- Director and Officer Requirements
- May 2, 2003 | Author: Heather B. Thayer
- Law Firm: Fredrikson & Byron, P.A. - Minneapolis Office
Companies often evaluate director and officer qualifications and performance, but less frequently examine underlying organizational structure. Statutes and regulations prescribe board composition and officer positions. How many members does your board of directors need, what officers should your organization have, and do you need regulatory approval before changing directors or officers?
A national bank must have between five and 25 members on its board of directors. Every director must be a U.S. citizen. Unless the Comptroller waives the residence requirement, a majority of directors must have resided in the State, Territory, or District where the bank is located or within 100 miles of the bank for at least one year prior to their election and must reside in the State or within 100 miles of the bank during their time in office. Every director must own common or preferred stock of the bank or of a company that controls the bank that has at least an aggregate fair market value, par value, or shareholders' equity of $1,000. The bank's president, or a director designated by the board, must be chairman of the board.
The directors appoint and dismiss officers and define officers' duties. The OCC's standard bylaws call for a president, vice president and cashier; however, officer titles are not prescribed. One person may serve as both president and cashier. For a period of two years, newly chartered national banks must obtain OCC approval prior to adding a director or executive officer.
Minnesota State Banks
A Minnesota state bank must have at least five members on its board of directors. However, a bank having fewer than five directors on August 1, 1995, is exempt, but its membership may be increased to up to five directors by order of the Commissioner of Commerce. Each director must sign an oath, and the bank must keep the oath in the corporate record books. A state bank must have a president, secretary and treasurer and may have one or more vice-presidents or other officers as its certificate or bylaws provide. The Minnesota Department of Commerce recommends and encourages state banks also to have a cashier, as Minnesota law affords certain authority to a cashier and the duties of a cashier are essential to a bank.
Bank Holding Companies
The board of directors of a bank holding company formed under Minnesota law must have at least one member. The number of directors may be changed in the manner provided in the articles or bylaws. The directors elect or appoint the company's officers. The articles or bylaws should describe officers' powers, rights, duties, responsibilities and terms. A Minnesota bank holding company must have officers that perform the functions of a chief executive officer and a chief financial officer. Holding companies may have other officers, and while not required, it is good practice to have a secretary to keep corporate records.
Although electing your board of directors and officers seems routine, failing to follow the statutes and regulations may prompt an inquiry by the regulators. Additionally, a banking institution designated as in "troubled condition" must give written notice before adding or replacing any member of its board of directors, employing any person as a senior executive officer, or changing the responsibilities of any senior executive officer. Make sure you know the statutory and regulatory requirements, and if you have any questions, contact counsel.