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D R A F T
FOR DISCUSSION ONLY
UNIFORM LIMITED COOPERATIVE
ASSOCIATION ACT
NATIONAL CONFERENCE OF
COMMISSIONERS
ON UNIFORM STATE LAWS
For Drafting Committee Meeting March 9-11, 2007
With Changes Incorporated
WITH PREFATORY NOTE AND WITHOUT
REPORTERS= NOTES
Copyright 82005
By
NATIONAL CONFERENCE OF
COMMISSIONERS
ON UNIFORM STATE LAWS
The
ideas and conclusions set forth in this draft, including the proposed statutory
language and any comments or reporter=s notes, have not been passed upon by the National
Conference of Commissioners on Uniform State Laws or the Drafting
Committee. They do not necessarily
reflect the views of the Conference and its Commissioners and the Drafting
Committee and its Members and Reporters.
Proposed statutory language may not be used to ascertain the intent or
meaning of any promulgated final statutory proposal.
February 7, 2007
DRAFTING COMMITTEE ON
UNIFORM LIMITED COOPERATIVE ASSOCIATION ACT
The
Committee appointed by and representing the National Conference of
Commissioners on Uniform State Laws in drafting this Act consists of the
following individuals:
PETER F. LANGROCK, P.O.
Drawer 351, Middlebury, VT 05753, Chair
LYLE W. HILLYARD, 175 E.
1st N., Logan, UT 84321
GENE N. LEBRUN, P.O. Box
8250, 909 St. Joseph St., Suite 900, Rapid City, SD 57709
REED L. MARTINEAU, P.O. Box
45000, 10 Exchange Pl., Salt Lake City, UT 84145
JAMES R. PENDER, 4001 N.
Rodney Parham Rd., Suite 101, Little Rock, AR 72211
MARILYN E. PHELAN, Texas
Tech University, School of Law, 1802 Hartford, Lubbock, TX
79409
HIROSHI SAKAI, 3773 Diamond
Head Circle, Honolulu, HI 96815
KEVIN P. H. SUMIDA, 735
Bishop St., Suite 411, Honolulu, HI 96813
JAMES B. DEAN, 4155 E.
Jewell Ave., Suite 703, Denver, CO 80222, Associate Reporter
THOMAS E. GEU, University
of South Dakota, School of Law, 414 E. Clark St., Suite 214,
Vermillion,
SD 57069-2390, Reporter
EX OFFICIO
HOWARD J. SWIBEL, 120 S.
Riverside Plaza, Suite 1200, Chicago, IL 60606, President
LEVI J. BENTON, State of
Texas, 201 Caroline, 13th Floor, Houston, TX 77002, Division
Chair
AMERICAN BAR ASSOCIATION ADVISOR
CRAIG A. HOUGHTON, 5260 N.
Palm, Suite 421, Fresno, CA 93704
EXECUTIVE
DIRECTOR
JOHN A. SEBERT, 211 E.
Ontario St., Suite 1300, Chicago, IL 60611, Executive Director
Copies of this Act may be obtained from:
NATIONAL CONFERENCE OF COMMISSIONERS
ON UNIFORM STATE LAWS
211 E. Ontario Street, Suite 1300
Chicago, Illinois
60611
312/915‑0195
www.nccusl.org
UNIFORM LIMITED COOPERATIVE ASSOCIATION ACT
TABLE OF CONTENTS
Prefatory Note................................................................................................................................ 1
[ARTICLE] 1 GENERAL
PROVISIONS
SECTION 101. SHORT TITLE.................................................................................................. 11
SECTION 102. DEFINITIONS................................................................................................... 11
SECTION 103. LIMITED COOPERATIVE ASSOCIATION SUBJECT TO
AMENDMENT OR REPEAL OF [ACT]........................................................................ 14
SECTION 104. NATURE OF LIMITED
COOPERATIVE ASSOCIATION........................... 15
SECTION 105. PURPOSE AND DURATION OF LIMITED COOPERATIVE
ASSOCIATION................................................................................................................ 15
SECTION 106. POWERS......................................................................................................... 15
SECTION 107. GOVERNING LAW......................................................................................... 15
SECTION 108. SUPPLEMENTAL
PRINCIPLES OF LAW.................................................. 16
SECTION 109. NAME............................................................................................................... 16
SECTION 110. RESERVATION OF NAME............................................................................ 17
SECTION 111. USE OF THE TERM ACOOPERATIVE@....................................................... 17
SECTION 112. EFFECT OF ORGANIC
RULES................................................................... 18
SECTION 113. REQUIRED
INFORMATION........................................................................... 18
SECTION 114. BUSINESS
TRANSACTIONS OF MEMBER WITH LIMITED COOPERATIVE ASSOCIATION................................................................................................................ 20
SECTION 115. DUAL CAPACITY........................................................................................... 20
SECTION 116. DESIGNATED OFFICE AND
AGENT FOR SERVICE OF PROCESS.. 21
SECTION 117. CHANGE OF DESIGNATED OFFICE OR AGENT FOR
SERVICE
OF PROCESS................................................................................................................ 21
SECTION 118. RESIGNATION OF
AGENT FOR SERVICE OF PROCESS.................... 22
SECTION 119. SERVICE OF PROCESS.............................................................................. 23
[ARTICLE] 2FILING AND ANNUAL
REPORTS
SECTION 201. SIGNING OF RECORDS TO BE DELIVERED FOR FILING
TO THE [SECRETARY OF STATE]............................................................................. 25
SECTION 202. SIGNING AND FILING OF RECORDS PURSUANT TO
JUDICIAL ORDER.......................................................................................................... 25
SECTION 203. DELIVERY TO AND FILING OF RECORDS BY
[SECRETARY
OF STATE]; EFFECTIVE TIME AND DATE............................................................... 26
SECTION 204. CORRECTING FILED
RECORD.................................................................. 27
SECTION 205. LIABILITY FOR FALSE
INFORMATION IN FILED RECORD.................... 28
SECTION 206. CERTIFICATE OF GOOD
STANDING OR AUTHORIZATION.................. 28
SECTION 207. ANNUAL REPORT FOR
[SECRETARY OF STATE]................................. 29
SECTION 208. FILING FEES................................................................................................... 30
[ARTICLE] 3FORMATION AND
ARTICLES OF ORGANIZATION
SECTION 301. ORGANIZERS................................................................................................. 31
SECTION 302. FORMATION OF LIMITED COOPERATIVE ASSOCIATION;
ARTICLES OF ORGANIZATION................................................................................... 31
SECTION 303. ORGANIZATION OF
LIMITED COOPERATIVE ASSOCIATION.............. 32
SECTION 304. BYLAWS.......................................................................................................... 32
[ARTICLE] 4MEMBERS
SECTION 401. MEMBERS...................................................................................................... 34
SECTION 402. BECOMING A MEMBER............................................................................... 34
SECTION 403. NO RIGHT OR POWER AS MEMBER TO BIND LIMITED
COOPERATIVE ASSOCIATION................................................................................... 34
SECTION 404. NO LIABILITY AS
MEMBER FOR LIMITED COOPERATIVE ASSOCIATION OBLIGATIONS........................................................................................................................................... 34
SECTION 405. RIGHT OF MEMBER AND
FORMER MEMBER TO INFORMATION...... 34
SECTION 406. ANNUAL MEMBERS= MEETINGS............................................................... 37
SECTION 407. SPECIAL MEMBERS= MEETINGS.............................................................. 38
SECTION 408. NOTICE OF MEMBERS= MEETINGS.......................................................... 39
SECTION 409. WAIVER OF MEMBERS= MEETING NOTICE............................................ 39
SECTION 410. QUORUM OF MEMBERS............................................................................. 39
SECTION 411. VOTING BY PATRON
MEMBERS................................................................ 39
SECTION 412. DETERMINATION OF
VOTING POWER OF PATRON MEMBER........... 40
SECTION 413. VOTING BY INVESTOR
MEMBERS............................................................ 40
SECTION 414. VOTING REQUIREMENTS
FOR MEMBERS............................................. 40
SECTION 415. MANNER OF VOTING.................................................................................... 41
SECTION 416. ACTION WITHOUT A
MEETING................................................................... 41
SECTION 417. DISTRICTS AND
DELEGATES; CLASSES OF MEMBERS .................. 41
[ARTICLE] 5MEMBER INTEREST
SECTION 501. MEMBER INTEREST..................................................................................... 43
SECTION 502. PATRON AND INVESTOR
MEMBER INTERESTS................................... 43
SECTION 503. TRANSFERABILITY OF
MEMBER INTEREST........................................... 43
SECTION 504. SECURITY INTEREST
AND SET-OFF........................................................ 44
SECTION 505. CHARGING ORDERS FOR A JUDGMENT CREDITOR OF
MEMBER
OR TRANSFEREE......................................................................................................... 45
[ARTICLE] 6MARKETING
CONTRACTS
SECTION 601. AUTHORITY..................................................................................................... 47
SECTION 602. MARKETING CONTRACTS.......................................................................... 47
SECTION 603. DURATION OF
MARKETING CONTRACT................................................. 47
SECTION 604. REMEDIES FOR BREACH
OF CONTRACT.............................................. 48
[ARTICLE] 7DIRECTORS AND
OFFICERS
SECTION 701. EXISTENCE AND
POWERS OF BOARD OF DIRECTORS.................... 49
SECTION 702. NO LIABILITY AS
DIRECTOR FOR LIMITED COOPERATIVE ASSOCIATION=S
OBLIGATIONS................................................................................................................. 49
SECTION 703. QUALIFICATIONS OF DIRECTORS AND COMPOSITION
OF
BOARD............................................................................................................................ 49
SECTION 704. ELECTION OF
DIRECTORS......................................................................... 50
SECTION 705. TERM OF DIRECTOR.................................................................................... 51
SECTION 706. RESIGNATION OF
DIRECTOR..................................................................... 51
SECTION 707. REMOVAL OF DIRECTOR........................................................................... 51
SECTION 708. SUSPENSION OF
DIRECTOR BY BOARD................................................ 52
SECTION 709. VACANCY ON BOARD................................................................................. 53
SECTION 710. COMPENSATION OF
DIRECTORS............................................................ 53
SECTION 711. MEETINGS...................................................................................................... 54
SECTION 712. ACTION WITHOUT
MEETING....................................................................... 54
SECTION 713. MEETINGS AND NOTICE............................................................................. 54
SECTION 714. WAIVER OF NOTICE OF
MEETING............................................................ 55
SECTION 715. QUORUM......................................................................................................... 55
SECTION 716. VOTING............................................................................................................ 56
SECTION 717. COMMITTEES................................................................................................. 56
SECTION 718. STANDARDS OF
CONDUCT AND LIABILITY........................................... 57
SECTION 719. CONFLICT OF
INTEREST............................................................................. 57
SECTION 720. OTHER
CONSIDERATIONS OF DIRECTORS........................................... 57
SECTION 721. RIGHT OF DIRECTOR OR COMMITTEE MEMBER TO
INFORMATION................................................................................................................ 58
SECTION 722. APPOINTMENT AND
AUTHORITY OF OFFICERS................................... 58
SECTION 723. RESIGNATION AND
REMOVAL OF OFFICERS....................................... 59
[ARTICLE] 8INDEMNIFICATION
SECTION 801. INDEMNIFICATION......................................................................................... 60
[ARTICLE] 9CONTRIBUTIONS,
ALLOCATIONS, AND DISTRIBUTIONS
SECTION 901. MEMBERS= CONTRIBUTIONS..................................................................... 61
SECTION 902. FORMS OF
CONTRIBUTION AND VALUATION........................................ 61
SECTION 903. CONTRIBUTION
AGREEMENTS................................................................. 61
SECTION 904. ALLOCATIONS OF
PROFITS AND LOSSES............................................ 62
SECTION 905. DISTRIBUTIONS............................................................................................. 64
SECTION 906. REDEMPTION OF
EQUITY........................................................................... 64
SECTION 907. LIMITATIONS ON
DISTRIBUTIONS.............................................................. 64
[SECTION 908. RELATION TO STATE
SECURITIES LAW]............................................... 65
[SECTION 909. ALTERNATIVE
DISTRIBUTION OF UNCLAIMED PROPERTY, DISTRIBUTIONS, REDEMPTIONS, OR PAYMENTS. .............................................................................. 65
[ARTICLE] 10DISSOCIATION
SECTION 1001. MEMBER=S DISSOCIATION....................................................................... 66
SECTION 1002. EFFECT OF
DISSOCIATION AS MEMBER ............................................ 69
SECTION 1003. POWER OF ESTATE OF
MEMBER......................................................... 69
[ARTICLE] 11DISSOLUTION
SECTION 1101. DISSOLUTION.............................................................................................. 70
SECTION 1102. NONJUDICIAL
DISSOLUTION.................................................................... 70
SECTION 1103. JUDICIAL DISSOLUTION............................................................................ 71
SECTION 1104. VOLUNTARY DISSOLUTION BEFORE COMMENCEMENT
OF ACTIVITY................................................................................................................... 71
SECTION 1105. VOLUNTARY
DISSOLUTION BY THE BOARD AND MEMBERS......... 72
SECTION 1106. WINDING UP................................................................................................. 73
SECTION 1107. DISTRIBUTION OF ASSETS IN WINDING UP LIMITED
COOPERATIVE ASSOCIATION................................................................................... 74
SECTION 1108. KNOWN CLAIMS AGAINST DISSOLVED LIMITED
COOPERATIVE ASSOCIATION................................................................................... 74
SECTION 1109. OTHER CLAIMS AGAINST DISSOLVED LIMITED
COOPERATIVE ASSOCIATION................................................................................... 75
SECTION 1110. COURT PROCEEDING............................................................................... 77
SECTION 1111. ADMINISTRATIVE
DISSOLUTION............................................................. 78
SECTION 1112. REINSTATEMENT FOLLOWING ADMINISTRATIVE
DISSOLUTION................................................................................................................. 79
SECTION 1113. DENIAL OF
REINSTATEMENT; APPEAL................................................ 79
SECTION 1114. STATEMENT OF
DISSOLUTION............................................................... 80
SECTION 1115. STATEMENT OF
TERMINATION............................................................... 80
[[ARTICLE] 12]ACTIONS BY
MEMBERS
SECTION 1201. DERIVATIVE ACTION.................................................................................. 82
SECTION 1202. PROPER PLAINTIFF................................................................................... 82
SECTION 1203. PLEADING.................................................................................................... 83
SECTION 1204. COURT APPROVAL FOR
DISCONTINUANCE OR SETTLEMENT..... 83
SECTION 1205. PROCEEDS AND
EXPENSES................................................................. 83
[ARTICLE] 13FOREIGN
COOPERATIVES
SECTION 1301. GOVERNING LAW....................................................................................... 84
SECTION 1302. APPLICATION FOR
CERTIFICATE OF AUTHORITY.............................. 84
SECTION 1303. ACTIVITIES NOT
CONSTITUTING TRANSACTING BUSINESS............ 85
SECTION 1304. FILING OF
CERTIFICATE OF AUTHORITY.............................................. 86
SECTION 1305. NONCOMPLYING NAME
OF FOREIGN COOPERATIVE...................... 87
SECTION 1306. REVOCATION OF
CERTIFICATE OF AUTHORITY................................. 87
SECTION 1307. CANCELLATION OF CERTIFICATE OF AUTHORITY;
EFFECT
OF FAILURE TO HAVE CERTIFICATE....................................................................... 88
SECTION 1308. ACTION BY
[ATTORNEY GENERAL]........................................................ 89
[ARTICLE] 14AMENDMENT OF
ORGANIC RULES
SECTION 1401. AUTHORITY TO AMEND
ORGANIC RULES............................................ 90
SECTION 1402. NOTICE AND ACTION ON AMENDMENT OF ARTICLES
OF ORGANIZATION OR BYLAWS............................................................................... 90
SECTION 1403. METHOD OF VOTING
ON AMENDMENT OF ORGANIC RULES........ 91
SECTION 1404. CHANGE TO
AMENDMENT OF ORGANIC RULES AT MEETING...... 91
SECTION 1405. VOTING BY
DISTRICT, CLASS OR VOTING GROUP............................ 92
SECTION 1406. APPROVAL OF
AMENDMENT.................................................................. 92
SECTION 1407. EMERGENCY BYLAWS.............................................................................. 94
SECTION 1408. RESTATED ARTICLES
OF ORGANIZATION........................................... 95
SECTION 1409. AMENDMENT OR RESTATEMENT OF ARTICLES OF
ORGANIZATION.............................................................................................................. 95
[ARTICLE] 15CONVERSION,
MERGER, AND CONSOLIDATION
SECTION 1501. DEFINITIONS................................................................................................ 97
SECTION 1502. CONVERSION.............................................................................................. 98
SECTION 1503. ACTION ON PLAN OF CONVERSION BY CONVERTING
LIMITED COOPERATIVE ASSOCIATION................................................................... 99
SECTION 1504. FILINGS REQUIRED
FOR CONVERSION; EFFECTIVE DATE.......... 100
SECTION 1505. EFFECT OF
CONVERSION..................................................................... 102
SECTION 1506. MERGER..................................................................................................... 103
SECTION 1507. NOTICE AND ACTION ON PLAN OF MERGER BY
CONSTITUENT LIMITED COOPERATIVE ASSOCIATION.................................... 104
SECTION 1508. APPROVAL OR ABANDONMENT OF MERGER BY MEMBERS
OF CONSTITUENT LIMITED COOPERATIVE ASSOCIATION.............................. 105
SECTION 1509. FILINGS REQUIRED
FOR MERGER; EFFECTIVE DATE................... 106
SECTION 1510. EFFECT OF MERGER.............................................................................. 107
SECTION 1511. CONSOLIDATION. .................................................................................... 108
SECTION 1512. [ARTICLE] NOT
EXCLUSIVE................................................................... 108
[ARTICLE] 16DISPOSITION OF
ASSETS
SECTION 1601. DISPOSITION OF ASSETS NOT REQUIRING MEMBER
APPROVAL................................................................................................................... 109
SECTION 1602. MEMBER APPROVAL OF
OTHER DISPOSITION OF ASSETS........ 109
SECTION 1603. NOTICE AND ACTION
ON DISPOSITION OF ASSETS....................... 109
SECTION 1604. ACTION ON
DISPOSITION OF ASSETS................................................ 110
[ARTICLE] 17MISCELLANEOUS
PROVISIONS
SECTION 1701. RELATION TO
RESTRAINT OF TRADE AND ANTITRUST LAWS..... 111
SECTION 1702. REQUIREMENTS OF
OTHER LAWS..................................................... 111
SECTION 1703. UNIFORMITY OF
APPLICATION AND CONSTRUCTION.................... 111
SECTION 1704. RELATION TO
ELECTRONIC SIGNATURES IN GLOBAL AND NATIONAL COMMERCE ACT................................................................................................................................ 112
SECTION 1705. SAVINGS CLAUSE................................................................................... 112
SECTION 1706. EFFECTIVE DATE.................................................................................... 112
UNIFORM LIMITED COOPERATIVE ASSOCIATION ACT
Prefatory Note
(1) This Draft attempts to provide an unincorporated and flexible
organizational structure buttressed and combined with cooperative principles
and values in order to obtain an increased equity investment opportunity
necessary for both capital intensive and start-up businesses. It is an alternative to other cooperative and
unincorporated structures already available under state laws.
It
attempts to provide a flexible breastwork of mandatory and default rules that
are grounded in cooperative values and participant governance. Nonetheless, the flexibility in this draft is
not necessarily Ahard-wired@ such that it will in all cases be qualified as a
cooperative, for example, under definitions of Acooperative@ for various federal law provisions. See generally (3), infra.
