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PAG LIN 1 1 Section 1. PURPOSE. The purpose of chapter 501 is to 1 2 provide an opportunity for producers of agricultural 1 3 commodities to contribute a portion of their production for a 1 4 single enterprise for purposes of enhancing the value of that 1 5 production and to restrict control of these enterprises to 1 6 agricultural producers. 1 7 Sec. 2. Section 203.1, subsection 8, Code Supplement 1995, 1 8 is amended to read as follows: 1 9 8. "Grain dealer" means a person who buys during any 1 10 calendar month five hundred bushels of grain or more from the 1 11 producers of the grain for purposes of resale, milling, or 1 12 processing. However, "grain dealer" does not includeaany of 1 13 the following: 1 14 a. A producer of grain who is buying grain for the 1 15 producer's own use as seed or feed; a. 1 16 b. A person solely engaged in buying grain future 1 17 contracts on the board of trade; a. 1 18 c. A person who purchases grain only for sale in a 1 19 registered feed; a. 1 20 d. A person who purchases grain for sale in a 1 21 nonregistered customer-formula feed regulated by chapter 198, 1 22 who purchases less than a total of fifty thousand bushels of 1 23 grain annually from producers, and who is also exempt as an 1 24 incidental warehouse operator under chapter 203C; a. 1 25 e. A person engaged in the business of selling 1 26 agricultural seeds regulated by chapter 199; a. 1 27 f. A person buying grain only as a farm manager; an. 1 28 g. An executor, administrator, trustee, guardian, or 1 29 conservator of an estate; a. 1 30 h. A bargaining agent as defined in section 203A.1; or a 1 31 custom livestock feeder. 1 32 i. A cooperative corporation organized under chapter 501, 1 33 if the cooperative buys grain from producers who are members 1 34 or a licensed grain dealer, and the cooperative does not 1 35 resell that grain. 2 1 SUBCHAPTER I 2 2 GENERAL PROVISIONS 2 3 Sec. 3. NEW SECTION. 501.101 DEFINITIONS. 2 4 As used in this chapter, unless the context requires 2 5 otherwise: 2 6 1. "Articles" means the cooperative's articles of 2 7 incorporation. 2 8 2. "Authorized person" means a person who is one of the 2 9 following: 2 10 a. A farming entity. 2 11 b. An individual or general partnership that owns land and 2 12 receives as rent a share of the crops or the animals raised on 2 13 the land if those crops or animals are a significant component 2 14 of the cooperative's business operations. 2 15 c. An employee of the cooperative who performs at least 2 16 one thousand hours of service for the cooperative in each 2 17 calendar year. 2 18 3. "Board" means the cooperative's board of directors. 2 19 4. "Cooperative" means a cooperative corporation organized 2 20 under this chapter or converted to this chapter pursuant to 2 21 section 501.601. 2 22 5. "Farming" means the same as section 9H.1. 2 23 6. "Farming entity" means any one of the following: 2 24 a. A natural person or a fiduciary for a natural person 2 25 who regularly participates in physical labor or operations 2 26 management in a farming operation and files schedule F as part 2 27 of the person's annual form 1040 or form 1041 filing with the 2 28 United States internal revenue service. 2 29 b. A family farm corporation, family farm limited 2 30 liability company, family farm limited partnership, or family 2 31 trust, as defined in section 9H.1. 2 32 7. "Member" means a person who owns voting stock in a 2 33 cooperative. 2 34 8. "Shareholder" means a person who owns stock in a 2 35 cooperative, whether or not that stock has voting rights. 3 1 9. "Voting stock" means stock in a cooperative that has 3 2 voting rights. 3 3 Sec. 4. NEW SECTION. 501.102 PURPOSES AND POWERS. 3 4 1. A cooperative organized under this chapter has the 3 5 purpose of engaging in any lawful business unless a more 3 6 limited purpose is set forth in the articles. 3 7 2. Unless its articles provide otherwise, a cooperative 3 8 has perpetual duration and succession in its corporate name 3 9 and has the same powers as an individual to do all things 3 10 necessary or convenient to carry out its business and affairs, 3 11 including, without limitation, all of the powers enumerated in 3 12 sections 490.302 and 490.303. 3 13 Sec. 5. NEW SECTION. 501.103 LIMITED FARMING ACTIVITIES. 3 14 1. Notwithstanding section 9H.4, a cooperative may, 3 15 directly or indirectly, acquire or otherwise obtain or lease 3 16 agricultural land in this state, for as long as the 3 17 cooperative continues to meet the following requirements: 3 18 a. Farming entities own sixty percent of the stock and are 3 19 eligible to cast sixty percent of the votes at member 3 20 meetings. 3 21 b. Authorized persons own at least seventy-five percent of 3 22 the stock and are eligible to cast at least seventy-five 3 23 percent of the votes at member meetings. 3 24 c. The cooperative does not, either directly or 3 25 indirectly, acquire or otherwise obtain or lease agricultural 3 26 land, if the total agricultural land either directly or 3 27 indirectly owned or leased by the cooperative would then 3 28 exceed six hundred forty acres. 