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Title 8: Banking and Insurance

Chapter 221: ORGANIZATION AND MANAGEMENT OF CREDIT UNION

  • Subchapter 001: Organization and Commencing Business
  • § 31101. Application to organize

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    (10) any additional information the Commissioner may require.

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

    (c) Publication of notice. After determining that the application required by this section is complete, the Commissioner shall advise the organization or the organizers of the entity to publish any notice that will be required by the Commissioner under subchapter 8 of chapter 220 of this title. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

  • § 31102. Issuance of certificate of approval; refusal to issue certificate of approval

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

    (b) Conditions. A grant of a certificate of approval may include such terms and conditions as the Commissioner determines necessary. These may include conditions regarding the organizational form of the credit union under this chapter.

    (c) Effect of refusal to issue certificate of approval. If the Commissioner refuses to issue a certificate of approval, the organizers may file a new application after one year from the date of the refusal. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

  • § 31103. Requirements to commence business; minimum initial share deposits; certificate of authority

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

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

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

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

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

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

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

    (4) The secretary shall file copies of the organizational documents with the Commissioner within 10 days after their adoption. Within 15 business days of receipt, the Commissioner shall, after examining such organizational documents for conformance with the requirements of this title and other applicable law, approve or disapprove the filed documents. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

  • § 31104. Submission to Secretary of State

    Following the meeting required under subdivision 31103(e)(1) of this title and approval of the organizational documents by the Commissioner under subdivision 31103(e)(4) of this title, the directors so elected shall submit to the Secretary of State an attested copy of the credit union's organizational documents as required by Title 11B. The Secretary of State shall determine whether such organizational documents satisfy the requirements of Title 11B. If such requirements are met, the Secretary of State shall file the organizational documents according to the provisions of law. The filing of the organizational documents by the Secretary of State shall not authorize the transaction of business by the credit union until all conditions of this subchapter are satisfied. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

  • § 31105. Payment of share deposits

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

    (b) At such time as the credit union has received in cash the minimum share deposits required in section 31103 of this title, a complete list of the share depositors, with the name, address, occupation, and the amount of the share deposited by each shall be filed with the Commissioner, which list shall be verified by an officer and the secretary of the credit union. Such deposits shall be handled by the credit union in accordance with subchapter 5 of this chapter. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

  • § 31106. Certificate to commence business; insurance; bond

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

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

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

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

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

    (f) In the case of a violation of this provision, the officers and directors assenting thereto shall be personally liable for all debts incurred before the certificate is issued and filed. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

  • § 31107. Failure to commence business

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

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

    (c) Upon the expiration of the time periods set forth in subsections (a) and (b) of this section, the contributors of initial share deposits of such proposed credit union shall be entitled to the return of any amounts which they have paid to the credit union, and all expenses incurred in the organization of the proposed credit union shall be borne by the original organizers who were named in the application for permission to organize. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

  • § 31108. Amendment to articles of incorporation

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

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

    (c) Following the Commissioner's approval of the amendment, the credit union shall submit the amendment to the Secretary of State for filing as required by Title 11B. (Added 2005, No. 16, § 1, eff. July 1, 2005.)


  • Subchapter 002: Bylaws and Name
  • § 31201. Bylaws; amendment of bylaws

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

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

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

    (3) the par value of shares;

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

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

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

    (7) the powers and duties of board officers;

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

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

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

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

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

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

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

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

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

    (c) The credit union shall file with the Commissioner, within ten days after its adoption, one copy of any proposed amendment. Any amendment to the bylaws of a credit union shall become effective only upon the written approval of the Commissioner. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

  • § 31202. Credit union name

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

    (b) No person, other than a credit union incorporated under this title, the acts of other states, the Federal Credit Union Act, an association of credit unions, or an organization or corporation, whose membership or ownership is limited to credit unions or credit union organizations, may use a name or title containing the phrase "credit union" or any derivation thereof, or may represent itself as a credit union or conduct business as a credit union. (Added 2005, No. 16, § 1, eff. July 1, 2005.)


  • Subchapter 003: Governing Body, Officers, and Committees
  • § 31301. Number and election of directors

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

    (b) Each director shall hold office for the term provided in the bylaws as long as the director is qualified to serve and until the director's successor has qualified. The term of a director may not exceed three years. A director may serve more than one term. If directors are elected for terms in excess of one year, their terms of office shall be staggered so that, insofar as possible, an equal number expires each year. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

  • § 31302. Duties of governing body

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

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

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

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

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

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

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

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

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

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

    (10) authorize the conveyance of property.

