Bill Text: MS SB2123 | 2011 | Regular Session | Introduced
Bill Title: Cooperatives; provide for the incorporation of.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Failed) 2011-02-01 - Died In Committee [SB2123 Detail]
Download: Mississippi-2011-SB2123-Introduced.html
MISSISSIPPI LEGISLATURE
2011 Regular Session
To: Judiciary, Division A
By: Senator(s) Horhn
Senate Bill 2123
AN ACT TO PROVIDE FOR THE INCORPORATION OF COOPERATIVE ASSOCIATIONS; TO PROVIDE THE POWERS AND DUTIES OF COOPERATIVES; TO PROVIDE THE REQUISITES FOR THE ARTICLES OF ASSOCIATION OF COOPERATIVES; TO PROVIDE FOR THE ADOPTIONS OF BYLAWS BY COOPERATIVES; TO SPECIFY THE MEMBERSHIP OF COOPERATIVES AND THE REQUISITES FOR VOTING BY MEMBERS; TO PROVIDE FOR THE ORGANIZATION OF MEETINGS AND THE NOTIFICATION OF MEMBERS OF MEETINGS; TO PROVIDE FOR THE AUTHORIZATION OF, CONTROL AND USE OF STOCK BY COOPERATIVES; TO PROVIDE FOR THE NUMBER, ELECTION AND REMOVAL OF DIRECTORS; TO PROVIDE FOR THE MEETINGS OF DIRECTORS; TO AUTHORIZE EXECUTIVE COMMITTEES; TO PROVIDE FOR THE OFFICERS OF COOPERATIVES; TO PROVIDE FOR THE COMPENSATION AND BENEFITS TO DIRECTORS, OFFICERS AND EMPLOYEES OF A COOPERATIVE; TO PROVIDE FOR THE LIABILITY OF DIRECTORS, MEMBERS, STOCKHOLDERS AND PATRONS OF COOPERATIVES; TO PROVIDE THE MANNER IN WHICH A COOPERATIVE MAY DISPOSE OF ASSETS; TO PROVIDE RULES THAT GOVERN CONTRACTS BY COOPERATIVES; TO AUTHORIZE CONTRACTS TO BE FILED WITH THE CHANCERY CLERK AND PROVIDE THE EFFECT OF SUCH FILING; TO PROVIDE THAT THE DIRECTORS SHALL DETERMINE AND DISTRIBUTE NET ASSETS AT LEAST ONCE ANNUALLY; TO PROVIDE FOR ANNUAL REPORTS; TO PROVIDE THE MANNER IN WHICH ARTICLES OF ASSOCIATION MAY BE AMENDED; TO PROVIDE THE MANNER IN WHICH COOPERATIVES MAY MERGE AND CONSOLIDATE; TO PROVIDE THE MANNER IN WHICH A CORPORATION MAY CONVERT ITSELF INTO A COOPERATIVE; TO PROVIDE THE MANNER IN WHICH A COOPERATIVE MAY VOLUNTARILY DISSOLVE ITSELF; TO PROVIDE THE MANNER IN WHICH A COOPERATIVE MAY BE INVOLUNTARILY DISSOLVED; TO PROVIDE FOR THE LIQUIDATION OF THE ASSETS AND BUSINESS OF A COOPERATIVE UNDER COURT SUPERVISION; TO PROVIDE FOR DERIVATIVE ACTIONS BY MEMBERS AND STOCKHOLDERS; TO LIMIT THE USE OF THE TERM "COOPERATIVE" TO ASSOCIATIONS ORGANIZED UNDER THIS ACT AND TO PROVIDE PENALTIES FOR IMPROPER USE OF SUCH TERM; AND FOR RELATED PURPOSES.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:
SECTION 1. Definitions. As used in this act:
(a) "Cooperative" means an association incorporated under this act.
(b) "Foreign cooperative" means an association incorporated under a cooperative law of another state which has members residing within this state and which is operating on the following cooperative basis:
(i) Either no member of the foreign cooperative who is an individual is allowed more than one vote because of the amount of stock or membership capital he owns therein, or the foreign cooperative does not pay dividends on stock or membership capital in excess of eight percent (8%) per annum; and
(ii) The foreign cooperative shall not deal in the products of or for nonmembers to an amount greater in value than such as are handled by it for members; and
(iii) The foreign cooperative distributes its proceeds according to either Section 31 of this act or, the law of the state of the foreign cooperative's incorporation.
(c) "Association" includes both cooperatives and foreign cooperatives.
(d) "Corporation" means all corporations not associations.
(e) "Member" means a person who has been qualified and accepted for membership in an association.
(f) "Membership stock" means any class of stock, continuous ownership of which is required for membership in a cooperative.
(7) "Security" as used in Section 17 of this act and Section 18 of this act means any indebtedness, capital stock or other equity interest in a cooperative's assets.
SECTION 2. Purposes. Cooperatives may be organized under this act for any lawful purpose except banking, insurance, and building or operating public railroads, but subject to statutes relating to the organization of specified kinds of corporations.
SECTION 3. General powers. Unless otherwise provided by its articles, a cooperative may:
(a) Exist perpetually.
(b) Sue and be sued.
(c) Have a seal.
(d) Make contracts, incur liabilities and borrow money; issue certificates representing indebtedness, or representing equity interests in its assets; acquire property; dispose of, mortgage, pledge, lease or otherwise use in any manner any of its property, or any interest therein, wherever situated.
(e) Invest its funds, lend money for its purposes and hold any property as security for repayment.
(f) Conduct its business and affairs and have offices and exercise its powers in the United States or in any foreign country.
(g) Elect officers and appoint agents, define their duties and fix their compensation.
(h) Make and alter bylaws, consistent with its articles, and the laws of this state, for the administration and regulation of its affairs.
(i) Make donations for charitable, scientific, educational or religious purposes.
(j) Indemnify any present or former director, officer or agent against actual expenses necessarily incurred in defense of any proceeding in which he is a party because he is or was such director, officer or agent. This paragraph does not apply to those proceedings in which he is adjudged liable for negligence or misconduct in the performance of duty. Such indemnification shall not be exclusive of other rights to which he may be entitled.
(k) Cease its activities and surrender its franchise.
(l) Exercise all powers necessary or convenient to effect its purposes.
