORDER

When on hearing and after such reasonable notice as the superior judge may direct, any order as to a lien upon assets of a closed Vermont financial institution or of subrogation to the rights of depositors therein shall have been made by such superior judge under the authority of sections 19304 through 19307 of this title, and no exceptions thereto shall have been filed within ten days after the making of the order, the same order shall be binding and effective to the extent necessary to secure the re payment of moneys which shall have been advanced thereon.

§ 19309. LIMITATION ON TIME FOR PROVING CLAIMS

By order, the superior judge shall limit the time for creditors of the Vermont financial institution to present and prove their claims before the receiver.

Within 60 days from the date of such order, the receiver shall cause notice thereof to be given by publication for three weeks successively in a newspaper printed and circulated in the county where such Vermont financial institution is located. The time allowed for creditors to present and prove their claims shall not be less than six months and may be extended as circumstances require. Claims not presented within the time limit shall not share in the assets of the Vermont financial institution.< /P>

§ 19310. SUBMISSION OF DISALLOWED CLAIMS TO SUPERIOR

JUDGE

Claims presented to the receiver, upon his request or upon that of a person interested in the financial institution, or upon request of a creditor within 20 days after notice of the disallowance of his or her claim in whole or in part, shall be submitted to the superior judge for the purpose of proving the same at such time and in such manner as the superior judge orders.

§ 19311. ORDER TO DISCONTINUE UNAUTHORIZED PRACTICES

Whenever it appears to the commissioner from the examination made by him or her, or from any report made to him or her, that a Vermont financial institution has committed a violation of its charter or of law, or is conducting its business and affairs in an unsafe or unauthorized manner, or that it or any of its officers have failed to comply with all the rules, restrictions and conditions provided by law, including the rules and requirements of the commissioner made in conformity to law, the commissio ner shall, by a written order delivered to the treasurer of such organization and the offending officer or officers, direct such organization and such officer or officers to discontinue such illegal, unsafe or unauthorized practices or conduct, and to proceed in strict conformity with the requirements of law.

§ 19312. FAILURE TO COMPLY WITH COMMISSIONER'S ORDER

If such financial institution or any of its officers refuses or neglects to comply with such order, the commissioner may apply to the superior court of Washington County for such an injunction or order against such financial institution and its officers as the circumstances require.

§ 19313. AUTHORITY OF COURT TO ENFORCE COMMISSIONER'S

ORDER

The court shall thereupon issue a notice to the treasurer and president of such financial institution and to any officer who is alleged in such petition to have failed to proceed in conformity with the requirements of law, to appear at a time and place named therein and show cause why an injunction or proper remedial order should not be issued. If sufficient cause is not shown, the court shall have power:

(1) To allow such financial institution to continue to transact business in conformity with the requirements of law subject to such orders, conditions or

restrictions as the evidence in the case and the interests involved shall require; or

(2) If it appears that it is unsafe or inexpedient for such financial institution to continue to transact business, to appoint a receiver or receivers to take charge of the property and effects of the financial institution; and such receivership shall be subject to the provisions of this subchapter applicable in case of a receiver appointed on petition of the commissioner on ascertainment of a financial institution's insolvency.

§ 19314. ACCOUNTING AND REPORT OF RECEIVER

Annually, on or before January 31, and at such other time as may be required by the commissioner, so long as the receivership is continued, the receiver of a financial institution shall make and transmit to the commissioner a full statement of the affairs of such institution showing the nature and amount of the assets and liabilities, also a true account of the expenses incurred and not previously reported, giving the items thereof. Such report shall be printed with and as a part of the annual report of the commissioner.

§ 19315. APPEAL

A person dissatisfied with an order or decree of the superior judge in any proceeding arising under this chapter may appeal therefrom as in other cases.

Subchapter 4. Reorganization or Establishment of New Financial Institution

§ 19401. PLAN FOR REOPENING OR ESTABLISHMENT OF NEW FINANCIAL INSTITUTION

If any Vermont financial institution has been closed by action of the commissioner or its governing body and a receiver, either temporary or permanent, appointed or petitioned for, the depositors thereof, representing not less than 75 percent of the deposit liability, and with the approval and consent of the commissioner, may join in a plan for the reopening or reorganization of the financial institution or the establishing of a new financial institution, and may select a committee of not more than 12 depositors to represent them for the purpose of carrying the plan into effect. However, a depositor who has been notified and does not refuse to give his or her consent within 15 days of that notification shall be included in reckoning that 75 percent.

§ 19402. PETITIONING COURT FOR HEARING; NOTICE; HEARING;

APPROVAL OF PLAN

(a) Upon receiving the approval of the plan by the commissioner, the committee or the commissioner may petition the superior court of Washington County, setting forth the details of the plan which has been agreed upon and requesting the court to set a day for hearing thereon. Thereupon the court shall make an order fixing a day for the hearing of the petition, notice of which shall be given to the depositors and the holders of equity interests in the financial institution by publication once in each week for not less than two successive weeks immediately preceding the date of hearing in some newspaper printed in the county where the financial institution's principal place of business is located, or in such other newspaper, having a general circulation in the county, as the court may direct and by posting a copy of the notice upon the front door of the financial institution.

(b) The court may adjourn the hearing from time to time and no further notice shall be required. At the date of hearing, or any adjournment thereof, the court shall take testimony, and if it appears that it is for the best interests of the depositors that the plan be approved, the court may make an order approving the same and fixing the terms and conditions upon which the receivership may be terminated.

