Capital letters indicate new material to be added to existing statute.
Dashes through the words indicate deletions from existing statute.

First Regular Session

Sixty-first General Assembly

LLS NO. 97­0254.01 EBD HOUSE BILL 97­1112

STATE OF COLORADO

BY REPRESENTATIVE Schauer;

also SENATORS Mutzebaugh and Perlmutter.

BUSINESS AFFAIRS & LABOR

A BILL FOR AN ACT

CONCERNING THE PROCEDURE FOR CONVERSION OF A FINANCIAL INSTITUTION TO A DIFFERENT FORM OF FINANCIAL INSTITUTION.

Bill Summary

(Note: This summary applies to this bill as introduced and does not necessarily reflect any amendments which may be subsequently adopted.)

Specifies procedures for a state chartered bank, savings and loan association, or credit union to convert to a different form of financial institution.

Allows a state bank to convert itself to another form of financial institution if its board of directors adopts a proposal for conversion that is approved by the division of banking and the shareholders. After such approval, the board must take appropriate action under state and federal law and file any new charter with the commissioner of banking. Specifies the contents of a proposal of conversion. Requires submission of such plan to any appropriate federal agencies.

Allows a chartered credit union to convert itself to another form of financial institution if its board of directors adopts a proposal for conversion that is approved by the division of financial services and the members. After such approval, the board must take appropriate action under state and federal law and file any new charter with the commissioner of financial services. Specifies the contents of a proposal of conversion. Requires submission of such plan to any appropriate federal agencies. Restricts the ability of credit union management to purchase stock in the resulting financial institution.

Allows a savings and loan association to convert itself to another form of financial institution if its board of directors adopts a proposal for conversion that is approved by the division of financial services and the members. After such approval, the board must take appropriate action under state and federal law and file any new charter with the commissioner of financial services. Specifies the contents of a proposal of conversion. Requires submission of such plan to any appropriate federal agencies.


Be it enacted by the General Assembly of the State of Colorado:

SECTION 1.  Article 4 of title 11, Colorado Revised Statutes, 1987 Repl. Vol., as amended, is amended BY THE ADDITION OF A NEW SECTION to read:

11­4­108.5.  Conversion of a state bank to a nonbank financial institution. (1)  ANY STATE BANK MAY CONVERT ITSELF INTO A FEDERAL OR STATE SAVINGS AND LOAN ASSOCIATION OR CREDIT UNION BY THE FOLLOWING PROCEDURE:

(a)  THE BOARD OF DIRECTORS OF THE STATE BANK SHALL APPROVE A PROPOSITION FOR CONVERSION.

(b)  UPON APPROVAL OF A PROPOSITION FOR CONVERSION, THE BOARD OF DIRECTORS SHALL PREPARE OR CAUSE TO BE PREPARED A PLAN FOR CONVERSION.

(c)  UPON THE APPROVAL OF THE PLAN FOR CONVERSION BY THE BOARD OF DIRECTORS, THE PLAN SHALL BE SUBMITTED TO THE DIVISION FOR ITS REVIEW AND APPROVAL.

(d)  SUBJECT TO SUBSECTION (3) OF THIS SECTION, IF THE PLAN IS APPROVED BY THE DIVISION, THE PLAN SHALL BE SUBMITTED BY THE BOARD OF DIRECTORS TO THE SHAREHOLDERS FOR THEIR APPROVAL AT ANY REGULAR OR SPECIAL MEETING OF THE SHAREHOLDERS OF THE STATE BANK CALLED TO CONSIDER SUCH ACTION AND HELD IN ACCORDANCE WITH THE LAWS GOVERNING SUCH STATE BANK. THE PLAN SHALL BE APPROVED BY THE AFFIRMATIVE VOTE OF A MAJORITY OF THE SHAREHOLDERS. SHAREHOLDERS MAY VOTE IN PERSON OR BY PROXY AT SUCH MEETING.