To
the extent it is already possible to qualify as a Acooperative@ for federal purposes without being organized as a
state law cooperative, other flexible forms of business organizations, like the
LLC, may be used for cooperative purposes.
This Draft, however, provides an efficient default template that
encourages planners to utilize tested cooperative principles for a broad range
of entities and purposes.
(2) Introduction
and Process
(a)
Freestanding and Nonexclusive Nature of the Act
The
Committee is charged with drafting a Limited Cooperative Association Act. The Act is to be a free-standing act
separate and apart from current cooperative acts and, therefore, is not a
statutory replacement of other law but; rather, another statutory option for
organizing cooperatives as a way to encourage economic development.
It
is important to remember that this act does not replace any existing state
co-op laws and, therefore, fulfills a different niche in the cooperative
economic ecosystem. Thus, some
provisions will be different than the more corporate-like framework of existing
traditional statutes. It is intended to
provide a cooperative structure as an alternative to the LLC; and, in some
ways, Ainvestor members@ are
similar to limited partners in a limited partnership. It seeks to provide an alternative which
accounts for cooperative principles to a greater extent, with less
room for design abuse than can be engineered in a combination of entities. Nonetheless, though some features of the
cooperative association are very similar to the features of other entities and
descriptive analogies to other entities may be helpful, it is imperative to
understand that the cooperative association is a unique entity with important
distinctions from each of the other entities to which it is often compared.
An
overarching question raised by this project, and discussed at the Drafting
Committee meetings, is what it means to be a cooperative. Older traditional statutes have found meaning
and form by finding the definition of a cooperative in other law or by stating
that the cooperative must be operated pursuant to a Acooperative plan,@ a
term that is undefined and without fixed meaning even within the industry. As a practical matter, perhaps, the most
important definition of Acooperative@ appears under the guise of the definition of
operating on a Acooperative basis@ found
in federal income tax law. A brief
illustrative discussion of some of those definitions is contained in the next
part of this preliminary note (ACooperatives: Background Information@).
The
definitions of these terms have had a modicum of Aevolvability@ over time, at least on the margin (and concerning
select issues). For example, the Service
threw in the towel on the issue of whether operating on a cooperative basis
required more than 50 percent of the cooperative's business be done with
members on a patronage basis. (Rev. Rul.
93-21, 1993-1 C.B. 188, stating that the 50 percent threshold is not
necessary). Further a frequently quoted
passage from a dissent written by Justice Brandeis (and joined by
Holmes) stated:
That
no one plan of organization is to be labeled as truly co-operative to the
exclusion of others was recognized by Congress in connection with co-operative
banks and building and loan associations [citation omitted]. With the expansion of agricultural
co-operatives it has been recognized repeatedly.
Frost v. Corporation
Comm. (Oklahoma), 2788 U.S. 515
(1929) (Brandeis, J., dissenting, Westlaw p. 14).
Brandeis,
as of 1929, also stated:
And
experts in the Department of Agriculture, charged with disseminating
information to farmers and legislatures, have warned against any
crystallization of the co-operative plan, so as to exclude any type of
co-operation.
The
genesis of the project was the enactment of the AWyoming
Processing Cooperative Law@ in 2001 and the AMinnesota
Cooperative Associations Act@ in 2003. The
Province of Saskatchewan enacted an Act for similar purposes that predated the
Wyoming law, but that act took a significantly different approach. Tennessee, Iowa and Wisconsin have enacted
statues based on the Minnesota Act.
Similar legislation was introduced in Vermont and Missouri but not
passed. Nebraska has been studying an
act and it may be introduced in 2007.
The
Committee=s scope was originally limited to AAgriculture and Agriculture Related@ purposes. In
effect, neither the Iowa nor Minnesota Acts are limited to agriculture.
(b)
Cooperative Values
The
Committee has carefully considered traditional cooperative values and has made
every reasonable attempt to integrate them into this draft as either mandates
or default rules. This represents a more
explicit design than current state cooperative law. The attention to cooperative values was
necessary because the project expressly contemplates the addition of investor
members (beyond nonvoting preferred stock as has long been available to
cooperatives under existing state law).
The
addition of investor members, however, is one of extent and not kind. As explained later in this preliminary note,
one cooperative value is democratic member control. This, at base, means that those using
the cooperative control it. Member
control remains an important part of this draft even though it allows for
investor members. There has long been,
however; even if ignored, an economic trade-off in cooperatives between equity
and control and this act and those state laws on which it is based attempts to
recognize and quantify this trade-off.
All
businesses, including cooperatives, continually monitor and balance equity
structure; which unavoidably includes both long-term debt and equity. Creditors, too, exert control over
decisions. Express covenants and Adeemed insecure@ clauses represent control by the creditor, no
matter of the identity of the creditor (e.g., secondary market standards and
requirements in some co-op sectors).
Further, even under Capper-Volstead, preferred equity capital may demand
a high fixed rate of return as long as all patron members have Aone vote.@ This act is
an attempt to reduce fixed costs associated with debt and preferred equity for
purposes of economic development.
There
are several formulations of Acooperative principles.@ As a matter
of general consensus they include voluntary and open membership; democratic
member control; member economic participation; autonomy and independence;
education, training and information; cooperation among cooperatives; and,
concern for community. This draft
contains specific provisions that contemplate these values.
One
of the fulcrums regarding cooperative values in this draft is Section 104,
captioned ANature of Limited Cooperative Association.@ It addresses
the values of voluntary membership, member economic participation, and autonomy
and independence. Again, autonomy must
be placed within the practical context of long-term debt and equity. Voluntary membership remains voluntary in the
sense that this act requires consent.
Open membership has been compromised under similar existing law and
remains so here in order to allow (but not require) the formation of Aclosed@ cooperatives.
Closed cooperative structure is necessary for patron members to share
the increased value of their equity and to provide member liquidity. These features make a business formed in
general conformance with other cooperative values more attractive.
Section
904, captioned AAllocations of Profits and Losses,@ expressly provides for the values of member
economic participation; education, training and information; and cooperation
among cooperatives. One of the trade-off
concerns Ademocratic member control.@ Sections
411(a), 412, 414, 704 and 716(a) all concern this trade-off.
AConcern for community@ is
directly addressed in Section 720 which varies the law generally applicable to;
for example, corporate directors, to allow the directors of a limited
cooperative to consider a number of community constituencies in making
decisions.
In
sum, this draft expressly considers the important traditional cooperative
values and provides reasoned departures from those values only where
economically necessary. Its intention
is to expand the use of entities recognizing cooperative principles.
Finally,
this draft is flexible enough to form a limited cooperative which operates like
a traditional cooperative. It is the
Committee=s understanding that several such cooperatives have
formed under the Minnesota act, one of this act=s
predecessors.
(3) Cooperatives:
General Background Information
Traditionally,
cooperatives have been organized as corporations under State laws specifically
enacted to authorize the creation of businesses operated on a cooperative
basis. The statutes direct organizers to
follow so-called cooperative principles of user-control, user-benefit, and
user-ownership. Voting rights are only
available to patron-users of the cooperative=s
services and earnings are allocated to patrons on the basis of use, rather than
on the basis of investment.
Member-patrons are the primary source of equity, which is accumulated
over time in the form of retained earnings allocated to equity accounts of the
patrons on the basis of each patron=s pro rata share of business conducted each year
with the cooperative. No market exists
for this equity and it is usually only redeemable at face value by the
cooperative at the discretion of the cooperative=s board
of directors.
The
new cooperative acts (Wyoming, Minnesota, Tennessee, and Iowa) on which this
project is based are sometimes known as ANew Generation Cooperative@ (ANGC@) acts though that name has not gained a precise
technical meaning and one of the primary reasons for this project is to attempt
to gain a measure of uniformity between and among limited cooperative
association acts as they are adopted by the states and to provide as
well-drafted and considered an act as reasonably possible.
In
fact, a new cooperative model gained some popularity, particularly in the Upper
Midwest starting in the 1970=s. The
features that distinguish these ANew Generation@ cooperatives from traditional cooperatives include:
(1) a new equity accumulation program based on substantial upfront investments
by patron-members, (2) a tie-in between equity investment and the right and
obligation to deliver a fixed quantity of product to the cooperative each year,
and (3) a right of patron-members to transfer their equity to another person
eligible to become a patron-member at whatever price is acceptable to both
parties. While traditional cooperatives
usually seek to maximize membership, New Generation cooperatives are Aclosed-end@ with a limited number of members.
While
New Generation cooperatives involve some significant departures from
traditional cooperative structure, they have been organized under traditional
cooperative statutes. Thus they have
limited voting rights to patron-users and allocated earnings to users based on
use.
The
new cooperative acts on which this project is based are sometimes known as ALLC-Cooperative@ laws though that name has not gained a precise
technical meaning. The forerunners to
this project differ in several important ways from traditional cooperative
laws. First, the entities created are
unincorporated associations. Thus they
have the option, under the Internal Revenue Service check-the-box regulations,
to be taxed as partnerships rather than as cooperative associations. Second, up to 85 percent of the voting rights
can be vested in non-patron investor members.
And third, up to 85 percent of the earnings can be directed to
non-patron investor members on the basis of investment. The stated purpose of those laws, as well as
this project, is to provide a vehicle for economic development (especially,
though by no means exclusively in rural areas).
The
new cooperative acts are more flexible than traditional cooperative acts and
such flexibility moves away from fail-safe statutory drafting for purposes of
qualifying as a Acooperative@ under other federal and state laws and
regulations. The primary Aother laws@ are anti-trust law, taxation, securities law, and
access to special cooperative loan provisions and institutions like the Farm
Credit System.
An
example of how other laws relate to the law of cooperatives is the
Capper-Volstead Act of 1922. Without the
Capper-Volstead Act, the Sherman Act of 1890 would apply to make most farmer
marketing contracts with cooperatives per se illegal restraints of trade
because the contracts fix prices. That
is, when farmers market products through cooperatives they agree on prices they
will charge and may agree to sell exclusively to the cooperative. The Capper-Volstead Act provides limited, but
important protection from the Sherman Act.
In order for a cooperative to qualify for the protection: (1) only
agricultural producers may be voting members; (2) the cooperative must be
operated for the mutual benefit of members as producers; (3) no member may have
more than one vote or dividends on stock may not exceed 8% per year; and
(4) the value of products marketed for members must be greater than the value
of products marketed for nonmembers.
Many traditional state agricultural (and general purpose) cooperative
statutes Ahard-wire@ compliance with Capper-Volstead by, for example,
mandating the 8% dividend limit on equity.
The LLC-Cooperative statutes, on the other hand, follow the general
trend in unincorporated statutes by allowing a cooperative to decide
whether to qualify for the antitrust protection provided by the Capper-Volstead
Act. Thus, the 8% dividend limitation is
not mandated by the LLC-Cooperative statutes.
Similarly,
the federal income tax law as of 2006 delineates requirements that associations
must meet to qualify for taxation under Subchapter T of the Internal Revenue
Code (patronage refunds not taxable at the cooperative level). The Code further delineates more requirements
to qualify for tax treatment under Section 521 (for farmer cooperatives
with additional tax benefits) as of 2006.
Qualification for cooperative taxation, however, is inconsistent with
tax treatment as a partnership. Thus,
the LLC-Cooperative model allows flexibility for the organization to be taxed
as a partnership or as a cooperative as the organization itself chooses. The LLC-Cooperative statutes enacted to date
are an option to, not a replacement for, existing cooperative laws.
The
Drafting Committee was established by the Conference at the 2003 Annual Meeting
pursuant to a Study Report and met for the first time December 12-14,
2003. It has met each Spring and Fall
since then. The first meeting of the
Drafting Committee discussed substantive and general drafting and formatting
issues, including the level of detail appropriate for the act and used the AWyoming Processing Cooperative Law@ as a model.
The Committee determined that a higher level of detail than that found
in the Wyoming law, following the general Alook and feel@ of general and traditional cooperative acts, was
appropriate. Discussion at subsequent
Drafting Committee meetings focused on substantive issues within the context of
a draft closely following the Minnesota Cooperative Associations Act which
integrated some of the substantive discussion from the first meeting.
The
Drafting Committee was originally asked to prepare a AUniform Agricultural and Agricultural Related
Cooperatives Act.@ However, at
the 2006 NCCUSL Annual Meeting, the charge was amended to draft a AUniform Limited Cooperative Association Act.@ Thus the
scope of the project was arguably expanded from a law targeted at agricultural
cooperatives to one available to a wide range of enterprises. The reason for the change in scope sounded in
both technical drafting issues and policy.
First, the Conference struggled for nearly two years to devise a
definition of AAgricultural and Agricultural Related@ that was precise yet not both over and under
inclusive. From that limited perspective
the change in scope can be seen as a change in Ainclusive/permissive@ to Aexclusive/prohibited@ or,
stated another way, from a positive to a negative definition. The foregoing change in approach was to
remove ambiguity from the draft. Second,
it was difficult to articulate a reasoned policy statement concerning why the
project should be limited to Aagricultural,@ no matter how defined. Finally, the leading cooperative
association laws as they currently exist were not limited to Aagricultural@ uses even though some notion of Aagricultural@ remains included in their names. Thus, attempting to limit the application of
the project to Aagricultural@ was inconsistent with existing acts and cast doubt
about whether NCCUSL could succeed its overarching organizational mission
encouraging uniformity in state laws.
The
current draft is the result of efforts by the Committee to move in this
direction. The Committee has had only
limited opportunity to discuss the specific language of this draft and
continues to discuss the appropriateness of exclusions, if any from the draft.
(4) Further
Background on Flexibility and Current Non-Law Constraints
In
numerous discussions of the Committee, it has been observed that it is
important for Limited Cooperative Associations that would be created under the
Uniform Limited Cooperative Association Act (the AAct@) to maintain qualification or exemption status
available to traditional cooperative organizations. This discussion is intended to focus those
issues without being an in-depth research report regarding any of them. It will identify some of the relevant federal
statutes and pose an issue under each of them and will provide, as an example,
more discussion of the application of Subchapter T of the Internal Revenue Code
as a prototypical analytical approach undertaken under other federal statutes.
Despite
a desire on the part of some people to try to preserve qualification or
exemption requirements for purposes of other law (non-state) for Limited
Cooperative Associations under the Act, some have suggested that is not likely
to happen with organizations organized under the Act. A bit of research suggests there are reasons
to believe there exists (to some degree) mitigating conditions that narrow the
concerns that associations formed under the Act will be unable to meet the
qualification requirements for co-ops under other law.
This
part of the Preliminary Note focuses, for illustration, on the question of
whether an entity will qualify for a qualification or exemption under statutes
based on the quantity of business done by the entity with members and
patrons. It does not look at other
requirements for qualification or exemption, such as whether the entity is
required to allocate and distribute patronage refunds, whether the entity has
one member-one vote, whether the entity must be involved in agriculture and its
members be agricultural producers, whether patron members are the only ones
allowed to vote or whether an entity must be a corporation.
The
following five (5) statutes have a quantitative requirement:
(1)
7 U.S.C. ' 291 (quantitative requirement in definition of
cooperative in Capper-Volstead federal antitrust exemption);
(2)
12 U.S.C. ' 1141j(a) (quantitative requirement in definition of
cooperative for farm credit purposes);
(3)
12 U.S.C. ' 2129 (quantitative requirement in definition of
cooperative for borrowing from bank for cooperatives);
(4)
49 U.S.C. ' 303(b) (quantitative requirement in definition of
cooperative for ICC exemption); and
(5)
12 U.S.C. ' 3015 ('105 (a), Pub.L. 95-351, 92 Stat. 499, 506 (August
20, 1978)) (quantitative requirement in definition of cooperative in National
Consumer Cooperative Bank Act).
(Taken from Conway
County Farmers Association v. U.S., 588 F.2d 592, 1978 U.S. App. LEXIS
7273, 78-2 U.S. Tax Cas. (CCH) P9840, 42 A.F.T.R. 2d (RIA) 6323.)
Generally,
each of the listed statutes require the association to conduct a specified
quantity of business (usually more than 50%) with members and/or patrons than
with non-members to be a Acooperative@ for purposes of the statute.
Thus,
if a Limited Cooperative Association were structured and operated to meet the
required quantitative amount of business with members/patrons, it would meet
the qualification. For this purpose
only, outside investment in the entity is not relevant although such
investment may be relevant for voting requirements or other requirements.
From
a federal income tax standpoint, the Internal Revenue Service took the position
that to be Aa corporation operating on a cooperative basis@ under Subchapter T ('1381(a)(2))
required the corporation to conduct more business with members and patrons than
with non-members. Rev. Rul. 72-602,
1972-2 Cum. Bull. 511. The Service did
not prevail on this requirement in three cases: Conway County Farmers Ass=n v. U.S.,
588 F.2d 592 (8th Cir. 1978); Columbus Food & Veg. Coop v.
U.S., 7 Claims Ct. 561 (1985); Geauga Landmark, Inc. v. U.S.,
#81-942 (Nor. Dist. Ohio 1985).
As
a result, the Service dropped this requirement and has said the Amember/patron@ portion of a cooperative corporation=s business (and patronage refunds resulting from it)
could receive patronage refund treatment under Subchapter T but the net
profits/losses from the non-member/patron business would be taxable in the same
manner as a non-cooperative corporation.
AWhether a nonexempt cooperative is entitled to the
benefits of Subchapter T depends upon the finding that it is >operating on a cooperative basis= under 26 U.S.C. ' 1381
(a)(2).@ Geauga
Landmark, Inc., supra. This
determination obviously needs to be made on a case by case factual basis.
The
point of this is the Cooperative Association Act could hardwire results for
certain other law but in doing so it could eliminate the flexibility of the
statute. It is likely the ultimate
results under other will need to be left to practitioners and users of the Act
to craft structures that will obtain the benefits of various other statutes as
desired. This may require knowledge and
skill and leave a trap for the unwary, but to accomplish one of the primary
goals of the Act, this may be necessary.
It may ultimately require administrative determinations and rulings for
final guidance in specific instances.
(5) Overview of this
Draft
This
draft draws from other organizational law including the Uniform Limited Partnership
Act (2001), limited liability company acts, the Minnesota Cooperative
Associations Act, several modern Atraditional@ cooperative acts (specifically including, without
limitation: Colorado, Ohio, Oregon, and Wisconsin), and the Model Business
Corporation Act.
Even
though the draft relies, in part, on general organizational law outside
cooperatives, it makes every reasonable attempt to acknowledge the fact that
cooperatives are a different kind of organization legally, historically, and
functionally and that limited cooperative associations, in turn, add a
dimension to traditional cooperatives.
Thus, for example, this draft has a strong participant/member
focus. Illustratively, the bylaws must
be amended by members and not the board of directors which is somewhat unusual
even in cooperative law. The specific
size and purpose of the cooperatives contemplated by this act, however, support
the member focus. Moreover, unlike the
trend in corporate law, this draft generally requires supermajority voting of
members on fundamental matters.
On
the other hand, this draft provides more flexibility for attracting capital
from outside the community of users and gives cooperatives the authority to
erode producer capital lock-in in its organic rules. Thus, it allows wide latitude for both patron
members/participants (e.g. producers/users of the cooperative) and
investor member/participants, within limitations, to provide for the sharing of
net proceeds, surplus, or profit and governance participation between patron
and investor member/participants. The
constraints on investor member participation in this draft are tighter than
those found in most, if not all, the Anew generation@ cooperative statutes. This clearly distinguishes this cooperative
draft from limited liability company statutes in an attempt to maintain the Aco-op brand.@ Over the
evolutionary course of this project the default rules have probably moved
closer to the look and feel of mid-twentieth century corporate-like
cooperatives.
