Chap. 449.—An ACT to provide for the incorporation, establishment and opera-
tion of loan and savings institutions known as “credit unions.” [H B 407]

Approved March 2/7, 1922.

1. _Be it enacted by the general assembly of Virginia, That credit
unions may be hereafter incorporated and operated in this State
under the following conditions:

Sec. 1. Incorporation and by-laws.—Any eight persons, residents
of the State of Virginia, may, by executing, filing and recording a
certificate as provided for in chapter one hundred and forty-eight
of the Code of Virginia, except as otherwise herein provided, estab-
lish a corporation for the purpose of accumulating and investing the
Savings of its members, making loans to members for provident
purposes, and generally conducting a credit union as hereinafter pro-
vided. Every corporation organized under this act shall include
in the corporate name the two words “credit union” and other dis-
tinguishing word or words shall be used.

Immediately after the granting of the certificate of incorporation
by the State corporation commission, the incorporators or members
shall adopt a set of by-laws in conformance with this act, and shall
file a copy of the same with the banking department of the State
corporation commission. When the by laws are filed with and ap-
proved by the chief bank examiner, the minimum amount of capital
stock subscribed for, and all requirements of law as to organization
are complied with, the State corporation commission shall thereupon
issue a certificate authorizing the credit union to commence business.

The by-laws shall specify: (a) The date of the annual meeting,
which shall be in January of each calendar year, requirements as to
notice and matter of conduct of meeting; (b) the number of directors,
which shall be not less than five, all of whom must be shareholders
and members of the corporation, their powers and duties, and the
compensation and duties of all officers; (c) the conditions and quali-
fications for membership; (d) the number of members of the credit
committee and of the supervisory committee, with their respective
powers and duties; (e) the conditions upon which shares may be
issued, transferred and withdrawn; (f) the charges, if any, to be made
for failure to meet obligations punctually; (g) the conditions upon
which deposits may be received and withdrawn, and whether the
corporation shall have the power to borrow; (h) the manner in
which the funds of the corporation may be invested; (1) the con-
ditions upon which loans may be made and repaid; (j) the method
of receipting for money paid in on account of shares, deposits or
loans; (k) the manner in which the reserve fund shall be accumu-
lated; (1) the manner in which dividends shall be determined and
paid out.

The State corporation commission, through the chief bank exam-
iner, shall have the power to require the credit union to amend or
change its by-laws, should such seem desirable, and upon the refusal
of any credit union so to do, its license to operate shall be suspended
by the State corporation commission.

Sec, 2. Amendments to by-laws.—The by-laws when so approved
and filed shall be the by-laws of the corporation and no amendments
shall be operative unless same shall conform to the provisions of this
act and be approved by the chief bank examiner.

Sec. 3. Restriction of term “credit union.”—The use by any per-

son, copartnership, association or corporation, except corporations
formed under the provisions of this act, of any name or title which
contains the words “credit union,” shall be a misdemeanor, and pun-
ishable by a fine of not less than ten nor more than one hundred
dollars for each day of the illegal use of such name, and may be
enjoined by any court having equity jurisdiction over the party or
parties.
_ Sec. 4. Powers.—The credit union may receive the savings of
its members in payments for shares or on deposit; may loan to its
members or may undertake such other activities relating to the
purposes of the corporation as its charter or by-laws may authorize,
not inconsistent with the provisions of this act.

Sec. 5. Membership——The membership of the corporation shall
consist of the incorporators and such persons, societies, associations,
partnership and corporations as have been duly elected to member-
ship and have subscribed for one or more shares and have paid for
the same-’in whole or in part, together with the entrance fee as
provided in the by-laws and have complied with such other require-
ments as the certificate of organization and by-laws may contain.

Sec. 6. Reports; examinations; supervision.—Corporations or-
ganized under the provisions of this act shall be subject to such super-
vision and examination as the State corporation commission may,
within its discretion, deem necessary. Every such corporation shall
make a report of condition to the department of banking of the State
corporation commission on the dates of the second and fifth calls
made on State banks. These reports shall be verified by the oath
of the president and the treasurer or secretary, or by the oath of a
majority of the members of the supervisory committee, and they
shall make such further reports under oath as the State corporation
commission or the chief bank examiner shall at any time demand.
Any such corporation which neglects or refuses to make any report
called for shall be subject to fine, to be imposed by the State cor-
poration commission, of not more than ten dollars for each day of
said neglect, unless execused by the commission for good cause
shown.

