DBO Says It "Will Not Criticize" Banks And Credit Unions For Holding Virtual Meetings
In response to Covid-19 (Coronavirus) emergency, the California Department of Business Oversight has issued guidance to banks and credit unions and to escrow agents, finance lenders and services, student loan servicers, residential mortgage lenders and servicers, and mortgage loan originators. The advice covers a variety of subjects, including the holding virtual meetings of by bank shareholders or credit union members. In this regard, the DBO takes a forgiving stance:
"The Department recognizes that social distancing may necessitate holding annual shareholder meetings, annual meeting of members, and regular board of directors meetings via videoconference or teleconference rather than in-person. The Department will not criticize banks that conduct meetings virtually without obtaining 100 percent consent from shareholders or credit unions that conduct meetings virtually in violation of the credit union’s own bylaws."
However, the fact that the DBO will not criticize a bank or credit union does not make the virtual meeting legal. The DBO's guidance makes this clear by warning "This Guidance does not modify any existing law or regulation."
A California state bank is a corporation incorporated under the General Corporation Law and it is generally subject to the provisions of the GCL except when it is inconsistent with the Banking Law. Cal. Fin. Code § 1004. A California credit union is generally subject to the California Nonprofit Mutual Benefit Corporation Law except when it is inconsistent with the Credit Union Law. Cal. Fin. Code § 14002.5. As noted in this post, the ability to hold an annual meeting absent unanimous shareholder/member consent is questionable (Section 7510(f) mirrors Section 600(e)).
The risk of proceeding with a virtual annual meeting is that it may later be determined that the shareholder/member approval was not obtained.