Texas Administrative Code
Title 7 - BANKING AND SECURITIES
Part 6 - CREDIT UNION DEPARTMENT
Chapter 91 - CHARTERING, OPERATIONS, MERGERS, LIQUIDATIONS
Subchapter J - CHANGES IN CORPORATE STATUS
Section 91.1010 - Voluntary Liquidation
Universal Citation: 7 TX Admin Code ยง 91.1010
Current through Reg. 49, No. 38; September 20, 2024
(a) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise.
(1) Voluntary liquidation means the
dissolution of a credit union with the assets being sold or collected,
liabilities paid, and shares/deposits distributed under the direction of the
board of directors.
(2) Liquidation
date means the date the membership votes to approve liquidation.
(3) Liquidating agent means the person or
persons appointed by the board of directors to take possession of, manage, and
liquidate the credit union.
(b) Initiating voluntary liquidation process.
(1) Unless the commissioner has issued a
liquidation order, the board of directors may, by resolution, recommend the
voluntary dissolution of the credit union and direct submission of the question
to the members of the credit union.
(2) Within five days after the date the board
adopts the resolution, the chairman of the board shall notify the commissioner,
in writing, of the reasons for the proposed liquidation including a balance
sheet and income statement as of the previous month-end.
(3) The board shall act promptly to obtain
the membership's approval in accordance with subsection (f) of this
section.
(4) The board's
recommendation to dissolve and liquidate the credit union must be approved by
the affirmative vote of a majority of members who submit ballots in person at
the special membership meeting and by mail. If less than a majority vote to
approve, the credit union may, subject to the commissioner's approval, resume
normal business, resubmit the question of liquidation to the membership or
request the appointment of a conservator under the Act and the rules adopted
under it.
(5) After an affirmative
vote by the members to dissolve and liquidate the credit union, the board of
directors shall be responsible for conserving the assets, for expediting the
liquidation, and for fair and equitable distribution of the assets to the
members.
(6) Within 5 days after an
affirmative vote to dissolve and liquidate the credit union the chairman shall
notify the commissioner in writing of the intention to liquidate together with
a list of the officers and directors.
(c) Notice of liquidation.
(1) If the vote to dissolve and liquidate the
credit union is affirmative, the credit union shall:
(A) File a notice with the Department within
five days after the liquidation date; and
(B) Mail a copy of the notice of liquidation
to shareholders/depositors, other known creditors, and known claimants of the
credit union within ten days after the liquidation date.
(2) A credit union shall publish public
notice of liquidation, if so directed, and in the manner directed, by the
Department.
(3) Creditors shall be
provided at least 30 days after the liquidation date to submit their
claims.
(d) Transaction of business during liquidation.
(1)
Immediately after notice of the special meeting to consider voluntary
liquidation is mailed to the membership, admission of new members shall be
suspended. No new extensions of credit shall be funded during the period
between the board of directors' adoption of the resolution recommending
voluntary liquidation and the membership meeting called to consider voluntary
liquidation, except for the issuance of loans fully secured by a pledge of
shares and the funding of outstanding loan commitments approved before adoption
of the board resolution. Collection of loans and interest, payments of
necessary expenses, clearing of share drafts and credit card charges shall
continue.
(2) If the membership
votes to dissolve and liquidate the credit union, the credit union shall
immediately discontinue payments on shares/deposits, withdrawal of
shares/deposits (except for transfer of shares/deposits to loans and interest),
transfer of shares/deposits to another share/deposit account, in the same
credit union, granting of loans, and making of investments other than
short-term investments shall be discontinued. The credit union shall continue
to collect on loans with interest and shall continue to pay necessary expenses
during the period of liquidation. The credit union shall direct its Members to
discontinue the use of share drafts and credit cards, and shall inform Members
that on and after the 15th calendar day after the liquidation date, items will
no longer be cleared.
(3) Approval
of the Department must be obtained prior to consummating any sale of assets
which would not provide sufficient funds to pay shareholders/depositors
dollar-for-dollar, principal plus any interest accrued or due to the
shareholder/depositor, through the liquidation date.
(e) Liquidation Plan. The board of directors shall develop and approve a written plan for the liquidation of the assets and payment of shares/deposits. The liquidation plan shall provide for the liquidation of the credit union within one year of the liquidation date. At a minimum, a credit union's liquidation plan shall address the following areas:
(1) Qualifications and experience of the
proposed liquidating agent and the compensation and expenses attributable to
the service of such person or persons;
(2) Income and expense items must be
projected to determine that sufficient funds will be available to finance the
liquidation of the credit union;
(3) Schedule for payment of all debts and
liabilities owed by the credit union;
(4) Partial distributions of shares/deposits
should be considered as funds become available from the liquidation of
assets;
(5) Distribution of the
credit union's assets that remain after settlement of debts and liabilities to
all persons entitled to them;
(6)
Disposition or maintenance of any remaining or unclaimed funds, real or
personal property, or other assets;
(7) Surety bond coverage of all persons who
will handle or have access to funds of the credit union and the proposed
discovery period after final distribution of assets; and
(8) Retention of the credit union's records
after liquidation, and in a manner that complies with subsection (j) of this
section.