Each credit union shall be examined at least once a year, but
he chief bank examiner may, in his discretion, order other examina-
ions; and the examiners shall be given free access to all books,
papers, securities and other sources of information in respect to said
corporation. At the time of examination the bank examiner shall
charge an examination fee which shall not exceed fifteen dollars,
unless the resources of the credit union so examined shall be in ex-
cess of one thousand dollars. Credit unions having resources in ex-
cess of one thousand dollars shall pay to the chief bank examiner
at the time of examination the sum of twenty-five dollars for each
one hundred thousand dollars of resources or fraction thereof. For
the purpose of making such examination the chief bank examiner,
or one of his assistants, shall have the power and authority to
subpoena and to examine personally, or by one of his assistants,
witnesses an oath, whether such witnesses are members of the cor-
poration or not, and to require the production of all documents,
whether said documents are documents of the corporation or not.
In the event that any such corporation shall continue to neglect or
refuse to make its reports as hereinbefore provided for more than
fifteen days, or in the event that any such corporation shall fail to
pay such charges as are herein required, including the charges for
delay in filing reports, the chief bank examiner shall give notice to
such corporation of his intention to revoke the certificate of ap-
proval of said corporation for said neglect or failure, and if such
neglect or failure continues for fifteen days after such notice, then
the State corperation commission may, upon motion of the chief
bank examiner, revoke or suspend the license of the corporation ;
and may, in its discretion, close said corporation and take possession
of its property and business until such time as it may see fit to allow
the corporation to resume business, or may proceed to finally liqut-
date said business, as may seem proper.

In the event that it appear to the chief bank examiner that any
such corporation is violating any provisions of this act, he may,
after a hearing or an opportunity for a hearing has been given tc
said accused corporation, direct that said corporation discontinue the
illegal methods or practices mentioned in his order; subject to appea
by the accused corporation to the State corporation commission. [1
any credit union is insolvent, or has failed or refused to comply with
the provisions of this act, the chief bank examiner, upon order o'
the State corporation commission, shall take possession of the busi.
ness and property of such corporation and retain such possession un:
til such time as he may permit it to resume business, or until it:
affairs are finally liquidated under order of the State corporatior
commission.

All expenses incident to any special examination which may b
necessary may be ordered to be paid by the credit union so examined

Sec. 7. Fiscal year and meetings; regulations as to voting —Th
fiscal year of every such corporation shall end at the close of busines
on the thirty-first day of December. The annual meeting of the cor
poration shall be held in January. Special meetings may be helc
by order of the directors or of the supervisory committee, and shal
be held upon request in writing of ten per centum of the members
Notice of all meetings of the corporation shall be given in the manne
prescribed in the by-laws. At all meetings of members a member
shall have but one vote, irrespective of the number of shares held
No shareholder may vote by proxy but a society, association, copart-
nership or corporation, having membership in the credit union, may
be represented by one person authorized by said society, association
copartnership or corporation to so represent it. At any meeting
the members may decide upon any question of interest to the corpo-
ration, and overrule the board of directors, and by a three-fourths
vote of those present and represented, provided the notice of the
meeting shall have specified the question to be considered, may vote
to amend the by-laws.

Sec. 8. At the annual meeting the members shall elect a board
of directors of not less than five members, a credit committee and
a supervisory committe of not less than three members each. How-
ever, in the discretion of the members the board of directors as such
may also be the credit committee. Except as herein specified, no
member of said board shall be a member of either of said committees,
nor shall one person be a member of more than one of said commit-
tees, and all members of committees and all directors, as well as
all officers whom they may elect, shall be sworn, and shall hold their
several offices for such term as may be determined by the by-laws.

The oath required of each director, officer and member of com-
mittee, shall be the oath of the individual taking the same that he
will, as far as the duty devolves upon him, diligently and honestly
administer the affairs of such corporation and will not knowingly
violate or willingly permit to be violated any of the provisions of law
applicable to such corporation, and that he 1s the owner in good
faith and in his own right on the books of the corporation of at least
one share therein. Such oath shall be subscribed by the individual
making it and certified by the officer before whom it is taken and
shall immediately be transmitted to the chief bank examiner and
filed and preserved in his office.

Sec. 9. Directors and officers ; compensation.—At their first meet-
ing, and at each first meeting in the fiscal year, the board of directors
shall elect from their number a president, vice-president, a secretary
and a treasurer. The offices of secretary and treasurer may, if the
by-laws so provide, be held by one person; and other officers may be
elected in the discretion of the directors. The board of directors shall
have the general management of the affairs, funds and records of
the corporation, and shall meet as often as may be necessary. Unless
the by-laws shall specifically reserve all or any of these duties to the
members it shall be the special duty of the directors: (a) To act
upon all applications for membership and the expulsion of members :
(b) to fix the amount of the surety bond which shall be required of
each officer having the custody of funds. The surety on said bond
shall be some solvent surety company licensed to do business in
Virginia and the amount thereof to be approved by the chief bank
=xaminer; (c) to determine from time to time the rate of interest
which shall be allowed on deposits and charged on loans; (d) to fix
the maximum number of shares which may be held by and the maxi-
mum amount which may be lent to any one member; to declare divi-
dends; and to recommend amendments to the by-laws; (e) to fill
vacancies in the board of directors or in the credit committee until
tne election and qualification of successors; (f) to have charge of
the investment of the funds of the corporation, and to perform such
other duties as the members may from time to time authorize.

