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S.B. 235

             1     

CREDIT UNION AND ASSOCIATION

             2     
CONVERSIONS

             3     
2001 GENERAL SESSION

             4     
STATE OF UTAH

             5     
Sponsor: Dan R. Eastman

             6      This act modifies the Financial Institutions Code to provide for the designation of credit
             7      unions as credit associations and the conversion of credit associations to mutual associations.
             8      This act modifies definitions. This act addresses restrictions on names of certain financial
             9      institutions. This act allows state mutual associations converted from credit associations to
             10      have one vote per member. This act provides the procedure for a credit union to be
             11      designated as a credit association. This act provides operational restrictions on credit
             12      associations and methods for expanding the limited field of membership of credit
             13      associations. This act provides triggers requiring conversion of a credit association to a state
             14      mutual association, the procedure to convert, and the impact of failing to convert.
             15      This act affects sections of Utah Code Annotated 1953 as follows:
             16      AMENDS:
             17          7-1-701, as last amended by Chapter 19, Laws of Utah 1997
             18          7-7-2, as last amended by Chapter 49, Laws of Utah 1995
             19          7-7-3.3, as last amended by Chapter 49, Laws of Utah 1995
             20          7-7-6, as last amended by Chapter 49, Laws of Utah 1995
             21          7-7-7, as last amended by Chapter 200, Laws of Utah 1994
             22          7-7-10, as last amended by Chapter 244, Laws of Utah 1985
             23          7-9-3, as last amended by Chapter 329, Laws of Utah 1999
             24          7-9-11, as last amended by Chapter 329, Laws of Utah 1999
             25          7-9-12, as last amended by Chapter 329, Laws of Utah 1999
             26          7-9-39, as last amended by Chapter 329, Laws of Utah 1999
             27          7-9-39.5, as enacted by Chapter 329, Laws of Utah 1999


             28          7-9-51, as enacted by Chapter 329, Laws of Utah 1999
             29          7-9-52, as enacted by Chapter 329, Laws of Utah 1999
             30          7-9-53, as enacted by Chapter 329, Laws of Utah 1999
             31      ENACTS:
             32          7-9-55, Utah Code Annotated 1953
             33          7-9-56, Utah Code Annotated 1953
             34          7-9-57, Utah Code Annotated 1953
             35          7-9-58, Utah Code Annotated 1953
             36          7-9-59, Utah Code Annotated 1953
             37      Be it enacted by the Legislature of the state of Utah:
             38          Section 1. Section 7-1-701 is amended to read:
             39           7-1-701. Representation and transacting business as financial institution restricted
             40      -- Restricted names -- Penalty.
             41          (1) As used in this section, "transact business" includes:
             42          (a) advertising;
             43          (b) representing oneself in any manner as being engaged in transacting business;
             44          (c) registering an assumed name under which to transact business; or
             45          (d) using an assumed business name, sign, letterhead, business card, promotion, or other
             46      indication that one is transacting business.
             47          (2) Unless authorized by the department or an agency of the federal government to do so,
             48      it is unlawful for any person to:
             49          (a) transact business as a:
             50          (i) bank;
             51          (ii) savings and loan association;
             52          (iii) savings bank;
             53          (iv) industrial loan corporation;
             54          (v) credit union;
             55          (vi) trust company; or
             56          (vii) other financial or depository institution; or
             57          (b) engage in any other activity subject to the jurisdiction of the department.
             58          (3) (a) Except as provided in Subsections (3)(b) through (d), only the following may


             59      transact business in this state under a name that includes "bank," "banker," "banking," "banque,"
             60      "banc," "banco," "bancorp," "bancorporation," any derivative of these words, or any other word
             61      or combination of words reasonably identifying the business of a bank:
             62          (i) a national bank;
             63          (ii) a bank authorized to do business under Chapter 3, Banks;
             64          (iii) a bank holding company; or
             65          (iv) an industrial loan corporation authorized to:
             66          (A) conduct business under Chapter 8, Industrial Loan Corporations; and
             67          (B) accept or hold deposit accounts insured by a federal deposit insurance agency.
             68          (b) A person authorized to operate in this state as a credit card bank, as defined in Section
             69      7-3-3 , may transact business under the name "credit card bank" and may not transact business
             70      under the name of "bank" unless it is immediately preceded by "credit card."
             71          (c) A nonbank subsidiary of a bank holding company may transact business under a name
             72      restricted in Subsection (3)(a) if the name is also part of the name of its parent holding company
             73      or is used for a group of subsidiaries of the parent holding company.
             74          (d) The Utah Bankers Association or other bona fide trade association of authorized banks
             75      may transact its affairs in this state under a name restricted under Subsection (3)(a) if it does not
             76      operate and does not hold itself out to the public as operating a depository or financial institution.
             77          (4) (a) Except as provided in Subsection (4)(b) or (b), only the following may transact
             78      business in this state under a name that includes "savings association," "savings and loan
             79      association," "building and loan association," "building association," any derivative of these words,
             80      or any other word or combination of words reasonably identifying the business of a savings and
             81      loan association:
             82          (i) a federal savings and loan association;
             83          (ii) a federal savings bank; or
             84          (iii) a savings and loan association authorized to do business under Chapter 7, Savings and
             85      Loan Associations Act.
             86          (b) A national bank may transact business under a name restricted in Subsection (4)(a) if
             87      the restricted words are part of the bank's corporate name.
             88          (c) Notwithstanding Subsection (4)(a), a credit association that, to comply with Section
             89      7-9-58 , converts to a state mutual association authorized to do business under Chapter 7, Savings


             90      and Loan Associations, may transact business in this state under a name that includes "credit
             91      association."
             92          (5) Only the following may transact business under the name "savings bank":
             93          (a) a depository institution listed in Subsection (3)(a);
             94          (b) a depository institution listed in Subsection (4)(a); or
             95          (c) a depository institution authorized under state law to operate in this state as a savings
             96      bank.
             97          (6) Only an industrial loan corporation authorized to do business under Chapter 8,
             98      Industrial Loan Corporations, may transact business in this state under a name that includes
             99      "industrial loan corporation," "ILC," "thrift," or any other word, combination of words, or
             100      abbreviation reasonably identifying the business of an industrial loan corporation.
             101          (7) (a) Except as provided in Subsection (7)(b), only a credit union authorized to do
             102      business under the laws of the United States or Chapter 9, Utah Credit Union Act, may transact
             103      business in this state under a name that includes "credit union" or any other word or combination
             104      of words reasonably identifying the business of a credit union.
             105          (b) The restriction in Subsection (7)(a) does not apply to the Utah League of Credit
             106      Unions, any credit union chapter, or any other association affiliated with the Utah League of Credit
             107      Unions that restricts its services primarily to credit unions.
             108          (8) (a) Except as provided in Subsection (8)(b), only a person granted trust powers under
             109      Chapter 5, Trust Business, may transact business in this state under a name that includes "trust,"
             110      "trustee," "trust company," or any other word or combination of words reasonably identifying the
             111      business of a trust company.
             112          (b) A business entity organized as a business trust, as defined in Section 7-5-1 , may use
             113      "business trust" in its name if it does not hold itself out as being a trust company.
             114          (9) The restrictions of Subsections (3) through (8) do not apply to:
             115          (a) the name under which an out-of-state depository institution operates a loan production
             116      office in this state, if the commissioner approves the name as not being reasonably likely to
             117      mislead the public;
             118          (b) the name under which a service organization of a financial institution transacts
             119      business, if the commissioner approves the name as not being reasonably likely to mislead the
             120      public;


             121          (c) the name under which a subsidiary of a depository or financial institution transacts
             122      business, if the commissioner approves the name as not being reasonably likely to mislead the
             123      public; or
             124          (d) a trade association or other nonprofit organization composed of members of a
             125      particular class of financial institutions using words applicable to that class.
             126          (10) (a) Upon written request, the commissioner may grant an exemption to this section
             127      if the commissioner finds that the use of an otherwise restricted name or word is not reasonably
             128      likely to cause confusion or lead the public to believe that the person requesting the exemption is
             129      a depository or financial institution or is conducting a business subject to the jurisdiction of the
             130      department.
             131          (b) In granting an exemption under Subsection (10)(a), the commissioner may restrict or
             132      condition the use of the name or word or the activities of the person or business as the
             133      commissioner considers necessary to protect the public.
             134          (11) (a) Each person, corporation, association, or other business entity and each principal
             135      and officer of a business entity violating this section is guilty of a class A misdemeanor. Each day
             136      of violation constitutes a separate offense.
             137          (b) In addition to a criminal penalty imposed under Subsection (11)(a), the commissioner
             138      may issue a cease and desist order against a person violating this section. The commissioner may
             139      impose a civil penalty of up to $500 for each day the person fails to comply with the cease and
             140      desist order.
             141          Section 2. Section 7-7-2 is amended to read:
             142           7-7-2. Definitions.
             143          As used in this chapter:
             144          (1) (a) "Association" means subject to this chapter:
             145          (i) a mutual or capital stock savings association[,];
             146          (ii) a savings and loan association[,];
             147          (iii) a mutual or capital stock savings bank[,]; or
             148          (iv) a building and loan association [subject to the provisions of this chapter, including
             149      all].
             150          (b) "Association" includes an out-of-state [associations] association qualified to do
             151      business in this state.


