[Federal Register Volume 70, Number 135 (Friday, July 15, 2005)]
[Proposed Rules]
[Pages 40924-40941]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-13312]


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NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Chapter VII


Federal Credit Union Bylaws

AGENCY: National Credit Union Administration (NCUA).

ACTION: Notice and request for comment.

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SUMMARY: NCUA is proposing changes to update, clarify and simplify the 
Federal Credit Union (FCU) Bylaws. NCUA proposes these changes because 
numerous bylaw amendments approved by the NCUA Board over the past five 
years reveal the need to modify bylaws or remove provisions that have 
become outdated or obsolete.

DATES: Comments must be received by October 13, 2005.

[[Page 40925]]


ADDRESSES: You may submit comments by any of the following methods 
(Please send comments by one method only):
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     NCUA Web Site: http://www.ncua.gov/RegulationsOpinionsLaws/proposed_regs/proposed_regs.html. Follow the 
instructions for submitting comments.
     E-mail: Address to [email protected]. Include ``[Your 
name] Comments on FCU Bylaws'' in the e-mail subject line.
     Fax: (703) 518-6319. Use the subject line described above 
for e-mail.
     Mail: Address to Mary Rupp, Secretary of the Board, 
National Credit Union Administration, 1775 Duke Street, Alexandria, 
Virginia 22314-3428.
     Hand Delivery/Courier: Same as mail address.
    Public inspection: All public comments are available on the 
agency's Web site at http://www.ncua.gov/RegulationsOpinionsLaws/comments as submitted, except as may not be possible for technical 
reasons. Public comments will not be edited to remove any identifying 
or contact information. Paper copies of comments may be inspected in 
NCUA's law library, at 1775 Duke Street, Alexandria, Virginia 22314, by 
appointment weekdays between 9 a.m. and 3 p.m. To make an appointment, 
call (703) 518-6546 or send an e-mail to OGC Mail @ncua.gov.

FOR FURTHER INFORMATION CONTACT: Chrisanthy J. Loizos or Elizabeth 
Wirick, Staff Attorneys, Office of General Counsel, National Credit 
Union Administration, 1775 Duke Street, Alexandria, Virginia 22314-3428 
or telephone: (703) 518-6540.

SUPPLEMENTARY INFORMATION: 

A. Background

    Section 108 of the Federal Credit Union Act (the Act) requires the 
NCUA Board to prepare bylaws that ``shall be used'' by FCUs. 12 U.S.C. 
1758. In 1999, the NCUA Board issued revised FCU Bylaws. 64 FR 55760 
(Oct. 14, 1999). The 1999 revision included consolidating the existing 
bylaws into one publication, deleting outdated and obsolete bylaws, and 
using plain English.
    In the five years since that revision, NCUA has approved numerous 
bylaw amendments that tended to clarify or update bylaws to keep pace 
with changes in technology and business practice. In 2003, NCUA 
reviewed the FCU Bylaws under the Board's policy to ``update, clarify 
and simplify existing regulations and eliminate unnecessary and 
redundant and unnecessary provisions.'' NCUA Interpretive Ruling and 
Policy Statement (IRPS) 87-2, Developing and Reviewing Government 
Regulations. As a result of this review, the Board issued a Notice and 
Request for Comment (Request) soliciting comments on ways to improve 
the FCU Bylaws. 69 FR 58203 (Sept. 29, 2004). The Request also sought 
comment on specific, suggested changes to the FCU Bylaws based on 
amendments FCUs had submitted for approval since 1999.
    The Board received comments on the various issues raised in the 
Request as well as numerous other suggestions for improving the FCU 
Bylaws and NCUA's process for issuing the Bylaws and reviewing 
amendments. This proposal incorporates many of the comments NCUA 
received in response to the Request, The proposal also continues the 
process of updating the bylaw language with plain English.

B. Comments

General

    NCUA received twenty-seven comment letters in response to the 
Request. NCUA received comments from ten federal credit unions, ten 
credit union trade organizations, one bank trade organization, five 
members and one proxy consultant. All of the commenters supported or 
suggested some change to the current FCU Bylaws. Specific comments 
regarding the proposed changes noted in the Request and suggestions to 
alter other bylaw provisions are discussed below in the Article-by-
Article Analysis.

Other Suggestions

    Approximately half of the commenters asked NCUA to give FCUs more 
flexibility to draft their bylaws. Several commenters stated that 
Section 108 of the FCU Act requires only FCU incorporators to use 
bylaws prepared by NCUA and does not specifically require FCUs to 
continue to use NCUA's draft after incorporation. Six commenters stated 
NCUA should specify content requirements for the bylaws but permit FCUs 
to draft their own bylaws. One commenter stated FCUs should adopt 
bylaws consistent with the state corporation law of the state where 
they are headquartered, noting that FCUs benefit from the state's 
nonprofit corporation laws, as well as guidance developed as a result 
of relevant state court decisions. Three commenters suggested an 
alternative to the nonstandard amendment procedures that would give 
FCUs the option of following the NCUA model bylaws or adopting their 
own. Three commenters requested that NCUA give FCUs more flexibility by 
allowing FCUs to amend their bylaws as they see fit within safety and 
soundness parameters without obtaining approval from NCUA. They 
suggested that NCUA allow FCUs to seek approval for nonstandard bylaws 
but not require it. One commenter incorporated many of these comments 
by suggesting that NCUA permit FCUs to: (1) Retain the current standard 
bylaws, along with the options NCUA has approved; (2) submit 
nonstandard bylaws for approval, if they wish; or (3) draft their own 
bylaws, or portions of their bylaws, consistent with a list that NCUA 
would develop containing specific issues and content requirements that 
an FCU must include.
    NCUA believes many of the commenters read the FCU Act too narrowly 
with regard to NCUA's responsibility for preparing and approving 
bylaws. NCUA does not construe Section 108 of the FCU Act to require 
that only newly chartered FCUs use NCUA's form bylaws. The Act not only 
requires NCUA to prepare form bylaws, but requires NCUA to approve 
proposed bylaws before an FCU's charter is complete. The Act does not 
contemplate a period of time after which an FCU may use alternate 
bylaws. Inherent in NCUA's responsibility to approve bylaws before an 
FCU can engage in business, is its authority to approve form bylaw 
changes and amendments while an FCU operates.
    NCUA also believes there are several benefits to issuing FCU Bylaws 
for all FCUs. The form FCU Bylaws address the member protections the 
Act affords and function as a contract between the FCU and its members; 
the FCU Bylaws give members notice of their rights, particularly when 
they are unfamiliar with the FCU Act. The FCU Bylaws adopted by NCUA 
also ensure that all FCUs use essentially the same rules for governing 
themselves, consistent with the requirements and limitations in the 
Act. This uniformity enhances the significance of the federal charter 
and has the practical benefit of reducing the amount of examiner time 
spent reviewing bylaws. Finally, FCUs may request approval to amend 
their bylaws when appropriate on a case-by-case basis. The amendment 
process gives FCUs flexibility to adjust with business developments as 
necessary.
    Some commenters questioned the level of detail NCUA currently uses 
in the bylaws. One commenter stated the current bylaws are not easily 
comprehensible for FCU officials and

[[Page 40926]]

employees. While this proposal deletes a few obsolete provisions, NCUA 
does not agree that the FCU Bylaws are too detailed. NCUA receives 
numerous inquiries every year regarding interpretations of various 
provisions in the FCU Bylaws. The proposal attempts to clarify 
provisions that have caused confusion in the past. In some instances, a 
proposed change offers more detail or further elaboration of a concept 
to help FCU officials, employees and members better understand a 
provision.

C. Article-by-Article Analysis

Introduction

    The proposal includes a new Introduction to address generally the 
function of the FCU Bylaws, methods for amending bylaws and some 
additional guidance.

Section Headings

    The proposal adds headings to each section of the bylaws in order 
to make it easier to locate bylaw provisions.

Article II. Qualifications for Membership

    The proposal inserts staff commentary at the end of Article II to 
address membership-related issues that FCUs commonly question. These 
staff comments are generally derived from Office of General Counsel 
opinions regarding membership fees and share balances below par value.
    The proposal amends Section 4 to clarify that FCUs may restrict 
services or access to FCU facilities to members who cause a loss to the 
FCU or are disruptive to FCU operations.

Article III. Shares of Members

    The proposal inserts staff commentary at the end of Article III to 
address share-related issues that FCUs commonly question. These staff 
comments are generally derived from Office of General Counsel opinions 
regarding payment of membership shares and par value of shares.
    The proposal amends Section 4 to clarify the requirement that 
shares with accrued credits for unpaid dividends will retain those 
credits if transferred to another member. One commenter suggested this 
section is confusing and should be deleted because membership shares 
cannot be transferred. Provisions of Article II and other sections of 
this Article address the situation where a member draws down an account 
below the par value of the membership share, so this section need not 
repeat the requirement for members to maintain deposits equal to one 
share. Further, NCUA believes this section serves as another reminder 
of FCUs' member-owned structure.
    The proposal deletes paragraph 5(b), which required shares paid in 
under accumulated payroll deduction plans to be credited to members' 
accounts before withdrawal of the shares. This paragraph is unnecessary 
because it addresses operational procedures of the FCU that are subject 
to the Federal Reserve's Regulations on Electronic Fund Transfers and 
Funds Availability. 12 CFR parts 205, 229. Also, this paragraph 
referred to the Accounting Manual for Federal Credit Unions, which 
applies only to FCUs with assets under $10 million.
    The proposal amends paragraph 5(c) to clarify that coverage 
provided under an FCU's overdraft protection policy does not count as a 
delinquency for purposes of triggering the requirement that the credit 
committee or loan officer approve any withdrawals of shares below the 
amount of the member's liability to the FCU.
    The proposal amends paragraph 5(d) to delete the requirement to 
discontinue the share account of a deceased member within 4 years. 
Imposing a specific time limit is unnecessary, and NCUA has approved a 
number of requests for longer or shorter maximum time limits. The 
remaining portion of this paragraph allows the FCU to continue the 
account of a deceased member only until the end of the dividend period 
in which the administration of the deceased's estate is completed.
    The proposal amends Section 7 to permit FCUs to decide whether to 
allow joint account holders to be members without each opening a 
separate account. Commenters agreed that this change would give FCUs 
flexibility in determining how to implement their membership policies 
and manage their accounts.

Article IV. Meetings of Members

    The proposal amends Section 1 to delete the requirement that the 
annual meeting be held ``within the period authorized by the Act'' 
because the Act no longer specifies a time period for holding the 
annual meeting. Instead, the proposal adds a blank for the FCU to 
insert the date of its annual meeting. NCUA believes it is helpful to 
members to include the date of the annual meeting in the bylaws, and 
offers examples, such as ``during the month of March.''
    The proposal amends Section 3 to increase the maximum number of 
member signatures required to call a special meeting from 500 to 750. 
NCUA is proposing to increase this number because special meetings are 
expensive to conduct and can be called by only a small percentage of an 
FCU's membership. There is no time limit for obtaining the number of 
signatures required to call a special meeting. Increasing the limit 
will help ensure that special meetings are called only when an issue is 
of interest to a broad group of FCU members, but will not prevent 
members from obtaining a special meeting.
    The proposal amends Section 4 to include references to the Act and 
NCUA regulations where they require items of business for the annual 
meeting agenda. Several commenters requested that the bylaws not 
provide a specific list of agenda items, but NCUA believes listing the 
suggested items and inserting references to requirements under the Act 
and regulations will help inform FCU members of events at the annual 
meeting. The proposal adds the requirement that FCUs participating in 
the Community Development Revolving Loan Program provide reports on the 
progress of providing needed community services to paragraph (c). 12 
CFR 706(b). Paragraph (f) references the Act's requirement for the 
supervisory committee to report at the annual meeting. 12 U.S.C. 1761d. 
Paragraph (i) references the Act's requirement to hold elections 
annually. 12 U.S.C. 1761(a).
    The proposal includes a new sentence at the end of Section 4 to 
notify members of the rules of order or procedure that the FCU will use 
when conducting member meetings. Members are entitled to know which 
rules will govern the process for conducting the meeting and making 
decisions. NCUA has long held the view that, during a membership 
meeting, an FCU member may make a motion for members to take action if 
the Act has entrusted the members with such action. Conversely, an FCU 
board need not recognize a member's motion if the motion is beyond the 
members' authority under the Act. In preserving the democratic process 
in FCUs as member-owned institutions, NCUA also has long recognized 
that members have the right to move for a member vote to recommend 
board action. If a member has followed the rules of order chosen by an 
FCU and moves for a membership recommendation to the board, the chair 
must recognize the motion even though the board is not bound to adopt 
the recommendation. This process avails members the opportunity to 
voice any issues, concerns or suggestions they may have for management 
and becomes part of a meeting's record. The proposal identifies four 
authorities an FCU may choose. NCUA requests comment on the proposal 
and alternative procedures, but notes the ability of members to make a 
motion during a membership meeting is

[[Page 40927]]

fundamental to the process and the right to be heard on matters that 
concern them as FCU members.

