Dear Mr. Smith:
As administrator of the Kansas state department of credit unions you ask our opinion regarding whether a Kansas chartered credit union may convert into or merge with another type of financial institution.
You inform us the department has historically taken the position that neither conversion nor merger into another type of financial institution is available, and a credit union's only option is to liquidate and cease doing business as a credit union. The department's position appears to be premised on the assumption that these types of conversion ormerger are prohibited because they are not specifically authorized by the Kansas credit unions act, K.S.A. 17-2201 et seq., and amendments thereto.
You inform us that credit unions are organized as nonprofit nonstock corporations. Corporations are creatures of statute which come into existence by virtue of statutory authority and possess corporate powers granted only by or under authority of statutory law. 19 C.J.S. Corporations § 19 (1990). As such, a credit union is governed not only by the Kansas credit unions act but also by applicable provisions of the Kansas corporations act, chapter 17 of Kansas Statutes Annotated. K.S.A. 1994 Supp. 17-6101. Within that act the authority and procedure for merger or consolidation of domestic nonstock corporations are set forth at K.S.A. 1994 Supp. 17-6705; the authority and procedure for merger or consolidation of domestic stock and nonstock corporations are set forth at K.S.A. 1994 Supp. 17-6707. These statutes clearly authorize a nonprofit nonstock corporation such as a credit union to merge or consolidate with another type of corporate financial institution, whether that institution is for profit or not.
Both the Kansas credit unions act and the Kansas corporations act are silent regarding conversion of a credit union into another type of financial institution. If the process of conversion is considered a sale or exchange of corporate assets to another entity, K.S.A. 17-6801 addresses the authorized statutory procedure. However, in our view conversion entails more than corporate assets changing hands. Conversion of a credit union into a savings and loan association or a bank would involve a total restructuring of corporate purpose and methods of operating. Since neither the Kansas corporations act nor the Kansas credit unions act authorizes conversion, a Kansas chartered credit union may not convert into another type of financial institution.