NCUA clarifies CUSO rule on conversion of CUSO from corporation to LLC status

ARLINGTON, Va. – Does the conversion of a CUSO from a for-profit corporation to a limited liability company trigger the divestiture provision of the CUSO rule? No, wrote Associate General Counsel Sheila Albin to Michael Riley, attorney at law, in response to his letter concerning the planned conversion of CUsource, a Montana corporation, to a LLC. Albin cited CUSO rule 12 C.F.R. 712.2. Regarding divestiture, she wrote that, "If the limitations in paragraph (a) of this section are reached or exceeded because of the profitability of the CUSO and the related GAAP valuation of the investment under the equity method, without an additional cash outlay by the FCU, divestiture is not require." Citing 12 C.F.R. 712.2 (e), Albin made it clear that the purpose of this provision, "is to avoid penalizing FCUs for making good investments."