Article V. Elections

    The proposal inserts NCUA staff commentary at the end of Article V 
to address election-related issues that FCUs commonly question. The 
staff comments regarding eligibility requirements, nomination criteria 
for the nominating committee, names on ballots, ballot secrecy and 
plurality voting are generally derived from legal opinions issued by 
NCUA's Office of General Counsel.

All Options

    The proposal amends Section 4 to delete the second sentence, which 
read, ``A trustee, or other person acting in a representative capacity, 
is not, as such, entitled to vote.'' As discussed in the Request, this 
provision is now outdated because a trust is recognized as a legal 
entity and may qualify for membership in its own right.
    The proposal revises Section 7 to insert a blank space for the 
minimum age for voting and holding office, so that FCU boards are aware 
of the need to establish a minimum age. The current version of the 
bylaws requires the board of directors to adopt a resolution 
establishing the minimum age. NCUA believes including the actual 
minimum age in the bylaw, rather than a separate board resolution that 
may or may not be available to the members, makes it easier for members 
to determine the age requirements for voting and holding office. The 
proposal also adds language to Section 7 to clarify that the minimum 
age for signing nominating petitions or requests for special meetings 
is the same as the minimum age for voting and holding office.
    One commenter suggested adding a self-nomination alternative as 
Option A5 to this article. The commenter suggested that FCUs notify 
members they are seeking nominations and allow members to nominate 
themselves for director positions. All nominees would be included on 
the ballot, and nominations by petition and from the floor would be 
prohibited. After considering this suggestion, NCUA decided not to add 
it to the bylaws. While the potential for broadening the pool of 
qualified board candidates and allowing more participation by all FCU 
members is an important goal, NCUA does not believe this goal requires 
such a drastic change to the bylaws. Rather, an FCU seeking to 
encourage members to nominate themselves can use its newsletter to 
publicize that the nominating committee is seeking nominees. An FCU 
that wishes to make it easier for members to run for director positions 
can simply reduce the number of signatures required for nomination by 
petition. NCUA believes that the current version of the bylaws provides 
sufficient flexibility to accomplish the commenter's objective.
Options A2, A3 and A4
    The proposal retains the 500 as the maximum number of signatures 
required for a petition for nomination for a director position in 
Options A2, A3 and A4. A number of commenters requested an increase in 
this maximum, or requiring the signatures of 1% of members on 
nominating petitions regardless of an FCU's size. NCUA has considered 
this request, but believes that the 500 signature maximum is 
appropriate. Because the membership of many FCUs is geographically 
dispersed and many members transact much of their business 
electronically, the requirement to obtain at least 500 signatures is a 
significant hurdle to a member seeking a nomination to a director 
position. Also, signatures on the nominating petitions must be obtained 
in the time between the mailing of the written notice to members that 
nominations for vacancies may be made by petition and 40 days before 
the annual meeting, which may be as few as 30 days. After considering 
these factors, NCUA believes that the 500 signature maximum should not 
be increased.
    The proposal clarifies language in Section 2 of Options A2, A3 and 
A4 that might be interpreted as permitting FCUs to designate which 
candidates are running for a particular open seat. The staff commentary 
restates NCUA's view that elections are not conducted on a seat by seat 
basis and the winners of the board elections are the nominees who win 
the most votes. The revised language in Section 2 conforms the bylaws 
to NCUA's longstanding interpretation.
Option A4
    The proposal amends Section 2(c)(2) to require FCUs to mail paper 
ballots to all members when conducting an election by electronic means. 
The Request sought comments as to whether FCUs should be required to 
include a mail ballot with its electronic election procedure 
instructions rather than require a member without the requisite 
electronic device to request a ballot under Option A4. The majority of 
commenters opposed this proposal, with one noting that it would defeat 
the purpose of electronic ballots. NCUA, however, proposes this 
requirement for comment again because it believes that members without 
the equipment or desire to vote electronically should not be subject to 
additional hurdles in attempting to exercise their vote. Also, NCUA 
staff has observed an FCU successfully combine its electronic voting 
instruction and mail ballot on one sheet of paper, providing members 
with the option and convenience of voting electronically or through the 
mail.
    The proposal clarifies that a ``properly designed'' ballot under 
Section 2(d)(5) of Option A4 is one that preserves the secrecy of the 
ballot. The Request sought comments regarding the design of ballots and 
what constitutes a ``properly designed'' ballot under this paragraph, 
when the ballot, identification form and mailing envelope are combined 
in one form. The Request asked whether an explicit secrecy requirement 
should be added to this provision. All nine commenters on this proposal 
supported including a secrecy requirement.
    The proposal retains the specifications for mail ballots under the 
current bylaws. Unless the FCU adopts one ``properly designed'' form, 
the bylaws detail specific requirements for mail ballots, including 
separate envelopes for the ballot and the identification form within 
the mailing requirement. Several commenters characterized these 
requirements as excessively detailed and burdensome. These procedures 
demonstrate one method of ensuring the secrecy of the balloting 
process, and FCUs have alternatives such as the combination form also 
permitted under this option. NCUA, accordingly, does not believe the 
inclusion of these specifications is overly burdensome and proposes to 
retain them to demonstrate one option for preserving secrecy.

Article VI. Board of Directors

    The proposal amends Section 2 to clarify that FCU employees, 
immediate family members of directors or committee members, and a 
combination of both, cannot constitute a majority of directors on an 
FCU's board.
    The proposal amends Section 4 to provide that FCU directors fill 
vacancies on the board of directors, credit committee, and supervisory 
committee ``as soon as possible, but no later than the next regularly 
scheduled board meeting.'' The proposed language replaces the current 
standard that directors fill vacancies ``within a reasonable time.'' 
One commenter stated that the current standard is vague and should be 
removed. As NCUA noted in the preamble to the 1999 FCU Bylaws,

[[Page 40928]]

FCU directors should have ``flexibility to deal with different 
situations and determine what is reasonable under the circumstances'' 
when filling a vacancy. 64 FR 55760, 55762 (Oct. 14, 1999). While NCUA 
continues to recognize that some flexibility is necessary, NCUA 
believes that directors must fill vacancies expeditiously to ensure 
that an FCU's board functions with the proper amount of directors as 
dictated by its bylaws. NCUA solicits comments as to whether the FCU 
Bylaws should include a time frame such as the one proposed so that FCU 
boards act quickly to fill vacancies. NCUA also welcomes comment on 
whether another time frame would be appropriate if included in the 
bylaws.
    The proposal adds to the list of board responsibilities in Section 
6(d) by acknowledging that boards should establish a training policy 
for directors and volunteer officials that covers areas such as ethics, 
fiduciary responsibilities and accounting, as part of the duties 
customarily performed by boards of directors.
    In the Request, NCUA welcomed comments on whether particular 
corporate governance practices or related issues should be added to the 
FCU Bylaws, such as board training or ethics. Several commenters 
offered suggestions in this regard. Two commenters opposed including 
director training requirements in the bylaws. They stated it would make 
it more difficult to attract volunteer board members. One commenter 
noted that the manager should have the necessary training so that the 
manager can properly inform the board of directors. One commenter did 
not oppose including corporate governance practices and related issues 
like board training or ethics in the bylaws but asked that NCUA leave 
the specifics of these policies to FCUs.
    Two commenters did not support including Sarbanes Oxley Act (SOXA) 
corporate governance provisions in the bylaws because SOXA does not 
apply to credit unions. They stated NCUA should adopt any standards it 
wants to impose through rulemaking. Another commenter stated, if NCUA 
is considering SOXA-like provisions for FCUs, it should recognize 
fundamental differences between FCUs and public companies. This 
commenter also stated, while the adoption of director experience 
requirements, training provisions, and independence standards would 
enhance safety and soundness, it is not appropriate to address these 
issues in the bylaws and NCUA should simply identify elements of SOXA 
that FCUs should adopt. Another commenter stated FCUs should address 
good corporate governance practices through policies and procedures 
rather than detail them in bylaws. One commenter stated the largest and 
most complex FCUs should be required to comply with the principles of 
SOXA to the same extent that similarly situated banks must comply.
    After reviewing the comments, the NCUA Board agrees that FCUs 
should establish their own policies and procedures regarding training 
and ethics and that it is inappropriate to include particular 
requirements in the FCU Bylaws. Because it would be difficult to 
fashion provisions suitable for all FCUs in areas such as training, 
NCUA proposes that the bylaws include, within the board's 
responsibilities in Section 6, the adoption of a policy to address 
training for new and incumbent directors and volunteer officials. NCUA 
proposes this amendment because training programs particularly help 
newly elected volunteer directors and committee members become familiar 
with their new positions and help more experienced individuals keep 
their knowledge and skills current. NCUA believes FCUs are currently 
providing various formal and informal training opportunities for their 
officials and notes that its expectation is that boards of directors 
will determine their own training needs in the context of an FCU's 
activities and resources.
    The proposal includes language in Section 7 to remind directors 
that only a quorum of the remaining directors is necessary to fill 
vacant board seats as provided in Section 4.
    The proposal separates the provisions regarding the removal of 
directors and credit committee members from that addressing the removal 
of board officers in the first paragraph of Section 8. One commenter 
suggested that NCUA amend this paragraph because it discusses the 
declaration of a director or committee member's seat as vacant for 
failing to attend meetings or otherwise failing to perform the duties 
of the position. It also permits the board to remove a board officer 
for failure to perform the officer's duties. The commenter recommended 
that NCUA revise this section to include only provisions related to 
directors and amend Article VII and Article VIII to include the 
provisions about board officers and credit committee members, 
respectively. The proposal retains these removal provisions for 
directors, credit committee members and board officers in Section 8 
because Article VI generally sets out the powers of the board of 
directors, particularly the authority to remove and fill vacancies. The 
proposal, however, sets apart the provision regarding board officers to 
make it easier for the reader to locate.