No member of the board of directors or of the credit or super-
visory committee shall receive any compensation for his services as a
member of said board or committee.

Sec. 10. Credit committee—The credit committee shall approve
every loan or advance made by the corporation to members. Every
application for a loan shall be made in wniting on a form prepared
by the board of directors and shall state the purpose for which the
loan is desired and the security offered. No loan shall be made
unless it has received the unanimous approval of those members of
said committee who were present when it was considered, which
number shall constitute at least a majority of the members of said
committee, nor if any member of said committee shall disapprove
thereof, but the applicant for a loan may appeal from the decision
of the credit committee to the board of directors. The credit com-
mittee shall meet as often as may be required after due notice has
been given to each member.

Sec. 11. Supervisory committee; audit and report.—The super-
visory committee shall inspect the securities, cash and accounts of the
corporation and supervise the acts of its board of directors, credit
committee and officers. At any time the supervisory committee, by
a unanimous vote, may suspend the credit committee or any member
thereof, or any member or members of the board of directors, or
any officer or officers elected by the board, and by a majority vote
they may call a meeting of the shareholders to consider any violation
of this act or of the by-laws, or any practice of the corporation which,
in the opinion of said committee, is unsafe and unauthorized. Within
seven days after the suspension of the credit committee, or any mem-
ber thereof or of any dirertor or officer the supervisory committee
shall cause notice to be given of a special meeting of the members tc
take action relative to such suspension. The supervisory committee
shall fill vacancies in their own number until the next meeting of
the members.

At the close of each fiscal year, the supervisory committee shal:
make or cause to be made a thorough audit of the receipts, disburse.
ments, income, assets and liabilities of the corporation for the saic
fiscal year, and shall make a full report thereon to the directors
Said report shall be read at the annual meeting of the members anc
shall be filed and preserved with the records of the corporation.
Sec. 12. Capital; par value of shares; entrance fee; transfer fee.
—The capital of a credit union shall consist of the payments that
have ‘been made to it by the several members thereof on shares. The
par value of the shares shall be five dollars per share and shall be
paid for in money only. Shares may be subscribed for and paid in
such manner as the by-laws shall prescribe, not inconsistent with
the provisions of this act. A credit union shall have a lien on the
shares of any member and upon any dividends payable thereon for
and to the extent of any loan made to him and of any dues and
fines payable by him. A credit union may, upon the resignation or
expulsion of a member, cancel the shares of such member and apply
the withdrawal value of such shares towards the liquidation of the
said member’s indebtedness.

A credit union may, if the by-laws so provide, charge an entrance
fee for each share subscribed, to be paid by the shareholder upon
his election to membership.

Fully paid shares of a credit union may be transferred to any
person on election to membership, upon such terms as the by-laws
may provide, and the payment of a transfer fee which shall not
exceed twenty five cents per share. .

Sec. 13. Shares and deposits of minors and in trust.—Shares
may be issued and deposits received in the name of a minor, and such
shares and deposits may be withdrawn by such minor, and in such
case payments made on such withdrawals shall be valid. If shares
are held or deposits made in trust the name and residence of the
beneficiary shall be disclosed and the account shall be kept in the
name of such holder as trustee for such person. Such shares and
deposits may, upon the death of the trustee, be withdrawn by the
person for whom the shares were held or for whom such deposits
were made by his legal representatives.

Sec. 14. Charges and penalties—For failure by any member of
a credit union to meet his payments on shares when due, such
charges and other penalties may be imposed upon the delinquent mem-
ber as the by-laws provide. Such charges shall not exceed one and
one-half per centum per month or a fraction thereof on amounts due,
except that a minimum charge of five cents may be imposed.

Sec. 15. Deposits——A credit union may receive the savings and
deposits of 1ts members in such amounts and upon such terms as the
board of directors may determine and the by-laws shall provide. A
credit union may also receive deposits from non-members, subject
to such terms as the by-laws may provide.

Sec. 16. Rates of interest—A credit union may lend to its mem-
bers at reasonable rates, or invest as hereinafter provided, the funds
accumulated. The rates of interest shall not exceed one and one-half
per centum per month computed on unpaid balances.