SECTION 4. Incorporators. Five (5) or more adults, one (1) of whom must be a resident, may form a cooperative by signing, acknowledging, filing and recording articles of association.
SECTION 5. Articles. (1) The articles of association shall set forth:
(a) The name of the cooperative.
(b) The period of existence, unless perpetual.
(c) The purposes for which organized. It is sufficient to state that the cooperative may engage in any activity within the purposes for which cooperatives may be organized, and all such activities shall then be deemed within it purposes, subject to express limitations.
(d) Whether the cooperative is organized with or without capital stock.
(e) The designation of classes of members, if more than one (1).
(f) The number and par value of shares of each authorized class of stock; if more than one (1) class is authorized, the designation, preferences, limitations and relative rights of each class shall also be set forth.
(g) Which classes of stock are membership stock.
(h) As to each class of stock, the rate of dividend, or that the rate of dividend may be fixed by the board, or that no dividend will be paid. If the dividend on any class of stock is to be cumulative, this shall also be stated.
(i) Any reservation of a right to acquire or recall any stock.
(j) The basis of distribution of assets in the event of liquidation.
(k) The city, village or town in this state in which the cooperative's principal office is to be located.
(1) The name and address of each incorporator.
(m) The names and addresses of at least five (5) incorporators who will act as the temporary board.
(2) It is not necessary to set forth in the articles any of the powers granted by this act. The articles may include additional provisions, consistent with law, including provisions which are required or permitted to be set forth in the bylaws. Any provision required or, permitted in the bylaws has equal force and effect if stated in the articles. Whenever a provision of the articles is inconsistent with a bylaw, the articles control.
(3) The articles shall be filed and recorded as provided in Section 52 of this act.
(4) The articles of association shall be conclusive evidence, except as against this state in a proceeding to cancel or revoke such certificate, that all conditions precedent to existence have been met.
SECTION 6. Organization meetings. (1) After articles have been filed, an organization meeting of the temporary board shall be held at the call of a majority of the incorporators or of a majority of the temporary directors for the adoption of bylaws, election of temporary officers, and transaction of other business.
(2) The first meeting of the members shall be called by the temporary president or a majority of the temporary directors. Such meeting shall be held as soon as reasonably possible after the organization meeting of the temporary board but not later than six (6) months after recording the articles. Failure to hold such meeting within the time specified does not affect the validity of the organization.
SECTION 7. Bylaws. The initial bylaw of a cooperative may be adopted by the temporary board. Thereafter, bylaws may be adopted and amended only by the members, unless the members adopt a bylaw which permits the board to make and amend specified bylaws. Any bylaw adopted or amended by the board shall be reported at the next regular member meeting. Any such bylaw shall be at any time subject to amendment or repeal by the members. Unless the bylaws provide otherwise, any bylaw may be adopted, amended or repealed by a majority of the members present at a meeting.
SECTION 8. Principal office; registered agent; service of process. (1) A cooperative shall maintain in this state its principal office and registered agent.
(2) The board may establish or change the location of the principal office or name and address of the registered agent by filing with the Mississippi Secretary of State the appropriate forms designed for this purpose by the Secretary of State.
(3) A registered agent may resign by mailing a written notice to both the Secretary of State and the cooperative. The resignation becomes effective when the cooperative names a new registered agent or sixty (60) days after the receipt of notice by the Secretary of State, whichever is sooner.
SECTION 9. Promotion expense; limitation. No cooperative funds may be used, nor any stock issued, in payment of any promotion expenses in excess of five percent (5%) of the paid-up capital stock or membership fees.
SECTION 10. Membership. (1) A cooperative may be organized on a membership basis with no capital stock, or, may be organized with capital stock.
(2) A cooperative may have one or more classes of members. The designation, qualifications, requirements, method of acceptance, and incidents of membership of each class shall be set forth in the bylaws. Any person, including a partnership, incorporated or unincorporated association, corporation, or body politic, may become a member in accordance with the bylaws.
(3) No member may transfer his membership except as permitted in the bylaws.
(4) The bylaws may provide for termination of membership and the conditions and terms thereof.
SECTION 11. Voting. (1) Except as permitted in this section, and Sections 37, 41 or 43 of this act, no person other than a member may vote at any member meeting. A person who has not fully paid for his membership may not vote except as expressly permitted in the bylaws. If the cooperative permits two (2) or more persons to hold one (1) membership, the bylaws may provide how such member vote is to be cast.
(2) At any member meeting, each member entitled to vote shall have one vote, except that the articles may permit either, or both:
(a) A member association to cast additional votes not exceeding a number equal to its membership.
(b) A cooperative whose member-patrons include other associations to base voting in whole or in part on a patronage basis.
(3) Voting by proxy shall not be allowed in any cooperative, except the bylaws may provide for representation of members by delegates apportioned territorially. A delegate shall cast the votes to which members represented by him are entitled.
(4) An absent member may submit a signed vote if he has been previously notified in writing of the exact motion or resolution upon which the vote is taken. The bylaws may limit use of signed votes except as provided in Section 37 of this act.
(5) In the absence of written notice that some person has been designated to represent a member who is other than a natural person, such member may be represented by any of its principal officers. Unless the bylaws provide otherwise, an individual may represent more than one (1) such member, and may also vote as an individual if he is a member.
(6) The bylaws may set forth provisions, not inconsistent with this act, relating to the methods and procedures for voting.
SECTION 12. Member meetings. (1) Unless the bylaws provide otherwise, member meetings shall be held at the principal office or such other place as the board may determine.
(2) An annual member meeting shall be held at the time fixed in or pursuant to the bylaws. In the absence of a bylaw provision, such meeting shall be held within six (6) months after the close of the fiscal year at the call of the president or board.
(3) Special member meetings may be called by the president, board, or members having one-fifth (1/5) of the votes entitled to be cast at such meeting.
(4) Written notice, stating the place, day and hour, and in case of a special member meeting, the purposes for which the meeting is called, shall be given not less than seven (7) nor more than thirty (30) days before the meeting at the direction of the person calling the meeting.
(5) At any meeting at which members are to be represented by delegates, notice to such members may be given by notifying such delegates and their alternates. Notice may consist of a notice to all members or may be in the form of an announcement at the meeting at which such delegates or alternates were elected.
(6) Action without a meeting may be taken pursuant to Section 22 of this act.
