(a) Activities restrictions. A mutual holding company may engage
in any business activity specified in 12 U.S.C. 1467a(c)(2) or (c)(9)(A)(ii).
In addition, the business activities of subsidiaries of mutual holding
companies may include the activities specified in section 239.7(a)(6).
A mutual holding company or its subsidiaries may engage in the foregoing
activities only upon compliance with the procedures specified
in sections 238.53(c) or 238.54(b) of this chapter.
(b) Pledging stock.
(1) No mutual holding company may pledge
the stock of its resulting association, an acquiree association, or
any subsidiary savings association that was in the mutual form when
acquired by the mutual holding company (or its parent mutual holding
company), unless the proceeds of the loan secured by the pledge are
infused into the association whose stock is pledged. No mutual holding
company may pledge the stock of its subsidiary holding company unless
the proceeds of the loan secured by the pledge are infused into any
subsidiary savings association of the subsidiary holding company that
is a resulting association, an acquiree association, or a subsidiary
savings association that was in the mutual form when acquired by the
subsidiary holding company (or its parent mutual holding company).
In the event the subsidiary holding company has more than one subsidiary
savings association, the loan proceeds shall, unless otherwise approved
by the Board, be infused in equal amounts to each subsidiary savings
association. Any amount of the stock of such association or subsidiary
holding company may be pledged for these purposes. Nothing in this
paragraph shall be deemed to prohibit:
(i) The payment of
dividends from a subsidiary savings association to its mutual holding
company parent to the extent otherwise permissible; or
(ii) The payment of dividends
from a subsidiary holding company to its mutual holding company parent
to the extent otherwise permissible; or
(iii) A mutual holding company from
pledging the stock of more than one subsidiary savings association
provided that the stock pledged of each such subsidiary association
is proportionate to the proceeds of the loan infused into each subsidiary
association.
(2) Any mutual holding company that fails to make any payment on
a loan secured by the pledge of stock pursuant to paragraph (b)(1)
of this section on or before the date on which such payment is due
shall, on the first day after such payment is due, provide written
notice of nonpayment to the appropriate Reserve Bank.
(c) Restrictions on stock
repurchases.
(1) No subsidiary holding company that
has any stockholders other than its parent mutual holding company
may repurchase any share of stock within one year of its date of issuance
(which may include the time period the shares issued by the savings
association were outstanding if the subsidiary holding company was
formed after the initial issuance by the savings association), unless
the repurchase:
(i) Is in compliance with the requirements
set forth in section 239.63;
(ii) Is part of a general repurchase
made on a pro rata basis pursuant to an offer approved by the Board
and made to all stockholders of the association or subsidiary holding
company (except that the parent mutual holding company may be excluded
from the repurchase with the Board’s approval);
(iii) Is limited to the repurchase of
qualifying shares of a director; or
(iv) Is purchased in the open market
by a tax-qualified or non-tax-qualified employee stock benefit plan
of the savings association (or of a subsidiary holding company) in
an amount reasonable and appropriate to fund such plan.
(2) No mutual holding
company may purchase shares of its subsidiary savings association
or subsidiary holding company within one year after a stock issuance,
except if the purchase complies with section 239.63. For purposes
of this section, the reference in section 239.63 to five percent refers
to minority shareholders.
(d) Restrictions on waiver of dividends.
(1) A mutual holding company
may waive the right to receive any dividend declared by a subsidiary
of the mutual holding company, if—
(i) No insider of the mutual
holding company, associate of an insider, or tax qualified
or non-tax-qualified employee stock benefit plan of the mutual holding
company holds any share of the stock in the class of stock to which
the waiver would apply; or
(ii) The mutual holding company gives
written notice to the Board of the intent of the mutual holding company
to waive the right to receive dividends, not later than 30 days before
the date of the proposed date of payment of the dividend, and the
Board does not object to the waiver.
(2) A notice of a waiver under paragraph
(d)(1)(ii) of this section shall include a copy of the resolution
of the board of directors of the mutual holding company together with
any supporting materials relied upon by the board of directors of
the mutual holding company, concluding that the proposed dividend
waiver is consistent with the fiduciary duties of the board of directors
to the mutual members of the mutual holding company. The resolution
shall include:
(i) A description of the conflict of
interest that exists because of a mutual holding company director’s
ownership of stock in the subsidiary declaring dividends and any actions
the mutual holding company and board of directors have taken to eliminate
the conflict of interest, such as waiver by the directors of their
right to receive dividends;
(ii) A finding by the mutual holding
company’s board of directors that the waiver of dividends is consistent
with the board of directors’ fiduciary duties despite any conflict
of interest;
(iii)
If the mutual holding company has pledged the stock of a subsidiary
holding company or subsidiary savings association as collateral for
a loan made to the mutual holding company, or is subject to any other
loan agreement, an affirmation that the mutual holding company is
able to meet the terms of the loan agreement; and
(iv) An affirmation that a majority
of the mutual members of the mutual holding company eligible to vote
have, within the 12 months prior to the declaration date of the dividend
by the subsidiary of the mutual holding company, approved a waiver
of dividends by the mutual holding company, and any proxy statement
used in connection with the member vote contained—
(A) A detailed
description of the proposed waiver of dividends by the mutual holding
company and the reasons the board of directors requested the waiver
of dividends;
(B) The
disclosure of any mutual holding company director’s ownership of stock
in the subsidiary declaring dividends and any actions the mutual holding
company and board of directors have taken to eliminate the conflict
of interest, such as the directors waiving their right to receive
dividends; and
(C) A provision
providing that the proxy concerning the waiver of dividends given
by the mutual members may be used for no more than 12 months from
the date it is given.