The
2006 Annual Meeting Draft contains substantial and numerous revisions from the
2005 Annual Meeting Draft reflecting Committee decisions at its Fall 2005 and
Spring 2006 meetings.
The
drafting decisions made and directed at the Spring 2006 meeting are reflected
in this Draft and include, most substantially, a revision of the member voting
provisions, derivative actions, and board of director organization. Other significant decisions made at the
Spring meeting concerned the financial rights of members.
The
February 2006 Draft reflected a number of noteworthy Committee directions. For example the nomenclature changed from Amember@ to Aparticipant@; from Anonpatron member@ to Ainvestor participant@; the
term Aassociation@ was inserted behind the word Acooperative@ wherever appropriate to avoid interpretive
confusion and to emphasize that this is a different type of cooperative within
the umbrella term; the February 2006 draft also changed the method of voting
for purposes of Committee discussion in response to questions raised on the
floor of the 2005 Annual Meeting such that fundamental changes require approval
of both Aclasses@ of participants; Aconversions@ were added; another approach to integrate the term Aconsolidation@ has been attempted by the reporters; and, for the
first time, the article on Asale of assets@ was included; the definitions were completely
reworked in light of the substantive changes made by the Committee in its
on-going discussion the inconsistent treatment of proxy has been remedied (no
proxies are allowed); the AReporters= Notes@ on participant actions (derivative actions) and
under selected other sections now reflect research conducted by the reporters
as requested by the Committee over the past two meetings; and, the Afilings@ were given substantial attention and editing though
they may need continued attention.
The
entire draft has undergone a heavy Style Committee edit five times since the
2005 Annual Meeting.
Finally,
the Reporters= Notes (now relegated to the blackline version of
the March 2007 Committee Draft) contain more, rather than fewer questions, as
the draft matures to address finer grained issues. These questions should be viewed as evidence
of progress and maturity and not a lack of either. Moreover, many of the questions are retained
in the Notes for historical reference in drafting official Comments even though
the Committee has resolved them.
UNIFORM LIMITED COOPERATIVE ASSOCIATION ACT
[ARTICLE] 1
GENERAL
PROVISIONS
SECTION 101.
SHORT TITLE. This [act] may be cited as the Uniform Limited
Cooperative Association Act.
SECTION 102.
DEFINITIONS. In this [act]:
(1) AArticles of organization@ means initial, amended, or restated articles of
organization of a limited cooperative association which contain the information
required or permitted in Section 302. In
the case of a foreign cooperative, the term includes all records that:
(A) have a
function similar to articles of organization under this [act]; and
(B) are
required to be filed in the office of the [Secretary of State] or other
official having custody of articles of organization in the state or country
under whose law the foreign cooperative is organized.
(2) ABylaws@ means initial, amended, or restated bylaws of a
limited cooperative association as provided in Section 304.
(3) AContribution@ means a benefit that a person provides to a limited
cooperative association to become a member or in the person=s capacity as a member.
(4) ACooperative@ means a limited cooperative association or an
entity organized under any cooperative law of any jurisdiction.
(5) ADesignated office@ means
with respect to a limited cooperative association or a foreign cooperative, the
office that it is required to designate and maintain under Section 116(a)(1).
(6) ADistribution@ means a transfer of money or other property from a
limited cooperative association to a member because of the member=s financial rights or to a transferee of a member=s financial rights.
(7) ADomestic entity@ means an entity organized under the laws of this
state.
(8) AEntity@ means a person other than an individual, whether
domestic or foreign.
(9) AFinancial rights@ means
the right to participate in allocations and distributions as provided in
[Articles] 9 and 11 but does not include rights or obligations under a
marketing contract governed by [Article] 6.
(10) AForeign cooperative@ means
an entity organized in a jurisdiction other than this state under a law similar
to this [act].
(11) AForeign entity@ means an entity that is organized under the laws of
a jurisdiction other than this state.
(12) AGovernance rights@ means
the right to participate in governance of a limited cooperative association as
provided in [Article] 4.
(13) AInvestor member@ means a person admitted as a member that is not
required by the organic rules to conduct patronage business with the limited
cooperative association in order to receive financial rights.
(14) ALimited cooperative association@ means an association organized under this [act].
(15) AMember@ means a person that is a patron member or investor
member in a limited cooperative association.
The term does not include a person that has dissociated as a member.
(16) AMember=s interest@ means the interest of a patron member or investor
member under Section 501.
(17) AMembers= meeting@ means an annual or special members= meeting.
(18) AOrganic law@ means the statute providing for the creation of an
entity or principally governing its internal affairs.
(19) AOrganic rules@ means the articles of organization and bylaws of a
limited cooperative association.
(20) AOrganizer@ means an individual who signs the articles of
organization.
(21) APatron@ means a person that conducts economic activity with
a limited cooperative association which entitles the person to receive
financial rights based on patronage.
(22) APatron member@ means a person admitted as a member that is
permitted or required to conduct patronage with the limited cooperative
association to receive financial rights.
(23) APatronage@ means business transactions between a limited
cooperative association and a person which entitle the person to receive
financial rights based on the value or quantity of business done between the
association and the person.
(24) APerson@ means an individual, corporation, business trust,
cooperative, estate, trust, partnership, limited partnership, limited liability
company, limited cooperative association, joint venture, association, public
corporation, government or governmental subdivision, agency, or
instrumentality, or any other legal or commercial entity.
(25) APrincipal office@ means
the principal executive office of a limited cooperative association or foreign
cooperative, whether or not in this state.
(26) ARecord@, used as a noun, means information that is
inscribed on a tangible medium or that is stored in an electronic or other
medium and is retrievable in perceivable form.
(27) ARequired information@ means
the information a limited cooperative association is required to maintain under
Section 113.
(28) ASign@ means, with the present intent to authenticate a
record:
(A) to
execute or adopt a tangible symbol; or
(B) to attach
to or logically associate with an electronic symbol, sound, or process to or
with a record.
(29) AState@ means a state of the United States, the District of
Columbia, Puerto Rico, the United States Virgin Islands, or any territory or
insular possession subject to the jurisdiction of the United States.
(30) ATransfer@ includes an assignment, conveyance, deed, bill of
sale, lease, mortgage, security interest, encumbrance, gift, and transfer by
operation of law.
(31) AVoting group@ means any combination of one or more voting members
in one or more districts or classes that under the organic rules or this [act]
are entitled to vote and can be counted together collectively on a matter at a
meeting of shareholders.
(32) AVoting member@ means a member that, under the organic law or
organic rules has a right to vote on matters subject to vote by members under
the organic law or organic rules.
(33) AVoting power@ means the total current power of members to vote on
a particular matter for which a vote may or is to be taken.
SECTION 103.
LIMITED COOPERATIVE ASSOCIATION SUBJECT TO AMENDMENT OR REPEAL OF [ACT]. A limited
cooperative association governed by this [act] is subject to any amendment or
repeal of this [act].
SECTION 104.
NATURE OF LIMITED COOPERATIVE ASSOCIATION. A limited cooperative association organized
under this [act] to be an autonomous unincorporated association of persons united
voluntarily to meet their mutual interests at a practicable cost through a
jointly owned enterprise primarily controlled by those persons which permits
combining:
(1) ownership, financing, and receipt of benefits by
the members for whose interests the association is formed; and
(2) separate investments in the association by
members who may receive returns on their investments and a share of control.
SECTION 105.
PURPOSE AND DURATION OF LIMITED COOPERATIVE ASSOCIATION.
(a) A limited
cooperative association is an entity distinct from its members.
(b) A limited
cooperative association may be organized under this [act] for any lawful
purpose, whether or not for profit, [except] [designated prohibited purposes].
(c) Unless
the articles of organization state a term for a limited cooperative association=s existence, the association has a perpetual
duration.
SECTION 106.
POWERS. A limited cooperative association has the
capacity to sue and be sued in its own name and power to do all things
necessary or convenient to carry on its activities. An association may maintain an action against
a member for harm caused to the association by a violation of a duty to the
association or the organic law or organic rules.
SECTION 107.
GOVERNING LAW. The law of this state governs:
(1) the
internal affairs of a limited cooperative association; and
(2) the
relations among the members of the association and between the members and the
association.
SECTION 108.
SUPPLEMENTAL PRINCIPLES OF LAW. Unless displaced by particular provisions of
this [act], the principles of law and equity supplement this [act].
SECTION 109.
NAME.
(a) In this
section, Aavailable@ means distinguishable upon the records of the
[Secretary of State] from:
(1) the name
of any entity organized or authorized to transact business in this state;
(2) a name
reserved or registered under Section 110; and
(3) a
fictitious or assumed name approved for a foreign cooperative authorized to
transact business in this state.
(b) The name
of a limited cooperative association must contain the words Alimited cooperative association@ or Alimited cooperative@ or
the abbreviation AL.C.A.@ or ALCA@. ALimited@ may be abbreviated as ALtd.@. ACooperative@ may be abbreviated as ACo-op@ or ACoop@. AAssociation@ may be abbreviated as AAssoc.@ or AAssn.@.
(c) Except as
authorized by subsection (d), the name of a limited cooperative association
must be available.
(d) A limited
cooperative association may apply to the [Secretary of State] for authorization
to use a name that is not available. The
[Secretary of State] shall authorize use of the name if:
(1) the name
is reserved or registered under Section 110 and the user, registrant, or owner
of the name consents in a record to the use and applies in a form satisfactory
to the [Secretary of State] to change the reserved or registered name to a name
that is distinguishable upon the records of the [Secretary of State] from the
name applied for; or
(2) the
applicant delivers to the [Secretary of State] a certified copy of the final
judgment of a court establishing the applicant=s
right to use the name in this state.
SECTION 110.
RESERVATION OF NAME.
(a) A person
may reserve the exclusive use of the name of a limited cooperative association,
including a fictitious name for a foreign cooperative whose name is not
available under Section 109, by delivering an application to the [Secretary of
State] for filing. The application must
set forth the name and address of the applicant and the name proposed to be
reserved. If the [Secretary of State]
finds that the name applied for is available under Section 109, the name must
be reserved for the applicant=s exclusive use for a nonrenewable period of 120
days.
(b) The owner
of a name reserved for a limited cooperative association may transfer the
reservation to another person by delivering to the [Secretary of State] a
signed notice of the transfer which states the name, street address, and, if
different, the mailing address of the transferee. If the owner of a reserved name is an
organizer of an association and the name of the association is the same as the
reserved name the delivery of articles of organization for filing [by the
Secretary of State] is a transfer by the owner of the reserved name to the
association.
[SECTION 111.
USE OF THE TERM ACOOPERATIVE@.
(a) Use of
the term Acooperative@ or its abbreviation under this [act] is not a
violation of the provisions restricting the use of the term under [insert
cross-reference to law of this state].
(b) A limited
cooperative association or a member may enforce the restrictions on the use of
the term Acooperative@ under this [act] [and] [insert cross-reference
to other laws of this state].
SECTION 112.
EFFECT OF ORGANIC RULES.
(a) This
[act] and the organic rules govern relations among and between a limited
cooperative association, the association=s members and the association=s board of directors.
(b) Provisions of this [act] not modified by the
phrases Aunless the organic rules otherwise provide@ or the phrase Aunless the articles of organization otherwise
provide@ is mandatory and may not be varied by the organic
rules except as otherwise expressly permitted in a specific provision. Matters not addressed by this [act] are
subject to the organic rules. The
organic rules may govern any other matters.
SECTION 113.
REQUIRED INFORMATION.
(a) A limited
cooperative association shall maintain in a record at its principal office the
following:
(1) a list
showing the full name and last known street address, mailing address, and term
of office of each current director and officer;
(2) a copy of
the initial articles of organization and all amendments to and restatements of
the articles, together with a signed copy of any powers of attorney under which
any articles, amendments, or restatements have been signed;
(3) a copy of
the initial bylaws and all amendments to and restatements of the bylaws;
(4) a copy of
all filed articles of consolidation or merger;
(5) a copy of
any financial statement of the association for the six most recent years;
(6) a copy of
the six most recent annual reports delivered by the association to the [Secretary
of State];
(7) a copy of
the minutes of meetings of members for the three most recent years;
(8) records
of all actions taken by members without a meeting for the three most recent
years;
(9) a list
showing the full name and last known street and mailing addresses of each
current member, separately identifying the patron members, in alphabetical
order, and the investor members, in alphabetical order;
(10) a copy
of the federal, state, and local income tax returns and reports of the
association, if any, for the six most recent years;
(11)
accounting records maintained by the association in the ordinary course
of its operations for the six most recent years;
(12) a copy
of the minutes of directors= meetings for the three most recent years;
(13) records
of all actions taken by directors without a meeting for the three most recent
years;
(14) a record
stating:
(A) the
amount of money contributed and agreed to be contributed by each member;
(B) a
description and statement of the agreed value of other benefits contributed and
agreed to be contributed by each member; and
(C) the times
at which, or events on the happening of which, any additional contribution
agreed to be made by each member is to be made;
(15) for each member, a description and statement of
the member=s interest or interests or information from which
the description and statement can be derived; and
(16) a copy
of all communications made in a record to all members, or to all members in
a class of members, for the three
most recent years.
(b) If a limited cooperative association has been in
existence for a period less than the time required for the maintenance of
records under subsection (a) the time for which records are to be kept shall be
the period of the association=s existence.
SECTION 114.
BUSINESS TRANSACTIONS OF MEMBER WITH LIMITED COOPERATIVE ASSOCIATION. Subject to the organic rules or a specific
contract relating to a transaction, a member may lend money to and transact
other business with a limited cooperative association and has the same rights
and obligations with respect to the loan or other transaction as a person that
is not a member.
SECTION 115.
DUAL CAPACITY. A person may be both a patron member and an
investor member. A person that is both a
patron member and an investor member has the rights, powers, duties, and
obligations provided by this [act] and the organic law in each of those
capacities. When the person acts as a
patron member, the person is subject to the obligations, duties, and
restrictions under this [act] and the organic rules governing patron members. When the person acts as an investor member,
the person is subject to the obligations, duties, and restrictions under this
[act] and the organic rules governing investor members.
SECTION 116.
DESIGNATED OFFICE AND AGENT FOR SERVICE OF PROCESS.
(a) A limited
cooperative association, and a foreign cooperative that has a certificate of
authority under Section 1304, shall designate and continuously maintain in this
state:
(1) an
office, which need not be a place of the association=s activity in this state; and
(2) an agent
for service of process at that office.
(b) An agent
for service of process of a limited cooperative association or foreign
cooperative must be an individual who is a resident of this state or an entity
that is authorized to do business in this state and has an office in this
state.
SECTION 117.
CHANGE OF DESIGNATED OFFICE OR AGENT FOR SERVICE OF PROCESS.
(a) Except as
otherwise provided in Section 207(e), to change its designated office or its
agent for service of process or the street address or, if different, the
mailing address of its principal office, a limited cooperative association
shall deliver to the [Secretary of State] for filing a statement of change
containing:
(1) the name
of the limited cooperative association;
(2) the
street and mailing addresses of its designated office;
(3) if the
designated office is to be changed, the street and mailing addresses of the new
designated office;
(4) the name
of its agent for service of process; and
(5) if the
agent for service of process is to be changed, the name of the new agent.
(b) Except as otherwise provided in Section 207(e),
to change its agent for service of process, the address of its agent for
service of process, or the street or mailing address of its principal office, a
foreign cooperative shall deliver to the [Secretary of State] for filing a
statement of change containing:
(1) the name of the foreign cooperative;
(2) the name and street and mailing addresses of its
current agent for service of process;
(3) if the current agent for service of process or
an address of the agent is to be changed, the new information;
(4) the street and mailing addresses of its
principal office; and
(5) if the street or mailing address of its
principal office is to be changed, the street and mailing addresses of the new
principal office.
(c) Except as
otherwise provided in Section 204, a statement of change is effective when
filed by the [Secretary of State].
SECTION 118.
RESIGNATION OF AGENT FOR SERVICE OF PROCESS.
(a) To resign
as an agent for service of process of a limited cooperative association or
foreign cooperative, the agent must deliver to the [Secretary of State] for
filing a statement of resignation containing the name of the association or
foreign cooperative.
(b) After
receiving a statement of resignation under subsection (a), the [Secretary of
State] shall file it and mail or otherwise provide or deliver a copy to the
principal office.
(c) An agency
for service of a limited cooperative association or foreign cooperative process
terminates pursuant to this section on the earlier of:
(1) the 31st day after the [Secretary of State]
files a statement of resignation under subsection (b); or
(2) when a record designating a new agent for
service of process is delivered to the [Secretary of State] for filing on
behalf of the association or cooperative and becomes effective.
SECTION 119.
SERVICE OF PROCESS.
(a) An agent
for service of process appointed by a limited cooperative association or
foreign cooperative is an agent of the association or foreign cooperative for
service of process, notice, or a demand required or permitted by law to be
served upon the association or foreign cooperative.
(b) If a
limited cooperative association or foreign cooperative does not appoint or
maintain an agent for service of process in this state or the agent for service
of process cannot with reasonable diligence be found at the agent=s address on file with the [Secretary of State], the
[Secretary of State] is an agent of the association or foreign cooperative upon
which process, notice, or a demand may be served.
(c) Service
of process, notice, or a demand on the [Secretary of State] as agent of a
limited cooperative association or foreign cooperative may be made by
delivering to the [Secretary of State] two copies of the process, notice, or
demand. The [Secretary of State] shall
forward one of the copies by registered or certified mail, return receipt
requested, to the association or foreign cooperative at its principal office.
(d) Service
is effected under subsection (c) on the earliest of:
(1) the date
the limited cooperative association or foreign cooperative receives the
process, notice, or a demand;
(2) the date
shown on the return receipt, if signed on behalf of the association or foreign
cooperative; or
(3) five days
after the process, notice, or a demand is deposited for delivery by the United
States Postal Service, if mailed postpaid and correctly addressed.
(e) The
[Secretary of State] shall keep a record of each process, notice, and demand
served pursuant to this section and record the time of, and the action taken
regarding, the service.
(f) This
section does not affect the right to serve process, notice, or a demand in any
other manner provided by law.
[ARTICLE] 2
FILING AND ANNUAL REPORTS
SECTION 201.
SIGNING OF RECORDS TO BE DELIVERED FOR FILING TO THE [SECRETARY OF
STATE].
(a) Records
delivered to the [Secretary of State] for filing pursuant to this [act] must be
signed as follows:
(1) The
initial articles of organization must be signed by at least one organizer.
(2) A
statement of cancellation under Section 302(d) must be signed by at least one
organizer.
(3) Except as
otherwise provided in paragraph (4), a record signed on behalf of an existing
limited cooperative association must be signed by an officer.
(4) A record
filed on behalf of a dissolved association must be signed by a person winding
up activities under Section 1106 or a person appointed under Section 1106 to
wind up those activities.
(5) Any other
record must be signed by the person on whose behalf the record is delivered to
the [Secretary of State].
(b) Any
record to be signed under this [act] may be signed by an authorized agent.
SECTION 202.
SIGNING AND FILING OF RECORDS PURSUANT TO JUDICIAL ORDER.
(a) If a
person required by this [act] to sign or deliver a record to the [Secretary of
State] for filing does not do so, the [appropriate court], upon petition of an
aggrieved person, may order:
(1) the
person to sign the record and deliver it to the [Secretary of State] for
filing; or
(2) the
delivery of the unsigned record to the [Secretary of State] for filing.
(b) If an
aggrieved person under subsection (a) is not the limited cooperative
association or foreign cooperative to which the record pertains, the aggrieved
person shall make the association or foreign cooperative a party to the action
brought to obtain the order.