Article VII. Board Officers, Management Officials and Executive 
Committee

    The proposal amends Section 1 to restate a restriction in Article 
6, Section 2 that prevents a management official or assistant 
management official from serving as board chair.
    A commenter asked NCUA to increase the number of days between a 
board's reorganization meeting and the annual meeting from seven to 
thirty days in Section 2 stating that the seven-day limit is onerous 
when there are scheduling conflicts. Many FCUs hold the first board 
meeting of the newly elected board immediately following the annual 
meeting. FCU boards may also conduct meetings by teleconference. NCUA 
believes it is unnecessary to change the seven-day limit in light of 
these options and the necessity for board officers to be elected as 
soon as possible to prevent interruptions in the board's operation. 
NCUA, however, seeks comment to determine whether the seven-day limit 
is a problem for FCUs.
    One commenter suggested that NCUA remove Section 6(c), the 
paragraph requiring the financial officer to post a copy of the current 
financial statement monthly in a conspicuous place in the FCU. NCUA is 
not inclined to remove the paragraph. The agency, however, solicits 
comments regarding the suggestion, particularly on whether FCU members 
benefit from public access to this information and alternatives to the 
monthly statements.
    The proposal revises Section 10 regarding the appointment of the 
executive committee and delegations to it. One commenter stated that 
the first sentence in Section 10 should refer only to the functions 
authorized under the FCU Act because NCUA's regulations do not 
authorize any functions for the executive committee. Another commenter 
asked NCUA to delineate the authorities a board may delegate to an 
executive committee. NCUA has incorporated both suggestions in the 
proposal by clarifying that the FCU Act permits FCU boards to appoint 
executive committees and requiring that boards be specific in their 
delegations to executive committees. The proposal also rearranges the 
sentence listing the positions the board may authorize to approve 
membership applications so that it is easier to read.

Article IX. Supervisory Committee

    The proposal amends Section 1 to prohibit both the compensated 
officer

[[Page 40929]]

and the financial officer from serving on the supervisory committee. 
The Request noted that the FCU Act precludes the director who is the 
``compensated officer'' from being the director who can also be on the 
supervisory committee. 12 U.S.C. 1761(b). The Request proposed 
replacing ``financial officer'' with ``compensated officer'' so that 
the bylaw regarding this issue is consistent with the FCU Act. Five 
commenters supported the change. Three commenters raised concerns about 
the change because they believe the financial officer, whether 
compensated or not, should not serve on the supervisory committee. They 
stated that the financial officer must be excluded from the supervisory 
committee to prevent the person in charge of the financial records from 
auditing those records. One of these commenters suggested excluding 
both the financial officer and any compensated director if necessary. 
NCUA agrees that the bylaws should prohibit both the compensated 
officer and the financial officer from serving on the supervisory 
committee as dictated by either the Act or principles of sound internal 
controls.
    One commenter suggested removing the word ``all'' from Section 4 
because it currently requires the supervisory committee to verify the 
accounts of ``all members'' with the financial officer even though the 
supervisory committee rule permits FCUs to use a sampling method to 
verify accounts. 12 CFR 715.8. NCUA agrees that the rule permits 
sampling methods for account verification and proposes to remove the 
word ``all'' as recommended.

Article XI. Loans and Lines of Credit to Members

    The proposal includes an instruction to FCUs that gives them the 
option to include business loans in Section 1 for consistency with a 
similar instruction in Article 1, Section 2.

Article XIII. Deposit of Funds

    The proposal deletes Article XIII but reserves it to retain the 
current numbering of the bylaws. A commenter suggested that NCUA remove 
the article's provisions requiring FCUs to set deadlines for depositing 
funds into a qualified depository. NCUA believes this article is no 
longer necessary as it addresses a basic issue of safety and soundness. 
FCUs should be able to deposit funds properly without guidance in the 
FCU bylaws.

Article XIV. Expulsion and Withdrawal

    The proposal expands the provision in Section 1 by including the 
two methods to expel a member under the FCU Act. 12 U.S.C. 1764(a),(b). 
NCUA believes the additional language about expulsion gives members 
notice as to the methods allowed by law.
    NCUA notes that one commenter asked that the bylaws permit a board 
to expel a member without a special meeting of the members for 
extraordinary circumstances, such as when a member poses a threat to 
the well-being or safety of FCU employees. The commenter noted that an 
FCU has a duty to protect its employees and should not be subject to a 
delay if the circumstances require immediate expulsion. Under the FCU 
Act, a member may be expelled only by members at a special meeting or 
under board policy for nonparticipation. 12 U.S.C. 1764. As such, a 
legislative change to the FCU Act must be adopted to allow additional 
expulsion procedures.

Article XV. Minors

    The proposal amends this article to note that state law controls 
transactions between FCUs and minors. One commenter stated that this 
article, which allows shares to be issued in the name of a minor, is 
unnecessary as the FCU Act already permits this. Another commenter 
stated that NCUA should provide guidance to FCUs as to what type of 
shares may be issued in the name of a minor because in many states a 
person must be eighteen to enter into a legally binding contract. While 
the article does restate a provision in 12 U.S.C. 1765, NCUA believes 
the bylaws should include certain provisions in the FCU Act related to 
member rights, including those pertaining to minors. The proposal, 
therefore, retains the current language and includes a sentence with 
regard to the applicability of state law in these transactions.

Article XVI. General

    One commenter asked that NCUA revise Section 3 so that the FCU's 
board or supervisory committee, or NCUA, can initiate the removal of 
directors and committee members, but not the membership who have called 
a special meeting for this purpose. NCUA disagrees with this suggestion 
and notes that the Model Business Corporation Act permits shareholders 
to call a special meeting to remove a director. MODEL BUS. CORP. ACT 
Sec. Sec.  7.02(a)(2), 8.08(d) (2003). Furthermore, members have the 
power to elect directors under the FCU Act. 12 U.S.C. 1761(a). Inherent 
in their authority to elect is the power to remove to directors, so 
members must be able to initiate the removal process.
    The proposal amends Section 6, as suggested by two commenters, to 
limit director and committee member access to the FCU's books and 
records on the condition that they have a proper purpose. This change 
is consistent with longstanding NCUA policy.
    One commenter suggested that NCUA remove Section 7, which requires 
each member to keep the FCU informed of his or her address but the 
proposal retains Section 7. NCUA believes this section should remain 
because the FCU Bylaws are a contract between the FCU and its members, 
and members should be aware of their responsibility to provide current 
contact information to the FCU.

Article XVIII. Definitions

    The proposed FCU Bylaws make various adjustments to the definition 
section. The proposal deletes the definitions of ``paid in and 
unimpaired capital'' and ``surplus'' in Section 1 because the NCUA 
Board defined these phrases in NCUA's Definitions rule. 12 CFR 
700.2(f). Section 1, however, retains the remaining definitions for 
ease of reference and moves the definition of ``immediate family 
member'' from Section 2 to Section 1. The proposal also rearranges the 
definitions in Section 1 in alphabetical order consistent with plain 
English principles.
    The proposal removes Section 2 from Article XVIII because NCUA's 
Chartering and Field of Membership Manual contains all the field of 
membership-related definitions under Section 2. NCUA Interpretive 
Ruling and Policy Statement 03-1. If an FCU chooses to adopt a more 
restrictive definition of ``immediate family member'' or ``household'' 
for purposes of determining eligibility in the FCU's field of 
membership, the FCU may insert its own more restrictive definition in 
Section 1.

D. Request for Comments

    NCUA seeks comment on the proposed changes to the FCU Bylaws, in 
addition to any other suggestions to improve or clarify the FCU Bylaws.
    So that commenters may easily find the proposed changes in this 
notice, NCUA has used bold typeface to indicate article and section 
titles and also has placed the word ``(NEW)'' in bold to identify 
provisions with substantive amended language. Proposed deletions appear 
in brackets. For purposes of publishing this notice in the Federal 
Register, NCUA has identified credit union instructions using the word 
``Instruction.'' Further, nonsubstantive plain English changes are not 
indicated in this notice. A copy of the proposal that identifies each

[[Page 40930]]

change and deletion is available on NCUA's Web site or commenters may 
contact either of the individuals listed in the For Further Information 
Contact paragraph above.

    By the National Credit Union Administration Board on June 30, 
2005.
Mary F. Rupp,
Secretary of the Board.

The Federal Credit Union Bylaws

(NEW) Introduction

    Effective date. After consideration of public comment, the National 
Credit Union Administration (NCUA) Board adopted these bylaws on ----
--. Unless a federal credit union has adopted bylaws before ------, it 
must adopt these revised bylaws.
    Adoption of all or part of these bylaws. Although federal credit 
unions may retain any previously approved version of the bylaws, the 
NCUA Board encourages federal credit unions to adopt the revised bylaws 
because it believes they provide greater clarity and flexibility for 
credit unions and their officials and members. Federal credit unions 
may also adopt portions of the revised bylaws and retain the remainder 
of previously approved bylaws, but the NCUA Board cautions federal 
credit unions to be extremely careful. Federal credit unions must be 
careful because they run the risk of having inconsistent or conflicting 
provisions because of the various options the revised bylaws provide as 
well as other revisions in the text.
    Bylaw amendments. Federal credit unions continue to have the 
flexibility to request a bylaw amendment if the need arises. NCUA must 
approve any bylaw amendments; federal credit unions may no longer adopt 
amendments from the ``Standard Bylaw Amendments'' booklet because the 
1999 revisions to the bylaws included sufficient flexibility to make 
the separate list of standard bylaw amendments superfluous. Thus, NCUA 
no longer differentiates between ``standard'' and ``nonstandard'' bylaw 
amendments.
    The procedure for approval of bylaw amendments is as follows:
     The federal credit union wishing to adopt a bylaw 
amendment must file a request with its regional director.
     The request must include the section of the bylaws to be 
amended; the reason for or purpose of the amendment, including an 
explanation of why the amendment is desirable and what it will 
accomplish for the credit union; and the specific, proposed wording of 
the amendment.
     After review by the regional director and consultation 
within the agency, the regional director will advise the credit union 
if a proposed amendment is approved.
    Federal credit unions considering an amendment may find it useful 
to review the section of the agency website on bylaws that has opinions 
issued by the Office of General Counsel about particular bylaw 
amendments. Even if an identical amendment has been previously 
approved, the credit union must submit the proposed amendment to NCUA 
for review under the procedure listed above.
    The nature of the bylaws. The Federal Credit Union Act requires the 
NCUA Board to prepare bylaws for federal credit unions. 12 U.S.C. 1758. 
The bylaws address a broad range of matters concerning a credit union's 
organization and governance, the relationship of the credit union to 
its members, and the procedures and rules a credit union follows. The 
bylaws supplement the broad provisions of: A federal credit union's 
charter, which establishes the existence of a federal credit union; the 
Federal Credit Union Act, which establishes the powers of federal 
credit unions; and NCUA regulations, which implement the Federal Credit 
Union Act. As a legal matter, a federal credit union's bylaws must 
conform to and cannot be inconsistent with any provision of its 
charter, the Federal Credit Union Act, NCUA regulations or other laws 
or regulations applicable to its operations.
    NCUA's long standing view is the bylaws, among other effects, 
function as a contract between a credit union and its members. While 
NCUA provides guidance and interpretations of the bylaws, generally 
state corporate law, to the extent it is consistent with the Federal 
Credit Union Act and NCUA regulations, determines disputes regarding 
the enforcement of bylaw provisions. Therefore, NCUA generally does not 
become involved in resolving internal governance disputes in federal 
credit unions involving bylaw disputes unless a matter presents a 
safety and soundness concern.

BYLAWS

Federal Credit Union, Charter No. --------

(A corporation chartered under the laws of the United States)

Article I. Name--Purposes

    Section 1. Name. The name of this credit union is as stated in 
Section 1 of the charter (approved organization certificate) of this 
credit union.
    Section 2. Purposes. The purpose of this credit union is to promote 
thrift among its members by affording them an opportunity to accumulate 
their savings and to create for them a source of credit for provident 
or productive purposes.
    Instruction: The credit union may add business as one of its 
purposes by placing a comma after ``provident'' and inserting 
``business.''

