House File 806 - Introduced



                                       HOUSE FILE       
                                       BY  COMMITTEE ON AGRICULTURE

                                       (SUCCESSOR TO HF 226)


    Passed House, Date               Passed Senate,  Date             
    Vote:  Ayes        Nays           Vote:  Ayes        Nays         
                 Approved                            

                                      A BILL FOR

  1 An Act relating to the establishment of a form of business
  2    association referred to as a cooperative, and providing for
  3    fees and tax credits, providing penalties, and providing an
  4    effective date.
  5 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
  6 TLSB 1021HV 81
  7 da/cf/24

PAG LIN



  1  1                           DIVISION I
  1  2         ENACTMENT OF IOWA COOPERATIVE ASSOCIATIONS ACT
  1  3                          SUBCHAPTER 1
  1  4                       GENERAL PROVISIONS
  1  5    Section 1.  NEW SECTION.  501A.101  SHORT TITLE.
  1  6    This chapter shall be known and may be cited as the "Iowa
  1  7 Cooperative Associations Act".
  1  8    Sec. 2.  NEW SECTION.  501A.102  DEFINITIONS.
  1  9    As used in this chapter, unless the context otherwise
  1 10 requires:
  1 11    1.  "Address" means mailing address, including a zip code.
  1 12 In the case of a registered address, the term means the
  1 13 mailing address and the actual office location, which shall
  1 14 not be a post office box.
  1 15    2.  "Alternative ballot" means a method of voting for a
  1 16 candidate or issue prescribed by the board in advance of the
  1 17 vote, and may include voting by electronic, telephonic,
  1 18 internet, or other means that reasonably allow members the
  1 19 opportunity to vote.
  1 20    3.  "Articles" means the articles of organization of a
  1 21 cooperative as originally filed or subsequently amended as
  1 22 provided in this chapter.
  1 23    4.  "Association" means a business entity on a cooperative
  1 24 plan and organized under the laws of this state or another
  1 25 state or that is chartered to conduct business under the laws
  1 26 of another state.
  1 27    5.  "Board" means the board of directors of a cooperative.
  1 28    6.  "Business entity" means a person organized under
  1 29 statute or common law in this state or another jurisdiction
  1 30 for purposes of engaging in a commercial activity on a profit,
  1 31 cooperative, or not=for=profit basis, including but not
  1 32 limited to a corporation or entity taxed as a corporation
  1 33 under the Internal Revenue Code, nonprofit corporation,
  1 34 cooperative or cooperative association, partnership, limited
  1 35 partnership, limited liability company, limited liability
  2  1 partnership, investment company, joint stock company, joint
  2  2 stock association, or trust, including but not limited to a
  2  3 business trust.
  2  4    7.  "Cooperative" means a business association organized
  2  5 under this chapter.
  2  6    8.  "Crop" means a plant used for food, animal feed, fiber,
  2  7 or oil, if the plant is classified as a forage or cereal
  2  8 plant, including but not limited to alfalfa, barley,
  2  9 buckwheat, corn, flax, forage, millet, oats, popcorn, rye,
  2 10 sorghum, soybeans, sunflowers, wheat, and grasses used for
  2 11 forage or silage.
  2 12    9.  "Domestic business entity" means a business entity
  2 13 organized under the laws of this state, including but not
  2 14 limited to a corporation organized pursuant to chapter 490; a
  2 15 nonprofit corporation organized under chapter 504; a limited
  2 16 liability company as defined in section 490A.102; a
  2 17 partnership, limited partnership, limited liability
  2 18 partnership, or limited liability limited partnership as
  2 19 provided in chapter 486A, 487, or 488; or a cooperative
  2 20 association or other cooperative organized under this chapter
  2 21 or chapter 497, 498, 499, or 501.
  2 22    10.  "Domestic cooperative" means a cooperative association
  2 23 or other cooperative organized under this chapter or chapter
  2 24 497, 498, 499, or 501.
  2 25    11.  "Foreign business entity" means a business entity that
  2 26 is not a domestic business entity.
  2 27    12.  "Foreign cooperative" means a foreign business entity
  2 28 organized to conduct business consistent with this chapter or
  2 29 chapter 497, 498, or 499.
  2 30    13.  "Iowa limited liability company" means a limited
  2 31 liability company governed by chapter 490A.
  2 32    14.  "Livestock" means the same as defined in section
  2 33 717.1.
  2 34    15.  "Member" means a person or entity reflected on the
  2 35 books of a cooperative as the owner of governance rights of a
  3  1 membership interest of the cooperative and includes patron and
  3  2 nonpatron members.
  3  3    16.  "Member control agreement" means an instrument which
  3  4 controls the investment or governance of nonpatron members,
  3  5 which may be executed by the board and one or more nonpatron
  3  6 members and which may provide for their individual or
  3  7 collective rights to elect directors or to participate in the
  3  8 distribution or allocation of profits or losses.
  3  9    17.  "Membership interest" means a member's interest in a
  3 10 cooperative consisting of a member's financial rights, a
  3 11 member's right to assign financial rights, a member's
  3 12 governance rights, and a member's right to assign governance
  3 13 rights.  "Membership interest" includes patron membership
  3 14 interests and nonpatron membership interests.
  3 15    18.  "Members' meeting" means a regular or special members'
  3 16 meeting.
  3 17    19.  "Nonpatron member" means a member who holds a
  3 18 nonpatron membership interest.
  3 19    20.  "Nonpatron membership interest" means a membership
  3 20 interest that does not require the holder to conduct patronage
  3 21 for or with the cooperative to receive financial rights or
  3 22 distributions.
  3 23    21.  "Patron" means a person or entity who conducts
  3 24 patronage with the cooperative, regardless of whether the
  3 25 person is a member.
  3 26    22.  "Patronage" means business, transactions, or services
  3 27 done for or with the cooperative as defined by the
  3 28 cooperative.
  3 29    23.  "Patron member" means a member holding a patron
  3 30 membership interest.
  3 31    24.  "Patron membership interest" means the membership
  3 32 interest requiring the holder to conduct patronage for or with
  3 33 the cooperative, as specified by the cooperative to receive
  3 34 financial rights or distributions.
  3 35    25.  "Secretary" means the secretary of state.
  4  1    26.  "Traditional cooperative" means a cooperative or
  4  2 cooperative association organized under chapter 497, 498, 499,
  4  3 or 501.
  4  4    Sec. 3.  NEW SECTION.  501A.103  REQUIREMENTS FOR DOCUMENTS
  4  5 == FILING AND SIGNATURES.
  4  6    A document is signed when a person has written on a
  4  7 document.  A person authorized to do so by this chapter, the
  4  8 articles or bylaws, or by a resolution approved by the
  4  9 directors or the members must sign the document.  A signature
  4 10 on a document may be a facsimile affixed, engraved, printed,
  4 11 placed, stamped with indelible ink, transmitted by facsimile
  4 12 or electronically, or in any other manner reproduced on the
  4 13 document.
  4 14                          SUBCHAPTER 2
  4 15                             FILING
  4 16                             PART A
  4 17                      GENERAL REQUIREMENTS
  4 18    Sec. 4.  NEW SECTION.  501A.201  GENERAL FILING
  4 19 REQUIREMENTS.
  4 20    1.  A document must satisfy the requirements of this
  4 21 section, and of any other section that adds to or varies these
  4 22 requirements, to be entitled to filing.
  4 23    2.  The document must be one that this chapter requires or
  4 24 permits to be filed with the secretary.
  4 25    3.  The document must contain the information required by
  4 26 this chapter.  The document may contain other information as
  4 27 well.
  4 28    4.  The document must be typewritten or printed.  The
  4 29 typewritten or printed portion shall be in black ink.
  4 30 Manually signed photocopies, or other reproduced copies,
  4 31 including facsimiles and other electronically or computer=
  4 32 generated copies of typewritten or printed documents may be
  4 33 filed.
  4 34    5.  The document must be in the English language.  A
  4 35 cooperative's name need not be in English if written in
  5  1 English letters or Arabic or Roman numerals.  The articles,
  5  2 duly authenticated by the official having custody of the
  5  3 applicable records in the state or country under whose law the
  5  4 cooperative is formed, which are required of cooperatives,
  5  5 need not be in English if accompanied by a reasonably
  5  6 authenticated English translation.
  5  7    6.  The document must be executed by one of the following
  5  8 persons:
  5  9    a.  An officer of the cooperative, or if no officer has
  5 10 been selected, by any patron member of the cooperative.
  5 11    b.  If the cooperative has not been organized, by the
  5 12 organizers of the cooperative as provided in subchapter 5.
  5 13    c.  If the cooperative is in the hands of a receiver,
  5 14 trustee, or other court=appointed fiduciary, that fiduciary.
  5 15    7.  The person executing the document shall sign the
  5 16 document and state beneath or opposite the person's signature,
  5 17 the person's name, and the capacity in which the person signs.
  5 18    8.  If, pursuant to any provision of this chapter, the
  5 19 secretary has prescribed a mandatory form for the document,
  5 20 the document shall be in or on the prescribed form.
  5 21    9.  The document must be delivered to the secretary for
  5 22 filing and must be accompanied by the correct filing fee as
  5 23 provided in this subchapter.