             152          (2) "Credit association" means a credit union that is designated as a credit association
             153      pursuant to Section 7-9-55 .
             154          [(2)] (3) "Federal association" means [a savings association, a savings and loan
             155      association, or a savings bank,] any of the following chartered by the Office of Thrift Supervision
             156      or successor federal agency[.]:
             157          (a) a savings association;
             158          (b) a savings and loan association; or
             159          (c) a savings bank.
             160          [(3)] (4) "Impaired condition" means a condition in which the assets of an association in
             161      the aggregate do not have a fair value equal to the aggregate amount of liabilities of the association
             162      to its creditors, including the holders of its savings accounts and all other persons.
             163          [(4)] (5) "Insured association" means an association the deposit accounts of which are
             164      insured by the Federal Deposit Insurance Corporation or any successor agency of the federal
             165      government.
             166          [(5)] (6) (a) "Liquid assets" means cash on hand and cash on deposit in federal home loan
             167      banks, federal reserve banks, state banks performing similar reserve functions, or in commercial
             168      banks, which cash is withdrawable upon not more than 30 days notice and which is not pledged
             169      as security for indebtedness.
             170          (b) Any deposits in a financial institution under the control or in the possession of any
             171      supervisory authority [shall] may not be considered as liquid assets.
             172          (c) "Liquid assets" also means obligations of, or obligations that are fully guaranteed as
             173      to principal and interest by, the United States, the Federal National Mortgage Association, the
             174      Government National Mortgage Association, any federal home loan bank, or this state, which
             175      obligations will mature in five years or less, and any other assets readily convertible into cash.
             176          [(6)] (7) "Out-of-state association" means an association whose home state is not Utah.
             177          [(7)] (8) (a) "Real estate loan" means:
             178          (i) any loan or other obligation secured by a lien on real estate in any state held in fee or
             179      in a leasehold[,]; and
             180          (ii) any transaction out of which a lien or its equivalent is created against real estate[,
             181      including].
             182          (b) "Real estate loan" includes:


             183          (i) the purchase of real estate in fee by an association; and
             184          (ii) the concurrent or immediate sale of the real estate on installment contract.
             185          [(8)] (9) "Savings liability" means the aggregate amount of savings accounts of depositors,
             186      including earnings credited to those accounts, less redemptions and withdrawals.
             187          [(9)] (10) "Service organization" means an organization substantially all the activities of
             188      which consist of the following performed primarily for financial institutions:
             189          (a) originating, purchasing, selling, or servicing loans and participating interests [therein,
             190      or];
             191          (b) clerical, bookkeeping, accounting, statistical, or other similar functions [or any];
             192          (c) a combination [thereof performed primarily for financial institutions, plus such] of
             193      activities described in Subsection (10)(a) or (b); or
             194          (d) other activities [as] approved by the commissioner [may approve].
             195          [(10)] (11) "Supervisor" means the supervisor of savings and loan associations.
             196          [(11)] (12) "Surplus" means:
             197          (a) the aggregate amount of the undistributed net income of an association held as
             198      undivided profits or unallocated reserves for general corporate purposes[,]; and
             199          (b) any paid-in surplus held by an association.
             200          [(12)] (13) "Withdrawal value" means the amount credited to a savings account less lawful
             201      deductions, as shown by the records of the association.
             202          Section 3. Section 7-7-3.3 is amended to read:
             203           7-7-3.3. Deposit insurance required.
             204          An association or branch may accept or hold deposits only if its accounts are insured by
             205      [a federal deposit insurance agency] the Federal Deposit Insurance Corporation or successor
             206      federal agency.
             207          Section 4. Section 7-7-6 is amended to read:
             208           7-7-6. Name requirements -- Establishment or changing location of offices.
             209          (1) (a) The name of every association shall include the words:
             210          (i) "savings association" [or];
             211          (ii) "savings and loan[,]" [or];
             212          (iii) "savings bank[.]"; or
             213          (iv) for a state mutual association that is converted from a credit association to comply


             214      with Section 7-9-58 , "credit association."
             215          (b) The name of an association:
             216          (i) may be changed from time to time [but];
             217          (ii) may not be the same as, or deceptively similar to, the name of:
             218          (A) an existing association or federal association doing business in this state; or
             219          (B) a bank or national bank; and
             220          (iii) is subject to the other requirements for corporate names in Section 16-10a-401 . [This
             221      prohibition]
             222          (c) Subsections (1)(b)(ii) and (iii) applies only to:
             223          (i) a domestic association formed after June 30, 1981[,]; and
             224          (ii) an out-of-state association issued a certificate of authority after June 30, 1981.
             225          [(b)] (d) Without the prior approval of the commissioner, [no] an association may not
             226      change its name from that fixed in [its] the association's certificate of authority.
             227          (2) (a) Without the prior approval of the commissioner, as provided in this chapter, [no]
             228      an association may not establish or maintain any office other than its home office[, which].
             229          (b) The home office of an association shall be in the location specified in the certificate
             230      of authority.
             231          [(b)] (c) [No office of an] An association may [be moved] not move an office from its
             232      immediate vicinity[, nor may] or the location of the home office of an association [be changed]:
             233          (i) unless approved by the commissioner[,];
             234          (ii) after notice to any other association that may be adversely effected by the change[,];
             235      and
             236          (iii) after an opportunity for a hearing.
             237          Section 5. Section 7-7-7 is amended to read:
             238           7-7-7. Conversion of associations.
             239          (1) [Any] (a) In accordance with this section:
             240          (i) a state or federal mutual association and [any] a federal capital stock association may
             241      convert to a state capital stock association[, and any]; and
             242          (ii) a state or federal capital stock association and [any] a federal mutual association may
             243      convert to a state mutual association.
             244          (b) A conversion described in Subsection (1)(a) shall be:


             245          (i) upon an equitable basis; and
             246          (ii) subject to:
             247          (A) the laws and rules governing the converting association[,];
             248          (B) the approval of the commissioner[,];
             249          (C) the approval of the members or stockholders of the converting association[,]; and
             250          (D) any rules adopted by the commissioner under this Subsection (1)(b).
             251          [(a) Upon receipt of the approval of a proposed conversion from the commissioner, a]
             252          (c) A credit association may convert to a state mutual association governed by this chapter
             253      by complying with the requirements of Section 7-9-58 .
             254          (2) (a) A converting association may[, under the supervision of the supervisor,] carry out
             255      the plan of conversion[.]:
             256          (i) upon receipt of the approval of the proposed conversion from the commissioner; and
             257          (ii) under the supervision of the supervisor.
             258          (b) A record of all acts and proceedings taken by the board of directors of the converting
             259      association in carrying out the proposed conversion shall be filed with the supervisor.
             260          [(b)] (3) Upon the issuance to an applicant of a certificate of conversion, [the] Subsection
             261      (3) applies.
             262          (a) The corporate existence of the converting applicant [shall] may not terminate, but the
             263      applicant shall be a continuation of the entity so converted.
             264          (b) (i) All property of the converting applicant, including its rights, titles, and interests in
             265      and to all property of whatever kind, whether real, personal, or mixed, things in action, and every
             266      right, privilege, interest and asset of any conceivable value or benefit then existing, or pertaining
             267      to it, or which would inure to it, immediately, by operation of law and without any conveyance or
             268      transfer and without any further act or deed, shall vest in and remain the property of the converted
             269      applicant[, and the same].
             270          (ii) The converting applicant shall have, hold, and enjoy [that] the property described in
             271      Subsection (3)(b)(i) in its own right as fully and to the same extent as that property was possessed,
             272      held, and enjoyed by the converting applicant before the conversion[, and the].
             273          (c) The converted applicant, upon issuance of the certificate of the conversion, shall
             274      continue to have and succeed to all the rights, obligations, and relations of the converting
             275      applicant.


