[Federal Register Volume 61, Number 233 (Tuesday, December 3, 1996)]
[Rules and Regulations]
[Pages 64007-64021]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-30262]
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Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
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Federal Register / Vol. 61, No. 233 / Tuesday, December 3, 1996 /
Rules and Regulations
[[Page 64007]]
DEPARTMENT OF THE TREASURY
Office of Thrift Supervision
12 CFR Parts 543, 544, 545, 552, 556, and 575
[No. 96-112]
RIN 1550-AA87
Corporate Governance
AGENCY: Office of Thrift Supervision, Treasury.
ACTION: Final rule.
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SUMMARY: The Office of Thrift Supervision (OTS or Office) is today
issuing a final rule amending its corporate governance regulations and
policy statements to update, reorganize and substantially streamline
them.
This final rule follows a detailed review of each pertinent
regulation and policy statement in the Code of Federal Regulations
(CFR) to determine whether it is necessary, imposes the least possible
burden consistent with safety and soundness, and is written in a clear
and straightforward manner. Today's final rule is issued pursuant to
the Regulatory Reinvention Initiative of the Vice President's National
Performance Review (Reinvention Initiative) and section 303 of the
Riegle Community Development and Regulatory Improvement Act of 1994
(CDRIA) which requires OTS and the other Federal banking agencies to
review, streamline, and modify regulations and policies to improve
efficiency, reduce unnecessary costs, and remove inconsistent,
outmoded, and duplicative requirements.
EFFECTIVE DATE: January 1, 1997.
FOR FURTHER INFORMATION CONTACT: David Permut, Counsel (Banking and
Finance), Business Transactions Division, (202) 906-7505; or Mary Jo
Johnson, Project Manager, Supervision Policy (202) 906-5739; or Valerie
J. Lithotomos, Counsel (Banking and Finance), Regulations and
Legislation Division, (202) 906-6439, Chief Counsel's Office, 1700 G
Street NW., Washington, D.C. 20552.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Background
II. Summary of Comments and Description of the Final Rule
A. General Discussion of the Comments
B. Section-by-Section Analysis
III. Disposition of Corporate Governance Regulations
IV. Administrative Procedure Act
V. Paperwork Reduction Act of 1995
VI. Executive Order 12866
VII. Regulatory Flexibility Act Analysis
VIII. Unfunded Mandates Act of 1995
IX. Effective Date
I. Background
In a comprehensive review of its regulations, beginning in the
spring of 1995, pursuant to the Vice President's Reinvention Initiative
and section 303 of CDRIA,1 OTS identified numerous obsolete or
redundant regulations that could quickly be repealed. On December 27,
1995, OTS published a final rule in the Federal Register repealing
eight percent of its regulations.2 As part of its review, OTS also
identified several key areas in its regulations for a more intensive,
systematic regulatory burden review. Certain areas--lending and
investment authority, corporate governance, subsidiaries and equity
investments, and conflicts of interest, corporate opportunity and
hazard insurance--were chosen for intensive review because they are
vital to the thrift industry, had not been developed on an interagency
basis,3 and had not been substantially reviewed or amended in
recent years.
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\1\ 12 U.S.C. 4803(a)(1).
\2\ 60 FR 66866 (December 27, 1995).
\3\ Interagency regulations are being reviewed through the
Federal Financial Institutions Examination Counsel.
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Earlier this year, OTS proposed a comprehensive streamlining of its
lending and investment regulations 4 and, subsequently, OTS
published a final lending and investment rule on September 30,
1996.5 Proposals regarding subsidiaries and equity investments
6 and conflicts of interest, corporate opportunity and hazard
insurance 7 were also issued this summer. The final rule regarding
conflicts of interest, corporate opportunity and hazard insurance was
published in the Federal Register on November 27, 1996. The final rule
regarding subsidiaries and equity investments is imminent.
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\4\ 61 FR 1162 (January 17, 1996).
\5\ 61 FR 50951 (September 30, 1996).
\6\ 61 FR 29976 (June 13, 1996).
\7\ 61 FR 30190 (June 14, 1996).
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On June 25, 1996, OTS also issued a notice of proposed rulemaking
to streamline its charter and bylaw regulations (corporate
governance).8 The proposal resulted from an intensive review by
OTS staff. OTS also sought industry input regarding staff's initial
recommendations through an industry focus group meeting among
representatives of seven savings associations and an industry trade
association.
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\8\ 61 FR 32713 (June 25, 1996).
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Today's final rule is quite similar to the proposal. It reduces the
number of charter and bylaw regulations and policy statements from 33
to 21, a reduction of 36 percent. In addition, deletion of the model
bylaws from the CFR will remove 10 pages of CFR text. This information
will be moved to the Application Processing Regulatory Handbook
(Handbook) as guidance. The Handbook is sent to all OTS regulated
institutions and is available to the public. The model bylaws will also
be available through PUBLIFAX at (202) 906-5660 and from fee service
providers on CD Rom.
The general tenor of the changes being made today can be summarized
in three points. First, we are removing a number of duplicative or
outdated corporate governance regulations. By clearing out the
deadwood, OTS hopes to reduce compliance costs. Second, we are updating
the regulations to reflect modern trends toward greater flexibility in
corporate governance. Third, we are adding clarifying language to
various regulations to respond to frequently recurring corporate
governance questions asked by institutions. Taken together, these
changes should significantly reduce regulatory burden. This final rule
is the first major update of the corporate governance regulations in
over a decade.9
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\9\ For an extensive discussion of the history of the current
and previous corporate governance regulations, see the discussion in
the proposal. 61 FR 32713, 32715 (June 25, 1996).
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[[Page 64008]]
II. Summary of Comments and Description of the Final Rule
A. General Discussion of the Comments
The public comment period on the June 25 proposal closed on August
26, 1996. Seven commenters responded. Three savings associations, one
savings and loan holding company on behalf of its affiliated savings
associations, one financial institutions trade group, one law firm, and
one private citizen submitted comments. The comments were generally
favorable. Specific comments addressing various sections are discussed,
where appropriate, in the section-by-section analysis below.
B. Section-by-Section Analysis
1. Existing Corporate Governance Sections
a. Part 544--Charter and Bylaws
Section 544.1 Federal Mutual Charter
This section contains the required charter for Federal mutual
associations. In its proposed rulemaking, OTS solicited comment on
alternative proposals. One option was to move the mutual charter (as
well as the charter for stock associations and the model bylaws for
both) from the regulations to the Handbook. The other option was to
retain the charters (and model bylaws) in the regulations, but update
them.
Most commenters responded to this aspect of the proposal. Only one
commenter generally supported moving the charters and bylaws to the
Handbook. Four commenters expressed concern that moving the charters
and model bylaws into the Handbook would remove the opportunity for
notice and comment under the Administrative Procedure Act (APA) when
changes are made to these documents. One commenter stated that
weakening the APA requirements will jeopardize the mutual charter and
enhance the possibility of hostile activity against mutuals by takeover
interests. One commenter stated that if the OTS believes that reasons
of safety and soundness warrant maintaining regulatory requirements
over the forms of charters and bylaws, then those requirements should
remain in the CFR. After considering these comments, OTS has decided to
retain the charters in the CFR and to amend them, as proposed. As for
the model bylaws, however, OTS is moving them to the Handbook because
the model bylaws are intended to serve only as guidance to
institutions. Critical bylaw issues are addressed in the regulations
described below. These regulations, rather than the model bylaws, will
serve as binding norms. Any institution which adopts the model bylaws
will be deemed to comply with the regulations.
The changes to the mutual charter are as follows:
Section 1. Corporate Title. Section 1 establishes the corporate
title of the Federal association. The words ``hereby chartered'' are
removed as unnecessary verbiage.
Section 2. Office. This section designates the location of the
association's home office. The section is being revised to indicate
that the street address of the home office need not be stated in the
charter. It is sufficient to indicate the city and state where the home
office is located.
Section 6. Members. This section identifies the association's
members and describes their rights. OTS is streamlining this section by
moving the third and fourth sentences to the introductory paragraph of
the regulation. These two sentences instruct institutions that wish to
adopt the charter, but are currently operating under old charters
conferring membership rights on borrowers, to grandfather the
membership rights of their existing borrowers.
The sixth sentence of section 6, dealing with proxies, is removed
because it also appears in the bylaws. The seventh and eighth
sentences, dealing with quorums, is moved to the bylaws because matters
regarding member meetings are more fully and appropriately addressed
there.
Section 7. Directors. This section provides that a Federal mutual
association may have from 5 to 15 directors. To further streamline the
charter, bracketed references to ``trustees'' are removed, and a single
sentence is added to the introductory instructions indicating that
institutions may substitute the term ``trustee'' for the term
``director'' where appropriate. Similar changes are made throughout the
charter (and the model bylaws) for mutual associations.
The third and fifth sentences (providing that directors shall be
members of the association and addressing staggered terms for
directors) are moved to the bylaw section dealing with directors. The
fourth sentence (regarding vacancies on the board) is moved to the
bylaw section on resignations, removals and (newly added) vacancies.
The last sentence, in brackets, is also moved to the bylaw section on
directors. This sentence authorizes state savings banks that convert to
Federal mutual associations to grandfather their existing provisions
for electing directors for a limited period of time. OTS believes each
of these matters is more appropriately addressed in the bylaws, where
related issues are already addressed. Presenting related requirements
in a single place should make the bylaws more user friendly.
Section 9. Amendment of charter. Section 9 describes the procedures
for amending the association's charter. References to Secs. 544.2 or
544.3 are removed as unnecessary verbiage. Section 9 is also revised to
reflect the fact that ``preapproved'' charter amendments (Sec. 544.2)
will now be truly preapproved. Institutions are no longer required to
submit these amendments to OTS for ``preliminary'' approval. (See
discussion of Sec. 544.2 below.)
Finally, the signature blocks of the charter are modified to
include a date to clarify when a charter is effective.
Section 544.2 Charter amendments
Paragraphs (a) and (b) describe the filing requirements for
amending Federal mutual charters. OTS is removing, from paragraphs
(a)(2)(i) and (ii), the requirement that institutions certify that
amendments they propose are permissible under all applicable laws. This
certification is unnecessary because the legality of a proposed
amendment is reviewed by OTS staff as part of the application process
and its deletion will reduce regulatory burden. In addition, paragraph
(b) is revised to indicate that preapproved charter amendments no
longer require advance submissions to OTS. Instead, preapproved
amendments are now deemed approved when adopted by the institution and
must simply be filed with OTS within 30 days after adoption.
A new preapproved charter amendment is added to Sec. 544.2 that
authorizes Federal mutual associations to amend their charters to raise
the cap on the maximum number of votes any member can cast up to 1,000.
