Opinion ID: 547464
Heading Depth: 3
Heading Rank: 1

Heading: Standard Conversions

Text: 8 The Bank Board's regulations offer guidance to mutual associations interested in converting to stock associations. The regulations describe the characteristics of a Bank Board-approved conversion, including the roles of the association's board of directors and members, the method of sale of the converted institution's stock, and the procedure to be followed throughout the conversion process. The standard conversion, as is apparent from its name, is the most common. Many of the standard conversion regulations also apply to voluntary and modified conversions. 9 9 A standard conversion requires action by the association's board of directors as well as its members. The association's plan of conversion must be approved by at least two-thirds of the association's board of directors. 10 If approved, the association's members vote on the plan, which must be accepted by at least a majority of the total outstanding votes of the association members. 11 The Bank Board sets forth specific notice, proxy, and voting rules to ensure that the approval or disapproval of the association's members is fairly obtained. 12 10 The Bank Board also prescribes regulations concerning the sale of the converting association's stock. Each officer, director and account holder eligible to purchase stock in the converted association, plus each association voting member, must receive a certain number of subscription rights to purchase the association's stock. 13 The regulations restrict the amount of stock that may be purchased by one person or group of persons acting together, including the converting association's officers and directors. 14 11 The standard conversion regulations also dictate the price at which the converted association's stock must be sold. The total stock price must equal the association's pro forma market value, based on an independent appraisal. 15 The price per share, which must be uniform, should be between $5.00 and $50.00, and account holders should be permitted to draw from their accounts without penalty in order to pay this price. 16 The association may not lend money to any person or group of persons to purchase its stock. 17 Finally, the Bank Board's regulations provide that the sale of the converting association's stock should be conducted as quickly as possible and must be completed within 45 days. 18 Once the sale is complete, the Bank Board regulations limit repurchases of stock and payments of dividends by the converted association, and limit the ability of the association's officers and directors to resell their stock. 19 12 The Bank Board regulations specify the procedural requirements of the conversion application process. For example, the conversion must be completed within a certain amount of time, 20 the costs incurred by the converting association must be reasonable, 21 and the conversion plan must establish a liquidation account. 22 Several rules also discuss the actual filing and preparation of a conversion application. 23 13 Finally, the Bank Board has created a catch-all requirement: the conversion application may not contain any provision the Bank Board believes to be unfair or harmful to the converting association, its members, or the public interest. 24 This provision allows the Bank Board to act as a watchdog over the conversion process.