Bishkek
October 28, 1999 #117
THE LAW OF THE KYRGYZ REPUBLIC
On Credit Unions
(As amended by the Laws of the Kyrgyz Republic of January 23, 2009 # 23,
October 6, 2012 #169, April 26, 2013 #60)
CHAPTER I. GENERAL PROVISIONS
CHAPTER II. ESTABLISHMENT OF A CREDIT UNION
CHAPTER III. MEMBERSHIP IN A CREDIT UNION
CHAPTER IV. GOVERNING BODIES OF A CREDIT UNION
CHAPTER V. SAVING SHARES IN A CREDIT UNION
CHAPTER VI. CREDITS AND LOANS
CHAPTER VII. ACTIVITY REGULATION OF A CREDIT UNION
CHAPTER VIII. CONCLUDING PROVISIONS
This Law sets out the legal and economic framework for the establishment and operation of credit unions in the Kyrgyz Republic.
CHAPTER 1
GENERAL PROVISIONS
Article 1. Concept of a credit union
A credit union is a financial and credit organization, created in the form of a cooperative in order to help its participants (members) by merging the personal savings of participants of a credit union and their use for mutual crediting and providing other financial services, including in accordance with the Islamic principles of banking and finance.
The activity of credit unions is governed by this Law. The rules contained in other laws and involving issues related to the activity of credit unions must comply with this Law. In the event of conflict rules governing the activities of credit unions contained in other laws with the provisions of this Law, the provisions of this Law have effect.
Features of the legal activity regulation of credit unions operating in accordance with the Islamic principles of banking and finance, established by normative legal acts of the National Bank of the Kyrgyz Republic.
(As amended by the Laws of the Kyrgyz Republic of January 23, 2009 #23, April 26, 2013 #60)
Article 2. Main terms and concepts used in this law
In this Law the following definitions are used:
dividend on saving shares - code name of income received by a participant of a credit union on the saving share;
capital - total amount of saving shares of reserves of a credit union and retained earnings;
saving share (share contribution) - amount of funds paid by a participant of a credit union in the capital and in the possession of a credit union.
(As amended by the Law of the Kyrgyz Republic of January 23, 2009 # 23)
Article 3. Main objectives of the credit union activity
1. Main objectives of the credit union activity are:
- meeting the needs of participants, carried out by consolidation their funds and granting them credits;
- attracting participants of a credit union to participate in the management of its operations;
- provision of financial services.
2. The activity of a credit union is based on the principles of joint activities, equality of its members, self-government and economic independence.
(As amended by the Law of the Kyrgyz Republic of January 23, 2009 # 23)
Article 4. Activity of a credit union
1. A credit union for the implementation of its activities must obtain a license of the National Bank of the Kyrgyz Republic, which provides the right to conduct the following operations:
1) raising funds from its participants through purchasing by them a saving share;
2) providing participants of a credit union with credits on terms of maturity, repayment and interest payment.
2. The National Bank of the Kyrgyz Republic shall maintain a register of credit unions. Information on credit unions, licensed, is published in the mass media.
A credit union operates in the territory as defined in the Charter of the credit union.
3. The activities of a legal entity as a credit union without a license from the National Bank of the Kyrgyz Republic shall be prohibited.
For the implementation of activity of a credit union without a license comes responsibility, stipulated by the legislation of the Kyrgyz Republic.
4. A credit union may further perform the following banking operations, provided that the transactions are in the license obtained in accordance with the requirements of the National Bank of the Kyrgyz Republic:
1) taking deposits from participants of a credit union in national and foreign currencies;
2) implementation of retail banking services under the agency agreement with the bank - without opening accounts for clients in a credit union;
3) settlements on behalf of participants of a credit union under an agreement with a bank or other authorized financial and credit institution without opening an account in the credit union;
4) implementation of the purchase and sale of foreign currency on its own behalf;
5) providing participants of a credit union with credits on terms of maturity, repayment and interest payment in foreign currency.
5. A credit union may provide only those financial services (operations) provided for in this Article, as well as to financial leasing transactions.
6. Operations specified in subparagraphs 2-5 of paragraph 4 of this Article shall be entitled to only credit unions that have a license to attract deposits.
(As amended by the Laws of the Kyrgyz Republic of January 23, 2009 #23, October 6, 2012 #169, April 26, 2013 #60)
See:
The Resolution of the Board of the National Bank of the Kyrgyz Republic of May 4, 2005 #14/3 “On new edition of the Regulations “On Licensing of Credit Unions”
Article 4-1. Restrictions on the activities of a credit union
A credit union shall not:
1) provide financial services to persons who are not members of the credit union, except for the services referred to in paragraphs 2 and 4 of paragraph 4 of Article 4 of this Law;
2) be a surety and issue guarantees for the obligations of its members and third parties;
3) issue their own securities.
(As amended by the Laws of the Kyrgyz Republic of January 23, 2009 #23, April 26, 2013 #60)
Article 5. Legal status of a credit union
1. A credit union is a legal entity from the moment of its state registration in accordance with the legislation of the Kyrgyz Republic.