3 29 2. A cooperative that claims that it is exempt from the 3 30 restrictions of section 9H.4 pursuant to subsection 1 shall 3 31 file an annual report with the secretary of state on or before 3 32 March 31 of each year on forms supplied by the secretary of 3 33 state. The report shall be signed by the president or the 3 34 vice president of the cooperative and shall contain the 3 35 following: 4 1 a. The cooperative's name and address. 4 2 b. A certification that the cooperative meets both of the 4 3 requirements of subsection 1. 4 4 c. The number of acres of agricultural land owned, leased 4 5 or held by the cooperative, including the following: 4 6 (1) The total number of acres in the state. 4 7 (2) The number of acres in each county identified by 4 8 county name. 4 9 (3) The number of acres owned. 4 10 (4) The number of acres leased. 4 11 (5) The number of acres held other than by ownership or 4 12 lease. 4 13 (6) The number of acres used for the production of row 4 14 crops. 4 15 3. The president or the vice president of the cooperative 4 16 who falsifies a report shall be guilty of perjury as provided 4 17 in section 720.2. 4 18 4. In the event of a transfer of stock by operation of law 4 19 as a result of death, divorce, bankruptcy, or pursuant to a 4 20 security interest, the cooperative may disregard the transfer 4 21 for purposes of determining compliance with subsection 1 for a 4 22 period of two years after the transfer. 4 23 Sec. 6. NEW SECTION. 501.104 NAME. 4 24 The name of a cooperative organized under this chapter must 4 25 contain the word "cooperative", "coop", or "co-op", and the 4 26 name must be distinguishable from the names of cooperatives 4 27 organized under this chapter or another chapter, or foreign 4 28 cooperatives authorized to do business in this state. 4 29 Sec. 7. NEW SECTION. 501.105 EXECUTION AND FILING OF 4 30 DOCUMENTS. 4 31 1. The secretary of state may prescribe and furnish on 4 32 request forms for the proper administration of this chapter. 4 33 If the secretary of state has prescribed a mandatory form for 4 34 a document, then that form must be on the prescribed form. 4 35 2. Articles must be signed by all of the incorporates; and 5 1 all other documents filed with the secretary of state must be 5 2 signed by one of the cooperative's officers. The printed name 5 3 and capacity of each signatory must appear in proximity to the 5 4 signatory's signature. The secretary of state may accept a 5 5 document containing a copy of the signature. A document is 5 6 not required to contain a corporate seal, an acknowledgment, 5 7 or a verification. 5 8 3. The secretary of state shall collect the following 5 9 fees: 5 10 a. Twenty dollars upon the filing of original or amended 5 11 articles or articles of merger. 5 12 b. Five dollars upon the filing of all other required 5 13 documents. 5 14 c. Five dollars per document and fifty cents per page for 5 15 copying and certifying a document. 5 16 4. A document is effective at the later of the following 5 17 times: 5 18 a. The time of filing on the date it is filed, as 5 19 evidenced by the secretary of state's date and time 5 20 endorsement on the original document. 5 21 b. The delayed effective time and date specified in the 5 22 document. If a delayed effective date but no time is 5 23 specified in the document, the document is effective at the 5 24 close of business on that date. A delayed effective date for 5 25 a document shall not be later than the ninetieth day after the 5 26 date it is filed. 5 27 5. A document filed under this section may be corrected if 5 28 the document contains an incorrect statement or the execution 5 29 of the document was defective. A document is corrected by 5 30 filing with the secretary of state articles of correction 5 31 which describe the document to be corrected, including its 5 32 filing date or a copy of the document. The articles must 5 33 specify and correct the incorrect statement or defective 5 34 execution. Articles of correction are effective on the 5 35 effective date of the document it corrects except as to 6 1 persons relying on the original document and adversely 6 2 affected by the correction. As to those persons, articles of 6 3 correction are effective when filed. 6 4 6. The secretary of state shall forward for recording a 6 5 copy of each original, amended, and restated articles, 6 6 articles of merger, articles of consolidation, and articles of 6 7 dissolution to the recorder of the county in which the 6 8 cooperative has its principal place of business, or in the 6 9 case of a merger or consolidation, to the recorders of each of 6 10 the counties in which the merging or consolidating 6 11 cooperatives have their principal offices. 6 12 Sec. 8. NEW SECTION. 501.106 REGISTERED OFFICE. 6 13 1. A cooperative must continuously maintain in this state 6 14 a registered office that may be the same as any of its places 6 15 of business, and a registered agent, who may be any of the 6 16 following: 6 17 a. An individual who resides in this state and whose 6 18 business office is identical with the registered office. 