(c) An
unsigned record filed pursuant to this section is effective.
SECTION 203.
DELIVERY TO AND FILING OF RECORDS BY [SECRETARY OF STATE]; EFFECTIVE
TIME AND DATE.
(a) A record
authorized or required by this [act] delivered to the [Secretary of State] for
filing must be captioned to describe the record=s
purpose, be in a medium permitted by the [Secretary of State], and be delivered
to the [Secretary of State]. If the
filing fees have been paid, unless the [Secretary of State] determines that a
record does not comply with the filing requirements of this [act], the [Secretary
of State] shall file the record [and send a copy of the filed record and a
receipt for the fees to the person on whose behalf the record was filed].
(b) Upon
request and payment of the requisite fee, the [Secretary of State] shall send
to the requester a certified copy of any record filed by the [Secretary of
State] under this [act].
(c) Except as
otherwise provided in Sections 117 and 204, a record delivered to the
[Secretary of State] for filing under this [act] may specify an effective time
and a delayed effective date that may include an effective time on that
date. Except as otherwise provided in
Sections 117 and 204, a record filed by the [Secretary of State] under this
[act] is effective:
(1) if the
record does not specify an effective time and does not specify a delayed
effective date, on the date and at the time the record is filed as evidenced by
the [Secretary of State=s] [endorsement] of the date and time on the record;
(2) if the
record specifies an effective time but not a delayed effective date, on the
date the record is filed at the time specified in the record;
(3) if the
record specifies a delayed effective date but not an effective time, at 12:01
a.m. on the earlier of:
(A) the
specified date; or
(B) the 90th
day after the record is filed; or
(4) if the
record specifies an effective time and a delayed effective date, at the
specified time on the earlier of:
(A) the
specified date; or
(B) the 90th day after the record is filed.
SECTION 204.
CORRECTING FILED RECORD.
(a) A limited
cooperative association or foreign cooperative may deliver to the [Secretary of
State] for filing a statement of correction to correct a record previously
delivered by the association or foreign cooperative to the [Secretary of State]
and filed by the [Secretary of State] if, at the time of filing, the record
contained false or erroneous information or was defectively signed.
(b) A
statement of correction may not state a delayed effective date and must:
(1) describe
the record to be corrected, including its filing date, or has attached a copy
of the record as filed;
(2) specify
the incorrect information and the reason it is incorrect or the manner in which
the signing was defective; and
(3) correct
the incorrect information or defective signature.
(c) When
filed by the [Secretary of State], a statement of correction is effective
retroactively as of the effective date of the record the statement
corrects. However, the statement is
effective when filed as to persons relying on the false or erroneous
information or defective signature before its correction and adversely affected
by the correction.
SECTION 205.
LIABILITY FOR FALSE INFORMATION IN FILED RECORD. If a record delivered to the [Secretary of
State] for filing under this [act] and filed by the [Secretary of State]
contains inaccurate information, a person that suffers loss by reliance on the
information may recover damages for the loss from a person that signed the record
or caused another to sign it on the person=s behalf and knew at the time the record was signed
that the information was inaccurate.
SECTION 206.
CERTIFICATE OF GOOD STANDING OR AUTHORIZATION.
(a) The
[Secretary of State], upon application and payment of the required fee, shall
furnish a certificate of good standing for a limited cooperative association if
the records filed in the [office of the Secretary of State] show that the [Secretary
of State] has filed articles of organization, that the association is in good
standing, and that the [Secretary of State] has not filed a statement of
termination.
(b) The
[Secretary of State], upon application and payment of the required fee, shall
furnish a certificate of authorization for a foreign cooperative if the records
filed in the [office of the Secretary of State] show that the [Secretary of
State] has filed a certificate of authority, has not revoked the certificate of
authority, and has not filed a notice of cancellation pursuant to Section 1307.
(c) Subject
to any qualification stated in the certificate, a certificate of good standing
or authorization issued by the [Secretary of State] establishes conclusively
that the limited cooperative association or foreign cooperative is in good
standing or is authorized to transact business in this state.
SECTION 207.
ANNUAL REPORT FOR [SECRETARY OF STATE].
(a) A limited
cooperative association or foreign cooperative authorized to transact business
in this state shall deliver to the [Secretary of State] for filing an annual
report that states:
(1) the name
of the limited cooperative association or foreign cooperative;
(2) the street
and mailing addresses of the association=s or cooperative=s
designated office and the name of its agent for service of process;
(3) the
street and mailing addresses of its principal office; and
(4) in the
case of a foreign cooperative, the state or other jurisdiction under whose law
the foreign cooperative is formed and any alternative name adopted under
Section 1305.
(b)
Information in an annual report must be current as of the date the
annual report is delivered to the [Secretary of State].
(c) The first
annual report must be delivered to the [Secretary of State] between [January 1
and April 1] of the year following the calendar year in which the limited
cooperative association was formed or the foreign cooperative was authorized to
transact business in this state. An
annual report must be delivered to the [Secretary of State] between [January 1
and April 1] of each subsequent calendar year.
(d) If an
annual report does not contain the information required by subsection (a), the
[Secretary of State] shall promptly notify the reporting limited cooperative
association or foreign cooperative and return the report for correction. If the report is corrected to contain the
information required by subsection (a) and delivered to the [Secretary of
State] within 30 days after the date of the notice from the [Secretary of
State], it is timely delivered.
(e) If a
filed annual report contains an address of the designated office, the name of
the agent for service of process, or the address of the principal office which
differs from the information shown in the records of the [Secretary of State]
immediately before the filing, the differing information in the annual report
is considered a statement of change under Section 117.
(f) If a
limited cooperative association fails to deliver an annual report under this
section, the [Secretary of State] may proceed under Section 1111 to
administratively dissolve the association.
(g) If a
foreign cooperative fails to deliver an annual report under this section, the
[Secretary of State] may proceed under Section 1306 to revoke the certificate
of authority of the cooperative.
SECTION 208.
FILING FEES. The filing fee for records filed under this
[article] by the [Secretary of State] is governed by [insert appropriate
citation to this state=s general business corporation act, limited
liability company act, or the general cooperative act.
[ARTICLE] 3
FORMATION AND ARTICLES OF ORGANIZATION
SECTION 301.
ORGANIZERS. A limited
cooperative association must be organized by one or more organizers who are
individuals.
SECTION 302.
FORMATION OF LIMITED COOPERATIVE ASSOCIATION; ARTICLES OF ORGANIZATION.
(a) To form a
limited cooperative association, the organizers of the association must deliver
articles of organization to the [Secretary of State] for filing. The articles must state:
(1) the name
of the association;
(2) the
purposes for which the association is formed;
(3) the
street and mailing addresses of the association=s
initial designated office and the name and street and mailing addresses of the
association=s initial agent for service of process;
(4) the name
and street and mailing addresses of each organizer; and
(5) the term
for which the association is to exist if other than perpetual.
(b) Subject to Section 112(b), articles of
organization may contain any other provisions in addition to those required by
subsection (a).
(c) A limited
cooperative association is formed after articles of organization that
substantially comply with subsection (a) are delivered to the [Secretary of
State], are filed, and become effective under section 203(c).
(d) If the
articles state a delayed effective date, a limited cooperative association is
not formed if, before the articles take effect, an organizer who signed the
initial articles of organization signs and delivers to the [Secretary of State]
for filing a statement of cancellation.
SECTION 303.
ORGANIZATION OF LIMITED COOPERATIVE ASSOCIATION.
(a) After a
limited cooperative association is formed under Section 302:
(1) if
initial directors are named in the articles of organization, the initial
directors shall hold an organizational meeting to adopt initial bylaws and
carry on any other business brought before the directors at the meeting; or
(2) if
initial directors are not named in the articles of organization, the organizers
shall designate the initial directors and call a meeting of the initial
directors to adopt initial bylaws and carry on any other business necessary or
proper to complete the organization of the association.
(b) Initial directors need not be members.
(c) An initial director serves until a successor is
elected and qualified at a special or annual members= meeting or the director is removed, resigns, is
declared incompetent by a court with jurisdiction, or dies.
SECTION 304.
BYLAWS.
(a) Bylaws must be in a record and, if not stated in
the articles of organization, must include:
(1) a
statement of the capital structure of the limited cooperative association,
including:
(A) the
groups, classes, or other types of member interests and relative rights,
preferences, and restrictions granted to or imposed upon each group, class, or
other type of member interest; and
(B) the
rights to share in profits or distributions of the association;
(2) a statement of the method for admission of
members;
(3) a
statement designating voting and other governance rights, including which
members have voting power and any restriction on the voting power under Sections
411 through 413;
(4) a
statement that member interests held by a member are not transferable or, if
transferable, a statement of the conditions upon which they may be transferred;
(5) a
statement concerning the manner in which profits and losses are allocated and
distributions are made among patron members and, if investor members are
authorized, the manner in which profits and losses are allocated and how
distributions are made between patron members and investor members; and
(6) a statement of the number and terms of directors
or the method by which the number and terms are determined.
(b) Subject to Section 112(b) and the articles of
organization, bylaws may contain any other provision for managing and
regulating the affairs of the association.
(c) In
addition to amendments permitted under [Article] 14, the initial board of
directors of a limited cooperative association may amend the bylaws by a
majority vote of the directors at any time before the admission of members.
[ARTICLE] 4
MEMBERS
SECTION 401.
MEMBERS. To begin business, a limited cooperative association
must have at least [two] patron members unless the sole member is a
cooperative.
SECTION 402.
BECOMING A MEMBER. A person becomes a member:
(1) as
provided in the organic rules;
(2) as the
result of merger or consolidation under [Article] 15; or
(3) with the
consent of all the members.
SECTION 403.
NO RIGHT OR POWER AS MEMBER TO BIND LIMITED COOPERATIVE ASSOCIATION. A member does not have the right or power as
a member to act for or bind the limited cooperative association.
SECTION 404.
NO LIABILITY AS MEMBER FOR LIMITED COOPERATIVE ASSOCIATION OBLIGATIONS. Unless the articles of organization otherwise
provide:
(a) an
obligation of a limited cooperative association, whether arising in contract,
tort, or otherwise, is not the obligation of a member; and
(b) a member is not personally liable, by way of
contribution or otherwise, for an obligation of the association solely by
reason of being a member.
SECTION 405.
RIGHT OF MEMBER AND FORMER MEMBER TO INFORMATION.
(a) Within 10
business days of receipt by a limited cooperative association of a demand made
in a record, the association shall permit a member to obtain, inspect, and copy
required information under Section 113(1) through (8) during regular business
hours in the association=s principal office.
A member need not have any particular purpose for seeking the
information. The association is not
required to provide the same information under Section 113(2) through (8) to
the same member more than once during a six-month period.
(b) On demand
made in a record received by the limited cooperative association, a member may
obtain, inspect, and copy required information under Section 113(9), (10),
(12), (13), and (16) if:
(1) the
member seeks the information in good faith and for a proper purpose reasonably
related to the member=s interest as a member;
(2) the
demand includes a description with reasonable particularity of the information
sought and the purpose for seeking the information;
(3) the
information sought is directly connected to the member=s purpose; and
(4) the
demand is reasonable.
(c) Within 10
business days after receiving a demand pursuant to subsection (b), a limited
cooperative association shall inform in a record the member that made the
demand:
(1) if the
association agrees to provide the demanded information:
(A) the
information the association will provide in response to the demand; and
(B) a
reasonable time and place at which the association will provide the
information; or
(2) if the
association declines to provide any demanded information, the association=s reasons for declining.
(d) Subject
to subsection (f), a person dissociated as a member may obtain, inspect, and
copy information under subsection (a) or (b):
(1) by delivering a demand in a record to the
limited cooperative association in the same manner and subject to the same
conditions applicable to a member under subsection (b);
(2) if the information pertains to the period during
which the person was a member in the association; and
(3) if the person seeks the information in good
faith.
(e) A limited
cooperative association shall respond to a demand made pursuant to subsection
(d) in the same manner as provided in subsection (c).
(f) Within 10 business days of receipt by a limited
cooperative association of a demand made by a member in a record, but not more
often than once in a six-month period, the association shall deliver to the
member a record stating the information with respect to the member required by
Section 113(15).
(g) If a
member dies or is adjudged incompetent, Section 1003 applies.
(h) A limited
cooperative association may impose reasonable restrictions, including
nondisclosure restrictions, on the use of information obtained under this
section. In a dispute concerning the
reasonableness of a restriction under this subsection, the association has the
burden of proving reasonableness.
(i) A limited
cooperative association may charge a person that makes a demand under this
section reasonable costs of copying, limited to the costs of labor and
material.
(j) A person
who may obtain information under this Section may obtain the information
through an attorney or other agent. A
restriction imposed on the person under subsection (h) or by the organic rules
applies to the attorney or other agent.
(k) The
rights stated in this section do not extend to a person as transferee.
(l) The organic rules may require a limited
cooperative association to provide more information than required by this
Section and may establish conditions and procedures for providing the
information pursuant to this subsection.
SECTION 406.
ANNUAL MEMBERS= MEETINGS.
(a) Members shall meet annually as provided in the
organic rules or at the direction of the limited cooperative association=s board of directors not inconsistent with the
organic rules.
(b) Annual members= meetings may be held inside or outside this state
at the place stated in the organic rules or by the limited cooperative
association=s board of directors not inconsistent with the
organic rules.
(c) Unless the organic rules otherwise provide,
members may attend or conduct annual members=
meetings through any means of communication if all members attending the
meeting can communicate with each other during the meeting.
(d) A limited
cooperative association=s board of directors shall report, or cause to be
reported, at the association=s annual members=
meeting the association=s business and financial condition as of the close
of the most recent fiscal year.
(e) Unless
the organic rules otherwise provide, a limited cooperative association=s board of directors shall designate the presiding
officer of the association=s annual members=
meeting.
(f) Failure to hold an annual meeting pursuant to
subsection (a) does not affect the validity of any limited cooperative
association action.
SECTION 407.
SPECIAL MEMBERS= MEETINGS.
(a) Special
members= meetings must be called:
(1) as
provided in the organic rules;
(2) by a
majority vote of the board of directors on a proposal stating the purpose of
the meeting;
(3) by demand
in a record signed by members holding at least 20 percent of the votes of any
class or group entitled to be cast on the matter that is the purpose of the
meeting stated in the demand; or
(4) by demand
in a record signed by members holding at least 10 percent of all votes entitled
to be cast on the matter that is the purpose of the meeting stated in the
demand.
(b) Any
voting member may withdraw its demand under subsection (a)(3) or (a)(4) before
receipt by the limited cooperative association of demands sufficient to require
a special members= meeting.
(c) A special
members= meeting may be held inside or outside this state at
the place stated in the organic rules or by the limited cooperative association=s board of directors in accordance with the organic
rules.
(d) Unless the organic rules otherwise provide,
members may attend or conduct special members=
meetings through the use of any means of communication if all members attending
the meeting can communicate with each other during the meeting.
(e) Only
affairs within the purpose or purposes stated pursuant to the notice of a
special members= meeting may be conducted at the meeting.
(f) Unless
the organic rules otherwise provide, the presiding officer of a special members= meeting shall be designated by the limited
cooperative association=s board of directors.
SECTION 408.
NOTICE OF MEMBERS= MEETINGS.
(a) A limited
cooperative association shall notify each member of the time, date, and place
of a members= meeting [at least 15 and not more than 60] days
before the meeting.
(b) Unless
the articles of organization otherwise provide, notice of an annual members= meeting need not include the purpose or purposes of
the meeting.
(c) Notice of
a special members= meeting must include the purpose or purposes of the
meeting as contained in the demand under Section 407(a)(3) or (a)(4) or as
voted upon by the limited cooperative association=s
board of directors under Section 407(a)(2).
SECTION 409.
WAIVER OF MEMBERS= MEETING NOTICE.
(a) A member
may waive notice of a members= meeting before, during, or after the meeting.
(b) A member=s participation in a members= meeting is a waiver of notice of that meeting
unless the member objects to the meeting at the beginning of the meeting or
promptly upon the member=s arrival at the meeting and does not thereafter
vote for or assent to action taken at the meeting.
SECTION 410.
QUORUM OF MEMBERS. Unless the organic rules otherwise provide,
the voting power of those members present at a members= meeting constitutes a quorum.
SECTION 411.
VOTING BY PATRON MEMBERS.
(a) Unless
the organic rules provide for a greater quantum, each patron member has one
vote. The organic rules may allocate
voting power among patron members as provided in Section 412.
(b) The
organic rules may provide for the allocation of patron member voting power by
districts, class, or classes or any combination of them.
SECTION 412.
DETERMINATION OF VOTING POWER OF PATRON MEMBER. The organic
rules may allocate voting power among patron members on the basis of one or a
combination of:
(1) one member, one vote;
(2) use or patronage;
(3) equity; or
(4) if a patron member is a cooperative, the number
of its patron members.
SECTION 413.
VOTING BY INVESTOR MEMBERS. If the
organic rules provide for investor members, each investor member has one vote,
unless the organic rules otherwise provide.
The organic rules may provide for the allocation of investor member
voting power by class, classes, or any combination of classes.
SECTION 414.
VOTING REQUIREMENTS FOR MEMBERS. If a limited
cooperative association has both patron and investor members:
(a) (1) the total voting power of all patron members
may not be less than two-thirds of the entire voting power entitled to vote;
and
(2) action on
any matter is approved only:
(A) upon the
affirmative vote of at least a majority of all members voting at the meeting
unless more than a majority is required by [Articles] 14 through 16 or in the
organic rules; and
(B) at least one-half of the votes cast by patron
members are in the affirmative, but the organic rules may require a larger
affirmative vote by patron members; and
(b) the organic rules may provide for the quantum of
the affirmative votes that must be cast by investor members to approve the
matter voted on.
SECTION 415.
MANNER OF VOTING.
(a) At a
members= meeting of proxy voting by members is prohibited.
(b) Delegate
voting based on district, class, or classes is not voting by proxy under this
section.
(c) The
organic rules may provide for voting on some, none, or all questions by secret
ballot delivered by mail or voting by other means on some or all questions that
are subject to vote by members .
SECTION 416.
ACTION WITHOUT A MEETING.
(a) Unless
the organic rules require that action be taken only at a members= meeting, any action that may be taken by the
members may be taken without a meeting if each member entitled to vote on the
action consents in a record to the action.
(b) A member may withdraw in a record consent under
subsection (a) at any time before the limited cooperative association receives
a consent from each member entitled to vote.
(c) The
consent record of any action may specify the effective date or time of the
action.
SECTION 417.
DISTRICTS AND DELEGATES; CLASSES OF MEMBERS .
(a) The
organic rules may provide for the formation of geographic districts of patron
members and may provide:
(1) for the conduct of patron member meetings by
districts and the election of directors at the meetings; or
(2) that districts may elect district delegates to
represent and vote for the district in members=
meetings.
(b) A
delegate elected under subsection (a)(2) has one vote unless voting power is
otherwise allocated under Section 412.
(c) The
organic rules may provide for the establishment of classes of members, the
preferences, rights, and limitations of the classes, and:
(1) the
conduct of members= meetings by classes and the election of directors
at the meetings; or
(2) that classes may elect class delegates to represent
and vote for the class in members= meetings.
(d) A delegate elected under subsection (c)(2) has
one vote unless the organic rules provide for aggregate or representative
voting based on the member voting under Sections 411 through 413.
[ARTICLE] 5
MEMBER INTEREST
SECTION 501.
MEMBER INTEREST. A member=s interest:
(1) is
personal property;
(2) consists
of:
(A)
governance rights;
(B) financial
rights; and
(C) the right
or obligation, if any, to do business with the limited cooperative association;
and
(3) may be in
certificated or uncertificated form.
