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You are asking . . .

Q. Is a financial institution required to post a bond to obtain pre-judgment possession of collateral?

A. Yes, it appears financial institutions are required to file a bond to obtain prejudgment possession of collateral. This issue is governed by N.D.C.C. § 32-07-04, entitled "Security by plaintiff." This section simply requires a plaintiff to provide the sheriff with "a written undertaking executed by one or more sufficient sureties approved by the sheriff, to the effect that they are bound in double the value of the property." Clearly, the purpose of this statute is to provide a judgment source for a defendant whose personal property has been wrongfully taken. Unlike an individual, however, financial institutions commonly provide a similar judgment source as does the surety. This weighs in favor of not requiring a financial institution to post the bond. Unfortunately, this statute is strictly construed and it appears unlikely to avoid this requirement.

Q. Are bank's bylaws required to have any unique features?

A. Yes. Although a bank's bylaws are substantially similar to the bylaws of other entities, there two unique features. First, a bank's board of directors cannot be less than 3 nor more than 25 under N.D.C.C. § 6-03-02(5). Furthermore, a majority of the board members must reside within this state. Second, any vacancies in the board not exceeding one-third for a calendar year must be filled by a majority vote of the current board of directors. Under N.D.C.C. § 6-03-02(6), the bylaws must establish a method of electing directors in excess of the one-third within a calendar year. These statutory requirements should be incorporated into the bylaws. Concerning bylaws, there is one other point worth noting. In the mid 1980's, North Dakota eliminated the requirement that board members hold X number of shares in the bank on which they sit. Although this requirement is still commonplace in many bylaws and may even be desirable, a bank's board members do not need to be shareholders of the institution.