A N A C T
RELATING TO FINANCIAL INSTITUTIONS
It is enacted by the General Assembly as follows:
SECTION 1. Title 19 of the General Laws entitled "Financial Institutions" is hereby amended by adding thereto the following chapter:
CHAPTER 19-5.1
CREDIT UNION CONVERSION ACT OF 2001
19-5.1-1. Short title. -- This chapter shall be known and may be cited as "The Credit Union Conversion Act of 2001."
19-5.1-2. Definitions. -- Terms used in this chapter shall have the same meaning as set forth in sections 19-1-1 and 19-5-1, unless another meaning is expressed or is clearly apparent from the language or context.
19-5.1-3. Conversion from credit union to financial institution or another form of financial services entity. -- (a) Any credit union chartered under the laws of this state may convert to and become a financial institution chartered under the laws of this state or another financial services entity chartered under the laws of the United States of America. Such conversion shall not require the prior liquidation of the subject credit union. In the event that any credit union chartered under the laws of this state elects to convert to and become a financial institution chartered under the laws of this state, such credit union shall first demonstrate compliance with the various requirements of Chapter 2 of Title 19, as appropriate. In the alternative, in the event that any credit union chartered under the laws of this state elects to convert to and become another form of financial services entity chartered under the laws of the United States, such credit union shall first demonstrate compliance with the various requirements of such federal laws and regulations governing the chartering of such designated financial services entity.
(b) Any credit union chartered under the laws of this state may convert to and become a financial institution chartered under the laws of this state or another form of financial services entity chartered under the laws of the United States upon adoption of a plan of conversion by two-thirds (2/3) vote of the board of directors and approval of the plan by the director or the director's designee and a majority vote of those members of the credit union qualified to vote pursuant to section 19-5-7 who are present in person or by proxy at a meeting called by the board of directors. For the purpose of this section, unless otherwise required under applicable provisions of federal or state banking law, a member shall be deemed to be the individual whose tax identification number or social security number is used by the credit union for interest reporting purposes to the Internal Revenue Service.
(c) In the event that the plan of conversion calls for the issuance of capital stock, it shall also provide that the converted entity shall issue and sell the stock issued in connection with the conversion at a price that represents its pro forma market value, as determined by an independent appraisal, and shall offer its stock initially in a subscription offering to the members of the credit union on an eligibility record date established by the board of directors, giving those members priority rights to purchase the shares over the general public pro rata based on deposits. The converted credit union shall also create a liquidation account for the benefit of its members on the eligibility record date, in an amount representing the total equity of the credit union at the time, the balances of which shall be calculated and subsequently recalculated as determined in accordance with regulations promulgated by the director or the director's designee. Unless otherwise impaired, any liquidation account so created also shall be considered as part of the paid-in and unimpaired capital stock and surplus of the newly chartered stock financial institution or financial services entity. The plan of conversion may provide for restrictions on the amount of stock which any person or entity may purchase in the conversion, or own or control thereafter, which may also be incorporated into the stock agreement to form the converted entity.
(d) In connection with the conversion, the financial institution or other financial services entity may form a holding company or utilize an existing holding company to hold all the shares of the financial institution or other financial services entity, and offer to its depositors and general public (subject to subscription rights in favor of depositors) all of the stock of the holding company in lieu of the capital stock of the financial institution or other financial services entity. This conversion may also be accomplished pursuant to a merger.
(e) No credit union may convert to a financial institution or other financial services entity unless its deposits will continue to be federally insured. The corporate existence of a credit union converting to the financial institution or other financial services entity shall not terminate, but the financial institution or other financial services entity shall be deemed to be a continuation of the corporate entity credit union so converted.
(f) In connection with its approval of any plan of conversion to a financial institution charted under the laws of this state, the director or the director's designee shall approve the proposed agreement to form and the proposed by-laws of the converted entity. The director or the director's designee, upon finding that the requirements of this section and applicable regulations have been met, (including when applicable, that the conversion to any entity issuing stock has been completed with the sale of all shares offered in the conversion to a stock form of financial institution), shall issue a certificate of approval of the conversion to the converted entity. Upon the payment of fifty dollars ($50.00), the certificate of approval shall be filed with the secretary of state, together with the certificate of the general treasurer that the converted entity has paid into the treasury for the use of the state a sum equal to one tenth of one percent (.10%) of its capital stock which in no event shall be less than one hundred dollars ($100). Upon the filing of the certificate with the secretary of state and payment of fifty dollars ($50.00), the secretary of state shall immediately record the certificate of approval and any agreement to form, whereupon such agreement to form will become effective.
(g) The director or the director's designee shall issue rules and regulations implementing this section.
(h) To the extent not inconsistent with this section, each credit union so converted into a financial institution chartered under the laws of this state shall have all the powers and privileges conferred on, and be subject to all the duties and liabilities imposed on, such financial institutions and each credit union so converted into a financial services entity chartered under the laws of the United States shall have all the powers and privileges conferred on, and be subject to all the duties and liabilities imposed on, such federally chartered financial services entity.
SECTION 2. This act shall take effect upon passage.