Mutual charters generally authorize depositors to cast one vote for
every $100 of deposits, subject to a cap that has historically tracked
the limit on deposit insurance. Thus, 1,000 votes is the standard cap
under the current mutual charter (Sec. 544.1). However, many
institutions operate under charters adopted before the cap was raised
to 1,000. Making the 1,000 cap a preapproved amendment enables
institutions to update their cap without filing an application and
paying an application fee. This is the most frequently requested
amendment for Federal mutual associations. One commenter suggested
removing the cap entirely, but the OTS has determined that the existing
cap has worked well in preventing unauthorized changes of
[[Page 64009]]
control of mutual associations. For example, if an institution had no
cap on votes, an investor with more than 10% of the deposits in the
institution conceivably could exercise control over the institution
without regulatory approval. OTS believes it is appropriate for the
voting rights of mutuals to be distributed broadly across the
membership base.
OTS also is removing from Sec. 544.2 an obsolete preapproved
amendment authorizing institutions to issue Mutual Capital Certificates
(MCCs). Institutions generally no longer issue MCCs.10 Elimination
of outdated matter such as this should make the regulations less
confusing and easier to use.
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\10\ An institution may still choose to issue MCCs, provided the
institution makes any necessary amendments to its charter and bylaws
(which are no longer preapproved) and follows the procedures
specified at 12 CFR 563.74.
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Paragraph 544.2(c) details the procedures an institution must
follow when it wants OTS to reissue its charter to reflect amendments
to the charter. The wording of this section is conformed to the wording
of the corresponding stock charter section at Sec. 552.4(d). No
substantive change results. Paragraph (c) is also amended to remove the
delegation of authority to the Chief Counsel to execute reissued
charters. This change was proposed as part of a continuing effort to
remove delegations from the regulations. Delegated authority to execute
reissued charters will be preserved via an internal OTS document.
Section 544.3 Adoption of a New Federal Charter by a Federal Savings
Association
This section details the procedures that a Federal mutual savings
and loan association would use to amend its charter to read in the form
of a Federal mutual savings bank, or vice versa. This section has
become obsolete. Today, the charters for both types of institution are
identical, except for a possible difference in corporate title. A
simple corporate title change can be used to redesignate an institution
as a ``savings bank'' or ``savings and loan association.'' Thus,
Sec. 544.3 is repealed. Corresponding changes are made to
Secs. 543.1(b) and 543.14.
Section 544.5 Federal Mutual Savings Association Bylaws
This section describes the requirements for the bylaws of a Federal
mutual association. A nonsubstantive change is made to paragraph (a) to
conform its language regarding procedures for bylaw amendments to
similar language that appears in Sec. 544.5(b)(16).
Paragraph (b)(1) contains the annual meeting requirements for
Federal mutual associations. This paragraph is amended to allow
meetings not only at the main office, but also at any other convenient
place the board of directors may designate, and to permit the
association to hold its annual meeting within 150 days of the end of
the association's fiscal year. The current requirement is 120 days.
Both changes provide additional flexibility for Federal mutual
associations.
Paragraph (b)(2) addresses special meetings of members. It
provides, inter alia, that the holders of ten percent or more of a
mutual association's voting capital may call a special meeting.
Institutions frequently ask for clarification of the meaning of
``voting capital,'' since the term is no longer defined by the Home
Owners' Loan Act (HOLA). As proposed, OTS is clarifying that voting
capital means all FDIC-insured deposits held by a savings association.
In response to a comment, OTS has also added a phrase to indicate that
voting capital will be determined as of the voting record date.
Paragraphs (b)(3) and (4), which discuss notice requirements for
meetings of members and the fixing of the record date for determining
which members are entitled to vote, respectively, are amended to
indicate the circumstances under which adjournment of a meeting of
members requires the issuance of new notices and the fixing of a new
record date. These are frequently asked questions.
OTS also proposed a new paragraph (b)(5), to be titled ``Member
Quorum.'' 11 This paragraph, which is being added as proposed,
contains certain quorum provisions previously found in the charter (as
discussed above), as well as clarification of what items of business
may be considered at a meeting held after adjournment. The agency
believes that quorum issues are more appropriately addressed in the
bylaws, where other rules governing member meetings already appear. The
new paragraph also clarifies, in response to a comment, that the
directors are elected by a plurality of votes in an election of
directors.
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\11\ All subsequent paragraphs will be renumbered accordingly.
However, only those paragraphs being substantively changed are
discussed herein.
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Current paragraph (b)(5), on voting by proxy, is moved to (b)(6)
and is amended to permit proxies to be given telephonically or
electronically as long as the holder uses a procedure for verifying the
identity of the member.12 Telephonic and electronic proxies enable
institutions to gather proxies and conduct corporate business more
rapidly and have become an accepted part of corporate democracy. In
addition, in response to frequent questions, OTS proposed to describe
voting procedures applicable to joint accounts and accounts held by
fiduciaries on behalf of others. These procedures will be included in
the model bylaws being moved to the Handbook, rather than in the
regulations. Moreover, the procedures will be slightly modified, in
response to a comment, to clarify that Individual Retirement Accounts
and Keogh accounts may be voted by an institution if no other
instructions are received. In addition, the procedures governing joint
voting of shares will be modified to parallel the provisions of the
stock bylaws, also in response to a comment.
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\12\ One example of a verification procedure is for the
institution receiving the proxy by facsimile to compare the
signature on the proxy to a signature that the institution has on
file.
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Current paragraph (b)(6), which references Sec. 545.131 regarding
communication with other members, becomes (b)(7). In addition, the
paragraph is amended to reflect the relocation of Sec. 545.131 to Part
544, and to extend the privacy rights now guaranteed to depositors of
Federal stock institutions (Sec. 552.11(d)) to the depositors of
Federal mutual institutions. The privacy rights of the members of
mutual institutions will not prevent the internal use of member
information by those institutions.
Current paragraph (b)(7), regarding the number of directors,
becomes (b)(8). In addition, the paragraph is amended to clarify that
the bylaws must specify the precise number of directors (rather than a
range). This number is chosen by the institution within the range
specified in the charter and may be changed by the institution from
time to time by amending its bylaws. One commenter requested that the
OTS allow a range of directors, as some state codes allow. OTS has
determined, however, that specificity is needed in the bylaws to
determine quorum requirements. Paragraph (b)(8) also contains three
provisions being moved from section seven of the charter. One provision
requires that directors be members of their association; a second
provision, modified in response to a comment, allows, but does not
require that directors serve staggered terms; and a third provision
permits state savings banks that convert to Federal mutual
[[Page 64010]]
associations to grandfather their method of electing directors for a
limited time.
Current paragraph (b)(9), which addresses the duties of officers,
employees and agents and their indemnification, becomes (b)(10). In
addition, a sentence on the removal of officers is added to answer a
frequently asked question. The sentence states: ``Any officer may be
removed by the board of directors with or without cause, but such
removal, other than for cause, shall be without prejudice to the
contractual rights, if any, of the person so removed.''
Current paragraph (b)(10), on the resignation or removal of
directors, becomes (b)(11). A cross reference to the definition of
``cause,'' which appears elsewhere in the regulations, is added in
response to a frequently asked question concerning the circumstances
under which shareholders can remove directors for ``cause.'' Paragraph
(b)(11) is also expanded to authorize boards of directors to fill
vacancies under the flexible rules that now apply to stock
associations.
Current paragraph (b)(12), discussing execution of instruments, is
removed in its entirety. OTS has determined that this is not an item
that it needs to regulate. For guidance purposes, however, current
provisions in the model bylaws on the execution of instruments will
remain.
Current paragraph (b)(13), discussing procedures for nominating
directors, is expanded to clarify the scope of the requirement that the
names of nominees be posted at least 15 days before an election, under
certain circumstances. New language confirms that the requirement does
not apply to a nominee substituted as a result of death or other
incapacity of another nominee. From time to time, institutions have
sought clarification on this issue.
Current paragraph (b)(15), discussing the corporate seal, is
removed in its entirety. OTS has determined this is not an area it
needs to regulate. Current provisions in the model bylaws remain, for
guidance purposes.
Current paragraph (b)(16), which sets forth procedures for amending
the bylaws, becomes (b)(15) and is amended to make it easier for a
board that fails to meet its quorum requirement solely due to vacancies
on the board to amend its bylaws. The new language specifies that, in
the absence of a quorum due solely to vacancies, the affirmative vote
of a majority of the sitting board may amend the bylaws.
Current paragraph (b)(17), on miscellaneous topics, becomes (b)(16)
and is amended to remove the reference to provisions regarding
``emergency preparedness.'' Emergency preparedness provisions will also
no longer be part of the model bylaws.
Paragraphs (c)(1) and (c)(2) discuss the filing procedures for
bylaw amendments. OTS proposed to remove the requirement that
applications for bylaw amendments contain certifications that the
proposed amendments comport with all laws. As noted above in the
discussion on charter amendments, the certification requirement is
unnecessary because the legality of proposed amendments are reviewed by
OTS staff as part of the application process and its deletion will
reduce regulatory burden. Accordingly, the certification requirement is
dropped. In addition, paragraph (c)(1) is revised to indicate that the
model bylaws can now be found in the Handbook, which is available from
OTS. The current appendix to part 544, which contains the model bylaws,
is removed. Subsection (c)(1)(ii) has been redesignated as (c)(1)(i)(B)
and modified to indicate OTS considers proposed bylaw amendments
regarding indemnification, conflicts of interest, and limitations on
director or officer liability to raise significant issues of law or
policy and, thus, require OTS review. A new subparagraph is added to
explain the application process for amendments raising issues of law or
policy.
Paragraph (c)(1)(iii) is revised to indicate that the model bylaws,
if adopted verbatim, are effective when adopted and must simply be
filed with OTS within 30 days after adoption. This change was proposed
because OTS has determined that over 90 percent of the bylaws
applications filed in recent years are for standard provisions that do
not require agency review.
A new paragraph (c)(3) is added to allow mutuals to adopt
additional corporate governance procedures to the extent such
procedures: (i) Are not inconsistent with the HOLA, applicable Federal
statutes and regulations, OTS policies, or safety and soundness; and
(ii) do not touch upon certain key areas, such as OTS policies and
regulations on indemnification, conflict of interest, limitation of
director or officer liability, or other matters of safety and
soundness. Subject to these qualifications, this new provision allows
Federal mutual associations to designate, en bloc or on a piecemeal
basis, any of the corporate governance procedures from the laws of the
state where the main office of the institution is located.\13\ No
preapproval is necessary if all provisions in question meet the
applicable criteria; instead an institution must submit notice of the
provisions it has chosen to the OTS Regional Office within 30 days of
adoption. All commenters who addressed this issue were in favor of the
more flexible corporate governance structure.