             276          (d) (i) Pending actions and other judicial proceedings to which the converting applicant
             277      is a party shall not be abated or discontinued by reason of the conversion, but may be prosecuted
             278      to final judgment, order, or decree in the same manner as if conversion had not occurred, and the
             279      converted applicant may continue the actions in its new corporate name.
             280          (ii) Any judgment, order, or decree may be rendered for or against [it] the converted
             281      applicant which might have been rendered for or against the converting applicant involved before
             282      the conversion in the proceedings.
             283          [(c)] (4) A conversion carried out under [this] Subsection (1) is effective on the date that:
             284          (a) all provisions of this chapter and the rules adopted under [it] this chapter have been
             285      complied with; and
             286          (b) a certificate of conversion has been issued by the commissioner.
             287          [(d)] (5) (a) In adopting rules or issuing orders in connection with the conversion of an
             288      association, the commissioner shall ensure that:
             289          (i) accurate and adequate disclosure of the terms and effects of plans of conversion are
             290      provided to purchasers of capital stock in resulting associations, including account holders of
             291      converting mutual associations;
             292          (ii) adjustments are made in plans of conversion to be effected by way of merger or
             293      holding company acquisition necessary or appropriate to accomplish the purposes of this section;
             294          (iii) plans of conversion and proxy statements, offering circulars and related instruments
             295      and actions implementing those plans are subject to review and approval by the appropriate
             296      supervisory authorities;
             297          (iv) the capital stock issued as a part of conversion is fairly and independently valued and
             298      priced;
             299          (v) the capital stock is allocated and distributed fairly and without employment of
             300      manipulative or deceptive devices;
             301          (vi) appropriate provision is made regarding fractional share interest and minimum capital
             302      stock purchase requirements; and
             303          (vii) plans of conversion are adopted and implemented in such form and manner that
             304      stability and continuity of management are encouraged and that the stability, safety, and soundness
             305      of associations and other financial institutions are not impaired. [In no event shall any]
             306          (b) A rule or order issued by the commissioner regarding the conversion of an association


             307      may not make it more difficult for an association subject to those rules or orders to implement
             308      conversion than for an association subject only to federal laws and regulations.
             309          [(e)] (6) (a) A conversion proposed by a domestic association shall, after approval by the
             310      commissioner, be submitted to the members or stockholders at an annual meeting or at a special
             311      meeting called to consider that action.
             312          (b) The conversion must have the approval of a majority of the total votes eligible to be
             313      cast by members or stockholders at the meeting.
             314          (c) (i) Notice shall be given of any meeting at which a conversion is to be considered.
             315          (ii) The notice required by Subsection (6)(c)(i) shall:
             316          (A) expressly state that a proposed conversion will be submitted for approval or
             317      disapproval[,];
             318          (B) include:
             319          (I) a full and accurate description of the plan of conversion; and
             320          (II) all other matters to be brought before the meeting[,];
             321          (C) state that a proxy for the meeting given previously is revocable[, and];
             322          (D) state the time, date, and place of the meeting[. The notice shall]; and
             323          (E) be mailed at least 20 days prior to the date of the meeting to each voting member or
             324      stockholder of the converting association addressed to [his] the member's address shown on the
             325      records of the association and to the supervisor or commissioner.
             326          (d) Notwithstanding the other provisions of this Subsection (6), a credit association that
             327      converts to a state mutual association to comply with Section 7-9-58 is not subject to this
             328      Subsection (6).
             329          [(f)] (7) If the commissioner finds that a conversion proceeding has been completed in
             330      accordance with the requirements of this section and any other applicable law and rules, [he] the
             331      commissioner shall:
             332          (a) issue to the applicant a certificate of conversion, attaching as a part of the certificate:
             333          (i) a copy of the charter[,];
             334          (ii) articles of incorporation[,];
             335          (iii) articles of association[,]; or
             336          (iv) similar instrument[. The commissioner shall also cause the same to be filed]; and
             337          (b) file the documents described in Subsection (7)(a) with the Division of Corporations


             338      and Commercial Code.
             339          [(2)] (8) Any state mutual association, including a credit association that converts to a state
             340      mutual association to comply with Section 7-9-58 , or state capital stock association eligible under
             341      federal law or regulations to become a federal association, may convert to a federal association by
             342      following the procedure outlined in this Subsection [(2)] (8).
             343          (a) At any regular meeting or at any special meeting of the members or stockholders of the
             344      association called to consider the action and held in accordance with the laws governing the
             345      association, the members or stockholders by majority vote of those present or voting by proxy may
             346      declare by resolution the determination to convert the association into a federal association.
             347          (b) (i) A copy of the minutes of the meeting of the members or shareholders verified by
             348      the affidavit of the president or vice president and the secretary of the meeting shall be, within ten
             349      days after the meeting, filed with the commissioner. [This]
             350          (ii) The verified copy of the minutes of the meeting described in Subsection (8)(b)(i), when
             351      so filed, shall be presumptive evidence of:
             352          (A) the holding of the meeting; and [of]
             353          (B) the action [there] taken by the members or stockholders at the meeting.
             354          (c) (i) Within a reasonable time and without any unnecessary delay after the adjournment
             355      of the meeting of shareholders, the association shall take such action as may be necessary under
             356      requirements of the Office of Thrift Supervision or other federal agency to [make it a] obtain a
             357      federal charter or certificate as a federal association[, and within].
             358          (ii) Within ten days after receipt of the federal charter [there shall be filed] or certificate,
             359      the association shall file with the commissioner a copy of the charter or [a] certificate showing the
             360      organization of the association as a federal association, certified by or on behalf of the Office of
             361      Thrift Supervision or other federal agency.
             362          (iii) Upon the filing of [these] the instruments described in this Subsection (8)(c) the
             363      association shall cease to be a state association and shall [thereafter] after the filing required by
             364      Subsection (8)(c)(ii) be a federal association.
             365          (d) Upon completion of a conversion to a federal association[,] the provisions of this
             366      Subsection (8)(d) apply.
             367          (i) The corporate existence of the converting association [shall] may not terminate, but the
             368      association shall be a continuation of the entity so converted.


             369          (ii) (A) All property of the converting association, including its rights, titles, and interests
             370      in and to all property of whatever kind, whether real, personal, or mixed, things in action, and
             371      every right, privilege, interest, and asset of any conceivable value or benefit then existing, or
             372      pertaining to it, or which would inure to it, immediately, by operation of law and without any
             373      conveyance or transfer and without any further act or deed, shall vest in and remain the property
             374      of the converted association[, and the same].
             375          (B) The converting association shall have, hold, and enjoy [that] the property described
             376      in Subsection (8)(d)(i)(A) in its own right as fully and to the same extent as that property was
             377      possessed, held, and enjoyed by the converting association[, and the].
             378          (C) The converted association shall continue to have and succeed to all the rights,
             379      obligations, and relations of the converting association.
             380          (iii) All pending actions and other judicial proceedings to which the converting association
             381      is a party shall not be abated or discontinued by reason of the conversion, but may be prosecuted
             382      to final judgment, order, or decree in the same manner as if the conversion had not been made, and
             383      the converted association may continue the actions in its new corporate name.
             384          (iv) Any judgment, order, or decree may be rendered for or against [it] the converting
             385      association which might have been rendered for or against the converting association before the
             386      conversion involved in the proceedings.
             387          (e) Upon the completion of a conversion to a federal association, the converted association
             388      shall cease to be supervised by the commissioner or by this state except as a federal association.
             389          Section 6. Section 7-7-10 is amended to read:
             390           7-7-10. Meetings of mutual association members -- Voting -- Notice.
             391          (1) (a) An annual meeting of the members of each mutual association shall be held at the
             392      time and place fixed in the bylaws of the association.
             393          (b) Special meetings may be called as provided in the bylaws.
             394          (2) (a) The members entitled to vote at any meeting of the members shall be those who are
             395      members of record at the end of the calendar month next preceding the date of the meeting of
             396      members, except those who have ceased to be members.
             397          (b) The number of votes which members shall be entitled to cast shall be in accordance
             398      with the books on the date determinative of entitlement to vote.
             399          (3) [In] (a) Subject to Subsection (3)(b), in the determination of all questions requiring


             400      action by the members, each member shall be entitled to cast one vote, plus an additional vote for
             401      each $100 or fraction [thereof] of $100 of the withdrawal value of savings accounts, if any, held
             402      by the member. [No]
             403          (b) A member[, however,] may not cast more than 50 votes.
             404          (c) Notwithstanding the other provisions of this Subsection (3), a state mutual association
             405      that is converted from a credit association to comply with Section 7-9-58 may provide that each
             406      member of the state mutual association shall have only one vote regardless of the amount of:
             407          (i) the member's deposited funds; or
             408          (ii) the withdrawal value of the member's savings accounts.
             409          (4) (a) At any meeting of the members, voting may be in person or by proxy, but [no] a
             410      proxy [shall] may not be eligible to be voted at any meeting unless the proxy has been filed with
             411      the secretary of the association, for verification, at least five days before the date of the meeting.
             412          (b) Every proxy shall:
             413          (i) be in writing [and];
             414          (ii) be signed by the member or [his] the member's duly authorized attorney in fact; and[,]
             415          (iii) when filed with the secretary, [shall,] if so specified in the proxy, continue in force
             416      from year to year until:
             417          (A) revoked by a writing duly delivered to the secretary; or [until]
             418          (B) superseded by subsequent proxies.
             419          (5) (a) At an annual meeting or at any special meeting of the members, any number of
             420      members present in person or by proxy eligible to be voted constitutes a quorum.
             421          (b) A majority of all votes cast at any meeting of members shall determine any question
             422      unless this chapter specifically provides otherwise.
             423          (6) (a) [No notice] Notice of annual meetings of members need not be given to members.
             424          (b) Notice of each special meeting of members shall:
             425          (i) state the purpose for which the meeting is called[,];
             426          (ii) the place of meeting[, and];
             427          (iii) the time when [it] the meeting shall convene[, and shall]; and
             428          (iv) be published once a week for two consecutive calendar weeks [(in each instance,]:
             429          (A) on any day of the week[)];
             430          (B) before the date on which the special meeting shall convene[,]; and