6 19 b. A domestic corporation or not-for-profit domestic 6 20 corporation whose business office is identical with the 6 21 registered office. 6 22 c. A foreign corporation or not-for-profit foreign 6 23 corporation authorized to transact business in this state 6 24 whose business office is identical with the registered office. 6 25 2. A corporation may change its registered office or 6 26 registered agent by delivering to the secretary of state for 6 27 filing a statement of change that sets forth all of the 6 28 following: 6 29 a. The name of the cooperative. 6 30 b. The street address of its current registered office. 6 31 c. If the street address of the current registered office 6 32 is to be changed, the street address of the new registered 6 33 office. 6 34 d. The name of its current registered agent. 6 35 e. If the current registered agent is to be changed, the 7 1 name of the new registered agent and the new agent's written 7 2 consent, either on the statement or attached to it, to the 7 3 appointment. 7 4 f. That after the change or changes are made, the street 7 5 addresses of its registered office and the business office of 7 6 its registered agent will be identical. 7 7 3. a. If a registered agent changes the street address of 7 8 the registered agent's business office, the registered agent 7 9 may change the street address of the registered office of any 7 10 cooperative for which the person is the registered agent by 7 11 notifying the cooperative in writing of the change and 7 12 signing, either manually or in facsimile, and delivering to 7 13 the secretary of state for filing, a statement that provides 7 14 for a registered office and a registered agent as provided in 7 15 this section, and which recites that the cooperative has been 7 16 notified of the change. 7 17 b. If a registered agent changes the registered agent's 7 18 business address to another place, the registered agent may 7 19 change the business address and the address of the registered 7 20 agent by filing a statement as required in paragraph "a" for 7 21 each cooperative, or a single statement for all cooperatives 7 22 named in the notice, except that it need be signed only by the 7 23 registered agent or agents or be responsive to subsection 2, 7 24 paragraph "e". The statement must recite that a copy of the 7 25 statement has been mailed to each cooperative named in the 7 26 notice. 7 27 4. A cooperative may also change its registered office or 7 28 registered agent in its annual report. 7 29 Sec. 9. NEW SECTION. 501.107 RECORDS AND REPORTS. 7 30 The provisions of sections 490.1601 through 490.1622 shall 7 31 apply to cooperatives organized under this chapter in the same 7 32 manner as the provisions apply to corporations organized under 7 33 chapter 490. 7 34 Sec. 10. NEW SECTION. 501.108 QUO WARRANTO. 7 35 The attorney general alone shall have the right to inquire 8 1 into whether a cooperative has the right to exist or continue 8 2 under this chapter. If the secretary of state is informed 8 3 that a cooperative is not functioning as a cooperative, the 8 4 secretary of state shall notify the attorney general. If the 8 5 attorney general finds reasonable cause that the cooperative 8 6 is not functioning as provided under this chapter, the 8 7 attorney general shall bring action to wind up the affairs of 8 8 the cooperative. 8 9 SUBCHAPTER II 8 10 ARTICLES AND BYLAWS 8 11 Sec. 11. NEW SECTION. 501.201 INCORPORATION. 8 12 Three or more individuals may organize a cooperative under 8 13 this chapter by executing and delivering articles to the 8 14 secretary of state. 8 15 Sec. 12. NEW SECTION. 501.202 ARTICLES OF INCORPORATION. 8 16 1. The initial articles must set forth all of the 8 17 following: 8 18 a. The name, address, and occupation of each incorporator. 8 19 b. The names and addresses of the initial directors. 8 20 c. The street address of the cooperative's initial 8 21 registered office and the name of its initial registered agent 8 22 at that office. 8 23 2. The articles must set forth all of the following: 8 24 a. The name that satisfies the requirements of section 8 25 501.104. 8 26 b. A statement that it is organized under this chapter. 8 27 c. Its duration, which may be perpetual. 8 28 d. The classes of stock and the authorized number of 8 29 shares of each class. 8 30 e. The quorum required for each member meeting. 8 31 f. The member voting rules. 8 32 3. The articles may set forth any other provision 8 33 consistent with law. 8 34 Sec. 13. NEW SECTION. 501.203 AMENDED AND RESTATED 8 35 ARTICLES OF INCORPORATION. 9 1 1. A cooperative may amend its articles at any time to add 9 2 or change a provision that is required or permitted in the 9 3 articles or to delete a provision not required in the 9 4 articles. 