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\13\ We note, however, that silence in a particular area in a
state's law may not, for these purposes, be construed as authorizing
adoption of procedures in that area. It should also be noted that
when adopting provisions from any of the alternative sources, a
mutual may adopt only provisions of state law specifically intended
for mutual institutions and a stock institution may adopt only
provisions intended for stock corporations.
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Paragraph (d), which addresses the effective date of all other
bylaw amendments (i.e., amendments that are not preapproved or do not
meet the standards just described), is amended to comport with a
similar provision for Federal stock associations. The change is
intended to clarify the circumstances under which an amendment may be
rejected by OTS, by cross referencing the standards that appear in
paragraph (c)(1).
Section 544.8 References to Old and New Charters; Rules Applicable to
Trustees of Federal Mutual Savings Banks
OTS proposed to remove this section, which indicates that trustees
will be treated as if they are directors for purposes of the
regulations. The same point is made in the introductory instructions to
the charter and model bylaws. It does not need to be repeated here.
Thus, the section is removed.
Section 544.9 Obsolete Charter Provision for Charter B Associations
This section provides that institutions that still operate under
the old Charter B are not bound by section 10 of that charter. Section
10 of Charter B purports to limit the authority of an institution to
invest in consumer loans and corporate debt securities. As proposed
Sec. 544.9, which affects very few institutions, is moved from the
regulations into the Handbook. The authority of Charter B associations
to invest in consumer loans and corporate debt securities is governed
by current Federal statutory limits, not section 10 of their charter.
Section 544.8 Communication Between Members of a Federal Mutual
Savings Association
OTS proposed to move the rules governing communications between
members of Federal mutual associations, which now appear in
Sec. 545.131, to part 544. This is where users of the regulations would
most likely look for guidance on such
[[Page 64011]]
matters. Accordingly, current Sec. 545.131 becomes new Sec. 544.8.
Appendix to Part 544
As indicated above, OTS proposed to eliminate the appendix to part
544, which contained the model bylaws. These bylaws are moved to the
Handbook, with changes to be made to conform the model bylaws to the
amendments to the bylaws regulations described above. The revised
Handbook will be available from OTS in the near future, as well as
through fee services on CD ROM. The revised model bylaws are already
available through PUBLIFAX at (202) 906-5660.
b. Part 552--Incorporation, Organization, and Conversion of Federal
Stock Associations
Section 552.2 Corporate Title
OTS proposed to remove this section, which merely reminds
institutions that Sec. 543.1 regarding corporate titles for Federal
associations applies to Federal stock associations. Section 543.1, as
currently written, clearly governs corporate titles for all Federal
associations. Accordingly, Sec. 552.2 is removed.
Section 552.2-5 Conversion from Federal Mutual to Federal Stock
Charter
This section authorizes Federal mutual associations to convert to
Federal stock associations and provides for issuance of a stock charter
upon completion of the conversion. These matters are also covered, in
greater detail, by OTS conversion regulations. OTS, therefore, proposed
to, and does, remove this section.
Section 552.3 Charters for Federal Stock Associations
This section contains the required charter for Federal stock
associations. For the reasons stated above in the discussion of
Sec. 544.1, OTS has decided not to move the charter into the Handbook.
OTS will make the following changes to the Federal stock charter, as
proposed:
Section 2. Office. This section designates the location of the
association's home office. The section is being revised to indicate
that the street address of the home office need not be stated in the
charter. It is sufficient to indicate the city and state where the home
office is located.
Section 5. Capital stock. Section 5 describes the rules governing
the capital stock of a Federal stock association, including the types
of stock it may issue, the consideration to be paid, and voting rights.
Several changes have been made. First, the section is amended to permit
the issuance of ``no par'' stock. The decision whether stock should
have a stated par value is a matter of internal corporate governance
that raises no supervisory or safety and soundness issues.
Second, the final sentence of the first paragraph is revised to
reflect more current accounting terminology. The term ``retained
earnings'' is substituted for ``surplus,'' and the phrase ``common
stock or paid-in capital accounts'' is substituted for ``stated
capital.''
Third, the second paragraph is revised to clarify that a Federal
stock association may issue stock to officers, directors, and
controlling persons in connection with its initial organization,
without a shareholder vote.
Fourth, the second sentence of the third paragraph is revised to
clarify that a Federal stock charter may be amended to eliminate
cumulative voting.
Section 7. Directors. This section specifies that the number of
directors of a stock association shall be fixed in the bylaws and shall
not be fewer than five nor more than fifteen. However, provision is
made for the Director of OTS to approve a larger or smaller board of
directors. OTS has made a technical amendment to this section to
specify that approval of a larger or smaller board can be given either
by the Director ``or his or her delegate.''
Section 8. Amendment of charter. Section 8 describes the procedure
for amending an association's charter. This section is revised to
indicate that preapproved charter amendments become effective once they
have been approved by the association's board of directors and
shareholders, without any need for ``preliminary approval'' or any
additional approval from OTS. (See discussion below of Sec. 552.4.)
In addition, OTS proposed to clarify the general rule that charter
amendments require approval by only a majority of the votes eligible to
be cast at a shareholders' meeting. Language is added indicating that
this general rule does not apply in those instances where an
association's charter specifies that a supermajority vote is required.
(See discussion of Sec. 552.4 below.)
Finally, the signature blocks of the charter are modified to
include a date to indicate when a charter is effective.
Section 552.4 Charter Amendments
Paragraphs (a) and (b) set forth the filing requirements for
amendments to Federal stock charters. In paragraph (a), OTS has made
the same changes regarding certification requirements as discussed
above in connection with the corresponding provisions for mutual
associations (Sec. 544.2(a)). Thus, stock associations are no longer
required to certify that proposed amendments comport with all
applicable laws.
Paragraph (b) sets forth a list of preapproved charter amendments.
OTS has added descriptive titles to each of the preapproved amendments.
The titles correspond, when applicable, to the titles of similar
preapproved charter provisions for Federal mutual associations.
Paragraph (b) is also revised to indicate that preapproved charter
amendments are effective when adopted and must simply be filed with OTS
within 30 days after adoption.
Paragraph (b)(3), which contains a preapproved amendment for
institutions that wish to change from a Federal stock savings and loan
association charter to a Federal stock savings bank charter, is removed
for the same reasons described above with regard to Sec. 544.3.14
---------------------------------------------------------------------------
\14\ Subsequent paragraphs will be renumbered accordingly.
However, only those paragraphs being substantively changed are
discussed below.
---------------------------------------------------------------------------
Current paragraph (b)(4), which permits changes to the authorized
number of shares and the par or stated value of such shares, becomes
(b)(3). Additional nonsubstantive changes have been made to clarify the
language of this provision.
Current paragraph (b)(5), which permits institutions to modify
section 5 of the charter so as to authorize the issuance of preferred
stock, becomes (b)(4) and includes the same changes to section 5 of the
charter as were discussed above for section 552.3. In addition, the
reference to the Resolution Trust Corporation is deleted, because that
agency no longer exists.
A new preapproved charter amendment is added, as new paragraph
(b)(6), to authorize institutions to prohibit cumulative voting for
directors. The standard charter for Federal stock associations provides
for cumulative voting for directors. Federal associations frequently
apply to amend their charters to prohibit cumulative voting, and OTS
routinely approves these applications. Adding this provision to the
list of preapproved amendments will save associations that wish to make
this change the time and expense of filing an application.
Paragraph (c) states OTS policy on antitakeover provisions in
charter amendments. OTS proposed to expand this provision to state the
two basic standards OTS uses when reviewing proposed antitakeover
amendments. First, the proposed amendment must be consistent with
applicable statutes, regulations and OTS policies. Second, such
amendments must be adopted by a percentage of the shareholder vote at
[[Page 64012]]
least equal to the highest percentage that would be required to take
any action under the antitakeover provision. While several commenters
objected to this clarification, OTS notes that these are not new
standards; OTS already employs them when reviewing antitakeover
amendments. Stating these standards in the regulations will enable
institutions to present applications that conform to OTS requirements,
thereby saving them time and expense. Accordingly, the proposed changes
have been made.
Section 552.5 Bylaws
This section presents the requirements for the bylaws of a Federal
stock association. A technical amendment is made to paragraph (a) to
confirm that shareholder votes to approve bylaw amendments must occur
``at a legal meeting'' 15 of shareholders.
---------------------------------------------------------------------------
\15\ A ``legal meeting'' means a duly constituted meeting of the
institution.
---------------------------------------------------------------------------
Paragraph (b) discusses the application and notice procedures
applicable to bylaw amendments. This paragraph is amended to remove the
requirement that associations certify that bylaw amendments comport
with applicable law. Revisions are also made to indicate that the model
bylaws, if adopted verbatim, are approved when adopted and must simply
be filed with OTS within 30 days after adoption. Paragraph (b) also
indicates that the model bylaws will be in the revised Handbook and
made available by OTS. Subsection (b)(1)(iii) is also modified, in the
same way the corresponding mutual subsection is modified, to indicate
to those contemplating bylaw changes, that OTS considers amendments
regarding indemnification, conflicts of interest, and limitations on
director or officer liability to raise significant issues requiring OTS
review. A new subparagraph is added to explain the application process
for such issues of law or policy.
A new paragraph (b)(3) is added to allow the adoption of additional
corporate governance procedures to the extent such procedures: (i) Are
not inconsistent with the Home Owner's Loan Act, applicable Federal
statutes and regulations, OTS policies, or safety and soundness
concerns; and (ii) do not touch upon certain key areas, such as OTS
policies and regulations on indemnification, conflict of interest,
limitation of director or officer liability, or other matters of safety
and soundness. Subject to these qualifications, this new provision
allows Federal stock associations to designate, en bloc or on a
piecemeal basis, any of the corporate governance procedures from: the
laws of the state where the main office of the institution is located;
the laws of the state where the institution's holding company, if any,
is located; Delaware General Corporation Law; or the Model Business
Corporation Act.16 No preapproval is necessary if all provisions
in question meet the applicable criteria; instead an institution must
submit to the OTS Regional Office the provisions it has chosen within
30 days of adoption. All commenters who addressed this issue were
generally in favor of the more flexible corporate governance structure.
---------------------------------------------------------------------------
\16\ We note, however, that silence in a particular area in a
state's law or in the Model Business Corporation Act may not, for
these purposes, be construed as authorizing adoption of procedures
in that area. It should also be noted that when adopting provisions
from any of the alternative sources, a stock institution may adopt
only provisions state law intended for stock institutions and a
mutual institution may adopt only provisions intended for a mutual
corporation.
---------------------------------------------------------------------------
OTS proposed to add a new paragraph (d) confirming that the
authority of a Federal stock association to engage in any transaction
is determined by the association's charter and bylaws in effect at the
time of the transaction. Subsequent amendments do not retroactively
affect this determination. A similar regulatory provision is already in
effect for Federal mutual associations (Sec. 544.6). Accordingly, the
paragraph is added as proposed.
