FROM: Richard S. Schulman, Associate General Counsel
SUBJ: [redacted] Bylaw Amendment
(The July 6, 1994, Memorandum of the Director, Office of Examination and Insurance)
DATE: November 18, 1994
[redacted] has submitted a request for an amendment to its bylaws to provide for indemnification of current and former officials and employees. The corporate's propose amendment is not consistent with the standard indemnification bylaw amendment.
[redacted] had no problem with the proposed language and asked if we had any legal concerns.
The standard bylaw amendment providing for indemnification was developed so that staff would not have to review individual proposed bylaws to ensure compliance with state law or the Model Business Corporation Act. In the past, we have recommended that proposed nonstandard indemnification bylaws not be approved, fearing that approval of one would open the door to consideration of numerous such bylaws in the future. We have attached two previous memoranda on this issue. Although we have no specific concerns about this proposed bylaw. we have not determined that it is in compliance with Massachusetts law. Rather than doing so, we recommend that it be disapproved for the reason stated herein.
We believe that the standard bylaw amendment for natural person credit unions is adequate to meet [redacted] needs. [redacted] has expressed concern that the bylaw be consistent with Massachusetts law. The standard amendment will provide indemnification "to the extent authorized by the state of [blank]_______." [redacted] can simply insert "Massachusetts." As noted in our previous memoranda, additional provisions can be adopted by board resolution.
Although we recommend that [redacted] request be "disapproved," your staff does not have the authority to do so, as the NCUA Board has not delegated the authority to decide corporate credit union nonstandard bylaw amendment requests. If [redacted] could be persuaded to withdraw its request, we recommend that it, on its own, adopt the standard bylaw amendment discussed above even though the amendment was not drafted for corporate credit unions. It is my opinion that the NCUA Board does not need to address this request if [redacted] is willing to adopt the existing bylaw amendment. The issue of indemnification raises no special concerns in the corporate credit union context.
That there is a question about a corporate credit union's authority to adopt one of the standard bylaw amendments for natural person credit unions (and in light of the problems that can arise from trying to do so when corporate and natural person bylaws are numbered and worded differently1) illustrates the need to develop a set of standard amendments specifically for corporates.
1 For example, the standard indemnification provision is Article XIX, Section 8, of the natural person federal credit union bylaws, but the comparable provision in the corporate federal credit union bylaws would be Article XV, Section 4.