§ 19403. DEPOSITOR'S OBJECTION TO PLAN; RECEIVERSHIP

CONTINUED

If any of the depositors of the Vermont financial institution file written objections to the approval of the plan and refuse to consent thereto, the court at the hearing may direct the receiver to set aside assets of each class of the receivership, in such amounts and character as the court finds to be just and equitable. Upon such terms as may be just and equitable, the court shall continue the receivership as to those assets and those depositors, and direct the receiver to turn over the remainder o f the assets of the financial institution in his or her hands to the new or reorganized financial institution when directed so to do by the commissioner, and discharge the receiver from further liability in relation thereto.

§ 19404. DEPOSITS OF PUBLIC MONEY

If, in any financial institution referred to in section 19401 of this title, there are deposits of public money belonging to the state or any political subdivision thereof, the state treasurer, if the deposit belongs to the state, and the treasurer of any political subdivision thereof, by and with the consent of the governing body of the political subdivision to which any such deposit may belong, may join with other depositors of the financial institution in a plan for the reopening or reorganizing th ereof or the establishment of a new financial institution, or the restricting of the withdrawal of deposits and for that purpose may bind the state or political subdivision thereof after being duly authorized so to do as herein provided, to limit withdrawals from that deposit over a period of time and in accordance with the plan as may have been agreed to by the other depositors of the financial institution joining in the plan.

§ 19405. DEPOSITS NOT PAID OR RECEIVED; BUSINESS

CONTINUED

When a proceeding has been brought under section 19401 of this title, a deposit shall not be paid or received by that financial institution after the filing of the petition until the final decree of the superior judge or, unless the commissioner, in his or her discretion, and under such orders as the commissioner may prescribe and from time to time alter and amend, permits the financial institution to continue in business pending final decree.

§ 19406. ORDERS UNDER WHICH FINANCIAL INSTITUTION MAY

CONTINUE BUSINESS

Those orders shall provide that deposits received after the petition is filed and before the final decree shall be kept in cash or invested in such liquid securities as the commissioner shall approve and segregated from the prior assets of the financial institution and shall constitute a fund for the repayment in full of deposits made after the filing of the petition. Those orders shall further provide that no withdrawal of prior deposits may be permitted except on such notice and to such specified a mounts and in such specified percentage as the commissioner determines clearly will not result in a preference.

§ 19407. EXPENSES; DEPOSITS RECEIVED AFTER PETITION FILED

The expense of operation between filing of the petition and final decree shall be apportioned between the original assets and the new assets in such manner as the superior judge may deem just. The deposits received between the filing of the petition and the final decree shall not be reduced by the decree except only to meet those expenses of operation, if any, or losses incurred with respect to those segregated assets.

§ 19408. PETITION DENIED; RECEIVER TO WIND UP AFFAIRS

If the petition is denied, the commissioner shall apply for a receiver to wind up the affairs of the financial institution, as provided in sections 19301 through 19315 of this title. In that case the deposits, if any, received after petition filed and the assets resulting therefrom shall be administered separately from the other assets and liabilities, and those assets shall be distributed to the depositors by the receiver as soon as possible after his or her appointment and without deduction on acco unt of the expense of the receivership except as provided in section 19407of this title.

Subchapter 5. State Financial Institutions

§ 19501. PETITION; POWERS; PROCEDURE

(a) The commissioner may apply to the superior court of Washington county to be appointed ancillary receiver of a state financial institution or any branch or subsidiary of a state financial institution in hazardous financial condition, if the commissioner finds that:

(1) the protection of customers or depositors in this state so requires;

(2) there are sufficient assets of the state financial institution located in this state to justify the appointment of an ancillary receiver; and

(3) The Federal Deposit Insurance Corporation has not been appointed receiver of the entity.

(b) The court may issue an order appointing the commissioner on whatever terms it shall deem appropriate. The commissioner, as receiver, shall administer or liquidate the assets and deposits of such financial institution found in this state under the provisions of this chapter as though the entity were a Vermont financial institution.

(c) If a person in the home state of the entity or the Federal Deposit Insurance Corporation is appointed receiver subsequent to the appointment of the commissioner under subsections (a) and (b) of this section, the commissioner shall notify the superior court. The court may release the commissioner as receiver if the court finds that the interests of Vermont customers or depositors of the entity are adequately protected in the proceedings in the home state of the entity. The court may impose cond itions on the entity to assure protection of its Vermont customers or depositors.

(d) The filing or recording of the order with the superior court of Washington County or the town clerk of the town in which its principal office or place of business is located; or, in the case of real estate, with the town clerk of the town where the property is located, and such filing or recording shall impart the same notice that a deed, bill of sale or other evidence of title duly filed or recorded with that town clerk would have imparted.

CHAPTER 210. MUTUAL OR COOPERATIVE HOLDING COMPANY

§ 20101. REORGANIZATION OF A MUTUAL OR COOPERATIVE

FINANCIAL INSTITUTION AS A MUTUAL HOLDING

COMPANY

A Vermont mutual or cooperative financial institution may reorganize, under a plan of reorganization adopted by the financial institution and submitted to and approved by the commissioner as provided in this chapter, as a mutual holding company owning an investor owned subsidiary financial institution in the following manner:

(1) By taking or causing to be taken the following actions:

(A) Organizing a subsidiary financial institution in accordance with the procedures in section 20102 and chapter 202 of this title, the voting common stock or other ownership interest of which will be owned by the mutual holding company emerging from the reorganization, except otherwise permitted in section 20106 of this title;

(B) Transferring to the subsidiary financial institution the substantial part of its assets and liabilities, including all of its insured liabilities, in exchange for voting common stock or other ownership interest of the subsidiary financial institution; and

(C) Adopting amended and restated organizational documents changing its name, and conforming its organization, governance and powers to those prescribed for a mutual holding company by section 20104 of this title; or

(2) Pursuant to any other form of restructuring approved by the commissioner.