SECTION 13. Quorum. A quorum at a member meeting shall be ten percent (10%) of the first one hundred (100) members plus five percent (5%) of additional members, present in person or represented by delegate. Unless the bylaws fix a larger number of members to constitute a quorum, a quorum shall never be more than fifty (50) members nor less than five (5) members or a majority of all members, whichever is smaller. Members represented by signed vote may be counted in computing a quorum only on those questions as to which the signed vote is taken.
SECTION 14. Notice to members, stockholders or other persons; waiver. (1) Whenever notice is required by this act to be given to any person, such notice shall be given either personally or by mail. If mailed, such notice is given when deposited in the United States mail, with postage prepaid thereon, addressed to such person at his address as it appears on the records of the cooperative.
(2) A signed waiver is equivalent to personal notice to the person so signing. The waiver may be signed at any time.
SECTION 15. Stock; authorization, issuance, control, use, rights. (1) A cooperative organized with capital stock may issue the amount of stock stated in its articles. Such stock may be divided into two (2) or more classes with such designations, preferences, limitations, and relative rights as shall be stated in the articles, except that:
(a) Stock as such has no voting power, except as stated in Sections 37, 41 and 43 of this act.
(b) Stock without par value shall not be authorized or issued.
(c) The rate of dividends upon stock shall not exceed six percent (6%) of its par value for any year, but dividends may be cumulative.
(2) (a) The articles may require that members own one or more shares of membership stock. Such stock shall be issued or transferred only to a person eligible to become a member, and only when such person satisfies other requisites for membership.
(b) Unless restricted by the articles, stock other than membership stock may be issued or transferred to any person.
(3) Each certificate for stock shall bear the manual or facsimile signature of a principal officer and shall state:
(a) The name of the cooperative, the number, par value and class of the shares represented by the certificate, and whether or not it is membership stock.
(b) Any restrictions on the issuance or transfer of such stock.
(c) If more than one (1) class of stock is authorized, the designation of the several classes, and their respective preferences, limitations and relative rights.
In lieu of a full statement, this information may be given in summary form, or the certificate may state that the cooperative will, upon request, furnish the information required by this subsection.
(4) No stock certificate may be issued except upon payment of the par value of the stock it represents. Payment for stock may be in cash or other property. If in other property, the value thereof shall be determined by the board and such determination, if made in good faith, shall be conclusive.
(5) Unless the articles provide otherwise, a cooperative may acquire, recall, exchange, redeem, and reissue its own stock. Provisions in the articles and on the stock certificate may reserve to the cooperative a prior right to acquire any stock offered for sale, or a right to recall the stock of any stockholder, or both of said rights. The consideration paid for stock recalled by the cooperative shall be its par value and accrued unpaid dividends, provided that if the book value of such stock is less than the par value, the consideration shall be such book value. The cooperative may set off obligations of the stockholder to it. If the remaining assets would be less than the aggregate amount payable to creditors and persons holding stock with preferential rights upon liquidation, no stock shall be acquired, recalled, exchanged or redeemed for a consideration other than stock or certificates of equity interest of equal or subordinate rank.
(6) When stock is acquired, recalled, exchanged, or redeemed by the cooperative, such stock is restored to the status of authorized but unissued stock.
(7) Stockholders as such have no preemptive right to purchase additional stock.
SECTION 16. Subscriptions for stock; liability therefor. (1) A subscription for stock of a cooperative is irrevocable for six (6) months unless otherwise provided by the subscription agreement, or unless all subscribers consent to the revocation.
(2) Except as provided in Section 25 of this act, a stockholder, or subscriber is under no obligation to any person with respect to his stock or subscription other than the obligation to pay to the cooperative the full consideration for which such stock was to be issued.
SECTION 17. Missing securities or records. (1) When a security issued by a cooperative is missing, the cooperative shall issue a duplicate security if the owner so requests and furnishes an indemnity acceptable to the cooperative.
(2) When records showing ownership of securities of apportionment of equity interest in the assets are missing and the information therein contained is necessary to a proposed redemption of the interest, the cooperative may give notice and redeem as follows:
(a) The cooperative shall set aside an amount equal to the value of the interests to be redeemed.
(b) The cooperative shall give notice of such redemption to all owners of interests of which the cooperative has knowledge.
(c) If there are interests, the ownership of which is unknown to the cooperative, it shall publish notice of the redemption at least once a month for four (4) months in a publication circulated among members of cooperatives in the area. SECTION 18. Liability of cooperative for wrongful transfers of its securities. (1) A cooperative is not liable for acting upon wrongful transfers of its securities unless it has notice that the certificate was not transferred by a proper person or has notice that the transfer was wrongful.
(2) As used in this section:
(a) "Proper person" means the registered owner or last prior transferee, whether or not described as fiduciary for another, or his authorized agent, legal representative, or successor to his interest by operation of law.
(b) "Wrongful transfer" means a transfer which is in excess of the authorization or capacity of the transferor, or which is made in breach of the transferor's fiduciary duty.
(c) "Transfer" includes a redemption or, recall of stock.
SECTION 19. Directors; number, election, removal and vacancies. (1) The business and affairs of a cooperative shall be managed by a board of directors. Every director shall be a member or a representative of a member who is other than a natural person. The bylaws shall prescribe any other qualifications for directors and may provide that directors be from specified territorial districts.
(2) The number of directors shall not be less than five (5), provided that, in a cooperative with less than fifty (50) members, the number of directors shall not be less than three (3). Subject to such limitation, the number shall be fixed in the articles, or if the articles so provide, in the bylaws.
(3) The directors constituting the temporary board, named in the articles, shall hold office until the first member meeting. At that meeting and thereafter, directors shall be elected by the members at a member meeting in the manner and for the terms provided in the bylaws. If the bylaws provide that directors be from specified territorial districts, the articles may limit voting for any director to members from within the territorial district from which such director is to be elected. Unless the bylaws provide otherwise, a director's term of office shall be one (1) year. Each director shall hold office for the term for which elected and until his successor takes office. The bylaws may permit selection of alternates to take the place of directors absent at a meeting of the board. Whenever any change is made in the board, the cooperative shall file within thirty (30) days with the Secretary of State a report showing the names and addresses of all directors.
(4) Unless the bylaws provide otherwise, a director may be removed upon a majority vote of all members.
(5) Unless the bylaws provide otherwise, any vacancy existing in the board may be filled until the next annual meeting by appointment by a majority vote of the directors then in office.
