The Vermont Statutes Online

Title 8: Banking and Insurance

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

• § 36101. Suspension, voluntary liquidation, and involuntary liquidation

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

  (b) Voluntary liquidation. At a meeting specially called to consider the matter, a majority of the entire membership may vote to dissolve the credit union if a copy of the notice was mailed to the members of the credit union at least 10 days prior to the meeting. Any member not present at the meeting may within the next 20 days vote in favor of dissolution by signing a statement in a form approved by the Commissioner, and the vote shall have the same force and effect as if cast at the meeting. The credit union shall thereupon immediately cease to do business except for the purposes of liquidation, and the chairperson of the governing body and secretary shall, within five days following the meeting, notify the Commissioner of the credit union’s intention to liquidate and shall include in the notification a list of the names and addresses of the directors and officers of the credit union.

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

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

  (e) NCUA as liquidating agent. In the case in which the administrator of the National Credit Union Administration is appointed liquidating agent, the Administrator shall have the right to be subrogated to the rights of the members of the liquidating credit union. (Added 2005, No. 16, § 1, eff. July 1, 2005; amended 2021, No. 105 (Adj. Sess.), § 344, eff. July 1, 2022.)

• § 36102. Involuntary merger of credit union

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

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

  (2) other alternatives are not reasonably available; and

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

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

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

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

  (d) Notwithstanding any other provision of law, the Commissioner may waive the need for a membership vote of both the acquired and continuing credit union to approve the involuntary merger and may waive the requirement that the governing body of the acquired credit union approve the involuntary merger. (Added 2005, No. 16, § 1, eff. July 1, 2005.)

• § 36103. Conservatorship

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

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

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

  (3) The Attorney General notifies the Commissioner in writing that a credit union has been found guilty of a criminal offense.

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

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

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

  (7) The credit union is critically undercapitalized.

  (b) Not later than 14 days after the date on which the Commissioner takes possession and control of the business and assets of a credit union pursuant to subsection (a) of this section, such credit union may apply to the Superior Court of Washington County for an order requiring the Commissioner to show cause why the Commissioner should not be enjoined from continuing such possession and control. Except as provided in this subsection, no court may take any action, except at the request of the Commissioner by regulation or order, to restrain or affect the exercise of powers or functions of the Commissioner as conservator.

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

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

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

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

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

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

  (g) The authority granted by this subsection is in addition to all other authority granted to the Commissioner under this title. (Added 2005, No. 16, § 1, eff. July 1, 2005; amended 2017, No. 11, § 8.)

• § 36104. Appointment of director and managing officers of troubled credit unions

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

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

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

  (3) is being operated in an unsafe and unsound manner. (Added 2005, No. 16, § 1, eff. July 1, 2005.)