This is part of a series of blog posts reviewing some of the key legal implications associated with a Saskatchewan credit union continuing federally. This post focuses on the differences in board governance between federal and Saskatchewan credit unions.
Continuing as a federal credit union will have implications for the governance of a Saskatchewan credit union, in particular as it relates to board structure and composition. Some of those implications, and a comparison to the existing requirements for a Saskatchewan credit union are described below.
NUMBER OF DIRECTORS
- A Saskatchewan credit union must have a minimum of 5 directors or any greater number provided for in its articles.
- A federal credit union is required to have a minimum of 7 directors.
- A majority of directors of a Saskatchewan credit union must be resident in Canada.
- Similarly, a majority of directors of a federal credit must be Canadian residents.
- At least 80% of the directors of a Saskatchewan credit union (or greater percentage provided in the credit union’s articles) must be members of that credit union. Further, all directors elected by members of the credit union must be members of that credit union.
- For a federal credit union, up to one-third of the directors (or any smaller proportion provided for in the credit union’s bylaws) do not have to be members of the credit union.
LIMITATION ON AFFILIATED DIRECTORS
- No more than two-thirds of directors of a federal credit union may be affiliated with the credit union.
- The circumstances in which someone will be considered to be affiliated with the federal credit union are outlined in the Affiliated Persons (Banks) Regulations.
- For example, officers or employees of the credit union will be considered affiliated, as will persons with significant borrowings from the credit union.
- In addition, a director may be considered affiliated with the federal credit union if, in the opinion of the Superintendent of Financial Institutions (OSFI), the director has a significant commercial, business or financial relationship with the credit union and such relationship can reasonably be expected to affect the exercise of the director’s best judgment.
- There is no similar affiliation restriction for Saskatchewan credit unions.
EMPLOYEES AS DIRECTORS
- An employee of a Saskatchewan credit union is not permitted to act as a director of that credit union, and accordingly, the CEO cannot sit on the board.
- Up to 15% of the directors of a federal credit union can be employees of the credit union or, alternatively, up to 4 employees may be directors of a federal credit union provided they constitute not more than half of the directors. Further, the CEO of a federal credit union will be required to sit as a director.
Both Saskatchewan credit unions and federal credit unions are required to appoint both an Audit Committee and a Conduct Review Committee.
- The Audit Committee and Conduct Review Committee of both a Saskatchewan credit union and a federal credit union must each consist of at least 3 directors.
- For Saskatchewan credit unions, certain employees and officers of the credit union may not be members of the Audit Committee (including, for example, the CEO).
- For federal credit unions, a majority of the members of such committees must not be affiliated with the federal credit union and none of the members of such committees can be an officer or employee of the federal credit union or any of its subsidiaries.
CORPORATE GOVERNANCE GUIDELINES
Both Saskatchewan credit unions and federal credit unions are required to comply with corporate governance guidelines issued by the Credit Union Deposit Guarantee Corporation and OSFI respectively.
- Both sets of guidelines are intended to align with corporate governance best practices and supplement the applicable statutory requirements.
- The guidelines are largely similar, although some differences exist (for example, Saskatchewan credit unions are specifically required to ensure that they make adequate disclosures that enable their members and stakeholders to understand their governance structure).
Next week’s blog post will focus on the legislative measures that have been proposed by the Federal Government to provide provincial credit unions with targeted protection against transitional risks and to facilitate a smooth entry process into the federal regime.