32-3-205. Cease and desist orders -- suspension -- involuntary liquidation.
32-3-205. Cease and desist orders -- suspension -- involuntary liquidation. (1) The department of administration may issue cease and desist orders after having determined, from competent and substantial evidence, that a credit union:
(a) is engaged or is about to engage in an unsafe or unsound practice; or
(b) is violating or has violated a material provision of any law, rule, or condition imposed in writing by the department or any written agreement made with the department.
(2) (a) The department may suspend from office and prohibit from further participation in any manner in the conduct of the affairs of a credit union any director, officer, or committee member who has committed any violation of a law, rule, or cease and desist order, who has engaged in or participated in any unsafe or unsound practice in connection with the credit union, or who has committed or engaged in any act, omission, or practice that constitutes a breach of that person's fiduciary duty as a director, officer, or committee member when the department has determined that:
(i) the action of the director, officer, or committee member has resulted or will likely result in substantial financial loss or other damage;
(ii) the interests of the credit union's members have been or may be prejudiced by the action of the director, officer, or committee member;
(iii) the director, officer, or committee member has received financial gain or other benefit as a result of the action; or
(iv) the action of the director, officer, or committee member involves personal dishonesty or demonstrates unfitness to serve as a director, officer, or committee member.
(b) A director, officer, or committee member suspended from office pursuant to subsection (2)(a) may request a hearing under the Montana Administrative Procedure Act.
(3) (a) If it appears that a credit union is bankrupt or insolvent or that it has willfully violated this chapter or is operating in an unsafe or unsound manner, the department may issue an order temporarily suspending the credit union's operations for not less than 30 or more than 60 days. The board of directors must be given notice by certified mail of the suspension. The notice must include a list of the reasons for the suspension and a list of the specific violations of this chapter.
(b) Upon receipt of a suspension notice, the credit union shall cease all operations, except those authorized by the department, or the department may appoint a conservator to operate the credit union during the period of suspension. The board of directors shall file with the department a reply to the suspension notice and present a plan of proposed corrective actions if it desires to continue operations. The board may request that the credit union be declared insolvent and a liquidating agent be appointed.
(c) Upon receipt from the suspended credit union of evidence that the conditions causing the order of suspension have been corrected or upon acceptance of a plan of proposed corrective actions, the department may revoke the suspension notice and permit the credit union to resume normal operations.
(d) If the department, after issuing a notice of suspension, rejects the credit union's plan to continue operations, the board may request an administrative hearing.
(4) If, within the suspension period, the credit union fails to answer the suspension notice or request a hearing or if after a hearing, the department continues to reject the credit union's plan to continue operations, the department may:
(a) permit the credit union to operate under a conservator until conditions requiring suspension are remedied;
(b) involuntarily merge the credit union in accordance with the provisions of 32-3-212; or
(c) revoke the credit union's charter, appoint a liquidating agent, and liquidate the credit union.
(5) The department may not involuntarily merge or involuntarily liquidate a credit union prior to the suspension procedures outlined in this section. A credit union may petition the appropriate court to stay the department's suspension, involuntary merger, or involuntary liquidation order.
(6) In the event of liquidation of a credit union, the assets of the credit union or the proceeds from the disposition of the credit union's assets must be applied and distributed in the following sequence:
(a) to secured creditors up to the value of their secured collateral;
(b) for the costs and expenses of liquidation;
(c) for wages due employees of the credit union;
(d) for taxes owed to any government unit;
(e) for any debts owed the United States;
(f) to general creditors and to secured creditors to the extent that their claims exceed the value of their collateral; and
(g) to shareholders of the credit union to the extent of their uninsured shares.
History: En. 14-664 by Sec. 64, Ch. 38, L. 1975; R.C.M. 1947, 14-664; amd. Sec. 2, Ch. 274, L. 1981; amd. Sec. 86, Ch. 483, L. 2001; amd. Sec. 8, Ch. 237, L. 2003.