(e)  WITHIN NINETY DAYS AFTER APPROVAL OF THE PLAN BY THE SHAREHOLDERS, THE BOARD OF DIRECTORS SHALL TAKE SUCH ACTION AS MAY BE NECESSARY UNDER APPLICABLE FEDERAL AND STATE LAW TO COMPLETE THE CONVERSION. WITHIN TEN DAYS AFTER THE RECEIPT OF THE FEDERAL OR STATE SAVINGS AND LOAN OR CREDIT UNION CHARTER, AS APPLICABLE, A COPY OF THE CHARTER THUS ISSUED SHALL BE FILED WITH THE COMMISSIONER. UPON SUCH FILING, THE STATE BANK SHALL CEASE TO BE A STATE BANK.

(2)  ANY PLAN OF CONVERSION SHALL INCLUDE THE FOLLOWING:

(a)  CURRENT FINANCIAL REPORTS;

(b)  AN EXPLANATION OF ANY PROVISIONS FOR RESERVES, UNDIVIDED EARNINGS, OR DIVIDENDS;

(c)  AN ANALYSIS OF STOCK VALUES;

(d)  AN ANALYSIS OF THE REGULATORY EFFECT OF CONVERSION BROUGHT ABOUT BY CHANGE IN GOVERNMENT REGULATORS;

(e)  AN EXPLANATION OF ANY OTHER RELEVANT EFFECT ON THE SHAREHOLDERS; AND

(f)  ANY ADDITIONAL INFORMATION AS MAY BE REQUIRED BY THE DIVISION OR ANY FEDERAL GOVERNMENTAL AGENCY OR REGULATOR HAVING AUTHORITY OVER OR INSURING THE DEPOSITS OF THE BANK.

(3)  IF REQUIRED BY APPLICABLE FEDERAL LAW OR REGULATION, THE PLAN OF CONVERSION SHALL BE SUBMITTED TO ANY FEDERAL GOVERNMENTAL AGENCY OR REGULATOR HAVING AUTHORITY OVER THE STATE BANK PRIOR TO SUBMISSION OF THE PLAN TO THE SHAREHOLDERS FOR THEIR APPROVAL.

(4)  NOTHING IN THIS SECTION SHALL PREVENT ANY SHAREHOLDER FROM EXERCISING ANY RIGHTS SUCH SHAREHOLDER MAY HAVE UNDER FEDERAL OR STATE LAW.

SECTION 2.  Article 30 of title 11, Colorado Revised Statutes, 1987 Repl. Vol., as amended, is amended BY THE ADDITION OF A NEW SECTION to read:

11­30­120.6.  Conversion of a state credit union to a non­credit union financial institution. (1)  ANY CREDIT UNION MAY CONVERT ITSELF TO A FEDERAL OR STATE BANK OR SAVINGS AND LOAN ASSOCIATION BY THE FOLLOWING PROCEDURE:

(a)  THE BOARD OF DIRECTORS OF THE CREDIT UNION SHALL APPROVE A PROPOSITION FOR CONVERSION.

(b)  UPON APPROVAL OF A PROPOSITION FOR CONVERSION, THE BOARD OF DIRECTORS SHALL PREPARE OR CAUSE TO BE PREPARED A PLAN FOR CONVERSION.

(c)  UPON THE APPROVAL OF THE PLAN FOR CONVERSION BY THE BOARD OF DIRECTORS, THE PLAN SHALL BE SUBMITTED TO THE DIVISION OF FINANCIAL SERVICES FOR ITS REVIEW AND APPROVAL.

(d)  SUBJECT TO SUBSECTION (3) OF THIS SECTION, IF THE PLAN IS APPROVED BY THE DIVISION OF FINANCIAL SERVICES, THE PLAN SHALL BE SUBMITTED BY THE BOARD OF DIRECTORS TO THE MEMBERS FOR THEIR APPROVAL AT ANY REGULAR OR SPECIAL MEETING OF THE MEMBERS OF THE CREDIT UNION CALLED TO CONSIDER SUCH ACTION AND HELD IN ACCORDANCE WITH THE LAWS GOVERNING SUCH CREDIT UNION. THE PLAN SHALL BE APPROVED BY THE AFFIRMATIVE VOTE OF A MAJORITY OF THE MEMBERS. MEMBERS MAY VOTE IN PERSON AT SUCH MEETING OR BY MAIL BALLOT.

