Mergers and Consolidations

PURPOSE: This rule outlines certain procedures state-chartered credit unions must follow in order to complete a merger or consolidation that involves a Missouri state-chartered credit union. (1) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise. (A) Surviving credit union—The credit union that will continue in operation after the merger. (B) Merging credit union—The credit union that will cease to exist as an operating state-chartered credit union at the time of the merger. (C) Consolidating credit union—The credit unions that will cease to exist and will consolidate into a new credit union. (D) Director—The director of the Missouri Division of Credit Unions. (2) Any two (2) or more credit unions formed under the laws of the state of Missouri or any credit union(s) formed under the laws of the state of Missouri and any credit union formed under the laws of any other state or of the United States of America which is formed for the same purpose for which a credit union might be formed under the laws of this state, may merge into one of such credit unions or consolidate into a new credit union. (3) The affected credit unions shall notify the director in writing of their intent to merge or consolidate within fourteen (14) days after the credit unions’ boards of directors formally agree in principle to merge or consolidate. (4) Upon approval of a proposal for merger by a majority of the board of directors, the credit unions must prepare a plan for the proposed merger. This plan shall include: (A) The names of the credit unions proposing to merge and the name of the credit union into which they propose to merge, which is defined as the “surviving credit union”; (B) The terms and conditions of the proposed merger and the mode of carrying the same into effect, hereinafter, referred to as the Articles of Merger and/or the Merger Agreement; (C) The manner and basis of converting the membership shares of each merging credit union into the membership shares of the surviving credit union; (D) A statement of any changes in the articles of agreement and the bylaws of the surviving credit union effected by such merger; (E) The current financial reports of each credit union as follows: 1. Current financial statements for both credit unions; 2. Current delinquent loan summaries and analyses of the adequacy of the Allowance for Loan and Lease Losses account; 3. Consolidated financial statements, including an assessment of the generally accepted accounting principles (GAAP) net worth of each credit union before the merger and the GAAP net worth of the continuing credit union after the merger; 4. Analysis of share values; 5. Explanation of any proposed share adjustments; 6. Explanation of any provisions for reserves, undivided earnings, or dividends; 7. Provisions with respect to notification and payment of creditors; and 8. Explanation of any changes relative to insurance, such as life savings and loan protection insurance and insurance of member accounts; (F) Disclosure of financial benefit to be received by the officers, senior management, and directors other than those available to ordinary members; (G) An explanation of any proposed adjustments to the members’ shares, provisions for reserves, or undivided earnings; (H) A summary of the products and services proposed to be available to the members of the surviving credit union that may differ from those available at the merging credit union, with an explanation of the effects of any changes from the current products and services provided to the members of the merging credit union; (I) A summary of the advantages and disadvantages of the merger; and (J) Any other items deemed critical to the merger agreement by the boards of directors. (5) An application for approval of the merger will be complete when the following information is submitted to the director: (A) The merger plan, as described in this rule; (B) A copy of the corporate resolution of each board of directors formally agreeing in principle to merge; (C) A copy of the corporate resolution of each board of directors formally approving the Articles of Merger, and/or the Merger Agreement; (D) The proposed Notice of Special or Annual Meeting of the members of the merging credit union; (E) A copy of the written or electronic ballot to be sent to the members of the merging credit union; (F) A written explanation as to the voting procedures; and (G) If the credit union is seeking a waiver pursuant to section 370.353.3, RSMo, a request for such waiver. (6) If the surviving credit union is organized under the laws of another state or of the United States, the director may accept an application to merge that is prescribed by the state or federal supervisory authority of the surviving credit union, provided that the director may require additional information to determine whether to deny or approve the merger. The application will be deemed complete upon receipt of all information requested by the director. (7) The director may grant preliminary approval of an application for merger conditioned upon specific requirements being met. However, final approval shall not be granted unless such conditions have been met within the time specified in the preliminary approval and until approval has been granted by the National Credit Union Administration. (8) The director shall deny an application for merger if the director finds any of the following: (A) The financial condition of the merging credit union before the merger is such that it will likely jeopardize the financial stability of the surviving credit union or prejudice the financial interests of the members, beneficiaries, or creditors of either credit union; (B) The plan includes a change in the products or services available to members of the merging credit union that substantially harms the financial interests of the members, beneficiaries, or creditors of the merging credit union; (C) The officers, directors and/or senior management are to receive undue financial benefits not ordinarily received by similar credit unions and which are not available to ordinary members; (D) The credit unions do not furnish to the director all information requested by the director which is material to the application; or (E) The merger would be contrary to law or regulation. (9) Upon approval of the plan of merger, the board of directors of the merging credit union shall direct, by