2. A credit union shall possess, use and dispose of its funds, buildings and other tangible assets in accordance with this Law and the legislation of the Kyrgyz Republic.
3. A credit union has the right to acquire, lease, use, assign, pledge, sell property owned by the credit union to provide consulting and information services, organize and conduct training seminars and workshops related to the activities of the credit union, as well as carry out other duties inherent in the credit union, which are necessary to effectively achieve its goals.
4. A credit union has the right to open branches in the territory of the Kyrgyz Republic. Opening and activities of branches of a credit union are governed by the normative acts of the National Bank of the Kyrgyz Republic.
(As amended by the Law of the Kyrgyz Republic of January 23, 2009 #23)
Article 6. Association of credit unions
1. Credit unions may form associations (associations and unions) and other non-profit organizations to protect and represent the common interests, coordinate their activities, joint projects and decisions of other common tasks and problems.
Activities of such associations shall be governed by the legislation of the Kyrgyz Republic.
2. Credit unions can create or participate in the ownership and / or management of specialized agencies whose activities are subject to regulation by the National Bank of the Kyrgyz Republic, including the central credit institution, the deposit insurance fund, the stabilization fund.
3. The central credit institution of credit unions - a specialized financial institution whose mission is to maintain liquidity and lending credit unions that are participants of the central credit union.
The central credit institution of credit unions in compliance with the requirements of the National Bank of the Kyrgyz Republic can perform the following operations:
1) to provide credits to credit unions participating in the central credit institution;
2) to open and maintain accounts of credit unions participating in the central credit institution;
3) to make payments on behalf of credit unions participating in the central credit institution;
4) other operations within the constraints of the National Bank of the Kyrgyz Republic.
Activities of the central credit institution of credit unions, including the organization, management, financing, lending, account management, settlements, regulated and licensed by the National Bank of the Kyrgyz Republic. The central credit institution may be organized as a central credit union, participants of which are credit unions, in which the vote at the general meeting based on the principle of “one member - one vote”.
4. Deposit insurance fund of credit unions - a dedicated fund, whose purpose is to guarantee payment of deposits of participants of credit unions by managing the fund's assets of deposit insurance of credit unions and compensation for deposits of participants of credit unions in the event of insolvency of the latter.
Activities of the deposit insurance fund of credit unions, including its creation, organization, management, financing, arrangements for compensation on deposits, regulation, defined by normative acts of the National Bank of the Kyrgyz Republic.
5. Stabilization fund of credit unions - a fund created to provide financial rehabilitation of credit unions at risk of insolvency. For its activities stabilization fund has the right to grant credits of last resort to credit unions, as well as consultations, training and monitoring of credit unions.
Activities of the stabilization fund of credit unions, including its creation, organization, management, financing, the issuance of a credit of last resort, regulation, defined by normative acts of the National Bank of the Kyrgyz Republic.
6. Activities of the central credit institution of credit unions, the deposit insurance fund of credit unions and stabilization fund of credit unions is subject to an annual audit by independent audit verification.
7. Credit unions may establish a central audit service of credit unions, whose task is to carry out the audit of credit unions on the principles of impartiality, accuracy and independence.
Activities of the central audit service of credit unions, including the organization, management, auditing requirements, regulated by the National Bank of the Kyrgyz Republic.
(As amended by the Law of the Kyrgyz Republic of January 23, 2009 #23)
CHAPTER II
ESTABLISHMENT OF A CREDIT UNION
Article 7. Founders of a credit union
1. A credit union is formed more than 10 resident individuals of the Kyrgyz Republic, which:
1) are close by occupation or profession or have a common employer, or
2) reside in one or several nearby settlements or in one area.
2. Founders of the credit union must:
1) adopt charter governing the activities of a credit union;
2) elect the members of the Board, the Credit Committee and the Audit Committee;
3) make a statement and the state registration of a credit union;
4) submit an application for a license of a credit union.
(As amended by the Law of the Kyrgyz Republic of January 23, 2009 #23)
Article 8. Charter of a Credit Union
1. A credit union operates on the basis of the charter, which is its main document. Entering the credit union, the participants commit to the approval and implementation of the Charter of a credit union.
2. Charter of a credit union shall contain:
1) (expelled in accordance with the Law of the Kyrgyz Republic of January 23, 2009 #23)
2) full and abbreviated name of a credit union;
3) confirmation that a credit union created by a group with a common interest, and to determine the nature of this community;
4) determination of the territory in which the activities of a credit union;
5) provisions on the rights and obligations of participants of a credit union;
6) procedure and conditions for the admission and release (exceptions) of participants of a credit union;
7) establish the minimum size of the saving share, payable upon entry;
8) procedure and conditions of payment and withdrawal of saving share by participants of a credit union;
9) provisions on the register of participants of a credit union;
10) provisions on the governing bodies of a credit union; procedure of decision-making by authorities, including a list of issues that require a majority vote of a credit union;
11) allocation of responsibilities between the management of a credit union;
12) procedure and conditions for granting credits to participants of a credit union, as well as the requirements for their security;
13) procedure for allocation of free funds of a credit union and types of financial institutions in which they can be contributed;
14) procedure for the creation of reserves to cover potential credit losses and damages, as well as other provisions of a credit union, if any, will be formed;
15) procedure for amendment and modifications the charter of a credit union;
16) other provisions relating to the characteristics of a credit union activity and not contradicting the legislation of the Kyrgyz Republic.