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

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

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

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

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

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

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

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

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

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

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

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

    (23) establish other policies as the governing body deems reasonable or prudent, and such policies as required by law, by regulation, or by the Commissioner. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

  • § 31303. Executive committee

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

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

    (c) The executive committee shall keep complete minutes of all of its actions, copies of which shall be submitted to the governing body at its next meeting. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

  • § 31304. Meetings of governing body

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

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

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

    (d) Unless a greater number is required by the bylaws, a majority of the governing body shall constitute a quorum. The act of a majority of the directors present at a meeting at which a quorum is present shall be the act of the governing body unless the act of a greater number is required by this part or the bylaws of the credit union. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

  • § 31305. Officers

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

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

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

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

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

    (f) Any person elected to fill a vacancy caused by death, resignation, or removal of an officer shall be appointed by the governing body to serve for the unexpired term of such office until his or her successor is duly elected and qualified. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

  • § 31306. Supervisory committee

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

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

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

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

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

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

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

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

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

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

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

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

    (1) verification of share and loan accounts of all members;

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

    (3) verification of accounts and passbooks in accordance with the requirements of the National Credit Union Administration.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    (o) For purposes of this section, a recordkeeping deficiency is "serious" if the Commissioner reasonably believes that the governing body and the management of the credit union have not met financial reporting objectives in a timely manner and established practices and procedures sufficient to safeguard members' assets. A serious recordkeeping deficiency is "persistent" when it continues beyond a usual, expected, or reasonable period of time. (Added 2005, No. 16, § 1, eff. July 1, 2005; amended 2007, No. 178 (Adj. Sess.), § 4.)

  • § 31307. Credit committee; credit manager

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

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

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

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

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

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

    (g) An applicant for an extension of credit or release or substitution of collateral that has been disapproved by a credit manager or loan officer may appeal to the credit committee or, in the absence of a credit committee, to the governing body. In those instances where the credit committee made the initial denial of an applicant's request for an extension of credit or release or substitution of collateral, the applicant may appeal to the governing body. Any such appeal to the credit committee or the governing body, as applicable, shall be acted upon at the next regular meeting of the credit committee or governing body. If the initial denial of the loan application has not been reviewed by the credit committee or governing body, as applicable, the notice of loan denial given to the member shall include a notice that the member has a right, upon written request, to appeal the loan denial to the credit committee or the governing body, as applicable. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

  • § 31308. Duties of officers, directors, and committee members

    (a) All officers, directors, and members of any committees of a credit union subject to the laws of this State under this title shall comply with the standards for such officers and directors established under Title 11B. Members of committees of credit unions shall comply with the same standards as directors.

    (b) All officers, directors, and members of the supervisory or credit committees of a credit union subject to the laws of this State under this title shall administer the affairs of the credit union fairly and impartially and without discrimination in favor of or against any particular member.

    (c) All executive officers, directors, and committee members shall comply with the conflict of interest standards established pursuant to section 31313 of this title. (Added 2005, No. 16, § 1, eff. July 1, 2005; amended 2011, No. 21, § 11.)

  • § 31309. Oaths of office; certificate of election

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

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

    (c) The oath of office and the certificate of election shall be executed on forms prepared by the Department, and one copy of each shall be filed with the Department within 15 days after the election or appointment. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

  • § 31310. Prohibited management interlocks

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

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

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

    (2) a corporate credit union;

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

    (4) any other relationship otherwise permitted under guidelines or regulations of federal supervisory authorities or the Commissioner adopted from time to time, relating to management interlocks. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

  • § 31311. Suspension and removal

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

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

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

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

    (b) The governing body of a credit union shall have the power to suspend at any time, by a two-thirds' vote of its members, at a regular or special meeting, any director, member of a governing-body-appointed committee, officer, or agent for good cause, including:

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

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

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

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

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

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

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

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

    (e) The supervisory committee shall have the power to suspend at any time, by a two-thirds' vote of its members at a meeting called for that purpose, any director, member of a governing-body-appointed committee, officer, or agent for cause. The suspension shall take effect immediately, and the Commissioner shall be notified promptly of such suspension. Not later than seven business days after the effective date of the suspension, the supervisory committee shall cause notice to be given to all members of the credit union of a special meeting of members to be held for the purpose of hearing the report of the supervisory committee regarding the suspension and voting on removal, provided such notice shall not be given if the person who is subject to suspension resigns. The special meeting shall be held no more than 21 business days after the date of suspension. The membership of the credit union shall have the authority to accept or reject the report of the supervisory committee. The supervisory committee shall take any action with respect thereto as the members deem necessary. If such action involves removal, the credit union shall promptly notify the Commissioner of such removal. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

  • § 31312. Vacancies

    A vacancy on the governing body, the supervisory committee, or any other governing-body-appointed or member-elected committee that exists due to the death, resignation, or removal of a director or committee member shall be filled by majority vote of the remaining directors, regardless of whether the remaining directors constitute a quorum. A director or committee member appointed by the governing body to fill a vacancy on a committee where the members elect the members of such committee shall hold office until the next annual meeting, at which time the members of the credit union shall vote to fill the remainder of the unexpired term. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

  • § 31313. Conflict of interest

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

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

    (1) the credit committee, if any;

    (2) the supervisory committee; or

    (3) the governing body.

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

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

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

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

    (A) salaries to employees;

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

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

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

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

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

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

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

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

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

    (C)(1) a partnership in which any insider or his or her immediate family member is a general partner or a limited partner with an interest of ten percent or more.

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

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

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

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

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

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

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

    (m) A credit union shall not grant a member business loan if any additional income received by the credit union or senior management of the credit union is tied to the profit or sale of the business or commercial endeavor for which the loan is made. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

  • § 31314. Compensation; insurance; expenses

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

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

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

    (d) Notwithstanding the foregoing, directors, officers of the governing body, and committee members may be compensated for services, other than duties performed as such director, officer of the governing body, or committee member, in accordance with the conflict-of-interest provision set forth in section 31313 of this title. (Added 2005, No. 16, § 1, eff. July 1, 2005.)


  • Subchapter 004: Membership
  • § 31401. Field of membership

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

    (A) a single common bond membership;

    (B) a multiple common bond membership;

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

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

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

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

    (B) organizers and employees of such credit union;

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

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

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

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

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

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

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

    (2) The Commissioner may approve an amendment to the bylaws of a credit union to change its field of membership whenever the Commissioner determines that continued operation of the credit union without the proposed amendment may result in liquidation or merger of such credit union. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

  • § 31402. Membership application

    The governing body shall act upon applications for membership as prescribed in its bylaws. The governing body may delegate its authority to act on applications for membership as provided in subdivision 31302(2) of this title. A person denied membership by a membership officer or membership committee may appeal the denial to the governing body. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

  • § 31403. Liability of members

    The members of the credit union shall not be personally or individually liable for the acts, debts, liabilities, or obligations of the credit union or the payment of the credit union's debts solely by virtue of their membership in the credit union. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

  • § 31404. Membership termination

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

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

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

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

    (e) A member who has been expelled as provided in this section may not be readmitted to membership except upon approval by a majority vote of the governing body after application and proof that the applicant remains within the credit union's field of membership, has adequately explained, addressed, or remedied the conditions leading to expulsion, and will abide by the terms and conditions of membership. Not more than one such application for readmission may be made within any 12-month calendar period. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

  • § 31405. Suspension of services

    A credit union may suspend or limit the use of services to credit union members who have caused a loss to the credit union, who have violated the membership agreement or any policy adopted by the governing body, or who are physically or verbally abusive to credit union members or staff. Members with suspended or limited services may maintain a share account and may continue to vote at annual and special membership meetings. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

  • § 31406. Meetings of members

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

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

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

    (d) An organization having membership in the credit union may be represented and have its vote cast by an officer of the organization or its designated agent so authorized by the organization's governing body as evidenced by a certified copy of such authorization provided to the credit union before the vote is cast. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

  • § 31407. Special membership meetings

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

    (b) The bylaws may also prescribe the manner in which a special meeting of the members may be called by the members or by the governing body, or both. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

  • § 31408. Notice to members of annual and special meeting

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

    (b) Notice of any special meeting shall state the purpose for which it is to be held, and no business other than that related to the purpose set forth in the notice shall be transacted at the special meeting. (Added 2005, No. 16, § 1, eff. July 1, 2005.)