resolution, that the plan be submitted to a vote at a meeting to be called within sixty (60) days of the approval by the director. Advance notice of the meeting shall be mailed or delivered to each member of the credit union. This notice must be sent no more than thirty (30) days and no less than fourteen (14) days prior to the meeting at which the special merger will be voted on. The notice must— (A) Specify the purpose of the meeting and the date, time, and place; (B) Contain a summary of the merger plan, including but not necessarily limited to current financial statements for each credit union, a consolidated financial statement for the continuing credit union, analyses of share values, explanation of any proposed share adjustments, and explanation of any changes relative to insurance, such as life savings and loan protection insurance and insurance of member accounts; (C) State reasons for the proposed merger; (D) Provide name and location, including branches, of the continuing credit union; (E) Inform the members that they have the right to vote on the merger proposal in person at the meeting, or by written or electronic ballot to be received no later than the date and time announced for the meeting called for that purpose, or by an alternative method that is approved by the director. All members should be provided the opportunity to vote without being required to attend the meeting; and (F) Be accompanied by a Ballot for Merger Proposal and instructions on how to vote in an alternative manner, which shall be included in or enclosed with the notice. (10) Approval of a proposal to merge a credit union into another credit union requires the affirmative vote of a majority of the members of the merging credit union who vote on the proposal. (11) The board of directors of the merging credit union shall appoint or hire independent tellers of elections. (12) The board of directors of the surviving credit union named in any such plan of merger need not submit the merger plan to its members but shall, instead, approve such merger plan according to the procedure stated in section 370.351, RSMo. (13) The membership of the merging credit union shall have the ability to complete a written or electronic ballot. This ballot may be in the form of an absentee ballot request that accompanies the notice of meeting or in the form of an actual ballot. All members should be provided the opportunity to vote without being required to attend the meeting where the merger plan is voted on. PROFESSIONAL REGISTRATION (14) With prior approval of the director, a credit union may accept member votes by an alternative method that is reasonably calculated to ensure each member has an opportunity to easily vote on the merger. (15) The director may waive any membership meeting required above upon the request of the board of directors of the merging credit union pursuant to section 370.353.3, RSMo. (16) Upon approval of the merger plan by the membership, if applicable, the certification of vote will be completed, signed, and submitted, along with necessary amendments to the surviving credit union’s bylaws, to the director for final approval. If applicable, the director will forward the approval to the National Credit Union Administration for insurance approval. Upon the National Credit Union Administration’s final approval, a certificate of merger will be issued to the surviving credit union. Necessary amendments to the surviving credit union’s bylaws shall also be submitted at this time. (17) Upon receipt of the director and the National Credit Union Administration’s approval, the records of the credit unions shall be combined as of the effective date of the merger. The board of the directors of the surviving credit union shall certify the completion of the merger to the director within thirty (30) days after the effective date of the merger. (18) Upon receipt by the director of the completion of the merger certification, a copy will be sent to the National Credit Union Administration, any bylaw amendments will be approved and the charter of the merging credit union will be cancelled. (19) Upon approval of a proposal for consolidation by a majority vote of the members of the board, the credit unions shall prepare a Plan of Consolidation setting forth: (A) The names of the credit unions proposing to consolidate and the name of the new credit union; (B) The terms and conditions of the proposed consolidation and the mode of carrying the same into effect, referred to as the Articles of Consolidation and/or the Consolidation Agreement; (C) The manner and basis of converting the membership shares, assets, and liabilities of each credit union into membership shares or assets and liabilities of the new credit union; (D) With regard to the new credit union, all of the statements required to be set forth in the articles of agreement and the bylaws for credit unions; (E) The current financial reports of each credit union, as follows: 1. Current financial statements; 2. Current delinquent loan summaries and analyses of the adequacy of the Allowance for Loan and Lease Losses account; 3. Consolidated financial statements, including an assessment of the generally accepted accounting principles (GAAP) net worth of each credit union before the consolidation, and the GAAP net worth of the new credit union after the consolidation; 4. Analyses of share values; 5. Explanation of any proposed share adjustments; 6. Explanation of any provisions for reserves, undivided earnings, or dividends; 7. Provisions with respect to notification and payment of creditors; 8. Explanation of any changes relative to insurance, such as life savings and loan protection insurance and insurance of member accounts; (F) Financial benefit to be received by the officers, senior management, and directors other than available to ordinary members; and (G) Such other provisions with regard to the proposed consolidation as are deemed necessary or desirable. (20) An application for approval of the consolidation will be complete when the following information is submitted to the director: (A) The consolidation plan, as described in this rule; (B) A copy of the corporate resolution of each board of directors formally agreeing in principle to consolidate; (C) A copy of the corporate resolution of each board of directors formally approving the articles of consolidation, the consolidation agreement, if applicable, and the