9 5 2. A cooperative may restate its articles at any time. A 9 6 restatement of the articles must contain the information 9 7 required by section 501.202, subsection 2, and may set forth 9 8 any other provision consistent with law. 9 9 3. If the board recommends the amendment or restatement to 9 10 the members, the amendment or restatement must be adopted by 9 11 the members by a vote of two-thirds of the votes cast. 9 12 4. If the board does not recommend the amendment or 9 13 restatement to the members, then the amendment or restatement 9 14 must be adopted by the members by a vote of two-thirds of the 9 15 votes cast on a ballot in which a majority of all votes are 9 16 cast. 9 17 Sec. 14. NEW SECTION. 501.204 BYLAWS. 9 18 The board may adopt or amend the cooperative's bylaws by a 9 19 vote of three-fourths of the board. The members may adopt or 9 20 amend the cooperative's bylaws by a vote of three-fourths of 9 21 the votes cast on a ballot in which a majority of all votes 9 22 are cast. A bylaw provision adopted by the members shall not 9 23 be amended or repealed by the directors. 9 24 SUBCHAPTER III 9 25 MEMBERS 9 26 Sec. 15. NEW SECTION. 501.301 LIABILITY OF MEMBERS. 9 27 A member is not personally liable for the acts or debts of 9 28 the cooperative. 9 29 Sec. 16. NEW SECTION. 501.302 CALLING AND NOTICE OF 9 30 MEETINGS. 9 31 1. A cooperative shall hold an annual member meeting at a 9 32 time and place fixed in accordance with the bylaws. 9 33 2. The board may call special member meetings, and the 9 34 board shall call a special member meeting upon the written 9 35 demand of twenty percent of the members. 10 1 3. A cooperative shall give each member at least ten days 10 2 advanced notice of the time, place, and the issues to be 10 3 considered at each member meeting. This notice may be given 10 4 in person or by mail to the last known address of the member, 10 5 or the notice requirement may be met by the member waiving the 10 6 notice. 10 7 4. The record date for determining the members entitled to 10 8 notice of and to vote at a member meeting is the close of 10 9 business on the day before the first notices for the meeting 10 10 are delivered or mailed. 10 11 Sec. 17. NEW SECTION. 501.303 CONDUCT OF MEETINGS. 10 12 1. Only those issues included in the notice of a member 10 13 meeting may be considered at that meeting. 10 14 2. A member may vote at a member meeting in person or by 10 15 signed absentee ballot that specifies the issue and the 10 16 member's vote on that issue. If the board makes available an 10 17 absentee ballot form, then that form must be used to cast an 10 18 absentee ballot on that issue. 10 19 Sec. 18. NEW SECTION. 501.304 MEMBER INFORMATION. 10 20 1. Within ten days from receiving a demand of a member, 10 21 the cooperative shall produce and furnish the member with the 10 22 names and addresses of all members of the cooperative. 10 23 2. The board shall adopt a policy which permits the 10 24 distribution of information to all of the members upon the 10 25 request of a member when the purpose of the request concerns 10 26 directly the action of the board. Upon receipt of the 10 27 information and the request of a member, the board shall 10 28 distribute the information to all of the members. The 10 29 cooperative may charge the requesting member the costs 10 30 incurred by the cooperative in distributing the information. 10 31 Sec. 19. NEW SECTION. 501.305 MULTIPLE MEMBERSHIP 10 32 PROHIBITED. 10 33 A person who is a member owning fifteen percent or more of 10 34 a cooperative shall not be eligible to be a member of any 10 35 other cooperative organized under this chapter. A person 11 1 violating this section is subject to a civil penalty of not 11 2 more than one hundred dollars. The person's membership in a 11 3 cooperative shall terminate if the person's acquisition of an 11 4 interest in that cooperative caused the person to be in 11 5 violation of this section. 11 6 Sec. 20. NEW SECTION. 501.306 NUMBER OF VOTES. 11 7 A person who is a member or shareholder shall not own more 11 8 than one membership or share of voting stock. The person 11 9 shall be entitled to cast not more than one vote regarding any 11 10 matter in which a vote is conducted, including any matter 11 11 subject to a vote during a cooperative meeting. 11 12 Sec. 21. NEW SECTION. 501.307 FINANCIAL INFORMATION. 11 13 The cooperative shall make available financial information 11 14 to its membership by doing either of the following: 11 15 1. Preparing and providing to its members a financial 11 16 statement for the cooperative's last fiscal year. 11 17 a. The financial statement must be based upon an 11 18 unqualified opinion based upon an audit performed by a 11 19 certified public accountant licensed in this state. However, 11 20 a qualification in an opinion is valid, if it is unavoidable 11 21 by any audit procedure that is permitted under generally 11 22 accepted accounting principles. An opinion that is qualified 11 23 because of a limited audit procedure or because the scope of 11 24 an audit is limited is invalid for purposes of this section. 