Section 50. Conversion of mutual to stock association

A. Conversion authorized. As authorized by § 6.2-1139 of the Code of Virginia, a state mutual savings and loan association may convert to a stock association in accordance with this section, the Virginia Non-Stock Corporation Act (§ 13.1-801 et seq. of the Code of Virginia), and regulations promulgated by the federal Office of Thrift Supervision (OTS) relating to mutual-to-stock conversions.

B. Application for conversion. Upon the affirmative vote of 2/3 of its board of directors, a state mutual association may file with the Bureau of Financial Institutions (bureau) an application to convert to a stock association. The application shall be accompanied by a filing fee of $1,000.00.

The application shall conform to OTS requirements as to its form and content. (A copy of the conversion application submitted to the OTS may be submitted.) In addition, the application shall include:

1. A certified copy of the minutes of the meeting at which the board of directors authorized the association's officers to apply for conversion.

2. The proposed amended articles of incorporation and bylaws of the stock association to be formed.

3. The proposed form of notice to members of the meeting at which conversion will be formally considered and voted upon, which notice shall include a clear statement to account holders that the stock to which they may subscribe will not be an insured investment.

4. A statement of the time and manner in which such notice will be provided.

C. Plan of conversion. In addition to complying with the requirements of OTS regulations, a plan of conversion shall be filed with the bureau that provides:

1. A statement of the business purposes to be accomplished by the conversion.

2. That the word "mutual" will not be in the name of the association after its conversion to stock form of ownership.

3. That no reduction in the association's reserves or net worth will result from the conversion.

D. Preliminary approval. The Commissioner of Financial Institutions (commissioner) shall review the application and, if (i) the application, plan of conversion, and articles of amendment comply with the requirements of state law and regulations, (ii) the proposed plan of conversion appears to be fair and equitable to members of the association, and (iii) there is an intention to retain FDIC insurance of deposit accounts, the commissioner shall issue preliminary approval of the conversion. Such preliminary approval shall be given subject to a concurring shareholder vote and to continued compliance with all applicable laws and regulations.

Prior to granting preliminary approval, the commissioner may require the applicant to submit such additional information as may be necessary for making a determination of fairness and may require that changes in the application be made where necessary to protect the interests of the applicant's members.

E. Special meeting of members. When it has received the commissioner's preliminary approval, the board of directors may call a special meeting of the members of the association for the purpose of considering and voting upon the conversion and the proposed amendments to the association's articles of incorporation. Written notice of such meeting shall conform to the applicable provisions of law and shall be mailed to each member entitled to vote on the matters to be taken up. The plan of conversion, or a summary of it, shall accompany the notice. Notice of the meeting may not be waived.

Conduct of the special meeting and voting on the proposed amendments to the articles of incorporation shall be governed by the applicable provisions of the Non-Stock Corporation Act. Voting rights of members shall be determined in accordance with § 6.2-1124 of the Code of Virginia. The plan of conversion shall be approved in accordance with § 13.1-886 D of the Code of Virginia, and a certified copy of the minutes of the special meeting shall be filed promptly with the bureau.

F. Formal approval; effective date of conversion. Upon receiving (i) evidence that the plan of conversion and the amended articles have been duly approved by the association's members, (ii) evidence that the accounts of the stock association will continue to be insured by the FDIC, and (iii) a copy of the amended articles of incorporation, as approved, the commissioner, when satisfied that all applicable laws and regulations have been complied with, shall issue formal approval authorizing the conversion. Thereafter, the effective date of the conversion shall be the date when the Clerk of the State Corporation Commission issues a certificate of amendment giving legal effect to the association's amended articles of incorporation.

G. Actions performed by the commissioner under this section shall be subject to review pursuant to the State Corporation Commission Rules of Practice and Procedure (5VAC5-20).

Historical Notes

Derived from Volume 22, Issue 03, eff. September 30, 2005; amended, Virginia Register Volume 28, Issue 01, eff. September 1, 2011.

Statutory Authority

§§ 6.2-1139 and 12.1-13 of the Code of Virginia.