Compliance Blog

Happy Wednesday! Here is a little fun fact to start your day… today is National Garden Meditation Day! Since it is still the middle of the work week, it may help you to recharge by going out into your garden (or a public garden) and practicing some meditation. For inspiration, here is a picture of my cat, Quincy, meditating in front of a virtual tv garden.

So, while you’re out in the garden pondering, your mind may start to wander and think about eligibility requirements necessary to run for the board of directors (board) (if you’re a compliance professional, this isn’t too far-fetched). You may start asking yourself, what qualifications does someone need in order to run for the board? For example, do they need to have good credit? Well, no need to waste precious garden meditation time wondering, this blog has got you covered!

Under the Federal Credit Union Act, there can only be three eligibility requirements to run for the board. The three requirements are:

1. The individual must be a member before distribution of ballots;

2. The individual cannot have been convicted of a crime of dishonesty or breach of trust; and

3. The individual must meet any minimum age requirement provided in the bylaws (if any), which cannot be greater than the age of majority under the applicable state law.

So, if an individual meets each of the three criteria outlined above, they may run for a position on the board.

However, NCUA Legal Opinion Letter 88-0526 discusses Board of Directors eligibility requirements and states the following:

“…it has long been our position that, generally, the only eligibility requirements for FCU board membership are those contained in the FCU Act. That is, a[s] long as an individual is a member (§111) and has not been convicted of a crime involving dishonesty or breach of trust (5205(d)), he or she is eligible to be elected as a director. There is one exception provided in the bylaws. Article VI, Section 7, permits the board, by resolution, to establish a minimum age requirement. This is essentially the recognition of a board's implied authority to set a restriction based on intellectual and legal competence.

There are, however, no restrictions on the eligibility requirements that a nominating committee can use in selection candidates for office. We have previously stated that the nominating committee is free to set reasonable standards as to whom it will nominate. Failure to be nominated by the committee, though, does not [p]reclude a member from running for office.” (Emphasis added).

Based on the above, there are “no restrictions on the eligibility requirements that a nominating committee can use in [selecting] candidates for office.” So, going back to our example of whether an individual needs a good credit score in order to be eligible, it appears that a credit union may require a good credit score as an eligibility requirement that a nominating committee can use in selecting candidates for office. However, “failure to be nominated by the committee… does not preclude a member from running for office” so long as they meet the three eligibility requirements contained in the FCU Act.

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