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The following opinion is presented on-line for informational use only and does not replace the official version. (Mich Dept of Attorney General Web Site - www.ag.state.mi.us)


STATE OF MICHIGAN

FRANK J. KELLEY, ATTORNEY GENERAL

Opinion No. 6421

February 5, 1987

SAVINGS AND LOAN ASSOCIATIONS:

Branch office of a foreign savings and loan association

Merger of foreign savings and loan association with domestic or federal savings and loan association in Michigan

A foreign savings and loan association may, subject to approval by the Commissioner of the Michigan Financial Institutions Bureau, purchase an existing savings and loan branch office or establish de novo a branch office in Michigan, provided that the laws of the state in which the foreign association is organized permit Michigan savings and loan associations to transact business to the same extent.

A foreign savings and loan association is not authorized to merge with either a Michigan domestic savings and loan association or a federal savings and loan association whose principal office is in Michigan.

A foreign savings and loan association is not authorized to acquire the stock of a Michigan domestic savings and loan association for operation as an insured subsidiary.

Hon. William R. Keith

State Representative

The Capital

Lansing, Michigan

You have requested my opinion with respect to the following question:

If the law of the state under which a foreign FSLIC insured savings association (foreign association) grants similar rights to Michigan chartered savings and loan associations, may a foreign association:

a. either purchase an existing savings and loan branch office in Michigan or establish de novo a branch office in Michigan;

b. merge with a Michigan domestic association with the foreign association being the surviving association; and

c. acquire the stock of a Michigan domestic association and operate the Michigan domestic association as an insured subsidiary?

The thrust of your question concerns the permissibility of "interstate" activities of state savings and loan associations under the Savings and Loan Act of 1980, 1980 PA 307, as amended, MCL 491.102 et seq; MSA 23.602(102) et seq, which governs the incorporation, regulation, supervision, and internal administration of state chartered savings and loan associations. You inquire whether a foreign association is authorized to engage in certain interstate activities in Michigan.

A study of the legislative history indicates that the Savings and Loan Act of 1980 was enacted to update, clarify, and reorganize statutory powers, duties and protections under the previous Savings and Loan Act of 1964 relative to state chartered savings and loan associations by providing primarily for greater intrastate--not interstate--industry competition.

The scope and application of the Savings and Loan Act of 1980 is set forth in MCL 491.322; MSA 23.602(322), where it is provided in pertinent part that:

"A person shall not engage in carrying on a savings and loan business as provided in this act, except a domestic association which is engaged in the business on the effective date of this act or which is organized under this act, a federal association having its principal office in this state, or a foreign association, to the extent authorized." (Emphasis added.)

Thus, a foreign association cannot engage in carrying on a savings and loan business except "to the extent authorized." For purposes of the Savings and Loan Act of 1980, "foreign association" is defined in MCL 491.126; MSA 23.602(126), as:

"a federal association with its principal office located in another state and any other corporate entity that transacts a savings and loan business as provided in this act pursuant to authority granted by the laws of another state."

MCL 491.1116; MSA 23.602(1116), pertaining to a certificate of authority for foreign associations to transact business in this state, provides in pertinent part that:

"A foreign association shall not transact business within this state until the foreign association procures from the supervisor a certificate of authority, and unless domestic associations are permitted by the law of the state in which the foreign association is organized to engage in or transact business in that state to the same extent as the foreign association desires to transact business in this state."

This section requires as a prerequisite to a foreign association's transaction of business in this state that (1) the foreign association obtain from the Commissioner of the Financial Institutions Bureau of the Department of Commerce (Commissioner) a certificate of authority, and (2) that Michigan state chartered savings and loan associations be granted strict reciprocity insofar as being permitted by the law of the state in which the foreign association is organized to engage in and transact business in that state to the same extent that the foreign association desires to transact business in this state.

The extent to which a foreign association is authorized to engage in carrying on a savings and loan business is specifically addressed in MCL 491.1114; MSA 23.602(1114), where it is provided that:

"Foreign savings and loan associations or their agents, whether chartered by another state or federally chartered to do business in another state, maintaining a branch office, agency, or similar facility in this state shall be considered to be transacting business in this state and shall conduct the business in accordance with the law of this state governing domestic associations, and shall comply with the law." (Emphasis added.)