  5 24    Sec. 5.  NEW SECTION.  501A.202  FILING DUTY OF SECRETARY
  5 25 OF STATE.
  5 26    1.  If a document delivered to the secretary for filing
  5 27 satisfies the requirements of section 501A.201, the secretary
  5 28 shall file it and issue any necessary certificate.
  5 29    2.  The secretary files a document by recording it as filed
  5 30 on the date and at the time of receipt.  After filing a
  5 31 document, and except as provided in section 501A.204, the
  5 32 secretary shall deliver the document, and an acknowledgement
  5 33 of the date and time of filing to the domestic cooperative or
  5 34 foreign cooperative or its representative.
  5 35    3.  If the secretary refuses to file a document, the
  6  1 secretary shall return it to the domestic cooperative or
  6  2 foreign cooperative or its representative within ten days
  6  3 after the document was received by the secretary, together
  6  4 with a brief, written explanation of the reason for the
  6  5 refusal.
  6  6    4.  The secretary's duty to file documents under this
  6  7 section is ministerial.  Filing or refusing to file a document
  6  8 does not do any of the following:
  6  9    a.  Affect the validity or invalidity of the document in
  6 10 whole or in part.
  6 11    b.  Relate to the correctness or incorrectness of
  6 12 information contained in the document.
  6 13    c.  Create a presumption that the document is valid or
  6 14 invalid or that information contained in the document is
  6 15 correct or incorrect.
  6 16    Sec. 6.  NEW SECTION.  501A.203  EFFECTIVE TIME AND DATE OF
  6 17 DOCUMENTS.
  6 18    1.  Except as provided in subsection 2 and section
  6 19 501A.204, subsection 3, a document accepted for filing is
  6 20 effective at the later of the following times:
  6 21    a.  At the time of filing on the date the document is
  6 22 filed, as evidenced by the secretary's date and time
  6 23 endorsement on the original document.
  6 24    b.  At the time specified in the document as its effective
  6 25 time on the date the document is filed.
  6 26    2.  A document may specify a delayed effective time and
  6 27 date, and if the document does so, the document becomes
  6 28 effective at the time and date specified.  If a delayed
  6 29 effective date but no time is specified, the document is
  6 30 effective at the close of business on that date.  A delayed
  6 31 effective date for a document shall not be later than the
  6 32 ninetieth day after the date the document is filed.
  6 33    Sec. 7.  NEW SECTION.  501A.204  CORRECTING FILED
  6 34 DOCUMENTS.
  6 35    1.  A domestic cooperative or foreign cooperative may
  7  1 correct a document filed by the secretary if the document
  7  2 satisfies any of the following requirements:
  7  3    a.  Contains an incorrect statement.
  7  4    b.  Was defectively executed, attested, sealed, verified,
  7  5 or acknowledged.
  7  6    2.  A document is corrected by complying with all of the
  7  7 following:
  7  8    a.  By preparing articles of correction that satisfy all of
  7  9 the following requirements:
  7 10    (1)  Describe the document, including its filing date, or
  7 11 attach a copy of the document to the articles.
  7 12    (2)  Specify the incorrect statement and the reason the
  7 13 statement is incorrect or the manner in which the execution
  7 14 was defective.
  7 15    (3)  Correct the incorrect statement or defective
  7 16 execution.
  7 17    b.  By delivering the articles of correction to the
  7 18 secretary for filing.
  7 19    3.  Articles of correction are effective on the effective
  7 20 date of the document the articles correct, except as to
  7 21 persons relying on the uncorrected document and adversely
  7 22 affected by the correction.  As to those persons, articles of
  7 23 correction are effective when filed.
  7 24    Sec. 8.  NEW SECTION.  501A.205  FEES.
  7 25    1.  The secretary shall collect the following fees when
  7 26 documents described in this subsection are delivered to the
  7 27 secretary's office for filing:
  7 28    a.  Articles of organization ............................. $50
  7 29    b.  Application for use of indistinguishable name ........ $10
  7 30    c.  Application for reserved name ........................ $10
  7 31    d.  Notice of transfer of reserved name .................. $10
  7 32    e.  Application for registered name per month
  7 33 or part thereof ............................................. $ 2
  7 34    f.  Application for renewal of registered name ........... $20
  7 35    g.  Statement of change of registered agent or
  8  1 registered office or both ................................ No fee
  8  2    h.  Agent's statement of change of registered
  8  3 office for each affected cooperative ..................... No fee
  8  4    i.  Agent's statement of resignation .................. No fee
  8  5    j.  Amendment of articles of organization ............... $ 50
  8  6    k.  Restatement of articles of organization with
  8  7 amendment of articles ...................................... $ 50
  8  8    l.  Articles of merger .................................. $ 50
  8  9    m.  Articles of dissolution ............................. $  5
  8 10    n.  Articles of revocation of dissolution ............... $  5
  8 11    o.  Certificate of administrative dissolution ......... No fee
  8 12    p.  Application for reinstatement following
  8 13 administrative dissolution  ................................ $  5
  8 14    q.  Certificate of reinstatement ...................... No fee
  8 15    r.  Certificate of judicial dissolution ............... No fee
  8 16    s.  Application for certificate of authority ............ $100
  8 17    t.  Application for amended certificate of authority .... $100
  8 18    u.  Application for certificate of cancellation ......... $ 10
  8 19    v.  Certificate of revocation of authority to transact
  8 20 business ................................................. No fee
  8 21    w.  Articles of correction .............................. $  5
  8 22    x.  Application for certificate of existence or
  8 23 authorization .............................................. $  5
  8 24    y.  Any other document required or permitted to
  8 25 be filed by this chapter ................................... $  5
  8 26    2.  The secretary shall collect a fee of five dollars each
  8 27 time process is served on the secretary under this chapter.
  8 28 The party to a proceeding causing service of process is
  8 29 entitled to recover this fee as costs if the party prevails in
  8 30 the proceeding.
  8 31    3.  The secretary shall collect the following fees for
  8 32 copying and certifying the copy of any filed document relating
  8 33 to a domestic cooperative or foreign cooperative:
  8 34    a.  One dollar a page for copying.
  8 35    b.  Five dollars for the certificate.
  9  1    Sec. 9.  NEW SECTION.  501A.206  FORMS.
  9  2    1.  The secretary may prescribe and furnish on request
  9  3 forms, including but not limited to the following:
  9  4    a.  An application for a certificate of existence.
  9  5    b.  A foreign cooperative's application for a certificate
  9  6 of authority to transact business in this state.
  9  7    c.  A foreign cooperative's application for a certificate
  9  8 of withdrawal.
  9  9    If the secretary so requires, use of these listed forms
  9 10 prescribed by the secretary is mandatory.
  9 11    2.  The secretary may prescribe and furnish on request
  9 12 forms, for other documents required or permitted to be filed
  9 13 by this chapter but their use is not mandatory.
  9 14    Sec. 10.  NEW SECTION.  501A.207  APPEAL FROM SECRETARY OF
  9 15 STATE'S REFUSAL TO FILE DOCUMENT.
  9 16    1.  If the secretary refuses to file a document delivered
  9 17 to the secretary's office for filing, the domestic cooperative
  9 18 or foreign cooperative may appeal the refusal, within thirty
  9 19 days after the return of the document, to the district court
  9 20 for the county in which the cooperative's principal office or,
  9 21 if none in this state, where its registered office is or will
  9 22 be located.  The appeal is commenced by petitioning the court
  9 23 to compel filing the document and by attaching to the petition
  9 24 the document and the secretary's explanation of the refusal to
  9 25 file.
  9 26    2.  The court may summarily order the secretary to file the
  9 27 document or take other action the court considers appropriate.
  9 28    3.  The court's final decision may be appealed as in other
  9 29 civil proceedings.
  9 30    Sec. 11.  NEW SECTION.  501A.208  EVIDENTIARY EFFECT OF
  9 31 COPY OF FILED DOCUMENT.
  9 32    A certificate attached to a copy of a document filed by the
  9 33 secretary, bearing the secretary's signature, which may be in
  9 34 facsimile, and the seal of the secretary, is conclusive
  9 35 evidence that the original document is on file with the
 10  1 secretary.
 10  2    Sec. 12.  NEW SECTION.  501A.209  CERTIFICATE OF EXISTENCE.
 10  3    1.  Anyone may apply to the secretary to furnish a
 10  4 certificate of existence for a domestic cooperative or a
 10  5 certificate of authorization for a foreign cooperative.
 10  6    2.  A certificate of existence or certificate of
 10  7 authorization must set forth all of the following:
 10  8    a.  The domestic cooperative's name or the foreign
 10  9 cooperative's name used in this state.
 10 10    b.  That one of the following applies:
 10 11    (1)  If it is a domestic cooperative, that it is duly
 10 12 organized under the law of this state, the date of its
 10 13 organization, and the period of its duration.
 10 14    (2)  If it is a foreign cooperative, that it is authorized
 10 15 to transact business in this state.
 10 16    c.  That all fees required by this subchapter have been
 10 17 paid.
 10 18    d.  If it is a domestic cooperative, that articles of
 10 19 dissolution have not been filed.
 10 20    e.  Other facts of record in the office of the secretary
 10 21 that may be requested by the applicant.