SECTION 20. Directors; meetings, quorum and waiver of notice. (1) Meetings of the board shall be held at such place and upon such notice as is prescribed in the bylaws.
(2) Unless a greater number is required in the bylaws, a majority of the directors in office shall constitute a quorum for transaction of business. Unless a greater number is required in the bylaws, an act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the board.
(3) A signed waiver of notice of a board meeting is equivalent to personal notice to the person so signing. The waiver may be signed at any time. Attendance at a meeting is a waiver of notice of such meeting, except when a director attends the meeting and objects thereat to the transaction of business because the meeting was not lawfully convened.
(4) Unless the bylaws provide otherwise, the purposes of any meeting of the board need not be specified in the notice or waiver of notice of such meeting.
SECTION 21. Executive committee. (1) If the bylaws so provide, the board may elect an executive committee to consist of three (3) or more directors. When the board is not in session, such committee shall have all powers of the board except in respect to:
(a) Powers reserved by the board to itself.
(b) Apportionment or distribution of proceeds.
(c) Election of officers.
(d) Filling of vacancies in the board.
(e) Amendments to the bylaws.
(2) The board may elect other directors as alternates for members of the executive committee.
SECTION 22. Action without meeting by directors or members. Any action which may be taken at a meeting may be taken without a meeting if a writing setting forth and approving the action taken shall be signed by all of the cooperative members, directors or executive committee members entitled to vote on such action. Such consent shall have the same force and effect as a unanimous vote at a meeting.
SECTION 23. Officers. (1) The principal officers of a cooperative are a president, one or more vice presidents as prescribed in the bylaws, a secretary and a treasurer. They shall be elected annually by the board at such time and in such manner as the bylaws provide. Upon original election and whenever any change is made in such officers, the cooperative shall file with the Secretary of State, within thirty (30) days, a report showing the name and address of all officers. Each principal officer except the secretary and the treasurer must be a director of the cooperative. The offices of secretary and treasurer may be combined in one (1) person.
(2) Any other officer may be chosen by the board or as provided in the bylaws.
(3) All officers shall have such authority and perform such duties as the bylaws provide, or as the board may determine not inconsistent with the bylaws. Any officer may be removed by the board whenever in its judgment the best interests of the cooperative will be served thereby. Election or appointment shall not of itself create contract rights.
SECTION 24. Compensation and benefits to directors, officers and employees. (1) Unless the bylaws provide otherwise, only the members may establish compensation or other benefits for a director not available generally to officers and employees, for services as a director.
(2) Unless the bylaws provide otherwise, for prior or future services of any officer or employee, the board may provide reasonable compensation, pension, bonuses or other benefits to such officer or employee, and pension or other benefits to a member of his family or his beneficiaries. No officer or employee who is a director may take part in the vote on his salary for services rendered the cooperative.
SECTION 25. Liability of directors and members. (1) Directors who negligently or in bad faith vote for any distribution of assets contrary to this act or the articles are jointly and severally liable to the cooperative for the value of assets distributed in excess of the amount which could have been distributed without violating this act or the articles.
(2) Members, stockholders and patrons of a cooperative are neither obligated to pay, nor liable upon, any cooperative obligation, except that stockholders are liable to an amount equal to the par value of their shares for debts due an employee for not more than six (6) months' service to the cooperative.
SECTION 26. Disposition of assets; right to secure debts. (1) Except as authorized by the members, the board may not dispose of all or substantially all of a cooperative's fixed assets. At any meeting the members may authorize the disposition of all or substantially all of a cooperative's fixed assets if:
(a) Notice that such disposition will be considered at such meeting has been given to all persons entitled to vote thereon; and
(b) Such disposition has been approved by two-thirds (2/3) of those entitled to vote thereon voting at the meeting.
(2) Unless the bylaws provide otherwise, the board may secure payment of a cooperative's debts by mortgaging the cooperative's rights, privileges, authority and franchises, revenues and other property.
SECTION 27. Cooperative contracts. (1) If otherwise lawful, contracts for any of the following purposes, whether written or contained in the bylaws, are valid when made between an association and any member in which such member agrees to:
(a) Sell, market or deliver all or any specified part of products produced or to be produced either by him or under his control to or through the association or any facilities furnished by it.
(b) Authorize the association or any facilities furnished by it to act for him in any manner with respect to all or, any specified part of such products and any services to be furnished by him.
(c) Buy or procure all or a specified part of goods or, services from or through the association or any facilities furnished by it.
(d) Authorize the association or any facilities furnished by it to act for him in any manner in the procurement of goods or services.
(2) The term of such contracts may not exceed five (5) years, but they may be made self-renewing for periods not exceeding five (5) years each, subject to the right of either party to terminate at the end of the original and each renewal term upon giving written notice of such termination during a period specified in such contract. Such period shall be a duration of at least thirty (30) days during the last year of each term. The association shall furnish to each member-maker a completed original or copy of his contract, and on his request at any time shall promptly furnish him information as to his rights of termination. The five-year limitation herein contained shall not apply to contracts for the furnishing of electric energy or service involving an investment by the vendor in fixed assets to be amortized over a longer term.
(3) Such contract may require liquidated damages to be paid by the member in the event of a breach of the contract. Liquidated damages may be either a percentage of the value of the products, goods or services, or a specific sum, but neither may be more than thirty percent (30%) of the value of the products, goods or services, subject to the breach. Where a specific sum is provided as liquidated damages, but such sum exceeds thirty percent (30%) of the value of the products, goods or services which are the subject of the breach, then the contract shall be construed as providing an amount equal to thirty percent (30%).
(4) If any contract authorized by subsection (l)(a) or (b) of this section contains an assignment to the association of any part or all of funds due or to become due the member during the life of the contract for any product produced or to be produced by him or for any services performed, or to be performed in producing any product, any person who accepts or receives such product from the member is bound by such assignment after receiving written notice from the association or the member of the amount and duration of such assignment. However, as to any seasonal crop, if no funds are paid or become payable by any person under such an assignment for a period of two (2) consecutive years during the life of the contract, thereafter the assignment shall not be binding upon any person who receives or accepts such product from the member until the assignment is reaffirmed by the member in writing and written notice thereof is given by the association or the member. Any such reaffirmation shall continue to be effective during the life of the contract until another such lapse of two (2) consecutive years shall occur.