3. A credit union must notify the National Bank of the Kyrgyz Republic on all amendments and modifications made to the charter of a credit union, within one month from the date of their adoption.
(As amended by the Laws of the Kyrgyz Republic of January 23, 2009 #23, April 26, 2013 #60)
Article 9. Name of a credit union
1. A credit union uses the brand name, which is written in its charter. Neither credit union has any right to call themselves in any documents, announcements or advertising other than the name, written in its charter. The name of a credit union shall contain the words “credit union”.
2. Credit unions and their associations, except republican, do not use in its name, or the symbolism of the word “National”, “Central”, “Kyrgyzstan”, in full or abbreviated form, in any language and in any combination.
It is not allowed to use as names that are identical or similar in their degree of confusion with the name of the previously established credit unions or banks.
(As amended by the Law of the Kyrgyz Republic of January 23, 2009 #23)
Article 10. Capital of a credit union
1. Capital of a credit Union has paid saving shares and reserves established by the credit union in accordance with the requirements and retained earnings.
Capital of a credit union acts as a protective measure against the possible risks that may arise in the implementation of the credit union.
2. The requirements for minimum capital of a credit union and the order of its formation are set by the National Bank of the Kyrgyz Republic.
If the benefits of saving shares of participants of a credit union, total amount of its saving shares will be less than the minimum total amount of saving shares, established by the National Bank of the Kyrgyz Republic, the credit union shall be liquidated in accordance with this Law.
3. Capital of a credit union is to be formed at the expense of funds of participants. It is not allowed the formation of a credit union by other credit assets, including fixed assets, securities and intangible assets.
(As amended by the Law of the Kyrgyz Republic of January 23, 2009 #23)
CHAPTER III
Membership in a credit union
Article 11. Participants of a credit union
1. A participant of a credit union may be any individual resident of the Kyrgyz Republic, and having reached the age of majority at the time of entry into the credit union community of interest, as defined in Article 7 of this Law.
2. Members of the family of a participant of a credit union (close relatives) who have not attained the age of majority from 14 years of age can participate in the credit union, if any such member of the family will get their own share in the saving share in established size in accordance with Article 20 of this Law, which provides the right to participate in the credit union. Participants who have not attained the age of majority, do not have a voice in decision-making at the general meeting of the credit union and are not eligible to be elected to the Board, the Credit Committee, the Audit Committee and other committees and commissions of the credit union.
3. Charter of a credit union must determine the conditions under which the participant, who has been convicted for crimes in the sphere of economic activity, cannot be a member of the Board, member of the Credit Committee and / or the Audit Committee.
4. Participants of a credit union, in addition to individuals, may be resident legal entities of the Kyrgyz Republic in the form of (peasant) farms and cooperatives. In this case, the credit union member cannot be another credit union.
5. Participation (membership) of a legal entity in the form of a peasant (farms) economy and the cooperative in a credit union through a legally authorized representative. Representation is carried out through a power of attorney in accordance with the legislation of the Kyrgyz Republic.
6. Participant of a credit union is entitled to learn the Charter and the financial statements of the credit union.
7. A credit union shall maintain a register of its members is available for familiarization by any party to the credit union, including information on which of participants is a party to legal entities in the form of (peasant) farms and cooperatives with a membership in the credit union.
(As amended by the Law of the Kyrgyz Republic of January 23, 2009 #23)
Article 12. Admission in a credit union
1. The Board of a credit union considers a request for the credit union on the basis of written statements and decisions on them within a period not exceeding one month.
Legal entities in the form of (peasant) farms and cooperatives when joining the credit union, along with an application shall submit copies of the charter, foundation agreement and a list of its members, certified by a notary.
2. Charter of a credit union must determine the conditions under which membership in the credit union ceases.
3. Any differences between the participant or former member of a credit union or wage employee and the credit union should be resolved through negotiations, and in the absence of consent - to the court in accordance with the legislation of the Kyrgyz Republic.
4. A participant of a credit union is responsible for the obligations of the credit union in the amount of paid saving share that the participant owns. Charter of a credit union may provide additional responsibility for the obligations of the participants of the credit union.
(As amended by the Law of the Kyrgyz Republic of January 23, 2009 #23)
Article 13. Exclusion from a credit union
1. A participant of a credit union may be excluded from the credit union subject to the conditions provided for in this Law.
Exclusion of a participant of a credit union may be carried out only after prior notification of it for 30 days and giving it the right to speak at the meeting of the Board of the credit union.
When a participant of a credit union does not agree with the decision of the Board to expel the decision may be appealed to the general meeting of the credit union.
2. A participant of a credit union is excluded from the credit union in the following cases:
1) for negligent performance of its obligations to a credit union;
2) in the commission of other acts contrary to this Law and the charter of a credit union.
