OCC Proposal to Allow Virtual Meetings & Modernize Meeting Notification Requirements
The Office of the Comptroller of the Currency (OCC) has released a proposal to update its regulations to incorporate modern technologies and enable national banks and federal savings associations to hold in-person meetings, such as board of directors, shareholder and member meetings, without violating COVID-19 social distancing restrictions and any future emergency situations when in-person meetings may not be feasible.
The interim final rule (IFR), published on May 28, 2020, clarifies that national banks and federal savings associations may use remote communication tools to conduct both annual and special meetings. Institutions would first have to update their bylaws. Institutions could hold in-person meetings with some participants attending remotely or hold these meetings exclusively through remote communication. The IFR also provides that members or shareholders participating remotely will be deemed present in person for quorum requirements. These amendments will be permanent and will not expire after the COVID-19 emergency has ended.
Federal Savings Associations
The IFR leverages existing regulation language for federal mutual savings associations and federal stock savings associations that currently permit ‘‘telephonic and electronic participation.’’ Federal savings associations will be required to have procedures in place for remote participation at member or shareholder meetings. Under this IFR, a federal mutual savings association has the choice of following the remote participation procedures of the laws of its home state if these procedures exist, the Delaware General Corporation Law or the Model Business Corporation Act. The association must indicate which procedure is chosen in its bylaws. A similar requirement would apply to federal stock saving associations, except that they have an additional option to choose the procedures of the state laws where the association’s holding company is incorporated or chartered. The IFR also will make technical updates so that telephonic and electronic participation also is allowed for regular board of directors meetings.
If bylaws need to be updated, current regulations provide that, in general, a federal savings association must submit an amendment to its bylaws to the OCC 30 days prior to adoption by its board of directors and that the amendment is effective 30 days after OCC filing. However, if an association adopts a bylaw amendment that includes the language of the OCC’s model or optional bylaws without change and files the bylaw with the OCC within 30 days after adoption, the bylaws are effective upon adoption. To expedite changes, the OCC has issued optional model bylaw provisions for remote participation at shareholder and member meetings:
- Model bylaw provisions for mutual savings associations
- Model bylaw provisions for stock savings associations
The OCC also is considering updating meeting notice requirements as follows:
- Permit a federal mutual savings association to deliver the meeting notice to a member electronically if the member receives electronic communications
- Permit the federal mutual savings association to post the notice of the meeting on its website instead of in its offices
- Permit a federal stock savings association to deliver the meeting notice to the shareholder electronically if the shareholder receives electronic communications and that this electronic notice be deemed delivered when sent to the shareholder’s electronic address appearing on the books or records of the association as of the record date
The IFR will reorganize existing shareholder meeting rules in one section. The newly created section will permit a national bank to provide for telephonic or electronic participation at shareholder meetings. A national bank has a choice of procedures—its elected corporate governance procedures if those elected procedures include remote participation procedures, Delaware General Corporation Law or the Model Business Corporation Act. The procedures must not be inconsistent with applicable federal statutes and regulations and safety and soundness. National banks must inform shareholders of the bank’s choice of procedures in their bylaws. In general, federal law does not require a national bank to file its bylaws and any amendments with—or to seek approval of its bylaws from—the OCC.
Comments on the interim final rule must be received no later than July 13, 2020.
BKD will continue to follow this developing situation. As with most topics related to COVID-19, changes are being made rapidly. Please note that this information is current as of the date of publication. Visit BKD’s COVID-19 Resource Center to learn more. If you have questions about these changes, contact your BKD Trusted Advisor™ today.