11 25 b. The financial statement must disclose the assets, 11 26 liabilities, and net worth of the cooperative. The financial 11 27 statement must be prepared according to generally accepted 11 28 accounting principles. Assets must be shown at original cost 11 29 less depreciation, or based upon a valuation in accordance 11 30 with a competent appraisal. Unpriced contracts for 11 31 agricultural commodities or products must be shown as a 11 32 liability and valued at the applicable current market price of 11 33 the agricultural commodities or products as of the date the 11 34 financial statement is prepared. 11 35 2. Honoring a demand to provide access at all reasonable 12 1 hours at its offices the books, records, accounts, papers, 12 2 documents, and computer programs or other recordings relating 12 3 to the property, assets, business, and financial affairs of 12 4 the cooperative. The demand shall be in writing and signed by 12 5 at least fifty percent of all the members of the cooperative. 12 6 The cooperative shall honor the demand within one day from its 12 7 receipt. Upon receipt of the demand, the cooperative must 12 8 provide access to one or more persons selected by the fifty 12 9 percent of the members to conduct the examination. 12 10 SUBCHAPTER IV 12 11 DIRECTORS AND OFFICERS 12 12 Sec. 22. NEW SECTION. 501.401 NUMBER AND ELECTION. 12 13 1. The affairs of a cooperative shall be managed by a 12 14 board of not less than three directors. 12 15 2. The members shall elect the directors as prescribed in 12 16 the articles or bylaws. 12 17 3. Each director shall serve the term prescribed in the 12 18 articles or bylaws. The terms may be staggered. 12 19 Sec. 23. NEW SECTION. 501.402 VACANCIES. 12 20 1. A director may resign at any time by delivering written 12 21 notice to the board chairperson or the board secretary. A 12 22 resignation is effective when the notice is delivered unless 12 23 the notice specifies a later effective date. 12 24 2. The members may remove one or more directors with or 12 25 without cause unless the articles provide that directors may 12 26 be removed only for cause. 12 27 3. The articles may authorize the board to remove a 12 28 director for a cause specified in the articles. 12 29 4. Unless the articles or bylaws provide otherwise, the 12 30 board shall fill each vacancy until the members elect a 12 31 director to fill the vacancy at the next scheduled meeting of 12 32 the members. If the directors remaining in office constitute 12 33 fewer than a quorum of the board, they may fill the vacancy by 12 34 the affirmative vote of a majority of all the directors 12 35 remaining in office. 13 1 Sec. 24. NEW SECTION. 501.403 BOARD ACTION. 13 2 1. The board may hold regular or special meetings in or 13 3 out of this state. A quorum of the board consists of a 13 4 majority of the directors. 13 5 2. Unless the articles or bylaws provide otherwise: 13 6 a. Regular board meetings may be held without notice of 13 7 the date, time, place, or purpose of the meeting. 13 8 b. Special board meetings must be preceded by at least two 13 9 days' notice of the date, time, and place of the meeting; but 13 10 the notice need not describe the purpose of the special 13 11 meeting. 13 12 c. The board may create one or more committees composed of 13 13 directors, and specify the duties and authority of each 13 14 committee. 13 15 d. The board may permit any number of directors to 13 16 participate in a regular or special meeting by, or conduct the 13 17 meeting through, the use of any means of communication by 13 18 which all directors participating may simultaneously hear each 13 19 other during the meeting. 13 20 e. Action required or permitted by this chapter to be 13 21 taken at a board meeting may be taken without a meeting if the 13 22 action is taken by all members of the board. The action must 13 23 be evidenced by one or more written consents describing the 13 24 action taken, signed by each director, and included in the 13 25 minutes or filed with the corporate records reflecting the 13 26 action taken. Action taken under this section is effective 13 27 when the last director signs the consent, unless the consent 13 28 specifies a different effective date. A consent signed under 13 29 this section has the effect of a meeting vote and may be 13 30 described as such in any document. 13 31 3. A director may waive any notice required by this 13 32 chapter, the articles, or the bylaws before or after the date 13 33 and time stated in the notice. The waiver must be in writing, 13 34 signed by the director entitled to the notice, and filed with 13 35 the minutes or corporate records. A director's attendance at 14 1 or participation in a meeting waives any required notice to 14 2 that director of the meeting unless the director at the 14 3 beginning of the meeting or promptly upon the director's 14 4 arrival objects to holding the meeting or transacting business 14 5 at the meeting and does not thereafter vote for or assent to 14 6 action taken at the meeting. 14 7 Sec. 25. NEW SECTION. 501.404 DIRECTOR CONFLICT OF 14 8 INTEREST. 