3. In the case of exclusion from a credit union in accordance with this Article shall be paid its saving share during the quarter from the date of the final decision about the exclusion. However, the dividends for the period can be paid for the financial year if it is provided by the charter of a credit union.
4. Payment of the saving share may be suspended or made deductions from the saving share of the participant of a credit unit, which has been excluded in accordance with this Article, if it has not fulfilled its obligations to a credit union as a borrower or guarantor.
CHAPTER IV
GOVERNING BODIES OF A CREDIT UNION
Article 14. General Meeting of a credit union
1. Procedure of the general meeting of participants of a credit union provided for in the charter of the credit union.
Annual meeting of participants of a credit union shall be held not later than three months after the end of the financial year.
In addition to the annual, may be held extraordinary (special) meetings, convened on the initiative of not less than fifty percent of participants of a credit union eligible to vote, the Board or the Audit Committee of the credit union.
2. Competence of the general meeting of participants of a credit union includes:
1) approval, amendments and modifications to the charter of a credit union;
2) approval of the plan and program of work of a credit union, estimates of its income and expenditure, reports on their implementation;
3) approval of rate, credit, investment and dividend policy in accordance with the principles and rules;
4) election and recall of members of the Board, the Credit Committee and the Audit Commission and their regulations;
5) declaration of dividends on saving share available for distribution;
6) addressing the issues related to the reorganization and / or liquidation of a credit union;
7) determining the remuneration of the members of the Board, Credit Committee and the Audit Committee, if such remuneration is provided by the charter of a credit union;
8) other matters referred by this Law to the general meeting of a credit union.
3. Competence of the annual meeting of participants of a credit union includes:
1) approval of the annual financial plan and report on its implementation;
2) approval of the annual performance report and the Board of a credit union;
3) election of members of the Board, the Credit Committee and the Audit Committee of a credit union.
4. About the upcoming meeting the participants shall be notified by the Board of a credit union in person at the addresses listed in the register of participants of a credit union, not later than twenty days before the meeting date. The notice shall specify the time and place of the meeting and the agenda.
(As amended by the Law of the Kyrgyz Republic of January 23, 2009 #23)
Article 15. Quorum and voting at the meeting of the members of a credit union
1. The general meeting shall be deemed valid if it is not less than fifty percent of participants of a credit union eligible to vote. The rights to vote at the general meetings of participants of a credit union have major individuals-participants and authorized representatives of legal entities- participating in the form of (peasant) farms and cooperatives. In the absence of a quorum the Board of a credit union shall, not later than thirty days to re-convene the general meeting of participants, which shall be considered valid if it is not less than thirty percent of participants of the credit union eligible to vote.
2. A participant of a credit union corresponds the conditions of paragraph 1 of this Article, the decision-making has only one vote regardless of the size of the saving share owned by it.
3. Individuals – participants of a credit union correspond the conditions of paragraph 1 of this Article may vote at the general meetings in person or appoint a voting representative with the issuance of the power of attorney executed in accordance with the legislation of the Kyrgyz Republic of order.
The Trustee shall not be a member of a credit union's governing body (the Board, the Credit Committee, the Audit Committee or a Committee).
4. Decisions of the general meeting are made by a simple majority vote of those present at the meeting of participants entitled to vote, except for the issue of withdrawal of members of the Board, the Credit Committee, the Audit Committee and other committees of a credit union, which requires at least 2/3 vote of the participants of the credit union, represented at the meeting and entitled to vote.
5. Decisions of the General Meeting for approval, amendments and modifications to the Charter and reorganization and / or liquidation of a credit union shall be taken by affirmative vote of at least fifty percent of the total number of participants of the credit union eligible to vote.
(As amended by the Law of the Kyrgyz Republic of January 23, 2009 #23, April 26, 2013 #60)
Article 16. The Board of a credit union
1. The Board of a credit union is elected from among its participants and manages the daily operations of the credit union.
The overall objective of the Board of a credit union is to protect and ensure the safety of savings of participants, providing the widest possible range of services to participants of the credit union.
The Board of a credit union annually reports to the General Meeting of participants of the credit union on their performance.
2. The powers of the Board of a credit union include:
1) approval of the rules of the credit union activity and their subsequent change;
2) preparation of proposals for the credit, interest, loan and investment policy in accordance with the principles and rules;
3) establish procedures for making the participants and the size of additional contributions to a saving share;
4) addressing issues related to the adoption of new and excluding members of a credit union;
5) determination of wages for hired employees if provided the charter of a credit union;
6) other powers associated with the ongoing activities of a credit union and are not in the competence of the general meeting.
3. The Board of a credit union is composed of an odd number of members of the credit union, but not less than three.
The Board of a credit union is elected for a term of 3 years, the members may be re-elected.
Members of the Board of a credit union at any time have the right to resign by submitting a written statement to the Chief Executive Officer.
4. Members of the Board of a credit union may be recalled from office only by the decision of a general or special meeting of participants with pre-establish formal notice to revoke the person. A decision on this matter should be taken 2/3 vote of a credit union present at the meeting and entitled to vote.
5. Members of the Board of a credit union, at its first meeting shall elect the Chief Executive Officer and appoint an accountant and a secretary.
