# Title 6 — Banks and Banking

## Chapter 6-06.2 — Cooperative Financial Institutions

### § 6-06.2-01. Definitions.

1. "Converted organization" means the banking institution, credit union, or other financial
institution previously authorized by the commissioner to engage in the business of
banking under the laws of this state and has been converted into a cooperative
financial institution under this chapter.
2. "Member" means a holder of a cooperative financial institution savings, demand, or
other authorized deposit account.
3. "Originating member" means an individual who seeks to form a cooperative financial
institution under this chapter.
### § 6-06.2-02. Formation.

Fifteen or more originating members who intend to associate themselves by written
agreement and a cooperative financial institution may, upon compliance with this title, become a
cooperative financial institution, with all the powers and privileges and subject to the duties,
restrictions, and liabilities under section 6-03-02.
### § 6-06.2-03. Capital structure.

A cooperative financial institution formed under this chapter shall have a capital structure
the state banking board or commissioner determines is adequate. The cooperative financial
institution shall comply with prompt corrective actions requirements of section 6-01-04.4. A
cooperative financial institution is not authorized to issue capital stock, common stock, preferred
stock, or other forms of equity ownership authorized by this title for other types of banking
associations.
### § 6-06.2-04. Contents of agreement of association.

1. Before the formation of a cooperative financial institution under this chapter, the
originating members of the proposed cooperative financial institution shall execute a
written agreement of association to form a cooperative financial institution. The written
agreement of association must identify and comply with the capital structure required
by the state banking board and must specifically state:
a. That the originating members of the cooperative financial institution intend to
associate themselves with the intention of forming a cooperative financial
institution;
b. The name of the cooperative financial institution;
c. The location of the principal office of the cooperative financial institution;
d. The purposes for which the cooperative financial institution is formed and the
nature of the business the cooperative financial institution is to conduct; and
e. The names and addresses of each originating member of the financial institution.
2. Each originating member shall subscribe to the agreement of association before
submission to the state banking board.
### § 6-06.2-05. Organization certificate - Contents.

Before formation of a cooperative financial institution under this chapter, originating
members who wish to associate themselves in a cooperative financial institution shall sign and
execute an organization certificate on a form prescribed by the commissioner, which must state:
1. The name of the cooperative financial institution. The name may not be the name of
any other bank, credit union, or financial institution previously incorporated within the
this state;
2. The location of the principal office of the cooperative financial institution at which
business will be conducted;
3. The names and places of residence of the originating members; and

4. The respective dates on which the cooperative financial institution will commence
business.
### § 6-06.2-06. Acknowledgment of organization certificate - Application for certificate of

authority - Notice of hearing.
The organization certificate must be notarized. The authenticated certificate must be
transmitted to the state banking board with a request for permission to present the certificate to
the secretary of state, with application for the issuance of a certificate of authority, as well as
payment of an application fee. The commissioner shall establish the application by rule. After
receipt of the proposed organization certificate, application, and application fee, the board shall
publish the application in the official newspaper of the county the cooperative financial institution
is proposed to be established. The notice must contain a statement of a time and place at which
the board will hear the application and must specify that any individual objecting the application
may appear and show cause why the application should not be approved.
### § 6-06.2-07. Hearing by board - Conclusions - Management - Confidentiality.

1. At the hearing, the board shall inquire whether the originating members have the
character, integrity, reputation, and financial standing shown by a detailed financial
statement, to demonstrate the establishment of the proposed cooperative financial
institution will be beneficial to the public welfare of the community where the
cooperative financial institution will be located. The board shall keep financial
statement furnished by the originating members confidential.
2. The board shall inquire into the qualifications of the management of the proposed
cooperative financial institution, including any experience with financial institutions and
other related experience. The board shall keep any inquiry into the qualifications of the
proposed management confidential.
3. The board shall hear any reasons advanced by the originating members as to why the
members should be permitted to organize the cooperative financial institution.
4. At the conclusion of the hearing, the board shall make a statement in writing of its
conclusions and conditions, if any, and if it finds the proposed cooperative financial
institution may not be permitted to organize, the board shall state the reasons why. If
approval is granted, a copy of the board's order must be attached to the organization
certificate and both must be presented to the secretary of state. A determination to
approve the organization of the cooperative financial institution must be joined by a
majority of all the members of the board.
### § 6-06.2-08. Determination of board - Recording of organization certificate.

