Inssh kiqu oF CREthT UNIoNs

R ELA NO
33 41 rower Mount Street, Dublin 2.
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Tei; (Intl —OC 353 6 4 6700 Fax: (Intl ÷00 353 1) 674 6701 e-mail: ;noCr’editunianJe www. redihjn,an. je

6 June 2003

The Secretary
Each Affiliated Credit lnion Republic of Ireland)

Re: Guidance note on the review by the supervisory conirnittee of the directors’
performance of their functions

Dear Secretary

am pleased to enclose a guidance note on the review by the supervisory committee of the
directors’ performance of their functions. I recommend that it be read in conjunction with the
guidance note on the legal responsibilities of credit umon directors, issued to credit unions in
August 1999 (and available under the Legal & Regulation section of the League’s private
web site. I also recommend that this guidance note be copied to each director and member
of the supervisory committee.

The guidance note is desigued to assist the supervisory committee in fulfilling its statutory
obligation and to assist the directors in understanding this obligation.

Kind regard:

Yours sincerely

/Thmes O’Dwyer
Head of Legal and Secretariat
 ME LAEO

Inisii tEMJE of CREdrr UPaONS

REJ’1EWBY THE SUPER 1’lSORY COMMITTEE OF THE DIRECTORS’

PERFORMANCE OF THEIR FUVCTIONS

It is recommended that this guidance note should be read in conjunction with the guidance
note on the Legal Responsibilities of Credit Union Directors, issued to credit unions in
August 1999 and available under the Legal & Regulation section of the League s private
web site).

Standard Rule T3 and Section 58(i) of the Credit Umon Act. I 99’ (“the Act”) provide that
the supervisory committee shall have the general duty of overseemg the performance by the
directors of their functions. Standard Rule 85(l) and Section 59(1) of the Act require that the
supervisory committee of a credit union shall:

• hold, at least four times in a year. a meeting with the board of directors to review the
directors’ performance of their functions:

• submit. in advance of the above meeting, a wntten report to the board of directors on
the directors’ performance of their functions.

This ts not a meeting of the board of directors as required under Section 54 of the Act Ruie
68). It is meeting held with the board of directors by the supervisory committee for the
purposes of Section 59 of the Act (Rule 85). The initiative lies with the supervisory
committee and the review must be conducted by the supervisory committee. Subject to fair
procedures, it is a matter for the supervisory committee to determine how the review will be
conducted.

The following procedural matters are recommended:

o The meetings are not necessarily each quarter, but “at least four times a year”.

o Each meeting should be held on a separate occasion to that of any other board
meeting.

o The supervisory committee should give reasonable notice of each meeting.

 o The requirement of Rule 90 that the chairman (of the credit union) shall preside at
meetings of the board of directors does not apply to the above meetings. The
supervisory committee will conduct the meeting.

o The requirement of Rule 92 [Section 54(2) that the secretary tof the credit urnon
shall prepare and maintain minutes of all meetings of the board does not apply to the
above meetings. In accordance with Section 60( i )(a) t Rule 86. the supervisory
committee must keep mmutes of the meeting.

o As soon as possible after each meeting, the supervisory committee should confirm in
writing to the board of directors a schedule and timetable for correction by the
directors of any unsatisfactory performance noted n the review by the supervisory
committee. It is preferable that the supervisory committee will endeavour to aee
such timetable with the board of directors. In the absence of areernent. the timetable
should be determined by the supervisory committee. In the event that any
unsatisfactory performance is not corrected within the timetable, the supervisory
committee will have a duty to report the details to the Monitoring Department of the
Leanue. Under Section 59(3) of the Act. the supervisory committee may notify the
Restrar of Credit Lnions of any concern it may have as to the proper conduct of the
credit union following a unanimous vote at a meeting of the Committee called for the
purpose of considering such notification.