The Chief Executive Officer of a credit union shall oversee the activities of the Credit Union and is responsible for the management of staff employed by the credit union.
6. Meetings of the Board are held when necessary but not less frequently than once a month.
The Board is authorized to resolve the questions made to it, if the meeting attended by at least two thirds of members. Decisions are made by majority vote.
7. Minutes and verbatim record of the meeting of the Board is conducted by the secretary of a credit union. Minutes of the meeting shall be signed by all those present at the meeting of members of the Board of a credit union and a secretary.
8. Members of the Board, the Credit Committee, the Audit Committee and other committees and commissions of a credit union shall carry out their work in the credit union at no charge. By the decision of the general meeting, they may be provided for the payment of remuneration, depending on the extent of their participation in the activities of a credit union.
The said persons may be reimbursed for expenses incurred in the performance of duties related to the activities of a credit union.
(As amended by the Laws of the Kyrgyz Republic of January 23, 2009 #23, April 26, 2013 #60)
Article 16-1. The Supervisory Board of a credit union
1. If there is a credit union over a hundred participants the charter may provide for the establishment of the supervisory board (committee) in a credit union to be elected by the general meeting of participants. The Supervisory Board is composed of an odd number of members of a credit union, but not less than three members shall be elected for a term of 3 years, with the possibility of re-election of its members.
2. Powers of the Supervisory Board:
1) monitoring the activities of the Board and the Credit Committee of a credit union for compliance with the provisions of the charter and legislation of the Kyrgyz Republic, the plans and programs of the credit union;
2) consideration of complaints and proposals of performance of the Board, the Credit Committee and the Audit Committee of a credit union;
3) approval of plans of work of the Board and the Credit Committee and review of reports on their implementation;
4) supervise the implementation of the annual financial plan of a credit union;
5) submit proposals to improve the performance of the Board, the Credit Committee and the Audit Committee on approval to the general meeting of participants of a credit union;
6) submit proposals to the early termination of the powers of the Board, the Credit Committee and the Audit Committee on approval to the general meeting of a credit union;
7) other powers that are not within the competence of the general meeting of a credit union.
3. Decisions of the Supervisory Board are made by a majority vote of the members of the Supervisory Board of a quorum - at least 2/3 majority of the members of the supervisory board.
4. The Supervisory Board shall report annually on its activities to the general meeting of a credit union.
(As amended by the Law of the Kyrgyz Republic of January 23, 2009 #23)
Article 17. The Credit Committee of a credit union
1. The Credit Committee is created in a credit union, whose members are elected by the general meeting of the credit union.
The structure of the Credit Committee should include an odd number of people, but not less than three. The Credit Committee shall be elected for a term of 3 years, the members may be re-elected.
2. The Credit Committee shall meet as often as you need it for the consideration of applications or work with credits. The regulations of the Credit Committee are approved by the Board of a credit union.
3. The Credit Committee makes decisions on each application of a participant of a credit union for obtaining a credit. None of credit shall be granted without the approval of a majority of committee members.
A participant of a credit union, whose application has been rejected, may appeal the decision to the Board or the general meeting of the credit union.
Article 18. The Audit Committee of a credit union
1. The annual meeting shall elect the Audit Committee consisting of at least three persons who shall conduct or arrange for regular audits of accounts, documents, and the state of a credit union. According to the decision of the annual general meeting of a credit union functions of the Audit Committee performs an external (independent) auditor, if the annual meeting decides not to elect the Audit Committee. An external auditor shall be elected by the general meeting of a credit union. External auditors of a credit union may not be persons who are members of the credit union.
Members of the Board and members of the Credit Committee may not be elected to the Audit Committee of a credit union. The Audit Committee shall be elected for a term of 3 years, the members may be re-elected.
2. The Audit Committee shall keep a record of its actions. Report on the activities of the Committee shall be submitted to the Board of a credit union and the Annual General Meeting of Members.
3. The Audit Committee may recommend to the Board of a credit union to suspend or terminate the authority of any hired employees. The decision on this issue is taken by at least two thirds of the present members of the Audit Committee.
The Audit Committee may recommend to the general meeting to suspend or terminate the authority of any members of the Board and / or the Credit Committee of a credit union. The decision on this issue is taken by a unanimous vote of the members of the Audit Committee.
(As amended by the Law of the Kyrgyz Republic of January 23, 2009 #23)
Article 18-1. Conflict of interest
1. Members of the management of a credit union (the Board, the Credit Committee, the Audit Committee, and the Supervisory Board) cannot be both persons who are in close relationship with the other members of the credit union.
2. None of the members of a credit union cannot in any way affect the resolution of issues related to its personal property interest or the interest of a close relative, or any other person to whom the member of the management has a direct or indirect property interest. Such issues may include the issuance or repayment of the credit, the introduction or withdrawal of deposit and saving share, investments in the capital of organizations and fixed assets, leasing operations and calculations, as well as other operations.
Members of the management of a credit union must disclose the information in advance on existing conflicts of interest to the Board of a credit union, which is obliged to convey this information to the general meeting of participants of a credit union.