SECTION 502.
PATRON AND INVESTOR MEMBER INTERESTS. Unless the organic rules establish investor
member interests, member interests must be patron member interests.
SECTION 503.
TRANSFERABILITY OF MEMBER INTEREST.
(a) Unless
the organic rules otherwise provide, member interests other than financial
rights are not transferable. The terms
of the restriction on transferability must be:
(1) set forth
in the organic rules and the member records of the association; and
(2)
conspicuously noted on any certificates evidencing a member=s interest.
(b) Unless
the transfer is restricted or prohibited by the organic rules, a member may
transfer its financial rights in the limited cooperative association.
(c) A
transferee of a member=s financial rights, to the extent transferred, has
the right to share in the allocation of profits or losses and to receive the
distributions to the member transferring the interest.
(d) A
transferee of a member=s financial rights does not become a member upon
transfer of the rights unless the transferee is admitted as a member by the
limited cooperative association.
(e) A limited
cooperative association need not give effect to a transfer under this section
until the association has notice of the transfer.
(f) A
transfer of a member=s financial rights in violation of a restriction or
prohibition on transfer contained in the organic rules is void.
SECTION 504.
SECURITY INTEREST AND SET-OFF.
(a) Subject
to subsection (b), a member or transferee may grant a security interest only in
financial rights in a limited cooperative association. The granting of a security interest in
financial rights is not a transfer for purposes of Section 503. The limitation contained in this subsection does
not apply to a member=s interest that may be transferred in its entirety
under the organic rules.
(b) The
organic rules may restrict or eliminate the granting of a security interest in
financial rights and may permit a security interest to be granted in governance
rights. The limitation of subsection (a)
to financial rights does not apply in the case of a member=s interest that is not subject to a restriction or
prohibition on transfer under the organic rules.
(c) A limited
cooperative association has a continued perfected security interest in the
financial rights of a member to secure payment of any indebtedness or other
obligation of the member to the association.
Notwithstanding [Sections 308 and 309 of UCC Article 9], the security
interest has priority over all other perfected security interests. The association may enforce its security
interest by set-off against the member=s financial rights in the association. Unless the organic rules otherwise provide, a
member may not compel the association to offset financial rights against any
indebtedness or obligation owed to the association.
SECTION 505.
CHARGING ORDERS FOR A JUDGMENT CREDITOR OF MEMBER OR TRANSFEREE.
(a) On
application by a judgment creditor of a member or transferee, a court may enter
a charging order against the financial rights of the judgment debtor for the
unsatisfied amount of the judgment. A
charging order issued under this subsection constitutes a lien on the judgment
debtor=s financial rights and requires the limited
cooperative association to pay over to the creditor or receiver, to the extent
necessary to satisfy the judgment, any distribution that would otherwise be
paid to the judgment debtor.
(b) To the
extent necessary to effectuate the collection of distributions pursuant to a
charging order under subsection (a), the court may:
(1) appoint a
receiver of the share of the distributions due or to become due to the judgment
debtor in respect of the judgment debtor=s financial rights, with the power to make all
inquiries the judgment debtor might have made; and
(2) make all
other orders that the circumstances of the case may require to give effect to
the charging order.
(c) Upon a
showing that distributions under a charging order will not pay the judgment
debt within a reasonable time, the court may foreclose the lien and order the
sale of the financial rights. The
purchaser at the foreclosure sale obtains only the financial rights that are
subject to the charging order, does not thereby become a member, and is subject
to Section 503.
(d) At any time before a sale pursuant to a
foreclosure, a member or transferee whose financial rights are subject to a
charging order under subsection (a) may extinguish the charging order by
satisfying the judgment and filing a certified copy of the satisfaction with
the court that issued the charging order.
(e) At any time before foreclosure, the limited
cooperative association or one or more members whose financial rights are not
subject to the charging order may pay to the judgment creditor the full amount
due under the judgment and thereby succeed to the rights of the judgment
creditor, including the charging order.
Unless the organic rules otherwise provide, the association may act
under this subsection only with the consent of all members whose financial
rights are not subject to the charging order.
(f) This
[act] does not deprive any member or transferee of the benefit of any exemption
laws applicable to the member=s or transferee=s financial rights.
(g) This
section provides the exclusive remedy by which persons seeking to enforce a
judgment against a member or transferee may, in the capacity of judgment
creditor, satisfy the judgment out of the judgment debtor=s financial rights.
(h) The
limitations of this section to financial rights do not apply to the extent that
the organic rules provide for the transfer of the member=s interest in addition to financial rights.
[ARTICLE] 6
MARKETING CONTRACTS
SECTION 601.
AUTHORITY. In this [article], Amarketing contract@ means
a contract between a limited cooperative association and another person that
need not be a patron member:
(1) requiring
the other person to sell, or deliver for sale or marketing on the person=s behalf, a specified part of the person=s products, commodities, or goods exclusively to or
through the association or any facilities furnished by the association; or
(2) authorizing the association to act for the
person in any manner with respect to the products, commodities, or goods.
SECTION 602.
MARKETING CONTRACTS.
(a) If a
marketing contract provides for the sale of products, commodities, or goods to
a limited cooperative association, the sale transfers title absolutely to the
association upon delivery or at any other specific time expressly provided by
the contract.
(b) A
marketing contract may:
(1) authorize
a limited cooperative association to grant a security interest in the products,
commodities, or goods delivered; and
(2) allow the
association to sell the products, commodities, or goods delivered, and pay or
distribute the sales price on a pooled or other basis after deducting selling
costs, processing costs, overhead, expenses, and other charges as provided by
agreement.
SECTION 603.
DURATION OF MARKETING CONTRACT. The initial duration of a marketing contract
may not exceed 10 years, but the contract may be made self-renewing for
additional periods not exceeding five years each. Unless the contract provides for another
manner or time for termination, either party may terminate the contract by
giving notice in a record at least 90 days before the end of the current term.
SECTION 604.
REMEDIES FOR BREACH OF CONTRACT.
(a) A
marketing contract or the organic rules may establish the right to injunctive relief,
specific performance, and liquidated damages and shall be enforceable in
accordance with the terms of the contract or the organic rules.
(b) The remedies in subsection (a) shall not be
construed as penalties and are in addition to any other available remedies.
[ARTICLE] 7
DIRECTORS AND OFFICERS
SECTION 701.
EXISTENCE AND POWERS OF BOARD OF DIRECTORS.
(a) Unless
the number of members is fewer than three, a limited cooperative association
must have a board of directors consisting of three or more individuals. If there are fewer than three members , the
number of directors may not be less than the number of members .
(b) The
affairs of a limited cooperative association must be managed by, or under the
direction of, the association=s board of directors and the board may adopt
policies and procedures not in conflict with the organic rules or this [act].
(c) An
individual does not have agency authority on behalf of a limited cooperative
association solely by being a director.
SECTION 702.
NO LIABILITY AS DIRECTOR FOR LIMITED COOPERATIVE ASSOCIATION=S OBLIGATIONS. An obligation of a limited cooperative
association, whether arising in contract, tort, or otherwise, is not the
obligation of a director. An individual
is not personally liable, directly or indirectly, by way of contribution or
otherwise, for an obligation of the association solely by reason of being a
director.
SECTION 703.
QUALIFICATIONS OF DIRECTORS AND COMPOSITION OF BOARD.
(a) A
director of a limited cooperative association must be an individual.
(b) Subject
to this section, the organic rules may provide for qualifications of directors.
(c) Unless
the organic rules otherwise provide and subject to Section 303 and subsections
(d) and (e), each director of a limited cooperative association must be a
member of the association or an individual designated by a member that is not
an individual.
(d) Unless
the organic rules otherwise provide, a director may be an officer or employee
of the limited cooperative association.
(e) Unless
the organic rules otherwise provide, if a limited cooperative association has
nonmember directors, the number of nonmember directors may not exceed:
(1) one
director if there are two, three, or four directors; or
(2) one-fifth
of the total number of directors if there are five or more directors.
SECTION 704.
ELECTION OF DIRECTORS.
(a) Unless the organic rules require a greater
number, a majority of the board of directors of a limited cooperative
association must be elected exclusively by patron members .
(b) If a limited cooperative association has
investor members, and unless the organic rules otherwise provide, the investor
members shall elect the directors who are not exclusively elected by patron
members under subsection (a).
(c) Subject
to subsection (a), the organic rules may provide for the election of all or a
specified number of directors by one or more districts or classes of members .
(d) Subject to subsection (a), the organic rules may
provide for the nomination or election of directors by districts or classes,
directly or by district delegates.
(e) If a class of members consists of a single
member, the organic rules may provide for the member to appoint a director or
directors.
(f) Unless the organic rules otherwise provide,
cumulative voting for directors of a limited cooperative association is
prohibited.
(g) Except as
otherwise provided by the organic rules, subsection (e), or Sections 417 and
709, member directors of a limited cooperative association must be elected at
an annual members= meeting.
SECTION 705.
TERM OF DIRECTOR.
(a) Unless
the organic rules otherwise provide and, subject to Section 303(c), the term of
a director of a limited cooperative association expires at the annual members= meeting following the director's election
appointment. The term of a director may
not exceed three years.
(b) Unless
the organic rules otherwise provide, a director may be reelected for subsequent
terms.
(c) A
director continues to serve until a successor director is elected or appointed
and qualified or the director is removed, resigns, ceases to qualify as a
director under the organic rules, is declared incompetent by a court with
jurisdiction, or dies.
SECTION 706.
RESIGNATION OF DIRECTOR.
(a) A
director may resign at any time by giving notice in a record to the limited
cooperative association.
(b) Unless
the notice states a later effective date, a resignation is effective when
notice is received by the limited cooperative association.
SECTION 707.
REMOVAL OF DIRECTOR. Unless the organic rules otherwise provide:
(1) members may remove one or more directors with or
without cause.
(2) A member
or members holding at least 10 percent of the total voting power entitled to be
voted in the election of the director may petition the board of directors for
the removal of a director by a signed record submitted to the officer of the
limited cooperative association charged with keeping its records.
(3) Upon
receipt of a petition for removal of a director:
(A) a limited cooperative association=s board of directors shall call a special members= meeting to be held within 90 days after receipt of
the petition by the association; and
(B) the board of directors shall mail or otherwise
transmit or deliver in a record to the members entitled to vote on the removal
notice of the meeting that complies with Section 408.
(4) A
director against whom a petition has been submitted must be informed in a
record of the petition within a reasonable time before the members= meeting at which the members consider the petition.
(5) A
director is removed if the votes in favor of removal is equal to or greater
than the votes required to elect the director.
SECTION 708.
SUSPENSION OF DIRECTOR BY BOARD.
(a) A limited
cooperative association=s board of directors may suspend a director of the
association if, considering the director=s course of conduct and the inadequacy of other
available remedies, immediate suspension is necessary for the best interests of
the association and the director is engaging, or has engaged, in:
(1) fraudulent
conduct with respect to the association or its members;
(2) gross
abuse of the position of the director;
(3)
intentional or reckless infliction of harm on the association; or
(4) any other
behavior, act or omission as provided by the organic rules.
(b) A
suspension is effective for 30 days unless the board of directors calls a
special meeting for removal of the director pursuant to Section 707(3), (4),
and (5) before the end of the 30-day period pursuant to Section 707(b). The organic rules may not vary those
requirements.
SECTION 709.
VACANCY ON BOARD.
(a) Unless
the organic rules otherwise provide, a vacancy on the board of directors of a
limited cooperative association must be filled within a reasonable time:
(1) by
majority vote of the remaining directors until the next annual members= meeting or a special members= meeting called to fill the vacancy; and
(2) for the
unexpired term by members at the next annual members= meeting or a special members= meeting called to fill the vacancy.
(b) Unless otherwise provided in the organic rules,
if the vacating director was elected or appointed by a class of members or a
district:
(1) the
appointed director must be of that class or district; and
(2) the election
of the director for the unexpired term must be conducted in the same manner as
would the election for that position without a vacancy.
(c) If a member appointed a vacating director under
Section 704(e), the organic rules may provide for that member to appoint a
director to fill the vacancy.
SECTION 710.
COMPENSATION OF DIRECTORS. Unless the organic rules otherwise provide,
the board of directors of a limited cooperative association may fix the
remuneration of directors and of nondirector committee members appointed under
Section 717(a).
SECTION 711.
MEETINGS.
(a) The board
of directors of a limited cooperative association shall meet at least annually
and may hold meetings inside or outside this state.
(b) Unless
the organic rules otherwise provide, a limited cooperative association=s board of directors may permit directors to attend
or conduct board meetings through the use of any means of communication, if all
directors attending the meeting can communicate with each other during the
meeting.
SECTION 712.
ACTION WITHOUT MEETING.
(a) Unless
prohibited by the organic rules, any action that may be taken by the board of
directors of a limited cooperative association may be taken without a meeting
if each director consents in a record to the action.
(b) Consent
under subsection (a) may be withdrawn by a director in a record at any time
before the limited cooperative association receives records of consent from all
directors.
(c) A record
of consent for any action under subsection (a) may specify the effective date
or time of the action.
SECTION 713.
MEETINGS AND NOTICE.
(a) Unless the
organic rules otherwise provide, a limited cooperative association=s board of directors may establish a time, date, and
place for regular board meetings and notice of the time, date, place, or
purpose of those meetings is not required.
(b) Unless
the organic rules otherwise provide, notice of the time, date, and place of a
special meeting of a limited cooperative association=s board of directors must be given to all directors
at least three days before the meeting.
The notice must contain a statement of the purpose of the special
meeting, and the meeting is limited to the matters contained in the statement.
SECTION 714.
WAIVER OF NOTICE OF MEETING.
(a) Unless
the organic rules otherwise provide, a director of a limited cooperative
association may waive any required notice of a meeting of the association=s board of directors in a record before, during, or
after the meeting.
(b) Unless
the organic rules otherwise provide, a director=s
participation in a meeting is a waiver of notice of that meeting unless:
(1) the director objects to the meeting at the
beginning of the meeting or promptly upon the director=s arrival at the meeting and does not thereafter
vote in favor of or otherwise assent to the action taken at the meeting; or
(2) the director promptly objects upon the
introduction of any matter for which proper notice has not been given and does
not thereafter vote in favor of or otherwise assent to the action taken on the
matter.
SECTION 715.
QUORUM.
(a) Unless
the articles of organization otherwise provide, a majority of the fixed number
of directors on a limited cooperative association=s board of directors constitutes a quorum for the
management of the affairs of the association.
(b) If a
quorum of the board of directors of a limited cooperative association is
present at the beginning of a meeting, any action taken by the directors
present is valid even if withdrawal of directors originally present results in
the number of directors being less than the number required for a quorum.
(c) A director present at a meeting but objecting to
notice under Section 714(b)(1) or (2) shall not be counted toward a quorum.
SECTION 716.
VOTING.
(a) Each
director of a limited cooperative association has one vote for purposes of
decisions made by the board of directors of the association.
(b) Unless the organic rules otherwise provide and
subject to Sections 715, 1402(1)(A), 1503(a)(1), 1508(a), and 1603(1), the
affirmative vote of the majority of directors present at a meeting is the act
of the board of directors.
SECTION 717.
COMMITTEES.
(a) Unless
the organic rules otherwise provide, a limited cooperative association=s board of directors may create one or more
committees and appoint one or more individuals to serve on a committee.
(b) Unless
the organic rules otherwise provide, an individual appointed to serve on a
committee of a limited cooperative association need not be a director or member
of the association. A non-director
serving on a committee has the same rights, duties, and obligations as a
director serving on a committee.
(c) Unless
the organic rules otherwise provide, each committee of a limited cooperative
association may exercise the powers delegated by the association=s board of directors, but a committee may not:
(1) approve
allocations or distributions except according to a formula or method prescribed
by the board of directors;
(2) approve
or propose to members action requiring approval of members; or
(3) fill
vacancies on the board of directors or any of its committees.
SECTION 718.
STANDARDS OF CONDUCT AND LIABILITY. Except as provided in Section 720:
(1) the
discharge of the duties of a director or member of a committee of the board of
directors of a limited cooperative association is governed by the law
applicable to directors of entities organized under [insert cross-reference to
this State=s Cooperative Corporation Act] [insert
cross-reference to this State=s Nonprofit Cooperative Act] [insert cross-reference
to this State=s General Business Corporation Act] [insert
cross-reference to this State=s Nonprofit Corporation Act]; and
(2) the
liability of a director or member of a committee of the board of directors is
governed by the law applicable to directors of entities organized under [insert
cross-reference to this State=s Cooperative Corporation Act] [insert
cross-reference to this State=s Nonprofit Cooperative Act] [insert cross-reference
to this State=s General Business Corporation Act] [insert
cross-reference to this State=s Nonprofit Corporation Act].
SECTION 719.
CONFLICT OF INTEREST. The law applicable to conflicts of interest
between a director of an entity organized under [insert cross-reference to this
State=s Cooperative Corporation Act] [insert
cross-reference to this State=s Nonprofit Corporation Act] [insert cross-reference
to this State=s General Business Corporation Act] governs
conflicts of interest between a limited cooperative association and a director
or member of a committee of the board of directors of the association.
SECTION 720.
OTHER CONSIDERATIONS OF DIRECTORS. Unless the articles of organization otherwise
provide, in considering the best interests of a limited cooperative
association, a director of the association in discharging the duties of director,
in conjunction with considering the long and short term interest of the
association and its patron members, may consider:
(1) the
interest of employees, customers, and suppliers of the association;
(2) the
interest of the community in which the association operates; and
(3) other
cooperative principles and values that appropriately can be applied in the
context of the decision.
SECTION 721.
RIGHT OF DIRECTOR OR COMMITTEE MEMBER TO INFORMATION. A director of a limited cooperative
association or a member of a committee appointed under Section 717 may obtain,
inspect, and copy all information regarding the state of activities and
financial condition of the association and other information regarding the
activities of the association reasonably related to the performance of the
director=s duties as director or the committee member=s duties as a member of the committee, but not for
any other purpose or in any manner that would violate any duty to the
association.
SECTION 722.
APPOINTMENT AND AUTHORITY OF OFFICERS.
(a) A limited
cooperative association has the officers:
(1) provided
in the organic rules; or
(2) if not provided in the organic rules,
established by the association=s board of directors consistent with the organic
rules.
(b) The
organic rules may designate or, if the rules do not designate, the board of
directors of the limited cooperative association shall designate, one of the
association=s officers for preparing all records required by
Section 113 and for the authentication of records.
(c) Unless the organic rules otherwise provide, the
board of directors shall appoint the officers of the limited cooperative
association.
(d) Officers
of a limited cooperative association have the authority and obligation to
perform the duties the organic rules prescribe or as the association=s board of directors determines is consistent with
the organic rules.
(e) The election
or appointment of an officer of a limited cooperative association does not of
itself create a contract between the association and the officer.
(f) Unless
the organic rules otherwise provide, an individual may simultaneously hold more
than one office in a limited cooperative association.
SECTION 723.
RESIGNATION AND REMOVAL OF OFFICERS.
(a) The board
of directors of a limited cooperative association may remove an officer at any
time with or without cause.
(b) An
officer of a limited cooperative association may resign at any time by giving
notice in a record to the association.
Unless the notice specifies a later time, the resignation is effective
when the notice is given.
[ARTICLE] 8
INDEMNIFICATION
SECTION 801.
INDEMNIFICATION.
(a)
Indemnification of any individual who has incurred liability or is a
party, or is threatened to be made a party, to litigation because of the
performance of a duty to, or activity on behalf of, a limited cooperative
association is governed by [insert cross-reference to this State=s Cooperative Corporation Act] [insert
cross-reference to this State=s Nonprofit Cooperative Act] [insert cross-reference
to this State=s General Business Corporation Act].