Section 552.6 Shareholders
This section contains certain corporate governance requirements
regarding shareholder meetings. Paragraph (a), which contains rules
regarding the time and place of shareholder meetings, is amended in two
respects. First, the requirement that shareholder meetings be held in
the state of an association's principal place of business is removed.
Instead, associations may hold shareholder meetings at any convenient
place the board of directors designates. Second, the time frame within
which an association must hold its annual shareholders meeting is
extended from 120 to 150 days of the end of the association's fiscal
year. These are the same changes made for Federal mutual associations
(Sec. 544.5(b)(1)).
Paragraph (b) states the notice requirements for shareholder
meetings. This paragraph is amended to waive the shareholder notice
requirements for wholly-owned institutions.
Paragraph (d)(1), which addresses access to shareholder lists, is
revised to clarify that shareholder lists are available only to
shareholders ``of record'' and their agents. In addition, the paragraph
is amended to waive its application to wholly-owned institutions.
Paragraph (e), regarding shareholder quorum requirements, is
amended to confirm that, whenever a quorum is present, the affirmative
vote of the majority of shares entitled to vote at shareholder meetings
shall constitute an act of the shareholders, absent a supermajority
voting requirement. The amended paragraph also clarifies, in response
to a comment, that directors are elected by a plurality of votes in an
election of directors.
Paragraph (f), which addresses proxies, is amended in the same
manner as the Federal mutual bylaws at Sec. 544.5(b)(6) to allow
proxies to be gathered electronically or telephonically. Subparagraph
(f)(3), which addresses cumulative voting, is removed, but remains in
the model bylaws as guidance for any association that continues to use
cumulative voting. In addition, OTS is not adding paragraph (f)(4) as
proposed. Instead, the proposed language, which describes voting
procedures applicable to stock held by fiduciaries on behalf of others
and stock held jointly, will be included in the model bylaws in the
Handbook, rather than in the regulations. The language will be modified
as described in the corresponding section of the Federal mutual bylaws.
A new paragraph (h) is added confirming that, if an association's
bylaws so provide, shareholder action may be taken by unanimous written
consent in lieu of a shareholder meeting. At times, this may allow
associations to obtain shareholder approval more rapidly and with less
expense.
Section 552.6-1 Board of Directors
This section addresses corporate governance matters involving
directors. Paragraph (a) is amended to provide that directors need not
be stockholders unless the bylaws so require.
Paragraph (b) sets forth the number and term of directors. This
paragraph is amended to clarify that the bylaws of a Federal stock
association must specify an exact number of positions on an
association's board of directors, not simply a range. The rationale for
this position is explained in the corresponding section for Federal
mutual associations. The number is selected by the institution within a
range prescribed in the charter. OTS also proposed to amend paragraph
(b) to exempt wholly-owned stock associations from the requirement that
their directors be elected to staggered terms. In response to a
comment, OTS
[[Page 64013]]
has decided to allow any association to elect not to have a staggered
board.
Paragraph (c), regarding regular meetings of the board, is expanded
to confirm that the board of directors has authority to determine the
place, frequency, time, and notice procedures for its meetings. These
matters need not be specified in the bylaws.
Paragraph (e), which covers director vacancies, is amended to
clarify that a director appointed to fill a vacancy may serve ``only''
until the next election of directors. This is not a substantive change.
The word ``only'' is being added for emphasis and clarity.
Paragraph (f), concerning removal of directors, is retitled
``Resignation or removal of directors'' to conform to the title for the
same provision for Federal mutual associations. In addition, the
paragraph is amended to confirm, as is already the case, that
shareholders may remove a director in the midst of his or her term
``only'' for cause. A cross reference to the existing regulatory
definition of ``cause'' is added to answer a frequently asked question.
Paragraph (k), on age limitations for directors, is revised to
indicate that any age limitation provision must conform to applicable
Federal law, rules, or regulations. These rules would include laws such
as the Age Discrimination in Employment Act and the Employee Retirement
Income Security Act (ERISA).
Section 552.6-2 Officers
This section addresses corporate governance matters involving
officers. Paragraph (a) is amended to remove the requirement that the
president always be a director and that either the president or the
chair of the board of directors always be the chief executive officer.
Paragraph (c), on age limitations for officers, is revised to
indicate that any age limitation on service by officers must conform to
applicable Federal law, rules, or regulations.
Section 552.8 Savings Deposits
This section contains instructions to Federal stock associations
regarding the types of savings deposits they may accept, preservation
of those accounts when a former mutual association adopts a stock
charter, rights of account holders in the event of liquidation, and
forms of certificates to use for accounts. OTS proposed to remove this
section from the regulations. The provisions of this section are either
self-evident or addressed by other statutes and regulations and general
contract law. Under the conversion regulations, all converting mutual
institutions are required to notify their accountholders that all the
rights they enjoyed as accountholders, except voting and ownership of
the institution, carry over to the converting association. Accordingly,
Sec. 522.8 is removed as proposed.
Section 552.11 Books and Records
This section describes a Federal stock association's obligations
with respect to books and records. Paragraph (b) is amended to make
clear that shareholders' inspection rights extend only to
nonconfidential portions of an institution's books and records.
Appendix to Part 552
As indicated above, OTS has moved the model bylaws for Federal
stock associations, which currently appear in the appendix to Part 552,
into the Handbook. Changes will be made to conform the model bylaws to
the amendments to the bylaw regulations described above. In addition,
OTS proposed to modify the model bylaws to indicate that procedures
other than Robert's Rules of Order may be used for shareholder
meetings, as long as the board of directors adopts alternative written
procedures. This change will also be made. As indicated above, a
revised Handbook will be available from OTS. The revised model bylaws
are already available through PUBLIFAX at (202) 906-5660.
c. Part 575--Mutual Holding Companies
Section 575.9 Charters and Bylaws for Mutual Holding Companies and
Their Savings Association Subsidiaries
This section describes the required charter and bylaws for Federal
mutual holding companies. Paragraph (a)(1) contains the prescribed
charter. The following changes are made to the charter:
Section 1. Corporate Title. Section 1 contains the corporate title
of the Federal mutual holding company. The words ``hereby chartered''
are deleted as unnecessary verbiage.
Section 5. Members. This section identifies the mutual holding
company's members and defines their rights. The sixth, seventh, and
eighth sentences of this section, addressing proxies and quorums, are
removed because these matters are now covered by the bylaw requirements
applicable to mutual holding companies. As a result of this change,
proxy and quorum issues are now addressed in a single place in the
corporate documents of mutual holding companies.
Section 6. Directors. This section provides that a Federal mutual
holding company may have from 5 to 15 directors. In addition, OTS has
made technical changes to conform the wording of this section to the
corresponding section of the charter for Federal mutual associations.
Section 8. Amendment of charter. Section 8 describes the procedures
for amending the mutual holding company's charter. These procedures are
modified to indicate that preapproved charter amendments are effective
once approved by members of the mutual holding company. Other
amendments will continue to require advance OTS approval.
Paragraph (a)(2) of Sec. 575.9 provides that mutual holding
companies may adopt the same preapproved charter amendments as are
specified for mutual savings associations, subject to certain specified
exclusions. Paragraph (a)(2) is updated to conform to the changes
proposed for the list of preapproved charter amendments for mutual
associations.
Paragraph (a)(4) specifies that Federal mutual holding companies
shall be subject to the same rules regarding bylaws as apply to Federal
mutual associations, with certain exceptions. This paragraph is amended
to indicate that the model bylaws may be found in a revised Handbook to
be made available from OTS.
A technical amendment is made to paragraph (a)(5), which requires
mutual holding companies to make their charter and bylaws available to
members. The cross reference to Sec. 545.131 is changed to reflect the
movement of this section to Part 544.
d. Miscellaneous Technical Changes
Section 543.1(b) Title Change
This section prescribes the rules for corporate titles for Federal
savings associations. This section is amended to delete cross
references to sections being removed by this final rule.
Section 543.14 Continuity of Existence
This section, which confirms that the corporate existence of
converting associations continues, notwithstanding the conversion, is
amended to delete a cross reference to a section being removed by this
final rule.
Section 556.1 Directors
This policy statement, which describes OTS policy on the number of
directors necessary for a quorum and the directors' power to fill
vacancies, is removed because both subjects are thoroughly covered by
the bylaw regulations.
[[Page 64014]]
Section 556.17 Effect of Loan Participation on Status of Borrowing
Members
This policy statement provides guidance regarding various issues
that arise when determining the identity of the borrowing members of a
Federal mutual savings association. For example, this section indicates
that sale of a whole loan by a savings association to a third party
terminates the borrower's membership rights in the association. As
proposed, this policy statement is moved from the regulations into
Handbook guidance. One commenter requested clarification on borrower
membership if a loan is sold when the servicing rights are retained by
the selling association. Retention of servicing rights, without more,
will not cause the loan to be deemed to be owned by the selling
association. Thus, such borrowers would not have voting or ownership
rights in the selling association.
III. Disposition of Corporate Governance Regulations
The following chart gives an overview of the changes made to OTS's
corporate governance regulations.
------------------------------------------------------------------------
Original provision Comment
------------------------------------------------------------------------
Sec. 543.1(b)............................ Amended to delete
references.
Sec. 543.14.............................. Amended to delete
references.
Sec. 544.1............................... Amended.
Sec. 544.1, Section 2.................... Revised for clarification
Sec. 544.1, Section 6.................... Moved portion to Sec. 544.5
for clarification.
Sec. 544.1, Section 7.................... Moved portion to Sec. 544.5
for clarification.
Sec. 544.1, Section 9.................... Removed need for preliminary
approval.
Sec. 544.2(a)(2)......................... Eliminated need for
management certification.
Sec. 544.2(b)............................ Eliminated need for prior
notice requirement.
Sec. 544.2(b)(4)......................... Removed existing paragraph
and added new preapproved
amendment raising the cap
to 1,000 votes.
Sec. 544.2(c)............................ Removed delegation.
Sec. 544.3............................... Removed.
Sec. 544.5(a)............................ Revised for clarification.
Sec. 544.5(b) (1) and (2)................ Amended for flexibility;
changed annual meeting
date.
Sec. 544.5(b) (3) and (4)................ Adjournment provisions
added.
New Sec. 544.5(b)(5)..................... Added new paragraph on
member quorum and
clarified.
Sec. 544.5(b) (5) through (11)........... Redesignated (b) (6) to
(12).
Sec. 544.5(b)(6)......................... Amended to add privacy
rights.
Sec. 544.5(b)(7)......................... Amended for clarification.
Sec. 544.5(b)(9)......................... Amended.