  • Subchapter 005: Net Worth; Reserves; Dividends
  • § 31501. Net worth

    Every Vermont credit union shall establish and maintain adequate levels of net worth pursuant to standards established by the Commissioner, as amended from time to time. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

  • § 31502. Regular reserve account

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

    (b) Any sums recovered on items previously charged to the regular reserve account shall be credited to the regular reserve account.

    (c) Except as permitted under subsection 31506(b) of this title, the governing body of a credit union shall not transfer any part of the regular reserve account to the undivided earnings account without the prior written approval of the Commissioner. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

  • § 31503. Allowance for loan and lease loss

    (a) An allowance for loan and lease loss account shall be established and maintained in an amount that represents the current estimated loss on loans and leases. The allowance for loan and lease loss account requirement shall be computed and adjusted through the provision for loan and lease loss expense account prior to the payment of dividends. This account shall be calculated in accordance with standards established by the Commissioner, as the same may be amended from time to time.

    (b) Any sums recovered on items previously charged to allowance for loan and lease loss account shall be credited to the allowance for loan and lease loss account. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

  • § 31504. Unrealized gain or loss on available for sale securities

    (a) An unrealized gain or loss on available for sale securities account shall be established and maintained in an amount that represents the current estimated gain or loss on investments.

    (b) Changes to the allowance for unrealized gain or loss on securities account resulting from appreciation or depreciation in the value of shares or securities acquired in accordance with the provisions of this chapter shall be accounted for in accordance with standards established by the Commissioner, as the same may be amended from time to time. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

  • § 31505. Additional or special reserves

    If the Commissioner determines that any reserve account is inadequate for any reason, he or she may require the establishment of such additional or special reserves as he or she deems necessary for the protection of the members. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

  • § 31506. Dividends to shareholders; conditions precedent

    (a) The governing body of any credit union may declare a dividend from the credit union's current period undivided earnings, which dividend shall be calculated as provided in this subchapter for any period determined by the governing body.

    (b)(1) The governing body may declare a dividend from the undivided earnings of a prior period of the credit union without the prior approval of the Commissioner if, following such distribution, the remaining net worth of the credit union will be more than a two-percent margin above the greatest of:

    (A) the minimum net worth required by this subchapter or by standards established by the Commissioner;

    (B) the net worth ratio requirement of a well-capitalized credit union as defined under the prompt corrective action guidelines of the National Credit Union Administration; or

    (C) such other net worth requirement as established for the credit union by the Commissioner.

    (2) Any other distribution of earnings from a prior period of the credit union may be made only with the prior written approval of the Commissioner.

    (c)(1) Earnings from all sources for the period for which a dividend is to be paid, except as provided in sections 31502, 31503, 31504, and 31505 of this title, may be credited to the profit and loss account of the credit union, and the following items shall be charged against such account in the determination of the amount available for dividends to shareholders:

    (A) all operating expenses paid or incurred by the credit union in the management of its affairs, the collection of its debts, or the transaction of its business;

    (B) the interest paid or accrued on debts owed by the credit union;

    (C) all losses projected or incurred on loans and leases in excess of the allowance for loan and lease loss account; and

    (D) all losses projected or incurred on investments according to generally accepted accounting principles.

    (2) The credit balance of the profit and loss account as thus determined shall constitute the current period net earnings of the credit union at the close of such period, and shall be applicable to the payment of dividends except as provided in subsection (d) of this section.

    (d) No dividend shall be credited or paid without the prior approval of the Commissioner, unless the credit union has:

    (1) Made good any existing impairment of its net worth below the standards established by the Commissioner.

    (2) Carried to its reserve account such part of its net earnings as may be required by the standards established by the Commissioner, as the same may be amended from time to time.

    (3) Carried to its allowance for loan and lease loss account such part of its earnings as is required by section 31503 of this title.

    (4) Carried to its special reserve account such part of its earnings as is required by section 31505 of this title.

    (e) Dividends may be paid on shares and share certificates at various rates with due consideration of the conditions that pertain to each type of account such as minimum balance, notice, and time requirements.