(b) A limited cooperative association may purchase
and maintain insurance on behalf of any individual against liability asserted
against or incurred by the individual to the same extent and subject to the
same conditions as provided by [insert cross-reference to this State=s Cooperative Corporation Act] [insert
cross-reference to this State=s Nonprofit Cooperative Act] [insert cross-reference
to this State=s General Business Corporation Act].
[ARTICLE] 9
CONTRIBUTIONS, ALLOCATIONS, AND DISTRIBUTIONS
SECTION 901.
MEMBERS= CONTRIBUTIONS. The organic rules may establish the amount,
manner, or method of determining any member contribution requirements for
members or may authorize the board of directors of a limited cooperative
association to establish the manner and terms of any contributions by members.
SECTION 902.
FORMS OF CONTRIBUTION AND VALUATION.
(a) Unless
the organic rules otherwise provide, the contributions of a member to a limited
cooperative association may consist of tangible or intangible property or other
benefit to the association, including money, services performed or to be
performed, promissory notes, other agreements to contribute cash or property,
and contracts to be performed.
(b) The
receipt and acceptance of contributions and the valuation of contributions must
be reflected in the limited cooperative association=s records required under Section 113.
(c) Unless
the organic rules otherwise provide, the board of directors of a limited
cooperative association shall determine the value of a member=s contributions received or to be received. The determination by the board of directors
of valuation is conclusive for purposes of determining whether the member=s contribution obligation has been fully met.
SECTION 903.
CONTRIBUTION AGREEMENTS.
(a) An
agreement by a person to make a contribution to a limited cooperative
association entered into before formation of the association is irrevocable for
six months unless all parties to the agreement consent to the revocation.
(b) A person=s obligation to make a contribution under subsection
(a) is not excused by the person=s death, disability, or other inability to perform
personally.
(c) If a
person does not make a required contribution to a limited cooperative association
under an agreement described in subsection (a):
(1) the
person is obligated, at the option of the association, once formed, to
contribute money equal to the value of that part of the contribution that has
not been made, and the obligation may be enforced as a debt to the association;
or
(2) the
association, once formed, may rescind the agreement if the debt remains unpaid
more than 20 days after the association demands payment from the person, and
upon recision the person shall have no further rights or obligations with
respect to the association.
(d) An agreement to make a contribution may vary the
requirements of this section.
SECTION 904.
ALLOCATIONS OF PROFITS AND LOSSES.
(a) The organic rules must provide that profits of a
limited cooperative association be allocated among members and, if the organic
rules permit, to an unallocated account.
Unless the organic rules otherwise provide, losses of the association
must be allocated in the same proportion as profits.
(b) Unless
the organic rules otherwise provide, all the profits and losses must be
allocated to patron members.
(c) If a
limited cooperative association has investor members, the organic rules may not
reduce the allocation to patron members to less than 50 percent of profits
except:
(1) sums paid or due on contracts for the delivery
to the association by patron members of products, goods, or services, if any,
are not considered amounts allocated to patron members under this subsection;
and
(2) sums paid, due, or allocated to investor members
as a stated fixed return on equity are not considered amounts allocated to
investor members for purposes of this subsection.
(d) Unless
the organic rules otherwise provide, in determining amount of profits of a
limited cooperative association, the association=s
board of directors may deduct and set aside a part of the revenue, whether or
not allocated to members , after accounting for other expenses to create or
accumulate:
(1) a capital
reserve; and
(2) reserves
for specific purposes, including expansion and replacement of capital assets,
education, training, and information concerning principles of cooperation,
community responsibility, and development.
(e) Subject
to subsection (f) and the organic rules, the board of directors of a limited
cooperative association shall further allocate the amounts determined pursuant
to subsections (a), (b), and (c):
(1) to patron
members in the ratio of each member=s patronage to the total patronage of all patron
members during the period; and
(2) to
investor members , if any, in the ratio of each investor member=s
contributions to the total contributions of all investor members.
(f) For
purposes of allocation of profits and losses of a limited cooperative
association to members, the organic rules may establish allocation units or
methods based on separate classes of members, or for patron members on class,
function, division, district, department, allocation units, pooling
arrangements, members= contributions, or other equitable methods.
SECTION 905.
DISTRIBUTIONS.
(a) Unless
the organic rules otherwise provide and subject to Section 907, the board of
directors may authorize, and the association may make, distributions to
members.
(b) Unless
the organic rules otherwise provide, distributions to members may be made in
the form of cash, capital credits, allocated patronage equities, revolving fund
certificates, the limited cooperative association=s own
or other securities, or any other form.
SECTION 906.
REDEMPTION OF EQUITY. Unless the organic rules otherwise provide
and subject to Section 907, a limited cooperative association:
(1) may
redeem a patron member=s equity; and
(2) may not
redeem an investor member=s equity.
SECTION 907.
LIMITATIONS ON DISTRIBUTIONS.
(a) A limited
cooperative association may not make a distribution if, after the distribution:
(1) the
association would not be able to pay its debts as they become due in the
ordinary course of the association=s activities; or
(2) the
association=s assets would be less than the sum of its total
liabilities.
(b) A limited
cooperative association may base a determination that a distribution is not
prohibited under subsection (a) on financial statements prepared on the basis
of accounting practices and principles that are reasonable in the circumstances
or on a fair valuation or other methods that are reasonable in the
circumstances.
(c) Except as
otherwise provided in subsection (d), the effect of a distribution allowed
under subsection (b) is measured:
(1) in the
case of distribution by purchase, redemption, or other acquisitions of
financial rights in the limited cooperative association, as of the date money
or other property is transferred or debt is incurred by the association; and
(2) in all
other cases, as of the date:
(A) the
distribution is authorized, if the payment occurs within 120 days after that
date; or
(B) the
payment is made, if payment occurs more than 120 days after the distribution is
authorized.
(d) If
indebtedness is issued as a distribution, each payment of principal or interest
on the indebtedness is treated as a distribution, the effect of which is
measured on the date the payment is made.
[SECTION 908.
RELATION TO STATE SECURITIES LAW]. Patron member interests in the limited
cooperative association that are based on patronage are entitled to the same
exemption as provided for substantially similar interests in cooperatives under
[citation to appropriate provision in other laws].]
[SECTION 909.
ALTERNATIVE DISTRIBUTION OF UNCLAIMED PROPERTY, DISTRIBUTIONS, REDEMPTIONS,
OR PAYMENTS. A limited
cooperative association may distribute unclaimed property, distributions,
redemptions, or payments under [citation to the applicable provision in the law
governing cooperatives not formed under this [act] in this state.]
[ARTICLE] 10
DISSOCIATION
SECTION 1001.
MEMBER=S DISSOCIATION.
(a) A person has the power to dissociate as a member
at any time, rightfully or wrongfully, by express will.
(b) Unless the organic rules otherwise provide, a
member=s dissociation from a limited cooperative
association is wrongful only if the dissociation:
(1) breaches an express provision of the organic
rules; or
(2) occurs before the termination of the limited
cooperative association and:
(A) the person is expelled as a member under
subsection (d)(3) or (4); or
(B) in the case of a person that is not an individual,
trust other than a business trust, or estate, the person is expelled or
otherwise dissociated as a member because it willfully dissolved or terminated.
(c) Unless the organic rules otherwise provide, a
person that wrongfully dissociates as a member is liable to the limited
cooperative association for damages caused by the dissociation. The liability is in addition to any other
debt, obligation, or liability of the member to the association.
(d) Unless
the organic rules otherwise provide, a member is dissociated from the limited
cooperative association as a member when any of the following occurs:
(1) the
association=s receipt of notice in a record of the member=s express will to dissociate as a member , except
that, if the member specifies in the notice a withdrawal date later than the
date the association had notice, on that later date;
(2) an event
stated in the organic rules as causing the member=s
dissociation as a member;
(3) the
member=s expulsion as a member pursuant to the organic
rules;
(4) the
member=s expulsion as a member by the association=s board of directors if:
(A) it is
unlawful to carry on the association=s activities with the member as a member;
(B) there has
been a transfer of all the member=s financial rights in the association, other than:
(i) a creation or perfection for security purposes;
or
(ii) a charging order in effect under Section 505
which has not been foreclosed;
(C) the
member is a limited liability company, association, or partnership and it has
been dissolved and its business is being wound up; or
(D) the member is a corporation or cooperative and:
(i) the:
(1) member has filed a certificate of dissolution or
the equivalent; or
(2) jurisdiction of formation has revoked the
association=s charter or right to conduct business;
(ii) the association notifies the member that it
will be expelled as a member for a reason described in subparagraph (i); and
(iii) within 90 days after the date of the notice
under subparagraph (B):
(1) the member does not revoke its certificate of
dissolution or the equivalent; or
(2) the jurisdiction of formation does not reinstate
the association=s charter or right to conduct business;
(5) in the
case of a member who is an individual:
(A) the individual=s
death;
(B) the appointment of a guardian or general
conservator for the individual; or
(C) a judicial determination that the individual has
otherwise become incapable of performing the individual=s duties as a member under this [act] or the organic
rules;
(6) in the
case of a member that is a trust or is acting as a member by virtue of being a
trustee of a trust, distribution of the trust=s
entire financial rights in the association, but not solely by reason of the
substitution of a successor trustee;
(7) in the
case of a member that is an estate, distribution of the estate=s entire financial interest in the association, but
not merely by the substitution of a successor personal representative;
(8)
termination of a member that is not an individual, partnership, limited
liability company, cooperative corporation, trust, or estate; or
(9) the
association=s participation in a consolidation or merger if,
under the plan of merger as approved under [Article] 15, the member ceases to
be a member .
SECTION 1002.
EFFECT OF DISSOCIATION AS MEMBER .
(a) Upon a
member=s dissociation:
(1) subject
to Section 1003, the person has no further rights as a member ; and
(2) subject
to Section 1003 and [Article] 15, any financial rights owned by the person in
the person=s capacity as a member immediately before
dissociation are owned by the person as a transferee who is not admitted as a
member after dissociation.
(b) A person=s dissociation as a member does not of itself
discharge the person from any debt, obligation, or liability to the limited
cooperative association which the person incurred under the organic rules, by
contract or by other means while a member .
SECTION 1003.
POWER OF ESTATE OF MEMBER. Unless the organic rules otherwise provide, if a
member dies or is adjudged incompetent, the member=s personal representative or other legal
representative may exercise the rights of a transferee and the member=s financial rights as provided in Section 503 and,
for purposes of settling the estate of the deceased member , may exercise the
informational rights of a current member under Section 405.
[ARTICLE] 11
DISSOLUTION
SECTION 1101.
DISSOLUTION. A
limited cooperative association may be dissolved:
(1)
nonjudicially under Section 1102;
(2)
judicially under Section 1103; or
(3)
administratively under Section 1111.
SECTION 1102.
NONJUDICIAL DISSOLUTION. Except as otherwise provided in Sections 1103 and
1111, a limited cooperative association is dissolved and its activities must be
wound up only upon:
(1) the
occurrence of an event or the coming of a time specified in the articles of
organization;
(2) the
action of the association=s organizers, board of directors, or member under
Section 1104 or 1105;
(3) the
passage of 90 days after the dissociation of a member , resulting in the
association having fewer than two members , at least one of whom is a patron
member , unless the association:
(A) has a sole member that is a cooperative; or
(B) before
the end of the 90 days, admits at least one member in accordance with the
organic rules and has at least two members, at least one of which is a patron
member.
SECTION 1103.
JUDICIAL DISSOLUTION. The [appropriate court] may dissolve a limited
cooperative association or order any action that under the circumstances is
appropriate and equitable:
(1) in a
proceeding initiated by the [Attorney General], if it is established that:
(A) the
association obtained its articles of organization through fraud; or
(B) the
association has continued to exceed or abuse the authority conferred upon it by
law;
(2) in a
proceeding initiated by a member , if it is established that:
(A) the
directors are deadlocked in the management of the association=s affairs, the members are unable to break the
deadlock, and irreparable injury to the association is occurring or is
threatened because of the deadlock;
(B) the
directors or those in control of the association have acted, are acting, or
most likely will act in a manner that is illegal, oppressive, or fraudulent;
(C) the
members are deadlocked in voting power and have failed to elect successors to
directors whose terms have expired for two consecutive periods during which
annual members= meetings were held or were to be held; or
(D) the
assets of the association are being misapplied or wasted.
SECTION 1104.
VOLUNTARY DISSOLUTION BEFORE COMMENCEMENT OF ACTIVITY. A majority of the organizers or initial
directors of a limited cooperative association that has not yet begun
business activity or the conduct of its affairs may dissolve the association.
SECTION 1105.
VOLUNTARY DISSOLUTION BY THE BOARD AND MEMBERS.
(a) Except as provided in Section 1104, in order for
a limited cooperative association to voluntarily dissolve:
(1) a
resolution to dissolve must be approved by a majority vote of the board of
directors unless a greater vote is required by the organic rules;
(2) the board
of directors must call a special members= meeting to consider the resolution, to be held
within 90 days after adoption of the resolution; and
(3) the board
of directors must mail or otherwise transmit or deliver to each member in a
record that complies with Section 408:
(A) the
resolution required by paragraph (1);
(B) a
recommendation that the members vote in favor of the resolution or, if the
board determines that because of conflict of interest or other special
circumstances, it should not make a favorable recommendation, the basis of that
determination; and
(C) notice of
the members= meeting, in the same manner as notice of a special
members= meeting is given.
(b) Unless
the organic rules otherwise provide, a resolution to dissolve must be approved
by at least a two-thirds vote of the voting power of all members present at a
special members= meeting.
However, if the limited cooperative association has investor
members, at least one-half of the votes
cast by patron members must be in the affirmative, but the organic rules may
require a larger affirmative vote by patron members .
SECTION 1106.
WINDING UP.
(a) A limited
cooperative association continues after dissolution only for purposes of
winding up its activities.
(b) In
winding up a limited cooperative association=s
activities, the board of directors shall cause the association to:
(1) discharge
its liabilities, settle and close its activities, and marshal and distribute
its assets;
(2) preserve
the association or its property as a going concern for no more than a
reasonable time;
(3) prosecute
and defend actions and proceedings;
(4) transfer
association property;
(5) settle
disputes by mediation or arbitration; and
(6) perform
other necessary acts.
(c) Upon
application of a limited cooperative association, any member, or a holder of
financial rights, the [appropriate court] may order judicial supervision of the
winding up of the association, including the appointment of a person to wind up
the dissolved association=s activities, if:
(1) after a
reasonable time, the association has not executed winding up; or
(2) the
applicant establishes other good cause.
(d) A limited cooperative association shall promptly
deliver to the [Secretary of State] for filing an amendment to the articles of
organization to reflect the appointment of a person to wind up the association=s activities.
SECTION 1107.
DISTRIBUTION OF ASSETS IN WINDING UP LIMITED COOPERATIVE ASSOCIATION.
(a) In
winding up a limited cooperative association=s
business, the association must apply its assets to discharge its obligations to
creditors, including members who are creditors.
Any remaining assets must be applied to pay in money the net amount
distributable to members in accordance with their right to distributions under
subsection (b).
(b) Unless the organic rules otherwise provide, each
member is entitled to a distribution from the limited cooperative association
of any remaining assets in the proportion of the member=s financial interests to the total financial
interests of the members after all other obligations are satisfied. For purposes of this subsection, unless the
organic rules otherwise provide, Afinancial interests@ means
the amounts recorded in the names of members in the records of the
association at the time the distribution
is made, including amounts paid to become a member , amounts allocated but not
distributed to members , and amounts of distributions authorized but not yet
paid to members .
SECTION 1108.
KNOWN CLAIMS AGAINST DISSOLVED LIMITED COOPERATIVE ASSOCIATION.
(a) Subject
to subsection (d), a dissolved limited cooperative association may dispose of
the known claims against it by following the procedure in subsection (b).
(b) A
dissolved limited cooperative association may notify its known claimants of the
dissolution in a record. The notice must:
(1) specify
the information required to be included in a claim;
(2) provide
an address to which the claim must be sent;
(3) state the
deadline for receipt of the claim, which may not be less than 120 days after
the date the notice is received by the claimant; and
(4) state
that the claim will be barred if not received by the deadline.
(c) A claim
against a dissolved limited cooperative association is barred if the
requirements of subsection (b) are met, and:
(1) the
association is not notified of the claimant=s claim,
in a record, by the specified deadline;
(2) in the
case of a claim that is timely received but rejected by the dissolved
association, the claimant does not commence an action to enforce the claim
against the association within 90 days after receipt of the notice of the
rejection; or
(3) in the case of a claim that is timely received
but is neither accepted nor rejected by the association within 120 days after
the deadline for receipt of claims, the claimant does not commence an action to
enforce the claim against the association within 90 days after the 120 day
period.
(d) This
section does not apply to a claim based on an event occurring after the date of
dissolution or a liability that is contingent on that date.
SECTION 1109.
OTHER CLAIMS AGAINST DISSOLVED LIMITED COOPERATIVE ASSOCIATION.
(a) A
dissolved limited cooperative association may publish notice of its dissolution
and request persons having claims against the association to present them in
accordance with the notice.
(b) A notice
under subsection (a) must:
(1) be
published at least once in a newspaper of general circulation in the [county]
in which the dissolved limited cooperative association=s principal office is located or, if the association
does not have a principal office in this state, in the [county] in which
the association=s designated office is or was last located;
(2) describe
the information required to be contained in a claim and provide an address to
which the claim is to be sent; and
(3) state
that a claim against the association is barred unless an action to enforce the
claim is commenced within three years after publication of the notice.
(c) If a
dissolved limited cooperative association publishes a notice in accordance with
subsection (b), the claim of each of the following claimants is barred unless
the claimant commences an action to enforce the claim against the dissolved
association within three years after the publication date of the notice:
(1) a
claimant that is entitled to but did not receive notice in a record under
Section 1108; and
(2) a
claimant whose claim is contingent or based on an event occurring after the
effective date of dissolution.
(d) A claim
not barred under this section may be enforced:
(1) against
the dissolved limited cooperative association, to the extent of its
undistributed assets; or
(2) if the
association=s assets have been distributed in connection with
winding up the association=s activities, against a member or holder of
financial rights to the extent of that person=s
proportionate share of the claim or the association=s assets distributed to the person in connection
with the winding up, whichever is less, to the extent the person=s total liability for all claims under this
subsection does not exceed the total amount of assets distributed to the person
as part of the winding up of the association.
SECTION 1110.
COURT PROCEEDING.
(a) A
dissolved limited cooperative association that has published a notice under
Section 1109 may file an application with the court in the [county] where the
principal office is located for a determination of the amount and form of
security to be provided for payment of claims that are contingent or have not
been made known to the association or that are based on an event occurring
after the effective date of dissolution but that, based on the facts known to
the association, are reasonably estimated to arise after the effective date of
dissolution.
(b) Within 10
days after filing an application pursuant to subsection (a), a dissolved
limited cooperative association shall give notice of the proceeding to each
known claimant holding a contingent claim.
(c) The court
may appoint a representative in any proceeding brought under this section to
represent all claimants whose identities are unknown. The reasonable fees and expenses of the
representative, including all reasonable expert witness fees, shall be paid by
the dissolved limited cooperative association.
(d) Provision
by the dissolved limited cooperative association for security in the amount and
the form ordered by the court satisfies the association=s obligations with respect to claims that are
contingent, have not been made known to the association, or are based on an
event occurring after the effective date of dissolution, and such claims may
not be enforced against a member who received a distribution.