Article II. Qualifications for Membership

    Section 1. Field of membership. The field of membership of this 
credit union is limited to that stated in Section 5 of its charter.
    Section 2. Membership application procedures. Applications for 
membership from persons eligible for membership under Section 5 of the 
charter must be signed by the applicant on forms approved by the board. 
The applicant is admitted to membership after approval of an 
application by a majority of the directors, a majority of the members 
of a duly authorized executive committee, or by a membership officer, 
and after subscription to at least one share of this credit union and 
the payment of the initial installment, and the payment of a uniform 
entrance fee if required by the board. If a person whose membership 
application is denied makes a written request, the credit union must 
explain the reasons for the denial in writing.
    Section 3. Maintenance of membership share required. A member who 
withdraws all shareholdings or fails to comply with the time 
requirements for restoring his or her account balance to par value in 
Article III, Section 3, ceases to be a member. By resolution, the board 
may require persons readmitted to membership to pay another entrance 
fee.
    Section 4. (NEW) Continuation of membership. Once a member becomes 
a member that person may remain a member until the person or 
organization chooses to withdraw or is expelled in accordance with the 
Act and Article XIV of these bylaws. A member who is disruptive to 
credit union operations may be subject to limitations on services and 
access to credit union facilities.
    Instruction: A credit union that wishes to restrict services to 
members no longer within the field of membership should specify the 
restrictions in this section.

(NEW) Staff commentary on qualifications for membership:

    Entrance fee--FCUs may not vary the entrance fee among different 
classes of members because the Act requires a

[[Page 40931]]

uniform fee. FCUs may, however, eliminate the entrance fee for all 
applicants.

Article III. Shares of Members

    Section 1. Par value. The par value of each share will be $------. 
Subscriptions to shares are payable at the time of subscription, or in 
installments of at least $------ per month.
    Section 2. Cap on shares held by one person. The board may 
establish, by resolution, the maximum amount of shares that any one 
member may hold.
    Section 3. Time periods for payment and maintenance of membership 
share. A member who fails to complete payment of one share within ----
-- of admission to membership, or within ------ from the increase in 
the par value of shares, or a member who reduces the share balance 
below the par value of one share and does not increase the balance to 
at least the par value of one share within ------ of the reduction may 
be terminated from membership.
    Section 4. Transferability. Shares may only be transferred from one 
member to another by an instrument in a form as the board may 
prescribe. Shares that accrue credits for unpaid dividends retain those 
credits when transferred.
    Section 5. Withdrawals. Money paid in on shares or installments of 
shares may be withdrawn as provided in these bylaws or regulation on 
any day when payment on shares may be made provided, however, that
    (a) The board has the right, at any time, to require members to 
give up to 60 days written notice of intention to withdraw the whole or 
any part of the amounts paid in by them.
    (b) (NEW) (RESERVED) [The board may determine that, if shares are 
paid in under an accumulated payroll deduction plan as prescribed in 
the Accounting Manual for Federal Credit Unions, they may not be 
withdrawn until credited to members' accounts.]
    (c) (NEW) No member may withdraw any shareholdings below the amount 
of the member's primary or contingent liability to the credit union if 
the member is delinquent as a borrower, or if borrowers for whom the 
member is comaker, endorser, or guarantor are delinquent, without the 
written approval of the credit committee or loan officer. Coverage of 
overdrafts under an overdraft protection policy does not constitute 
delinquency for purposes of this paragraph. Shares issued in an 
irrevocable trust as provided in Section 6 of this article are not 
subject to withdrawal restrictions except as stated in the trust 
agreement.
    (d) (NEW) The share account of a deceased member (other than one 
held in joint tenancy with another member) may be continued until the 
close of the dividend period in which the administration of the 
deceased's estate is completed [, but not to exceed a period of 4 
years].
    (e) The board will have the right, at any time, to impose a fee for 
excessive share withdrawals from regular share accounts. The number of 
withdrawals not subject to a fee and the amount of the fee will be 
established by board resolution and will be subject to regulations 
applicable to the advertising and disclosure of terms and conditions on 
member accounts.
    Section 6. Trusts. Shares may be issued in a revocable or 
irrevocable trust, subject to the following:
    When shares are issued in a revocable trust, the settlor must be a 
member of this credit union in his or her own right. When shares are 
issued in an irrevocable trust, either the settlor or the beneficiary 
must be a member of this credit union. The name of the beneficiary must 
be stated in both a revocable and irrevocable trust. For purposes of 
this section, shares issued pursuant to a pension plan authorized by 
the rules and regulations will be treated as an irrevocable trust 
unless otherwise indicated in the rules and regulations.
    Section 7. (NEW) Joint accounts and membership requirements.
    Instruction: Select one option and check the box corresponding to 
that option.

----Option A--Separate account not required to establish membership

    Owners of a joint account may both be members of the credit union 
without opening separate accounts. For joint membership, both owners 
are required to fulfill all of the membership requirements including 
each member purchasing and maintaining at least one share in the 
account.

----Option B--Separate account required to establish membership

    Each member must purchase and maintain at least one share in a 
share account that names the member as the sole or primary owner. Being 
named as a joint owner of a joint account is insufficient to establish 
membership.

(NEW) Staff commentary on shares:

    Installments--The Act requires credit unions to permit membership 
shares to be paid in installments.
    Par value--FCUs may establish differing par values for different 
classes of members or types of accounts, provided this action does not 
violate any federal, state or local antidiscrimination laws. For 
example, an FCU may want to establish a higher par value for recent 
credit union members, without requiring long-time members to bring 
their accounts up to the new par value. A differing par value may also 
be permissible for different types of accounts, such as requiring a 
higher par value for a member with only a share draft account. If a 
credit union adopts differing par values, all of the possible par 
values should be stated in Section 1.
    Reduction in share balance below par value--When a member's account 
balance falls below the par value, Section 3 requires FCUs to allow 
members a minimum time period to restore their account balance to the 
par value before membership is terminated. FCUs may not delete this 
requirement or delete references to this requirement in Article II, 
Section 3.

Article IV. Meetings of Members

    Section 1. (NEW) Annual meeting. The annual meeting of the members 
must be held [within the period authorized in the Act,] ---------- in 
the county in which any office of the credit union is located or within 
a radius of 100 miles of an office, at the time and place as the board 
determines and announces in the notice of the annual meeting.
    Instruction: Insert time for annual meeting, for example, ``during 
the month of March/on the third Saturday of April/no later than March 
31'' in blank.
    Section 2. Notice of meetings required. At least 30 but no more 
than 75 days before the date of any annual meeting or at least 7 days 
before the date of any special meeting of the members, the secretary 
must give written notice to each member by in person delivery, or by 
mailing the written notice to each member at the address that appears 
on the records of this credit union. Notice of the annual meeting may 
be given by posting the notice in a conspicuous place in the office of 
this credit union where it may be read by the members, at least 30 days 
before the meeting, if the annual meeting is to be held during the same 
month as that of the previous annual meeting and if this credit union 
maintains an office that is readily accessible to members where regular 
business hours are maintained. Any meeting of the members, whether 
annual or special, may be held without prior notice, at any place or 
time, if all the members entitled to vote, who are not present at the 
meeting, waive notice in writing, before, during, or after the meeting.

[[Page 40932]]

    Notice of any special meeting must state the purpose for which it 
is to be held, and no business other than that related to this purpose 
may be transacted at the meeting.
    Section 3. (NEW) Special meetings. Special meetings of the members 
may be called by the chair or the board of directors upon a majority 
vote, or by the supervisory committee as provided in these bylaws. A 
special meeting must be called by the chair within 30 days of the 
receipt of a written request of 25 members or 5% of the members as of 
the date of the request, whichever number is larger. However, a request 
of no more than [500] 750 members may be required to call a special 
meeting.
    The notice of a special meeting must be given as provided in 
Section 2 of this article. Special meetings may be held at any location 
permitted for the annual meeting.
    Section 4. (NEW) Items of business for annual meeting. The 
suggested order of business at annual meetings of members is--
    (a) Ascertainment that a quorum is present.
    (b) Reading and approval or correction of the minutes of the last 
meeting.
    (c) Report of directors, if there is one. For credit unions 
participating in the Community Development Revolving Loan Program, the 
directors must report the credit union's progress on providing needed 
community services, unless a written report on this subject is sent to 
members, as required by NCUA Regulations.
    (d) Report of the financial officer or the chief management 
official.
    (e) Report of the credit committee, if there is one.
    (f) Report of the supervisory committee, as required by Section 115 
of the Act.
    (g) Unfinished business.
    (h) New business other than elections.
    (i) Elections, as required by Section 111 of the Act.
    (j) Adjournment.
    To the extent consistent with these bylaws, all meetings of the 
members will be conducted according to --------. The order of business 
for the annual meeting may vary from the suggested order, provided it 
includes all required items and complies with the rules of procedure 
adopted by the credit union.
    Instruction: The credit union must fill in the blank with one of 
the following authorities, noting the edition to be used: Democratic 
Rules of Order, The Modern Rules of Order, Robert's Rules of Order, or 
Sturgis' Standard Code of Parliamentary Procedure.
    Section 5. Quorum. Except as otherwise provided, 15 members 
constitute a quorum at annual or special meetings. If no quorum is 
present, an adjournment may be taken to a date at least 7 but not more 
than 14 days thereafter. The members present at any adjourned meeting 
will constitute a quorum, regardless of the number of members present. 
The same notice must be given for the adjourned meeting as is 
prescribed in Section 2 of this article for the original meeting, 
except that the notice must be given at least 5 days before the date of 
the meeting as fixed in the adjournment.

Article V. Elections

    Instruction: The credit union must select one of the four voting 
options. This may be done by printing the credit union's bylaws with 
the option selected or retaining this copy and checking the box of the 
option selected. All options continue with Section 3 of this article.
----Option A1--In-person elections; nominating committee and 
nominations from floor

    Section 1. Nomination procedures. At least 30 days before each 
annual meeting, the chair will appoint a nominating committee of three 
or more members. It is the duty of the nominating committee to nominate 
at least one member for each vacancy, including any unexpired term 
vacancy, for which elections are being held, and to determine that the 
members nominated are agreeable to the placing of their names in 
nomination and will accept office if elected.
    Section 2. Election procedures. After the nominations of the 
nominating committee have been placed before the members, the chair 
calls for nominations from the floor. When nominations are closed, the 
chair appoints the tellers, ballots are distributed, the vote is taken 
and tallied by the tellers, and the results announced. All elections 
are determined by plurality vote and will be by ballot except where 
there is only one nominee for the office.

----Option A2--In-person elections; nominating committee and 
nominations by petition

    Section 1. Nomination procedures. At least 120 days before each 
annual meeting, the chair will appoint a nominating committee of three 
or more members. It is the duty of the nominating committee to nominate 
at least one member for each vacancy, including any unexpired term 
vacancy, for which elections are being held, and to determine that the 
members nominated are agreeable to the placing of their names in 
nomination and will accept office if elected.
    The nominating committee files its nominations with the secretary 
of the credit union at least 90 days before the annual meeting, and the 
secretary notifies in writing all members eligible to vote at least 75 
days before the annual meeting that nominations for vacancies may also 
be made by petition signed by 1% of the members with a minimum of 20 
and a maximum of 500.
    (NEW) The written notice must indicate that the election will not 
be conducted by ballot and there will be no nominations from the floor 
when the number of nominees equals the number of positions to be 
filled. A brief statement of qualifications and biographical data in a 
form approved by the board of directors will be included for each 
nominee submitted by the nominating committee with the written notice 
to all eligible members. Each nominee by petition must submit a similar 
statement of qualifications and biographical data with the petition. 
The written notice must state the closing date for receiving 
nominations by petition. In all cases, the period for receiving 
nominations by petition must extend at least 30 days from the date that 
the petition requirement and the list of nominating committee's 
nominees are mailed to all members. To be effective, nominations by 
petition must be accompanied by a signed certificate from the nominee 
or nominees stating that they are agreeable to nomination and will 
serve if elected to office. Nominations by petition must be filed with 
the secretary of the credit union at least 40 days before the annual 
meeting and the secretary will ensure that nominations by petition, 
along with those of the nominating committee, are posted in a 
conspicuous place in each credit union office at least 35 days before 
the annual meeting.
    Section 2. Election procedures. All persons nominated by either the 
nominating committee or by petition must be placed before the members. 
When nominations are closed, the chair appoints the tellers, ballots 
are distributed, the vote is taken and tallied by the tellers, and the 
results announced. All elections are determined by plurality vote and 
will be by ballot except where there is only one nominee for each 
position to be filled.
    (NEW) If sufficient nominations are made by the nominating 
committee or by petition to provide at least as many nominees as 
positions to be filled, nominations cannot be made from the floor. 
[Nominations cannot be made from the floor unless insufficient 
nominations have been made by the

[[Page 40933]]

nominating committee or by petition to provide for one nominee for each 
position to be filled or circumstances prevent the candidacy of the one 
nominee for a position to be filled. Only those positions without a 
nominee are subject to nominations from the floor.] In the event 
nominations from the floor are permitted and result in more nominees 
than positions to be filled, when nominations have been closed, the 
chair appoints the tellers, ballots are distributed, the vote is taken 
and tallied by the tellers, and the results announced. When the number 
of nominees equals the number of [only one member is nominated for 
each] positions to be filled, the chair may take a voice vote or 
declare each nominee elected by general consent or acclamation at the 
annual meeting.

