§20104. Effect of reorganization; ownership and governance

Link to law: http://legislature.vermont.gov/statutes/section/08/210/20104
Published: 2015

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Title

08

:
Banking and Insurance






Chapter

210

:
MUTUAL OR COOPERATIVE HOLDING COMPANY











 

§

20104. Effect of reorganization; ownership and governance

(a)(1) The

organizational existence of the reorganizing mutual or cooperative financial

institution shall not terminate, and the mutual holding company resulting from

the reorganization shall be deemed to be a continuation of the entity of such

financial institution, not as a depository institution but as a financial

institution holding company. The depositors of the mutual or cooperative

financial institution immediately prior to the reorganization shall be entitled

to deposits in the mutual holding company subsidiary financial institution of

like amounts, interest rate, and other terms, without interruption of interest

and such deposits shall continue to be insured by the Federal Deposit Insurance

Corporation up to the maximum amount provided by law. The depositors of the

mutual or cooperative financial institution immediately before the

reorganization, shall, by virtue of the reorganization, have proprietary

interests in the net worth of the mutual holding company of the same nature,

rights, and proportions as the proprietary interests which they had in the

mutual or cooperative financial institution immediately prior to the

reorganization, in lieu of such former interests. Except as otherwise set forth

in this section with respect to the rights of depositors, creditors of the

reorganizing mutual or cooperative financial institution immediately prior to

the reorganization shall be deemed to have such rights as creditors solely with

respect to the mutual holding company subsidiary financial institution upon

consummation of the reorganization.

(2) Except as

otherwise specifically provided in the plan of reorganization adopted pursuant

to section 20102 of this title, upon consummation of the reorganization into

mutual holding company form, the mutual holding company subsidiary financial

institution shall by operation of law be deemed to have succeeded to all rights

of or in all tangible or intangible property, franchises, and interests of the

mutual or cooperative financial institution, including appointments,

designations, nominations, and all other rights and interests as trustee,

executor, administrator, registrar of stocks and bonds, guardian of estates,

assignee, and every other fiduciary capacity, in the same manner and to the

same extent as such rights, franchises, and interests were held or enjoyed by

the reorganizing mutual or cooperative financial institution immediately prior

to the effective date of the reorganization, and without further additional

assignment, appointment, or designation.

(b)(1) A mutual

holding company shall not issue capital stock. Its net earnings and net worth

shall inure to the benefit of the persons who are from time to time the savings

depositors of its mutual holding company subsidiary financial institution and

any other persons acquiring proprietary interests in the earnings and net worth

of the mutual holding company, whether by merger or otherwise. Such net

earnings may be distributed among such depositors and other persons at such

times and in such equitable manner as the governing body of the mutual holding

company, in its discretion, may determine. Apart from any such distributions,

the proportionate proprietary interests of such depositors and other persons in

the net earnings and net worth of the mutual holding company shall be realized

only upon liquidation of the mutual holding company after the claims of all of

its creditors have been satisfied. The proprietary interest of any depositor of

the mutual holding company subsidiary financial institution in the net earnings

and net worth of the mutual holding company shall terminate upon the complete

withdrawal by such depositor of his or her accounts. Neither the depositors of

the mutual holding company subsidiary financial institution nor any other

persons acquiring proprietary interests in the mutual holding company shall

have any voting rights in the organization.

(2) The powers

of the mutual holding company shall vest in its corporators or governing body,

as the case may be. The initial corporators or directors shall consist of such

of the persons who were serving as corporators or directors of the reorganizing

mutual or cooperative financial institution immediately prior to the

reorganization and as are named in the plan of reorganization. Thereafter, the

corporators or directors shall be chosen from time to time in the manner set

forth in the internal governance documents of the mutual holding company. The

management of the mutual holding company shall be vested in its governing body,

who shall be elected by the corporators in the case of a mutual financial

institution. The initial governing body shall consist of such of the persons

who were serving as the directors of the mutual or cooperative financial

institution immediately prior to the reorganization and as are named in the

plan of reorganization. Such persons shall hold office until the first annual

meeting of the corporators and until their successors have been chosen and

qualified. The governing body shall hold an organizational meeting immediately

following consummation of the reorganization for the adoption of internal

governance documents and the election of officers in such manner as the

internal governance documents may prescribe. Any action by a mutual holding

company which, if taken by a business corporation, would require the approval

of its shareholders under 11A V.S.A. chapter 10, 11, 12, or 14, shall require

the vote of concurrence of the corporators of the mutual holding company and in

such proportion of the corporators as would be required for the approval of

similar action by shareholders of a business corporation.

(3) The general

purpose of a mutual holding company shall be conducting and carrying on the

business and activities of a financial institution holding company. A mutual

holding company shall not take deposits. It shall have the general powers of

business corporations as set forth in 

11A V.S.A. § 3.02 and shall have the powers of, and be subject to the

limitations on, bank holding companies under the federal Bank Holding Company

Act of 1956, as amended or the Savings and Loan Holding Company Act, as

amended, as the case may be. Without limiting the generality of the foregoing

and subject to provisions of applicable state and federal law, a mutual holding

company may:

(A) invest in

the stocks and securities of any depository institution;

(B) acquire

control of any depository institution;

(C) merge or

consolidate with or otherwise acquire another mutual holding company;

(D) merge or

consolidate any subsidiary of the mutual holding company with another

subsidiary thereof or transfer all or a portion of the assets of one such

subsidiary to another;

(E) make capital

contributions and loans to its subsidiaries and affiliates and otherwise assist

them financially;

(F) engage in,

directly or indirectly through a subsidiary, any non-banking activity

authorized for a bank holding company under state or federal law or regulation;

(G) issue

capital debentures;

(H) pledge the

common stock of its subsidiaries to secure the indebtedness of the mutual

holding company, provided that the proceeds of such indebtedness are used to

fund the business operations, or to effect other business purposes, of the

mutual holding company or its subsidiaries; and

(I) sell or

transfer the common stock of its mutual holding company subsidiary financial

institution, provided that the Commissioner has approved the transaction, and

provided further that it does not result in the mutual holding company holding

less than 51 percent of the outstanding stock of the mutual holding company

subsidiary financial institution.

(4) A mutual

holding company may convert from mutual to investor-owned form subject to the

same procedures and requirements as are applicable to the conversion of a mutual

or cooperative financial institution to investor-owned form under chapter 206

of this title.

(5) The mutual

holding company shall obtain the Commissioner's approval before entering into

any transaction described in subdivision (b)(3)(B), (C), or (D) of this

section. In addition to any other applicable law governing the approval of the

transaction, the Commissioner shall disapprove any transaction which is unfair

to the holders of the proprietary interests in the mutual holding company.

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