SECTION 1111.
ADMINISTRATIVE DISSOLUTION.
(a) The
[Secretary of State] may dissolve a limited cooperative association
administratively if the association does not:
(1) within 60
days after the due date pay any fee, tax, or penalty due to the [Secretary of
State] under this [act] or other law; or
(2) deliver
its annual report to the [Secretary of State] as required by Section 207.
(b) If the
[Secretary of State] determines that a ground exists for administratively
dissolving a limited cooperative association, the [Secretary of State] shall
file a record of the determination and serve the association with a copy of the
record.
(c) If,
within 60 days after service of a copy of the [Secretary of State=s] determination that a ground exists for dissolving
a limited cooperative association, the association does not correct each ground
for dissolution or demonstrate to the reasonable satisfaction of the [Secretary
of State] that each uncorrected ground determined by the [Secretary of State]
does not exist, the [Secretary of State] shall administratively dissolve the
association by preparing, signing, and filing a declaration of dissolution that
states the grounds for dissolution. The [Secretary of State] shall serve the
association with a copy of the declaration.
(d) A limited
cooperative association administratively dissolved continues its existence but
may carry on only activities necessary to wind up its activities and liquidate
its assets under Section 1106 and to give notice to claimants under Sections
1108 and 1109.
(e) The
administrative dissolution of a limited cooperative association does not
terminate the authority of its agent for service of process.
SECTION 1112.
REINSTATEMENT FOLLOWING ADMINISTRATIVE DISSOLUTION.
(a) A limited
cooperative association that has been administratively dissolved may apply to
the [Secretary of State] for reinstatement within two years after the effective
date of dissolution. The application
must be delivered to the [Secretary of State] for filing and state:
(1) the name
of the association and the effective date of its administrative dissolution;
(2) that the
grounds for dissolution either did not exist or have been eliminated; and
(3) that the
association=s name satisfies the requirements of Section 109.
(b) If the
[Secretary of State] determines that an application contains the information
required by subsection (a) and that the information is correct, the [Secretary
of State] shall:
(1) prepare a
declaration of reinstatement that states this determination;
(2) sign and
file the original of the declaration; and
(3) serve the
limited cooperative association with a copy of the declaration.
(c) When
reinstatement under this section becomes effective, it relates back to and
takes effect as of the effective date of the administrative dissolution, and
the limited cooperative association may resume or continue its activities as if
the administrative dissolution had never occurred.
SECTION 1113.
DENIAL OF REINSTATEMENT; APPEAL.
(a) If the
[Secretary of State] denies a limited cooperative association=s application for reinstatement following
administrative dissolution, the [Secretary of State] shall prepare, sign, and
file a notice that explains the reason or reasons for denial and serve the
association with a copy of the notice.
(b) Within 30
days after service of a notice of denial of reinstatement by the [Secretary of
State] under subsection (a), a limited cooperative association may appeal the
denial by petitioning the [appropriate court] to set aside the
dissolution. The petition must be served
on the [Secretary of State] and contain a copy of the [Secretary of State=s] declaration of dissolution, the association=s
application for reinstatement, and the [Secretary of State=s] notice of denial.
(c) The court
may order the [Secretary of State] to reinstate the dissolved cooperative
association or may take other action the court considers appropriate.
SECTION 1114.
STATEMENT OF DISSOLUTION.
(a) A limited
cooperative association that has dissolved or is about to dissolve may deliver
to the [Secretary of State] for filing a statement of dissolution that states:
(1) the name
of the association;
(2) the date
the association dissolved or will dissolve; and
(3) any other
information the association considers relevant.
(b) A person
has notice of a limited cooperative association=s
dissolution on the later of:
(1) 90 days
after a statement of dissolution is filed; or
(2) the
effective date stated in the statement of dissolution.
SECTION 1115.
STATEMENT OF TERMINATION.
(a) A
dissolved limited cooperative association that has completed winding up may
deliver to the [Secretary of State] for filing a statement of termination that
states:
(1) the name
of the association;
(2) the date
of filing of its initial articles of organization; and
(3) the association is terminated.
(b) The
filing of a statement of termination does not itself terminate the limited
cooperative association.
[[ARTICLE] 12]
ACTIONS BY MEMBERS
SECTION 1201.
DERIVATIVE ACTION. A member may maintain a derivative action to
enforce a right of a limited cooperative association if:
(1) the
member adequately represents the interests of the association;
(2) the
member demands that the association bring an action to enforce the right; and
(3) any of
the of following occur:
(A) the
association does not, within 90 days after the member makes the demand under
paragraph (2), agree to bring the action;
(B) the
association notifies the member that it has rejected the demand;
(C)
irreparable injury to the association would result by waiting 90 days
after the member makes the demand under paragraph (2); or
(D) the
association agreed to bring an action demanded under paragraph (2) and fails to
bring the action within a reasonable time.
SECTION 1202.
PROPER PLAINTIFF.
(a) A
derivative action to enforce a right of a limited cooperative association may
be maintained only by a person that is a member at the time the action is
commenced and:
(1) was a
member when the conduct giving rise to the action occurred; or
(2) whose
status as a member or transferee of a member devolved upon the person by
operation of law from a person that was a member at the time of the conduct.
(b) If the sole plaintiff in a derivative action
dies while the action is pending, the court may permit another member to be
substituted as plaintiff.
SECTION 1203.
PLEADING. In a derivative action, the complaint must state with
particularity:
(1) the date
and content of the plaintiff=s demand and the limited cooperative association=s response to the demand;
(2) if 90
days have not expired since the demand, how irreparable injury to the
association would result by waiting for the expiration of 90 days; or
(3) if the
association agreed to bring an action demanded under Section 1202(2), that the
action has not been brought within a reasonable time.
SECTION 1204.
COURT APPROVAL FOR DISCONTINUANCE OR SETTLEMENT. A derivative
action to enforce a right of a limited cooperative association may not be
discontinued or settled without the [appropriate court=s] approval.
SECTION 1205.
PROCEEDS AND EXPENSES.
(a) Except as
otherwise provided in subsection (b):
(1) any
proceeds or other benefits of a derivative action to enforce a right of a
limited cooperative association, whether by judgment, compromise, or settlement,
belong to the association and not to the plaintiff; and
(2) if the
derivative plaintiff receives any proceeds, the plaintiff shall immediately
remit them to the association.
(b) If a
derivative action to enforce a right of limited cooperative association is
successful in whole or in part, the court may award the plaintiff reasonable
expenses, including reasonable attorney=s fees, from the recovery of the association.]
[ARTICLE] 13
FOREIGN COOPERATIVES
SECTION 1301.
GOVERNING LAW.
(a) The law
of the state or other jurisdiction under which a foreign cooperative is
organized governs relations among the members of the foreign cooperative and
between the members and the foreign cooperative.
(b) A foreign
cooperative may not be denied a certificate of authority by reason of any
difference between the laws of the jurisdiction under which the foreign
cooperative is organized and the law of this state.
(c) A
certificate of authority does not authorize a foreign cooperative to engage in
any activity or exercise any power that a limited cooperative association may
not engage in or exercise in this state.
SECTION 1302.
APPLICATION FOR CERTIFICATE OF AUTHORITY.
(a) A foreign
cooperative may apply for a certificate of authority to transact business in
this state by delivering an application to the [Secretary of State] for
filing. The application must state:
(1) the name
of the foreign cooperative and, if the name does not comply with Section 109,
an alternative name adopted pursuant to Section 1305;
(2) the name
of the state or other jurisdiction under whose law the foreign cooperative is
organized;
(3) the
street and mailing addresses of the principal office and, if the laws of the
jurisdiction under which the foreign cooperative is organized require the
foreign cooperative to maintain another office in that jurisdiction, the street
and mailing addresses of the required office;
(4) the name
and street and mailing addresses of the cooperative=s initial agent for service of process in this
state;
(5) the street and mailing addresses of a designated
office in this state which may be the addresses of the agent for service of
process in this state; and
(6) the name
and street and mailing addresses of each of the foreign cooperative=s current directors and officers.
(b) A foreign
cooperative shall deliver with a completed application under subsection (a) a
certificate of good standing [or existence] or a similar record signed by the
[Secretary of State] or other official having custody of the cooperative=s publicly filed records in the state or other
jurisdiction under whose law the foreign cooperative is organized.
SECTION 1303.
ACTIVITIES NOT CONSTITUTING TRANSACTING BUSINESS.
(a)
Activities of a foreign cooperative which do not constitute transacting
business in this state under this [article] include:
(1)
maintaining, defending, and settling an action or proceeding;
(2) holding
meetings of the foreign cooperative=s members or carrying on any other activity
concerning its internal affairs;
(3)
maintaining accounts in financial institutions;
(4)
maintaining offices or agencies for the transfer, exchange, and
registration of the foreign cooperative=s own securities or maintaining trustees or
depositories with respect to those securities;
(5) selling
through independent contractors;
(6) soliciting
or obtaining orders, whether by mail or electronic means, through employees,
agents, or otherwise, if the orders require acceptance outside this state
before they become contracts;
(7) creating
or acquiring indebtedness, mortgages, or security interests in real or personal
property;
(8) securing
or collecting debts or enforcing mortgages or other security interests in
property securing the debts, and holding, protecting, and maintaining property
so acquired;
(9)
conducting an isolated transaction that is completed within 30 days and
is not one in the course of similar transactions; and
(10)
transacting business in interstate commerce.
(b) For
purposes of this [article], the ownership in this state of income-producing
real property or tangible personal property, other than property excluded under
subsection (a), constitutes transacting business in this state.
(c) This
section does not apply in determining the contacts or activities that may
subject a foreign cooperative to service of process, taxation, or regulation
under any law of this state, other than this [act].
SECTION 1304.
FILING OF CERTIFICATE OF AUTHORITY. Unless the [Secretary of State] determines
that an application for a certificate of authority does not comply with the
filing requirements of this [act], the [Secretary of State], upon payment of
all filing fees, shall file the application, prepare, sign, and file a
certificate of authority to transact business in this state, and send a copy of
the filed certificate, together with a receipt for the fees, to the foreign
cooperative or its representative.
SECTION 1305.
NONCOMPLYING NAME OF FOREIGN COOPERATIVE.
(a) A foreign
cooperative whose name does not comply with Section 109 may not obtain a
certificate of authority until it adopts, for the purpose of transacting
business in this state, an alternative name that complies with Section 109. A foreign cooperative that adopts an
alternative name under this subsection and then obtains a certificate of
authority with that name need not comply with [fictitious or assumed name
statute]. After obtaining a certificate
of authority with an alternative name, a foreign cooperative=s business in this state must be transacted under
that name unless the foreign cooperative is authorized under [fictitious name
statute] to transact business in this state under another name.
(b) If a
foreign cooperative authorized to transact business in this state changes its
name to one that does not comply with Section 109, it may not thereafter
transact business in this state until it complies with subsection (a) and
obtains an amended certificate of authority.
SECTION 1306.
REVOCATION OF CERTIFICATE OF AUTHORITY.
(a) A
certificate of authority of a foreign cooperative to transact business in this
state may be revoked by the [Secretary of State] in the manner provided in
subsection (b) if the foreign cooperative does not:
(1) pay,
within 60 days after the due date, any fee, tax, or penalty due to the
[Secretary of State] under this [act] or law of this state other than this
[act];
(2) deliver,
within 60 days after the due date, its annual report required under Section
207;
(3) appoint
and maintain an agent for service of process as required by Section 116; or
(4) deliver
for filing a statement of change under Section 117 within 30 days after a
change has occurred in the name or address of the agent.
(b) To revoke
a certificate of authority of a foreign cooperative to transact business in
this state, the [Secretary of State] must prepare, sign, and file a notice of
revocation and send a copy to the foreign cooperative=s registered agent for service of process in this
state or, if the foreign cooperative does not appoint and maintain an agent for
service of process in this state, to the cooperative=s principal office.
The notice must state:
(1) the
revocation=s effective date, which must be at least 60 days
after the date the [Secretary of State] sends the copy; and
(2) the
foreign cooperative=s noncompliance under subsection (a) which is the
reason for the revocation.
(c) The
authority of a foreign cooperative to transact business in this state ceases on
the effective date of the notice of revocation unless before that date the
foreign cooperative cures each failure to comply under subsection (a) stated in
the notice. If the foreign cooperative
cures the failures, the [Secretary of State] shall so indicate on the filed
notice.
SECTION 1307.
CANCELLATION OF CERTIFICATE OF AUTHORITY; EFFECT OF FAILURE TO HAVE
CERTIFICATE.
(a) To cancel
its certificate of authority to transact business in this state, a foreign
cooperative must deliver to the [Secretary of State] for filing a notice of
cancellation. The certificate is
canceled when the notice becomes effective under Section 203.
(b) A foreign
cooperative transacting business in this state may not maintain an action or
proceeding in this state unless it has a certificate of authority to transact
business in this state.
(c) The
failure of a foreign cooperative to have a certificate of authority to transact
business in this state does not impair the validity of a contract or act of the
foreign cooperative or prevent the foreign cooperative from defending an action
or proceeding in this state.
(d) A member
of a foreign cooperative is not liable for the obligations of the foreign
cooperative solely by reason of the foreign cooperative=s having transacted business in this state without a
certificate of authority.
(e) If a
foreign cooperative transacts business in this state without a certificate of
authority or cancels its certificate of authority, it appoints the [Secretary
of State] as its agent for service of process for action arising out of the
transaction of business in this state.
SECTION 1308.
ACTION BY [ATTORNEY GENERAL]. The [Attorney General] may maintain an action to
restrain a foreign cooperative from transacting business in this state in
violation of this [article].
[ARTICLE] 14
AMENDMENT OF ORGANIC RULES
SECTION 1401.
AUTHORITY TO AMEND ORGANIC RULES.
(a) A limited
cooperative association may amend its organic rules under this [article].
(b) Unless the organic rules otherwise provide, a
member does not have a vested property right resulting from any provision in
the organic rules, including provisions relating to management, control,
capital structure, distribution, entitlement, purpose, or duration of the limited
cooperative association.
SECTION 1402.
NOTICE AND ACTION ON AMENDMENT OF ARTICLES OF ORGANIZATION OR BYLAWS. To amend its organic rules:
(1) either:
(A) a majority
of the association=s board of directors, or a greater percentage if
required by the organic rules, must approve the proposed amendment; or
(B) the board
of directors must have received a petition in a record that: (i)
proposes an amendment; and
(ii) is signed by at least 10 percent of the patron
members or 10 percent of the investor members; and
(2) the board
of directors must call a special members= meeting to consider the amendment, to be held
within 90 days following approval of the proposed amendment by the board or
receipt by the board of a petition in accordance with paragraph (1)(B), and
must mail or otherwise transmit or deliver in a record to each member:
(A) the
proposed amendment, or a summary of the proposed amendment and a statement of
the manner in which a copy of the amendment in a record may be reasonably
obtained by a member;
(B) a
recommendation that the members approve the amendment, or if the board
determines that because of conflict of interest or other special circumstances,
it should not make a favorable recommendation, the basis for that
determination;
(C) a
statement of any condition of the board=s
submission of the amendment to the members; and
(D) notice of
the meeting at which the proposed amendment will be considered, which must be
given in the same manner as notice for a special members= meeting.
SECTION 1403.
METHOD OF VOTING ON AMENDMENT OF ORGANIC RULES. Members may vote on a proposed amendment to
the organic rules as provided in Section 415.
SECTION 1404.
CHANGE TO AMENDMENT OF ORGANIC RULES AT MEETING.
(a) A
substantive change to a proposed amendment of the organic rules may not be made
at the members= meeting at which a vote on the amendment occurs.
(b) Any
change in an amendment to the organic rules at a meeting permitted by
subsection (a) need not be separately voted upon by the board of directors.
(c) A vote to
adopt a change to a proposed amendment to the organic rules permitted by
subsection (a) must be the same vote required to pass a proposed amendment.
SECTION 1405.
VOTING BY DISTRICT, CLASS OR VOTING GROUP.
(a) In
addition to the approval required under Section 1406 if the organic rules
provide for voting by district, class, or if there are one or more identifiable
voting groups that a proposed amendment would affect differently from other
members with respect to matters identified in Section 1406(c)(1) through (5),
approval of the amendment to the organic rules requires the same quantum of
votes of the members of that district, class, or voting group as required in
Section 1406.
(b) If members in two or more districts or classes
of members entitled to vote separately under subsection (a) and the amendment
would affect the members in the districts or classes in the same or a
substantially similar way, the districts or classes of members affected must
vote as a single voting group unless the organic rules otherwise provide for
separate voting.
SECTION 1406.
APPROVAL OF AMENDMENT.
(a) Subject
to Section 1405:
(1) unless the organic rules otherwise provide, an
amendment to the articles of organization must be approved by at least
two-thirds of the voting power of all members present at a special members= meeting called under Section 1402; and
(2) if the limited cooperative association has investor
members, at least one-half of the votes cast by patron members are in the
affirmative, but the organic rules may require a larger affirmative vote by
patron members.
(b) Subject
to Section 1405 and subsection (c):
(1) unless the organic rules otherwise provide, an
amendment to the bylaws must be approved by at least a majority vote of the
voting power of all members present at a special members= meeting called under Section 1402.
(2) if a limited cooperative association has
investor members at least one-half of the votes cast by patron members must be
affirmative, but the organic rules may require a larger affirmative vote by
patron members.
(c) The vote required under subsection (a) is
required to amend bylaws if the proposed
amendment modifies:
(1) the
equity capital structure of the limited cooperative association, including the
rights of the association=s members to share in profits or distributions, the
relative rights, preferences, and restrictions granted to or imposed upon one
or more districts, classes or voting groups of similarly situated members;
(2) the
transferability of members= interests;
(3) the
manner or method of allocation of profits or losses among members;
(4) the
quorum for a meeting and rights of voting and governance not including the
modification of district boundaries which may, unless otherwise provided in the
organic rules, be determined by the board of directors; or
(5) unless otherwise provided in the organic rules,
the terms for admission of new members.
(d) Articles of organization may:
(1) reduce the quantum of voting power required
under subsection (a)(1) to be voted affirmatively for amendment of the articles
of organization to not less than a majority vote of members; and
(2) delegate amendment of the bylaws in whole or in
part to the board of directors, with or without member approval, subject to
subsection (e), except for amendments concerning matters described in
subsections (c)(1) through (5).
(e) Amendments to bylaws concerning matters
described in subsections (c)(1) through (5) must be made by members as provided
for amendments to the articles of incorporation in subsection (a).
(f) If the articles of organization delegate
amendment of bylaws to the board of directors under subsection (d)(2), the
board must provide a description of the amendment to the members in a record
within 120 days after the amendment of the bylaws. The description may be provided at the next
annual meeting of members if the meeting is held within the 120-day period.
SECTION 1407.
EMERGENCY BYLAWS.
(a) Unless
the articles of organization otherwise provide, a limited cooperative
association may adopt bylaws that are effective only in the case of an
emergency caused by a catastrophic event.
The emergency bylaws, which are subject to amendment or repeal by the
members, may make all provisions necessary for managing the association during
an emergency.
(b) Bylaws which are consistent with emergency
bylaws adopted pursuant to subsection (a) remain effective during the
emergency. The emergency bylaws are not
effective after the emergency ends.
(c) Action
taken by a limited cooperative association in good faith in accordance
with emergency bylaws adopted under subsection (a):
(1) binds the
association; and
(2) may not
be used to impose liability on a director, officer, employee, or agent of the
association.
SECTION 1408.