o The Act contemplates a full or near full attendance by the board, otherwise the
purpose of the review is not achieved. The entire board should be at the meeting
unless there is a very good reason for any absence. In order to transact the business of
the review, at least a majority of the board of directors should be present. Whilst the
purpose of the meeting is to review the directors’ performance of their functions. this
includes a review of individual directors as well as a review of the board as a
collective. It is advised that the supervisory committee should obtain and be satisfled
with a written explanation from each director who is absent from the review and a
written report made to the Monitoring Department of the League where any director is
absent from three successive reviews, together with the reasons ven for the absence
in each case.

o It is perhaps possible to envisage an extreme situation where it might not be possible

to achieve a majority of the board of directors. In the latter event, it is advised that the
review should be adjourned by the supervisory committee to a new date and time.
when, if a majority of the board is not present the meeting should take place but the
matter should be immediately reported by the supervisory committee in writing to the
Monitoring Department of the League.
 o As the meeting is with the board of directors to review the directors’ performance of
their functions. no other person including staff at any level of the credit union (other
than a director who is also an empiovee should be present.

o The secretary of the supervisory committee should inform the secretary of the credit
umon of the date and time the supervisory committee wishes to hold the meeting. A
date and time mutually suitable to the board of directors and the supervisory
committee is advised.

o In advance of the meeting, the supervisory conirnittee must submit a written report to
the board of directors on the directors performance of their functions. This should he
done in sufficient time to allow each director a reasonable opportunity to consider the
renort prior to the meeting. The supervisory committee should ensure that the reoort
is provided to each individual director.

The Written Report

It is recommended that the written report should review the performance by the directors of:

o the directors’ responsibility for the general control, direction and management of the
affairs, funds and records of the credit union:

o each of the 31 functions reserved to the directors by Rule ‘75:

o compliance by the directors with the Rules and the Credit Union Act, 1997:

o compliance with the requirements of League general meetings for affiliated credit
unions, for example. the conditions for continued participation by the credit union in
the Savings Protection Scheme;

o compliance by the directors with all applicable laws (for example, Safety Health and
Welfare. Money Laundering Reporting requirements, tax obligations including
income tax deduction and remittance).

The review should note in respect of each function of the directors, whether in the opinion of
the supervisory committee the directors’ performance of that function is satisfactory or
unsatisfactory. The supervisory committee should have objective evidence available to
substantiate its opinion of unsatisfactory performance in each case. Where the directors have
not carried out a required function or not complied with the rules and applicable laws in
carrying out that function, their performance will be unsatisfactory.
For example, if the directors have not fixed the maximum amount which may be on loan at a
particular time to a member [Rule “5(7’)j. their performance. in that respect. will be
unsatisfactory. If the directors have fixed the maximum amount which may be on loan at a
particular time to a member. but such limits do not apply equally to all members, their
performance. in that respect. will be unsatisfactory. In the above example. if the directors
have fixed the maximum amount which may be on ioan at a particular time to a member and
if such limits apply eaually to all members. their performance, in that respect. will be
satisfactory.

Agenda for the meeting with the board of directors

It is a matter for the supervisory committee :o determine the agenda. It is suggested that the
foiiowtng be included:

c A review by the supervisory committee of the written report, containing the details
advised above, provided to the directors in advance of the meeting.

o An exchange of views between the directors and the supervisory committee on the
details of the review, particularly where unsatisfactory performance in the opinion of
the supervisory committeej has been drawn to the attention of the directors.

o To draw up a schedule and timetable for correction by the directors of any

unsatisfactory performance noted in the review by the supervisory committee.

It is recommended that this guidance note should be copied to all directors and members of
the supervisory committee.

This note does not represent legal advice or purport to be a legal representation of the Credit Union Act,
1997. Whilst every effort is made to ensure the information is accurate, responsibility cannot be accepted
for any Liabiltv incurred or loss suffered as a consequence of relying on any matter publlshed herein.
Appropriate professional advice should be taken before acting or refraining to act on the basis of this
note.

© Irish League of Credit Unions May 2003

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