14 9 1. A conflict of interest transaction is a transaction 14 10 with the cooperative in which a director has a direct or 14 11 indirect interest. A director shall be deemed to have a 14 12 conflict of interest in a matter concerning a transaction 14 13 between the cooperative and another entity, if the director 14 14 owns a twenty-five percent or greater ownership interest in 14 15 the other entity. A conflict of interest transaction is not 14 16 voidable by the cooperative solely because of the director's 14 17 interest in the transaction if any one of the following is 14 18 true: 14 19 a. The material facts of the transaction and the 14 20 director's interest were disclosed or known to the board or a 14 21 board committee and the board or committee authorized, 14 22 approved, or ratified the transaction. For purposes of this 14 23 paragraph, a conflict of interest transaction is authorized, 14 24 approved, or ratified if it receives the affirmative vote of a 14 25 majority of the directors on the board or on the committee who 14 26 have no direct or indirect interest in the transaction, but a 14 27 transaction may not be authorized, approved, or ratified under 14 28 this section by a single director. If a majority of the 14 29 directors who have no direct or indirect interest in the 14 30 transaction vote to authorize, approve, or ratify the 14 31 transaction, a quorum is present for the purpose of taking 14 32 action under this subsection. The presence of, or a vote cast 14 33 by, a director with a direct or indirect interest in the 14 34 transaction does not affect the validity of any action taken 14 35 under this subsection, if the transaction is otherwise 15 1 authorized, approved, or ratified as provided in this 15 2 subsection. 15 3 b. The material facts of the transaction and the 15 4 director's interest were disclosed or known to the 15 5 shareholders entitled to vote and they authorized, approved, 15 6 or ratified the transaction. For purposes of this subsection, 15 7 a conflict of interest transaction is authorized, approved, or 15 8 ratified if it receives a majority of the votes entitled to be 15 9 counted under this subsection. Shares owned by or voted under 15 10 the control of a director who has a direct or indirect 15 11 interest in the transaction, and shares owned by or voted 15 12 under the control of an entity described in paragraph "a", 15 13 shall not be counted in a vote of members to determine whether 15 14 to authorize, approve, or ratify a conflict of interest 15 15 transaction under this subsection. The vote of those shares, 15 16 however, is counted in determining whether the transaction is 15 17 approved under other sections of this chapter. A majority of 15 18 the votes, whether or not the shareholders are present, that 15 19 are entitled to be counted in a vote on the transaction under 15 20 this subsection constitutes a quorum for the purpose of taking 15 21 action under this subsection. 15 22 c. The transaction was fair to the cooperative. 15 23 2. For purposes of this section, a director of the 15 24 cooperative has an indirect interest in a transaction if 15 25 either: 15 26 a. Another entity in which the director has a material 15 27 financial interest is a party to the transaction. 15 28 b. Another entity of which the director is a director, 15 29 officer, or trustee is a party to the transaction and the 15 30 transaction is or should be considered by the board. 15 31 Sec. 26. NEW SECTION. 501.405 OFFICERS. 15 32 A cooperative shall have officers described in its bylaws 15 33 or appointed by the board in accordance with the bylaws. The 15 34 bylaws or the board shall delegate to one of the officers 15 35 responsibility for preparing minutes of the directors' and 16 1 members' meetings and for authenticating records of the 16 2 cooperative. Each officer has the authority and shall perform 16 3 the duties set forth in the bylaws or, to the extent 16 4 consistent with the bylaws, the duties prescribed by the 16 5 board. The same individual may simultaneously hold more than 16 6 one office. 16 7 Sec. 27. NEW SECTION. 501.406 STANDARDS OF CONDUCT. 16 8 1. A director or officer shall discharge the director's or 16 9 officer's duties in conformity with all of the following: 16 10 a. In good faith. 16 11 b. With the care an ordinarily prudent person in a like 16 12 position would exercise under similar circumstances. 16 13 c. In a manner the director or officer reasonably believes 16 14 to be in the best interests of the cooperative. 16 15 2. In discharging duties by a director or officer, the 16 16 director or officer is entitled to rely on information, 16 17 opinions, reports, or statements, including financial 16 18 statements and other financial data, if prepared or presented 16 19 by any of the following: 16 20 a. One or more officers or employees of the cooperative 16 21 whom the director or officer reasonably believes to be 16 22 reliable and competent in the matters presented. 