----Option A3--Election by ballot boxes or voting machine; nominating 
committee and nomination by petition

    Section 1. Nomination procedures. At least 120 days before each 
annual meeting, the chair will appoint a nominating committee of three 
or more members. It is the duty of the nominating committee to nominate 
at least one member for each vacancy, including any unexpired term 
vacancy, for which elections are being held, and to determine that the 
members nominated are agreeable to the placing of their names in 
nomination and will accept office if elected.
    The nominating committee files its nominations with the secretary 
of the credit union at least 90 days before the annual meeting, and the 
secretary notifies in writing all members eligible to vote at least 75 
days before the annual meeting that nominations for vacancies may also 
be made by petition signed by 1% of the members with a minimum of 20 
and a maximum of 500.
    (NEW) The written notice must indicate that the election will not 
be conducted by ballot and there will be no nominations from the floor 
when the [there is only one] number of nominees equals the number of 
[for each] positions to be filled. A brief statement of qualifications 
and biographical data in a form approved by the board of directors will 
be included for each nominee submitted by the nominating committee with 
the written notice to all eligible members. Each nominee by petition 
must submit a similar statement of qualifications and biographical data 
with the petition. The written notice must state the closing date for 
receiving nominations by petition. In all cases, the period for 
receiving nominations by petition must extend at least 30 days from the 
date of the petition requirement and the list of nominating committee's 
nominees are mailed to all members. To be effective, nominations by 
petition must be accompanied by a signed certificate from the nominee 
or nominees stating that they are agreeable to nomination and will 
serve if elected to office. Nominations by petition must be filed with 
the secretary of the credit union at least 40 days before the annual 
meeting and the secretary will ensure that nominations by petition 
along with those of the nominating committee are posted in a 
conspicuous place in each credit union office at least 35 days before 
the annual meeting.
    Section 2. Election procedures. All elections are determined by 
plurality vote. The election will be conducted by ballot boxes or 
voting machines, subject to the following conditions:
    (a) The board of directors will appoint the election tellers;
    (b) If sufficient nominations are made by the nominating committee 
or by petition to provide more nominees than positions to be filled, 
the secretary, at least 10 days before the annual meeting, will cause 
ballot boxes and printed ballots, or voting machines, to be placed in 
conspicuous locations, as determined by the board of directors with the 
names of the candidates posted near the boxes or voting machines. The 
name of each candidate will be followed by a brief statement of 
qualifications and biographical data in a form approved by the board of 
directors;
    (c) After the members have been given 24 hours to vote at 
conspicuous locations as determined by the board of directors, the 
ballot boxes or voting machines will be opened, the vote tallied by the 
tellers, the tallies placed in the ballot boxes, and the ballot boxes 
resealed. The tellers are responsible at all times for the ballot boxes 
or voting machines and the integrity of the vote. A record must be kept 
of all persons voting and the tellers must assure themselves that each 
person voting is entitled to vote; and
    (d) The tellers will take the ballot boxes to the annual meeting. 
At the annual meeting, printed ballots will be distributed to those in 
attendance who have not voted and their votes will be deposited in the 
ballot boxes placed by the tellers, before the beginning of the 
meeting, in conspicuous locations with the names of the candidates 
posted near them. After those members have been given an opportunity to 
vote at the annual meeting, balloting will be closed, the ballot boxes 
opened, the vote tallied by the tellers and added to the previous 
count, and the chair will announce the result of the vote.

----Option A4--Election by electronic device (including but not limited 
to telephone and electronic mail) or mail ballot; nominating committee 
and nominations by petition

    Section 1. Nomination procedures. At least 120 days before each 
annual meeting, the chair will appoint a nominating committee of three 
or more members. It is the duty of the nominating committee to nominate 
at least one member for each vacancy, including any unexpired term 
vacancy, for which elections are being held, and to determine that the 
members nominated are agreeable to the placing of their names in 
nomination and will accept office if elected.
    (NEW) The nominating committee files its nominations with the 
secretary of the credit union at least 90 days before the annual 
meeting, and the secretary notifies in writing all members eligible to 
vote at least 75 days before the annual meeting that nominations for 
vacancies may also be made by petition signed by 1% of the members with 
a minimum of 20 and a maximum of 500. The secretary may use electronic 
mail to notify members who have opted to receive notices or statements 
electronically.
    (NEW) The [written] notice must indicate that the election will not 
be conducted by ballot and there will be no nominations from the floor 
when the [there is only one] number of nominees equals the number of 
[for each] positions to be filled. A brief statement of qualifications 
and biographical data in a form approved by the board of directors will 
be included for each nominee submitted by the nominating committee with 
the [written] notice to all eligible members. Each nominee by petition 
must submit a similar statement of qualifications and biographical data 
with the petition. The [written] notice must state the closing date for 
receiving nominations by petition. In all cases, the period for 
receiving nominations by petition must extend at least 30 days from the 
date of the petition requirement and the list of nominating committee's 
nominees are mailed to all members. To be effective, nominations by 
petition must be accompanied by a signed certificate from the nominee 
or nominees stating that they are agreeable to nomination and will 
serve if elected to office. Nominations by petition must be filed with 
the secretary of the credit union at least 40 days before the annual 
meeting and the secretary will ensure that nominations by petition, 
along with those of the nominating committee, are posted in a 
conspicuous place in each

[[Page 40934]]

credit union office at least 35 days before the annual meeting.
    Section 2. Election procedures. All elections are determined by 
plurality vote. All elections will be by electronic device or mail 
ballot, subject to the following conditions:
    (a) The board of directors will appoint the election tellers;
    (b) (NEW) If sufficient nominations are made by the nominating 
committee or by petition to provide more [than one] nominees than [for 
any] positions to be filled, the secretary, at least 30 days before the 
annual meeting, will cause either a printed ballot or notice of ballot 
to be mailed to all members eligible to vote. Electronic mail may be 
used to provide the notice of ballot to members who have opted to 
receive notices or statements electronically;
    (c) If the credit union is conducting its elections electronically, 
the secretary will cause the following materials to be mailed to each 
eligible voter and the following procedures will be followed:
    (1) One notice of balloting stating the names of the candidates for 
the board of directors and the candidates for other separately 
identified offices or committees. The name of each candidate must be 
followed by a brief statement of qualifications and biographical data 
in a form approved by the board of directors.
    (2) (NEW) One mail ballot that conforms to Section 2(d) of this 
article and one instruction sheet stating specific instructions for the 
electronic election procedure, including how to access and use the 
system, and the period of time in which votes will be taken. The 
instruction will state that members without the requisite electronic 
device necessary to vote on the system may vote by submitting the 
enclosed mail ballot [upon written or telephone request] and specify 
the date the [request] mail ballot must be received by the credit 
union.
    (3) It is the duty of the tellers of election to verify, or cause 
to be verified the name of the voter and the credit union account 
number as they are registered in the electronic balloting system. It is 
the duty of the teller to test the integrity of the balloting system at 
regular intervals during the election period.
    (4) Ballots must be received no later than midnight, 5 calendar 
days before the annual meeting.
    (5) [Voting will be closed at the midnight deadline specified in 
subsection (4) hereof and the] The vote will be tallied by the tellers. 
The result must be verified at the annual meeting and the chair will 
make the result of the vote public at the annual meeting.
    (6) (NEW) In the event of malfunction of the electronic balloting 
system, the board of directors may in its discretion order elections be 
held by mail ballot only. The mail ballots must conform to Section 2(d) 
of this article and must be mailed once more to all eligible members 30 
days before the annual meeting. The board may make reasonable 
adjustments to the voting time frames above, or postpone the annual 
meeting when necessary, to complete the elections before the annual 
meeting.
    (d) If the credit union is conducting its election by mail ballot, 
the secretary will cause the following materials to be mailed to each 
member and the following procedures will be followed:
    (1) (NEW) One ballot, clearly identified as the ballot on which the 
names of the candidates for the board of directors and the candidates 
for other separately identified offices or committees are printed in 
random order [as determined by the draw of lots]. The name of each 
candidate will be followed by a brief statement of qualifications and 
biographical data in a form approved by the board of directors;
    (2) One ballot envelope clearly marked with instructions that the 
completed ballot must be placed in that envelope and sealed;
    (3) One identification form to be completed so as to include the 
name, address, signature and credit union account number of the voter;
    (4) One mailing envelope in which the voter, following instructions 
provided with the mailing envelope, must insert the sealed ballot 
envelope and the identification form, and which must have postage 
prepaid and be preaddressed for return to the tellers;
    (5) (NEW) When properly designed with features that preserve the 
secrecy of the ballot, one form can be printed that represents a 
combined ballot and identification form, and postage prepaid and 
preaddressed return envelope;
    (6) It is the duty of the tellers to verify, or cause to be 
verified, the name and credit union account number of the voter as 
appearing on the identification form; to place the verified 
identification form and the sealed ballot envelope in a place of 
safekeeping pending the count of the vote; in the case of a 
questionable or challenged identification form, to retain the 
identification form and sealed ballot envelope together until the 
verification or challenge has been resolved;
    (7) Ballots mailed to the tellers must be received by the tellers 
no later than midnight 5 days before the date of the annual meeting;
    (8) [Voting will be closed at the midnight deadline specified in 
subsection (7) hereof and the] The vote will be tallied by the tellers. 
The result will be verified at the annual meeting and the chair will 
make the result of the vote public at the annual meeting.

All options continue here.