SECTION 28. Filing of cooperative contracts; effect thereof. (1) The association may file in the office of the chancery clerk of the county in which the member-maker resides:
(a) A copy of any contract authorized by Section 27 of this act; and
(b) If a uniform contract is used, a sworn list of the names of all member-makers of that contract.
(2) The chancery clerk, upon payment of a fee of Fifty Cents (50¢) for each contract and of Five Cents (5¢) for each member-maker of a uniform contract, shall number each contract consecutively and shall file it. The chancery clerk shall enter the name of every member-maker of such a contract alphabetically in a book to be kept for that purpose. He shall place members and cooperatives under a separate head and shall state in separate columns, opposite each name, the number of the contract, the date of the filing, and a brief description of the products, goods or services covered by such contract.
(3) The filing constitutes notice to all persons of the association's rights under the contract. The filing also constitutes such notice that an interest in the title to all products agreed to be sold by the member-maker of such contract to the association during the term of such contract is vested in the association. In case of a purchase of any such product thereafter by any party other than the association from any party other than the association, no interest of any nature shall pass to such other purchaser. The association may recover the possession of such products from any person in whose possession they may be found, may obtain an injunction to prevent any attempted purchase, receipt or transfer not permitted by the contract, or may enforce its rights in any manner permitted by law.
(4) The filing constitutes notice to all persons that the contract is and remains a valid contract until:
(a) It expires according to its terms; or
(b) It is canceled by written mutual agreement of the parties thereto; or
(c) It is annulled or otherwise terminated by final judgment of a court.
(5) Whenever the contract has been terminated in any such manner, the association shall give, upon demand, a statement of termination to the member-maker of the contract. Such member may file such statement in the office of the chancery clerk where the contract was originally filed. The chancery clerk shall stamp "expired" after the name of the member in the alphabetical index. For such filing and stamping, the register of deeds shall receive a fee of Twenty-five Cents (25¢). At least once each year, the association shall file in the office of the chancery clerk where the contract was originally filed a sworn list of the names of all member-makers whose contract has been terminated in any manner specified by subsection (4)(b) and (c) of this section. The chancery clerk shall stamp "expired" after the name of the members in the alphabetical index. For such filing and stamping the chancery clerk shall receive a fee of Five Cents (5¢) for each member-maker.
SECTION 29. Relief against breach or threatened breach. (1) In the event of a breach or threatened breach of a contract authorized by Section 27 of this act by a member, the association shall be entitled to an injunction to prevent the breach or any further breach thereof, and to a decree of specific performance. Upon filing of a verified complaint showing such breach or threatened breach, and upon filing a sufficient bond, the association shall be entitled to a temporary restraining order against the member.
(2) Any person, with actual or constructive notice that a contract exists, who induces or attempts to induce any member to breach or repudiate his contract with the association, or who in any manner aids a breach of such contract, is liable to the aggrieved party for damages caused by such interference. The association is also entitled to an injunction to prevent any interference or further interference with the contract.
SECTION 30. Application of Sections 27 through 29; venue of action. (1) Sections 27 through 29 of this act apply after July 1, 2011, to all contracts whether made before or after that date.
(2) The proper place of trial of any action by or against an association when based on Sections 27 through 29 of this act is in the county where the association has its principal office or registered agent.
SECTION 31. Apportionment and distribution of proceeds. At least once annually the directors shall determine and distribute net proceeds as follows:
(a) There shall be deducted from total proceeds:
(i) All operating expenses and costs.
(ii) The cost of supplies, commodities, equipment and other property or services procured or sold for patrons.
(iii) The cost of services performed for patrons.
(iv) All taxes and all other expenses.
(v) Reasonable and necessary reserves for depreciation, depletion and obsolescence of physical property, doubtful accounts and other valuation reserves, all of which shall be established in accordance with usual and customary accounting practices.
(b) The remainder of the total proceeds are net proceeds, and shall be distributed and paid as follows:
(i) An amount not to exceed five percent (5%) thereof may be set aside as an educational fund to be used in teaching or promoting cooperative organization or principles. Such funds shall for all purposes, except the computation of net proceeds, be deemed an expense of operation of the cooperative.
(ii) A share of the net proceeds may be set aside for or paid to officers or employer, or both. Such amount shall for all purposes except the computation of net proceeds be deemed an expense of operation of the cooperative.
(iii) In a cooperative organized with capital stock, such dividend may be paid upon capital stock as is authorized by the articles. No dividend may be paid if the capital is impaired or if payment of such dividend would result in an impairment of capital.
(c) Unless the articles or bylaws otherwise expressly provide, none of the remainder of the net proceeds shall constitute income of the cooperative but all thereof shall be distributed and paid to patrons, whether members or not, as follows:
(i) Reasonable reserves for necessary purposes may be created, which shall be credited to patrons in accordance with the ratio which their patronage bears to total patronage.
(ii) All the remainder of the net proceeds shall be distributed and paid to patrons in accordance with the ratio which their patronage bears to total patronage.
(iii) There shall be no distinction between the persons entitled thereto, but such reserves and distributions may be based upon business done with particular departments or in particular commodities, supplies or services, or upon classification of business according to the type or nature thereof.
(d) If the articles or bylaws so provide:
(i) Any of the net proceeds may be credited to allocated or unallocated surplus or reserves of the cooperative.
(ii) None of the remainder shall constitute income to the cooperative, but all thereof shall be distributed and paid in accordance with the ratio which individual patronage bears to total patronage, either, to member patrons only or to all patrons with nonmembers receiving a lower proportion than members, as the bylaws may provide. There shall be no other distinction between members and nonmembers, but distribution may be based on business done with particular departments, or in particular commodities, supplies or services, or upon classification of business according to type or nature thereof.
(e) The distribution and payment of net proceeds under paragraph (c) or (d) of this section may be in cash, credits, stock, certificates of interest, revolving fund certificates, letters of advice, or other certificates or securities of the cooperative or of other associations or corporations, in other property, or in any combination thereof.
(f) All or any part of the net proceeds may be applied to losses incurred in prior years, and the bylaws may also include any reasonable provisions for the apportionment of losses.
