Federal Credit Union Bylaws, 40924-40941 [05-13312]

Agencies

• National Credit Union Administration

[Federal Register Volume 70, Number 135 (Friday, July 15, 2005)]
[Proposed Rules]
[Pages 40924-40941]
From the Federal Register Online via the Government Printing 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become outdated or obsolete.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: https://www.regulations.gov. 
Follow the instructions for submitting comments.
     NCUA Web Site: https://www.ncua.gov/
RegulationsOpinionsLaws/proposed_regs/proposed_regs.html. Follow the 
instructions for submitting comments.
     E-mail: Address to regcomments@ncua.gov. 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 https://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 elect