DBO Approves Repeal of CCR 30.105 Regarding CA State CU Bylaws

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The California Department of Business Oversight (DBO) finalized the repeal of section 30.105 of Title 10 of the California Code of Regulations (CCR), which required credit union bylaw amendments be approved by the Commissioner of Business Oversight.

Background

Financial Code section 14103 provides the manner in which the business of a credit union is to be conducted, and includes provisions the bylaws must contain. Corporations Code sections 7150 and 7151 (in the Nonprofit Mutual Benefit Corporations Law) also provide information that credit unions must include in bylaws, optional bylaw provisions, and procedures on how to amend bylaws.

Pursuant to Financial Code section 14250, subdivision (b)(1), the DBO examines credit unions, at a minimum, once every two years. During a credit union examination, the DBO reviews the bylaws and any amendments to the bylaws made since the DBO’s prior examination. If the bylaws or any recent amendments are found to be inconsistent with the law or include unsafe or unsound corporate governance practices, the DBO has the authority to instruct a credit union to revise the amendment so that it conforms to current law. The DBO has determined this review of a credit union’s bylaws provides sufficient oversight of credit union bylaws.

California Credit Union Bylaw Amendment Approval Procedures—Section 30.105 Repealed

Previously, under CCR 30.105, any California credit union bylaw amendment became effective only after the amendment had been approved and filed with the Commissioner. This required the following be submitted to the DBO:

(1) A certificate of secretary or assistant secretary, which shall include a statement that the bylaws, or the amendments thereto, were approved by the board of directors and, if applicable, by the required vote of the members of the credit union; and (2) A copy of the bylaw provision proposed to be amended which is marked to show changes between the existing provision and the provision as it is proposed to be amended.

New Process

In repealing CCR 30.105, except for field of membership changes and any changes affecting members’ rights, California state credit unions may now amend their bylaws by an affirmative vote of the majority of credit union board of directors without submitting an application to the DBO for approval. 

However, California credit unions should review their bylaws regarding bylaw amendments to ensure they are operating within the authority of their bylaws, as some credit unions may have adopted changes to the California State Credit Union Standard Bylaws, Article XVII listed below. 

California State Credit Union Standard Bylaws, Article XVII.

SECTION 1701. BYLAWS. Subject to the right of the members to amend these bylaws, amendments to said bylaws, other than an amendment changing the authorized number of directors, or relating to membership voting by mail, may be adopted by the affirmative vote of a majority of the board of directors at any duly held meeting thereof. An amendment changing the authorized number of directors may be adopted by the written vote of the members, provided notice of the meeting has been given in accordance with the provisions of Section 403 of these bylaws and provided such notice has contained a copy of the proposed amendment. An amendment relating to membership voting by mail shall be submitted to all members for their written vote which shall be certified by the president and secretary as to the manner by which it was submitted and the result of the voting. Proxy voting shall not be permitted in regard to any amendment submitted to the members for their written vote.

Exceptions

  • Field of Membership (FOM) Applications

    • The application requirements for a field of membership expansion is unaffected by this change
    • The DBO will continue to review and approve applications to expand field of membership pursuant to California Financial Code section 14155 and CCR sections 50, 30.51, 30.60 and 30.61
    • FOM applications must continue to clearly define the proposed FOM and should include the text of the bylaw amendment defining the new FOM.  The DBO will approve the FOM application, but will not actually approve the FOM bylaw amendment

  • Membership Vote & Approval Requirements

    • Any bylaw changes affecting members’ rights or governance, must still go to the membership for vote and approval. For example:

      • Amendments changing the authorized number of directors
      • Amendments relating to members’ voting rights
      • Amendments affecting the rights of members as to dissolution, redemption, or transfer
      • Creating an audit committee in lieu of a supervisory committee
      • Any changes required by law, code or regulation that require member approval

New Process

This change improves the efficiencies of both the DBO and California credit unions.   However, with this change, responsibility to know and understand applicable laws, regulations, bylaws, and codes, is now clearly on the credit union.  While most bylaw changes are not dramatic or controversial, it is recommended CA credit unions seek legal counsel or other assistance for bylaw amendments, especially for those related to governance or those that involve complex or technical issues. 

Resources

  • Your credit union’s legal counsel
  • The League’s compliance help desk:  844-731-6072 or CANV@PolicyWorksLLC.com
  • Your credit union’s DBO portfolio manager
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