consolidation plan; (D) The proposed Notice of Special or Annual Meeting of the members; (E) A copy of the written or electronic ballot to be sent to the members; (F) A written explanation as to the voting procedures; and (G) If the credit union is seeking a waiver pursuant to section 370.353.3, RSMo, a request for such waiver. (21) If the new credit union is organized under the laws of another state or of the United States, the director may accept an application to consolidate that is prescribed by the state or federal supervisory authority of the surviving credit union, provided that the director may require additional information to determine whether to deny or approve the consolidation. The application will be deemed complete upon receipt of all information requested by the director. (22) The director may grant preliminary approval of an application for consolidation conditioned upon specific requirements being met. However, final approval shall not be granted unless such conditions have been met within the time specified in the preliminary approval and until approval has been granted by the National Credit Union Administration. (23) The director shall deny an application for consolidation if the director finds any of the following: (A) The financial condition of the merging credit union before the consolidation is such that it will likely jeopardize the financial stability of the new credit union or prejudice the financial interests of the members, beneficiaries, or creditors; (B) The plan includes a change in the products or services available to members of the new credit union that substantially harms the financial interest of the members, beneficiaries, or creditors; (C) The officers, directors, and/or senior management are to receive undue financial benefits not ordinarily received by similar credit unions and which are not available to ordinary members; (D) The credit unions do not furnish to the director all information requested by the director which is material to the application; or (E) The consolidation would be contrary to law or regulation. (24) Upon approval of the plan of consolidation, the board of directors shall direct, by resolution, that the plan be submitted to a vote at a meeting to be called within sixty (60) days of the approval by the director. Advance notice of the meeting shall be mailed or delivered to each member of the credit union. This notice must be sent no more than thirty (30) days and no less than fourteen (14) days prior to the meeting at which the consolidation will be voted on. The notice must— (A) Specify the purpose of the meeting and the date, time, and place; (B) Contain a summary of the consolidation plan, including but not necessarily limited to current financial statements for each credit union, a consolidated financial statement for the new credit union, analyses of share values, explanation of any proposed PROFESSIONAL REGISTRATION share adjustments, and explanation of any changes relative to insurance, such as life savings and loan protection insurance and insurance of member accounts; (C) State reasons for the proposed consolidation; (D) Provide name and location, including branches of the new credit union; (E) Inform the members that they have the right to vote on the consolidation proposal in person at the meeting, or by written or electronic ballot to be received no later than the date and time announced for the meeting called for that purpose, or by an alternative method that is approved by the director. All members should be provided the opportunity to vote without being required to attend the meeting; and (F) Be accompanied by a Ballot for Consolidation Proposal and instructions on how to vote in an alternative manner, which shall be included in or enclosed with the notice. (25) Approval of a proposal to consolidate into another credit union requires the affirmative vote of a majority of the members who vote on the proposal. (26) The board of directors of the consolidating credit unions shall appoint or hire independent tellers of elections. (27) The membership shall have the ability to complete a written or electronic ballot. This ballot may be in the form of an absentee ballot request that accompanies the notice of meeting or in the form of an actual ballot. All members should be provided the opportunity to vote without being required to attend the meeting where the consolidation plan is voted on. (28) With prior approval of the director, a credit union may accept member votes by an alternative method that is reasonably calculated to ensure each member has an opportunity to easily vote on the consolidation. (29) The director may waive any membership meeting required above upon the request of the board of directors of any of the consolidating credit unions pursuant to section 350.353.3, RSMo. (30) Upon approval of the consolidation plan by the membership, if applicable, the certification of vote will be completed, signed, and submitted, along with necessary amendments to the bylaws, to the director for final approval. If applicable, the director will forward the approval to the National Credit Union Administration for insurance approval. Upon the National Credit Union Administration’s final approval, a certification of consolidation will be issued. (31) Upon receipt of the director and the National Credit Union Administration’s approval, the records of the credit unions shall be combined as of the effective date of the consolidation. The board of directors of the new credit union shall certify the completion of the consolidation to the director within thirty (30) days after the effective date of the consolidation. (32) Upon receipt by the director of the completion of the consolidation certification, a copy will be sent to the National Credit Union Administration, any bylaw amendments will be approved and the charter of the consolidating credit unions will be cancelled. AUTHORITY: sections 370.351, 370.352, 370.354, 370.355, 370.356, and 370.357, RSMo 2000, and section 370.353, RSMo Supp. 2011.* Original rule filed June 14, 2006, effective Dec. 30, 2006. Amended: Filed Aug. 29, 2011, effective Feb. 29, 2012. *Original authority: 370.351, RSMo 1955, amended 1982, 1988; 370.352, RSMo 1955, amended 1982, 1988; 370.353, RSMo 1955, amended 1982, 2011; 370.354, RSMo 1955, amended 1972, 1982; 370.355, RSMo 1955, amended 1972; 370.356, RSMo 1955; and 370.357, RSMo 1955, amended 1988.