§ 20102. PROCEDURE FOR ADOPTING A PLAN OF

REORGANIZATION

(a) Plan of reorganization. The plan of reorganization pursuant to which the reorganization is to be carried out, and the proposed amended organizational documents, shall be approved by the governing body of the mutual or cooperative financial institution by resolution adopted by two-thirds of the whole number of the governing body. The plan of reorganization, along with the proposed amended organizational documents, shall then be submitted for adoption to a regular or special meeting of the mutual voters of the financial institution called in the manner provided by its internal governance documents. Copies or summaries of the plan and amended organizational documents shall be enclosed with the notice of the meeting. Adoption of the plan of reorganization shall be by the affirmative vote of two-thirds of the mutual voters casting votes. A mutual voter may vote at such regular or special meeting either in person or by proxy executed in writing by the mutual voter or by his or her duly authorized at torney-in-fact.

(b) Notice to commissioner. A mutual or cooperative financial institution, having adopted a plan of reorganization in accordance with subsection (a) of this section, shall provide the commissioner with 60 days prior written notice of the proposed reorganization. The notice shall include the plan of reorganization, accompanied by certified copies of the votes of its governing body and mutual voters required by subsection (a) of this section, and such other relevant information as the commissioner sh all require. Unless the commissioner, within such 60-day notice period, disapproves the proposed mutual holding company reorganization, or extends for another 30 days the period during which such disapproval may issue, the proposed reorganization shall be deemed approved and the mutual or cooperative financial institution providing such notice may proceed with the proposed reorganization. The commissioner may disapprove any proposed mutual holding company formation only if:

(1) Such disapproval is necessary to prevent unsafe or unsound banking practices;

(2) The financial or management resources of the financial institution warrant disapproval;

(3) The mutual or cooperative financial institution fails to furnish the information required by this section;

(4) The mutual or cooperative financial institution fails to comply with subsection (a) of this section;

(5) The proposed reorganization would be unfair to depositors.

(c) Notice to depositors. After a mutual or cooperative financial institution has complied with the provisions of subsections (a) and (b) of this section, it shall give its depositors at least 60 days prior written notice of the effective date of the reorganization. Such notice shall include a brief description of the plan of reorganization, and a statement of the depositor's right to withdraw any amount deposited to his or her account without penalty. The form of such notice shall be approved by the commissioner and shall be sent to each depositor by first class mail. Any depositor objecting to the reorganization within 60 days of such notice may withdraw any amounts on deposit and shall be paid the full amount of the deposit, with interest to the date of payment computed at the rate established by the deposit agreement or, in the absence of an agreement, at the rate paid by the financial institution on other similar interest bearing accounts. Any depositor who fails to withdraw the amount deposit ed to his or her credit prior to the effective date of the reorganization shall be deemed to have assented to the reorganization.

§ 20103. RETENTION OF CAPITAL ASSETS AT HOLDING COMPANY

LEVEL

With the approval of the commissioner, the plan of reorganization of a mutual or cooperative financial institution may provide for the retention of capital assets at the mutual holding company level, provided such retention will not cause the subsidiary financial institution to fail to meet any applicable capital adequacy requirement prescribed by state or federal laws or regulations.

§ 20104. EFFECT OF REORGANIZATION; OWNERSHIP AND

GOVERNANCE

(a)(1) The organizational existence of the reorganizing mutual or cooperative financial institution shall not terminate, and the mutual holding company resulting from the reorganization shall be deemed to be a continuation of the entity of such financial institution, not as a depository institution but as a financial institution holding company. The depositors of the mutual or cooperative financial institution immediately prior to the reorganization shall be entitled to deposits in the subsidiary fi nancial institution of like amounts, interest rate and other terms, without interruption of interest and such deposits shall continue to be insured by the Federal Deposit Insurance Corporation up to the maximum amount provided by law. The depositors of the mutual or cooperative financial institution immediately before the reorganization, shall, by virtue of the reorganization, have proprietary interests in the net worth of the mutual holding company of the same nature, rights and proportions as the proprie tary interests which they had in the mutual or cooperative financial institution immediately prior to the reorganization, in lieu of such former interests. Except as otherwise set forth in this section with respect to the rights of depositors, creditors of the reorganizing mutual or cooperative financial institution immediately prior to the reorganization shall be deemed to have such rights as creditors solely with respect to the subsidiary financial institution upon consummation of the reorganization.

(2) Except as otherwise specifically provided in the plan of reorganization adopted pursuant to section 20102 of this title, upon consummation of the reorganization into mutual holding company form, the subsidiary financial institution shall by operation of law be deemed to have succeeded to all rights of or in all tangible or intangible property, franchises and interests of the mutual or cooperative financial institution, including without limitation appointments, designations, nominations, and all other rights and interests as trustee, executor, administrator, registrar of stocks and bonds, guardian of estates, assignee and every other fiduciary capacity, in the same manner and to the same extent as such rights, franchises and interests were held or enjoyed by the reorganizing mutual or cooperative financial institution immediately prior to the effective date of the reorganization, and without further additional assignment, appointment or designation.