             431          (C) in a newspaper of general circulation in the county in which the home office of the
             432      association is located.
             433          (c) In addition to publication of the notice, a copy of the notice shall be posted in a
             434      conspicuous place in all offices of the association during the 30 days immediately preceding the
             435      date on which the special meeting convenes[; provided, however, that].
             436          (d) Notwithstanding the other provisions of this Subsection (6), if all the members entitled
             437      to vote, vote in favor of an action at any meeting of the members, [no] notice need not be given.
             438          Section 7. Section 7-9-3 is amended to read:
             439           7-9-3. Definitions.
             440          As used in this chapter:
             441          (1) "Association" means a group of persons that:
             442          (a) has a similar:
             443          (i) interest;
             444          (ii) profession;
             445          (iii) occupation; or
             446          (iv) formal association with an identifiable purpose; or
             447          (b) is employed by a common employer.
             448          (2) "Capital and surplus" means:
             449          (a) shares;
             450          (b) deposits;
             451          (c) reserves; and
             452          (d) undivided earnings.
             453          (3) "Corporate credit union" means any credit union organized pursuant to any state or
             454      federal act for the purpose of serving other credit unions.
             455          (4) "Credit association" means a credit union that is designated as a credit association
             456      pursuant to Section 7-9-55 .
             457          [(4)] (5) "Deposits" means that portion of the capital paid into the credit union by members
             458      on which a specified rate of interest will be paid.
             459          [(5)] (6) "Immediate family" means any of the following in relationship to a member:
             460          (a) parents[,];
             461          (b) spouse[,];


             462          (c) surviving spouse[,];
             463          (d) children[,]; and
             464          (e) siblings [of the member].
             465          [(6)] (7) "Limited field of membership" means persons designated as eligible for credit
             466      union membership in accordance with Section 7-9-51 or 7-9-53 .
             467          [(7)] (8) (a) "Member-business loan" means any loan, line of credit, or letter of credit, the
             468      proceeds of which will be used for:
             469          (i) a commercial purpose;
             470          (ii) other business investment property or venture purpose; or
             471          (iii) an agricultural purpose.
             472          (b) "Member-business loan" does not include an extension of credit:
             473          (i) that is fully secured by a lien on a one- to four- family dwelling that is the primary
             474      residence of a member;
             475          (ii) that is fully secured by:
             476          (A) shares or deposits in the credit union making the extension of credit; or
             477          (B) deposits in other financial institutions;
             478          (iii) the repayment of which is fully insured or fully guaranteed by, or where there is an
             479      advance commitment to purchase in full by, an agency of:
             480          (A) the federal government;
             481          (B) a state; or
             482          (C) a political subdivision of a state; or
             483          (iv) that is granted by a corporate credit union to another credit union.
             484          [(8)] (9) "Service center" means a single location at which multiple credit unions can
             485      provide products or services directly to their members.
             486          [(9)] (10) "Share drafts," "deposit drafts," and "transaction accounts" mean accounts from
             487      which owners are permitted to make withdrawals by negotiable or transferable instruments or other
             488      orders for the purpose of making transfers to other persons or to the owner.
             489          [(10)] (11) "Shares" means that portion of the capital paid into the credit union by
             490      members on which dividends may be paid.
             491          Section 8. Section 7-9-11 is amended to read:
             492           7-9-11. Bylaws and amendments to be approved.


             493          (1) A credit union may not receive payments on shares, deposits, or certificates, or make
             494      any loans or other transactions, until its bylaws have been approved in writing by the
             495      commissioner.
             496          (2) An amendment to a credit union's bylaws does not become operative until the
             497      amendment to the bylaws is approved by the commissioner.
             498          (3) (a) If the amendment to the bylaws of a credit union expands the limited field of
             499      membership of a credit union as described in Subsection 7-9-52 (1), the commissioner's approval
             500      of the amendment is subject to Section 7-9-52 .
             501          (b) If the amendment to the bylaws of a credit union terminates the grandfathering of a
             502      limited field of membership under Section 7-9-54 , the commissioner's approval of the amendment
             503      is subject to Section 7-9-54 .
             504          (c) If the bylaws or an amendment to the bylaws of a credit union adds an association to
             505      the limited field of membership of the credit union including a credit union designated as a credit
             506      association, the commissioner may require that the credit union provide written confirmation from
             507      the association that the association has agreed to be served by the credit union.
             508          (d) If an amendment to the bylaws of a credit union designated as a credit association
             509      expands the limited field of membership of the credit association as provided in Section 7-9-57 ,
             510      the commissioner's approval of the amendment is subject to Section 7-9-57 .
             511          Section 9. Section 7-9-12 is amended to read:
             512           7-9-12. Contents of bylaws.
             513          The bylaws of a credit union shall specify at least the following:
             514          (1) the name of the credit union;
             515          (2) the purpose for which it was formed;
             516          (3) a limited field of membership of the credit union that:
             517          (a) complies with Section 7-9-51 or 7-9-53 ; or
             518          (b) if the credit union is designated as a credit association under Section 7-9-55 , complies
             519      with Section 7-9-57 in addition to Section 7-9-51 or 7-9-53 ;
             520          (4) the number of directors and procedures for their election;
             521          (5) the term of directors;
             522          (6) whether a credit manager, credit committee, or combination of both shall be
             523      responsible for credit functions of the credit union;


             524          (7) the duties of the officers;
             525          (8) the time of year of the annual meeting of members;
             526          (9) the manner in which members shall be notified of meetings;
             527          (10) the number of members which shall constitute a quorum at meetings;
             528          (11) the manner of amending;
             529          (12) the manner in which officers may act as surety; and
             530          (13) such other matters, rules, and regulations as the board of directors consider necessary.
             531          Section 10. Section 7-9-39 is amended to read:
             532           7-9-39. Voluntary merger.
             533          (1) Any credit union may merge with another credit union under the existing charter of the
             534      other credit union when all of the following have occurred:
             535          (a) the majority of the directors of each merging credit union votes in favor of the merger
             536      plan;
             537          (b) the commissioner approves the merger plan;
             538          (c) the majority of the members of each merging credit union present at a meeting called
             539      for the purpose of considering the merger plan votes to approve the merger plan, but a vote of the
             540      membership of the surviving credit union is not required if its board of directors determines that
             541      the merger will not have any significant effect on the organization, membership, or financial
             542      condition of the credit union; and
             543          (d) (i) the National Credit Union Administration or its successor federal deposit insurance
             544      agency approves the merger plan and commits to insure deposits of the surviving credit union; or
             545          (ii) the commissioner approves the surviving credit union to operate without federal
             546      deposit insurance in accordance with Section 7-9-45 .
             547          (2) Upon merger, the chair of the board and secretary of each credit union shall execute,
             548      and file with the department, a certificate of merger setting forth:
             549          (a) the time and place of the meeting of the board of directors at which the plan was
             550      approved;
             551          (b) the vote by which the directors approved the plan;
             552          (c) a copy of the resolution or other action by which the plan was approved;
             553          (d) the time and place of the meeting of the members at which the plan was approved;
             554          (e) the vote by which the members approved the plan; and


             555          (f) the effective date of the merger, which shall be:
             556          (i) the date on which the last approval or vote required under Subsection (1) was obtained;
             557      or
             558          (ii) a later date specified in the merger plan.
             559          (3) On the effective date of any merger:
             560          (a) all property, property rights, and interests of the merged credit union shall vest in the
             561      surviving credit union without deed, endorsement, or other instrument of transfer; and
             562          (b) all debts, obligations, and liabilities of the merged credit union are considered to have
             563      been assumed by the surviving credit union.
             564          (4) Except as provided in Subsection (5)[(b)], if the surviving credit union is chartered
             565      under this chapter, the residents of a county in the limited field of membership of the merging
             566      credit union may not be added to the limited field of membership of the surviving credit union,
             567      except that the surviving credit union:
             568          (a) may admit as a member any member of the merging credit union that is not in the
             569      limited field of membership of the surviving credit union if the member of the merging credit
             570      union was a member of that credit union at the time of merger; and
             571          (b) may service any member-business loan of the merging credit union until the
             572      member-business loan is paid in full.
             573          (5) (a) This section shall be interpreted, whenever possible, to permit a credit union
             574      chartered under this chapter to merge with a credit union chartered under any other law if the
             575      preservation of membership interest is concerned.
             576          (b) If the surviving credit union is designated as a credit association in accordance with
             577      Section 7-9-55 before the merger, the surviving credit association may not serve a limited field of
             578      membership that is larger than the limited field of membership that the surviving credit association
             579      could serve through expansion of its limited field of membership under Section 7-9-57 if the
             580      merger is considered as a request under Section 7-9-57 to expand the surviving credit association's
             581      limited field of membership filed on the date the merger becomes effective.
             582          [(b) The] (c) (i) If the commissioner makes the finding described in Subsection (5)(c)(ii),
             583      the commissioner may under Subsection (1)(b) approve a merger plan that:
             584          (A) includes the addition of the residents of a county in the limited field of membership
             585      of the merging credit union to the limited field of membership of the surviving credit union; or


