Senate File 2348 - Enrolled PAG LIN 1 1 SENATE FILE 2348 1 2 1 3 AN ACT 1 4 RELATING TO THE MANAGEMENT OF COOPERATIVE ASSOCIATIONS. 1 5 1 6 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 1 7 1 8 Section 1. NEW SECTION. 499.36A STANDARDS OF CONDUCT FOR 1 9 DIRECTORS. 1 10 1. A director shall discharge the duties of the position 1 11 of director in good faith, in a manner the director reasonably 1 12 believes to be in the best interests of the association, and 1 13 with the care that a person in a like position would 1 14 reasonably believe appropriate under similar circumstances. A 1 15 person who so performs those duties is not liable by reason of 1 16 being or having been a director of the cooperative. 1 17 2. a. A director is entitled to rely on information, 1 18 opinions, reports, or statements, including financial 1 19 statements and other financial data, in each case prepared or 1 20 presented by any of the following: 1 21 (1) One or more officers or employees of the association 1 22 whom the director reasonably believes to be reliable and 1 23 competent in the matters presented. 1 24 (2) Legal counsel, public accountants, or other persons as 1 25 to matters that the director reasonably believes are within 1 26 the person's professional or expert competence. 1 27 (3) A committee of the board upon which the director does 1 28 not serve, duly established by the board as to matters within 1 29 its designated authority, if the director reasonably believes 1 30 the committee to merit confidence. 1 31 b. Paragraph "a" does not apply to a director who has 1 32 knowledge concerning the matter in question that makes the 1 33 reliance otherwise permitted by that paragraph unwarranted. 1 34 3. A director who is present at a meeting of the board 1 35 when an action is approved by the affirmative vote of a 2 1 majority of the directors present is presumed to have assented 2 2 to the action approved, unless any of the following applies: 2 3 a. The director objects at the beginning of the meeting to 2 4 the transaction of business because the meeting is not 2 5 lawfully called or convened, and does not participate in the 2 6 meeting after the objection, in which case the director is not 2 7 considered to be present at the meeting for any purpose of 2 8 this chapter. 2 9 b. The director votes against the action at the meeting. 2 10 c. The director is prohibited by a conflict of interest 2 11 from voting on the action. 2 12 4. In discharging the duties of a director, the director 2 13 may, in addition to consideration of the effects of any action 2 14 on the association and its members, consider any or all of the 2 15 following community interest factors: 2 16 a. The effects of the action on the association's 2 17 employees, suppliers, creditors, and customers. 2 18 b. The interests of and effects on communities and the 2 19 cooperative system in which the association and its members 2 20 operate. 2 21 c. The long=term as well as short=term interests of the 2 22 association and its members, including the possibility that 2 23 these interests may be best served by the continued 2 24 independence of the association. 2 25 Sec. 2. NEW SECTION. 499.37A STANDARDS OF CONDUCT FOR 2 26 OFFICERS. 2 27 1. An officer, when performing in such capacity, shall act 2 28 in conformity with all of the following: 2 29 a. In good faith. 2 30 b. With the care that a person in a like position would 2 31 reasonably exercise under similar circumstances. 2 32 c. In a manner the officer reasonably believes to be in 2 33 the best interests of the association. 2 34 2. In discharging the officer's duties, an officer who 2 35 does not have knowledge that makes such reliance unwarranted 3 1 is entitled to rely on any of the following: 3 2 a. The performance of properly delegated responsibilities 3 3 by one or more employees of the association whom the officer 3 4 reasonably believes to be reliable and competent in performing 3 5 the responsibilities delegated. 3 6 b. Information, opinions, reports, or statements, 3 7 including financial statements and other financial data, 3 8 prepared or presented by one or more employees of the 3 9 association whom the officer reasonably believes to be 3 10 reliable and competent in the matters presented. 3 11 c. Legal counsel, public accountants, or other persons 3 12 retained by the association as to matters involving skills or 3 13 expertise the officer reasonably believes are matters within 3 14 the particular person's professional or expert competence or 3 15 as to which the particular person merits confidence. 3 16 3. An officer shall not be liable as an officer to the 3 17 association or its members for any decision to take or not to 3 18 take action, or any failure to take any action, if the duties 3 19 of the officer are performed in compliance with this section. 3 20 Whether an officer who does not comply with this section is 3 21 liable depends in such instance on applicable law, including 3 22 those principles of section 499.36A that have relevance. 3 23 Sec. 3. NEW SECTION. 499.41A GREATER VOTING 3 24 REQUIREMENTS. 3 25 An amendment to the articles of incorporation of an 3 26 association that adds, changes, or deletes a greater voting or 3 27 quorum requirement by the members than required by this 3 28 chapter must be adopted by the voting or quorum requirements 3 29 then in effect or proposed to be adopted, whichever is 3 30 greater. 