Section 13-03-23-09 - Structure of a credit union service organization and subsidiary credit union service organization1. A credit union and a credit union service organization or subsidiary credit union service organization must be operated in a manner that demonstrates to the public the separate corporate existence of the credit union and the credit union service organization or subsidiary credit union service organization. Good business practices dictate each must operate so that: a. Its respective business transactions, accounts, and records are not intermingled;b. Each observes the formalities of its separate corporate procedures;c. Each is adequately financed as a separate unit in the light of normal obligations reasonably foreseeable in a business of its size and character;d. Each is held out to the public as a separate enterprise;e. The credit union does not dominate the credit union service organization or subsidiary credit union service organization to the extent the credit union service organization or subsidiary credit union service organization is treated as a department of the credit union; andf. Unless the credit union has guaranteed a loan obtained by the credit union service organization or subsidiary credit union service organization, all borrowings by the credit union service organization or subsidiary credit union service organization indicate that the credit union is not liable.2. Prior to a credit union investing in a credit union service organization or subsidiary credit union service organization, the credit union shall obtain written legal advice as to whether the credit union service organization or subsidiary credit union service organization is established in a manner that will limit potential exposure of the credit union to no more than the loss of funds invested in, or loaned to, the credit union service organization or subsidiary credit union service organization. In addition, if a credit union invests in, or makes a loan to, a credit union service organization or subsidiary credit union service organization, and that credit union service organization or subsidiary credit union service organization plans to change its structure, the federally insured credit union also shall obtain prior written legal advice that the credit union service organization or subsidiary credit union service organization will remain established in a manner that will limit potential exposure of the credit union to no more than the loss of funds invested in, or loaned to, the credit union service organization or subsidiary credit union service organization. The written legal advice must address factors that have led courts to "pierce the corporate veil," such as inadequate capitalization, lack of separate corporate identity, common boards of directors and employees, control of one entity over another, and lack of separate books and records. The written legal advice must be provided by independent legal counsel of the investing credit union or the credit union service organization or subsidiary credit union service organization.N.D. Admin Code 13-03-23-09
Adopted by Administrative Rules Supplement 371, January 2019, effective 1/1/2019.General Authority: NDCC 6-01-04
Law Implemented: NDCC 6-06-06