Sec. 17. Power to borrow.—lIf ithe by-laws so provide, a credit
union shall have the power to rediscount, as hereinafter provided,
yr to borrow money from amy source in addition to receiving deposits
1s indicated in section fifteen, but the aggregate amount of redis-
‘counts and borrowings shall at no time exceed the sum total of the
‘apital, surplus and reserve funds of such borrowing credit union.

Sec. 18. Investment of funds.—The capital, deposits, undivided
orofits and reserve fund of the corporation may be invested in the
following ways, and in such ways only: (a) Lent to members of the
corporation in accordance with the provisions of this act; (b) de-
posited to the credit of the corporation in other credit unions char-
tered by this State, State banks or trust companies, incorporated
under the laws of this State, or in national banks operating in this
State; (c) not more than ten per centum of the capital stock and re-
serve fund of a credit union may be invested in the stock of other
credit unions; (d) invested in any investment which is legal for
savings banks in the State of Virginia.

Sec. 19. Loans.—As provided in section eighteen, a credit union
may loan to its members for such purposes and upon such security
and terms as the by-laws shall provide and the credit committee
shall approve; but security must be taken for any loan in excess of
fifty dollars. Endorsement of a note or assignment of shares in any
credit union shall be deemed security in the meaning of this section.

A member who needs funds with which to purchase necessary
supplies for growing crops may receive a loan in fixed monthly
installments instead of in one sum, :

The supervisory committee shall appoint a substitute to act on the
credit committee in the place of any member in case such membet
makes application to borrow money from a credit union or become
surety for any other member whose application for a loan is under
consideration.

All officers and members of any committee in any way knowingly
permitting or participating in making a loan of funds of a credit
union to a non-member thereof shall be guilty of a misdemeanor
The credit union shall have the right to recover the amount of such
illegal loans from the borrower or from any officer or member ot
committees who knowingly committed or participated in the making
thereof, or from all of them jointly. _

A borrower may repay the whole or any part of his loan on any
day on which the office of the corporation is open for the transactior
of business.

Sec. 20. Reserve fund—All entrance fees, transfer fees, anc
charges shall, after the payment of organization expenses, be knowr
as reserve income, and shall be added to the reserve fund of th
corporation.

At the close of each fiscal year there shall be set apart to the
reserve fund twenty per centum of the net income of the corporatiotr
which has accumulated during the year. But upon the recommenda
tion of the board of directors the members at an annual meeting may
increase, and whenever said funds equal the amount of the capita
may decrease the proportion of profits which is required by this sec-
tion to be set apart to the reserve fund.

The reserve fund shall belong to the corporation and shall be
held to meet contingencies, and shall not be distributed to the mem-
bers except upon dissolution of the corporation.

Sec. 21. Dividends.—At the close of the fiscal year a credit union
may declare a dividend from the net earnings. Dividends shall be
paid on all fully paid shares outstanding at the close of the fiscal
year, but shares which become fully paid during the year shall be
entitled to a proportional part of said dividend calculated from the
first day of the month following such payment in full.

Sec. 22. Notes, drafts, bills of exchange.—Notes, drafts, and bills
of exchange, executed for the purpose of this act, having a maturity
not to exceed six months, and endorsed by a national bank, a State
bank or trust company, may be rediscounted in the open market. The
total of such paper outstanding shall at no time exceed the paid-in
capital and surplus ; provided, however, that the chief bank examiner
in his discretion may extend this limit temporarily, and provided
further, that the limitation here fixed shall not be considered money
borrowed under section seventeen.

Sec. 23. Expulsion and withdrawal—At any regularly called
meeting, the members by a two-thirds vote of those present may expel
from the corporation any member thereof. A member may withdraw
from a credit union or a hon-member may withdraw deposits, as
hereafter provided, by filing a written notice of such intention.

All amounts paid in on shares of an expelled or withdrawing mem-
ber, with any dividends credited to his shares to the date of expulsion
or withdrawal, shall be paid to such member in the order of expulsion
or withdrawal and only as funds therefor become available, after
deducting any amounts due to the corporation by said member. All
deposits of an expelled or withdrawing member, with any interest
acrued, shall be paid to such member subject to sixty days’ notice
and after deducting any amounts due the corporation by said member.
Said member when withdrawing shares or deposits shall have no
other or further right in said credit union or to any of its benefits,
but such expulsion or withdrawal shall not operate to relieve said
member from any remaining liability to the corporation.

Sec. 24. Voluntary dissolution—Any credit union may dissolve
in accordance with the provisions of chapter one hundred and forty-
seven of the Code of Virginia, pertinent thereto.

Sec. 25. Change of place of business—A credit union may change
its place of business on written notice to and approval of the chief

bank examiner.