Merger and Acquisition Record Retention: Survivor Edition
Mergers aren’t always a bad thing, you know? We have had many SUCCESSFUL mergers throughout the course of history; even those that did not make complete business sense to the less business savvy population. And to prove it to you, I’m going to list them out: airplanes and an office supply company; burgers and roast beef sandwiches; oatmeal and fruit juice… Wait, these aren’t sounding too great once I read them out loud. Nevertheless, we can agree that peanut butter and chocolate is a hit, right?
When credit unions merge into each other, that is essentially two businesses becoming one. Now that the ink on the paperwork is dry, your staff is so enthused to begin sifting through all the new paperwork that they didn’t generate. Yay, you!
Whatever your reasoning is for the merger, you have one major question on your mind when it comes to this new paperwork. You need to know this now because the pizza party is not distracting your staff from the truckloads of business records and potentially long hours! The question is: which credit unions’ record retention policy do we follow with respect to the newly acquired documentation?
First things first, you may want to consult with local counsel to check your merger agreement and determine if record retention was addressed. Sometimes, credit unions agree to handle record retention policy in a different manner based upon their various business needs. If your merger agreement does not address record retention, then it's important for you to understand the general nature of mergers: the survivor wins. Or loses, depending on whether you’re a pessimist.
Generally, when a credit union merges into another credit union, the surviving credit union typically “stands in the shoes” of the merged credit union for purposes of legal proceedings and agreements. After a merger, the merged credit union ceases to exist. Consequently, the merged credit union’s records will become the records of the surviving credit union. The surviving credit union will need to retain those new documents as its own records, subject to attorney advice and applicable law.
For example, if the surviving credit union acquires a new credit union which filed SARs within the last five years through a merger, then the surviving credit union will have to comply with BSA record retention for those newly acquired SAR filings. Since the surviving credit union is now legally responsible for these filings, the surviving institution must retain records that were previously created by the merged credit union.
Record retention is mostly governed by state law. Normally, retention schedules don’t restart after a merger and acquisition. While NCUA does not regulate how long a credit union should maintain various types of operational records, Appendix A to Part 749 of NCUA’s regulations provides suggested guidelines. The NCUA guidelines on record retention recommend consulting with local counsel in setting recordkeeping requirements. Different states have different laws regarding how many years a plaintiff must file a lawsuit so record retention can be important for defending the credit union against adversarial legal proceedings. Experienced counsel can help the credit union identify other state law requirements or practical concerns that may affect the credit union's determination, including mergers.
For more information on federal record retention schedules, check out these previously published NAFCU resources: here and here. NAFCU also has a merger book filled with things like checklists and is available for credit unions to purchase.
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About the Author
JaMonika Williams joined NAFCU as regulatory compliance counsel in July 2022. In this role, JaMonika assists credit unions with a variety of compliance issues.