3. Members of a credit union that are parties to legal entities in the form of a peasant (farming) or cooperative with membership in the credit union shall immediately inform the government, which is obliged to communicate this information to the general meeting of participants of the credit union.
4. Information on existing conflicts of interest and cohesion of the participants should be accessible to all participants of a credit union.
(As amended by the Law of the Kyrgyz Republic of January 23, 2009 #23)
Article 19. External audit of a credit union
1. Activities of a credit union may be subject to annual audit. In the case of a decision on the audit it is conducted within 60 days of the end of the financial year of the credit union.
On the Audit Committee of a credit union is responsibility of the external auditor if the credit union has decided not to conduct an external audit.
2. An auditor should express an opinion about whether the financial statements fairly reflect the financial position of a credit union at the end of the year, what are the financial results for the year under review was conducted and whether accounting. The audit should include verification of the quality of assets, as well as evaluating the adequacy of credit loss provisions to cover potential credit losses.
3. An auditor shall have access to all account ledgers, accounts, receipts and payments documents, invoices and other documents of a credit union. Members of the Board, committees or commissions, and hired employees of a credit union must provide the auditor with all the information it may need.
4. An auditor shall submit the audit report and any recommendations to the Board of a credit union and the Audit Committee are required to bring it to the attention of participants of the credit union at the annual general meeting.
CHAPTER V
SAVING SHARES IN A CREDIT UNION
Article 20. Saving shares
1. Charter of a credit union, taking into account the requirements of the National Bank of the Kyrgyz Republic shall be determined by the minimum size of the saving share that need to be made for entry into the credit union.
2. The size of the saving share of one member of a credit union may not exceed ten percent of the amount of all paid saving shares of the credit union.
3. Saving shares in credit unions are not transferable to third parties, including other participants of a credit union, except the withdrawal of the participants of the credit union when a participant withdrawing from the credit union, with the consent of alienating saving shares to another participant of the credit union.
4. If the loss-making assets of a credit union are less than the aggregate amount of fully paid saving shares and obligations, the participants of a credit union must resolve to reduce the value of saving shares of each of the members so as to apportion the damages among themselves and that the assets of the credit union are equal to the sum fully paid saving shares and obligations.
(As amended by the Law of the Kyrgyz Republic of January 23, 2009 #23)
Article 21. Delivery of information about a credit union
A credit union is forbidden to give any information about the saving shares of participants or financial transactions of the credit union of any kind to any third party, except in cases provided by the legislation of the Kyrgyz Republic.
Article 22. Procedure for contribution and withdrawal of saving shares
1. When contributing funds as saving shares to a participant of a credit union issued a share book, confirming the contribution or withdrawal by the participant of the credit union funds with the following information:
1) for an individual- surname, name, patronymic name, date of birth and address of its residence, for a legal entity - full name, legal address and date of its registration, surname, name, patronymic name and current address of the authorized representative;
2) amount contributed or withdrawn saving shares and the date of their contribution and withdrawal;
3) amount of re-registered saving shares to / from another party at the withdrawal from a credit union and the date of re-registration;
4) amount of dividends paid to the date of payment.
All operations of the saving shares of a participant and the changes of the authorized representative of a legal entity in the share book must be certified by the signature of the Chief Executive Officer of a credit union.
2. A participant of a credit union may withdraw from its structure, due to it withdrawing saving share, the written notice to the Board of the credit union not less than thirty days, unless otherwise provided by the charter of the credit union.
Charter may provide for withdrawal of funds at the termination of membership in a credit union, as in the form of cash and through the transfer to the account specified by the participant of the credit union.
In cases of withdrawal of a participant from a credit union within three months from the date of entry into the credit union dividends on saving share of such participant of the credit union are not paid, unless otherwise provided by charter.
3. The withdrawal of any amount of a saving share is prohibited if actually paid saving share of a participant in a credit union does not cover the total amount of commitment of the participant to the credit union (including any contingent, off-balance sheet liabilities), as borrower or guarantor.
4. If a participant does not withdraw from a credit union, any withdrawals of funds should be subject to the requirement that the member of a credit union, at least, the minimum size of saving share.
(As amended by the Law of the Kyrgyz Republic of January 23, 2009 #23)
Article 23. Dividend payment on saving shares
1. At the end of the financial year the general meeting of participants of a credit union may declare dividends to be paid on saving shares. Dividends are paid from the available balance of funds of a credit union after transfers to reserves and other necessary deductions from the allocation of those benefits to the costs of the credit union.
2. Heirs of a deceased participant of a credit union, established in accordance with the legislation, inherit its saving shares, together with all accrued dividends.
Article 24. Using a saving share to extinction overdue obligations
In the event of any overdue debt or obligation of a participant to a credit union the latter has the right to foreclose on dividends payable to the participant to repay that debt.
CHAPTER VI
CREDITS AND LOANS
Article 25. Credits granted by a credit union
1. A credit union may provide credits to its participants under the conditions established by this Law and banking legislation.
The Regulations of Principles pursued by the credit policy, including the establishment of the terms and conditions of repayment of credits, credit limits and acceptable forms of collateral taken by the general meeting of participants of a credit union to meet the requirements of the banking legislation.