16 23 b. A person, including but not limited to a legal counsel 16 24 or public accountant, regarding a matter that the director or 16 25 officer reasonably believes is within the person's 16 26 professional or expert competence. 16 27 c. A committee of the board of which the director or 16 28 officer is not a member if the director or officer reasonably 16 29 believes the committee merits confidence. 16 30 3. A director or officer is not acting in good faith if 16 31 the director or officer has knowledge concerning a matter in 16 32 question that makes reliance otherwise permitted by subsection 16 33 2 unwarranted. 16 34 4. A director or officer is not liable for any action 16 35 taken as a director or officer, or the failure to take action, 17 1 if the director or officer performs the duties of the office 17 2 in compliance with this section, or if, and to the extent 17 3 that, liability for the action or failure to act has been 17 4 limited by the articles pursuant to section 501.407. 17 5 Sec. 28. NEW SECTION. 501.407 PERSONAL LIABILITY. 17 6 The articles may contain a provision eliminating or 17 7 limiting the personal liability of a director, officer, or a 17 8 shareholder of the cooperative for monetary damages for breach 17 9 of a fiduciary duty as a director, officer, or shareholder, 17 10 provided that the provision does not eliminate or limit 17 11 liability for any of the following: 17 12 1. A breach of the duty of loyalty to the cooperative or 17 13 its shareholders. 17 14 2. An act or omission not in good faith or which involves 17 15 intentional misconduct or a knowing violation of law. 17 16 3. A transaction from which the director, officer, or 17 17 shareholder derives an improper personal benefit. 17 18 4. An act or omission occurring prior to the date when the 17 19 provision in the articles becomes effective. 17 20 Sec. 29. NEW SECTION. 501.408 INDEMNIFICATION. 17 21 A cooperative may indemnify a present or former director, 17 22 officer, employee, or agent in the manner and in the instances 17 23 authorized in sections 490.850 through 490.858, provided that 17 24 where these sections provide for action by the shareholders 17 25 these sections are applicable to actions by the members, and 17 26 where these sections refer to the cooperative these sections 17 27 are applicable to a cooperative. 17 28 SUBCHAPTER V 17 29 CAPITAL STRUCTURE 17 30 Sec. 30. NEW SECTION. 501.501 ISSUANCE AND TRANSFER OF 17 31 STOCK. 17 32 1. A cooperative may issue the number of shares of each 17 33 class authorized by its articles. A cooperative may issue 17 34 fractional shares. Stock may be represented by certificates 17 35 or by entry on the cooperative's stock record books. 18 1 2. A member may sell or otherwise transfer stock, other 18 2 than voting stock, to any other member or to any person who 18 3 has been approved by the board for membership, subject to the 18 4 limitations in the articles or bylaws on the amount of each 18 5 class of stock that may be owned by one member. 18 6 3. A cooperative may acquire its own stock, and shares so 18 7 acquired constitute authorized but unissued shares. 18 8 Sec. 31. NEW SECTION. 501.502 TERMINATION OF MEMBERSHIP. 18 9 1. A membership shall terminate upon the death of the 18 10 member. 18 11 2. The articles or bylaws may authorize the board to 18 12 terminate a membership for any of the following reasons: 18 13 a. The member has attempted to transfer stock to a person 18 14 who is not a member and has not been approved for membership. 18 15 b. The member has failed to meet the member's commitment 18 16 to provide products to the cooperative or to buy the 18 17 cooperative's products. 18 18 c. The member is no longer an authorized person. 18 19 d. The member is no longer a farming entity. 18 20 3. A member's right to vote at member meetings shall cease 18 21 upon termination of the membership. 18 22 4. The cooperative shall redeem, without interest, the 18 23 voting stock of a terminated member within one year after the 18 24 termination of the membership for the fair market value of the 18 25 stock. If the amount originally paid by the member for the 18 26 voting stock was less than ten percent of the total amount the 18 27 member paid for all classes of stock, the cooperative may 18 28 redeem the voting stock for its issue price if the 18 29 cooperative's articles of incorporation grant the cooperative 18 30 this authority. 18 31 5. The cooperative shall redeem, without interest, all of 18 32 the terminated member's allocated patronage refunds and 18 33 preferred stock originally issued as allocated patronage 18 34 refunds for the issue price. A cooperative shall make this 18 35 payment within one year after the termination of the 19 1 membership. However, if a terminated member's current equity 19 2 equals or exceeds two percent of the cooperative's total 19 3 members' equity, the cooperative shall redeem the terminated 19 4 member's equity in annual amounts of not less than fifteen 19 5 percent of the total amount provided that the entire amount 19 6 must be redeemed within seven years. 19 7 Sec. 32. NEW SECTION. 501.503 DISTRIBUTION OF NET 19 8 SAVINGS. 