Nonstandard Bylaw Amendment

90-0405 / June 1990
Nonstandard Bylaw Amendment

SSIC 3700


FROM: Hattie M. Ulan, Associate General Counsel

SUBJ: [redacted] Nonstandard Bylaw Amendment

(Your March 29 1990 Memorandum)
Date: June 4, 1990

You have asked that we comment on a proposed nonstandard bylaw amendment submitted by [redacted]. You have indicated that you are inclined to approve the amendment.


The proposed amendment adds Section 8, providing for indemnification of the FCU's officials and employees under the Model Business Corporation Act, to Article XIX of the bylaws. The FCU's attorney has made several modifications the standard language, in order to: 1) assure officials a employees of the credit union that they will be indemnified as long as they act in good faith; 2) more closely follow language of the Model Business Corporation Act; and 3) clarify that the credit union does not intend to extend indemnification beyond the confines of the Model Business Corporation Act.

We recommend that the proposed amendment not be approved. The standard bylaw adequately addresses counsel's concerns providing that officials and employees may be indemnified only "to the extent authorized by the [Model Business Corporation Act]." Additional restrictions may be adopted board resolution and need not be part of the bylaws.

Furthermore, the standard bylaw amendment was developed that NCUA would not be required to engage in the time-consuming process of reviewing every proposed indemnification bylaw to ensure compliance with state law or the Model Business Corporation Act. Retreating from that position in the instant case might open the door to consideration of numerous similar nonstandard bylaws in the future. Attached is an earlier memorandum addressing a similar issue.


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