(b)(1) A mutual holding company shall not issue capital stock. Its net earnings and net worth shall inure to the benefit of the persons who are from time to time the savings depositors of its subsidiary financial institution and any other persons acquiring proprietary interests in the earnings and net worth of the mutual holding company, whether by merger or otherwise. Such net earnings may be distributed among such depositors and other persons at such times and in such equitable manner as the gove rning body of the mutual holding company, in its discretion, may determine. Apart from any such distributions, the proportionate proprietary interests of such depositors and other persons in the net earnings and net worth of the mutual holding company shall be realized only upon liquidation of the mutual holding company after the claims of all of its creditors have been satisfied. The proprietary interest of any depositor of the subsidiary financial institution in the net earnings and net worth of the mut ual holding company shall terminate upon the complete withdrawal by such depositor of his or her accounts. Neither the depositors of the subsidiary financial institution nor any other persons acquiring proprietary

interests in the mutual holding company shall have any voting rights in the organization.

(2) The powers of the mutual holding company shall vest in its corporators or governing body, as the case may be. The initial corporators or directors shall consist of such of the persons who were serving as corporators or directors of the reorganizing mutual or cooperative financial institution immediately prior to the reorganization and as are named in the plan of reorganization. Thereafter, the corporators or directors shall be chosen from time to time in the manner set forth in the internal gov ernance documents of the mutual holding company. The management of the mutual holding company shall be vested in its governing body, who shall be elected by the corporators in the case of a mutual financial institution. The initial governing body shall consist of such of the persons who were serving as the directors of the mutual or cooperative financial institution immediately prior to the reorganization and as are named in the plan of reorganization. Such persons shall hold office until the first annua l meeting of the corporators and until their successors have been chosen and qualified. The governing body shall hold an organizational meeting immediately following consummation of the reorganization for the adoption of internal governance documents and the election of officers in such manner as the internal governance documents may prescribe. Any action by a mutual holding company which, if taken by a business corporation, would require the approval of its shareholders under chapters 10, 11, 12 or 14 of Title 11A, shall require the vote of concurrence of the corporators of the mutual holding company and in such proportion of the corporators as would be required for the approval of similar action by shareholders of a business corporation.

(3) The general purpose of a mutual holding company shall be conducting and carrying on the business and activities of a financial institution holding company. A mutual holding company shall not take deposits. It shall have the general powers of business corporations as set forth in section 3.02 of Title 11A and shall have the powers of, and be subject to the limitations on, bank holding companies under the federal Bank Holding Company Act of 1956, as amended or the Savings and Loan Holding Company Act, as amended, as the case may be. Without limiting the generality of the foregoing and subject to provisions of applicable state and federal law, a mutual holding company may:

(A) Invest in the stocks and securities of any depository institution;

(B) Acquire control of any depository institution;

(C) Merge or consolidate with or otherwise acquire another mutual holding company;

(D) Merge or consolidate any subsidiary of the mutual holding company with another subsidiary thereof or transfer all or a portion of the assets of one such subsidiary to another;

(E) Make capital contributions and loans to its subsidiaries and affiliates and otherwise assist them financially;

(F) Engage in, directly or indirectly through a subsidiary, any non-banking activity authorized for a bank holding company under state or federal law or regulation;

(G) Issue capital debentures;

(H) Pledge the common stock of its subsidiaries to secure the indebtedness of the mutual holding company, provided that the proceeds of such indebtedness are used to fund the business operations, or to effect other business purposes, of the mutual holding company or its subsidiaries; and

(I) Sell or transfer the common stock of its subsidiary financial institution, provided that the commissioner has approved the transaction, and provided further that it does not result in the mutual holding company holding less than 51 percent of the outstanding stock of the subsidiary financial institution.

(4) A mutual holding company may convert from mutual to investor owned form subject to the same procedures and requirements as are applicable to the conversion of a mutual or cooperative financial institution to investor owned form under chapter 206 of this title.

(5) The mutual holding company shall obtain the commissioner's approval before entering into any transaction described in subdivisions (b)(3)(B), (C), or (D) of this section. In addition to any other applicable law governing the approval of the transaction, the commissioner shall disapprove any transaction which is unfair to the holders of the proprietary interests in the mutual holding company.

§ 20105. CHARTERING OF SUBSIDIARY FINANCIAL INSTITUTION

(a) Procedures. The procedures for the organization of a subsidiary financial institution shall be as prescribed in chapter 202 of this title, except that:

(1) A majority of the governing body of the reorganizing mutual or cooperative financial institution may serve as the incorporators of the subsidiary financial institution being formed and as the petitioners seeking approval of its incorporation.

(2) The initial capital requirement of section 12103 of this title shall not apply prior to the effective date of the reorganization.

(3) If the commissioner grants the petition under 12102 of this title, he or she shall condition such approval upon the transfer by the reorganizing mutual or cooperative financial institution to the subsidiary financial institution (in organization), before such transferee shall commence business, of assets having a value in excess of the amount of the transferred liabilities, as determined by the commissioner, such that the subsidiary financial institution will at the time of such transfer meet all applicable net worth and capital adequacy requirements prescribed by state or federal statutes or regulations.

(b) Filing of amended charter. Contemporaneously with consummation of the reorganization, duplicate originals of the amended and restated charter adopted by the mutual or cooperative financial institution under section 20102 of this title, governing the continuing entity as a mutual holding company, shall be filed in the office of the secretary of state. The amended and restated charter of the continuing entity as a mutual holding company shall take effect as of the date of the filing of such dupli cate originals in the office of the secretary of state.