    (f) Subject to the liability and standards set forth in 11B V.S.A. § 8.33, other than subdivision 8.33(b)(2), when any dividend shall be declared in excess of the amount available for dividends as determined in accordance with the provisions of this section, the directors voting for such dividend may be held jointly and severally liable to the credit union for the amount of the excess so declared, unless specifically permitted and approved by the Commissioner. The provisions of 11B V.S.A. § 8.33(b)(2) shall not apply to dividends declared by the directors. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

  • § 31507. Standards

    For purposes of this subchapter, in the absence of standards otherwise prescribed by the Commissioner, a credit union shall follow the standards established by the National Credit Union Administration (NCUA). In the event standards promulgated by the NCUA require the credit union to accumulate or maintain accounts in an amount in excess of the standard established by the Commissioner, the credit union shall accumulate and maintain such accounts in a manner sufficient to satisfy the requirements of the NCUA. (Added 2005, No. 16, § 1, eff. July 1, 2005.)


  • Subchapter 006: Bonds and Insurance
  • § 31601. Share insurance

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

    (b) A credit union insured under this section shall have the duty and power to comply with all statutes and regulations governing insurance of shares by the NCUA; provided that nothing contained in this section shall be construed as repealing, modifying, or impairing any powers, duties, rights, or responsibilities of the Commissioner, or the credit union so insured, under the provisions of this title. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

  • § 31602. Bonds and insurance

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

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

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

    (d) The Commissioner may require a credit union authorized to do business in this State under this title to secure additional bonds and insurance. (Added 2005, No. 16, § 1, eff. July 1, 2005.)


  • Subchapter 007: Corporate Credit Unions
  • § 31701. General application

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

    (b) A corporate credit union shall be federally insured by the National Credit Union Administration (NCUA), or its successor, and shall be subject to such rules, regulations, and orders as the NCUA or its successor deems appropriate. In the event state laws or regulations are inconsistent with the regulations of the NCUA or its successor, the federal regulations will supersede. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

  • § 31702. Organization

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

    (b) A corporate credit union shall use the word "corporate" in its name. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

  • § 31703. Membership

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

    (b) A member of the corporate credit union shall designate one person to be its authorized representative to attend meetings of the corporate credit union and to vote on behalf of the member. A credit union member of the corporate credit union may only designate a member of its own credit union as its authorized representative. No person may serve as the authorized representative of more than one member of the corporate credit union. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

  • § 31704. Purposes

    A corporate credit union is a credit union whose members consist primarily of other credit unions and whose purposes are to:

    (1) accumulate and prudently manage the liquidity of its member credit unions through interlending and investment services;

    (2) act as an intermediary for credit union funds between members and other corporate credit unions;

    (3) obtain liquid funds from other credit union organizations, financial intermediaries, and other sources;

    (4) foster and promote in cooperation with other state, regional, and national corporate credit unions and credit union organizations or associations the economic security, growth, and development of member credit unions; and

    (5) Perform such other financial services of benefit to its members that are authorized by the Commissioner. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

  • § 31705. Powers

    A corporate credit union shall enjoy the powers and privileges of any other credit union incorporated under this part in addition to those powers enumerated in this subchapter, notwithstanding any limitation or restrictions found elsewhere in this part. The Commissioner may adopt such rules and regulations concerning the establishment and operation of corporate credit unions as he or she deems necessary and proper. Subject to such regulations, a corporate credit union may:

    (1) accept shares or deposits in any form from its members, from other state, regional, or national corporate credit unions, and from credit union organizations and associations;

    (2) make loans to its members, to other credit unions, and to other state, regional, and national corporate credit unions, organizations, and associations of credit unions;

    (3) establish lines of credit for members and participate with other credit unions in making loans to its members under the terms and conditions determined by the board of directors;

    (4) invest in the shares of or make deposits in credit unions;

    (5) borrow money, accept demand deposits, and issue notes or debentures;

    (6) acquire or sell the assets and assume the liabilities of a member; and

    (7) enter into agreements with credit unions to discount or purchase loans made pursuant to government-guaranteed loan programs, real estate loans made by members, or any obligations of the United States or any agency thereof held by members. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

  • § 31706. Reserves

    Each corporate credit union shall maintain such reserves and accounts as required by the rules and regulations of the National Credit Union Administration, or its successor, as amended from time to time. (Added 2005, No. 16, § 1, eff. July 1, 2005.)