 10 22    3.  Subject to any qualification stated in the certificate,
 10 23 a certificate of existence or certificate of authorization
 10 24 issued by the secretary may be relied upon as conclusive
 10 25 evidence that the domestic cooperative or foreign cooperative
 10 26 is in existence or is authorized to transact business in this
 10 27 state.
 10 28    Sec. 13.  NEW SECTION.  501A.210  PENALTY FOR SIGNING FALSE
 10 29 DOCUMENT.
 10 30    1.  A person commits an offense if that person signs a
 10 31 document the person knows is false in any material respect
 10 32 with intent that the document be delivered to the secretary
 10 33 for filing.
 10 34    2.  An offense under this section is a serious misdemeanor
 10 35 punishable by a fine of not to exceed one thousand dollars.
 11  1    Sec. 14.  NEW SECTION.  501A.211  SECRETARY OF STATE ==
 11  2 POWERS.
 11  3    The secretary has the power reasonably necessary to perform
 11  4 the duties required of the secretary by this chapter.
 11  5                             PART B
 11  6                      FOREIGN COOPERATIVES
 11  7    Sec. 15.  NEW SECTION.  501A.221  CERTIFICATE OF AUTHORITY.
 11  8    A foreign cooperative may apply for a certificate of
 11  9 authority to transact business in this state by delivering an
 11 10 application to the secretary for filing.  An application for
 11 11 registration as a foreign cooperative shall set forth all of
 11 12 the following:
 11 13    1.  The name of the foreign cooperative and, if different,
 11 14 the name under which the foreign cooperative proposes to
 11 15 register and transact business in this state.
 11 16    2.  The state or other jurisdiction in which the foreign
 11 17 cooperative was formed and the date of its formation.
 11 18    3.  The street address of the registered office of the
 11 19 foreign cooperative in this state and the name of the
 11 20 registered agent at the office.
 11 21    4.  The address of the principal office, which is the
 11 22 office where the principal executive offices are located.
 11 23    5.  A certificate of existence or a document of similar
 11 24 import duly authenticated by the proper office of the state or
 11 25 other jurisdiction of its formation which is dated no earlier
 11 26 than ninety days prior to the date that the application is
 11 27 filed with the secretary.
 11 28    Sec. 16.  NEW SECTION.  501A.222  CANCELLATION OF
 11 29 CERTIFICATE OF AUTHORITY.
 11 30    1.  A foreign cooperative may cancel its certificate of
 11 31 authority by delivering to the secretary for filing a
 11 32 certificate of cancellation which shall set forth all of the
 11 33 following:
 11 34    a.  The name of the foreign cooperative and the name of the
 11 35 state or other jurisdiction under whose jurisdiction the
 12  1 foreign cooperative was formed.
 12  2    b.  That the foreign cooperative is not transacting
 12  3 business in this state and that the foreign cooperative
 12  4 surrenders its registration to transact business in this
 12  5 state.
 12  6    c.  That the foreign cooperative revokes the authority of
 12  7 its registered agent to accept service on its behalf and
 12  8 appoints the secretary as its agent for service of process in
 12  9 any proceeding based on a cause of action arising during the
 12 10 time the foreign cooperative was authorized to transact
 12 11 business in this state.
 12 12    d.  A mailing address to which the secretary may mail a
 12 13 copy of any process served on the secretary under paragraph
 12 14 "c".
 12 15    e.  A commitment to notify the secretary in the future of
 12 16 any change in the mailing address of the foreign cooperative.
 12 17    2.  The certificate of authority shall be canceled upon the
 12 18 filing of the certificate of cancellation by the secretary.
 12 19                             PART C
 12 20                             REPORTS
 12 21    Sec. 17.  NEW SECTION.  501A.231  BIENNIAL REPORT FOR
 12 22 SECRETARY OF STATE.
 12 23    1.  A cooperative authorized to transact business in this
 12 24 state shall deliver to the secretary of state for filing a
 12 25 biennial report that sets forth all of the following:
 12 26    a.  The name of the cooperative.
 12 27    b.  The address of its registered office and the name of
 12 28 its registered agent at that office in this state, together
 12 29 with the consent of any new registered agent.
 12 30    c.  The address of its principal office.
 12 31    d.  The names and addresses of the president, secretary,
 12 32 treasurer, and one member of the board of directors.
 12 33    2.  Information in the biennial report must be current as
 12 34 of the first day of January of the year in which the report is
 12 35 due.  The report shall be executed on behalf of the
 13  1 cooperative and signed as provided in section 501A.103 or by
 13  2 any other person authorized by the board of directors of the
 13  3 cooperative.
 13  4    3.  The first biennial report shall be delivered to the
 13  5 secretary of state between January 1 and April 1 of the first
 13  6 even=numbered year following the calendar year in which a
 13  7 cooperative is organized.  Subsequent biennial reports shall
 13  8 be delivered to the secretary of state between January 1 and
 13  9 April 1 of the following even=numbered calendar years.  A
 13 10 filing fee for the biennial report shall be determined by the
 13 11 secretary of state.
 13 12    4.  If a biennial report does not contain the information
 13 13 required by this section, the secretary of state shall
 13 14 promptly notify the reporting cooperative in writing and
 13 15 return the report to the cooperative for correction.
 13 16    5.  The secretary of state may provide for the change of
 13 17 registered office or registered agent on the form prescribed
 13 18 by the secretary of state for the biennial report, provided
 13 19 that the form contains the information required by section
 13 20 501A.402.  If the secretary of state determines that a
 13 21 biennial report does not contain the information required by
 13 22 this section but otherwise meets the requirements of section
 13 23 501.402 for the purpose of changing the registered office or
 13 24 registered agent, the secretary of state shall file the
 13 25 statement of change of registered office or registered agent,
 13 26 effective as provided in section 501A.203, before returning
 13 27 the biennial report to the cooperative as provided in this
 13 28 section.  A statement of change of registered office or agent
 13 29 pursuant to this subsection shall be executed by a person
 13 30 authorized to execute the biennial report.
 13 31                          SUBCHAPTER 3
 13 32                              NAMES
 13 33    Sec. 18.  NEW SECTION.  501A.301  NAME.
 13 34    1.  A cooperative name must contain the word "cooperative",
 13 35 "coop", or the abbreviation "CP".
 14  1    2.  Except as authorized by subsections 3 and 4, a
 14  2 cooperative name must be distinguishable upon the records of
 14  3 the secretary from all of the following:
 14  4    a.  The name of a domestic cooperative, limited liability
 14  5 company, limited partnership, or corporation organized under
 14  6 the laws of this state or registered as a foreign cooperative,
 14  7 foreign limited liability company, foreign limited
 14  8 partnership, or foreign corporation in this state.
 14  9    b.  A name reserved in the manner provided under the laws
 14 10 of this state.
 14 11    c.  The fictitious name adopted by a foreign cooperative,
 14 12 foreign limited liability company, foreign limited
 14 13 partnership, or foreign corporation authorized to transact
 14 14 business in this state because its real name is unavailable.
 14 15    d.  The corporate name of a nonprofit corporation
 14 16 incorporated or authorized to transact business in this state.
 14 17    3.  A cooperative may apply to the secretary for
 14 18 authorization to use a name that is not distinguishable upon
 14 19 the secretary's records from one or more of the names
 14 20 described in subsection 2.  The secretary shall authorize use
 14 21 of the name applied for if one of the following conditions
 14 22 applies:
 14 23    a.  The other entity consents to the use in writing and
 14 24 submits an undertaking in a form satisfactory to the secretary
 14 25 to change the entity's name to a name that is distinguishable
 14 26 upon the records of the secretary from the name of the
 14 27 applying cooperative.
 14 28    b.  The applicant delivers to the secretary a certified
 14 29 copy of the final judgment of a court of competent
 14 30 jurisdiction establishing the applicant's right to use the
 14 31 name applied for in this state.
 14 32    4.  A cooperative may use the name, including the
 14 33 fictitious name, of another business entity that is used in
 14 34 this state if the other business entity is formed under the
 14 35 laws of this state or is authorized to transact business in
 15  1 this state and the proposed user cooperative meets one of the
 15  2 following conditions:
 15  3    a.  Has merged with the other business entity.
 15  4    b.  Has been formed by reorganization of the other business
 15  5 entity.
 15  6    c.  Has acquired all or substantially all of the assets,
 15  7 including the name, of the other business entity.
 15  8    5.  This chapter does not control the use of fictitious
 15  9 names; however, if a cooperative uses a fictitious name in
 15 10 this state, the cooperative shall deliver to the secretary for
 15 11 filing a certified copy of the resolution of the cooperative
 15 12 adopting the fictitious name.
 15 13    Sec. 19.  NEW SECTION.  501A.302  RESERVED NAME.
 15 14    1.  A person may reserve the exclusive use of a cooperative
 15 15 name, including a fictitious name for a foreign cooperative
 15 16 whose cooperative name is not available, by delivering an
 15 17 application to the secretary for filing.  The application must
 15 18 set forth the name and address of the applicant and the name
 15 19 proposed to be reserved.  If the secretary finds that the
 15 20 cooperative name applied for is available, the secretary shall
 15 21 reserve the name for the applicant's exclusive use for a
 15 22 nonrenewable one=hundred=twenty=day period.