1. If the state banking board votes to approve the application to organize a cooperative
financial institution, the organization certificate and permission of the board must be
recorded in the county where the cooperative financial institution will be established
and must be transmitted to the secretary of state.
2. The secretary of state shall certify the facts to the state banking board and record the
document in the secretary of state's office. The secretary of state shall issue a
certificate of authority to the cooperative financial institution.
3. The secretary of state shall send the certificate to the commissioner. The
commissioner may not issue the certificate until an examination is made and the
certificate of the commissioner stating the capital structure as required by the state
banking board has been acquired, federal deposit insurance corporation insurance of
deposits has been secured, and all conditions of the law have been complied with
strictly.
4. If the determination of the state banking board is against the organization of the
cooperative financial institution, the organization certificate may not be recorded in the
office of the recorder and may not be accepted by the secretary of state.

### § 6-06.2-09. Conversion to or from a cooperative financial institution.

1. Any banking institution, credit union, or financial institution authorized by the
commissioner to engage in the business of banking under the laws of this state, laws
of the United States, or laws of another state may be converted into a cooperative
financial institution.
2. A cooperative financial institution may convert to a federal savings association by
complying with the following requirements:
a. The proposition for conversion must be approved by a majority of the directors of
the organization that seeks conversion. If approved by a majority of the directors,
the directors shall set a date for a vote by the members either at a meeting or by
written ballot to be filed on or before the date. Written notice of the proposition
and the date set for the vote must be delivered in person to each member or
mailed to each member at the address for the member appearing on the records
of the organization, between seven and thirty days before the date. Conversion
must be approved by two-thirds of the members participating in the vote.
b. Each member of the credit union is entitled to one vote during regular or special
meetings of the membership.
c. The voting rights for a banking institution or financial institution are determined by
applicable law.
d. Forty-five days before consideration of a conversion, the membership or board
acting on the proposed change must be notified of the bylaw change under
consideration and of the date and time of the meeting the change will be acted
on.
e. Promptly after the vote is taken, but no more than ninety days after, if the
proposition for conversion was approved, the organization seeking conversion
shall provide the state banking board with the results of the vote, verified by the
affidavits of the president or vice president and secretary.
f. A cooperative financial institution converting to a federal savings association shall
provide notice of completion of subdivisions a, b, c, d and e, and may not be
subject to any other provision of this chapter. The converted cooperative financial
institution shall provide notice to the state banking board upon commencement of
operations as a federal savings association, at which time the state charter must
be terminated.
3. If a cooperative financial institution converts to a state-chartered credit union, the
institution shall:
a. Obtain federal deposit insurance.
b. File with the commissioner an organization certificate as required in section
commissioner.
c. Obtain approval from the state credit union board.
### § 6-06.2-10. Application for conversion.

1. A banking institution, credit union, or financial institution may be converted to a
cooperative financial institution under this chapter through submission of an
application, which must include:
a. A statement of the results of the vote to approve the conversion, along with
affidavits of the president or vice president and secretary;
b. A completed form, prescribed by the commissioner, requesting an amendment to
the organization certificate;
c. A copy of the executed bylaws to establish the cooperative financial institution;
d. An application fee, as established by the commissioner by rule; and
e. An affirmation from the organization granting discretionary authority to the
commissioner to conduct an examination before the conversion date.
2. The commissioner shall set fees for an examination at an hourly rate sufficient to cover
all reasonable expenses of the department associated with the examination. Fees

must be collected by the commissioner, transferred to the state treasurer, and
deposited in the financial institutions regulatory fund.
3. When the commissioner determines all requirements have been met, the
commissioner shall notify the applicant and the state banking board. The board shall
instruct the secretary of state to issue an amended organization certificate for the
converted organization to operate as a cooperative financial institution. After issuance
of the amended organization certificate, the organization becomes a cooperative
financial institution and ceases to operate as originally organized. The cooperative
financial institution is vested with all assets of the prior organization and is responsible
for all of the obligations of the converted organization to the same extent as though the
conversion had not taken place.
### § 6-06.2-11. Benefit to directors or management.

