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Title 8: Banking and Insurance

Chapter 203: ORGANIZATION AND MANAGEMENT OF MUTUAL AND COOPERATIVE FINANCIAL INSTITUTIONS

  • Subchapter 001: 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. The application 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:

    (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 for 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 that 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 subsection 11702(c) of this title. (Added 1999, No. 153 (Adj. Sess.), § 2, eff. Jan. 1, 2001.)

  • § 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 subchapter 7 of chapter 201 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 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. (Added 1999, No. 153 (Adj. Sess.), § 2, eff. Jan. 1, 2001.)

  • § 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, or 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. (Added 1999, No. 153 (Adj. Sess.), § 2, eff. Jan. 1, 2001.)

  • § 13104. Submission to Secretary of State

    Following the meeting required under subdivision 13103(e)(1) of this title 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 State shall file the organizational documents according to the provisions of law. The filing of the organizational documents by the Secretary of State shall not authorize the transaction of business by the financial institution until all conditions of this subchapter are satisfied. (Added 1999, No. 153 (Adj. Sess.), § 2, eff. Jan. 1, 2001.)

  • § 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. (Added 1999, No. 153 (Adj. Sess.), § 2, eff. Jan. 1, 2001.)

  • § 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 filed. 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. (Added 1999, No. 153 (Adj. Sess.), § 2, eff. Jan. 1, 2001.)

  • § 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 the 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. (Added 1999, No. 153 (Adj. Sess.), § 2, eff. Jan. 1, 2001.)


  • Subchapter 002: 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 subchapter. (Added 1999, No. 153 (Adj. Sess.), § 2, eff. Jan. 1, 2001.)

  • § 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. (Added 1999, No. 153 (Adj. Sess.), § 2, eff. Jan. 1, 2001.)

  • § 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. (Added 1999, No. 153 (Adj. Sess.), § 2, eff. Jan. 1, 2001.)


  • Subchapter 003: 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. (Added 1999, No. 153 (Adj. Sess.), § 2, eff. Jan. 1, 2001.)

  • § 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 pledged.

    (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 has 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. (Added 1999, No. 153 (Adj. Sess.), § 2, eff. Jan. 1, 2001.)

  • § 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 publication 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. (Added 1999, No. 153 (Adj. Sess.), § 2, eff. Jan. 1, 2001.)


  • Subchapter 004: 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. (Added 1999, No. 153 (Adj. Sess.), § 2, eff. Jan. 1, 2001.)

  • § 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 subsection 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. (Added 1999, No. 153 (Adj. Sess.), § 2, eff. Jan. 1, 2001.)

  • § 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) 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 such 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. (Added 1999, No. 153 (Adj. Sess.), § 2, eff. Jan. 1, 2001.)


  • Subchapter 005: 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 becomes 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 in this subsection.

    (1) The chair 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 chair 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. (Added 1999, No. 153 (Adj. Sess.), § 2, eff. May 24, 2000.)


  • Subchapter 006: 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. (Added 1999, No. 153 (Adj. Sess.), § 2, eff. Jan. 1, 2001.)