 15 23    2.  The owner of a reserved cooperative name may transfer
 15 24 the reservation to another person by delivering to the
 15 25 secretary a signed notice of the transfer that states the name
 15 26 and address of the transferee.
 15 27                          SUBCHAPTER 4
 15 28                   REGISTERED OFFICE AND AGENT
 15 29    Sec. 20.  NEW SECTION.  501A.401  REGISTERED OFFICE AND
 15 30 REGISTERED AGENT.
 15 31    A cooperative must continuously maintain in this state each
 15 32 of the following:
 15 33    1.  A registered office that may be the same as any of its
 15 34 places of business.
 15 35    2.  A registered agent who may be any of the following:
 16  1    a.  An individual who is a resident of this state and whose
 16  2 business office is identical with the registered office.
 16  3    b.  A cooperative, domestic corporation, domestic limited
 16  4 liability company, or not=for=profit domestic corporation
 16  5 whose business office is identical with the registered office.
 16  6    c.  A foreign cooperative, foreign corporation, foreign
 16  7 limited liability company, or not=for=profit foreign
 16  8 corporation authorized to transact business in this state
 16  9 whose business office is identical with the registered office.
 16 10    Sec. 21.  NEW SECTION.  501A.402  CHANGE OF REGISTERED
 16 11 OFFICE OR REGISTERED AGENT.
 16 12    1.  A cooperative may change its registered office or
 16 13 registered agent by delivering to the secretary for filing a
 16 14 statement of change that sets forth the following:
 16 15    a.  The name of the domestic cooperative or foreign
 16 16 cooperative.
 16 17    b.  If the current registered office is to be changed, the
 16 18 street address of the new registered office.
 16 19    c.  If the current registered agent is to be changed, the
 16 20 name of the new registered agent and the new agent's written
 16 21 consent either on the statement or attached to the statement,
 16 22 to the appointment.
 16 23    d.  That after the change or changes are made, the street
 16 24 address of its registered office and the business office of
 16 25 its registered agent will be identical.
 16 26    2.  A statement of change shall forthwith be filed in the
 16 27 office of the secretary by a cooperative whenever its
 16 28 registered agent dies, resigns, or ceases to satisfy the
 16 29 requirements of section 501A.401.
 16 30    3.  If a registered agent changes the registered agent's
 16 31 business address to another place, the registered agent may
 16 32 change the business address and the address of the registered
 16 33 agent by filing a statement as required in subsection 1 for
 16 34 each cooperative, or a single statement for all cooperatives
 16 35 named in the notice, except that the statement need be signed
 17  1 only by the registered agent and need not be responsive to
 17  2 subsection 1, paragraph "c", and must recite that a copy of
 17  3 the statement has been mailed to each cooperative named in the
 17  4 notice.
 17  5    4.  The change of address of a registered office or the
 17  6 change of registered agent becomes effective upon the filing
 17  7 of such statement by the secretary.
 17  8    Sec. 22.  NEW SECTION.  501A.403  RESIGNATION OF REGISTERED
 17  9 AGENT == DISCONTINUANCE OF REGISTERED OFFICE == STATEMENT.
 17 10    1.  A registered agent may resign the agent's agency
 17 11 appointment by signing and delivering to the secretary for
 17 12 filing an original statement of resignation.  The statement
 17 13 may include a statement that the registered office is also
 17 14 discontinued.  The registered agent shall send a copy of the
 17 15 statement of resignation to the registered office, if not
 17 16 discontinued, and to the cooperative at its principal office.
 17 17 The agent shall certify to the secretary that the copy has
 17 18 been sent to the cooperative, including the date the copy was
 17 19 sent.
 17 20    2.  The agency appointment is terminated, and the
 17 21 registered office discontinued if so provided, on the date on
 17 22 which the statement is filed by the secretary.
 17 23    Sec. 23.  NEW SECTION.  501A.404  SERVICE ON DOMESTIC
 17 24 COOPERATIVES.
 17 25    1.  A domestic cooperative's registered agent is the
 17 26 cooperative's agent for service of process, notice, or demand
 17 27 required or permitted by law to be served on the cooperative.
 17 28    2.  If a cooperative has no registered agent, or the agent
 17 29 cannot with reasonable diligence be served, the cooperative
 17 30 may be served by registered mail or certified mail, return
 17 31 receipt requested, and addressed to the cooperative at its
 17 32 principal office.  Service is perfected under this subsection
 17 33 at the earliest of any of the following:
 17 34    a.  The date the cooperative receives the mail.
 17 35    b.  The date shown on the return receipt for the registered
 18  1 mail or certified mail, return receipt requested, if signed on
 18  2 behalf of the cooperative.
 18  3    c.  Five days after its deposit in the United States mail,
 18  4 as evidenced by the postmark, if mailed postpaid and correctly
 18  5 addressed.
 18  6    3.  This section does not prescribe the only means, or
 18  7 necessarily the required means, of serving a domestic
 18  8 cooperative or foreign cooperative.
 18  9    Sec. 24.  NEW SECTION.  501A.405  SERVICE ON FOREIGN
 18 10 COOPERATIVE.
 18 11    1.  The registered agent of a foreign cooperative
 18 12 authorized to transact business in this state is the foreign
 18 13 cooperative's agent for service of process, notice, or demand
 18 14 required or permitted by law to be served on the foreign
 18 15 cooperative.
 18 16    2.  A foreign cooperative may be served by certified mail
 18 17 or restricted certified mail addressed to the foreign
 18 18 cooperative at its principal office shown in its application
 18 19 for a certificate of authority if the foreign cooperative
 18 20 meets any of the following conditions:
 18 21    a.  Has no registered agent or its registered agent cannot
 18 22 with reasonable diligence be served.
 18 23    b.  Has withdrawn from transacting business in this state.
 18 24    c.  Has had its certificate of authority revoked.
 18 25    3.  Service is perfected under subsection 2 at the earliest
 18 26 of any of the following:
 18 27    a.  The date the foreign cooperative receives the mail.
 18 28    b.  The date shown on the return receipt for the restricted
 18 29 certified mail, if signed on behalf of the foreign
 18 30 cooperative.
 18 31    c.  Five days after its deposit in the United States mail,
 18 32 as evidenced by the postmark, if mailed postpaid and correctly
 18 33 addressed.
 18 34    4.  A foreign cooperative may also be served in any other
 18 35 manner permitted by law.
 19  1                          SUBCHAPTER 5
 19  2                          ORGANIZATION
 19  3    Sec. 25.  NEW SECTION.  501A.501  ORGANIZATIONAL PURPOSE.
 19  4    A cooperative may be formed and organized for any lawful
 19  5 purpose for the benefit of its members, including but not
 19  6 limited to any of the following purposes:
 19  7    1.  To store or market agricultural commodities, including
 19  8 crops and livestock.
 19  9    2.  To market, process, or otherwise change the form or
 19 10 marketability of agricultural commodities.  The cooperative
 19 11 may provide for the manufacturing or processing of those
 19 12 commodities into products.
 19 13    3.  To accomplish other purposes that are necessary or
 19 14 convenient to facilitate the production or marketing of
 19 15 agricultural commodities or agricultural products by patron
 19 16 members, other patrons, and other persons, and for other
 19 17 purposes that are related to the business of the cooperative.
 19 18    4.  To provide products, supplies, and services to its
 19 19 patron members, other patrons, and others.
 19 20    5.  For any other purpose that a cooperative is authorized
 19 21 by law under chapter 499 or 501.
 19 22    Sec. 26.  NEW SECTION.  501A.502  ORGANIZERS.
 19 23    1.  QUALIFICATION.  A cooperative may be organized by one
 19 24 or more organizers who shall be adult natural persons, and who
 19 25 may act for themselves as individuals or as the agents of
 19 26 other entities.  The organizers forming the cooperative need
 19 27 not be members of the cooperative.
 19 28    2.  ROLE OF ORGANIZERS.  If the first board of directors is
 19 29 not named in the articles of organization, the organizers may
 19 30 elect the first board or may act as directors with all of the
 19 31 powers, rights, duties, and liabilities of directors, until
 19 32 directors are elected or until a contribution is accepted,
 19 33 whichever occurs first.
 19 34    3.  MEETING.  After the filing of articles of organization,
 19 35 the organizers or the directors named in the articles of
 20  1 organization shall either hold an organizational meeting at
 20  2 the call of a majority of the organizers or of the directors
 20  3 named in the articles, or take written action for the purposes
 20  4 of transacting business and taking actions necessary or
 20  5 appropriate to complete the organization of the cooperative,
 20  6 including but not limited to all of the following:
 20  7    a.  Amending the articles.
 20  8    b.  Electing directors.
 20  9    c.  Adopting bylaws.
 20 10    d.  Authorizing or ratifying the purchase, lease, or other
 20 11 acquisition of suitable space, furniture, furnishings,
 20 12 supplies, or materials.
 20 13    e.  Adopting a fiscal year.
 20 14    f.  Contracting to receive and accept contributions.
 20 15    g.  Making appropriate tax elections.
 20 16    If a meeting is held, the person or persons calling the
 20 17 meeting shall give at least three days' notice of the meeting
 20 18 to each organizer or director named, stating the date, time,
 20 19 and place of the meeting.  Organizers and directors may waive
 20 20 notice of an organizational meeting in the same manner that a
 20 21 director may waive notice of meetings of the board.