2. Credit may be granted only to a participant of a credit union, owned by a secured saving share under the provisions of the Charter of the credit union and subject to the regulatory requirements of the banking legislation.
The charter should contain provisions that establish the maximum credit that can be granted to a borrower or related borrowers to meet the requirements of regulation established by the banking legislation.
3. Credits can be both secured and unsecured. A credit to a participant of a credit union can be secured by a guarantee issued by another participant of the credit union under its saving share.
4. All credits must be supported by proper legal documentation executed in accordance with the requirements prescribed by the legislation.
(As amended by the Law of the Kyrgyz Republic of January 23, 2009 #23)
Article 26. Loans undertaken by a credit union
1. A credit union subject to the restrictions set by the National Bank of the Kyrgyz Republic may borrow from the specialized credit institutions and / or specialized banks of credit unions, commercial banks, government agencies, international financial institutions and foreign sources based on credit agreements.
2. In that case, if there are arrears of a credit union on interest or principal amount of the credit obtained from any source of finance, the credit union is prohibited to lend, pay dividends or permit the withdrawal of saving shares as long as the arrears will not be repaid.
(As amended by the Law of the Kyrgyz Republic of January 23, 2009 #23)
Article 27. Crediting treatment
1. A credit union provides credits to members of the Board, the Credit Committee, the Audit Committee with the following conditions:
1) granted credit meets all the requirements of this Law, the charter and regulations relating to crediting to other participants, and available on terms no more favorable than those established for other participants;
2) total amount of credits granted to such persons, a credit union may not exceed the amount determined by the charter of the credit union, subject to the regulatory requirements established by the banking legislation.
2. Total amount of credits granted to persons referred to in this Article shall be required and checked regularly by the Audit Committee and / or audit for compliance with the legislation and be brought to the attention of participants of the Board and all participants of a credit union at the annual general meeting.
(As amended by the Law of the Kyrgyz Republic of January 23, 2009 #23)
Article 28. Investment of funds
1. A credit union subject to the restrictions set by the National Bank of the Kyrgyz Republic may invest available funds are not used for crediting.
2. Total investment of a credit union in fixed assets such as buildings, land, furniture and equipment, which are necessary for the conduct of the credit union of its economic activity, and total capital investment in financial institutions may not exceed the amount established by regulations of the banking legislation of each from such total investments.
(As amended by the Law of the Kyrgyz Republic of January 23, 2009 #23)
Article 29. Reserves established by a credit union
1. Credit unions are required to establish reserves to cover potential losses and damages on credits and investments, or other losses on assets that are not subject to distribution among participants of the credit union, except liquidation of the credit union in the amounts established by the banking legislation.
2. The National Bank of the Kyrgyz Republic shall be entitled:
- set checkoff rates in reserves; and / or
- change the formula for calculating the amount of reserves and / or;
- cancel by relevant reason of the requirements for forming reserves in any one or more reporting periods.
Contributions to reserves must be made prior to the payment of dividends on saving shares.
3. A credit union may create other reserves related to the activities of the credit union.
CHAPTER VII
ACTIVITY REGULATION OF A CREDIT UNION
Article 30. Activity regulation of a credit union
1. The National Bank of the Kyrgyz Republic shall regulate the activities of credit unions in order to maintain a stable financial system and to protect the interests of credit unions.
In order to carry out its functions relating to the activity regulation of credit unions, the National Bank of the Kyrgyz Republic has the right to issue normative acts (instructions, directives, etc.) to request and obtain the necessary information available to a credit union, and to take measures and sanctions provided for by this Law and banking legislation.
See:
The Resolution of the Board of the National Bank of the Kyrgyz Republic of May 4, 2005 #14/2 “On new edition of the Rules of the regulation of credit unions in the Kyrgyz Republic”
2. The National Bank of the Kyrgyz Republic shall supervise the activities of credit unions, licensed by studying and analyzing their activities on submitted reports and information, as well as through on-site inspections.
The National Bank of the Kyrgyz Republic may fulfill the function of supervising the operations of credit unions by an authorized body or supervise jointly with the competent authority.
3. In order to carry out its functions relating to the activity regulation of credit unions, the National Bank of the Kyrgyz Republic has the right to:
1) establish prudential regulations;
2) check the activities of credit unions;
3) issue recommendations to improve the financial situation of a credit union, including the imposition of restrictions on the withdrawal of the credit union of saving shares;
4) direct binding orders to eliminate in the activities of the credit union violations and deficiencies;
5) request and receive reports and other documents or information on the activities of a credit union;
6) establish direct bank supervision over the activities of a credit union;
7) establish an interim administration regime in a credit union;
8) temporarily suspend or restrict certain operations of a credit union;
9) temporarily suspend the license of a credit union or revoke it;
10) begin the process of liquidation of a credit union in accordance with the legislation of the Republic;
11) impose a fine on the officials of a credit union for breach of the provisions of the legislation, failure to mandatory requirements of the National Bank of the Kyrgyz Republic or systematic failure to report or submission of false information, statements or information.