Sec. 544.5(b)(10)........................ Amended to add guidance on
vacancies.
Sec. 544.5(b)(12)........................ Removed.
Sec. 544.5(b)(13)........................ Amended to add guidance on
nominee substitution.
Sec. 544.5(b)(15)........................ Removed.
Sec. 544.5(b)(16)........................ Revised for clarification.
Sec. 544.5(b)(17)........................ Amended to delete emergency
preparedness.
Sec. 544.5(c)............................ Eliminated need for
management certification.
Sec. 544.5(c)(1)(ii)..................... New paragraph added to
explain application
process.
Sec. 544.5(c)(1)(iii).................... Eliminated need for prior
notice requirement.
Sec. 544.5(c)(3)......................... New paragraph to provide
alternative corporate
governance procedures.
Sec. 544.5(d)............................ Reduced filing requirement.
Sec. 544.8............................... Removed.
Sec. 544.9............................... Removed.
Part 544 Appendix......................... Conformed to proposed
changes and moved to
Handbook.
Sec. 545.131............................. Moved to Part 544.
Sec. 552.1............................... Removed.
Sec. 552.2............................... Removed.
Sec. 552.2-5............................. Removed.
Sec. 552.3............................... Amended.
Sec. 552.3, Section 2.................... Revised for clarity.
Sec. 552.3, Section 8.................... Removed need for preliminary
approval.
Sec. 552.4(a)(2)......................... Eliminated need for
management certification.
Sec. 552.4(b)............................ Eliminated need for prior
notice requirement.
Sec. 552.4(b)(3)......................... Removed.
Sec. 552.4(b) (4) through (6)............ Redesignated (b) (3) to (5).
New Sec. 552.4(b)(6)..................... Added new preapproved
amendment.
Sec. 552.4(c)............................ Amended for clarification.
Sec. 552.5(b)............................ Eliminated need for
management certification.
Sec. 552.5(b)(1)(ii)..................... New paragraph added to
explain application
process.
Sec. 552.5(b)(1)(iii).................... Eliminated need for prior
notice requirement.
Sec. 552.5(b)(3)......................... New paragraph to provide
alternative corporate
governance procedures.
Sec. 552.5(d)............................ Added new paragraph for
clarification.
Sec. 552.6(a)............................ Amended for flexibility;
changed annual meeting
date.
Sec. 552.6(b)............................ Amended shareholder meeting
requirements.
Sec. 552.6(d)............................ Amended for clarification.
Sec. 552.6(e)............................ Amended to add guidance on
certain voting
requirements.
Sec. 552.6(f)(1)......................... Amended for flexibility.
Sec. 552.6(f)(3)......................... Removed.
New Sec. 552.6(h)........................ Added section on informal
action.
Sec. 552.6-1(a).......................... Amended for flexibility.
Sec. 552.6-1(b).......................... Removed necessity for
staggered board of
directors. Also amended to
specify number of
directors.
Sec. 552.6-1(f).......................... Amended to clarify where
``cause'' is defined.
Sec. 552.6-1(k).......................... Amended to add guidance.
Sec. 552.6-2(a).......................... Amended to remove provision
requiring president to be a
director.
Sec. 552.8............................... Removed.
Sec. 552.11(b)........................... Amended for clarification.
Part 552 Appendix......................... Conformed to proposed
changes and moved to
Handbook.
Sec. 556.1............................... Removed.
Sec. 556.17.............................. Moved to Handbook.
Sec. 575.9............................... Amended.
Sec. 575.9 Section 8..................... Removed need for preliminary
approval.
Sec. 575.9 (a)(2) and (a)(4)............. Amended.
------------------------------------------------------------------------
IV. Administrative Procedure Act
This final rule results from the notice of proposed rulemaking OTS
published on June 25, 1996. In addition to the regulatory language
proposed in that notice, OTS is today deleting several bylaw
regulations previously located in Part 544 and Part 552, as described
[[Page 64015]]
above. Pursuant to section 553(b) of the Administrative Procedure Act,
OTS hereby finds that good cause exists not to publish the deletions
for public notice and comment. The bylaw regulations deleted by this
final rule are either unnecessary or are deleted as a result of moving
the model bylaws into the Handbook. Also, deleting these regulations
reduces regulatory burden. Thus, notice and opportunity to comment are
unnecessary.
V. Paperwork Reduction Act of 1995
The reporting requirements contained in this final rule have been
submitted to and approved by the Office of Management and Budget under
OMB Control Nos. 1550-0017 and 1550-0018, in accordance with the
Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)). Comments on the
collection of information should be sent to the Office of Management
and Budget, Paperwork Reduction Project (1550), Washington, DC 20503,
with copies to OTS, 1700 G Street, NW., Washington, DC 20552.
Respondents are not required to respond to the foregoing collection
of information unless it displays a currently valid OMB control number.
VI. Executive Order 12866
The Director of OTS has determined that this final rule does not
constitute a ``significant regulatory action'' for the purposes of
Executive Order 12866.
VII. Regulatory Flexibility Act Analysis
Pursuant to section 605(b) of the Regulatory Flexibility Act, OTS
certifies that this final rule will not have a significant economic
impact on a substantial number of small entities. The final rule does
not impose additional burdens or requirements upon small entities and
lowers several paperwork and other burdens on all savings associations.
VIII. Unfunded Mandates Act of 1995
Section 202 of the Unfunded Mandates Reform Act of 1995, Public Law
104-4 (Unfunded Mandates Act), requires that an agency prepare a
budgetary impact statement before promulgating a rule that includes a
Federal mandate that may result in expenditure by state, local, and
tribal governments, in the aggregate, or by the private sector, of $100
million or more in any one year. If a budgetary impact statement is
required, Section 205 of the Unfunded Mandates Act also requires an
agency to identify and consider a reasonable number of regulatory
alternatives before promulgating a rule. As discussed in this preamble
and the preamble of the proposal, this final rule reduces regulatory
burden and updates, reorganizes and substantially streamlines corporate
governance regulations and policy statements. OTS has determined that
the final rule will not result in expenditures by state, local, or
tribal governments or by the private sector of $100 million or more.
Accordingly, a budgetary impact statement is not required under section
202 of the Unfunded Mandates Act of 1995.
IX. Effective Date
Two statutes affect the effective date of OTS regulations. Section
302 of CDRIA delays the effective date of regulations promulgated by
the Federal banking agencies that impose additional reporting,
disclosure, or new requirements to the first day of the first calendar
quarter following publication of the final rule. CDRIA does not apply
to this final rule because it imposes no new burden. It reduces
regulatory burden in the corporate governance area and provides
additional flexibility to both stock and mutual institutions. The
second statute, the Administrative Procedure Act 17 (APA),
generally requires a 30-day delay in effective date for final rules.
The APA provides that an agency may waive this delay where a regulation
relieves regulatory restrictions. Here, because this rule reduces
regulatory burden, the OTS believes there is good cause to waive the
normal 30-day delay of effective date. This will make the effective
date of this final rule the first day of the first calendar quarter
following publication of the final rule.
---------------------------------------------------------------------------
\17\ 5 U.S.C. 553(d).
---------------------------------------------------------------------------
List of Subjects
12 CFR Parts 543 and 544
Reporting and recordkeeping requirements, Savings associations.
12 CFR Part 545
Accounting, Consumer protection, Credit, Electronic Funds
transfers, Investments, Reporting and recordkeeping requirements,
Savings associations.
12 CFR Part 552
Reporting and recordkeeping requirements, Savings associations,
Securities.
12 CFR Part 556
Savings associations.
12 CFR Part 575
Administrative practice and procedure, Capital, Holding companies,
Reporting and recordkeeping requirements, Savings associations,
Securities.
Accordingly, the Office of Thrift Supervision amends chapter V,
title 12, Code of Federal Regulations, as set forth below.
PART 543--INCORPORATION, ORGANIZATION, AND CONVERSION OF FEDERAL
MUTUAL ASSOCIATIONS
1. The authority citation for part 543 continues to read as
follows:
Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a, 2901 et
seq.
Sec. 543.1 [Amended]
2. Section 543.1 is amended in paragraph (b) by removing the phrase
``only pursuant to a charter change under Sec. 544.3 or Sec. 552.4 of
this chapter''.
Sec. 543.14 [Amended]
3. Section 543.14 is amended by removing the phrase ``or under
Sec. 544.3 of this chapter''.
PART 544--CHARTER AND BYLAWS
4. The authority citation for part 544 continues to read as
follows:
Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a, 2901 et
seq.
5. Section 544.1 is amended by revising the introductory text, and
sections 1, 2, 6, 7 and 9 and the signature blocks at the end of the
charter to read as follows:
Sec. 544.1 Federal mutual charter.
A Federal mutual savings association shall have a charter in the
following form, which may include any of the additional provisions set
forth in Sec. 544.2 of this Part, if such provisions are specifically
requested. A charter for a Federal mutual savings bank shall substitute
the term ``savings bank'' for ``association.'' The term ``trustee'' may
be substituted for the term ``director.'' Associations adopting this
charter with existing borrower members must grandfather those borrower
members who were members as of the date of issuance of the new charter
by the Office. Such borrowers shall have one vote for the period of
time such borrowings are in existence.
Federal Mutual Charter
Section 1. Corporate title. The full corporate title of the
Federal savings association is ______.
Section 2. Office. The home office shall be located in ______
[city, state].
* * * * *
Section 6. Members. All holders of the association's savings,
demand, or other authorized accounts are members of the association.
In the consideration of all
[[Page 64016]]
questions requiring action by the members of the association, each
holder of an account shall be permitted to cast one vote for each
$100, or fraction thereof, of the withdrawal value of the member's
account. No member, however, shall cast more than 1000 votes. All
accounts shall be nonassessable.
Section 7. Directors. The association shall be under the
direction of a board of directors. The authorized number of
directors shall not be fewer than five nor more than fifteen
persons, as fixed in the association's bylaws, except that the
number of directors may be decreased to a number less than five or
increased to a number greater than fifteen with the prior approval
of the Director of the Office or his or her delegate.
* * * * *
Section 9. Amendment of charter. Adoption of any preapproved
charter amendment shall be effective after such preapproved
amendment has been approved by the members at a legal meeting. Any
other amendment, addition, change, or repeal of this charter must be
approved by the Office prior to approval by the members at a legal
meeting, and shall be effective upon filing with the Office in
accordance with regulatory procedures.
Attest:----------------------------------------------------------------
Secretary of the Association
By:--------------------------------------------------------------------
President or Chief Executive Officer of the Association
Attest:----------------------------------------------------------------
Secretary of the Office of Thrift Supervision
By:--------------------------------------------------------------------
Director of the Office of Thrift Supervision
Effective Date:--------------------------------------------------------
6. Section 544.2 is amended by revising paragraph (a)(2), the third
sentence of the introductory text to paragraph (b), paragraph (b)(4),
and paragraph (c) to read as follows:
Sec. 544.2 Charter amendments.