    Section 3. Order of nominations. Nominations may be in the 
following order:
    (a) Nominations for directors.
    (b) Nominations for credit committee members, if applicable. 
Elections may be by separate ballots following the same order as the 
above nominations or, if preferred, may be by one ballot for all 
offices.
    Section 4. (NEW) Proxy and agent voting. Members cannot vote by 
proxy. A member other than a natural person may vote through an agent 
designated in writing for the purpose. [A trustee, or other person 
acting in a representative capacity, is not, as such, entitled to 
vote.]
    Section 5. One vote per member. Irrespective of the number of 
shares, no member has more than one vote.
    Section 6. Submission of information regarding credit union 
officials to NCUA. The names and addresses of members of the board, 
board officers, executive committee, and members of the credit 
committee, if applicable, and supervisory committees must be forwarded 
to the Administration in accordance with the Act and regulations in the 
manner as may be required by the Administration.
    Section 7. (NEW) Minimum age requirement. [The board may establish 
by resolution a minimum age, not greater than 18 years of age, as a 
qualification for eligibility to vote at meetings of the members, or to 
hold elective or appointive office, or both.] Members must be at least 
---- years of age by the date of the meeting (or for appointed offices, 
the date of appointment) in order to vote at meetings of the members, 
hold elective or appointive office, sign nominating petitions, or sign 
petitions requesting special meetings.
    Instruction: The credit union may select the absentee ballot 
provision in conjunction with the voting procedure it has selected. 
This may be done by printing the credit union's bylaws with this 
provision or by retaining this copy and checking the box.
    Section 8. Absentee ballots. The board of directors may authorize 
the use of absentee ballots in conjunction with the other procedures 
authorized in this article, subject to the following conditions:

[[Page 40935]]

    (a) The board of directors will appoint the election tellers;
    (b) If sufficient nominations are made by the nominating committee 
or by petition to provide more than one nominee for any position to be 
filled, the secretary, at least 30 days before the annual meeting, will 
cause printed ballots to be mailed to all members of the credit union 
who are eligible to vote and who have submitted a written request for 
an absentee ballot;
    (c) The secretary will cause the following materials to be mailed 
to each [such] eligible voter who has submitted a written request for 
an absentee ballot:
    (1) (NEW) One ballot, clearly identified as the ballot on which the 
names of the candidates for the board of directors and the candidates 
for other separately identified offices or committees are printed in 
random order [as determined by the draw of the lots]. The name of each 
candidate will be followed by a brief statement of qualifications and 
biographical data in a form approved by the board of directors;
    (2) One ballot envelope clearly marked with instructions that the 
completed ballot must be placed in that envelope and sealed;
    (3) One identification form to be completed so as to include the 
name, address, signature and credit union account number of the voter;
    (4) One mailing envelope in which the voter, pursuant to 
instructions provided with the envelope, must insert the sealed ballot 
envelope and the identification form, and which must have postage 
prepaid and be preaddressed for return to the tellers;
    (5) (NEW) When properly designed with features that preserve the 
secrecy of the ballot, one form can be printed that represents a 
combined ballot and identification form, and postage prepaid and 
preaddressed return envelope;
    (d) It is the duty of the election tellers to verify, or cause to 
be verified, the name and credit union account number of the voter as 
appearing on the identification form; to place the verified 
identification and the sealed ballot envelope in a place of safekeeping 
pending the count of the vote; in the case of a questionable or 
challenged identification form, to retain the identification form and 
the sealed ballot envelope together until the verification or challenge 
has been resolved; and in the event that more than one voting procedure 
is used, to verify that no eligible voter has voted more than one time;
    (e) Ballots mailed to the tellers [pursuant to subsection (b) 
hereof,] must be received by the tellers no later than midnight 5 days 
before the date of the annual meeting; and
    (f) [After the expiration of the period of time specified in the 
preceding subsection (e), the voting by absentee ballot will be closed 
and] Absentee ballots will be deposited in the ballot boxes to be taken 
to the annual meeting or included in a precount in accordance with 
procedures specified in Article V, Section 2.

(NEW) Staff commentary on the election process:

    Eligibility requirements: The Act and the FCU Bylaws contain the 
only eligibility requirements for membership on an FCU's board of 
directors, which are as follows:
    (a) The individual must be a member of the FCU before distribution 
of ballots;
    (b) The individual cannot have been convicted of a crime involving 
dishonesty or breach of trust unless the NCUA Board has waived the 
prohibition for the conviction; and
    (c) The individual meets the minimum age requirement established 
under Article V, Section 7 of the FCU Bylaws.
    Anyone meeting the three eligibility requirements may run for a 
seat on the board of directors if properly nominated. It is the 
nominating committee's duty to ascertain that all nominated candidates, 
including those nominated by petition, meet the eligibility 
requirements.
    Nomination criteria for nominating committee: The FCU Act and the 
FCU Bylaws do not prohibit a board of directors from establishing 
reasonable criteria, in addition to the eligibility requirements, for a 
nominating committee to follow in making its nominations, such as 
financial experience, years of membership, or conflict of interest 
provisions. The board's nomination criteria, however, applies only to 
individuals nominated by the nominating committee; they cannot be 
imposed on individuals who meet the eligibility requirements and are 
properly nominated from the floor or by petition.
    Candidates' names on ballots: When producing an election ballot, 
the FCU's secretary may order the names of the candidates on the ballot 
using any method for selection provided it is random and used 
consistently from year to year so as to avoid manipulation or 
favoritism.
    Secret ballots: An FCU must establish an election process that 
assures members their votes remain confidential and secret from all 
interested parties. If the election process does not separate the 
member's identity from the ballot, FCUs should use a third-party teller 
that has sole control over completed ballots. If the ballots are 
designed so that members' identities remain secret and are not 
disclosed on the ballot, FCUs may use election tellers from the FCU. In 
any case, FCU employees, officials, and members must not have access to 
ballots identifying members or to information that links members' votes 
to their identities.
    Plurality voting: At least one nominee must be nominated for each 
vacant seat. When there are more nominees than seats open for election, 
the nominees who receive the greatest number of votes are elected to 
the vacant seats.

Article VI. Board of Directors

    Section 1. Number of members. The board consists of ----members, 
all of whom must be members of this credit union. The number of 
directors may be changed to an odd number not fewer than 5 nor more 
than 15 by resolution of the board. No reduction in the number of 
directors may be made unless corresponding vacancies exist as a result 
of deaths, resignations, expiration of terms of office, or other 
actions provided by these bylaws. A copy of the resolution of the board 
covering any increase or decrease in the number of directors must be 
filed with the official copy of the bylaws of this credit union.
    Section 2. (NEW) Composition of board. ----(Fill in the number) 
directors or committee members may be a paid employee of the credit 
union. ----(Fill in the number) immediate family members of a director 
or committee member may be a paid employee of the credit union. In no 
case may employees, [and] family members, or employees and family 
members constitute a majority of the board. The board may appoint a 
management official who ----(may or may not) be a member of the board 
and one or more assistant management officials who ----(may or may not) 
be a member of the board. If the management official or assistant 
management official is permitted to serve on the board, he or she may 
not serve as the chair.
    Section 3. Terms of office. Regular terms of office for directors 
must be for periods of either 2 or 3 years as the board determines. All 
regular terms must be for the same number of years and until the 
election and qualification of successors. Regular terms must be fixed 
at the first meeting [beginning], or upon any increase or decrease in 
the number of directors, so that approximately an equal number of 
regular terms must expire at each annual meeting.

[[Page 40936]]

    Section 4. (NEW) Vacancies. Any vacancy on the board, credit 
committee, if applicable, or supervisory committee will be filled 
[within a reasonable time] as soon as possible, but no later than the 
next regularly scheduled board meeting, by vote of a majority of the 
directors then holding office. Directors and credit committee members 
appointed to fill a vacancy will hold office only until the next annual 
meeting, at which any unexpired terms will be filled by vote of the 
members, and until the qualification of their successors. Members of 
the supervisory committee appointed to fill a vacancy will hold office 
until the first regular meeting of the board following the next annual 
meeting of members, at which the regular term expires, and until the 
appointment and qualification of their successors.
    Section 5. Regular and special meetings. A regular meeting of the 
board must be held each month at the time and place fixed by resolution 
of the board. One regular meeting each calendar year must be conducted 
in person. If a quorum is present in person for the annual in person 
meeting, the remaining board members may participate using audio or 
video teleconference methods. The other regular meetings may be 
conducted using audio or video teleconference methods. The chair, or in 
the chair's absence the ranking vice chair, may call a special meeting 
of the board at any time and must do so upon written request of a 
majority of the directors then holding office. Unless the board 
prescribes otherwise, the chair, or in the chair's absence the ranking 
vice chair, will fix the time and place of special meetings. Notice of 
all meetings will be given in the manner the board may from time to 
time by resolution prescribe. Special meetings may be conducted using 
audio or video teleconference methods.
    Section 6. Board responsibilities. The board has the general 
direction and control of the affairs of this credit union and is 
responsible for performing all the duties customarily performed by 
boards of directors. This includes but is not limited to the following:
    (a) Directing the affairs of the credit union in accordance with 
the Act, these bylaws, the rules and regulations and sound business 
practices.
    (b) Establishing programs to achieve the purposes of this credit 
union as stated in Article I, Section 2, of these bylaws.
    (c) Establishing a loan collection program and authorizing the 
chargeoff of uncollectible loans.
    (d) (NEW) Establishing a policy to address training for newly 
elected and incumbent directors and volunteer officials, in areas such 
as ethics and fiduciary responsibility, regulatory compliance, and 
accounting, and determining that all persons appointed or elected by 
this credit union to any position requiring the receipt, payment or 
custody of money or other property of this credit union, or in its 
custody or control as collateral or otherwise, are properly bonded in 
accordance with the Act and regulations.
    (e) Performing additional acts and exercising additional powers as 
may be required or authorized by applicable law.
    Instruction: If the credit union has an elected credit committee, 
you do not need to check a box. If the credit union has no credit 
committee check Option 1 and if it has an appointed credit committee 
check Option 2.

----Option 1 No Credit Committee

    (f) Reviewing denied loan applications of members who file written 
requests for review.
    (g) Appointing one or more loan officers and delegating to those 
officers the power to approve or disapprove loans, lines of credit or 
advances from lines of credit.
    (h) In its discretion, appointing a loan review committee to review 
loan denials and delegating to the committee the power to overturn 
denials of loan applications. The committee will function as a mid-
level appeal committee for the board. Any denial of a loan by the 
committee must be reviewed by the board upon written request of the 
member. The committee must consist of three members and the regular 
term of office of the committee member will be for two years. Not more 
than one member of the committee may be appointed as a loan officer.

----Option 2 Appointed Credit Committee

    (f) Appointing an odd number of credit committee members as 
provided in Article VIII of these bylaws.
    Section 7. (NEW) Quorum. A majority of the number of directors, 
including any vacant positions, constitutes a quorum for the 
transaction of business at any meeting, except that vacancies may be 
filled by a quorum consisting of a majority of the directors holding 
office as provided in Section 4 of this article. Fewer than a quorum 
may adjourn from time to time until a quorum is in attendance.
    Section 8. (NEW) Attendance and removal. If a director or a credit 
committee member, if applicable, fails to attend regular meetings of 
the board or credit committee, respectively, for 3 consecutive months, 
or 4 meetings within a calendar year, or otherwise fails to perform any 
of the duties as a director or a credit committee member, the office 
may be declared vacant by the board and the vacancy filled as provided 
in the bylaws. [The board may remove any board officer from office for 
failure to perform the duties thereof, after giving the officer 
reasonable notice and opportunity to be heard.]
    The board may remove any board officer from office for failure to 
perform the duties thereof, after giving the officer reasonable notice 
and opportunity to be heard.
    When any board officer, membership officer, executive committee 
member or investment committee member is absent, disqualified, or 
otherwise unable to perform the duties of the office, the board may by 
resolution designate another member of this credit union to fill the 
position temporarily. The board may also, by resolution, designate 
another member or members of this credit union to act on the credit 
committee when necessary in order to obtain a quorum.
    Section 9. Suspension of supervisory committee members. Any member 
of the supervisory committee may be suspended by a majority vote of the 
board of directors. The members of this credit union will decide, at a 
special meeting held not fewer than 7 nor more than 14 days after any 
suspension, whether the suspended committee member will be removed from 
or restored to the supervisory committee.