 20 22    Sec. 27.  NEW SECTION.  501A.503  ARTICLES OF ORGANIZATION.
 20 23    1.  a.  The articles of organization for the cooperative
 20 24 shall include all of the following:
 20 25    (1)  The name of the cooperative.
 20 26    (2)  The purpose of the cooperative.
 20 27    (3)  The name and address of each organizer.
 20 28    (4)  The period of duration for the cooperative, if the
 20 29 duration is not to be perpetual.
 20 30    (5)  The street address of the cooperative's initial
 20 31 registered office and the name of its registered agent at that
 20 32 office.
 20 33    b.  The articles may contain any other lawful provision.
 20 34    2.  EFFECT OF FILING.  When the articles of organization or
 20 35 an application for a certificate of authority has been filed
 21  1 pursuant to subchapter 2 and the required fee has been paid to
 21  2 the secretary under section 501A.205, all of the following
 21  3 shall be presumed:
 21  4    a.  All conditions precedent that are required to be
 21  5 performed by the organizers have been complied with.
 21  6    b.  The organization of the cooperative has been organized
 21  7 under the laws of this state as a separate legal entity.
 21  8    c.  The secretary shall issue an acknowledgment to the
 21  9 cooperative.
 21 10    Sec. 28.  NEW SECTION.  501A.504  AMENDMENT OF ARTICLES.
 21 11    1.  a.  The articles of organization of a cooperative shall
 21 12 be amended only as follows:
 21 13    (1)  The board, by majority vote, must pass a resolution
 21 14 stating the text of the proposed amendment.  The text of the
 21 15 proposed amendment and an attached mail or alternative ballot,
 21 16 if the board has provided for a mail or alternative ballot in
 21 17 the resolution or alternative method approved by the board and
 21 18 stated in the resolution, shall be mailed or otherwise
 21 19 distributed with a regular or special meeting notice to each
 21 20 member.  The notice shall designate the time and place of the
 21 21 meeting for the proposed amendment to be considered and voted
 21 22 on.
 21 23    (2)  If a quorum of the members is registered as being
 21 24 present or represented by alternative vote at the meeting, the
 21 25 proposed amendment is adopted if any of the following occurs:
 21 26    (a)  If approved by a majority of the votes cast.
 21 27    (b)  For a cooperative with articles or bylaws requiring
 21 28 more than majority approval or other conditions for approval,
 21 29 the amendment is approved by a proportion of the votes cast or
 21 30 a number of total members as required by the articles or
 21 31 bylaws and the conditions for approval in the articles or
 21 32 bylaws have been satisfied.
 21 33    b.  After an amendment has been adopted by the members, the
 21 34 amendment must be signed by the chairperson, vice chairperson,
 21 35 records officer, or assistant records officer and a copy of
 22  1 the amendment filed in the office of the secretary.
 22  2    2.  CERTIFIED STATEMENT.
 22  3    a.  The board shall prepare a certified statement affirming
 22  4 that all of the following are true:
 22  5    (1)  The vote and meeting of the board adopting a
 22  6 resolution of the proposed amendment.
 22  7    (2)  The notice given to members of the meeting at which
 22  8 the amendment was adopted.
 22  9    (3)  The quorum registered at the meeting.
 22 10    (4)  The vote cast adopting the amendment.
 22 11    b.  The certified statement shall be signed by the
 22 12 chairperson, vice chairperson, records officer, or financial
 22 13 officer and filed with the records of the cooperative.
 22 14    3.  AMENDMENT BY DIRECTORS.  A majority of directors may
 22 15 amend the articles if the cooperative does not have any
 22 16 members with voting rights.
 22 17    4.  FILING.  An amendment of the articles shall be filed
 22 18 with the secretary as required in section 501A.503.  The
 22 19 amendment is effective as provided in subchapter 2.  After an
 22 20 amendment to the articles of organization has been adopted and
 22 21 approved in the manner required by this chapter and by the
 22 22 articles of organization, the cooperative shall deliver to the
 22 23 secretary of state for filing articles of amendment which
 22 24 shall set forth all of the following:
 22 25    a.  The name of the cooperative.
 22 26    b.  The text of each amendment adopted.
 22 27    c.  The date of each amendment's adoption.
 22 28    d.  If the amendment was adopted by the directors or
 22 29 members and that members' adoption was not required.
 22 30    e.  If an amendment required adoption by the members, a
 22 31 statement that the amendment was duly adopted by the members
 22 32 in the manner required by this chapter and by the articles of
 22 33 organization.
 22 34    Sec. 29.  NEW SECTION.  501A.505  EXISTENCE.
 22 35    1.  COMMENCEMENT.  The existence of a cooperative shall
 23  1 commence on or after the filing of articles of organization as
 23  2 provided in section 501A.503.
 23  3    2.  DURATION.  A cooperative shall have a perpetual
 23  4 duration unless the cooperative provides for a limited period
 23  5 of duration in the articles or the cooperative is dissolved as
 23  6 provided in subchapter 12.
 23  7    Sec. 30.  NEW SECTION.  501A.506  BYLAWS.
 23  8    1.  REQUIRED.  A cooperative shall have bylaws governing
 23  9 the cooperative's business affairs, structure, the
 23 10 qualifications, classification, rights and obligations of
 23 11 members, and the classifications, allocations, and
 23 12 distributions of membership interests, which are not otherwise
 23 13 provided in the articles or by this chapter.
 23 14    2.  CONTENTS.
 23 15    a.  If not stated in the articles, a cooperative's bylaws
 23 16 must state all of the following:
 23 17    (1)  The purpose of the cooperative.
 23 18    (2)  The capital structure of the cooperative to the extent
 23 19 not stated in the articles, including a statement of the
 23 20 classes and relative rights, preferences, and restrictions
 23 21 granted to or imposed upon each class of member interests, the
 23 22 rights to share in profits or distributions of the
 23 23 cooperative, and the authority to issue membership interests,
 23 24 which may be designated to be determined by the board.
 23 25    (3)  A provision designating the voting and governance
 23 26 rights, to the extent not stated in the articles, including
 23 27 which membership interests have voting power and any
 23 28 limitations or restrictions on the voting power, which shall
 23 29 be in accordance with the provisions of this chapter.
 23 30    (4)  A statement that patron membership interests with
 23 31 voting power shall be restricted to one vote for each member
 23 32 regardless of the amount of patron membership interests held
 23 33 in the affairs of the cooperative or a statement describing
 23 34 the allocation of voting power allocated as prescribed in this
 23 35 chapter.
 24  1    (5)  A statement that membership interests held by a member
 24  2 are transferable only with the approval of the board or as
 24  3 provided in the bylaws.
 24  4    (6)  If nonpatron membership interests are authorized, all
 24  5 of the following:
 24  6    (a)  A statement as to how profits and losses will be
 24  7 allocated and cash will be distributed between patron
 24  8 membership interests collectively and nonpatron membership
 24  9 interests collectively to the extent not stated in the
 24 10 articles.
 24 11    (b)  A statement that net income allocated to a patron
 24 12 membership interest as determined by the board in excess of
 24 13 dividends and additions to reserves shall be distributed on
 24 14 the basis of patronage.
 24 15    (c)  A statement that the records of the cooperative shall
 24 16 include patron membership interests and, if authorized,
 24 17 nonpatron membership interests, which may be further described
 24 18 in the bylaws of any classes and in the reserves.
 24 19    b.  The bylaws may contain any provision relating to the
 24 20 management or regulation of the affairs of the cooperative
 24 21 that are not inconsistent with law or the articles, and shall
 24 22 include all of the following:
 24 23    (1)  The number of directors and the qualifications, manner
 24 24 of election, powers, duties, and compensation, if any, of
 24 25 directors.
 24 26    (2)  The qualifications of members and any limitations on
 24 27 their number.
 24 28    (3)  The manner of admission, withdrawal, suspension, and
 24 29 expulsion of members.
 24 30    (4)  Generally, the governance rights, financial rights,
 24 31 assignability of governance and financial rights, and other
 24 32 rights, privileges, and obligations of members and their
 24 33 membership interests, which may be further described in member
 24 34 control agreements.
 24 35    (5)  Any provisions required by the articles to be in the
 25  1 bylaws.
 25  2    3.  ADOPTION.
 25  3    a.  Bylaws shall be adopted before any distributions to
 25  4 members, but if the articles or bylaws provide that rights of
 25  5 contributors to a class of membership interest will be
 25  6 determined in the bylaws, the bylaws must be adopted before
 25  7 the acceptance of any contributions to that class.
 25  8    b.  Subject to subsections 4, 5, and 6, the bylaws of a
 25  9 cooperative may be adopted or amended by the directors, or the
 25 10 members may adopt or amend bylaws at a regular or special
 25 11 members' meeting if all of the following apply:
 25 12    (1)  The notice of the regular or special meeting contains
 25 13 a statement that the bylaws or restated bylaws will be voted
 25 14 upon and copies are included with the notice, or copies are
 25 15 available upon request from the cooperative and a summary
 25 16 statement of the proposed bylaws or amendment is included with
 25 17 the notice.