(a) * * *
(2) Form of filing--(i) Application requirement. If the proposed
charter amendment would: render more difficult or discourage a merger,
proxy contest, the assumption of control by a mutual account holder of
the association, or the removal of incumbent management; or involve a
significant issue of law or policy; then, the association shall file
the proposed amendment and obtain the prior approval of the OTS.
(ii) Notice requirement. If the proposed charter amendment does not
involve a provision that would be covered by paragraph (a)(2)(i) of
this section and is permissible under all applicable laws, rules and
regulations, then the association shall submit the proposed amendment
to the OTS, at least 30 days prior to the effective date of the
proposed charter amendment.
(b) * * * In addition, notwithstanding anything in paragraph (a) of
this section to the contrary, the following charter amendments,
including the adoption of the Federal mutual charter as set forth in
Sec. 544.1 of this part, shall be effective and deemed approved at the
time of adoption, if adopted without change and filed with OTS, within
30 days after adoption, provided the association follows the
requirements of its charter in adopting such amendments:
* * * * *
(4) Maximum number of votes. A Federal mutual savings association
may amend its charter by substituting ______ votes per member in
section 6. [Fill in a number from 50 to 1000.]
(c) Reissuance of charter. A Federal mutual savings association
that has amended its charter may apply to have its charter, including
the amendments, reissued by the Office. Such request for reissuance
should be filed in accordance with Sec. 516.1(c) of this chapter and,
contain signatures required under Sec. 544.1 of this part, together
with such supporting documents as may be needed to demonstrate that the
amendments were properly adopted.
Sec. 544.3 [Removed]
7. Section 544.3 is removed.
8. Section 544.5 is amended by:
a. Revising paragraph (a);
b. Removing the words ``[trustee]'' and ``[trustees]'' wherever
they appear in paragraph (b);
c. Revising the second sentence of paragraph (b)(1);
d. Adding a separate new sentence at the end of each of paragraphs
(b)(2), (b)(3) and (b)(4);
e. Removing paragraphs (b)(12) and (b)(15);
f. Redesignating paragraphs (b)(5) through (b)(11) as paragraphs
(b)(6) through (b)(12), and paragraphs (b)(16) and (b)(17) as
paragraphs (b)(15) and (b)(16), respectively;
g. Adding a new paragraph (b)(5);
h. Revising newly designated paragraphs (b)(6), (b)(7), (b)(8) and
the second sentence of paragraph (b)(10)(i);
i. Adding a sentence at the end of newly designated paragraph
(b)(10)(ii);
j. Revising newly designated paragraph (b)(11), the last sentence
of paragraph (b)(13), and newly designated paragraphs (b)(15), and
(b)(16);
k. Redesignating paragraphs (c)(1) introductory text, (c)(1)(i)
through (c)(1)(iii), and (c)(1) concluding text as paragraphs (c)(1)(i)
introductory text, (c)(1)(i)(A) through (c)(1)(i)(C) and (c)(1)(iii),
respectively, adding a new paragraph (c)(1)(ii), revising newly
designated paragraph (c)(1)(i) introductory text, revising newly
designated paragraph (c)(1)(i)(B), and by revising newly designated
paragraph (c)(1)(iii); and
l. Revising paragraph (c)(2), adding a new paragraph (c)(3), and
revising the last sentence of paragraph (d).
The additions and revisions read as follows:
Sec. 544.5 Federal mutual savings association bylaws.
(a) General. A Federal mutual savings association shall operate
under bylaws that contain provisions that comply with all requirements
specified by the OTS in this section and that are not otherwise
inconsistent with the provisions of this section, the association's
charter, and all other applicable laws, rules, and regulations provided
that, a bylaw provision inconsistent with the provisions of this
section may be adopted with the approval of the OTS. Bylaws may be
adopted, amended or repealed by a majority of the votes cast by the
members at a legal meeting or a majority of the association's board of
directors. The bylaws for a Federal mutual savings bank shall
substitute the term ``savings bank'' for ``association''. The term
``trustee'' shall be substituted for the term ``director''.
(b) * * *
(1) * * * Such meeting shall be held, as designated by its board of
directors, at a location within the state that constitutes the
principal place of business of the association, or at any other
convenient place the board of directors may designate, and at a date
and time within 150 days after the end of the association's fiscal
year. * * *
(2) * * * For purposes of this section, ``voting capital'' means
FDIC-insured deposits as of the voting record date.
(3) * * * When any meeting is adjourned for 30 days or more, notice
of the adjournment and reconvening of the meeting shall be given as in
the case of the original meeting.
(4) * * * The same determination shall apply to any adjourned
meeting.
(5) Member quorum. Any number of members present and voting,
represented in person or by proxy, at a regular or special meeting of
the members shall constitute a quorum. A majority of all votes cast at
any meeting of the members shall determine any question, unless
otherwise required by regulation. At any adjourned meeting, any
business may be transacted that might have been transacted at the
meeting as originally called. Members present at a duly constituted
meeting may continue to transact business until adjournment.
[[Page 64017]]
(6) Voting by proxy. Procedures shall be established for voting at
any annual or special meeting of the members by proxy pursuant to the
rules and regulations of the Office, including the placing of such
proxies on file with the secretary of the association, for
verification, prior to the convening of such meeting. Proxies may be
given telephonically or electronically as long as the holder uses a
procedure for verifying the identity of the member. All proxies with a
term greater than eleven months or solicited at the expense of the
association must run to the board of directors as a whole, or to a
committee appointed by a majority of such board.
(7) Communications between members. Provisions relating to
communications between members shall be consistent with Sec. 544.8 of
this part. No member, however, shall have the right to inspect or copy
any portion of any books or records of a Federal mutual savings
association containing:
(i) A list of depositors in or borrowers from such association;
(ii) Their addresses;
(iii) Individual deposit or loan balances or records; or
(iv) Any data from which such information could be reasonably
constructed.
(8) Number of directors, membership. The bylaws shall set forth a
specific number of directors, not a range. The number of directors
shall be not fewer than five nor more than fifteen, unless a higher or
lower number has been authorized by the Director of the Office or his
or her designee. Each director of the association shall be a member of
the association. Directors may be elected for periods of one to three
years and until their successors are elected and qualified, but if a
staggered board is chosen, provision shall be made for the election of
approximately one-third or one-half of the board each year, as
appropriate. State-chartered savings banks converting to Federal
savings banks may include alternative provisions for the election and
term of office of directors so long as such provisions are authorized
by the Office, and provide for compliance with the standard provisions
of this section no later than six years after the conversion to a
Federal savings association.
* * * * *
(10) Officers, employees, and agents. (i) * * * The officers of the
association shall consist of a president, one or more vice presidents,
a secretary, and a treasurer or comptroller, each of whom shall be
elected annually by the board of directors. * * *
(ii) * * * Any officer may be removed by the board of directors
with or without cause, but such removal, other than for cause, shall be
without prejudice to the contractual rights, if any, of the person so
removed.
* * * * *
(11) Vacancies, resignation or removal of directors. Members of the
association shall elect directors by ballot: Provided, that in the
event of a vacancy on the board, the board of directors may, by their
affirmative vote, fill such vacancy, even if the remaining directors
constitute less than a quorum. A director elected to fill a vacancy
shall be elected to serve only until the next election of directors by
the members. The bylaws shall set out the procedure for the resignation
of a director, which shall be by written notice or by any other
procedure established in the bylaws. Directors may be removed only for
cause as defined in Sec. 563.39 of this chapter, by a vote of the
holders of a majority of the shares then entitled to vote at an
election of directors.
* * * * *
(13) * * * However, if such provision is made for prior submission
of nominations by a member, then the bylaws must provide for a
nominating committee, which, except in the case of a nominee
substituted as a result of death or other incapacity, must submit
nominations to the secretary and have such nominations similarly posted
at least 15 days prior to the date of the annual meeting.
* * * * *
(15) Amendment. Bylaws may include any provision for their
amendment that would be consistent with applicable law, rules, and
regulations and adequately addresses its subject and purpose.
(i) Amendments shall be effective:
(A) After approval by a majority vote of the authorized board, or
by a majority of the vote cast by the members of the association at a
legal meeting; and
(B) After receipt of any applicable regulatory approval.
(ii) When an association fails to meet its quorum requirement,
solely due to vacancies on the board, the bylaws may be amended by an
affirmative vote of a majority of the sitting board.
(16) Miscellaneous. The bylaws may also address the subject of age
limitations for directors or officers as long as they are consistent
with applicable Federal law, rules or regulations, and any other
subjects necessary or appropriate for effective operation of the
association.
(c) Form of filing--(1) Application requirement. (i) Any bylaw
amendment shall be submitted to the OTS if it would:
* * * * *
(B) Involve a significant issue of law or policy, including
indemnification, conflicts of interest, and limitations on director or
officer liability; or
* * * * *
(ii) Applications submitted under paragraph (c)(1)(i) of this
section shall be subject to the applications processing procedures set
forth at Sec. 516.2 of this chapter.
(iii) For purposes of this paragraph (c), bylaw provisions that
adopt the language of the model bylaws set forth in OTS's Application
Processing Handbook, if adopted without change, and filed within 30
days after adoption, are effective upon adoption.
(2) Filing requirement. If the proposed bylaw amendment does not
involve a provision that would be covered by paragraph (c)(1) or (c)(3)
of this section, then the association shall submit the amendment to the
OTS at least 30 days prior to the date the bylaw amendment is to be
adopted by the association.
(3) Corporate governance procedures. A Federal mutual association
may elect to follow the corporate governance procedures of the laws of
the state where the main office of the institution is located, provided
that such procedures may be elected only to the extent not inconsistent
with applicable Federal statutes, regulations, and safety and
soundness, and such procedures are not of the type described in
paragraph (c)(1) of this section. If this election is selected, a
Federal mutual association shall designate in its bylaws the provision
or provisions from the body of law selected for its corporate
governance procedures, and shall file a copy of such bylaws, which are
effective upon adoption, within 30 days after adoption. The submission
shall indicate, where not obvious, why the bylaw provisions meet the
requirements stated in paragraph (c)(1) of this section.
(d) Effectiveness. * * * This automatic effective date does not
apply if, prior to the expiration of such 30-day period, the OTS
notifies the association that such amendment is rejected or that such
amendment requires an application to be filed pursuant to paragraph
(c)(1) of this section.
Secs. 544.8-544.9 [Removed]
9. Sections 544.8 and 544.9 are removed.
Appendix to Part 544 [Removed]
10. The Appendix to Part 544 is removed.
[[Page 64018]]
PART 545--OPERATIONS
11. The authority citation for part 545 continues to read as
follows:
Authority: 12 U.S.C. 1462a, 1463, 1464, 1828.