§ 20106. ISSUANCE OF CAPITAL STOCK AND DEBENTURES BY

REORGANIZED SAVINGS FINANCIAL INSTITUTION

A subsidiary financial institution may issue up to 49 percent of its voting common stock to persons other than the mutual holding company. Depositors of a subsidiary financial institution at the time of commencement of any public offering of voting common stock shall be given the opportunity to participate in such offering in accordance with terms reasonably established by the governing body. A subsidiary financial institution may issue nonvoting stock, preferred stock, or capital debentures to the mutual holding company or to any person other than the mutual holding company. The issuance of stock or debentures by a subsidiary financial institution shall be subject to the procedures and requirements of chapter 204 of this title; provided, however, that the liquidation rights of any preferred shareholders shall be limited to repayment of their original investment in such shares and any dividends earned but unpaid prior to such liquidation.

Sec. 3. 8 V.S.A. § 1801 is amended to read:

§ 1801. PURPOSES

The expression "development credit corporation" hereinafter called the corporation, as used in this chapter *[and section 1153 of this title,]* shall mean a corporation, incorporated under the general laws of the state, the purposes of which shall be:

* * *

Sec. 4. 8 V.S.A. § 2051 is amended to read:

§ 2051. ORGANIZATION

(a) Any seven or more residents of the state of Vermont, of legal age, who have a common bond referred to in section 2055 of this title may organize a credit union and become charter members thereof by:

* * *

*[(5)]*(b) Charges for services rendered may be assessed by the commissioner in accordance with section *[78(b)]* 19(a) of this title for credit unions with assets of $30 million or more. Credit unions with less than $30 million in assets shall be charged $100.00 per service.

Sec. 5. 8 V.S.A. § 2052 is amended to read:

§ 2052. AMENDMENTS

The articles of association or the bylaws may be amended as provided in the bylaws. Amendments to the articles of association or bylaws shall be submitted to the commissioner of banking, insurance, securities, and health care administration who shall act upon the amendments within *[thirty]* 30 days.

Amendments shall become effective upon approval in writing by the commissioner of banking, insurance, securities, and health care administration*[ and no fee may be charged for his approval]*.

Sec. 6. 8 V.S.A. § 2066a is added to read:

§ 2066a. APPLICABILITY OF OTHER LAWS

The provisions of sections 11501(c), 14107, 14203, 14204, 14205, 14211, 14302(d) and 14303 shall apply to credit unions as if they were financial institutions as defined in section 11101(32) of this title.

Sec. 7. 8 V.S.A. § 2069(a) is amended to read:

(a) The department of banking, insurance, securities, and health care administration at least once every three years shall examine or cause to be examined each credit union, but the commissioner may, in his or her discretion, order such other examination or examinations as he or she may deem to be necessary. Each credit union and all of its officers and agents shall be required to give to representatives of the department full access to all books, papers, securities, records and other sources of inform ation under their control; and for the purpose of the examination those representatives may subpoena witnesses, administer oaths, compel the giving of testimony, and require the submission of documents. Each credit union shall pay to the department of banking, insurance, securities, and health care administration examination fees as prescribed by *[section 78]* sections 18 and 19 of this title, which fees shall be billed when they are incurred, but there shall be no charge for the first exami on.

Sec. 8. 8 V.S.A. § 2070(b) is amended to read:

(b) Each credit union shall pay their pro rata share of department expenses as apportioned by section *[504]* 19 of this title.

Sec. 9. 8 V.S.A. § 2079(7) is amended to read:

Funds not used in loans to members may be invested:

* * *

(7) in any investment legal for *[savings banks or trust companies in Vermont]* financial institutions as they are defined in section 11101(32) of this title, but in no event common stock; or

Sec. 10. 8 V.S.A. § 2200(1) is amended to read:

(1) "Bank," *["savings and loan association," "credit union," and "insurance company"]* shall mean institutions organized and regulated as such under the laws of the United States or any state or territory of the United States and which are engaged in the business of banking, and shall also include any Vermont financial institution as defined in section 11101(65) of this title, any insured depository institution as such term is defined he Federal Deposit Insurance Act, 12 U.S.C. § 1813(c)(2), and a bank not organized within the United States, or a United States or state branch or agency thereof, which is conducting business pursuant to the International banking Act of 1978, 12 U.S.C. § 3101 et seq. For purposes of this chapter, "bank" shall also include credit unions organized and regulated as such under the laws of the United States or any state or territory of the United States.

Sec. 11. 8 V.S.A. § 2200 is amended to read:

§ 2200. DEFINITIONS

As used in this chapter:

(1) "Bank," "savings and loan association," "credit union," and "insurance company" shall mean institutions organized and regulated as such under the laws of the United States or any state or territory of the United States, and shall include any insured depository institution as such term is defined by the Federal Deposit Insurance Act, 12 U.S.C. § 1813(c)(2), and a bank not organized within the United States, or a United States or state branch or agency ther eof, which is conducting business pursuant to the International Banking Act of 1978, 12 U.S.C. § § 3101 et seq.

(2) "Commercial loan" means any loan or extension of credit that is described in section 46(1), (2) or (4) of Title 9 and that is in excess of $25,000.00. The term does not include a loan or extension of credit for the purpose of farming, as defined in section 6001(22) of Title 10.

(3) "Commissioner" means the commissioner of banking, insurance, securities, and health care administration.

(4) "Control" means the possession, direct or indirect, of the power to direct or cause the direction of the management or policies of a person, whether through the ownership of voting securities, by contract other than a commercial contract for goods or nonmanagement services, or otherwise, unless the power is the result of an official position with or corporate office held by the person. Control shall be presumed to exist if any person, directly or indirectly, owns, controls, holds with the power to vote, or holds proxies representing, ten percent or more of the voting securities or other interest of any other person.

(5) "Holder" shall have the meaning set forth in section 1-201(20) of Title 9A.