             586          (B) if the surviving credit union is designated as a credit association in accordance with
             587      Section 7-9-55 before the merger, includes a limited field of membership of the surviving credit
             588      association that is larger than is permitted under Subsection (5)(b).
             589          (ii) The commissioner may take an action described in Subsection (5)(c)(i), if the
             590      commissioner finds that:
             591          [(i)] (A) the expansion of the limited field of membership of the surviving credit union is
             592      necessary for that credit union's safety and soundness; and
             593          [(ii)] (B) the expanded limited field of membership of the surviving credit union meets the
             594      criteria stated in Subsection 7-9-52 (3)(c).
             595          (6) [If] (a) This Subsection (6) applies to the surviving credit union if:
             596          (i) the commissioner approves a merger plan under Subsection (5)[(b)](c)(i)(A) under
             597      which the surviving credit union's limited field of membership after the merger will include
             598      residents of more than one county[, Subsections (6)(a) through (e) apply to the surviving credit
             599      union.]; and
             600          (ii) the surviving credit union is not designated as a credit association in accordance with
             601      Section 7-9-55 .
             602          [(a)] (b) The domicile-county of the surviving credit union is:
             603          (i) if the credit union does not have a limited field of membership under Subsection
             604      7-9-53 (2)(c) or (2)(d), the county in which the credit union has located the greatest number of
             605      branches as of the date the merger is effective; or
             606          (ii) if the credit union has a limited field of membership under Subsection 7-9-53 (2)(c) or
             607      (2)(d), the county that is the domicile-county of the surviving credit union under Section 7-9-53 [;].
             608          [(b)] (c) Within the surviving credit union's domicile-county, the surviving credit union
             609      may establish, relocate, or otherwise change the physical location of the credit union's:
             610          (i) main office; or
             611          (ii) branch.
             612          [(c)] (d) Within a county other than the domicile-county that is in the limited field of
             613      membership of the surviving credit union after the merger, the surviving credit union may not:
             614          (i) establish a main office or branch if the main office or branch was not located in the
             615      county as of the date that the merger is effective;
             616          (ii) participate in a service center in which it does not participate as of the date that the


             617      merger is effective; or
             618          (iii) relocate the surviving credit union's main office or a branch located in the county as
             619      of the date that the merger is effective unless the commissioner finds that the main office or branch
             620      is being relocated within a three-mile radius of the original location of the main office or branch.
             621          [(d)] (e) After the merger, the surviving credit union may admit as a member:
             622          (i) a person in the surviving credit union's limited field of membership after the date that
             623      the merger is effective; or
             624          (ii) a person belonging to an association that:
             625          (A) is added to the limited field of membership of the credit union; and
             626          (B) resides in the domicile-county of the surviving credit union, as defined in Section
             627      7-9-53 .
             628          [(e)] (f) In addition to any requirement under this Subsection (6), a surviving credit union
             629      shall comply with any requirement under this title for the establishment, relocation, or change in
             630      the physical location of a main office or branch of a credit union.
             631          (7) (a) This Subsection (7) applies to the surviving credit association if the commissioner
             632      approves a merger plan under Subsection (5)(c)(i)(B).
             633          (b) (i) Within a county other than a county described in Subsection (7)(b)(ii), the surviving
             634      credit association may not:
             635          (A) establish a main office or branch if the main office or branch was not located in the
             636      county as of the date the merger is effective;
             637          (B) participate in a service center in which the surviving credit association did not
             638      participate as of the date the merger is effective; or
             639          (C) relocate a main office or branch of the surviving credit association that was located
             640      in a county within the limited field of membership of the surviving credit association as of the date
             641      of the merger is effective unless the commissioner finds that the main office or branch is being
             642      relocated within a three-mile radius of the original location of the main office or branch.
             643          (ii) Subsection (7)(b)(i) does not apply to:
             644          (A) the credit association's domicile-county, if the credit association has a grandfathered
             645      limited field of membership;
             646          (B) a county whose residents are added to the limited field of membership of the credit
             647      association pursuant to Section 7-9-57 ; or


             648          (C) a county from which the restrictions on branching under Section 7-9-53 within the
             649      county have been removed under Section 7-9-57 .
             650          (c) After the merger, the surviving credit association may admit as a member a person in
             651      the surviving credit association's limited field of membership after the date the merger is effective.
             652          (d) In addition to any requirement under this Subsection (7), a surviving credit association
             653      shall comply with any requirement under this title for the establishment, relocation, or change in
             654      the physical location of a main office or branch of a credit union.
             655          Section 11. Section 7-9-39.5 is amended to read:
             656           7-9-39.5. Supervisory merger.
             657          If a credit union is merged with another credit union as a result of a supervisory action
             658      under Chapter 2 or 19, the commissioner may permit the surviving credit union to have a limited
             659      field of membership that is larger than a limited field of membership permitted:
             660          (1) under Section 7-9-51 [.]; or
             661          (2) with respect to a credit union designated as a credit association in accordance with
             662      Section 7-9-55 , under Section 7-9-51 or 7-9-57 .
             663          Section 12. Section 7-9-51 is amended to read:
             664           7-9-51. Limited field of membership.
             665          (1) Except as provided in Subsection (3), the limited field of membership of a credit union
             666      may include only the following:
             667          (a) the immediate family of a member of the credit union;
             668          (b) the employees of the credit union;
             669          (c) residents of a single county; and
             670          (d) one or more associations.
             671          (2) A credit union may have a limited field of membership that is more restrictive than the
             672      limited field of membership described in Subsection (1).
             673          (3) A credit union may have a limited field of membership that is less restrictive than the
             674      limited field of membership described in Subsection (1) if the limited field of membership of the
             675      credit union:
             676          (a) is determined under Subsection 7-9-53 (2)(c) or (2)(d);
             677          (b) is approved by the commissioner after a merger under [Subsection] Section
             678      7-9-39 [(5)]; [or]


             679          (c) is permitted by the commissioner after a merger in accordance with Section 7-9-39.5 [.];
             680      or
             681          (d) is expanded under Section 7-9-57 for a credit union that is designated as a credit
             682      association.
             683          (4) If a credit union includes the residents of one county in its limited field of membership,
             684      the credit union may not change its limited field of membership to include a different county than
             685      the county that is first included in the limited field of membership of the credit union.
             686          Section 13. Section 7-9-52 is amended to read:
             687           7-9-52. Expansion of a limited field of membership.
             688          (1) [The] Except as otherwise permitted in Section 7-9-57 with respect to a credit union
             689      designated as a credit association, the commissioner shall comply with Subsection (2) if the
             690      commissioner receives a request to approve an amendment to the bylaws of a credit union that
             691      expands the credit union's limited field of membership to include:
             692          (a) residents of one county; or
             693          (b) an association consisting of 50 or more persons.
             694          (2) If the conditions of Subsection (1) are met, the commissioner shall:
             695          (a) give notice of the request in the manner and to the extent the commissioner considers
             696      appropriate to institutions subject to the jurisdiction of the department that:
             697          (i) are located in the county, if the limited field of membership is being expanded to
             698      include residents of a county; or
             699          (ii) serve or may serve the association described in Subsection (1)(b), if that association
             700      is being added to the limited field of membership; and
             701          (b) cause a supervisor to examine and submit written findings and recommendations to
             702      the commissioner as to:
             703          (i) whether the credit union is adequately capitalized;
             704          (ii) whether the credit union has the financial capacity to serve the financial needs of the
             705      expanded limited field of membership in a safe and sound manner;
             706          (iii) whether the credit union has the managerial expertise to serve the financial needs of
             707      the expanded limited field of membership in a safe and sound manner;
             708          (iv) any potential harm the expansion of the limited field of membership may have on the
             709      institutions described in Subsection (2)(a); and


