Opinion ID: 547464
Heading Depth: 3
Heading Rank: 2

Heading: Voluntary Conversions

Text: 14 Many of the Bank Board's standard conversion regulations apply to voluntary and modified conversions. 25 However, the Bank Board has promulgated separate regulations for voluntary and modified conversions. These regulations explain when the converting association may deviate from the standard conversion rules, and provide substitute rules for the association to follow. 26 15 In a voluntary conversion, a majority of the converting association's board of directors must approve the conversion plan. 27 The converting association's members, however, have no right to approve or otherwise participate in the conversion process. 28 Therefore, the Bank Board must ensure that the plan is or would be in the association members' best interest. 16 Before the Bank Board will consider authorizing a voluntary conversion, two requirements must be met. First, the association's liabilities must exceed its assets according to generally accepted accounting principles (GAAP). 29 In other words, the association must be GAAP-insolvent. Second, the association must demonstrate that it would be a viable entity after the conversion. 30 To create a viable entity, the prospective acquirer of the association must infuse capital into the association sufficient to achieve a required ratio of net worth to total liability. 31 The acquirer must also convince the Bank Board that the conversion transaction taken as a whole is in the best interests of, and does not present the potential for injury to, the converting institution, its depositors and the FSLIC [Federal Savings and Loan Insurance Corporation]. 32 17 To obtain authorization for a voluntary conversion, the converting association must file a special application with the Bank Board. The filing of this application must comply with certain procedural requirements. 33 The conversion application itself must comply with numerous substantive requirements. It must contain: a plan of conversion describing the proposed purchasers of the converted association's stock, the sale of the stock, and the type of stock to be sold; opinions of independent attorneys and certified public accountants; a business plan for the converted association; an audited balance sheet and financial statements of the association; and a proposed charter and set of bylaws for the converted association. 34 The application also must include Change-In-Control Act notices for each proposed conversion stock purchaser. 35 If the converting association files a proper conversion application, is GAAP-insolvent, and has shown that it would be a viable entity after conversion, the Bank Board may authorize the association's voluntary conversion. 36