 25 18    (2)  A quorum is registered as being present or represented
 25 19 by mail or alternative voting method if the mail or
 25 20 alternative voting method is authorized by the board.
 25 21    (3)  The bylaws or amendment is approved by a majority vote
 25 22 cast, or for a cooperative with articles or bylaws requiring
 25 23 more than majority approval or other conditions for approval,
 25 24 the bylaws or amendment is approved by a proportion of the
 25 25 vote cast or a number of the total members as required by the
 25 26 articles or bylaws and the conditions for approval in the
 25 27 articles or bylaws have been satisfied.
 25 28    c.  Until the next annual or special members' meeting, the
 25 29 majority of directors may adopt and amend bylaws for the
 25 30 cooperative that are consistent with subsections 4, 5, and 6,
 25 31 which may be further amended or repealed by the members at an
 25 32 annual or special members' meeting.
 25 33    4.  AMENDMENT OF BYLAWS BY BOARD OR MEMBERS.
 25 34    a.  The board may amend the bylaws at any time to add,
 25 35 change, or delete a provision, unless any of the following
 26  1 applies:
 26  2    (1)  This chapter, the articles, or the bylaws reserve the
 26  3 power exclusively to the members in whole or in part.
 26  4    (2)  A particular bylaw expressly prohibits the board from
 26  5 doing so.
 26  6    b.  Any amendment of the bylaws adopted by the board must
 26  7 be distributed to the members no later than ten days after
 26  8 adoption and the notice of the annual meeting of the members
 26  9 must contain a notice and summary or the actual amendments to
 26 10 the bylaws adopted by the board.
 26 11    c.  The members may amend the bylaws even though the bylaws
 26 12 may also be amended by the board.
 26 13    5.  BYLAW CHANGING QUORUM OR VOTING REQUIREMENT FOR
 26 14 MEMBERS.
 26 15    a.  (1)  The members may amend the bylaws to fix a greater
 26 16 quorum or voting requirement for members, or voting groups of
 26 17 members, than is required under this chapter.
 26 18    (2)  An amendment to the bylaws to add, change, or delete a
 26 19 greater quorum or voting requirement for members shall meet
 26 20 the same quorum requirement and be adopted by the same vote
 26 21 and voting groups required to take action under the quorum and
 26 22 voting requirements then in effect or proposed to be adopted,
 26 23 whichever is greater.
 26 24    b.  A bylaw that fixes a greater quorum or voting
 26 25 requirement for members under paragraph "a" shall not be
 26 26 adopted and shall not be amended by the board.
 26 27    6.  BYLAW CHANGING QUORUM OR VOTING REQUIREMENT FOR
 26 28 DIRECTORS.
 26 29    a.  A bylaw that fixes a greater quorum or voting
 26 30 requirement for the board may be amended by any of the
 26 31 following methods:
 26 32    (1)  If adopted by the members, only by the members.
 26 33    (2)  If adopted by the board, either by the members or by
 26 34 the board.
 26 35    b.  A bylaw adopted or amended by the members that fixes a
 27  1 greater quorum or voting requirement for the board may provide
 27  2 that the bylaw may be amended only by a specified vote of
 27  3 either the members or the board, but if the bylaw is to be
 27  4 amended by a specified vote of the members, the bylaw must be
 27  5 adopted by the same specified vote of the members.
 27  6    c.  Action by the board under paragraph "a", subparagraph
 27  7 (2), to adopt or amend a bylaw that changes the quorum or
 27  8 voting requirement for the board shall meet the same quorum
 27  9 requirement and be adopted by the same vote required to take
 27 10 action under the quorum and voting requirement then in effect
 27 11 or proposed to be adopted, whichever is greater.
 27 12    7.  EMERGENCY BYLAWS.
 27 13    a.  Unless otherwise provided in the articles or bylaws,
 27 14 the board may adopt bylaws to be effective only in an
 27 15 emergency as defined in paragraph "d".  The emergency bylaws,
 27 16 which are subject to amendment or repeal by the members, may
 27 17 include all provisions necessary for managing the cooperative
 27 18 during the emergency, including any of the following:
 27 19    (1)  Procedures for calling a meeting of the board.
 27 20    (2)  Quorum requirements for the meeting.
 27 21    (3)  Designation of additional or substitute directors.
 27 22    b.  All provisions of the regular bylaws consistent with
 27 23 the emergency bylaws shall remain in effect during the
 27 24 emergency.  The emergency bylaws shall not be effective after
 27 25 the emergency ends.
 27 26    c.  All of the following shall apply to action taken in
 27 27 good faith in accordance with the emergency bylaws:
 27 28    (1)  The action binds the cooperative.
 27 29    (2)  The action shall not be the basis for imposition of
 27 30 liability on any director, officer, employee, or agent of the
 27 31 cooperative on the grounds that the action was not authorized
 27 32 cooperative action.
 27 33    d.  An emergency exists for the purposes of this section,
 27 34 if a quorum of the directors cannot readily be obtained
 27 35 because of some catastrophic event.
 28  1    Sec. 31.  NEW SECTION.  501A.507  COOPERATIVE RECORDS.
 28  2    1.  PERMANENT RECORDS REQUIRED TO BE KEPT.  A cooperative
 28  3 shall keep as permanent records minutes of all meetings of its
 28  4 members and of the board, a record of all actions taken by the
 28  5 members or the board without a meeting by a written unanimous
 28  6 consent in lieu of a meeting, and a record of all waivers of
 28  7 notices of meetings of the members and of the board.
 28  8    2.  ACCOUNTING RECORDS.  A cooperative shall maintain
 28  9 appropriate accounting records.
 28 10    3.  FORMAT.  A cooperative shall maintain its records in
 28 11 written form or in another form capable of conversion into
 28 12 written form within a reasonable time.
 28 13    4.  COPIES.  A cooperative shall keep a copy of each of the
 28 14 following records at its principal office:
 28 15    a.  Its articles and other governing instruments.
 28 16    b.  Its bylaws or other similar instruments.
 28 17    c.  A record of the names and addresses of its members, in
 28 18 a form that allows preparation of an alphabetical list of
 28 19 members with each member's address.
 28 20    d.  The minutes of members' meetings, and records of all
 28 21 actions taken by members without a meeting by unanimous
 28 22 written consent in lieu of a meeting, for the past three
 28 23 years.
 28 24    e.  All written communications within the past three years
 28 25 to members as a group or to any class of members as a group.
 28 26    f.  A list of the names and business addresses of its
 28 27 current board members and officers.
 28 28    g.  All financial statements prepared for periods ending
 28 29 during the last fiscal year.
 28 30    5.  Except as otherwise limited by this chapter, the board
 28 31 of a cooperative shall have discretion to determine what
 28 32 records are appropriate for the purposes of the cooperative,
 28 33 the length of time records are to be retained, and policies
 28 34 relating to the confidentiality, disclosure, inspection, and
 28 35 copying of the records of the cooperative.
 29  1                          SUBCHAPTER 6
 29  2                     POWERS AND AUTHORITIES
 29  3    Sec. 32.  NEW SECTION.  501A.601  POWERS.
 29  4    1.  GENERALLY.
 29  5    a.  In addition to other powers, a cooperative as an agent
 29  6 or otherwise may do any of the following:
 29  7    (1)  Perform every act necessary or proper to the conduct
 29  8 of the cooperative's business or the accomplishment of the
 29  9 purposes of the cooperative.
 29 10    (2)  Enjoy other rights, powers, or privileges granted by
 29 11 the laws of this state to other cooperatives, except those
 29 12 that are inconsistent with the express provisions of this
 29 13 chapter.
 29 14    (3)  Have the powers provided in section 501A.501 and in
 29 15 this section.
 29 16    b.  This section does not give a cooperative the power or
 29 17 authority to exercise the powers of a credit union under
 29 18 chapter 533, a bank under chapter 524, or a savings and loan
 29 19 association under chapter 534.
 29 20    2.  DEALING IN PRODUCTS.  A cooperative may buy, sell, or
 29 21 deal in its own commodities or products or those of another
 29 22 person, including but not limited to those of its members,
 29 23 patrons, or nonmembers; another cooperative organized under
 29 24 this chapter or another cooperative association organized
 29 25 under other law including a traditional cooperative, or
 29 26 members or patrons of such cooperatives or cooperative
 29 27 associations.  A cooperative may negotiate the price at which
 29 28 its commodities products may be sold.
 29 29    3.  CONTRACTS WITH MEMBERS.  A cooperative may enter into
 29 30 or become a party to a contract or agreement for the
 29 31 cooperative or for the cooperative's members or patrons or
 29 32 between the cooperative and its members or patrons.
 29 33    4.  HOLDING AND TRANSACTIONS OF REAL AND PERSONAL PROPERTY.
 29 34    a.  A cooperative may purchase and hold, lease, mortgage,
 29 35 encumber, sell, exchange, and convey as a legal entity real,
 30  1 personal, and intellectual property, including real estate,
 30  2 buildings, personal property, patents, and copyrights as the
 30  3 business of the cooperative may require, including but not
 30  4 limited to the sale or other disposition of assets required by
 30  5 the business of the cooperative as determined by the board.