(e)  WITHIN NINETY DAYS AFTER APPROVAL OF THE PLAN BY THE MEMBERS, THE BOARD OF DIRECTORS SHALL TAKE SUCH ACTION AS MAY BE NECESSARY UNDER APPLICABLE FEDERAL AND STATE LAW TO COMPLETE THE CONVERSION. WITHIN TEN DAYS AFTER THE RECEIPT OF THE FEDERAL OR STATE BANK OR SAVINGS AND LOAN CHARTER, AS APPLICABLE, A COPY OF THE CHARTER THUS ISSUED SHALL BE FILED WITH THE COMMISSIONER. UPON SUCH FILING, THE CREDIT UNION SHALL CEASE TO BE A STATE CREDIT UNION.

(2)  ANY PLAN OF CONVERSION SHALL INCLUDE THE FOLLOWING:

(a)  CURRENT FINANCIAL REPORTS;

(b)  AN EXPLANATION OF ANY PROVISIONS FOR RESERVES, UNDIVIDED EARNINGS, OR DIVIDENDS;

(c)  AN ANALYSIS OF SHARE VALUES;

(d)  AN ANALYSIS OF THE REGULATORY EFFECT OF CONVERSION BROUGHT ABOUT BY CHANGE IN GOVERNMENT REGULATORS;

(e)  AN EXPLANATION OF ANY OTHER RELEVANT EFFECT ON THE SHAREHOLDERS; AND

(f)  ANY ADDITIONAL INFORMATION AS MAY BE REQUIRED BY THE DIVISION OF FINANCIAL SERVICES OR ANY FEDERAL GOVERNMENTAL AGENCY OR REGULATOR HAVING AUTHORITY OVER OR INSURING THE SHARES OR DEPOSITS OF THE CREDIT UNION.

(3)  THE PLAN FOR CONVERSION SHALL PROVIDE THAT, FOR A PERIOD OF AT LEAST TWO YEARS AFTER THE EFFECTIVE DATE OF THE TRANSACTION:

(a) (I)  NO DIRECTOR OF THE CREDIT UNION SHALL RECEIVE ANY COMPENSATION OR ANY BENEFITS PROVIDED OR AVAILABLE TO OTHER MEMBERS; AND

(II)  NO DIRECTOR OR SENIOR MANAGEMENT OFFICIAL OF THE CREDIT UNION SHALL BE ALLOWED TO ACQUIRE STOCK IN THE RESULTING INSTITUTION OR ANY SUCCESSOR INSTITUTION ON ANY TERMS OTHER THAN THOSE READILY AVAILABLE TO ALL MEMBERS OF THE FORMER CREDIT UNION. THIS PROHIBITION SHALL INCLUDE STOCK ISSUED FOR SERVICES RENDERED PRIOR TO THE CONVERSION.

(b)  FOR PURPOSES OF THIS SUBSECTION (3),"SENIOR MANAGEMENT OFFICIAL" MEANS THE CREDIT UNION'S CHIEF EXECUTIVE OFFICER, ANY ASSISTANT CHIEF EXECUTIVE OFFICER, AND THE CHIEF FINANCIAL OFFICER.

(4)  IF REQUIRED BY APPLICABLE FEDERAL LAW OR REGULATION, THE PLAN OF CONVERSION SHALL BE SUBMITTED TO ANY FEDERAL GOVERNMENTAL AGENCY OR REGULATOR HAVING AUTHORITY OVER THE CREDIT UNION PRIOR TO SUBMISSION OF THE PLAN TO THE MEMBERS FOR THEIR APPROVAL.

(5)  NOTHING IN THIS SECTION SHALL PREVENT ANY MEMBER FROM EXERCISING ANY RIGHTS SUCH MEMBER MAY HAVE UNDER FEDERAL OR STATE LAW.

SECTION 3. Article 45 of title 11, Colorado Revised Statutes, 1987 Repl. Vol., is amended BY THE ADDITION OF A NEW SECTION to read:

11­45­104.  Conversion of a state savings and loan association to a non­savings and loan financial institution. (1)  ANY SAVINGS AND LOAN ASSOCIATION, OR OTHER HOME­FINANCING ORGANIZATION, BY WHATEVER NAME OR STYLE IT MAY BE DESIGNATED, MAY CONVERT ITSELF TO A FEDERAL OR STATE BANK OR CREDIT UNION BY THE FOLLOWING PROCEDURE:

(a)  THE BOARD OF DIRECTORS OF THE ASSOCIATION SHALL APPROVE A PROPOSITION FOR CONVERSION.

