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Supplemental Capital and Corporate Governance "Credit News 24"

The National Credit Union Administration (NCUA) Board is inviting comments on the potential effect supplemental capital may have on the
mutual ownership structure and governance of credit unions. Specifically, the Board is exploring whether it should impose restrictions, such as non-voting and limits on covenants, in the investment agreement that may give investors levels of control over the credit union.

The Board believes that federal credit unions can issue supplemental capital only as subordinated debt. Debt holders do not have an ownership interest and cannot vote. It would not endanger the one member one vote structure of credit unions. So, the issuing of supplemental capital will not affect the mutual ownership structure of the credit unions.

However, the Board should not seek to limit covenants in the investment agreement. These covenants are the only way to protect the interest of the investors in supplemental capital. These covenants should be the result of private negotiations between investors in supplemental capital and the credit union and NCUA should not seek to abridge the rights of investors.

The Board should address what happens to a credit union if it is in violation of its covenants in the investment agreement.
Title : Supplemental Capital and Corporate Governance "Credit News 24"
link : Supplemental Capital and Corporate Governance "Credit News 24"