Sec. 545.131 [Redesignated as Sec. 544.8]
12. Section 545.131 is redesignated as Sec. 544.8.
PART 552--INCORPORATION, ORGANIZATION, AND CONVERSION OF FEDERAL
STOCK ASSOCIATIONS
13. The authority citation for part 552 continues to read as
follows:
Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a.
Secs. 552.1-552.2 [Removed]
14. Sections 552.1 and 552.2 are removed.
Sec. 552.2-5 [Removed]
15. Section 552.2-5 is removed.
16. Section 552.3 is amended in the Federal Stock Charter by:
a. revising Section 2;
b. revising, in Section 5, the first and last sentences in the
first paragraph, the second paragraph, and the second sentence of the
third paragraph;
c. revising Section 7;
d. revising Section 8;
e. revising the signature blocks at the end of the charter.
The revisions read as follows:
Sec. 552.3 Charters for Federal stock associations.
* * * * *
Federal Stock Charter
* * * * *
Section 2. Office. The home office shall be located in ______
[city, state].
* * * * *
Section 5. Capital stock. The total number of shares of all
classes of the capital stock that the association has the authority
to issue is ______, all of which shall be common stock of par [or if
no par is specified then shares shall have a stated] value of ______
per share. * * * In the case of a stock dividend, that part of the
retained earnings of the association that is transferred to common
stock or paid-in capital accounts upon the issuance of shares as a
stock dividend shall be deemed to be the consideration for their
issuance.
Except for shares issued in the initial organization of the
association or in connection with the conversion of the association
from the mutual to stock form of capitalization, no shares of
capital stock (including shares issuable upon conversion, exchange,
or exercise of other securities) shall be issued, directly or
indirectly, to officers, directors, or controlling persons of the
association other than as part of a general public offering or as
qualifying shares to a director, unless the issuance or the plan
under which they would be issued has been approved by a majority of
the total votes eligible to be cast at a legal meeting.
* * * Each holder of shares of common stock shall be entitled to
one vote for each share held by such holder, except as to the
cumulation of votes for the election of directors, unless the
charter provides that there shall be no such cumulative voting. * *
*
* * * * *
Section 7. Directors. The association shall be under the
direction of a board of directors. The authorized number of
directors, as stated in the association's bylaws, shall not be fewer
than five nor more than fifteen except when a greater or lesser
number is approved by the Director of the Office, or his or her
delegate.
Section 8. Amendment of charter. Except as provided in Section
5, no amendment, addition, alteration, change or repeal of this
charter shall be made, unless such is proposed by the board of
directors of the association, approved by the shareholders by a
majority of the votes eligible to be cast at a legal meeting, unless
a higher vote is otherwise required, and approved or preapproved by
the Office.
Attest:----------------------------------------------------------------
Secretary of the Association
By:--------------------------------------------------------------------
President or Chief Executive Officer of the Association
Attest:----------------------------------------------------------------
Secretary of the Office of Thrift Supervision
By:--------------------------------------------------------------------
Director of the Office of Thrift Supervision
Effective Date:--------------------------------------------------------
17. Section 552.4 is amended by:
a. removing at the end of paragraph (a)(1) the semicolon and the
word ``and'', and by adding in lieu thereof a period;
b. revising paragraph (a)(2);
c. revising the last sentence of the introductory text of paragraph
(b);
d. adding headings to paragraphs (b)(1) and (b)(2);
e. removing paragraph (b)(3);
f. redesignating paragraph (b)(4) as paragraph (b)(3) and revising
it;
g. redesignating paragraph (b)(5) as paragraph (b)(4) and revising
the introductory text;
h. revising the first and last sentences of the first paragraph in
Section 5 of newly designated paragraph (b)(4);
i. revising the first sentence of the second paragraph in Section 5
of newly designated paragraph (b)(4);
j. revising the introductory text of the third paragraph in Section
5 of newly designated paragraph (b)(4);
k. amending newly designated paragraph (b)(4) by revising paragraph
(ii) of the third paragraph in Section 5;
l. amending newly designated paragraph (b)(4) by revising the last
sentence of paragraph A. of the fourth paragraph in Section 5;
m. redesignating paragraph (b)(6) as paragraph (b)(5) and revising
it;
n. adding a new paragraph (b)(6);
o. adding a heading to paragraph (b)(8); and
p. revising paragraph (c);
The additions and revisions read as follows:
Sec. 552.4 Charter amendments.
(a) * * *
(2) Form of filing--(i) Application requirement. If the proposed
charter amendment would render more difficult or discourage a merger,
tender offer, or proxy contest, the assumption of control by a holder
of a block of the association's stock, the removal of incumbent
management, or involve a significant issue of law or policy, the
association shall file the proposed amendment and shall obtain the
prior approval of the OTS; and
(ii) Notice requirement. If the proposed charter amendment does not
involve a provision that would be covered by paragraph (a)(2)(i) of
this section and such amendment is permissible under all applicable
laws, rules or regulations, then the association shall submit the
proposed amendments to the OTS, at least 30 days prior to the date the
proposed charter amendment is to be mailed for consideration by the
association's shareholders.
(b) * * * In addition, the following charter amendments, including
the adoption of the Federal stock charter as set forth in Sec. 552.3 of
this part, shall be approved at the time of adoption, if adopted
without change and filed with OTS within 30 days after adoption,
provided the association follows the requirements of its charter in
adopting such amendments:
(1) Title change. * * *
(2) Home office. * * *
(3) Number of shares of stock and par value. A Federal stock
association may amend Section 5 of its charter to change the number of
authorized shares of stock, the number of shares within each class of
stock, and the par or stated value of such shares.
(4) Capital stock. A Federal stock association may amend its
charter by revising Section 5 to read as follows:
Section 5. The total number of shares of all classes of capital
stock that the association has the authority to issue is ______, of
which ______ shall be common stock of par [or if no par value is
specified the stated] value of ______ per share and of which [list
the number of each class of preferred and the par or if no par value
is specified the stated value per share of each such class]. * * *
In the case of a stock dividend, that part of the retained earnings
of the association that is transferred to common stock or paid-in
capital accounts upon the issuance of shares
[[Page 64019]]
as a stock dividend shall be deemed to be the consideration for
their issuance.
Except for shares issued in the initial organization of the
association or in connection with the conversion of the association
from the mutual to the stock form of capitalization, no shares of
capital stock (including shares issuable upon conversion, exchange,
or exercise of other securities) shall be issued, directly or
indirectly, to officers, directors, or controlling persons of the
association other than as part of a general public offering or as
qualifying shares to a director, unless their issuance or the plan
under which they would be issued has been approved by a majority of
the total votes eligible to be cast at a legal meeting. * * *
Nothing contained in this section 5 (or in any supplementary
sections hereto) shall entitle the holders of any class of a series
of capital stock to vote as a separate class or series or to more
than one vote per share, except as to the cumulation of votes for
the election of directors, unless the charter otherwise provides
that there shall be no such cumulative voting: Provided, That this
restriction on voting separately by class or series shall not apply:
* * * * *
(ii) To any provision that would require the holders of
preferred stock, voting as a class or series, to approve the merger
or consolidation of the association with another corporation or the
sale, lease, or conveyance (other than by mortgage or pledge) of
properties or business in exchange for securities of a corporation
other than the association if the preferred stock is exchanged for
securities of such other corporation: Provided, That no provision
may require such approval for transactions undertaken with the
assistance or pursuant to the direction of the Office or the Federal
Deposit Insurance Corporation;
* * * * *
A. Common stock. * * * Each holder of shares of the common stock
shall be entitled to one vote for each share held by each holder,
except as to the cumulation of votes for the election of directors,
unless the charter otherwise provides that there shall be no such
cumulative voting.
* * * * *
(5) Limitations on subsequent issuances. A Federal stock
association may amend its charter to require shareholder approval of
the issuance or reservation of common stock or securities convertible
into common stock under circumstances which would require shareholder
approval under the rules of the New York or American Stock Exchange if
the shares were then listed on the New York or American Stock Exchange.
(6) Cumulative voting. A Federal stock association may amend its
charter by substituting the following sentence for the second sentence
in the third paragraph of Section 5: ``Each holder of shares of common
stock shall be entitled to one vote for each share held by such holder
and there shall be no right to cumulate votes in an election of
directors.''
* * * * *
(8) Anti-takeover provisions following mutual to stock conversion.
* * *
(c) Anti-takeover provisions. The Office may grant approval to a
charter amendment not listed in paragraph (b) of this section regarding
the acquisition by any person or persons of its equity securities
provided that the association shall file as part of its application for
approval an opinion, acceptable to the OTS, of counsel independent from
the association that the proposed charter provision would be permitted
to be adopted by a corporation chartered by the state in which the
principal office of the association is located. Any such provision must
be consistent with applicable statutes, regulations, and OTS policies.
Further, any such provision that would have the effect of rendering
more difficult a change in control of the association and would require
for any corporate action (other than the removal of directors) the
affirmative vote of a larger percentage of shareholders than is
required by this Part, shall not be effective unless adopted by a
percentage of shareholder vote at least equal to the highest percentage
that would be required to take any action under such provision.
* * * * *
18. Section 552.5 is amended by:
a. revising the second sentence of paragraph (a);
b. redesignating paragraphs (b)(1) introductory text, (b)(1)(i),
(b)(1)(ii), and (b)(1) concluding text as paragraphs (b)(1)(i)
introductory text, (b)(1)(i)(A), (b)(1)(i)(B), and (b)(1)(iii),
respectively, adding a new paragraph (b)(1)(ii), and by revising newly
designated paragraphs (b)(1)(i) introductory text, (b)(1)(i)(B) and
(b)(1)(iii);
c. revising paragraph (b)(2);
d. adding a new paragraph (b)(3); and
e. adding a new paragraph (d).
The additions and revisions read as follows:
Sec. 552.5 Bylaws.
(a) * * * Bylaws may be adopted, amended or repealed by either a
majority of the votes cast by the shareholders at a legal meeting or a
majority of the board of directors. * * *
(b) * * * (1) Application requirement. (i) Any bylaw amendment
shall be submitted to the OTS for approval if it would:
* * * * *
(B) Be inconsistent with Secs. 552.6, 552.6-1, 552.6-2, and 552.6-3
of this part, with applicable laws, rules, regulations or the
association's charter or involve a significant issue of law or policy,
including indemnification, conflicts of interest, and limitations on
director or officer liability.
(ii) Applications submitted under paragraph (b)(1)(i) of this
section shall be subject to the applications processing procedures set
forth at Sec. 516.2 of this chapter.