Article VII. Board Officers, Management Officials and Executive 
Committee

    Section 1. (NEW) Board officers. The board officers of this credit 
union are comprised of a chair, one or more vice chairs, a financial 
officer, and a secretary, all of whom are elected by the board and from 
their number. The board determines the title and rank of each board 
officer and records them in the addendum to this article. One board 
officer, the --------, may be compensated for services as determined by 
the board. If more than one vice chair is elected, the board determines 
their rank as first vice chair, second vice chair, and so on. The 
offices of the financial officer and secretary may be held by the same 
person. If a management official or assistant management official is 
permitted to serve on the board, he or she may not serve as the chair. 
Unless removed as provided in these bylaws, the board officers elected 
at the first meeting of the board hold office until the first meeting 
of the board following the first annual meeting of the members and

[[Page 40937]]

until the election and qualification of their respective successors.
    Section 2. Election and term of office. Board officers elected at 
the meeting of the board next following the annual meeting of the 
members, which must be held not later than 7 days after the annual 
meeting, hold office for a term of 1 year and until the election and 
qualification of their respective successors: provided, however, that 
any person elected to fill a vacancy caused by the death, resignation, 
or removal of an officer is elected by the board to serve only for the 
unexpired term of that officer and until a successor is duly elected 
and qualified.
    Section 3. Duties of chair. The chair presides at all meetings of 
the members and at all meetings of the board, unless disqualified 
through suspension by the supervisory committee. The chair also 
performs other duties customarily assigned to the office of the chair 
or duties he or she is directed to perform by resolution of the board 
not inconsistent with the Act and regulations and these bylaws.
    Section 4. Approval required. The board must approve all 
individuals who are authorized to sign all notes of this credit union 
and all checks, drafts and other orders for disbursement of credit 
union funds.
    Section 5. Vice chair. The ranking vice chair has and may exercise 
all the powers, authority, and duties of the chair during the chair's 
absence or inability to act.
    Section 6. Duties of financial officer. The financial officer 
manages this credit union under the control and direction of the board 
unless the board has appointed a management official to act as general 
manager. Subject to limitations, controls and delegations as the board 
may impose, the financial officer will:
    (a) Have custody of all funds, securities, valuable papers and 
other assets of this credit union.
    (b) (NEW) Provide and maintain full and complete records of all the 
assets and liabilities of this credit union in accordance with forms 
and procedures prescribed in regulations and other guidance [the 
Accounting Manual for Federal Credit Unions or otherwise] approved by 
the Administration, including, for small credit unions, the Accounting 
Manual for Federal Credit Unions.
    (c) Within 20 days after the close of each month, ensure that a 
financial statement showing the condition of this credit union as of 
the end of the month, including a summary of delinquent loans is 
prepared and submitted to the board and post a copy of the statement in 
a conspicuous place in the office of the credit union where it will 
remain until replaced by the financial statement for the next 
succeeding month.
    (d) Ensure that financial and other reports the Administration may 
require are prepared and sent.
    (e) Within standards and limitations prescribed by the board, 
employ tellers, clerks, bookkeepers, and other office employees, and 
have the power to remove these employees.
    (f) Perform other duties customarily assigned to the office of the 
financial officer or duties he or she is directed to perform by 
resolution of the board not inconsistent with the Act, regulations and 
these bylaws.
    The board may employ one or more assistant financial officers, none 
of whom may also hold office as chair or vice chair, and may authorize 
them, under the direction of the financial officer, to perform any of 
the duties devolving on the financial officer, including the signing of 
checks. When designated by the board, any assistant financial officer 
may also act as financial officer during the financial officer's 
temporary absence or temporary inability to act.
    Section 7. Duties of management official and assistant management 
official. The board may appoint a management official who is under the 
direction and control of the board or of the financial officer as 
determined by the board. The management official may be assigned any or 
all of the responsibilities of the financial officer described in 
Section 6 of this article. The board will determine the title and rank 
of each management official and record them in the addendum to this 
article. The board may employ one or more assistant management 
officials. The board may authorize assistant management officials under 
the direction of the management official, to perform any of the duties 
devolving on the management official, including the signing of checks. 
When designated by the board, any assistant management official may 
also act as management official during the management official's 
temporary absence or temporary inability to act.
    Section 8. Board powers regarding employees. The board employs, 
fixes the compensation, and prescribes the duties of employees as may 
in the discretion of the board be necessary, and has the power to 
remove employees, unless it has delegated these powers to the financial 
officer or management official. Neither the board, the financial 
officer, nor the management official has the power or duty to employ, 
prescribe the duties of, or remove necessary clerical and auditing 
assistance employed or used by the supervisory committee and, if there 
is a credit committee, the power or duty to employ, prescribe the 
duties of, or remove any loan officer appointed by the credit 
committee.
    Section 9. Duties of secretary. The secretary prepares and 
maintains full and correct records of all meetings of the members and 
of the board, which records will be prepared within 7 days after the 
respective meetings. The secretary must promptly inform the 
Administration in writing of any change in the address of the office of 
this credit union or the location of its principal records. The 
secretary will give or cause to be given, in the manner prescribed in 
these bylaws, proper notice of all meetings of the members, and perform 
other duties he or she may be directed to perform by resolution of the 
board not inconsistent with the Act, regulations and these bylaws. The 
board may employ one or more assistant secretaries, none of whom may 
also hold office as chair, vice chair, or financial officer, and may 
authorize them under direction of the secretary to perform any of the 
duties assigned to the secretary.
    Section 10. (NEW) Executive committee. [The board may appoint an 
executive committee of not fewer than three directors to serve at its 
pleasure, to act for it with respect to specifically delegated 
functions authorized by the Act and regulations.] As authorized by the 
Act, the board may appoint an executive committee of not fewer than 
three directors to serve at its pleasure, to act for it with respect to 
the board's specifically delegated functions. When making delegations 
to the executive committee, the board must be specific with regard to 
the committee's authority and limitations related to the particular 
delegation. The board may also authorize any of the following to 
approve membership applications under conditions the board and these 
bylaws may prescribe: an executive committee; a membership officer(s) 
appointed by the board from the membership, other than a board member 
paid as an officer; the financial officer; any assistant to the paid 
officer of the board or to the financial officer; or any loan officer. 
[The board may also authorize such executive committee or a membership 
officer(s) appointed by the board from the membership other than a 
board member paid as an officer, the financial officer, any assistant 
to the paid officer of the board or to the financial officer or any 
loan officer, to serve at its pleasure to approve applications for 
membership under such conditions as

[[Page 40938]]

the board and these bylaws may prescribe.] No executive committee 
member or membership officer may be compensated as such.
    Section 11. Investment committee. The board may appoint an 
investment committee composed of not less than two, to serve at its 
pleasure to have charge of making investments under rules and 
procedures established by the board. No member of the investment 
committee may be compensated as such.
    Addendum: The board must list the positions of the board officers 
and management officials of this credit union. They are as follows:
    Instruction: Select Option 1 if the credit union has a credit 
committee and Option 2 if it does not have a credit committee.

 ---- Option 1 Article VIII. Credit Committee

    Section 1. Credit committee members. The credit committee consists 
of ---- members. All the members of the credit committee must be 
members of this credit union. The number of members of the credit 
committee must be an odd number and may be changed to not fewer than 3 
nor more than 7 by resolution of the board. No reduction in the number 
of members may be made unless corresponding vacancies exist as a result 
of deaths, resignations, expiration of terms of office, or other 
actions provided by these bylaws. A copy of the resolution of the board 
covering any increase or decrease in the number of committee members 
must be filed with the official copy of the bylaws of this credit 
union.
    Section 2. Terms of office. Regular terms of office for elected 
credit committee members are for periods of either 2 or 3 years as the 
board determines: Provided, however, that all regular terms are for the 
same number of years and until the election and qualification of 
successors. The regular terms are fixed at the beginning, or upon any 
increase or decrease in the number of committee members, that 
approximately an equal number of regular terms expire at each annual 
meeting.
    Regular terms of office for appointed credit committee members are 
for periods as determined by the board and as noted in the board's 
minutes.
    Section 3. Officers of credit committee. The credit committee 
chooses from their number a chair and a secretary. The secretary of the 
committee prepares and maintains full and correct records of all 
actions taken by it, and those records must be prepared within 3 days 
after the action. The offices of the chair and secretary may be held by 
the same person.
    Section 4. Credit committee powers. The credit committee may, by 
majority vote of its members, appoint one or more loan officers to 
serve at its pleasure, and delegate to them the power to approve 
application for loans or lines of credit, share withdrawals, releases 
and substitutions of security, within limits specified by the committee 
and within limits of applicable law and regulations. Not more than one 
member of the committee may be appointed as a loan officer. Each loan 
officer must furnish to the committee a record of each approved or not 
approved transaction within 7 days of the date of the filing of the 
application or request, and this record becomes a part of the records 
of the committee. All applications or requests not approved by a loan 
officer must be acted upon by the committee. No individual may disburse 
funds of this credit union for any application or share withdrawal 
which the individual has approved as a loan officer.
    Section 5. Credit committee meetings. The credit committee holds 
meetings as the business of this credit union may require, and not less 
frequently than once a month. Notice of meetings will be given to 
members of the committee in a manner as the committee may from time to 
time, by resolution, prescribe.
    Section 6. Credit committee duties. For each loan or line of 
credit, the credit committee or loan officer must inquire into the 
character and financial condition of the applicant and the applicant's 
sureties, if any, to ascertain their ability to repay fully and 
promptly the obligations incurred by them and to determine whether the 
loan or line of credit will be of probable benefit to the borrower. The 
credit committee and its appointed loan officers should endeavor 
diligently to assist applicants in solving their financial problems.
    Section 7. Unapproved loans prohibited. No loan or line of credit 
may be made unless approved by the committee or a loan officer in 
accordance with applicable law and regulations.
    Section 8. Lending procedures. Subject to the limits imposed by 
applicable law and regulations, these bylaws, and the general policies 
of the board, the credit committee, or a loan officer, determines the 
security, if any, required for each application and the terms of 
repayment. The security furnished must be adequate in quality and 
character and consistent with sound lending practices. When funds are 
not available to make all the loans and lines of credit for which there 
are applications, preference should be given, in all cases, to the 
smaller applications if the need and credit factors are nearly equal.

 ---- Option 2 Article VIII. Loan Officers (No Credit Committee)

    Section 1. Records of loan officer; prohibition on loan officer 
disbursing funds. Each loan officer must maintain a record of each 
approved or not approved transaction within 7 days of the filing of the 
application or request, and that record becomes a part of the records 
of the credit union. No individual may disburse funds of this credit 
union for any application or share withdrawal which the individual has 
approved as a loan officer.
    Section 2. Duties of loan officer. For each loan or line of credit, 
the loan officer must inquire into the character and financial 
condition of the applicant and the applicant's sureties, if any, to 
ascertain their ability to repay fully and promptly the obligations 
incurred by them and to determine whether the loan or line of credit 
will be of probable benefit to the borrower. The loan officers should 
endeavor diligently to assist applicants in solving their financial 
problems.
    Section 3. Unapproved loans prohibited. No loan or line of credit 
may be made unless approved by a loan officer in accordance with 
applicable law and regulations.
    Section 4. Lending procedures. Subject to the limits imposed by law 
and regulations, these bylaws, and the general policies of the board, a 
loan officer determines the security if any required for each 
application and the terms of repayment. The security furnished must be 
adequate in quality and character and consistent with sound lending 
practices. When funds are not available to make all the loans and lines 
of credit for which there are applications, preference should be given, 
in all cases, to the [smaller] applications for lesser amounts if the 
need and credit factors are nearly equal.