(6) "Insurance company" shall mean an institution organized and regulated as such under the laws of the state of Vermont or any state or territory of the United States.

(7) "Licensee" means any person subject to the provisions of section 2201 of this title.

(8) "Mortgage broker" means any person who for compensation or gain, or in the expectation of compensation or gain, directly or indirectly negotiates, places, assists in placement, finds or offers to negotiate, place, assist in placement or find mortgage loans, other than commercial loans, on real property for others. The term shall not include real estate brokers or salespersons, as defined in section 2211 of Title 26, who in connection with services performed in a prospective real estate tra nsaction, provide mortgage information or assistance to a buyer, if such real estate broker or real estate salesperson is not compensated for providing such mortgage information or assistance in addition to the compensation received from the seller or buyer for such real estate services. The term shall not include attorneys licensed to practice law in this state acting in their professional capacity. The term shall not include persons engaged in the foregoing activities solely in connection with the sale, assignment, or other transfer of one or more previously originated loans.

(9) "Mortgage loan" means a loan secured primarily by a lien against real estate.

(10) "Person" shall have the meaning set forth in section 128 of Title 1.

(11) "Sales finance company" means any person who has purchased one or more retail installment contracts, as defined in sections 2351(5) and 2401(7) of Title 9, from one or more retail sellers located in this state. Taking one or more retail installment contracts as security for a loan or loans shall not be construed as purchasing for purposes of this definition.

Sec. 12. 8 V.S.A. § 2201(c)(4) is amended to read

(c) No licensse shall be required of:

* * *

(4) a bank*[, savings andloan association, or credit union]*;

Sec. 13. 8 V.S.A. § 2210(a)(2) is amended to read:

(2) The licensee has violated any provisions of this chapter, sections *[1211, 1256, 1260]* 10403 and 10404 of this title or chapters 4, 59 or 61 of Title 9, where applicable, or any rule or regulation lawfully made thereunder; or

* * *

Sec. 14. 8 V.S.A. § 2215(a) is amended to read:

§ 2215. PENALTIES

(a) The commissioner may:

(1) Impose an administrative penalty of not more than $1,000.00 for each violation upon any person who violates or participates in the violation of this chapter, sections *[1211, 1256, 1260]* 10403 and 10404 of this title or chapters 4, 59 or 61 of Title 9, or any lawful regulation or order issued thereunder; and

(2) Order any person to make restitution to any person injured as a result of a violation of this chapter, sections *[1211, 1256, 1260]* 10403 and 10404 of this title, or chapters 4, 59 or 61 of Title 9.

Sec. 15. 8 V.S.A. § 2216 is amended to read:

§ 2216. MORTGAGE LENDING; SPECIFIC REQUIREMENTS; EXCEPTIONS

Every licensee engaging in the making of loans secured by a lien against real estate located in this state, whether conducting its affairs as an agent or principal and whether operating from facilities within the state or by mail, telephone or by electronic means, shall comply with the general provisions of this chapter unless exempted herein. A licensee making such loans through a third person, shall only make loans through a person licensed as a mortgage broker under this chapter, unless such third pe rson is exempt from such licensing provisions. Any lender who makes such loans through a third person required to be licensed and not so licensed, in addition to being subject to all applicable penalties under Vermont law, shall be responsible for the acts or omissions of the third person as a principal is responsible for the acts and omissions of its agent. Every licensee making loans secured by a lien against real estate shall comply with sections *[1211, 1256, 1260]* 10403 and 10404, and ubchapter 6 of chapter 55]* subchapter 2 of chapter 200 of this title, and shall also be subject to the following specific limitations:

* * *

(6) Any loan secured by a lien on real estate, except a commercial loan, which does not contain a fixed rate or substantially equal payments for full amortization within the repayment period shall conform *[to the provisions of the commissioner's rules promulgated under section 1256 of this title, or]* to federal regulations on alternative mortgages where applicable by reason of federal law or action of the commissioner.

Sec. 16. 8 V.S.A. § 2222(a) and (d) are amended to read:

(a) For the purpose of discovering violations of this chapter, *[subchapter 6 of chapter 55, sections 1211, 1256, and 1260]* subchapter 2 of chapter 200 and sections 10403 and 10404 of this title, or chapters 4, 59 or 61 of Title 9, or securing information lawfully required thereunder, the commissioner may at any time, either personally or by a person or persons duly designated by him or her, investigate the loans and business and examine the books, accounts, records and files used therein every licensee and of every person whom the commissioner believes to be engaged in the business described in section 2201 of this title, whether such person shall act or claim to act as principal or agent, or under or without the authority of this chapter.

(d) Each licensee shall pay to the department examination, review and investigation fees as prescribed by section *[78]* 18 of this title, which fees shall be billed when they are incurred. In addition to the powers set forth in section 2210 of this title, the commissioner may maintain an action for the recovery of examination, review and investigation costs as prescribed in section *[78]* 18 of this title in any court of competent jurisdiction.

Sec. 17. 8 V.S.A. § 2224 is amended to read:

§ 2224. ANNUAL REPORT

Annually, on or before *[March 1]* May 1, each licensee shall file a report with the commissioner giving such relevant information as the commissioner reasonably may require concerning the business and operations during the preceding calendar year of each licensed place of business conducted by such licensee within the state. Such report shall be made under oath and shall be in the form prescribed by the commissioner, who shall make and publish annually an analysis and recapitulation of su eports.

