FCU Bylaws 2019 Update: Bylaw Amendments, Meetings, and Elections
Happy Hump Day, compliance friends! We’re halfway through the week.
As mentioned in Monday’s blog, last week the NCUA Board finalized a handful of rules, including an update to the FCU Bylaws, found in Appendix A to Part 701. Here are a few updates regarding bylaw amendments, meetings, and elections.
Many federal credit unions (FCUs) have requested flexibility to draft their own set of bylaws, rather than adopt the NCUA’s standard bylaws. NCUA clarified that the FCU Act requires NCUA to publish bylaws, and therefore does not permit FCUs to draft different bylaws. However, because NCUA allows FCUs to amend their bylaws (with NCUA's approval), many FCUs have requested the establishment of a streamlined process for bylaw amendments and a clear timeline for the approval process. In response, the Board updated the instructions for bylaw amendments.
This update informs FCUs that NCUA’s Office of Credit Union Resources and Expansion (CURE) now is the primary office handling bylaw amendments and consults with the NCUA’s Office of General Counsel, as necessary. This change to the bylaw approval process requires CURE to review a credit union’s bylaw amendment request and render an approval decision within 60 calendar days. This 60 day deadline was a compromise between the Board’s original proposal of 90 days and commenters suggestion of a 30 day deadline. For situations in which CURE does not make an approval decision within 60 days, the final rule permits CURE to request additional time from the FCU to process a bylaw amendment request. If CURE fails to render a decision, even after an extension of time, the amendment request will be treated as a denial and the FCU may appeal to the Board. Amendment requests may be sent to CURE at CUREMail@ncua.gov.
Article IV. Meetings of Members
To increase member participation in annual meetings, the final rule requires FCUs to post a notice conspicuously in the FCU’s physical office, and on the FCUs website if it maintains one. The Board clarified that adding meetings to the FCU’s online calendar will be considered conspicuous, so long as the calendar is easily accessible from the homepage of the FCUs website.
In addition to notice requirements, the final staff commentary encourages FCUs to provide live streaming options so that members may watch annual and special meetings, as well as post a video of the annual meeting on the FCUs website, if it maintains one.
Occasionally, we receive questions about whether staff and officials may be counted to establish the required 15-member quorum for meetings. In the original proposal, the Board proposed a change to the number of members required to establish quorum, and considered excluding staff and officials from this count. However, after considering suggestions from commenters, the Board has not adopted the change. According, under the final rule, any 15 members of the FCU establish a quorum at an annual or special meeting. NCUA did not change the total number of member signatures required to call a special meeting, but will consider requests to change the number of signatures required on a case-by-case basis, including considering establishing a percentage based on the number of members.
As technology advances and more FCUs serve members across the country, there have been requests that FCUs be permitted to conduct virtual meetings. The final rule permits all FCUs to conduct hybrid meetings, which consist of an in-person meeting that also allows virtual attendees, so long as they have adequate technology and cybersecurity protections to successfully conduct meetings.
Article V. Elections
With regard to the procedures for the nominating committee, the final rule requires it to publicize the call for nominations to all members and interview the applicants who meet certain objective qualifications established by the nominating committee. Additionally, the secretary is required to post the nominations petition in the FCUs office and on the FCUs website if it maintains one. This rule is meant to encourage member participation without unduly burdening the nomination process. The Board also encourages the nominating committee to consider establishing criteria to promote diversity. Further, the staff commentary explains that any nomination criteria established by the nominating committee cannot be imposed on individuals who meet the eligibility requirements of the bylaws and are nominated from the floor or by petition.
As many credit unions have requested options to conduct virtual meetings, they have also requested flexibility in allowing members to vote in a variety of methods, such as in person, on the FCUs website, or on mobile apps. The final rule does not include a standard option to allow for this type of voting variety, but the Board will consider this type of bylaw amendment request on a case by case basis.
The final rule includes a recommendation that FCUs consider applicants who are at least 21 years old for elective or appointive office. The Board clarified, in order to encourage flexibility for FCU looking to develop younger members, FCUs are able to use an age under 21 years.
Lastly, the final rule includes staff commentary clarifying uncontested elections, however, does not establish specific procedures. Since the first three voting options do not permit nominations from the floor, the staff commentary highlights that the notice provided to members under these options should include the fact that there are no nominations from the floor and that the FCU will not conduct a vote by ballot if the vote is uncontested.
The final rule is not yet in the Federal Register or the eCFR, but it can be viewed in a pdf on NCUA’s website. The final rule becomes effective 90 days after publication in the Federal Register.
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About the Author
Loran Jackson was named regulatory compliance counsel in April 2019. In this role, Jackson helps NAFCU members with a variety of federal regulatory compliance issues.