§ 20104. Effect of reorganization; ownership and governance

(a)(1) The organizational existence of the reorganizing mutual or cooperative financial institution shall not terminate, and the mutual holding company resulting from the reorganization shall be deemed to be a continuation of the entity of such financial institution, not as a depository institution but as a financial institution holding company. The depositors of the mutual or cooperative financial institution immediately prior to the reorganization shall be entitled to deposits in the mutual holding company subsidiary financial institution of like amounts, interest rate, and other terms, without interruption of interest, and such deposits shall continue to be insured by the Federal Deposit Insurance Corporation up to the maximum amount provided by law. The depositors of the mutual or cooperative financial institution immediately before the reorganization, shall, by virtue of the reorganization, have proprietary interests in the net worth of the mutual holding company of the same nature, rights, and proportions as the proprietary interests that they had in the mutual or cooperative financial institution immediately prior to the reorganization, in lieu of such former interests. Except as otherwise set forth in this section with respect to the rights of depositors, creditors of the reorganizing mutual or cooperative financial institution immediately prior to the reorganization shall be deemed to have such rights as creditors solely with respect to the mutual holding company subsidiary financial institution upon consummation of the reorganization.

(2) Except as otherwise specifically provided in the plan of reorganization adopted pursuant to section 20102 of this title, upon consummation of the reorganization into mutual holding company form, the mutual holding company subsidiary financial institution shall by operation of law be deemed to have succeeded to all rights of or in all tangible or intangible property, franchises, and interests of the mutual or cooperative financial institution, including appointments, designations, nominations, and all other rights and interests as trustee, executor, administrator, registrar of stocks and bonds, guardian of estates, assignee, and every other fiduciary capacity, in the same manner and to the same extent as such rights, franchises, and interests were held or enjoyed by the reorganizing mutual or cooperative financial institution immediately prior to the effective date of the reorganization, and without further additional assignment, appointment, or designation.

(b)(1) A mutual holding company shall not issue capital stock. Its net earnings and net worth shall inure to the benefit of the persons who are from time to time the savings depositors of its mutual holding company subsidiary financial institution and any other persons acquiring proprietary interests in the earnings and net worth of the mutual holding company, whether by merger or otherwise. Such net earnings may be distributed among such depositors and other persons at such times and in such equitable manner as the governing body of the mutual holding company, in its discretion, may determine. Apart from any such distributions, the proportionate proprietary interests of such depositors and other persons in the net earnings and net worth of the mutual holding company shall be realized only upon liquidation of the mutual holding company after the claims of all of its creditors have been satisfied. The proprietary interest of any depositor of the mutual holding company subsidiary financial institution in the net earnings and net worth of the mutual holding company shall terminate upon the complete withdrawal by such depositor of his or her accounts. Neither the depositors of the mutual holding company subsidiary financial institution nor any other persons acquiring proprietary interests in the mutual holding company shall have any voting rights in the organization.

(2) The powers of the mutual holding company shall vest in its corporators or governing body, as the case may be. The initial corporators or directors shall consist of such of the persons who were serving as corporators or directors of the reorganizing mutual or cooperative financial institution immediately prior to the reorganization and as are named in the plan of reorganization. Thereafter, the corporators or directors shall be chosen from time to time in the manner set forth in the internal governance documents of the mutual holding company. The management of the mutual holding company shall be vested in its governing body, who shall be elected by the corporators in the case of a mutual financial institution. The initial governing body shall consist of such of the persons who were serving as the directors of the mutual or cooperative financial institution immediately prior to the reorganization and as are named in the plan of reorganization. Such persons shall hold office until the first annual meeting of the corporators and until their successors have been chosen and qualified. The governing body shall hold an organizational meeting immediately following consummation of the reorganization for the adoption of internal governance documents and the election of officers in such manner as the internal governance documents may prescribe. Any action by a mutual holding company that, if taken by a business corporation, would require the approval of its shareholders under 11A Vt. Stat. Ann. chapter 10, 11, 12, or 14, shall require the vote of concurrence of the corporators of the mutual holding company and in such proportion of the corporators as would be required for the approval of similar action by shareholders of a business corporation.

(3) The general purpose of a mutual holding company shall be conducting and carrying on the business and activities of a financial institution holding company. A mutual holding company shall not take deposits. It shall have the general powers of business corporations as set forth in 11A V.S.A. § 3.02 and shall have the powers of, and be subject to the limitations on, bank holding companies under the federal Bank Holding Company Act of 1956, as amended or the Savings and Loan Holding Company Act, as amended, as the case may be. Without limiting the generality of the foregoing and subject to provisions of applicable state and federal law, a mutual holding company may:

(A) invest in the stocks and securities of any depository institution;

(B) acquire control of any depository institution;

(C) merge or consolidate with or otherwise acquire another mutual holding company;

(D) merge or consolidate any subsidiary of the mutual holding company with another subsidiary thereof or transfer all or a portion of the assets of one such subsidiary to another;

(E) make capital contributions and loans to its subsidiaries and affiliates and otherwise assist them financially;

(F) engage in, directly or indirectly through a subsidiary, any non-banking activity authorized for a bank holding company under state or federal law or regulation;

(G) issue capital debentures;

(H) pledge the common stock of its subsidiaries to secure the indebtedness of the mutual holding company, provided that the proceeds of such indebtedness are used to fund the business operations, or to effect other business purposes, of the mutual holding company or its subsidiaries; and

(I) sell or transfer the common stock of its mutual holding company subsidiary financial institution, provided that the Commissioner has approved the transaction, and provided further that it does not result in the mutual holding company holding less than 51 percent of the outstanding stock of the mutual holding company subsidiary financial institution.

(4) A mutual holding company may convert from mutual to investor-owned form subject to the same procedures and requirements as are applicable to the conversion of a mutual or cooperative financial institution to investor-owned form under chapter 206 of this title.

(5) The mutual holding company shall obtain the Commissioner’s approval before entering into any transaction described in subdivision (b)(3)(B), (C), or (D) of this section. In addition to any other applicable law governing the approval of the transaction, the Commissioner shall disapprove any transaction that is unfair to the holders of the proprietary interests in the mutual holding company. (Added 1999, No. 153 (Adj. Sess.), § 2, eff. Jan. 1, 2001.)