 30  6    b.  A cooperative may take, receive, and hold real or
 30  7 personal property, including the principal and interest of
 30  8 money or other negotiable instruments and rights in a
 30  9 contract, in trust for any purpose not inconsistent with the
 30 10 purposes of the cooperative in its articles or bylaws.  The
 30 11 cooperative may exercise fiduciary powers in relation to
 30 12 taking, receiving, and holding the real or personal property.
 30 13 However, a cooperative's fiduciary powers do not include trust
 30 14 powers or trust services exercised for its members as provided
 30 15 in section 633.63 or chapter 524.
 30 16    5.  BUILDINGS.  A cooperative may erect buildings or other
 30 17 structures or facilities on the cooperative's owned or leased
 30 18 property or on a right=of=way legally acquired by the
 30 19 cooperative.
 30 20    6.  DEBT INSTRUMENTS.
 30 21    a.  A cooperative may issue bonds, debentures, or other
 30 22 evidence of indebtedness, except as provided in subsection 1,
 30 23 paragraph "b".  The cooperative shall not issue bonds,
 30 24 debentures, or other evidence of indebtedness to a
 30 25 nonaccredited member, unless prior to issuance the cooperative
 30 26 provides the member with a written disclosure statement which
 30 27 includes a conspicuous notice that moneys are not insured or
 30 28 guaranteed by an agency or instrumentality of the United
 30 29 States government, and that the investment may lose value.
 30 30    b.  A cooperative may borrow money, may secure any of its
 30 31 obligations by mortgage of or creation of a security interest
 30 32 in or other encumbrances or assignment of all or any of its
 30 33 property, franchises, or income, and may issue guarantees for
 30 34 any legal purpose.
 30 35    c.  A cooperative may form special purpose business
 31  1 entities to secure assets of the cooperative.
 31  2    7.  ADVANCES TO PATRONS.  A cooperative may make advances
 31  3 to its members or patrons on products delivered by the members
 31  4 or patrons to the cooperative.
 31  5    8.  DEPOSITS.  A cooperative may accept donations or
 31  6 deposits of money or real or personal property from other
 31  7 cooperatives or associations from which the cooperative is
 31  8 constituted.
 31  9    9.  BORROWING, INVESTMENT, AND PAYMENT TERMS.  A
 31 10 cooperative may borrow money from its members, or cooperatives
 31 11 or associations from which the cooperative is constituted,
 31 12 with security that the cooperative considers sufficient.  A
 31 13 cooperative may invest or reinvest its moneys.  A cooperative
 31 14 may extend payment terms to its customers on the sale of the
 31 15 cooperative's goods or services.  An extension of payment
 31 16 terms by the cooperative shall not be secured by real
 31 17 property.  A cooperative which authorizes nonpatron members
 31 18 under section 501A.901 shall not borrow moneys from a bank for
 31 19 cooperatives or from an agricultural credit bank, if the
 31 20 collective vote of patron members is less than eighty percent
 31 21 of the total vote on general matters of the cooperative.
 31 22    10.  PENSIONS AND BENEFITS.  A cooperative may pay
 31 23 pensions, retirement allowances, and compensation for past
 31 24 services to and for the benefit of, and establish, maintain,
 31 25 continue, and carry out, wholly or partially at the expense of
 31 26 the cooperative, employee, or incentive benefit plans, trusts,
 31 27 and provisions to or for the benefit of any or all of its and
 31 28 its related organizations' officers, managers, directors,
 31 29 governors, employees, and agents; and in the case of a related
 31 30 organization that is a cooperative, members who provide
 31 31 services to the cooperative, and any of their families,
 31 32 dependents, and beneficiaries.  A cooperative may indemnify
 31 33 and purchase and maintain insurance for and on behalf of a
 31 34 fiduciary of any of these employee benefit and incentive
 31 35 plans, trusts, and provisions.
 32  1    11.  INSURANCE.
 32  2    a.  A cooperative may purchase and maintain insurance on
 32  3 behalf of a person who is or was a director, officer,
 32  4 employee, or agent of the cooperative and in which the
 32  5 cooperative has an insurable interest.  The cooperative may
 32  6 also purchase and maintain insurance on the life of a member
 32  7 for the purpose of acquiring at the death of the member any or
 32  8 all membership interests in the cooperative owned by the
 32  9 member.
 32 10    b.  A cooperative or a foreign cooperative shall not sell,
 32 11 solicit, or negotiate in this state any line of insurance to
 32 12 members or nonmembers.
 32 13    12.  OWNERSHIP INTERESTS IN OTHER ENTITIES.
 32 14    a.  A cooperative may purchase, acquire, hold, or dispose
 32 15 of the ownership interests of another business entity or
 32 16 organize business entities whether organized under the laws of
 32 17 this state or another state or the United States and assume
 32 18 all rights, interests, privileges, responsibilities, and
 32 19 obligations arising out of the ownership interests, including
 32 20 a business entity organized as any of the following:
 32 21    (1)  As a federation of associations.
 32 22    (2)  For the purpose of forming a district, state, or
 32 23 national marketing sales or service agency.
 32 24    (3)  For the purpose of acquiring marketing facilities at
 32 25 terminal or other markets in this state or other states.
 32 26    b.  A cooperative may purchase, own, and hold ownership
 32 27 interests, including stock and other equity interests,
 32 28 memberships, interests in nonstock capital, and evidences of
 32 29 indebtedness of any domestic business entity or foreign
 32 30 business entity.
 32 31    13.  FIDUCIARY POWERS.  A cooperative may exercise any and
 32 32 all fiduciary powers in relations with members, cooperatives,
 32 33 or business entities from which the cooperative is
 32 34 constituted.  However, these fiduciary powers do not include
 32 35 trust powers or trust services for its members as provided in
 33  1 section 633.63 or chapter 524.
 33  2    Sec. 33.  NEW SECTION.  501A.602  EMERGENCY POWERS.
 33  3    1.  In anticipation of or during an emergency as defined in
 33  4 this section, the board may do any of the following:
 33  5    a.  Modify lines of succession to accommodate the
 33  6 incapacity of any director, officer, employee, or agent.
 33  7    b.  Relocate the principal office, designate alternative
 33  8 principal offices or regional offices, or authorize the
 33  9 officers to do so.
 33 10    2.  During an emergency, unless emergency bylaws provide
 33 11 otherwise, all of the following apply:
 33 12    a.  A notice of a meeting of the board need be given only
 33 13 to those directors to whom it is practicable to reach and may
 33 14 be given in any practicable manner, including by publication
 33 15 or radio.
 33 16    b.  One or more officers of the cooperative present at a
 33 17 meeting of the board may be deemed to be directors for the
 33 18 meeting, in order of rank and within the same rank in order of
 33 19 seniority, as necessary to achieve a quorum.
 33 20    3.  All of the following apply to cooperative action taken
 33 21 in good faith during an emergency under this section to
 33 22 further the ordinary business affairs of the cooperative:
 33 23    a.  The action binds the cooperative.
 33 24    b.  The action shall not be the basis for the imposition of
 33 25 liability on any director, officer, employee, or agent of the
 33 26 cooperative on the grounds that the action was not an
 33 27 authorized cooperative action.
 33 28    4.  An emergency exists for purposes of this section if a
 33 29 quorum of the directors cannot readily be obtained because of
 33 30 a catastrophic event.
 33 31    Sec. 34.  NEW SECTION.  501A.603  AGRICULTURAL COMMODITIES
 33 32 AND PRODUCTS == MARKETING CONTRACTS.
 33 33    1.  AUTHORITY.  A cooperative and its patron member or
 33 34 patron may make and execute a marketing contract, requiring
 33 35 the patron member or patron to sell a specified portion of the
 34  1 patron member's or patron's agricultural commodity or product
 34  2 or specified commodity or product produced from a certain area
 34  3 exclusively to or through the cooperative or facility
 34  4 established by the cooperative.
 34  5    2.  TITLE TO COMMODITIES OR PRODUCTS.  If a sale is
 34  6 contracted to the cooperative, the sale shall transfer title
 34  7 to the commodity or product absolutely, except for a recorded
 34  8 lien or security interest against the agricultural commodity
 34  9 or product of the patron member or patron as provided in
 34 10 article 9 of chapter 554, and provisions in Title XIV,
 34 11 subtitle 3, governing agricultural liens, and liens granted
 34 12 against farm products under federal law, to the cooperative on
 34 13 delivery of the commodity or product or at another specified
 34 14 time if expressly provided in the contract.  The contract may
 34 15 allow the cooperative to sell or resell the commodity or
 34 16 product of its patron member or patron with or without taking
 34 17 title to the commodity or product, and pay the resale price to
 34 18 the patron member or patron, after deducting all necessary
 34 19 selling, overhead, and other costs and expenses, including
 34 20 other proper reserves and interest.
 34 21    3.  TERM OF CONTRACT.  A single term of a marketing
 34 22 contract shall not exceed ten years, but a marketing contract
 34 23 may be made self=renewing for periods not exceeding five years
 34 24 each, subject to the right of either party to terminate by
 34 25 giving written notice of the termination during a period of
 34 26 the current term as specified in the contract.