3 31 Sec. 4. Section 499.47B, subsections 1 and 3, Code 2007, 3 32 are amended to read as follows: 3 33 1. The board of directors shall adopt a resolution 3 34 recommending the sale, lease, exchange, or other disposition 3 35 and directing the submission thereof to a vote at a meeting of 4 1 the membership, which may either be an annual or a special 4 2 meeting. The board of directors may condition its 4 3 recommendation and submission of the sale, lease, exchange, or 4 4 other disposition to the members for approval under this 4 5 section on any basis. 4 6 3. At the meeting the membership may authorize the sale, 4 7 lease, exchange, or other disposition and may fix, or may 4 8 authorize the board of directors to fix, any or all of the 4 9 terms and conditions thereof and the consideration to be 4 10 received by the cooperative association. Such authorization 4 11shallfor the sale, lease, exchange, or other disposition 4 12 shall be approved by the members as follows: 4 13 a. Except as provided in paragraph "b", the sale, lease, 4 14 exchange, or other disposition must be approvedifby a 4 15 two=thirds vote of the membersvote affirmativelyon a ballot 4 16 in which a majority of all voting members participate. 4 17 b. (1) If the cooperative association's articles of 4 18 incorporation require approval by more than two=thirds of its 4 19 members on a ballot in which a majority of all voting members 4 20 participate, the sale, lease, exchange, or other disposition 4 21 must be approved by the greater number as provided in the 4 22 articles of incorporation. 4 23 (2) If the board of directors adopts additional conditions 4 24 for the approval of the sale, lease, exchange, or other 4 25 disposition as provided in subsection 1, the additional 4 26 conditions must be satisfied in order for the sale, lease, 4 27 exchange, or other disposition to be approved. 4 28 Sec. 5. NEW SECTION. 499.47D CONSIDERATION OF 4 29 ACQUISITION PROPOSALS == COMMUNITY INTERESTS. 4 30 1. A director, in determining what is in the best interest 4 31 of the association when considering a tender offer or proposal 4 32 of acquisition, proposal of merger, proposal of consolidation, 4 33 or similar proposal, may, in addition to consideration of the 4 34 effects of any action on the association and its members, 4 35 consider any or all of the community interest factors 5 1 described in section 499.36A. 5 2 2. If on the basis of the community interest factors 5 3 described in section 499.36A, the board of directors 5 4 determines that a tender offer or proposal to acquire, merge, 5 5 or consolidate the association or any similar proposal is not 5 6 in the best interests of the association, it may reject the 5 7 tender offer or proposal. If the board of directors rejects 5 8 any such tender offer or proposal, the board of directors has 5 9 no obligation to facilitate, to remove any barriers to, or to 5 10 refrain from impeding the tender offer or proposal. 5 11 Consideration of any or all of the community interest factors 5 12 is not a violation of the business judgment rule or of any 5 13 duty of the director to the members, or a group of members, 5 14 even if the director reasonably determines that a community 5 15 interest factor or factors outweigh the financial or other 5 16 benefits to the association or a member or group of members. 5 17 Sec. 6. Section 499.64, Code 2007, is amended to read as 5 18 follows: 5 19 499.64 VOTE OF MEMBERS. 5 20 1. The board of directors of a cooperative association, 5 21 uponapprovingrecommending a plan of merger or consolidation 5 22 be approved by the members, shall, by motion or resolution, 5 23 direct that the plan be submitted to a vote at a meeting of 5 24 members, which may be either an annual or special meeting. 5 25 The board of directors may condition its recommendation and 5 26 submission of a plan of merger or consolidation to the members 5 27 for approval under this section on any basis. Written notice 5 28 shall be given not less than twenty days prior to the meeting, 5 29 either personally or by mail to each voting member and 5 30 shareholder of record. The notice shall state the time, 5 31 place, and purpose of the meeting, and a summary of the plan 5 32 of merger or consolidation shall be included in or enclosed 5 33 with the notice. 5 34 2. At the meeting, a ballot of the members who are 5 35 entitled to vote in the affairs of the association shall be 6 1 taken on the proposed plan of merger or consolidation. The 6 2 plan of merger or consolidation shall be approvedifas 6 3 follows: 6 4 a. Except as provided in paragraph "b", the proposed plan 6 5 of merger or consolidation must be approved by a two=thirds 6 6 vote of the membersvote affirmativelyon a ballot in which a 6 7 majority of all voting members participate. 6 8 b. (1) If the cooperative association's articles of 6 9 incorporation require approval by more than two=thirds of its 6 10 members on a ballot in which a majority of all voting members 6 11 participate, the proposed plan of merger or consolidation must 6 12 be approved by the greater number as provided in the articles 6 13 of incorporation. 6 14 (2) If the board of directors adopts additional conditions 6 15 for the approval of the plan of merger or consolidation as 6 16 provided in subsection 1, the additional conditions must be 6 17 satisfied in order for the plan of merger or consolidation to 6 18 be approved. 6 19 3. Voting by members may be by mail ballot notwithstanding 6 20 any contrary provision in the articles of incorporation or 6 21 bylaws. 6 22 6 23 6 24 6 25 JOHN P. KIBBIE 6 26 President of the Senate 6 27 6 28 6 29 6 30 PATRICK J. MURPHY 6 31 Speaker of the House 6 32 6 33 I hereby certify that this bill originated in the Senate and 6 34 is known as Senate File 2348, Eighty=second General Assembly. 6 35 7 1 7 2 7 3 MICHAEL E. MARSHALL 7 4 Secretary of the Senate 7 5 Approved , 2008 7 6 7 7 7 8 7 9 CHESTER J. CULVER 7 10 Governor