Article IX. Supervisory Committee

    Section 1. (NEW) Appointment and membership. The supervisory 
committee is appointed by the board from among the members of this 
credit union, one of whom may be a director other than the financial 
officer or the compensated officer of the board. The board determines 
the number of members on the committee, which may not be fewer than 3 
nor more than 5. No member of the credit committee, if applicable, or 
any employee of this credit union may be appointed to the committee. 
Regular terms of committee members are for periods of 1, 2, or 3 years 
as the board determines: Provided,

[[Page 40939]]

however, that all regular terms are for the same number of years and 
until the appointment and qualification of successors. The regular 
terms are fixed at the beginning, or upon any increase or decrease in 
the number of committee members, so that approximately an equal number 
of regular terms expires at each annual meeting.
    Section 2. Officers of supervisory committee. The supervisory 
committee members choose from among their number a chair and a 
secretary. The secretary of the supervisory committee prepares, 
maintains, and has custody of full and correct records of all actions 
taken by it. The offices of chair and secretary may be held by the same 
person.
    Section 3. Duties of supervisory committee. The supervisory 
committee makes, or causes to be made, the audits, and prepares and 
submits the written reports required by the Act and regulations. The 
committee may employ and use clerical and auditing assistance required 
to carry out its responsibilities prescribed by this article, and may 
request the board to provide compensation for this assistance. It will 
prepare and forward to the Administration required reports.
    Section 4. (NEW) Verification of accounts. The supervisory 
committee will cause the verification of the accounts of [all] members 
with the records of the financial officer from time to time and not 
less frequently than as required by the Act and regulations. The 
committee must maintain a record of this verification.
    Section 5. Powers of supervisory committee--removal of directors 
and credit committee members. By unanimous vote, the supervisory 
committee may suspend until the next meeting of the members any 
director, board officer, or member of the credit committee. In the 
event of any suspension, the supervisory committee must call a special 
meeting of the members to act on the suspension, which meeting must be 
held not fewer than 7 nor more than 14 days after the suspension. The 
chair of the committee acts as chair of the meeting unless the members 
select another person to act as chair.
    Section 6. Powers of supervisory committee--special meetings. By 
the affirmative vote of a majority of its members, the supervisory 
committee may call a special meeting of the members to consider any 
violation of the provisions of the Act, the regulations, or of the 
charter or the bylaws of this credit union, or to consider any practice 
of this credit union which the committee deems to be unsafe or 
unauthorized.

Article X. Organization Meeting

    Section 1. Initial meeting. When application is made for a federal 
credit union charter, the subscribers to the organization certificate 
must meet for the purpose of electing a board of directors and a credit 
committee, if applicable. Failure to commence operations within 60 days 
following receipt of the approved organization certificate is cause for 
revocation of the charter unless a request for an extension of time has 
been submitted to and approved by the Regional Director.
    Section 2. Election of directors and credit committee. The 
subscribers elect a chair and a secretary for the meeting. The 
subscribers then elect from their number, or from those eligible to 
become members of this credit union, a board of directors and a credit 
committee, if applicable, all to hold office until the first annual 
meeting of the members and until the election and qualification of 
their respective successors. If not already a member, every person 
elected under this section or appointed under Section 3 of this 
article, must qualify within 30 days by becoming a member. If any 
person elected as a director or committee member or appointed as a 
supervisory committee member does not qualify as a member within 30 
days of election or appointment, the office will automatically become 
vacant and be filled by the board.
    Section 3. Election of board officers. Promptly following the 
elections held under the provisions of Section 2 of this article, the 
board must meet and elect the board officers who will hold office until 
the first meeting of the board of directors following the first annual 
meeting of the members and until the election and qualification of 
their respective successors. The board also appoints a supervisory 
committee at this meeting as provided in Article IX, Section 1, of 
these bylaws and a credit committee, if applicable. The members so 
appointed hold office until the first regular meeting of the board 
following the first annual meeting of the members and until the 
appointment and qualification of their respective successors.

Article XI. Loans and Lines of Credit to Members

    Section 1. Loan purposes. Loans may only be made to members and for 
provident or productive purposes in accordance with applicable law and 
regulations.
    (NEW) Instruction: The credit union may add business as one of its 
purposes by placing a comma after ``provident'' and inserting 
``business.''
    Section 2. Delinquency. Any member whose loan is delinquent may be 
required to pay a late charge as determined by the board of directors.

Article XII. Dividends

    Section 1. Power of board to declare dividends. The board 
establishes dividend periods and declares dividends as permitted by the 
Act and applicable regulations.

Article XIII. [Deposit of Funds] (RESERVED)

    [Section 1. All funds of this credit union, except for petty cash 
and cash change funds, must be deposited in such qualified depository 
or depositories from among those authorized by applicable law and 
regulations as the board may from time to time by resolution designate; 
and must be so deposited not later than the ---- (fill in number) 
banking day after their receipt: provided, however, that receipts in 
the aggregate of $---- (fill in number) or less may be held as long as 
1 week before they are deposited.]

Article XIV. Expulsion and Withdrawal

    Section 1. (NEW) Expulsion procedure; expulsion or withdrawal does 
not affect members' liability or shares. A member may be expelled [only 
in the manner provided by the Act] by a two-thirds vote of the members 
present at special meeting called for that purpose, but only after the 
member has been given the opportunity to be heard. A member also may be 
expelled under a nonparticipation policy adopted by the board of 
directors and provided to each member in accordance with the Act. 
Expulsion or withdrawal will not operate to relieve a member of any 
liability to this credit union. All amounts paid in on shares by 
expelled or withdrawing members, before their expulsion or withdrawal, 
will be paid to them in the order of their withdrawal or expulsion, but 
only as funds become available and only after deducting any amounts due 
to this credit union.

Article XV. Minors

    Section 1. (NEW) Minors permitted to own shares. Shares may be 
issued in the name of a minor. State law governs the rights of minors 
to transact business with this credit union.

Article XVI. General

    Section 1. Compliance with law and regulation. All power, 
authority, duties,

[[Page 40940]]

and functions of the members, directors, officers, and employees of 
this credit union, pursuant to the provisions of these bylaws, must be 
exercised in strict conformity with the provisions of applicable law 
and regulations, and of the charter and the bylaws of this credit 
union.
    Section 2. Confidentiality. The officers, directors, members of 
committees and employees of this credit union must hold in confidence 
all transactions of this credit union with its members and all 
information respecting their personal affairs, except when permitted by 
state or federal law.
    Section 3. Removal of directors and committee members. 
Notwithstanding any other provisions in these bylaws, any director or 
committee member of this credit union may be removed from office by the 
affirmative vote of a majority of the members present at a special 
meeting called for the purpose, but only after an opportunity has been 
given to be heard.
    Section 4. Conflicts of interest prohibited. No director, committee 
member, officer, agent, or employee of this credit union may 
participate in any manner, directly or indirectly, in the deliberation 
upon or the determination of any question affecting his or her 
pecuniary or personal interest or the pecuniary interest of any 
corporation, partnership, or association (other than this credit union) 
in which he or she is directly or indirectly interested. In the event 
of the disqualification of any director respecting any matter presented 
to the board for deliberation or determination, that director must 
withdraw from the deliberation or determination; and if the remaining 
qualified directors present at the meeting plus the disqualified 
directors or directors constitute a quorum, the remaining qualified 
directors may exercise with respect to this matter, by majority vote, 
all the powers of the board. In the event of the disqualification of 
any member of the credit committee, if applicable, or the supervisory 
committee, that committee member must withdraw from the deliberation or 
determination.
    Section 5. Records. Copies of the organization certificate of this 
credit union, its bylaws and any amendments to the bylaws, and any 
special authorizations by the Administration must be preserved in a 
place of safekeeping. Copies of the organization certificate and field 
of membership amendments should be attached as an appendix to these 
bylaws. Returns of nominations and elections and proceedings of all 
regular and special meetings of the members and directors must be 
recorded in the minute books of this credit union. The minutes of the 
meetings of the members, the board, and the committees must be signed 
by their respective chairmen or presiding officers and by the persons 
who serve as secretaries of those meetings.
    Section 6. (NEW) Availability of credit union records. All books of 
account and other records of this credit union must be available at all 
times to the directors and committee members of this credit union 
provided they have a proper purpose for obtaining the records. The 
charter and bylaws of this credit union must be made available for 
inspection by any member and, if the member requests a copy, it will be 
provided for a reasonable fee.
    Section 7. Member contact information. Members must keep the credit 
union informed of their current address.
    Section 8. Indemnification. (a) The credit union may elect to 
indemnify to the extent authorized by (check one)

[ ] law of the state of --------:
[ ] Model Business Corporation Act:

    The following individuals from any liability asserted against them 
and expenses reasonably incurred by them in connection with judicial or 
administrative proceedings to which they are or may become parties by 
reason of the performance of their official duties (check as 
appropriate).

[ ] current officials
[ ] former officials
[ ] current employees
[ ] former employees

    (b) The credit union may purchase and maintain insurance on behalf 
of the individuals indicated in (a) above against any liability 
asserted against them and expenses reasonably incurred by them in their 
official capacities and arising out of the performance of their 
official duties to the extent such insurance is permitted by the 
applicable state law or the Model Business Corporation Act.
    (c) The term ``official'' in this bylaw means a person who is a 
member of the board of directors, credit committee, supervisory 
committee, other volunteer committee (including elected or appointed 
loan officers or membership officers), established by the board of 
directors.

Article XVII. Amendments of Bylaws and Charter

    Section 1. Amendment procedures. Amendments of these bylaws may be 
adopted and amendments of the charter requested by the affirmative vote 
of two-thirds of the authorized number of members of the board at any 
duly held meeting of the board if the members of the board have been 
given prior written notice of the meeting and the notice has contained 
a copy of the proposed amendment or amendments. No amendment of these 
bylaws or of the charter may become effective, however, until approved 
in writing by the NCUA Board.

Article XVIII. (NEW) Definitions

    Section 1. General definitions. When used in these bylaws the 
terms:
    ``Act'' means the Federal Credit Union Act, as amended.
    ``Administration'' means the National Credit Union Administration.
    ``Applicable law and regulations'' means the Federal Credit Union 
Act and rules and regulations issued thereunder or other applicable 
federal and state statutes and rules and regulations issued thereunder 
as the context indicates (such as The Higher Education Act of 1965).
    ``Board'' means board of directors of the federal credit union.
    ``Immediate family member'' means spouse, child, sibling, parent, 
grandparent, grandchild, stepparents, stepchildren, stepsiblings, and 
adoptive relationships.
    ``NCUA Board'' means the Board of the National Credit Union 
Administration.
    [``Paid in and unimpaired capital,'' as of a given date, means the 
balance of the paid-in share accounts as of such date, less any losses 
that may have been incurred for which there is no reserve or which have 
not been charged against undivided earnings.]
    ``Regulation'' or ``regulations'' means rules and regulations 
issued by the NCUA Board.
    ``Share'' or ``shares'' means all classes of shares and share 
certificates that may be held in accordance with applicable law and 
regulations.
    [``Surplus,'' as of a given date, means the credit balance of the 
undivided earnings account on such date, after all losses have been 
provided for and net earnings or net losses have been added thereto or 
deducted therefrom, as the case may be. Reserves are not considered as 
a part of the surplus.]
    Instruction: A credit union may insert a more restrictive 
definition of ``immediate family member'' or ``household'' than found 
in NCUA's Chartering and Field of Membership Manual for purposes of 
determining eligibility in the credit union's field of membership.
    [Section 2. If included in the definition of the field of 
membership in the organization certificate charter of

[[Page 40941]]

this credit union, the term or expressions:
    (a) ``Organizations of such persons'' means an organization or 
organizations composed exclusively of persons who are within the field 
of membership of this credit union.
    (b) ``Immediate family member'' eligibility is limited to spouse, 
child, sibling, parent, grandparent or grandchild. For the purposes of 
this definition, immediate family member includes stepparents, 
stepchildren, stepsiblings, and adoptive relationships.
    Instruction: A credit union may adopt a more restrictive definition 
of this term by deleting this definition from its bylaws and replacing 
it with its own more restrictive definition.
    (c) ``Household'' is defined as persons living in the same 
residence maintaining a single economic unit.
    Instruction: A credit union may adopt a more restrictive definition 
of this term by deleting this definition from its bylaws and replacing 
it with its own more restrictive definition.]

[FR Doc. 05-13312 Filed 7-14-05; 8:45 am]
BILLING CODE 7535-01-P