SECTION 32. Books and records; penalty for refusal to produce. (1) A cooperative shall keep correct and complete books and records of account, and shall also keep minutes of the proceedings of meetings of its members, board and executive committee. The cooperative shall keep at its principal office records of the names and addresses of all members and stockholders with the amount of stock held by each, and of ownership of equity interests. At any reasonable time, any member or stockholder, or his agent or attorney, upon written notice stating the purposes thereof, delivered or sent to the cooperative at least one (1) week in advance, may examine for a proper purpose any books or records pertinent to the purpose specified in such notice.
(2) In any proceedings, or upon petition for such purpose, any court of record may, upon notice and after hearing at which proper cause is shown, and upon suitable terms, order any of the cooperative's books or records, and any other pertinent documents in its possession, or duly authenticated copies thereof, to be brought within this state. Such documents shall be kept at such place and for such time and purposes as the order designates. Any cooperative failing to comply with the order is subject to dissolution, and its directors and officers are liable for contempt of court.
SECTION 33. Annual reports; filing thereof. (1) A cooperative under this section shall file an annual report signed by a principal officer, or the general manager setting forth:
(a) Its name and complete address.
(b) The names and addresses of its directors and principal officers.
(c) A statement, by class and par value, of the amount of stock which it has authority to issue, and the amount issued.
(d) A statement as to the general type of business engaged in during the prior year.
(2) Such annual report shall be made on forms furnished by the Secretary of State, and the information therein contained shall be given as of the date of the execution of the report.
(3) The annual report shall be delivered to the Secretary of State between January 1 and April 15 of each year following incorporation. If the report does not conform to requirements, it shall be returned to the cooperative for necessary corrections. The penalties for failure to file such report shall not apply if it is corrected and returned within thirty (30) days after receipt thereof.
(4) If the report is not filed before the following January 1, the cooperative is not in good standing and shall be placed in dissolved status automatically. Until restored to good standing, the Secretary of State may not accept for filing any document respecting such cooperative except those incident to its dissolution.
(5) The cooperative may be restored to good standing by delivering to the Secretary of State a current annual report and by paying the Twenty Dollar ($20.00) reinstatement fee plus Twenty-five Dollars ($25.00) for each calendar year or part thereof during which it was not in good standing.
SECTION 34. Omission of seal. Whenever any document is required to be sealed, no seal is required if the document includes a statement to the effect that the cooperative has no seal.
SECTION 35. Income tax return, filing of, when. Any cooperative association, society, company, corporation, exchange or union organized under the provisions of this act shall not be obliged to file a state income tax return unless such association, society, company, corporation, exchange or union is at the time subject to a state income tax.
SECTION 36. Amendments to articles. (1) At any member meeting a cooperative may adopt any amendment to its articles which is lawful under Section 5 of this act, if a statement of the nature of the amendment was contained in the notice of the meeting.
(2) Unless stockholders are entitled by Section 37 of this act to vote on an amendment, an amendment is adopted when approved by members holding two-thirds (2/3) of the member votes cast thereon.
SECTION 37. Stockholder voting on amendments to articles. (1) Whether or not permitted to vote by the articles, a holder of stock other than membership stock who is affected by a proposed amendment to articles shall be entitled to cast one (1) vote on such amendment regardless of the dollar amount of stock he holds, or the number of affected classes of stock held by him, provided that the articles may permit such affected stockholder to cast one (1) vote for each share of stock he holds. A member, holding stock affected by a proposed amendment may vote both as a member and as an affected stockholder.
(2) For purposes of this section, a holder of stock is affected as to any class of stock owned by him, only if an amendment would expressly:
(a) Decrease the dividends to which that class may be entitled or change the method by which the dividend rate on that class is fixed.
(b) Restrict rights to transfer that class.
(c) Give to another existing or any new class of stock or equity interest not previously entitled thereto, any preference as to dividends or upon dissolution which is the same or higher than preferences of that class.
(d) Change the par value of shares of that class or of any other class having the same or higher preferences as to dividends or upon dissolution.
(e) Increase the number of authorized shares of any class having a higher preference as to dividends or upon dissolution.
(f) Require or permit an exchange of shares of any class with lower preferences as to dividends or upon dissolution for shares of that class or any other class with the same or higher preferences.
(3) If stockholders are entitled to vote on an amendment, such amendment is adopted if:
(a) Notice of the meeting, a copy of the proposed amendment and a mail ballot thereon has been sent to each member and each affected stockholder;
(b) Members holding two-thirds (2/3) of the member votes cast thereon approve; and
(c) Two-thirds (2/3) of the affected stockholders voting thereon approve. If stockholders are permitted by the articles to cast one (1) vote for each share of stock they hold, the amendment shall be adopted by the holders of at least two-thirds (2/3) of the shares of each class entitled to vote thereon voting at the meeting.
(4) This section shall not apply to stock issued prior to July 1, 2010, unless the cooperative adopts an amendment to its articles making such stock subject to this section.
SECTION 38. Filing and recording amendments; effect thereof. (1) Amendments to articles shall be signed by the president or a vice president and the secretary or an assistant secretary, and shall set forth:
(a) The name of the cooperative.
(b) The amendment and date of adoption.
(c) The number of members.
(d) The number of members voting for and against such amendment.
(e) If affected stockholders have the right to vote under Section 37 of this act, the number of affected stockholders voting for and against such amendment. If affected stockholders voted on a share basis, then the shares of each class voting for and against the amendment.
(2) The amendment shall be filed and recorded as provided in Section 52 of this act.
(3) No amendment may affect any existing cause of action or proceeding to which the cooperative is a party or existing rights of persons other than members or stockholders.
(4) No action may be maintained to invalidate any amendment because of the manner of its adoption unless commenced within two (2) years after the date of recording.
SECTION 39. Restated articles. A cooperative may, by action taken in the manner required for an amendment, adopt restated articles. When filed and recorded in the manner prescribed for an amendment, restated articles supersede existing articles and all amendments thereto. Restated articles shall meet:
(a) Incorporators constituting the temporary board and the names and addresses of the incorporators may be omitted; and
(b) The location of the principal office, or the complete address of the present registered agent, shall be set forth as of the time of adoption of the restated articles.
SECTION 40. Amendments by bankruptcy court. Certified copies of any order of a court of the United States, in proceedings under the bankruptcy laws, shall be filed and recorded as an amendment if the order effects an amendment to the articles. The principal officers of a cooperative shall cause each order to be promptly filed and recorded after it becomes final.