19 9 The board shall annually dispose of the cooperative's 19 10 earnings in excess of its operating expenses as follows: 19 11 1. If the articles authorize the payment of dividends on a 19 12 class of stock, then the directors may declare dividends 19 13 pursuant to the articles. Dividends may not exceed eight 19 14 percent of the value of the stock in each fiscal year. The 19 15 members may control the amount that is allocated under this 19 16 subsection. 19 17 2. To provide a reasonable reserve for depreciation, 19 18 obsolescence, bad debts, or contingent losses or expenses. 19 19 The members may control the amount that is allocated under 19 20 this subsection. 19 21 3. To increase the cooperative's retained savings to the 19 22 extent determined by the board to be necessary based on its 19 23 evaluation of the future needs and the competitive position of 19 24 the cooperative. 19 25 4. The cooperative shall have an unconditional binding 19 26 obligation to distribute to the members all remaining net 19 27 savings as determined under the United States Internal Revenue 19 28 Code. These net savings shall be allocated to each member in 19 29 proportion to the business the member did with the cooperative 19 30 during the preceding fiscal year. The net savings may be 19 31 separately calculated for two or more categories of business, 19 32 and allocated to the members on the basis of business done 19 33 within each of these categories. Net savings shall be 19 34 distributed in the form of cash or stock, or a combination of 19 35 cash and stock, as determined by the board. 20 1 SUBCHAPTER VI 20 2 CONVERSION, MERGER, SALE, AND DISSOLUTION 20 3 Sec. 33. NEW SECTION. 501.601 EXISTING CORPORATIONS. 20 4 1. As used in this section: 20 5 a. "Dissenting member" means a voting member who votes in 20 6 opposition to the plan of conversion and who makes a demand 20 7 for payment as provided in this section not later than the 20 8 deadline for members to cast ballots on the vote to approve 20 9 the plan of conversion. 20 10 b. "Issue price" means the amount paid for an interest in 20 11 the association or the value stated in a notice of allocation 20 12 of patronage refunds. 20 13 2. An association organized under chapter 497, 498, or 499 20 14 may adopt this chapter pursuant to the following procedures: 20 15 a. The board must adopt a plan of conversion that 20 16 specifies the changes in the articles to comply with this 20 17 chapter, the affect of the conversion on the association's 20 18 outstanding members' equity, and the option or options 20 19 available to the equity holders who do not want to continue 20 20 their investment in the association. 20 21 b. The members must approve the plan of conversion by the 20 22 vote of two-thirds of the votes cast on a ballot in which a 20 23 majority of all votes are cast. 20 24 3. a. The cooperative shall redeem all of the members' 20 25 equity held by dissenting members at its issue price within 20 26 one year after the conversion to this chapter is effective. 20 27 b. An equity holder who is not a voting member shall have 20 28 the same rights as a dissenting member if the equity holder 20 29 makes a demand for payment pursuant to paragraph "a" not later 20 30 than the deadline for members to cast ballots on the vote to 20 31 approve the plan of conversion. 20 32 c. The association shall notify all equity holders of 20 33 their rights pursuant to paragraph "a" at the same time the 20 34 association notifies the members of the member meeting to vote 20 35 on the plan of conversion. 21 1 Sec. 34. NEW SECTION. 501.602 MERGER AND CONSOLIDATION. 21 2 A cooperative organized under this chapter may merge or 21 3 consolidate with one or more other cooperatives organized 21 4 under this chapter. The provisions of sections 499.61 through 21 5 499.70 shall apply to such a merger or consolidation. 21 6 Sec. 35. NEW SECTION. 501.603 SALE OF ASSETS. 21 7 1. A cooperative may, on the terms and conditions and for 21 8 the consideration determined by the board, mortgage, pledge, 21 9 or otherwise encumber any or all of its property. 21 10 2. A cooperative may sell, lease, exchange, or otherwise 21 11 dispose of all, or substantially all, of its property, with or 21 12 without the good will, on the terms and conditions and for the 21 13 consideration determined by the board, which consideration may 21 14 include the preferred stock of another cooperative, if the 21 15 board recommends the proposed transaction to the members, and 21 16 the members approve it by the vote of two-thirds of the votes 21 17 cast on a ballot in which a majority of all votes are cast. 21 18 The board may condition its submission of the proposed 21 19 transaction on any basis. 21 20 Sec. 36. NEW SECTION. 501.604 DISSOLUTION. 21 21 The provisions of sections 490.1401 through 490.1440 shall 21 22 apply to cooperatives in the same manner as they apply to 21 23 corporations organized under chapter 490. 21 24 SF 2135 21 25 da/cc/26
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