(3) The Board may not object to a waiver
of dividends under paragraph (d)(1)(ii) of this section if:
(i) The
waiver would not be detrimental to the safe and sound operation of
the savings association;
(ii) The board of directors of the mutual
holding company expressly determines that a waiver of the dividend
by the mutual holding company is consistent with the fiduciary duties
of the board of directors to the mutual members of the mutual holding
company; and
(iii)
The mutual holding company has, prior to December 1, 2009—
(A) Reorganized
into a mutual holding company under section 10(o) of HOLA;
(B) Issued minority stock either
from its mid-tier stock holding company or its subsidiary stock savings
association; and
(C) Waived
dividends it had a right to receive from the subsidiary stock savings
association.
(4) For a mutual holding company that does not
meet each of the conditions in paragraph (d)(3) of this section, the
Board will not object to a waiver of dividends under paragraph (d)(1)(ii)
of this section if:
(i) The savings association currently
operates in a manner consistent with the safe and sound operation
of a savings association, and the waiver is not detrimental to the
safe and sound operation of the savings association;
(ii) If the mutual holding company has
pledged the stock of a subsidiary holding company or subsidiary savings
association as collateral for a loan made to the mutual holding company,
or is subject to any other loan agreement, an affirmation that the
mutual holding company is able to meet the terms of the loan agreement;
(iii) Within the 12
months prior to the declaration date of the dividend by the subsidiary
of the mutual holding company, a majority of the mutual members of
the mutual holding company has approved the waiver of dividends by
the mutual holding company. Any proxy statement used in connection
with the member vote must contain—
(A) A detailed description of
the proposed waiver of dividends by the mutual holding company and
the reasons the board of directors requested the waiver of dividends;
(B) The disclosure of any
mutual holding company director’s ownership of stock in the subsidiary
declaring dividends and any actions the mutual holding company and
board of directors have taken to eliminate the conflict of interest,
such as the directors waiving their right to receive dividends; and
(C) A provision providing
that the proxy concerning the waiver of dividends given by the mutual
members may be used for no more than 12 months from the date it is
given;
(iv) The board of directors of the mutual holding company expressly
determines that the waiver of dividends is consistent with the board
of directors’ fiduciary duties despite any conflict of interest;
(v) (A) A majority of the entire board of directors of the mutual
holding company approves the waiver of dividends and any director
with direct or indirect ownership, control, or the power to vote shares
of the subsidiary declaring the dividend, or who otherwise directly
or indirectly benefits through an associate from the waiver of dividends,
has abstained from the board vote; or
(B) Each officer or director of the mutual
holding company or its affiliates, associate of such officer or director,
and any tax-qualified or non-tax-qualified employee stock benefit
plan in which such officer or director participates that holds any
share of the stock in the class of stock to which the waiver would
apply waives the right to receive any dividend declared by a subsidiary
of the mutual holding company;
(vi) The Board does not object to the
amount of dividends declared by a subsidiary of the mutual holding
company. In reviewing whether a declaration by a subsidiary of the
mutual holding company is appropriate, the Board may consider, among
other factors, the reasonableness of the entire dividend distribution
declared if the waiver is not approved;
(vii) The waived dividends are excluded
from the capital accounts of the subsidiary holding company or savings
association, as applicable, for purposes of calculating any future
dividend payments;
(viii) The mutual holding company appropriately accounts for all
waived dividends in a manner that permits the Board to consider the
waived dividends in evaluating the proposed exchange ratio in the
event of a full conversion of the mutual holding company to stock
form; and
(ix) The
mutual holding company complies with such other conditions as the
Board may require to prevent conflicts of interest or actions detrimental
to the safe and sound operation of the savings association.
(5) Valuation.
(i) The Board will
consider waived dividends in determining an appropriate exchange ratio
in the event of a full conversion to stock form.
(ii) In the case of a savings association
that has reorganized into a mutual holding company, has issued minority
stock from a mid-tier stock holding company or a subsidiary stock
savings association of the mutual holding company, and has waived
dividends it had a right to receive from a subsidiary savings association
before December 1, 2009, the Board shall not consider waived dividends
in determining an appropriate exchange ratio in the event of a full
conversion to stock form.
(e) Restrictions on issuance
of stock to insiders. A subsidiary of a mutual holding company
that is not a savings association or subsidiary holding company may
issue stock to any insider, associate of an insider or tax-qualified
or non-tax-qualified employee stock benefit plan of the mutual holding
company or any subsidiary of the mutual holding company, provided
that such persons or plans provide written notice to the appropriate
Reserve Bank at least 30 days prior to the stock issuance, and the
Reserve Bank or the Board does not object to the subsequent stock
issuance. Subsidiary holding companies may issue stock to such persons
only in accordance with section 239.24.
(f) Applicability of rules governing savings and
loan holding companies. Except as expressly provided in this
part, mutual holding companies shall be subject to the provisions
of 12 U.S.C. 1467a and 3201 et seq. and the provisions of parts
207, 228, and 238 of this chapter.
(g) Separate vote for charitable organization contribution. In a mutual holding company stock issuance, a separate vote of a
majority of the outstanding shares of common stock held by stockholders
other than the mutual holding company or subsidiary holding company
must approve any charitable organization contribution.