SECTION 41. Merger and consolidation. If otherwise lawful, any two (2) or more associations may merge or consolidate under this act or under the law of the state where the surviving or new association will exist. Before a cooperative may merge or consolidate with any other association, a written plan of merger or consolidation shall be prepared by the board or by a committee selected by the board or the members for that purpose. Such plan shall set forth all the terms of the merger or consolidation and the proposed effect thereof on all members and stockholders of the cooperative. In case of consolidation the plan shall also contain the articles of the new association. The members and such stockholders as are entitled to vote thereon shall approve the plan in the manner provided in Section 37 of this act for amendments to the articles.
SECTION 42. Articles of merger or consolidation effect thereof. (1) Articles of merger or consolidation shall set forth the approved plan and such other information as is required by Section 38 of this act. They shall be signed by two (2) principal officers of each association merging or consolidating, and filed with the Secretary of State on forms provided for that purpose. Unless otherwise specified in the plan, the merger or consolidation is effective when the articles are recorded with the Secretary of State.
(2) After the effective date, the associations which are parties to the plan become a single association. In the case of a merger, the surviving association is that association so designated in the plan. In the case of a consolidation, the new association is the association provided for in the plan. The separate existence of all associations which are parties to the plan, except the surviving or new association, then ceases.
(3) The surviving or new association possesses all the rights and all the property of each of the individual associations, and is responsible for all their obligations. Title to any property is vested in the surviving or new association with no reversion or impairment thereof caused by the merger or consolidation. No right of any creditor may be impaired by the merger or consolidation without his consent.
(4) The articles of the surviving association are deemed amended to the extent provided in the plan of merger.
SECTION 43. Division of a cooperative. (1) Any cooperative may divide itself into two (2) or more cooperatives under this act. A written plan of division shall be prepared by the board or by a committee selected by the board for that purpose. Such plan shall set forth all the terms of the division and the proposed effect thereof on all members and stockholders of the cooperative. The plan shall also contain the articles of each new cooperative being formed and any amendments to the articles of the remaining cooperative.
(2) The members, and such stockholders as are entitled to vote thereon, shall approve the plan in the manner provided in Section 37 of this act for amendments to articles.
(3) Articles of division shall set forth the approved plan and such other information as is required by Section 38 of this act and shall be filed and recorded as an amendment to the articles. Each part of the plan which contains the articles of a new cooperative shall be separately filed and recorded as articles of association for such new cooperative.
SECTION 44. Conversion of corporation. A corporation may convert itself into a cooperative by adopting an amendment to its articles by which it elects to become subject to this act, together with changes in its articles required by this act and other desirable changes permitted by this act. Such amendments shall be adopted, filed and recorded in the manner provided by the law then applicable to the corporation.
SECTION 45. Voluntary dissolution. (1) At any member meeting, whether or not a quorum is present, a cooperative may dissolve if:
(a) Notice that a resolution for dissolution will be considered and acted upon has been given to all members and to all other persons entitled by the articles to vote thereon; and
(b) Such resolution is adopted by members holding three-fourths (3/4) of the member votes cast thereon. The articles may permit stockholders to vote on the resolution for dissolution.
(2) When the resolution is adopted, either a committee designated by the resolution or the board shall liquidate all assets and pay the net proceeds of such liquidation available for distribution to all persons entitled to the same by law, the articles and the bylaws.
(3) Articles of dissolution shall be signed by a majority of directors or of committee members and shall be sealed with the cooperative's seal. They shall set forth:
(a) The name of the cooperative.
(b) The name and address of each director or committee member.
(c) The date of adoption of the resolution of dissolution.
(d) A statement that all liquidation activities have been completed.
(4) The articles of dissolution shall be filed and recorded as provided in Section 52 of this act, and thereupon the existence of the cooperative ceases.
SECTION 46. Involuntary Judicial dissolution. (1) A cooperative may be dissolved involuntarily by a decree of the circuit court where the principal office or registered agent is located in an action commenced by the Attorney General when it is established that:
(a) The cooperative's certificate of association was procured through fraud;
(b) The cooperative has continued to exceed or abase the authority conferred upon it by this chapter; or
(c) The cooperative failed to comply with a court order for the production of books, records or other documents of the cooperative as provided in Section 32 of this act.
(2) If the cooperative cures its defaults other than those under subsection (1)(a) and (b) of this section prior to the entry of the court's final decree and pays all penalties and court costs that have accrued, the cause of action with respect to the defaults so cured will abate.
SECTION 47. Liquidation under court supervision. (1) The circuit court of the county where the principal office or registered agent of the cooperative is located may liquidate the assets and business of such cooperative when a petition to that effect is filed by or on behalf of:
(a) A majority of the designated committee or directors when a resolution is adopted pursuant to Section 45 of this act.
(b) The Attorney General when a decree of dissolution has been obtained pursuant to Section 46 of this act.
(c) A judgment creditor whose execution is returned unsatisfied when it is established that the cooperative is unable to pay its debts as they become due in the usual course of its business.
(d) Any creditor when it is established that the cooperative is dissolving pursuant to Section 45 of this act without making adequate provision for payment of all creditors.
(2) Upon filing of any such petition, the court acquires exclusive jurisdiction of all matters pertaining to the liquidation of such cooperative and the distribution of its assets to persons entitled thereto, and may determine and order paid the expense of such liquidation proceedings. The court has power to issue injunctions, appoint receivers with such duties and powers as the court may direct, and take any other action necessary to the cooperative's liquidation. A receiver appointed in such proceeding has authority to sue and be sued as receiver for the cooperative.
(3) The court shall fix the time within which creditors may file claims and shall prescribe the notice to be given to interested persons. Creditors who do not file their claims within the time limit may not participate in any distribution hereafter made unless the court, upon good cause shown, extends their time for filing.
(4) When the court approves the final distribution of a cooperative's assets, it shall enter a decree in the nature of articles of dissolution which shall be filed and recorded as provided in Section 52 of this act.
(5) The filing of a petition under this section operates as a stay of all other proceedings against the cooperative until such time as the court issues its final judgment or directs otherwise.
(6) The court upon proper cause shown may at any time order the proceedings dismissed upon such terms and conditions as the court may impose.
SECTION 48. Property omitted from final distribution. (1) Upon filing and recording the articles or decree of dissolution, title to any property omitted from the final distribution vests in the surviving directors or committee members who signed the articles, as trustees. They have all the powers of the cooperative with respect to such property and shall distribute the property or its proceeds to the persons beneficially entitled thereto.
