Clarification Of Shareholder Vote Needed To Approve Stock Benefit Plan Adopted By Converted Stock Form Savings Bank - Q3 1999

By the Division of Banks

A state-chartered stock form savings bank converted from mutual form and intends to establish certain stock purchase and stock grant plans as part of its incentive compensation structure. Specifically the bank asks whether a simple majority shareholder vote rather than a two-thirds shareholder vote is required for the stock purchase and stock grant plans it is considering for adoption. It is the Divisions' view that Mass. Gen. Laws c.172, section 25A authorizes stock form savings banks that converted under the Standard Conversion Regulations to adopt and implement certain stock plans, restricted stock purchase plans and stock grant plans for bank employees, officers and directors. Said section 25A states in pertinent part, any such plans established by a savings bank or a co-operative bank which has converted from mutual to stock form pursuant to section thirty-four C of chapter one hundred and sixty-eight... shall conform to regulations promulgated by federal bank regulatory agencies pursuant to 12 U.S. 1464 or other applicable law governing similar plans. This provision essentially incorporates by reference requirements under federal law and regulation governing the adoption of stock benefit plans by converted federally chartered thrift institutions. The Office of Thrift Supervision's regulation, 12 C.F.R. §563.b3(g)(4)(vii), contains detailed provisions governing such stock benefit plans and specifies that a majority vote of shareholders is required. Accordingly, a stock form savings bank that converted under the Standard Conversion Regulations need only obtain a majority vote from its shareholders to adopt a stock benefit plan under Mass. Gen. Laws 172, section 25A.