This section makes clear that the maintenance of a branch office in this state by a foreign association shall be considered the transaction of business by such foreign association. This section also requires that in transacting business, the foreign association must do so "in accordance with the law of this state governing domestic associations." A domestic association must apply to the Commissioner for approval to establish or relocate a branch office. MCL 491.522; MSA 23.602(522), provides in pertinent part that:

"An association shall not establish or relocate a branch office for the transaction of business without application to and approval by the supervisor."

This section requires the Commissioner to make an independent examination of each branch application to determine whether the proposed branch office has a reasonable probability of success and that the net worth of the association is adequate with respect to the general operating policies and financial condition of the association. It should also be noted that no geographical limitations are set forth in MCL 491.520; MSA 23.602(520), and MCL 491.522; MSA 23.602(522), governing the establishment of branch offices for domestic associations as exist, for example, for state chartered banks under section 171 of the Banking Code of 1969, MCL 487.471; MSA 23.710(171).

It is my opinion, in answer to part (a) of your question, that a foreign savings and loan association may, subject to approval by the Commissioner of the Michigan Financial Institutions Bureau, purchase an existing savings and loan branch office or establish de novo a branch office in Michigan, provided that the laws of the state in which the foreign association is organized permit Michigan savings and loan associations to transact business to the same extent.

Parts (b) and (c) of your question, relating to merger and acquisition between a foreign association and a domestic association, can be addressed together.

A review of the Savings and Loan Act of 1980 discloses no express statutory provisions for the merger of a domestic association with a foreign association, nor is there express statutory authority governing the acquisition of the stock of a domestic association by a foreign association.

Article 8 of the Savings and Loan Act of 1980, MCL 491.800 et seq; MSA 23.602(800) et seq, addresses voluntary changes in the corporate structure of domestic associations such as merger, conversion of mutual association to stock association or vice versa, conversion of mutual or stock association to federal association, and conversion of federal mutual or stock associations to mutual or stock associations. Article 8 makes no mention of foreign associations. For example, MCL 491.800(1); MSA 23.602(800)(1), provides:

"With the approval of the supervisor, 1 or more mutual or stock associations may merge into an existing mutual or stock association, or into an existing federal mutual or stock association. The plan of merger for each domestic association shall be adopted in the manner provided by this act, and approval of the supervisor shall be based on an examination of the constituent associations and of the plan of merger. A merger shall not be made to defeat or defraud a creditor of a constituent association." (Emphasis added.)

Because the term "association" is defined in MCL 491.108; MSA 23.602(108), to mean a domestic association, except as provided in sections 460 to 470 and the term "domestic association" is defined in MCL 491.122; MSA 23.602(122), to mean a corporate organization that transacts a savings and loan business as provided in this Act under articles of association, articles of incorporation, or other charter issued by this state, this merger provision involves only the merger of a domestic association or associations into another domestic association, or into a federal association whose principal office is located in Michigan. There is no statutory provision authorizing the merger of a foreign association with a domestic association. Since there is no mention of foreign associations in Article 8, the condition "to the extent authorized" in MCL 491.322; MSA 23.602(322), has not been met. Therefore, only domestic associations and federal associations having their principal office in this state may merge under the Savings and Loan Act of 1980.

The Banking Code of 1969 was amended by 1985 PA 177 to provide a detailed framework under which interstate banking would be permitted on a regional basis from January 1, 1986 until October 10, 1988, when full interstate banking on a reciprocal basis would then be authorized. There, MCL 487.430b; MSA 23.710(130b), sets forth procedures for various acquisitions, i.e. acquisition by a regional bank holding company of a Michigan banking institution; acquisition by an out-of-state bank holding company of a Michigan banking institution; and acquisition by a Michigan bank holding company of an out-of-state banking institution. A reading of this section discloses the Legislature's clarity when regulating interstate acquisitions. Article 8 of the Savings and Loan Act of 1980, by contrast, is silent as to any foreign mergers or acquisitions and thus confers no authority for any mergers or acquisitions involving a foreign association.

It is my opinion, in answer to part (b) of your question, that a foreign savings and loan association is not authorized to merge with either a Michigan domestic savings and loan association or a federal savings and loan association whose principal office is in Michigan.

For the reasons explicated above, it is my opinion, in answer to part (c) of your question, that a foreign savings and loan association is not authorized to acquire the stock of a Michigan domestic savings and loan association for operation as an insured subsidiary.

Frank J. Kelley

Attorney General

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