See:
The Resolution of the Board of the National Bank of the Kyrgyz Republic of March 23, 2006 #7/5 “On approval of the Regulations “On the impact of measures applied to credit unions”;
The Resolution of the Board of the National Bank of the Kyrgyz Republic of April 12, 2006 #10/6 “On approval of the amended Regulations “On the classification of credits in credit unions”
4. The National Bank of the Kyrgyz Republic has the right to issue orders terminating any actual or planned activities of a credit union, previously presenting convincing evidence that the credit union:
1) has been or is about to do unsafe or unsound financial activities;
2) violates the provisions of the banking legislation or normative acts or the regulations of the National Bank of the Kyrgyz Republic, and / or the charter of the credit union.
5. Other than those provided in this article the impact of measures the National Bank of the Kyrgyz Republic has the right to apply preventive measures and sanctions provided by the banking legislation.
(As amended by the Law of the Kyrgyz Republic of April 26, 2013 #60)
CHAPTER VIII.
CONCLUDING PROVISIONS
Article 31. Financial accounting and reporting
1. The fiscal year of a credit union shall be established from January 1 to December 31 of the current year inclusive.
2. All account ledgers, records, accounting systems and internal regulations adopted by a credit union must meet reliable economic practice, the charter of the credit union and the requirements of the National Bank of the Kyrgyz Republic.
The nature, amount, list of forms and reporting deadlines are set by the National Bank of the Kyrgyz Republic.
3. A credit union shall ensure strict control and storage of documents used in accounting and reporting.
List of main documents to be stored and retention time are set by the National Bank of the Kyrgyz Republic.
Article 32. Special provisions
1. In the case of realization of pledged property to a person who is not a participant of a credit union, the credit union has the right to cover the costs associated with registration of the sale, subject to the limitations set by the National Bank of the Kyrgyz Republic.
2. (Excluded in accordance with the Law of the Kyrgyz Republic of January 23, 2009 #23)
3. The costs of a credit union to include the necessary costs associated with the ongoing activities of the credit union.
(As amended by the Law of the Kyrgyz Republic of January 23, 2009 #23)
Article 33. Reorganization and / or liquidation of credit unions
1. A credit union can be reorganized (merger, accession, division, separation), subject to the requirements established by the legislation of the Kyrgyz Republic.
2. A credit union may be reorganized to a financial institution in the form of a limited liability company or joint stock company, with the consent and in accordance with the requirements of the National Bank of the Kyrgyz Republic.
3. A credit union may voluntarily self-destruct. Self-destruction of credit unions is carried out in accordance with the legislation of the Kyrgyz Republic with the following features:
- a credit union must pass the original license (including additional license) to the National Bank of the Kyrgyz Republic within three days of the decision to self-destruct;
- a credit union should suspend issuing credits, investment in capital of organizations and fixed assets, acceptance of saving shares and deposits with the decision to self-destruct;
- a credit union must fulfill all obligations to creditors and participants of the credit union.
4. Charter of a credit union may provide that in the event of a voluntary liquidation of the assets of the credit union after satisfaction of all liabilities in excess of the total amount paid saving shares shall be apportioned among the participants in accordance with the terms of the charter of the credit union.
5. A credit union must be liquidated in revocation of the license by the National Bank of the Kyrgyz Republic in the following cases:
- if the number of individuals participating in a credit union having the right to vote, became less than ten;
- if a credit union does not fulfill the conditions to comply with the minimum total amount of saving shares in accordance with the requirements of this Law;
- if a credit union regularly (i.e., two or more times in a period of twelve consecutive calendar months) violates the provisions of the legislation, normative acts, regulations of the National Bank of the Kyrgyz Republic and / or charter of the credit union, resulting in the activities of the credit union has become or may become unsafe or financially insecure;
- if a credit union is declared insolvent in accordance with the legislation of the Kyrgyz Republic.
6. A credit union within three days after receiving the decision of the National Bank of the Kyrgyz Republic to revoke the license must pass the original license (including additional license) to the National Bank of the Kyrgyz Republic, and for one month - to begin liquidation proceedings out of court.
7. Responsibilities for the liquidation of a credit union are assigned to its participants or to the governing body authorized to liquidate the charter of the credit union.
8. In the case of insolvency of a credit union shall be liquidated in accordance with the law of bankruptcy. Peculiarities of the bankruptcy of cooperatives to credit unions do not apply.
9. In the case of insolvency of a credit union, which has license to attract deposits from its participants, shall be liquidated in accordance with the law on conservation, liquidation and bankruptcy of banks.
(As amended by the Law of January 23, 2009 #23)
Article 34. On implementation of this Law
1. This Law shall come into force from the date of publication.
2. The Government of the Kyrgyz Republic and the National Bank of the Kyrgyz Republic within a month:
- to submit for consideration to the Jogorku Kenesh of the Kyrgyz Republic on bringing legislative acts of the Kyrgyz Republic in accordance with this Law;
- to bring its solutions in accordance with this Law.
President of the Kyrgyz Republic A.Akaev
Approved by Legislative Assembly
of the Jogorku Kenesh of the Kyrgyz Republic September 30, 1999
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