RESTATED ARTICLES OF ORGANIZATION. A limited cooperative association, by the
affirmative vote of a majority of all the members taken at a meeting for which
the purpose is stated in the notice of the meeting, may adopt restated articles
of organization that contain the original articles as previously amended. Restated articles may contain amendments if
the restated articles are adopted in the same manner and with the same vote as
required for amendments to the articles under Section 1406(a). Upon filing, restated articles supersede the
existing articles and all amendments.
SECTION 1409.
AMENDMENT OR RESTATEMENT OF ARTICLES OF ORGANIZATION.
(a) To amend
its articles of organization, a limited cooperative association must
deliver to the [Secretary of State] for filing an amendment of the articles of
organization, or restated articles of organization or articles of conversion,
merger, or consolidation pursuant to [Article] 15 that contain one or more
amendments of the articles of organization, stating:
(1) the name
of the cooperative association;
(2) the date
of filing of its initial articles of organization; and
(3) the
changes the amendment makes to the articles of organization as most
recently amended or restated.
(b) Before
the commencement of the initial meeting of the board of directors of a limited
cooperative association, an organizer of the association which knows that
information in the filed articles of organization was false when the articles
were filed or has become false due to changed circumstances shall promptly:
(1) cause the
articles to be amended; or
(2) if
appropriate, deliver to the [Secretary of State] for filing an amendment
pursuant to Section 203.
(c) Articles
of organization may be amended at any time for any proper purpose as determined
by the limited cooperative association.
(d) If
restated articles of organization are adopted, the restated articles of
organization may be delivered to the [Secretary of State] for filing in the
same manner as an amendment.
(e) Subject to
Section 203, an amendment of the articles of organization or other record
containing an amendment of the articles of organization which has been properly
adopted by the members is effective when filed by the [Secretary of State].
[ARTICLE] 15
CONVERSION, MERGER, AND CONSOLIDATION
SECTION 1501.
DEFINITIONS. In this [article]:
(1) AConstituent limited cooperative association@ means a limited cooperative association that
is a party to a consolidation or merger.
(2) AConstituent entity@ means
an entity that is party to a consolidation or merger.
(3) AConverted entity@ means
the organization into which a converting entity converts pursuant to Sections
1502 through 1505.
(4) AConverting limited cooperative association@ means a converting entity that is a
limited cooperative association.
(5) AConverting entity@ means
an entity that converts into another entity pursuant to Sections 1502 through
1505.
(6) AOrganizational documents@ means articles of incorporation, bylaws, articles
of organization, operating agreements, partnership agreements, or other
documents serving a similar function in the creation and governance of an
entity.
(7) APersonal liability@ means
personal liability for a debt, liability, or other obligation of an entity
imposed, by operation of law or otherwise, by a person that co-owns or has an
interest in the entity:
(A) by the
entity=s organic law solely by reason of the person
co-owning or having an interest in the entity; or
(B) by the
entity=s organizational documents under a provision of the
entity>s organic law authorizing those documents to make
one or more specified persons liable for all or specified parts of the entity=s debts, liabilities, and other obligations solely
by reason of the person co-owning or having an interest in the entity.
(8) ASurviving entity@ means
an entity into which one or more other entities are merged. A surviving entity
may exist before the merger or be created by the merger.
SECTION 1502.
CONVERSION.
(a) An entity
that is not a limited cooperative association may convert to a limited
cooperative association and a limited cooperative association may convert to an
entity that is not a limited cooperative association pursuant to this section,
Sections 1503 through 1505, and a plan of conversion, if:
(1) the other
entity=s organic law authorizes the conversion;
(2) the
conversion is not prohibited by the law of the jurisdiction that enacted the
other entity=s organic law; and
(3) the other
entity complies with its organic law in effecting the conversion.
(b) A plan of
conversion must be in a record and must include:
(1) the name
and form of the entity before conversion;
(2) the name
and form of the entity after conversion;
(3) the terms
and conditions of the conversion, including the manner and basis for converting
interests in the converting entity into any combination of money, interests in
the converted entity, and other consideration; and
(4) the
organizational documents of the converted entity.
SECTION 1503.
ACTION ON PLAN OF CONVERSION BY CONVERTING LIMITED COOPERATIVE
ASSOCIATION.
(a) Unless
the organic rules otherwise provide, for a limited cooperative association to
convert to another entity:
(1) a
majority of the board of directors, or a greater percentage if required by the
organic rules, must approve a plan of conversion;
(2) the board
of directors must call a special members= meeting to consider the plan of conversion, hold
the meeting within 90 days following approval of the plan by the board, and
mail or otherwise transmit or deliver in a record to each member :
(A) the plan,
or a summary of the plan and a statement of the manner in which a copy of the
plan in a record may be reasonably obtained by a member ;
(B) a
recommendation that the members approve the plan of conversion, or if the board
determines that because of a conflict of interest or other special
circumstances it should not make a favorable recommendation, the basis for that
determination;
(C) a
statement of any condition of the board=s submission of the plan of conversion to the
members; and
(D) notice of
the meeting at which the proposed plan of conversion will be considered, which
must be given in the same manner as notice of a special members= meeting; and
(3) the following apply:
(A) unless the organic rules otherwise
provide, a plan of conversion must be approved by at least a two-thirds vote of
all members voting at the meeting.
(B) if the limited cooperative association has
investor members, at least one-half of the votes cast by patron members must be
affirmative, but the organic rules may require a larger affirmative vote by
patron members.
(b) If as a result of the conversion any member of
the converting limited cooperative association will have personal liability,
consent in a record of that member must be delivered to the association before
delivery of articles of conversion for filing pursuant to Section 1504.
(c) Subject
to subsection (b) and any contractual rights, after a conversion is approved,
and at any time before the effective date of the conversion, a converting
limited cooperative association may amend a plan of conversion or abandon the
planned conversion:
(1) as
provided in the plan; and
(2) except as
prohibited by the plan, by the same affirmative vote of the board of directors
and of the members as required to approve the plan.
(d) The voting requirements for districts, classes,
or voting groups under Section 1405 apply to approval of a conversion under
this [article].
SECTION 1504.
FILINGS REQUIRED FOR CONVERSION; EFFECTIVE DATE.
(a) After a
plan of conversion is approved:
(1) a
converting limited cooperative association shall deliver to the [Secretary
of State] for filing articles of conversion, which must include:
(A) a
statement that the limited cooperative association has been converted into
another entity;
(B) the name
and form of the converted entity and the jurisdiction of its governing statute;
(C) the date
the conversion is effective under the governing statute of the converted
entity;
(D) a
statement that the conversion was approved as required by this [act];
(E) a
statement that the conversion was approved as required by the governing statute
of the converted entity; and
(F) if the
converted entity is an entity organized in a jurisdiction other than this state
and is not authorized to transact business in this state, the street and
mailing address of an office which the [Secretary of State] may use for
purposes of Section 119; and
(2) if the
converting entity is not a converting limited cooperative association, the
converting entity shall deliver to the [Secretary of State] for filing articles
of organization, which must include, in addition to the information required by
Section 302:
(A) a
statement that the association was converted from another entity;
(B) the name
and form of the converting entity and the jurisdiction of its governing
statute; and
(C) a
statement that the conversion was approved in a manner that complied with the
converting entity=s governing statute.
(b) A
conversion becomes effective:
(1) if the
converted entity is a limited cooperative association, when the articles of
conversion take effect; or
(2) if the
converted entity is not a limited cooperative association, as provided by the
governing statute of the converted entity.
SECTION 1505.
EFFECT OF CONVERSION.
(a) An entity
that has been converted pursuant to this [article] is for all purposes the same
entity that existed before the conversion and is not a new entity but, after
conversion, is organized under the organic law of the converted entity and is
subject to that law and other law as it applies to the converted entity.
(b) When a
conversion takes effect:
(1) all
property owned by the converting entity remains vested in the converted entity;
(2) all
debts, liabilities, and other obligations of the converting entity continue as
obligations of the converted entity;
(3) an action
or proceeding pending by or against the converting entity may be continued as
if the conversion had not occurred;
(4) except as
prohibited by other law, all of the rights, privileges, immunities, powers, and
purposes of the converting entity remain vested in the converted entity;
(5) except as
otherwise provided in the plan of conversion, the terms and conditions of the
plan of conversion take effect; and
(6) except as
otherwise agreed, the conversion does not dissolve a converting limited
cooperative association for purposes of [Article] 11.
(c) A
converted entity that is an entity organized under the laws of a jurisdiction
other than this state consents to the jurisdiction of the courts of this
state to enforce any obligation owed by the converting limited cooperative
association if before the conversion the converting limited cooperative
association was subject to suit in this state on the obligation. A converted entity that is an entity
organized under the laws of a jurisdiction other than this state and not
authorized to transact business in this state appoints the [Secretary of State]
as its agent for service of process for purposes of enforcing an obligation
under this subsection. Service on the
[Secretary of State] under this subsection is made in the same manner and with
the same consequences as in Section 119(c) and (d).
SECTION 1506.
MERGER.
(a) One or
more limited cooperative associations may merge with one or more other entities
pursuant to this [article] and a plan of merger if:
(1) the
governing statute of each of the other entities authorizes the merger;
(2) the
merger is not prohibited by the law of a jurisdiction that enacted any of those
governing statutes; and
(3) each of
the other entities complies with its governing statute in effecting the merger.
(b) A plan of
merger must be in a record and must include:
(1) the name
and form of each constituent entity;
(2) the name
and form of the surviving entity and, if the surviving entity is to be created
by the merger, a statement to that effect;
(3) the terms
and conditions of the merger, including the manner and basis for converting the
interests in each constituent entity into any combination of money, interests
in the surviving entity, and other consideration;
(4) if the
surviving entity is to be created by the merger, the surviving entity=s organizational documents;
(5) if the
surviving entity is not to be created by the merger, any amendments to be made
by the merger to the surviving entity=s organizational documents; and
(6) if a
member of a constituent limited cooperative association will have personal
liability with respect to a surviving entity, the identity of the member by
descriptive class or other reasonable manner.
SECTION 1507.
NOTICE AND ACTION ON PLAN OF MERGER BY CONSTITUENT LIMITED COOPERATIVE ASSOCIATION.
(a) A plan of
merger must be approved by a majority vote of the board of directors of a
limited cooperative association or a greater percentage if required by the
limited cooperative association=s organic rules.
(b) The board
of directors must call a special members= meeting to consider the plan of merger, hold the
meeting within 90 days following approval of the plan by the board, and mail or
otherwise transmit or deliver in a record to each member:
(1) the plan
of merger, or a summary of the plan and a statement of the manner in which a
copy of the plan in a record may be reasonably obtained by a member;
(2) a
recommendation that the members approve the plan of merger, or if the board
determines that because of conflict of interest or other special circumstances
it should not make a favorable recommendation, the basis for that
determination;
(3) a
statement of any condition of the board=s
submission of the plan of merger to the members; and
(4) notice of
the meeting at which the plan of merger will be considered, which must be given
in the same manner as notice of a special members=
meeting.
SECTION 1508.
APPROVAL OR ABANDONMENT OF MERGER BY MEMBERS OF CONSTITUENT LIMITED
COOPERATIVE ASSOCIATION.
(a) For
members of a limited cooperative association to approve the merger:
(1) unless the organic rules otherwise provide, a
plan of merger must be approved by at least a two-thirds vote of all members
voting at a special members= meeting called under Section 1507.
(2) if a limited cooperative association has
investor members , at least one-half of the affirmative votes cast by patron
members must be affirmative, but the organic rules may require a larger
affirmative vote by patron members.
(b) If as a
result of the merger any member will have personal liability for an obligation
of the association, consent in a record of that member must be delivered to the
association before delivery of articles of merger for filing pursuant to
Section 1509.
(c) Subject
to any contractual rights, after a merger is approved, and at any time before
the effective date of the merger, a constituent limited cooperative
association that is a party to the merger may approve an amendment to the plan
of merger or approve abandonment of the planned merger:
(1) as
provided in the plan; and
(2) except as
prohibited by the plan, with the same affirmative vote of the board of
directors and of the members as was required to approve the plan.
(d) The
voting requirements for districts, classes, or voting groups under Section 1405
apply to approval of a merger under this [article].
SECTION 1509.
FILINGS REQUIRED FOR MERGER; EFFECTIVE DATE.
(a) After
each constituent entity has approved a merger, articles of merger must be
signed on behalf of each constituent entity by an authorized representative.
(b) The
articles of merger must include:
(1) the name
and form of each constituent entity and the jurisdiction of its governing
statute;
(2) the name
and form of the surviving entity, the jurisdiction of its governing statute,
and, if the surviving entity is created by the merger, a statement to that
effect;
(3) the date
the merger is effective under the governing statute of the surviving entity;
(4) if the
surviving entity is to be created by the merger:
(A) if it
will be a limited cooperative association, the limited cooperative association=s articles of organization; or
(B) if it
will be an entity other than a limited cooperative association, the
organizational document that creates the entity;
(5) if the
surviving entity preexists the merger, any amendments provided for in the plan
of merger for the organizational document that created the entity;
(6) a
statement as to each constituent entity that the merger was approved as
required by the entity=s governing statute;
(7) if the
surviving entity is a foreign organization not authorized to
transact
business in this state, the street and mailing addresses of an office which the
[Secretary of State] may use for the purposes of Section 119; and
(8) any
additional information required by the governing statute of any constituent
entity.
(c) Each
constituent limited cooperative association shall deliver the articles of
merger to the [office of the Secretary of State] for filing.
(d) A merger
becomes effective under this [article]:
(1) if the
surviving entity is a limited cooperative association, upon the later of:
(A)
compliance with subsection (c); or
(B) subject
to Section 203(c), as specified in the articles of merger; or
(2) if the
surviving entity is not an association, as provided by the governing statute of
the surviving entity.
SECTION 1510.
EFFECT OF MERGER. When a merger becomes effective:
(1) the
surviving entity continues or comes into existence;
(2) each
constituent entity that merges into the surviving entity ceases to exist as a
separate entity;
(3) all
property owned by each constituent entity that ceases to exist vests in the
surviving entity;
(4) all
debts, liabilities, and other obligations of each constituent entity that
ceases to exist continue as obligations of the surviving entity;
(5) an action
or proceeding pending by or against any constituent entity that ceases to exist
may be continued as if the merger had not occurred;
(6) except as
prohibited by other law, all rights, privileges, immunities, powers, and
purposes of each constituent entity that ceases to exist vest in the surviving
entity;
(7) except as
otherwise provided in the plan of merger, the terms and conditions of the plan
take effect;
(8) except as
otherwise provided in the plan of merger, if a constituent limited cooperative
association ceases to exist, the merger does not dissolve the cooperative
association for purposes of [Article] 11;
(9) if the
surviving entity is created by the merger:
(A) if it is
a limited cooperative association, the articles of organization become
effective; or
(B) if it is
an entity other than a limited cooperative association, the organizational
document that creates the entity becomes effective; and
(10) if the
surviving entity preexists the merger, any amendments provided for in the
articles of merger for the organizational documents of the surviving entity
become effective.
SECTION 1511.
CONSOLIDATION.
(a) One or
more limited cooperative associations may agree to call a merger a
consolidation under this [article].
(b) All
provisions governing mergers or using the term merger in this [act] apply
equally to mergers that the constituent entities choose to call consolidations
under subsection (a).
SECTION 1512.
[ARTICLE] NOT EXCLUSIVE. This [article] does not preclude a
limited cooperative association from being converted or merged under law
other than this [act].
[ARTICLE] 16
DISPOSITION OF ASSETS
SECTION 1601.
DISPOSITION OF ASSETS NOT REQUIRING MEMBER APPROVAL. Unless the
articles of organization otherwise provide, and if conducted in the usual and
regular course of business of a limited cooperative association, no member
approval under Section 1602 is required for the association to:
(1) sell,
lease, exchange, license, or otherwise dispose of all or any part of the assets
of the association; or
(2) mortgage,
pledge, dedicate to the repayment of indebtedness, or encumber in any way all
or any part of the assets of the association.
SECTION 1602.
MEMBER APPROVAL OF OTHER DISPOSITION OF ASSETS. Subject to
Section 1601, a sale, lease, exchange, license, or other disposition of assets
requires approval of the limited cooperative association=s members under Sections 1603 through 1605 if the
disposition leaves the association without significant continuing business
activity.
SECTION 1603.
NOTICE AND ACTION ON DISPOSITION OF ASSETS. For a
limited cooperative association to dispose of assets under Section 1602:
(1) a
majority of the board of directors, or a greater percentage if required by the
organic rules, must approve the proposed disposition; and
(2) the board
of directors must call a special members= meeting to consider the proposed disposition, hold
the meeting within 90 days following approval of the proposed disposition by
the board, and mail or otherwise transmit or deliver in a record to each member
:
(A) the terms
of the proposed disposition;
(B) a
recommendation that the members approve the disposition, or if the board
determines that because of conflict of interest or other special circumstances
it should not make a favorable recommendation, the basis for that
determination;
(C) a
statement of any condition of the board=s submission of the proposed disposition to the
members ; and
(D) notice of
the meeting at which the proposed disposition will be considered, which must be
given in the same manner as notice of a special members= meeting.
SECTION 1604.
ACTION ON DISPOSITION OF ASSETS.
(a) Unless the organic rules otherwise provide, a
disposition of assets under Section 1602 must be approved by at least a
two-thirds vote of all members voting at a special members= meeting called under Section 1603.
(b) If the limited cooperative association has
investor members, at least one-half of the votes cast by patron members must be
affirmative, but the organic rules may require a larger affirmative vote by
patron members.
(c) The voting requirements for districts, classes,
or voting groups under Section 1405 apply to approval of a disposition of
assets under this [article].
[ARTICLE] 17
MISCELLANEOUS PROVISIONS
[SECTION 1701.
RELATION TO RESTRAINT OF TRADE AND ANTITRUST LAWS. To the extent a limited cooperative
association or activities conducted by a limited cooperative association in
this state meet the material requirements, if any, for other cooperatives
entitled to an exemption from or immunity under the antitrust laws of this
state, the association and its activities are entitled to the exemption or
immunity to which other cooperatives are entitled. Nothing in this section may be construed to
create any new exemption or immunity for an association or to affect any
exemption or immunity provided to a cooperative organized under any other
[act].]
SECTION 1702.
REQUIREMENTS OF OTHER LAWS.
(a) This act does not alter or amend any laws that
govern the licensing and regulation of individuals or entities in carrying on
specific businesses or professions even if those laws permit the businesses or
professions to be conducted in or by a limited cooperative association, any
foreign cooperative, or its members.
(b) A limited cooperative association may not
conduct activities that, under other laws, must be conducted in an entity that
meets specific requirements for the internal affairs of that entity unless the
organic rules of the limited cooperative association conform to those
requirements.
SECTION 1703.
UNIFORMITY OF APPLICATION AND CONSTRUCTION. In applying and construing this uniform act,
consideration must be given to the need to promote uniformity of the law with
respect to its subject matter among states that enact it.
SECTION 1704.
RELATION TO ELECTRONIC SIGNATURES IN GLOBAL AND NATIONAL COMMERCE ACT. This [act] modifies, limits, or supersedes
the federal Electronic Signatures in Global and National Commerce Act, 15
U.S.C. Section 7001 et seq. [as amended], but this [act] does not modify,
limit, or supersede Section 101(c) of that act (15 U.S.C. Section 7001(c) as
amended) or authorize electronic delivery of any of the notices described in
Section 103(b) of that act (15 U.S.C. Section 7003(b) as amended).
SECTION 1705.
SAVINGS CLAUSE. This [act] does not affect an action or
proceeding commenced, or right accrued, before [this [act] takes effect].
SECTION 1706.
EFFECTIVE DATE. This [act] takes effect [effective date].