The subscription for credit union shares is the basic method of saving. Shares in credit unions do not have the characteristics of company shares. They may not be preference shares. Bonus shares may be issued from reserves, but statutory reserves may not be used for this purpose. There are no share certificates as such
Passbooks and records show the value of shares and other financial transactions between the member and the credit union.
The principle of “one member, one vote” applies due to the cooperative nature of the union. Accordingly, one member has a vote irrespective of the number of shares.
Shares may be issued on terms whereby they are withdrawable. Equal rights apply to shares. Withdrawable shares are the classic form of the credit union’s capital, while non-withdrawable shares are much less common.
A transfer of shares must be approved by the Board of Directors under standard rules. The transferee must not exceed statutory limits on shareholdings, where applicable.
There is provision for an appeal to the District Court if registration of share transfer is not granted by the Board.The transfer must be to a member who qualifies under the relevant common bond. The 1997 Act removes stamp duty on transfer of shares in credit unions.
A dividend of up to 10% of the nominal value of the shares may be declared at the Annual General Meeting. The percentage may be higher under rules if so provided.
The dividend may only be paid out of surplus income after deducting expenses and depreciation. Where a share is held for less than a year, a proportionate dividend may be paid.
Fully paid bonus shares may be issued from reserves provided that there are distributable reserves. They are to be proportionate to the entitlement to a dividend.
Funds may be raised by deposits from members who have a minimum share balance. The 1997 legislation clarified the status of deposits, which was previously unclear.
The 1997 Act provides that a member with shares of at least £1000 may hold up to £20,000 on deposit. Deposits are not to exceed 75% of aggregate liabilities in respect of shares unless the regulator grants a disposition.
Aggregate shares and deposits may not exceed £50,000 or 1% of the credit union capital. The purpose is to have a diversified shareholding and to prevent the credit union from falling under the dominant control of a limited number of persons.
A credit union, as per its rules, may require members to give up to 60 days’ notice on withdrawals of shares and 21 days on withdrawal of deposits. Shorter periods may be allowed at discretion but will be governed by liquidity considerations.
An application for withdrawal of shares may be permitted if the balance of savings after the withdrawal is equal to or higher than the amount of the outstanding liability. Alternatively, the withdrawal may be approved in accordance with the rules by a majority of the Board of Directors. This may only be given if the balance of savings after withdrawal is at least 25% of the outstanding liability or such other percentage as may be approved by the registrar.
Credit unions may withdraw shares or deposits and set them against sums owed. A promissory note signed by a member may authorise the union to apply shares towards in default.
Registers of Members
Records must be kept of shareholdings in a register. It must contain details of name, address, occupation, number of shares, amounts paid, dates, etc. Permanent records must be kept of deposits, withdrawals, and lodgements, etc.
Where the holder of a joint account dies, it vests in the survivor. Where there are joint accounts, only the first named may generally vote unless another is nominated. Joint holders are not entitled to hold office in the credit union by reason of the joint holding alone.
Passbooks are issued to members under standard rules. They record deposits, loans, interest, withdrawals, etc. Quarterly statements are to be issued.
Where passbooks are issued, they constitute the member’s record of their account with the credit union. Loss of a passbook should be notified. The credit union may require to be indemnified against loss arising thereby.
In modern times, electronic records have largely replaced passbooks. In some cases, they continue to be used in parallel.
Savings Protection (1997 Act)
A savings protection scheme was commenced under the 1989 legislation. It required 1% of the credit union saving to be lodged to provide funds in the event of default by a credit union. It was a condition of registration that credit unions participated in the scheme.
Credit unions may participate in the Savings Protection Scheme. This is designed to cover loss in the event of insolvency or before by the union. The League of Credit Unions maintains a Savings Protection Scheme.
Nominations on Death
There are special provisions that allow the nomination of member shares on death so that they do not pass through the deceased estate. This facilitates the transfer of shares without a grant of probate.
Members may nominate beneficiaries in writing in respect of the whole or part of their shares or deposits in the credit union, taking effect on death. The member must be over 16. An officer may not be a nominee unless he is a family member of the nominating party.There is a cap on the value of nomination.
Nominations may be varied or revoked during the lifetime in writing. A will does not affect them as they pass outside the estate.
Credit unions are obliged to keep records of nominations up-to-date. Nominations are generally undertaken in a small form. Where members have not made a nomination, the credit union may pay an amount up to [a specified amount] to persons who appear to be entitled without letters of administration or grant of probate. The limits may be varied by the Minister.
The members pay money or assets for members who are incapable of managing their affairs by reason of mental incapacity. They may pay to a person who has entered a binding arrangement to administer assets for the benefit of the member.
Payments to a person who appears ostensibly entitled to the payment are deemed valid and effective.
Where a member owes money to the credit union, he may only withdraw a share or deposit to the extent that the value of savings would not exceed the amount outstanding. A member may not withdraw shares if he holds a deposit if the withdrawal would leave him below the minimum amount required for holding a deposit.
Credit union shares are transferable and may pay a dividend. The dividend is decided at the general meeting and may not exceed 10 percent of the nominal value. It may only be paid out of a surplus available or from reserves set aside from previous surpluses.
Credit unions may accept monies by way of deposit that pay interest at a rate determined by the directors. The person must have shares of at least €1,250. A person may not hold shares which in aggregate exceed €200,000 or 1 percent of the credit union’s asset. The maximum deposit per member must not exceed €100,000. Unless Central Bank authorization is given, liabilities in relation to members’ deposits must not exceed 100 percent of liability in relation to shares.