(iii) Bylaw provisions that adopt the language of the model bylaws
set forth in the OTS's Application Processing Handbook, if adopted
without change, and filed with OTS within 30 days after adoption, are
effective upon adoption.
(2) Filing requirement. If the proposed bylaw amendment does not
involve a provision that would be covered by paragraph (b)(1) or (b)(3)
of this section and is permissible under all applicable laws, rules, or
regulations, then the association shall submit the amendment to the OTS
at least 30 days prior to the date the bylaw amendment is to be adopted
by the association.
(3) Corporate governance procedures. A Federal stock association
may elect to follow the corporate governance procedures of: The laws of
the state where the main office of the association is located; the laws
of the state where the association's holding company, if any, is
incorporated or chartered; Delaware General Corporation law; or The
Model Business Corporation Act, provided that such procedures may be
elected to the extent not inconsistent with applicable Federal statutes
and regulations and safety and soundness, and such procedures are not
of the type described in paragraph (b)(1) of this section. If this
election is selected, a Federal stock association shall designate in
its bylaws the provision or provisions from the body or bodies of law
selected for its corporate governance procedures, and shall file a copy
of such bylaws, which are effective upon adoption, within 30 days after
adoption. The submission shall indicate, where not obvious, why the
bylaw provisions meet the requirements stated in paragraph (b)(1) of
this section.
* * * * *
(d) Effect of subsequent charter or bylaw change. Notwithstanding
any subsequent change to its charter or bylaws, the authority of a
Federal stock association to engage in any transaction shall be
determined only by the association's charter or bylaws then in effect,
unless otherwise provided by Federal law or regulation.
19. Section 552.6 is amended by:
a. revising the first and last sentences in paragraph (a);
b. adding a sentence at the end of paragraph (b);
[[Page 64020]]
c. revising paragraph (d)(1);
d. adding a sentence at the end of paragraph (e);
e. adding two sentences after the first sentence in paragraph
(f)(1);
f. removing paragraph (f)(3); and
g. adding paragraph (h).
The additions and revisions read as follows:
Sec. 552.6 Shareholders.
(a) Shareholder meetings. An annual meeting of the shareholders of
the association for the election of directors and for the transaction
of any other business of the association shall be held annually within
150 days after the end of the association's fiscal year. * * * All
annual and special meetings of shareholders shall be held at such place
as the board of directors may determine in the state in which the
association has its principal place of business, or at any other
convenient place the board of directors may designate.
(b) * * * Notwithstanding anything in this section, however, a
Federal stock association that is wholly owned shall not be subject to
the shareholder notice requirement.
* * * * *
(d) Voting lists. (1) At least 20 days before each meeting of the
shareholders, the officer or agent having charge of the stock transfer
books for the shares of the association shall make a complete list of
the stockholders of record entitled to vote at such meeting, or any
adjournments thereof, arranged in alphabetical order, with the address
and the number of shares held by each. This list of shareholders shall
be kept on file at the home office of the association and shall be
subject to inspection by any shareholder of record or the stockholder's
agent during the entire time of the meeting. The original stock
transfer book shall constitute prima facie evidence of the stockholders
entitled to examine such list or transfer books or to vote at any
meeting of stockholders. Notwithstanding anything in this section,
however, a Federal stock association that is wholly owned shall not be
subject to the voting list requirements.
* * * * *
(e) * * * If a quorum is present, the affirmative vote of the
majority of the shares represented at the meeting and entitled to vote
on the subject matter shall be the act of the stockholders, unless the
vote of a greater number of stockholders voting together or voting by
classes is required by law or the charter. Directors, however, are
elected by a plurality of the votes cast at an election of directors.
(f) Shareholder voting.--(1) * * * Proxies may be given
telephonically or electronically as long as the holder uses a procedure
for verifying the identity of the shareholder. A proxy may designate as
holder a corporation, partnership or company as defined in Part 574 of
this chapter, or other person. * * *
* * * * *
(h) Informal action by stockholders. If the bylaws of the
association so provide, any action required to be taken at a meeting of
the stockholders, or any other action that may be taken at a meeting of
the stockholders, may be taken without a meeting if consent in writing
has been given by all the stockholders entitled to vote with respect to
the subject matter.
20. Section 552.6-1 is amended by:
a. adding a sentence at the end of paragraph (a);
b. revising paragraph (b);
c. adding a sentence after the first sentence in paragraph (c);
d. revising the second sentence of paragraph (e);
e. revising the heading of paragraph (f) and paragraph (f)(1); and
f. revising paragraph (k).
The additions and revisions read as follows:
Sec. 552.6-1 Board of directors.
(a) * * * Directors need not be stockholders unless the bylaws so
require.
(b) Number and term. The bylaws shall set forth a specific number
of directors, not a range. The number of directors shall be not fewer
than five nor more than fifteen, unless a higher or lower number has
been authorized by the Director of the Office or his or her delegate.
Directors shall be elected for a term of one to three years and until
their successors are elected and qualified. If a staggered board is
chosen, the directors shall be divided into two or three classes as
nearly equal in number as possible and one class shall be elected by
ballot annually. In the case of a converting or newly chartered
association where all directors shall be elected at the first election
of directors, if a staggered board is chosen, the terms shall be
staggered in length from one to three years.
(c) * * * The board of directors shall determine the place,
frequency, time and procedure for notice of such meetings.
* * * * *
(e) * * * A director elected to fill a vacancy shall be elected to
serve only until the next election of directors by the shareholders. *
* *
(f) Removal or resignation of directors. (1) At a meeting of
shareholders called expressly for that purpose, any director may be
removed only for cause, as defined in Sec. 563.39 of this chapter, by a
vote of the holders of a majority of the shares then entitled to vote
at an election of directors. Associations may provide for procedures
regarding resignations in the bylaws.
* * * * *
(k) Age limitation on directors. A Federal association may provide
a bylaw on age limitation for directors. Bylaws on age limitations must
comply with all Federal laws, rules and regulations.
21. Section 552.6-2 is amended by revising the first and fifth
sentences of paragraph (a); by removing the third and fourth sentences
of paragraph (a), and revising paragraph (c) to read as follows:
Sec. 552.6-2 Officers.
(a) Positions. The officers of the association shall be a
president, one or more vice presidents, a secretary, and a treasurer or
comptroller, each of whom shall be elected by the board of directors. *
* * The offices of the secretary and treasurer or comptroller may be
held by the same person and the vice president may also be either the
secretary or the treasurer or comptroller. * * *
* * * * *
(c) Age limitation on officers. A Federal association may provide a
bylaw on age limitation for officers. Bylaws on age limitations must
comply with all Federal laws, rules, and regulations.
Sec. 552.8 [Removed]
22. Section 552.8 is removed.
Sec. 552.11 [Amended]
23. Section 552.11 is amended by adding the phrase
``nonconfidential portions of'' in paragraph (b) between the words
``times,'' and ``its'' in the first sentence.
Appendix to Part 552 [Removed]
24. The Appendix to part 552 is removed.
PART 556--STATEMENTS OF POLICY
25. The authority citation for part 556 continues to read as
follows:
Authority: 5 U.S.C. 552, 559; 12 U.S.C. 1464, 1701j-3; 15 U.S.C.
1693-1693r.
Secs. 556.1 and 556.17 [Removed]
26. Sections 556.1 and 556.17 are removed.
[[Page 64021]]
PART 575--MUTUAL HOLDING COMPANIES
27. The authority citation for part 575 continues to read as
follows:
Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a, 1828, 2901.
28. Section 575.9 is amended by:
a. revising Section 1 of the Charter in paragraph (a)(1);
b. removing, in Section 5 of the Charter in paragraph (a)(1), the
sixth, seventh, and eighth sentences in the last paragraph;
c. revising Section 6 of the Charter in paragraph (a)(1);
d. revising Section 8 of the Charter in paragraph (a)(1);
e. revising the signature blocks at the end of the Charter in
paragraph (a)(1);
f. revising paragraph (a)(2);
g. revising the last sentence of paragraph (a)(4); and
h. revising the last sentence of paragraph (a)(5).
The revisions read as follows:
Sec. 575.9 Charters and bylaws for mutual holding companies and their
savings association subsidiaries.
(a) Charters and bylaws for mutual holding companies--(1) Charters.
* * *
Charter
Section 1: Corporate title. The name of the mutual holding
company is ______ (the ``Mutual Company'').
* * * * *
Section 6. Directors. The Mutual Company shall be under the
direction of a board of directors. The authorized number of
directors shall not be fewer than five nor more than fifteen, as
fixed in the Mutual Company's bylaws, except that the number of
directors may be decreased to a number less than five or increased
to a number greater than fifteen with the prior approval of the
Director of the Office or his or her delegate.
* * * * *
Section 8. Amendment. Adoption of any preapproved charter
amendment shall be effective after such preapproved amendment has
been approved by the members at a legal meeting. Any other
amendment, addition, change, or repeal of this charter must be
approved by the Office prior to approval by the members at a legal
meeting and shall be effective upon filing with the Office in
accordance with regulatory procedures.
Attest:----------------------------------------------------------------
Secretary of the Association
By:--------------------------------------------------------------------
President or Chief Executive Officer of the Association
Attest:----------------------------------------------------------------
Secretary of the Office of Thrift Supervision
By:--------------------------------------------------------------------
Director of the Office of Thrift Supervision
Effective Date:--------------------------------------------------------
(2) Charter amendments. The rules and regulations set forth in
Sec. 544.2 of this chapter regarding charter amendments and reissuances
of charters (including delegations and filing instructions) shall be
applicable to mutual holding companies to the same extent as if mutual
holding companies were Federal mutual savings associations, except
that, with respect to the pre-approved charter amendments set forth in
Sec. 544.2 of this chapter, Secs. 544.2(b)(1) and (b)(3) of this
chapter shall not apply to mutual holding companies, and mutual holding
companies changing their corporate title pursuant to Sec. 544.2(b)(2)
of this chapter shall be required to comply with Sec. 575.9(a)(3) of
this part as well as Sec. 543.1(b) of this chapter.
* * * * *
(4) * * * The model bylaws for Federal mutual savings associations
set forth in the OTS Applications Processing Handbook shall also serve
as the model bylaws for mutual holding companies, except that the term
``association'' each time it appears therein shall be replaced with the
term ``Mutual Company''; section 11(e) (extending leniency to borrowing
members) and section 11(f) (rejection of applications for accounts or
membership) shall be removed and the remaining paragraphs of section 11
redesignated accordingly.
(5) * * * Mutual holding companies shall also be subject to the
provisions of Sec. 544.8 of this chapter.
* * * * *
Dated: November 20, 1996.
By the Office of Thrift Supervision.
Nicolas P. Retsinas,
Director.
[FR Doc. 96-30262 Filed 12-2-96; 8:45 am]
BILLING CODE 6720-01-U