             710          (v) the probable beneficial effect of the expansion.
             711          (3) The commissioner may approve the amendment to the bylaws described in Subsection
             712      (1) if the commissioner:
             713          (a) has given the notice required under Subsection (2)(a);
             714          (b) received the written findings and recommendations of the supervisor under Subsection
             715      (2)(b); and
             716          (c) finds that:
             717          (i) the credit union is adequately capitalized;
             718          (ii) the credit union has the financial capacity to serve the financial needs of the expanded
             719      limited field of membership in a safe and sound manner;
             720          (iii) the credit union has the managerial expertise to serve the financial needs of the
             721      expanded limited field of membership in a safe and sound manner; and
             722          (iv) any potential harm the expansion of the limited field of membership may have on
             723      other institutions subject to the jurisdiction of the department does not clearly outweigh the
             724      probable beneficial effect of the expansion.
             725          (4) In accordance with Section 7-1-309 , the commissioner may hold a hearing on the
             726      expansion of a credit union's limited field of membership.
             727          (5) [This] (a) Except as provided in Subsection (5)(b), this section may not be interpreted
             728      to permit a credit union to:
             729          [(a)] (i) expand its limited field of membership to include residents of more than one
             730      county; or
             731          [(b)] (ii) change the county included in the limited field of membership of a credit union,
             732      if any.
             733          (b) This section does not limit the right of a credit union to:
             734          (i) elect to be designated as a credit association in accordance with Section 7-9-55 ; or
             735          (ii) after a credit union is designated as a credit association, to expand its limited field of
             736      membership in accordance with Section 7-9-57 .
             737          Section 14. Section 7-9-53 is amended to read:
             738           7-9-53. Grandfathering.
             739          (1) As used in this [section and Section 7-9-54 ] chapter:
             740          (a) "Association that resides in a domicile-county" means an association that:


             741          (i) operates a place of business or other physical location in the domicile-county; or
             742          (ii) has at least 100 members that are residents of the domicile-county.
             743          (b) "Domicile-county" means the county:
             744          (i) in the limited field of membership of the credit union as of January 1, 1999; and
             745          (ii) in which the credit union has located the greatest number of branches as of January 1,
             746      1999.
             747          (c) "Grandfathered limited field of membership" means the limited field of membership
             748      as of May 3, 1999, of a credit union described in Subsection (2)(d).
             749          (d) "Restrictions on branching" means a restriction under this section on:
             750          (i) establishing, relocating, or changing the physical location of a main office or branch
             751      of a credit union; or
             752          (ii) participating in a service center.
             753          (2) For each credit union formed before January 1, 1999, its limited field of membership
             754      as of May 3, 1999, is determined as follows:
             755          (a) if the limited field of membership stated in the bylaws of the credit union as of January
             756      1, 1999, complies with Section 7-9-51 , the credit union's limited field of membership is the limited
             757      field of membership indicated in its bylaws;
             758          (b) (i) the limited field of membership of a credit union as of May 3, 1999, is as provided
             759      in Subsection (2)(b)(ii) if:
             760          (A) the limited field of membership stated in the bylaws of the credit union as of January
             761      1, 1999, includes the residents of more than one county; and
             762          (B) as of January 1, 1999, the credit union's main office and any of its branches are located
             763      in only one county in its limited field of membership;
             764          (ii) as of May 3, 1999, the limited field of membership of a credit union described in
             765      Subsection (2)(b)(i) is:
             766          (A) the immediate family of a member of the credit union;
             767          (B) the employees of the credit union;
             768          (C) residents of the one county in which the credit union has its main office or branches
             769      as of January 1, 1999, and
             770          (D) any association that as of January 1, 1999, is in the limited field of membership of the
             771      credit union;


             772          (c) (i) the limited field of membership of a credit union as of May 3, 1999, is as provided
             773      in Subsection (2)(c)(ii) if:
             774          (A) the limited field of membership of a credit union stated in the bylaws of the credit
             775      union as of January 1, 1999, includes residents of more than one county;
             776          (B) as of January 1, 1999, the credit union has a main office or branch in more than one
             777      county; and
             778          (C) as a result of a merger pursuant to a supervisory action under Chapter 2 or 19 that is
             779      effective on or after January 1, 1983, but before January 1, 1994, the credit union acquired a branch
             780      in a county in the limited field of membership of the credit union and the credit union did not have
             781      a branch in the county before the merger;
             782          (ii) as of May 3, 1999, the limited field of membership of a credit union described in
             783      Subsection (2)(c)(i) is the same limited field of membership that the credit union would have had
             784      under Subsection (2)(d) except that the credit union:
             785          (A) is not subject to Subsection (3); and
             786          (B) is subject to Subsection (4)(b); and
             787          (d) (i) the limited field of membership of a credit union as of May 3, 1999, is as provided
             788      in Subsection (2)(d)(ii) if:
             789          (A) the limited field of membership stated in the bylaws of the credit union as of January
             790      1, 1999, includes the residents of more than one county; and
             791          (B) as of January 1, 1999, the credit union has a main office or branch in more than one
             792      county;
             793          (ii) as of May 3, 1999, the limited field of membership of a credit union described in
             794      Subsection (2)(d)(i) is:
             795          (A) the immediate family of a member of the credit union;
             796          (B) the employees of the credit union;
             797          (C) residents of the credit union's domicile-county;
             798          (D) the residents of any county other than the domicile-county:
             799          (I) if, as of January 1, 1999, the county is in the limited field of membership of the credit
             800      union; and
             801          (II) in which, as of January 1, 1994, the credit union had located its main office or a
             802      branch; and


             803          (E) any association that as of January 1, 1999, is in the limited field of membership of the
             804      credit union.
             805          (3) If a credit union's limited field of membership is as described in Subsection (2)(d),
             806      beginning May 3, 1999, the credit union:
             807          (a) within the credit union's domicile-county, may establish, relocate, or otherwise change
             808      the physical location of the credit union's:
             809          (i) main office; or
             810          (ii) branch;
             811          (b) within a county other than a domicile-county that is in the credit union's grandfathered
             812      limited field of membership, may not:
             813          (i) establish a main office or branch that:
             814          (A) was not located in the county as of January 1, 1999; or
             815          (B) for which the credit union has not received by January 1, 1999, approval or conditional
             816      approval of a site plan for the main office or branch from the planning commission of the
             817      municipality where the main office or branch will be located;
             818          (ii) participate in a service center in which it does not participate as of January 1, 1999;
             819      or
             820          (iii) relocate the credit union's main office or a branch located in the county as of January
             821      1, 1999, unless the commissioner finds that the main office or branch is relocated within a
             822      three-mile radius of where it was originally located; and
             823          (c) may only admit as a member:
             824          (i) a person in the credit union's grandfathered limited field of membership; or
             825          (ii) a person belonging to an association that:
             826          (A) is added to the limited field of membership of the credit union; and
             827          (B) resides in the domicile-county of the credit union.
             828          (4) (a) If a credit union's limited field of membership is as described in Subsection (2)(b),
             829      as of May 3, 1999, the credit union may operate as a credit union having a limited field of
             830      membership under Section 7-9-51 .
             831          (b) If a credit union's limited field of membership is as described in Subsection (2)(c), as
             832      of May 3, 1999, the credit union:
             833          (i) within the credit union's domicile-county, may establish, relocate, or otherwise change


             834      the physical location of the credit union's:
             835          (A) main office; or
             836          (B) branch;
             837          (ii) within a county other than its domicile-county that is in the credit union's limited field
             838      of membership under Subsection (2)(c), may not:
             839          (A) establish a main office or branch that was not located in the county as of January 1,
             840      1999;
             841          (B) participate in a service center in which it does not participate as of January 1, 1999;
             842      or
             843          (C) relocate the credit union's main office or a branch located in the county as of January
             844      1, 1999, unless the commissioner finds that the main office or branch is relocated within a
             845      three-mile radius of where it was originally located; and
             846          (iii) may only admit as a member:
             847          (A) a person in the credit union's limited field of membership under Subsection (2)(c); or
             848          (B) a person belonging to an association that is added to the limited field of membership
             849      of the credit union, regardless of whether the association resides in the domicile-county of the
             850      credit union.
             851          (5) (a) Notwithstanding Subsections (1) through (4), after May 3, 1999, a credit union
             852      described in Subsection (2)(c) or (2)(d) may:
             853          (i) operate an office or branch that is operated by the credit union on May 3, 1999, but that
             854      is not located in a county that is in the credit union's limited field of membership as of May 3,
             855      1999; and
             856          (ii) serve a member who is not in a credit union's limited field of membership as of May
             857      3, 1999, if the member is a member of the credit union as of March 15, 1999.
             858          (b) Subsection (5)(a) does not authorize a credit union to:
             859          (i) establish a branch in a county that is not in the credit union's limited field of
             860      membership as of May 3, 1999, unless the branch meets the requirements under this title for
             861      establishing a branch; or
             862          (ii) for a credit union described in Subsection (2)(d), include in its limited field of
             863      membership an association that:
             864          (A) as of January 1, 1999, is not included in the credit union's limited field of membership;