Sec. 18. 8 V.S.A. § 2402(b) is amended to read:

(b) An independent trust company formed and authorized under this chapter shall have the same fiduciary powers, duties and obligation as a *[bank]* financial institution operating a trust department under chapter *[59]* 204, subchapter 4 of this title. An independent trust company formed under this title shall have the privileges and be subject to the provisions granted or contained in the general law governing the company and in this chapter, except where the general law go the company is inconsistent with this chapter. In case of conflict between the general law governing the company and this chapter, this chapter shall control. Such companies shall not be required to make any annual report except as provided in this chapter. Except as provided in this chapter, chapter *[59]* 204, subchapter 4 and *[chapter 62]* section 12602 of this title, no person shall engage in a trust business in this state without first obtaining a certificate of authority e commissioner.

Sec. 19. 8 V.S.A. § 2403(e) is amended to read:

(e) Each application for a certificate of authority shall be accompanied by an application fee as provided in section *[78]* 19 of this title, for new financial institutions.

Sec. 20. 8 V.S.A. § 2405(f) is amended to read:

(f) Any independent trust company that maintains one or more offices in this state may be assessed and, if assessed, shall pay assessment and examination fees at a rate determined by the commissioner pursuant to sections *[78 and 504]* 18 and 19 of this title.

Sec. 21. 8 V.S.A. § 2406(b) is amended to read:

(b) For purposes of this section, an independent trust company organized under the laws of a jurisdiction other than Vermont shall mean an entity that is organized and regulated in a manner that is substantially similar to an independent trust company formed under this chapter by whatever name, but which is not a *[bank or special purpose bank]* financial institution within the meaning of section 11101(32) of this title.

Sec. 22. 8 V.S.A. § 2411 is amended to read:

§ 2411. UNSAFE CONDITION; RECEIVERSHIP

If the commissioner finds a deficiency in capital or other unsafe or unsound condition of an independent trust company has not been remedied within the time prescribed under an order of the commissioner issued pursuant to this chapter, the commissioner may apply to the superior court in Washington County, to be appointed receiver for the liquidation or rehabilitation of the company. The expense of the receivership shall be paid out of the assets of the independent trust company. The provisions of chapt er *[63]* 209, subchapters 2, 3 and 4 of this title shall apply to an independent trust company formed or regulated under this chapter as if the independent trust company were a *[bank]* financial institution to the extent applicable.

Sec. 23. 11 V.S.A. § 3012(b) is amended to read:

(b) A limited liability company or a foreign limited liability company engaging in a business subject to any other provisions of law of this state governing or regulating business may be formed or authorized to transact business under this chapter only if permitted by, and subject to all limitations of, the other statute. The following shall not be formed or authorized to transact business under this chapter:

(1) *[banks, savings and loan associations and]* credit unions regulated under Title 8.

(2) insurance companies regulated under Title 8.

(3) railroad companies regulated under Title 19.

Sec. 24. 11 V.S.A. § 3291(a)(2)(A) is amended to read:

(a)(1) Any lawful partnership may become a limited liability partnership pursuant to this section.

(2) A limited liability partnership or a foreign limited liability partnership engaging in a business subject to any other provisions of law of this state governing or regulating business may be formed or authorized to transact business under this chapter only if permitted by, and subject to all limitations of, the other statute. The following shall not be formed or authorized to transact business under this chapter:

(A) *[banks, savings and loan associations and]* credit unions regulated under Title 8.

Sec. 25. 26 V.S.A. § 2214(c) is amended to read:

(c) If a deposit is not reasonably expected to earn a substantial amount of interest, the broker shall place the deposit in a pooled interest-bearing trust or escrow account and direct that the interest be remitted to the Vermont housing finance agency in accordance with the provisions of 8 V.S.A. § *[920]* 14210.

Sec. 26. 8 V.S.A. § 4871 is amended to read:

§ 4871. EXAMINATIONS BY COMMISSIONER

The commissioner shall examine without notice the condition and affairs of each licensee at least once every two years. In connection with any examination, the commissioner may examine on oath any licensee, and any director, officer, employee, customer, creditor or stockholder of a licensee, concerning the affairs and business of the licensee. The commissioner shall ascertain whether the licensee transacts its business in the manner prescribed by law and the regulations issued hereunder. Failure to pa y the examination fee as prescribed in *[section 78]* sections 18 and 11501 of this title within *[thirty]* 30 days of receipt of demand from the commissioner shall automatically suspend the license until the fee is paid. In the investigation of alleged violations of this chapter, the commissioner may compel the attendance of any person or the production of any books, accounts, records and files used therein; and may examine under oath all persons in attendance pursuant thereto.

Sec. 27. SECTIONS REPEALED

Sections 1 through 79, 501 through 1709, 1831 through 1917 and 2301 through 2304 of Title 8 are repealed.

Sec. 28. 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 sections repealed in Sec. 21 of this act shall continue in full force and effect until modified or repealed.

Sec. 29. TRANSITIONAL PROVISIONS

(a) This act which enacted chapters 200 through 210 of Title 8 and repealed the sections referred to in Sec. 21 of this act applies to all bank agencies, branches and offices, bank and trust companies, banks, commercial banks, cooperative savings and loan, savings banks, both stock and mutual, and trust subsidiaries 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 bank agenc ies, branches and offices and bank and trust companies, banks, commercial banks, cooperative savings and loan, savings banks, both stock and mutual, and trust subsidiaries 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 eff ect; 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.