(b)  UPON APPROVAL OF A PROPOSITION FOR CONVERSION, THE BOARD OF DIRECTORS SHALL PREPARE OR CAUSE TO BE PREPARED A PLAN FOR CONVERSION.

(c)  UPON THE APPROVAL OF THE PLAN FOR CONVERSION BY THE BOARD OF DIRECTORS, THE PLAN SHALL BE SUBMITTED TO THE DIVISION OF FINANCIAL SERVICES FOR ITS REVIEW AND APPROVAL.

(d)  SUBJECT TO SUBSECTION (3) OF THIS SECTION, IF THE PLAN IS APPROVED BY THE DIVISION OF FINANCIAL SERVICES, THE PLAN SHALL BE SUBMITTED BY THE BOARD OF DIRECTORS TO THE MEMBERS FOR THEIR APPROVAL AT ANY REGULAR OR SPECIAL MEETING OF THE MEMBERS OF THE ASSOCIATION CALLED TO CONSIDER SUCH ACTION AND HELD IN ACCORDANCE WITH THE LAWS GOVERNING SUCH ASSOCIATION. THE PLAN SHALL BE APPROVED BY THE AFFIRMATIVE VOTE OF A MAJORITY OF THE MEMBERS. MEMBERS MAY VOTE IN PERSON OR BY PROXY AT SUCH MEETING.

(e)  WITHIN NINETY DAYS AFTER APPROVAL OF THE PLAN BY THE MEMBERS, THE BOARD OF DIRECTORS SHALL TAKE SUCH ACTION AS MAY BE NECESSARY UNDER APPLICABLE FEDERAL AND STATE LAW TO COMPLETE THE CONVERSION. WITHIN TEN DAYS AFTER THE RECEIPT OF THE FEDERAL OR STATE BANK OR CREDIT UNION CHARTER, AS APPLICABLE, A COPY OF THE CHARTER THUS ISSUED SHALL BE FILED WITH THE COMMISSIONER. UPON SUCH FILING, THE ASSOCIATION SHALL CEASE TO BE A STATE SAVINGS AND LOAN ASSOCIATION.

(2)  ANY PLAN OF CONVERSION SHALL INCLUDE THE FOLLOWING:

(a)  CURRENT FINANCIAL REPORTS;

(b)  AN EXPLANATION OF ANY PROVISIONS FOR RESERVES, UNDIVIDED EARNINGS, OR DIVIDENDS;

(c)  AN ANALYSIS OF SHARE OR STOCK VALUES;

(d)  AN ANALYSIS OF THE REGULATORY EFFECT OF CONVERSION BROUGHT ABOUT BY CHANGE IN GOVERNMENT REGULATORS;

(e)  AN EXPLANATION OF ANY OTHER RELEVANT EFFECT ON THE MEMBERS; AND

(f)  ANY ADDITIONAL INFORMATION AS MAY BE REQUIRED BY THE DIVISION OF FINANCIAL SERVICES OR ANY FEDERAL GOVERNMENTAL AGENCY OR REGULATOR HAVING AUTHORITY OVER OR INSURING THE SHARES OR DEPOSITS OF THE ASSOCIATION.

(3)  IF REQUIRED BY APPLICABLE FEDERAL LAW OR REGULATION, THE PLAN OF CONVERSION SHALL BE SUBMITTED TO ANY FEDERAL GOVERNMENTAL AGENCY OR REGULATOR HAVING AUTHORITY OVER THE ASSOCIATION PRIOR TO SUBMISSION OF THE PLAN TO THE MEMBERS FOR THEIR APPROVAL.

(4)  NOTHING IN THIS SECTION SHALL PREVENT ANY MEMBER FROM EXERCISING ANY RIGHTS SUCH MEMBER MAY HAVE UNDER FEDERAL OR STATE LAW.

SECTION 4.  Safety clause. The general assembly hereby finds, determines, and declares that this act is necessary for the immediate preservation of the public peace, health, and safety.