             865      and
             866          (B) does not reside within the credit union's domicile-county.
             867          (6) A credit union shall amend its bylaws in accordance with Section 7-9-11 by no later
             868      than August 3, 1999, to comply with this section.
             869          (7) In addition to any requirement under this section, a credit union shall comply with any
             870      requirement under this title for the establishment, relocation, or change in the physical location of
             871      a main office or branch of a credit union.
             872          (8) This section does not limit the right of a credit union to:
             873          (a) elect to be designated as a credit association in accordance with Section 7-9-55 ; or
             874          (b) after the credit union is designated as a credit association, to:
             875          (i) expand its limited field of membership in accordance with Section 7-9-57 ; or
             876          (ii) remove restrictions on branching in accordance with Section 7-9-57 .
             877          Section 15. Section 7-9-55 is enacted to read:
             878          7-9-55. Designation as a credit association.
             879          (1) In accordance with this section, a credit union may elect to be designated as a credit
             880      association:
             881          (a) through an affirmative vote of its members; and
             882          (b) subject to approval from the commissioner.
             883          (2) (a) If the board of directors seeks to have a credit union be designated as a credit
             884      association, the board of directors shall initiate a proposition by a written resolution of the board
             885      of directors.
             886          (b) If one or more members of a credit union seek to have a credit union be designated as
             887      a credit association, the one or more members of the credit union shall initiate a proposition by
             888      submitting to the board of directors a petition signed by at least the lesser of:
             889          (i) 50 members of the credit union; or
             890          (ii) 5% of the credit union membership.
             891          (3) Subject to Subsection (4), the proposition initiated under Subsection (2) shall:
             892          (a) be subject to the vote of the full membership of the credit union; and
             893          (b) submitted to the credit union membership:
             894          (i) pursuant to any applicable procedures under federal law governing the National Credit
             895      Union Association for a membership vote to convert to a state mutual association; or


             896          (ii) in the absence of procedures described in Subsection (3)(b)(i), pursuant to:
             897          (A) this chapter;
             898          (B) the procedures of the credit union for membership votes; and
             899          (C) the rules made by the commissioner for membership votes of a credit union.
             900          (4) (a) A credit union shall notify its members of the vote on the proposition initiated
             901      under Subsection (2).
             902          (b) The notice required under this Subsection (4) shall:
             903          (i) be in a form:
             904          (A) approved by the National Credit Union Association;
             905          (B) approved by the commissioner; and
             906          (C) required by federal law for a conversion vote; and
             907          (ii) shall include:
             908          (A) the proposition that the credit union be designated as a credit association; and
             909          (B) an explanation that after designation as a credit association, the credit association may
             910      be:
             911          (I) required to convert to a state mutual association in accordance with Section 7-9-58 ; and
             912          (II) if the credit association converts to a state mutual association, the newly converted
             913      state mutual association is subject to taxation under Title 59, Chapter 7, Corporate Franchise and
             914      Income Taxes.
             915          (5) If at the time of the proposition initiated under Subsection (2) the credit union would
             916      be required to convert to a state mutual association under Section 7-9-58 if it were a credit
             917      association:
             918          (a) contemporaneously with the vote required by Subsection (3) the credit union shall
             919      conduct any vote required under Section 7-9-58 ; and
             920          (b) the date the proposition is initiated under Subsection (3) shall be considered the day
             921      on which the commissioner receives information of an event requiring conversion under
             922      Subsection 7-9-58 (2).
             923          (6) (a) If the proposition is approved by a vote of the credit union membership, the credit
             924      union shall submit an application to be designated as a credit association to the commissioner in
             925      a form prescribed by the commissioner.
             926          (b) The application shall include the following:


             927          (i) evidence that the credit union is adequately capitalized;
             928          (ii) evidence that the credit union has the financial capacity to serve the financial needs of
             929      the limited field of membership in a safe and sound manner;
             930          (iii) evidence that the credit union has the managerial expertise to serve the financial needs
             931      of the expanded limited field of membership in a safe and sound manner; and
             932          (iv) any other information the commissioner considers material to determining whether
             933      to approve the application.
             934          (c) The commissioner shall approve the application:
             935          (i) after accepting it as complete; and
             936          (ii) finding that the credit union:
             937          (A) is adequately capitalized;
             938          (B) has the financial capacity to serve the financial needs of the limited field of
             939      membership in a safe and sound manner; and
             940          (C) has the managerial expertise to serve the financial needs of the expanded limited field
             941      of membership in a safe and sound manner.
             942          (d) To protect the safety and soundness of the application, the commissioner may:
             943          (i) approve an application subject to the terms and conditions the commissioner considers
             944      necessary; or
             945          (ii) disapprove an application.
             946          Section 16. Section 7-9-56 is enacted to read:
             947          7-9-56. Operations of credit associations.
             948          (1) A credit union designated as a credit association, unless it converts to a state mutual
             949      association governed by Chapter 7, Savings and Loan Associations, shall:
             950          (a) comply with this chapter as a credit union except where the chapter expressly provides
             951      for a credit association; and
             952          (b) is a credit union under this chapter that may obtain and maintain insurance on its shares
             953      and deposits from the National Credit Union Association.
             954          (2) If under Section 7-9-55 the credit union is designated as a credit association, within 90
             955      days of the day the credit union is designated as a credit association:
             956          (a) the name of the credit association shall be changed to replace the words "credit union"
             957      with "credit association";


             958          (b) an amendment to the credit union's articles of incorporation indicating the name change
             959      shall be filed with the Division of Corporations and Commercial Code; and
             960          (c) the credit association is prohibited from using the words "credit union" in its:
             961          (i) advertisement;
             962          (ii) signage;
             963          (iii) solicitation for members; or
             964          (iv) in any other correspondence and communication intended for members of the public.
             965          Section 17. Section 7-9-57 is enacted to read:
             966          7-9-57. Expansion of credit association.
             967          (1) The commissioner shall comply with this section if the commissioner receives a
             968      request to approve an amendment to the bylaws of a credit union designated as a credit association
             969      that:
             970          (a) expands the credit association's limited field of membership; or
             971          (b) removes restrictions on branching if the credit association has a grandfathered limited
             972      field of membership.
             973          (2) (a) If the credit association requests to add residents within a county of the fourth, fifth,
             974      or sixth class as classified in Section 17-50-501 , the commissioner:
             975          (i) may approve the addition of the residents within the county of the fourth, fifth, or sixth
             976      class at any time;
             977          (ii) may approve the addition of residents within more than one county of the fourth, fifth,
             978      or sixth class in any one calendar year; and
             979          (iii) shall comply with Subsection (4).
             980          (b) If the credit association has a grandfathered limited field of membership and requests
             981      the removal on the restrictions on branching under Section 7-9-53 on a county of the fourth, fifth,
             982      or sixth class of county, the commissioner:
             983          (i) may approve the removal of the restriction on branching within a county of the fourth,
             984      fifth, or sixth class at any time;
             985          (ii) may approve the removal of the restrictions on branching within more than one county
             986      of the fourth, fifth, or sixth class in any one calendar year;
             987          (iii) may approve the removal of the restrictions on branching regardless of whether the
             988      commissioner has approved the addition of residents of a county of the fourth, fifth, or sixth class


             989      to the limited field of membership of the credit association; and
             990          (iv) shall comply with the requirements under this title for the establishment, relocation,
             991      or change in the physical location of a main office or branch of a credit union to determine whether
             992      to approve the removal of the restrictions on branching.
             993          (3) (a) If the credit association requests to add residents within a county of the first,
             994      second, or third class as classified in Section 17-50-501 , the commissioner:
             995          (i) in any one calendar year may:
             996          (A) for a credit association that does not have a grandfathered limited field of membership,
             997      approve the addition of residents within only one county of the first, second, or third class; or
             998          (B) if the credit association is a credit association with a grandfathered limited field of
             999      membership:
             1000          (I) approve the addition of residents within only one county of the first, second, or third
             1001      class; or
             1002          (II) remove the restrictions on branching in only one county of the first, second, or third
             1003      class as provided in Subsection (3)(b); and
             1004          (ii) shall comply with Subsection (4).
             1005          (b) If the credit association has a grandfathered limited field of membership and requests
             1006      the removal on the restrictions on branching under Section 7-9-53 on a county of the first, second,
             1007      or third class, the commissioner:
             1008          (i) may approve the removal of the restrictions on only one county of the first, second, or
             1009      third class in any one calendar year;
             1010          (ii) may not approve the addition of residents within a county of the first, second, or third
             1011      class to the limited field of membership of the credit association in the same calendar year the
             1012      commissioner removes the restrictions on branching in the county of the first, second, or third
             1013      class; and
             1014          (iii) shall comply with the requirements under this title for the establishment, relocation,
             1015      or change in the physical location of a main office or branch of a credit union to determine whether
             1016      to approve the removal of the restrictions on branching.
             1017          (4) (a) If the commissioner receives a request to add the residents within a county to the
             1018      limited field of membership of a credit association, the commissioner shall:
             1019          (i) give notice of the request in the manner and to the extent the commissioner considers