1. A director or senior management official of a converted organization may not receive
any economic benefit in connection with a conversion of the converted organization
other than reasonable director fees, compensation, and other benefits paid to the
directors or senior management officials in the ordinary course of business.
2. For purposes of this section, "senior management official" means a chief executive
officer, an assistant chief executive officer, a chief financial officer, and any other
senior executive officer as may be defined by the state banking board.
### § 6-06.2-12. Adoption of rules.

The commissioner may adopt rules necessary to carry out the conversion of a banking
institution, credit union, or other financial institution to or from a cooperative financial institution
under this chapter.
### § 6-06.2-13. Review by commissioner.

The commissioner shall review the process for the conversion member vote and procedures
applicable to the member vote. The commissioner shall report the commissioner's findings to
the state banking board. If the commissioner or the state banking board disapproves of the
methods by which the conversion member vote was taken or procedures applicable to the
member vote, the member vote must be retaken as directed by the commissioner or the state
banking board.
### § 6-06.2-14. Membership, voting, meetings, and bylaws.

1. Each member of the cooperative financial institution is entitled to one vote during
regular or special meetings of the membership.
2. Voting may be conducted in-person or digital as outlined in the cooperative financial
institution's bylaws. Proxy voting is permitted as authorized in the bylaws. A quorum for
a meeting must be defined in the bylaws.
3. Changes to a cooperative financial institution's charter or bylaws require a majority
vote of the membership at an annual or special membership meeting or a two-thirds
majority vote of the board of directors. Fifteen days before consideration of a bylaw
change, the membership or board acting upon the proposed change must be made
aware of the bylaw change under consideration and the day and time of the meeting
the change will be acted upon. No amendment to the bylaws are effective until
reviewed for appropriateness and compliance with applicable law and approved by the
state banking board.
4. A cooperative financial institution shall conduct at least one meeting of the
membership annually. Meetings:
a. Must be noticed at least fifteen days before the meeting date and include the
time, place, and agenda for any items considered at the meeting.
b. May be conducted virtually if permitted within the bylaws.
5. At the annual meeting the membership shall:
a. Fill any vacancies on the board of directors as outlined in the bylaws; and

b. Review the financial conditions of the cooperative financial institution, financial
performance since the prior annual meeting, and the projection for the upcoming
year.
6. Special meetings of the membership may be called by the board of directors as
outlined in the bylaws.
7. The board of directors:
a. May exercise powers of the cooperative financial institution not expressly
reserved for the members.
b. May not be fewer than five or more than fifteen members as outlined in the
bylaws.
c. Must be elected to terms of one to three years and until their successors are
elected, and shall serve staggered terms with approximately one-third of the
board positions up for consideration at any given annual meeting, as outlined in
the bylaws.
d. Must be elected from the membership of the cooperative financial institution, and
nomination shall be made of any member in good standing and following a
nomination process as outlined in the bylaws.
e. Must set the time and place of meetings as outlined in the bylaws, with a
minimum of twenty-four hours' notice required unless waived by all members of
the board.
f. Shall elect from among the elected board members, officers, including the
positions of chair, vice chair, treasurer, and recorder, with duties and
responsibilities as outlined in the bylaws.
g. Must be independent and the majority of board of directors may not be
employees of the cooperative financial institution.
h. Must be made up of at least two members with appropriate banking experience.
i. Must be made up of at least two-thirds members who are both citizens of the
United States and North Dakota residents.
j. May remove a board member as outlined in the bylaws.
8. The board of directors may terminate membership in a cooperative financial institution
for cause as outlined in the bylaws.