Sec. 30. RECIPROCITY SECTION

In the event the provision on reciprocity of the establishment of de novo interstate branches, 8 V.S.A. § 15202(b)(2), is declared void or any part of it declared invalid, then all Vermont financial institutions or national financial institutions with their principal place of business in this state that are merged or consolidated or whose branches are acquired to establish one or more interstate branches in this state after the provision is declared void or the part of it is declared invalid shal l be required to be in existence for at least five years before it or they may be merged, consolidated or acquired, and the de novo establishment of interstate branches will no longer be permitted in this state and the provisions that so provide shall be amended to conform to the provisions of this section. The commissioner shall be authorized to promulgate a rule that incorporates the provisions of this section, provided, however, the provisions of this section shall be given full force and effect whether or not such a rule is promulgated by the commissioner.

Sec. 31. 27 V.S.A. § 410 is added to read:

§ 410. LIEN PRIORITIES

(a) Rules of Construction. This section is intended to clarify existing law governing the priority of real estate mortgages. In the case of conflict of this section with any other provision of law, this section will control.

(b) Closed-End Mortgages; Future Advances. Any closed-end mortgage so written as to secure a present debt and any future advances by the mortgagee or an assignee shall be a lien upon the mortgaged property for the full amount of the debt (including future advances) directly created between the mortgagor and the mortgagee and between the mortgagor and an assignee of the mortgagee after assignment, due to the mortgagee or assignee at any given time, provided that, if the mortgaged property includes a homestead, the spouse of the mortgagor shall consent in writing to the creation of any subsequent indebtedness. Any such closed-end mortgage may be assigned for the full amount due thereon at the time of the assignment.

(c) Open-end Mortgages.

(1) Any sum which shall be lent or relent by the mortgagee to the mortgagor at any time after the recording of an open-end mortgage that secures such sum shall be equally secured with and have the same priority as would any such sum disbursed as of the time of the recording of such mortgage. Notwithstanding the foregoing, the priority afforded under this section shall apply only to

(A) the principal sum so loaned or reloaned, up to the amount specified in such mortgage as the maximum sum intended to be secured thereby;

(B) interest on the principal amount to which such priority applies; and

(C) all charges and fees other than principal and interest that are secured by such mortgage.

In the event that an open-end mortgage is amended to increase the amount intended to be secured thereby, such mortgage shall be deemed to have been recorded, with respect only to the amount of such increase, at the time such amendment is recorded. If the mortgaged property includes a homestead, the consent of the spouse to the open-end mortgage shall be deemed to constitute a consent to any debt secured thereby which is then existing or which is later created pursuant to the loan or credit plan, to t he extent of the lien priority created herein.

(2) At any time after the termination of the authority of all persons to borrow sums pursuant to a loan or credit plan secured by an open-end mortgage, the holder of such mortgage shall, within ten business days of the request of any person with an interest in the mortgaged real estate, furnish to such person an executed and acknowledged written notice stating that such authority has terminated and stating the amount of the loans secured by such mortgage that remain outstanding on the date of such no tice, which notice may be recorded.

(d) Subsequent Mortgages. A subsequent closed-end or open-end mortgage on the same premises which secure an earlier recorded open-end or closed-end mortgage shall be inferior in priority to the prior recorded mortgage unless the second mortgagee in writing notifies the holders of prior recorded mortgages of the incidence of the subsequent mortgage. In such case, indebtedness created under such earlier recorded mortgages subsequent to the notice by the holder of the subsequent mortgage shall be infe rior in priority to the lien of the subsequent mortgage. Notwithstanding the foregoing, the receipt by the holder of an open-end mortgage of a notice of subsequent mortgage, as contemplated in this subsection, shall not affect the priority of subsequent advances or re-advances under the open-end mortgage, up to the maximum sum stated in the mortgage intended to be secured thereby.

(e) Definitions. For purposes of this section, the following definitions shall apply:

(1) "Closed-end mortgage" shall mean a mortgage of real estate securing a loan, pursuant to which (A) the lender does not contemplate repeated transactions; and (B) the amount of the credit that may be extended from time to time is generally not made available to the extent that any outstanding balance is repaid. A mortgage may constitute a closed-end mortgage notwithstanding that it contains a clause providing that the mortgage shall secure a present and any future advances to the mortgag or.

(2) "Open-end mortgage" shall mean a mortgage of real estate the terms of which provide that it secures sums lent by the mortgagee to the mortgagor from time to time pursuant to a credit plan which the creditor reasonably contemplates repeated transactions, which prescribes the terms of such transactions, and which provides for a finance charge which may be computed from time to time on the outstanding unpaid balance. A credit plan may qualify as open-end under this section even if credit information is verified from time to time.

Sec. 32. 32 V.S.A. § 5836 is amended to read:

§ 5836. FRANCHISE TAX ON *[BANKING CORPORATIONS AND LOAN ]*

*[ASSOCIATIONS]* FINANCIAL INSTITUTIONS

(a) A tax is imposed for each calendar month or part thereof upon the franchise or privilege of doing business in this state of every corporation which is a *[bank, savings bank, savings institution, trust company, and every savings and loan association, or building and loan association,]* financial institution as defined in section 11101(32) of Title 8 that has a business location in this state; provided, however, that a merchant bank organized under section 12603 of Title 8 and an uni ed bank organized under section 12604 of Title 8 shall not be considered to be financial institutions for purposes of the tax imposed by this section.

* * *

(i) An independent trust company established pursuant to chapter 77 of Title 8 is not a *[bank, or trust company]* financial institution within the meaning of this section.

* * *

Sec. 33. EFFECTIVE DATE

This act shall take effect January 1, 2001.

The committee further recommends that, after passage, the title of the bill be amended to read: AN ACT RELATING TO THE MODERNIZATION OF THE LAWS RELATED TO BANKS AND BANKING