             1020      appropriate to institutions subject to the jurisdiction of the department that are located in the
             1021      applicable county; and
             1022          (ii) cause a supervisor to examine and submit written findings and recommendations to
             1023      the commissioner as to:
             1024          (A) whether the credit association is adequately capitalized;
             1025          (B) whether the credit association has the financial capacity to serve the financial needs
             1026      of the expanded limited field of membership in a safe and sound manner;
             1027          (C) whether the credit association has the managerial expertise to serve the financial needs
             1028      of the expanded limited field of membership in a safe and sound manner;
             1029          (D) any potential harm the expansion of the limited field of membership may have on the
             1030      institutions described in Subsection (4)(a)(i); and
             1031          (E) the probable beneficial effect of the expansion.
             1032          (b) The commissioner may approve the amendment to the bylaws described in Subsection
             1033      (1) or (2) if the commissioner:
             1034          (i) gives the notice required under this Subsection (4);
             1035          (ii) receives the written findings and recommendations of the supervisor under this
             1036      Subsection (4); and
             1037          (iii) finds that:
             1038          (A) the credit association is adequately capitalized;
             1039          (B) the credit association has the financial capacity to serve the financial needs of the
             1040      expanded limited field of membership in a safe and sound manner;
             1041          (C) the credit association has the managerial expertise to serve the financial needs of the
             1042      expanded limited field of membership in a safe and sound manner; and
             1043          (D) any potential harm the expansion of the limited field of membership may have on
             1044      other institutions subject to the jurisdiction of the department does not clearly outweigh the
             1045      probable beneficial effect of the expansion.
             1046          (5) If the credit union requests to add an association, the commissioner:
             1047          (a) may approve the addition of more than one association in any calendar year; and
             1048          (b) (i) if the association consists of 50 or more persons, shall comply with the procedure
             1049      under Section 7-9-52 for adding an association to a credit union; or
             1050          (ii) (A) if the association consists of less than 50 persons, is not subject to Section 7-9-52


             1051      in approving the addition of an association; and
             1052          (B) shall approve the amendment if the commissioner finds:
             1053          (I) the credit association is adequately capitalized;
             1054          (II) the credit association has the financial capacity to serve the financial needs of the
             1055      expanded limited field of membership in a safe and sound manner;
             1056          (III) the credit association has the managerial expertise to serve the financial needs of the
             1057      expanded limited field of membership in a safe and sound manner; and
             1058          (IV) if the credit association is a credit association with a grandfathered limited field of
             1059      membership, that the association resides in the domicile-county of the credit association.
             1060          (6) In accordance with Section 7-1-309 , the commissioner may hold a hearing on the
             1061      expansion of a credit association's limited field of membership.
             1062          (7) This section may not be interpreted to permit a credit union that has not been
             1063      designated as a credit association to:
             1064          (a) expand its limited field of membership to include residents of more than one county;
             1065      or
             1066          (b) change the county included in the limited field of membership of a credit union, if any.
             1067          Section 18. Section 7-9-58 is enacted to read:
             1068          7-9-58. Conversion to mutual association.
             1069          (1) A credit association designated pursuant to Section 7-9-55 is required to convert to a
             1070      state mutual association governed by Chapter 7, Savings and Loan Associations, if one or more
             1071      of the following events occur on or after the date the credit association is designated as a credit
             1072      association:
             1073          (a) the credit association exceeds $75,000,000 in total assets;
             1074          (b) the credit association exceeds $6,750,000 in capital;
             1075          (c) the credit association exceeds 30,000 in membership;
             1076          (d) the credit association extends a member-business loan in violation of the limits on
             1077      member-business loans under this chapter including in Section 7-9-20 ; or
             1078          (e) (i) the credit association establishes branches in two or more counties whose residents
             1079      are included in the credit association's limited field of membership; and
             1080          (ii) the total number of the branches described in Subsection (1)(e)(i) is equal or greater
             1081      than six.


             1082          (2) Within 30 days after the day on which the commissioner receives information
             1083      demonstrating that an event described in Subsection (1) occurs, the commissioner shall give
             1084      written notice to the credit association stating that the credit association is required to convert to
             1085      a state mutual association governed by Chapter 7, Savings and Loan Associations, in accordance
             1086      with this section.
             1087          (3) By no later than 30 days after the day the commissioner gives the credit association
             1088      written notice under Subsection (2):
             1089          (a) if a vote to convert to a mutual association governed by Chapter 7, Savings and Loan
             1090      Associations, is required by federal law governing the National Credit Union Association, the
             1091      board of directors of the credit association shall:
             1092          (i) set a date for the vote of the members to approve the conversion in compliance with the
             1093      federal law; and
             1094          (ii) submit the initial notice of the vote as may be required by federal law; or
             1095          (b) submit to the National Credit Union Association any required notice or information
             1096      of the required conversion as may be required by federal law;
             1097          (c) submit an application for deposit insurance for the state mutual association with the
             1098      Federal Deposit Insurance Corporation; and
             1099          (d) submit to the commissioner all materials that may be:
             1100          (i) required by Section 7-7-7 ;
             1101          (ii) required by applicable federal law governing the National Credit Union Association;
             1102      or
             1103          (iii) otherwise requested by the commissioner to complete the conversion under this
             1104      section.
             1105          (4) (a) If a vote is required by federal law governing the National Credit Union
             1106      Association:
             1107          (i) the credit association shall conduct a vote of the credit association's members to
             1108      approve the conversion under this section; and
             1109          (ii) the conversion to a state mutual association under this section is subject to the
             1110      affirmative vote of the membership as measured pursuant to the federal law that requires the vote.
             1111          (b) The vote required by this Subsection (4) shall be conducted pursuant to the terms of
             1112      the federal law that requires the vote.


             1113          (c) If a membership vote is not required by federal law, the affirmative vote by the
             1114      members for the credit association designation under Section 7-9-55 is considered an affirmative
             1115      vote for the credit association's conversion to a state mutual association under this section.
             1116          (5) A credit association may not convert to a state mutual association governed by Chapter
             1117      7, Savings and Loan Association, without the approval of the commissioner.
             1118          (6) Prior to the issuance of the conversion certificate by the commissioner and the filing
             1119      of the documents required by Section 7-7-7 , the credit association shall:
             1120          (a) continue to be a credit association chartered under this chapter; and
             1121          (b) remain eligible for deposit insurance through the National Credit Union Association.
             1122          Section 19. Section 7-9-59 is enacted to read:
             1123          7-9-59. Failure to convert.
             1124          (1) A credit association is subject to Subsection (2) if the credit association is required to
             1125      convert under Section 7-9-58 and the credit association has not completed its conversion within
             1126      one year from:
             1127          (a) the date the proposition is initiated under Subsection 7-9-55 (2) if at the time of the
             1128      proposition the credit union would be required to convert to a state mutual association under
             1129      Section 7-9-58 if it were a credit association;
             1130          (b) the date the commissioner gives written notice of the requirement to convert under
             1131      Subsection 7-9-58 (2); or
             1132          (c) the date on which the credit association receives a final determination that it cannot
             1133      obtain insurance from the Federal Deposit Insurance Corporation or its successor federal agency.
             1134          (2) (a) Subject to Subsections (2)(b) and (c), on the day described in Subsection (1), the
             1135      credit association:
             1136          (i) shall lose its designation as a credit association;
             1137          (ii) may not seek any additional members in any county whose residents were added to the
             1138      credit association's limited field of membership pursuant to Section 7-9-57 ;
             1139          (iii) shall be governed by Sections 7-9-51 through 7-9-53 with respect to its limited field
             1140      of membership; and
             1141          (iv) shall be subject to the chapter as if the designation as a credit association had not been
             1142      made.
             1143          (b) By no later than ten days before a credit association fails to meet the deadline under


             1144      Subsection (1), the credit association shall:
             1145          (i) notify the commissioner of the credit association's failure to meet the deadline;
             1146          (ii) submit a plan for:
             1147          (A) the closure and divestiture of all branches or offices of the credit association obtained
             1148      or opened in connection with a county whose residents were added to the limited field of
             1149      membership of the credit association under Section 7-9-57 ; and
             1150          (B) returning the limited field of membership of the credit association to a limited field
             1151      of membership under Section 7-9-51 or 7-9-53 ; and
             1152          (iii) obtain the commissioner's approval of the plan.
             1153          (c) Under the supervision of the commissioner, the credit association shall implement the
             1154      plan approved by the commissioner under Subsection (2)(b) within 180 days from the day
             1155      described in Subsection (1).




Legislative Review Note
    as of 2-14-01 7:49 AM


A limited legal review of this legislation raises no obvious constitutional or statutory concerns.

Office of Legislative Research and General Counsel


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