(2) When no trustee can be found, the circuit court of the county where the property is located has power to appoint trustees upon application of any person having an interest in such property or its disposition.
(3) Any trustee may at any time make application to the proper circuit court for supervision of liquidation pursuant to Section 47 of this act.
SECTION 49. Amounts due, unknown persons. Upon liquidation of a cooperative, the assets distributable to persons who are unknown or cannot be found may be reduced to cash and deposited with the State Treasury. If claimed within ten (10) years thereafter such funds shall be paid without interest to persons entitled thereto upon proof satisfactory to the State Treasurer of their right thereto.
SECTION 50. Survival of remedy after dissolution. Except as provided in Section 47 of this act, the dissolution of a cooperative does not impair any remedy available to or against such cooperative, its directors, stockholders, or members for any claim existing or any liability incurred prior to such dissolution if a proceeding thereon is commenced within two (2) years after the date of recording the articles or decree of dissolution.
SECTION 51. Admission of foreign cooperatives. A foreign cooperative is entitled to all rights, exemptions and privileges of a cooperative organized under this chapter, if it is authorized to do business in this state.
SECTION 52. Filing and recording documents; penalty: for false document. (1) When any document is to be filed originals shall be delivered to the Secretary of State on the form provided and by the method prescribed by the Secretary of State. The Secretary of State shall stamp on the document the date of filing and return it to the cooperative with a certificate of filing. (2) A stamped copy shall be recorded by the cooperative in the office of the chancery clerk of the county where the principal or registered office is located. The chancery clerk shall note on the record of the articles the volume and page where any subsequent documents are recorded. If a document effects a change in the county where the principal or registered office is located, the original articles and subsequent documents or certified copies thereof, shall also be recorded by the cooperative in such new county.
(3) Any document is filed when received in proper form with all required information by the recording office of the Secretary of State with all required fees paid.
(4) Whoever causes any document to be filed or recorded, knowing such to be false in any material respect, may be fined not more than One Thousand Dollars ($1,000.00) or imprisoned not more than three (3) years, or both.
SECTION 53. Fees for filing. (1) The Secretary of State shall collect from any cooperative for filing:
(a) Articles of association for a new cooperative, Fifty Dollars ($50.00).
(b) An amendment to the articles or articles of merger, consolidation, or division, Twenty-five Dollars ($25.00). (c) Articles or decree of dissolution, Twenty-five Dollars ($25.00).
(d) Receiving services of any process, notice or demand, Fifteen Dollars ($15.00).
(e) Filing an annual report of a cooperative, Twenty-five Dollars ($25.00).
(f) Answering a request for verification of corporate existence or status and issuing a certificate to the effect, Twenty-five Dollars ($25.00).
(g) For any other document required to be filed under this chapter or revisions thereto, Twenty-five Dollars ($25.00).
(2) No document may be filed or recorded until all fees therefor have been paid.
SECTION 54. Fees or penalty due state. Any fee or penalty due under this act may be recovered in a suit brought by the Secretary of State or the Attorney General in the name of the state.
SECTION 55. Forms to be furnished by Secretary of State. The Secretary of State may provide forms for any document to be filed in his office under this act. All filings, electronic or in paper shall be made utilizing forms issued by the Secretary of State when possible. The Secretary of State shall have the exclusive right to designate the method or means by which these forms may be filed and to promulgate rules therefore.
SECTION 56. Voting requirements of articles. Whenever the articles require the vote of a greater proportion of the members or stockholders than required by this act, the articles control except for dissolution under Section 45 of this act.
SECTION 57. Defense of ultra vires. No act and no transfer of property to or by a cooperative is invalid, because made in excess of the cooperative's power, except that such lack of power may be asserted in a proceeding by:
(a) A member, stockholder or director against the cooperative to enjoin any act or any transfer of property to or by the cooperative.
(b) The cooperative or its legal representative against any present or former officer or director.
(c) The Attorney General against the cooperative in an action to dissolve the cooperative or to enjoin it from the transaction of unauthorized business.
SECTION 58. Member or stockholder derivative actions. (1) No action may be instituted or maintained in the right of any association by a member or stockholder unless he:
(a) Alleges in his complaint that he was a member or registered stockholder when any part of the transaction of which he complains took place, or that his stock thereafter devolved upon him by operation of law from a stockholder at such time.
(b) Alleges in his complaint with particularity his efforts to secure from the board such action as he desires. He shall allege further that he has either informed the association or board in writing of the ultimate facts of each cause of action against each director or that he has delivered to the association or board a copy of the complaint which he proposes to file. He shall state the reasons for his failure to obtain such action or the reasons for not making such effort.
(c) Files the complaint in such action within twenty (20) days after the action is commenced.
(2) The action shall not be dismissed or compromised without the approval of the court.
(3) If anything is recovered or obtained as the result of the action, whether by means of a compromise and settlement or, by a judgment, the court may, out of the proceeds of the action, award the plaintiff the reasonable expenses of maintaining the action, including reasonable attorney's fees, and may direct the plaintiff to account to the association for the remainder of such proceeds.
(4) In any action brought in the right of an association by less than three percent (3%) of the members or by holders of less than three percent (3%) of any class of stock outstanding, the defendants may require the plaintiff to give security for the reasonable expenses of defending such action, including attorney's fees. The amount of such security may thereafter be increased or decreased in the discretion of the court upon showing that the security provided is or may be inadequate or is excessive.
SECTION 59. Use of term "cooperative"; penalty for improper use. (1) The term "cooperative," or any variation thereof, may be used either by an association or by a credit union organized under this act or other acts or legislation as passed, or may be passed, in this state.
(2) No other person may use the term "cooperative" or any variation thereof, as part of his corporate of other business name or title, nor may any other person in any other manner represent himself to be a cooperative. Whoever violates this subsection may be fined not more than One Hundred Dollars ($100.00). Each day of improper use constitutes a separate offense.
(3) Any cooperative may obtain an injunction against acts prohibited by subsection (2) of this section without showing any damage to itself.
(4) Every cooperative shall use the term "cooperative" or an abbreviation thereof as part of its corporate name or affixed thereto.
SECTION 60. This act shall take effect and be in force from and after July 1, 2011.