(f) Approval of the liquidation proposal by membership.
(1)
Not later than the 10th calendar day before the date of the special membership
meeting to consider approval of the liquidation, the credit union shall notify,
by first class mail, the Commissioner and each member who is eligible to vote
on the proposal. The notice must adequately describe the purpose and subject
matter of the vote and clearly inform members that they may vote at a special
meeting held on the date set for the vote or by mailing in the ballot. The
notice must include a clear and conspicuous disclosure of how the voluntary
liquidation may affect the availability of funds on deposit and state the date,
time, and place of the meeting. A ballot must be included in the same envelope
as the notice.
(2) No director or
senior management employee may receive any economic benefit in connection with
the voluntary liquidation of the credit union other than compensation and other
benefits paid to directors and senior management employees in the ordinary
course of business.
(3) A credit
union considering the question of liquidation must conduct its membership vote
in a fair and legal manner. No inducements may be offered to encourage members
to participate in the vote.
(4) A
credit union should be careful to conduct its special membership meeting in a
manner conducive to accommodating all members wishing to attend, including
selecting a meeting location that can accommodate the anticipated number of
attendees and is conveniently located. The meeting should also be held on a day
and time suitable to most members' schedules.
(g) Distribution of assets.
(1) The liquidating agent shall use the
credit union's assets to pay, in the following order:
(A) Secured creditors to the extent of the
value of their collateral;
(B)
Liquidation expenses, including a surety bond;
(C) Depositors;
(D) General creditors, including secured
creditors to the extent that their claims exceed the value of their collateral;
and
(E) Distributions to members in
proportion to the shares/deposits held by each member.
(2) After all assets of the credit union have
been converted to cash or found to be worthless, and all loans and debts owing
to it have been collected or found to be uncollectible, and all obligations of
the credit union have been paid/settled, except for shares/deposits due its
members, the credit union shall close its books and compute the pro rata
distribution to its members. The computation shall be based on the total amount
in each share/deposit account as of the liquidation date or the date on which
all share drafts have cleared, whichever is later.
(3) Payments must be made to members promptly
after the pro rata distribution has been computed. The credit union may mail a
check to the member's last known address, deliver the check personally to the
member, or make the payment by wire or any other electronic means authorized by
the member.
(4) Unclaimed
share/deposit accounts, unpaid claims, and unpaid claims of members or
creditors who failed to cash their final distribution checks shall be escheated
in accordance with Texas laws.
(5)
The Department shall be notified in writing within five days after the final
distribution of assets to the members begins.
(h) Economic benefit. No director or senior management employee may receive any economic benefit in connection with the voluntary liquidation of the credit union other than compensation and other benefits paid to directors and senior management employees in the ordinary course of business.
(i) Continued supervision of voluntary liquidation.
(1) A
voluntary liquidation of a credit union shall be conducted only with the
continued supervision of the Department. The commissioner may conduct any
examinations of the credit union the commissioner considers necessary or
appropriate.
(2) The credit union
shall submit a report to the Department within 10 business days after the start
of liquidation showing the credit union's balance sheet as of the start of
liquidation. The liquidating credit union shall submit a report of progress as
requested by the Department.
(3) If
the commissioner has reason to conclude the voluntary liquidation of a credit
union is not being safely or expeditiously conducted, or is being conducted in
violation of this section, the commissioner may take possession of the business
and property of the credit union in the same manner, with the same effect, and
subject to the same rights accorded the credit union as if the commissioner had
issued a liquidation order. The commissioner may appoint a new liquidating
agent and proceed to liquidate the affairs of the credit union as provided in
the Finance Code, Title 3, Subtitle D, Subchapter E.
(j) Retention of records.
(1) The board of directors shall appoint a
custodian for the credit union's records that are to be retained after the
final distribution of assets.
(2)
The custodian shall retain all records of the liquidating credit union that are
necessary to establish that the credit union paid creditors, and distributed
assets to the members fairly and equitably in accordance with the approved
liquidation plan. The custodian shall retain the records for a period of five
years following the date the Department cancels the credit union's
charter.
(k) Certificate of dissolution and liquidation. Within 120 days after the credit union begins final distribution of assets to members, it shall file with the Department a duly executed Certificate of Dissolution and Liquidation.
(l) Inquiries after liquidation. It will be the responsibility of the custodian for the credit union's records to respond timely to inquiries after liquidation.
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