Organization of a Connecticut Credit Union
The people of Connecticut have relied upon credit union services since the 1940's. In 1945, the first Connecticut credit union was officially chartered and is still in existence today. Throughout the 1950's and 1960's, the number of credit unions in Connecticut flourished, although recent years have seen a significant consolidation in the industry. Nevertheless, the number of Connecticut credit unions members has greatly increased from 114,000 in 1968 to 295,000 in 2009 in reflection of the vital role these institutions play in today's financial services industry.
The Connecticut Department of Banking encourages the chartering of new credit unions in areas that are in need of services and where a reasonable level of growth can be expected. This summary provides a general introduction to the Department's credit union chartering process. It does not represent an all-inclusive summary of the law or a legal opinion; potential incorporators are encouraged to read section 36a-437a, C.G.S., for specific legal requirements.
Each credit union must have at least seven persons (incorporators) to begin the chartering process. The first step is for the proposed incorporators to meet with officials of the Department of Banking to discuss the economic need for the proposed credit union as well as common bond requirements. During this meeting, the proposed incorporators will be given an application to be completed and filed with the Department of Banking.
Federal share insurance is required for all Connecticut credit unions and the corporators will need to contact the National Credit Union Administration (NCUA) to obtain an application for share insurance. The Department of Banking and NCUA follow similar processes for applications and will work together to ensure that requirements are completed in time for the anticipated opening date of the proposed credit union.
Supporting Documentation Required
The incorporators will need to prepare several documents that will be filed with the application to form the credit union. A certificate of incorporation should be prepared (three copies) and should include the following:
- The credit union's name and address;
- A description of the field of membership;
- Statement of the par value of shares;
- A statement that the object is to conduct the business of a credit union, and to engage in any lawful activity. Further, that the credit union's existence is perpetual; and
- Any other lawful provision the incorporators deem appropriate.
Bylaws will also need to be developed to guide the operation of the credit union's corporate structure, as well as to guide how the board of directors and its' committees will operate. The Department of Banking will provide incorporators with model bylaws for use in developing their own. At a minimum, the bylaws should contain such information as the title and duties of officers; length of terms for directors, officers and committee members; the manner in which directors and officers will be replaced, if needed, and additional provisions the commissioner deems necessary.
One of the most critical documents to be prepared in the chartering process is a business plan that details the incorporators' business objectives, and the strategies that will be used to achieve those objectives and to operate the credit union. The Department of Banking places significant importance in the business plan prepared by the incorporators. The plan should include:
- A detailed description of the proposed field of membership;
- The number of potential members;
- Description of the membership to be served;
- Description of the competition in the market to be served;
- Proposed mission of the credit union;
- Growth projections for the first three years of operations, including a balance sheet and income statement for each year;
- Description of the management of the credit union;
- Details of marketing strategies to be employed;
- Information about the sponsoring organization, including services to be provided by the sponsor;
- Information concerning the office and premises to be used by the credit union, including cost to buy/lease, cost of furniture and fixtures, hours of operation; and
- Detailed discussion of arrangements and methodology used for bookkeeping and accounting.
When the completed application is submitted to the Department of Banking, a review will be conducted. Within thirty days from the date when the application is complete, the Commissioner will furnish to the incorporators a written notice of the determination as to whether:
- The proposed field of membership is favorable to success;
- The incorporators are of good character;
- The certificate of organization meets all requirements;
- The proposed bylaws meet all requirements.
If the application is approved, the incorporators will hold an organizational meeting within a reasonable time period. During this meeting, directors will be elected and the bylaws will be adopted.
The organization of a credit union requires time, planning and effort on the part of the incorporators. Officials of the Department of Banking are always available during this process to answer questions or to assist in preparing required documents. Contact key personnel of the Financial Institutions Division.
Once established, a new credit union can expect advice and assistance from the division so that directors, officers and committees understand their responsibilities and obligations under the law.