 34 27    4.  DAMAGES FOR BREACH OF CONTRACT.  The cooperative's
 34 28 bylaws or marketing contract in which the cooperative is a
 34 29 party may set a specific sum as liquidated damages to be paid
 34 30 by the patron member or patron to the cooperative for breach
 34 31 of any provision of the marketing contract regarding the sale
 34 32 or delivery or withholding of a commodity or product and may
 34 33 provide that the patron member or patron shall pay the costs,
 34 34 premiums for bonds, expenses, and fees if an action is brought
 34 35 on the contract by the cooperative.  The remedies for breach
 35  1 of contract are valid and enforceable in the courts of this
 35  2 state.  The provisions shall be enforced as liquidated damages
 35  3 and are not considered a penalty.
 35  4    5.  INJUNCTION AGAINST BREACH OF CONTRACT.  If there is a
 35  5 breach or threatened breach of a marketing contract by a
 35  6 patron member or patron, the cooperative is entitled to an
 35  7 injunction to prevent the further breach of the contract and
 35  8 to a decree of specific performance of the contract.  Pending
 35  9 the adjudication of the action after filing a complaint
 35 10 showing the breach or threatened breach and filing a
 35 11 sufficient bond, the cooperative is entitled to a temporary
 35 12 restraining order and preliminary injunction against the
 35 13 patron member or patron.
 35 14    6.  PENALTIES FOR CONTRACT INTERFERENCE AND FALSE REPORTS.
 35 15 A person who knowingly induces or attempts to induce any
 35 16 member or patron of a cooperative organized under this chapter
 35 17 to breach a marketing contract with the cooperative, or who
 35 18 maliciously and knowingly spreads false reports about the
 35 19 cooperative's finances or management, is guilty of a simple
 35 20 misdemeanor.
 35 21    7.  CIVIL DAMAGES FOR CONTRACT INTERFERENCE AND FALSE
 35 22 REPORTS.  In addition to the penalty provided in subsection 6,
 35 23 the person may be liable to the cooperative for civil damages
 35 24 for any violation of that subsection.  Each violation shall
 35 25 constitute a separate offense.
 35 26                          SUBCHAPTER 7
 35 27                     DIRECTORS AND OFFICERS
 35 28    Sec. 35.  NEW SECTION.  501A.701  BOARD GOVERNS
 35 29 COOPERATIVE.
 35 30    A cooperative shall be governed by its board of directors,
 35 31 which shall take all action for and on behalf of the
 35 32 cooperative, except those actions reserved or granted to
 35 33 members.  Board action shall be by the affirmative vote of a
 35 34 majority of the directors voting at a duly called meeting
 35 35 unless a greater majority is required by the articles or
 36  1 bylaws.  A director individually or collectively with other
 36  2 directors does not have authority to act for or on behalf of
 36  3 the cooperative unless authorized by the board.  A director
 36  4 may advocate interests of members or member groups to the
 36  5 board, but the fiduciary duty of each director is to represent
 36  6 the best interests of the cooperative and all members
 36  7 collectively.
 36  8    Sec. 36.  NEW SECTION.  501A.702  NUMBER OF DIRECTORS.
 36  9    The board shall not have less than five directors, except
 36 10 that a cooperative with fifty or fewer members may have three
 36 11 or more directors as prescribed in the cooperative's articles
 36 12 or bylaws.
 36 13    Sec. 37.  NEW SECTION.  501A.703  ELECTION OF DIRECTORS.
 36 14    1.  FIRST BOARD.  The organizers shall elect and obtain the
 36 15 acknowledgment of the first board to serve until directors are
 36 16 elected by members.  Until election by members, the first
 36 17 board shall appoint directors to fill any vacancies.
 36 18    2.  GENERALLY.
 36 19    a.  Directors shall be elected for the term, at the time,
 36 20 and in the manner provided in this section and the bylaws.
 36 21    b.  A majority of the directors shall be members and a
 36 22 majority of the directors shall be elected exclusively by the
 36 23 members holding patron membership interests unless otherwise
 36 24 provided in the articles or bylaws.
 36 25    c.  The voting power of the directors may be allocated
 36 26 according to equity classifications or allocation units of the
 36 27 cooperative.  If the cooperative authorizes nonpatron
 36 28 membership interests, one of the following must apply:
 36 29    (1)  At least one=half of the voting power on matters of
 36 30 the cooperative that are not specific to equity
 36 31 classifications or allocation units shall be allocated to the
 36 32 directors elected by members holding patron membership
 36 33 interests.
 36 34    (2)  The directors elected by the members holding patron
 36 35 membership interests shall have at least an equal voting power
 37  1 or shall not have a minority voting power on general matters
 37  2 of the cooperative that are not specific to equity
 37  3 classifications or allocation units.
 37  4    d.  A director holds office for the term the director was
 37  5 elected and until a successor is elected and has qualified, or
 37  6 until the earlier death, resignation, removal, or
 37  7 disqualification of the director.
 37  8    e.  The expiration of a director's term with or without
 37  9 election of a qualified successor does not make the prior or
 37 10 subsequent acts of the director or the board void or voidable.
 37 11    f.  Subject to any limitation in the articles or bylaws,
 37 12 the board may set the compensation of directors.
 37 13    g.  Directors may be divided into or designated and elected
 37 14 by class or other distinction as provided in the articles or
 37 15 bylaws.
 37 16    h.  A director may resign by giving written notice to the
 37 17 chairperson of the board or the board.  The resignation is
 37 18 effective without acceptance when the notice is given to the
 37 19 chairperson of the board or the board unless a later effective
 37 20 time is specified in the notice.
 37 21    3.  ELECTION AT REGULAR MEETING.  Directors shall be
 37 22 elected at the regular members' meeting for the terms of
 37 23 office prescribed in the bylaws.  Except for directors elected
 37 24 at district meetings or special meetings to fill a vacancy,
 37 25 all directors shall be elected at the regular members'
 37 26 meeting.  There shall be no cumulative voting for directors
 37 27 except as provided in this chapter and the articles or bylaws.
 37 28    4.  DISTRICT OR LOCAL UNIT ELECTION OF DIRECTORS.  For a
 37 29 cooperative with districts or other units, members may elect
 37 30 directors on a district or unit basis if provided in the
 37 31 bylaws.  The directors may be nominated or elected at district
 37 32 meetings if provided in the bylaws.  Directors who are
 37 33 nominated at district meetings shall be elected at the annual
 37 34 regular members' meeting by vote of the entire membership,
 37 35 unless the bylaws provide that directors who are nominated at
 38  1 district meetings are to be elected by vote of the members of
 38  2 the district, at the district meeting, or the annual regular
 38  3 members' meeting.
 38  4    5.  VOTE BY MAIL OR ALTERNATIVE BALLOT.  The following
 38  5 shall apply to voting by mail or alternative ballot voting:
 38  6    a.  A member shall not vote for a director other than by
 38  7 being present at a meeting or by mail ballot or alternative
 38  8 ballot authorized by the board.
 38  9    b.  The ballot shall be in a form prescribed by the board.
 38 10    c.  The member shall mark the ballot for the candidate
 38 11 chosen and mail the ballot to the cooperative in a sealed
 38 12 plain envelope inside another envelope bearing the member's
 38 13 name, or shall vote designating the candidate chosen by
 38 14 alternative ballot in the manner prescribed by the board.
 38 15    d.  If the ballot of the member is received by the
 38 16 cooperative on or before the date of the regular members'
 38 17 meeting or as otherwise prescribed for alternative ballots,
 38 18 the ballot shall be accepted and counted as the vote of the
 38 19 absent member.
 38 20    6.  BUSINESS ENTITY MEMBERS MAY NOMINATE PERSONS FOR
 38 21 DIRECTOR.  If a member of a cooperative is not a natural
 38 22 person, and the bylaws do not provide otherwise, the member
 38 23 may appoint or elect one or more natural persons to be
 38 24 eligible for election as a director.
 38 25    7.  TERM.  A director holds office for the term the
 38 26 director was elected and until a successor is elected and has
 38 27 qualified, or the earlier death, resignation, removal, or
 38 28 disqualification of the director.
 38 29    8.  ACTS NOT VOID OR VOIDABLE.  The expiration of a
 38 30 director's term with or without the election of a qualified
 38 31 successor does not make prior or subsequent acts of the
 38 32 director void or voidable.
 38 33    9.  COMPENSATION.  Subject to any limitation in the
 38 34 articles or bylaws, the board may fix the compensation of the
 38 35 directors.
 39  1    10.  CLASSIFICATION.  Directors may be divided into classes
 39  2 as provided in the articles or bylaws.
 39  3    Sec. 38.  NEW SECTION.  501A.704  FILLING VACANCIES.
 39  4    1.  PATRON DIRECTORS.  If a patron member director's
 39  5 position becomes vacant or a new director position is created
 39  6 for a director that was or is to be elected by patron members,
 39  7 the board, in consultation with the directors elected by
 39  8 patron members, shall appoint a patron member of the
 39  9 cooperative to fill the director's position until the next
 39 10 regular or special members' meeting.  If there are no
 39 11 directors elected by patron members on the board at the time
 39 12 of the vacancy, a special patron members' meeting shall be
 39 13 called to fill the patron member director vacancy.
 39 14    2.  NONPATRON DIRECTORS.  If the vacating director was not
 39 15 elected by the patron members or a new director position is
 39 16 created, unless otherwise provided in the articles or bylaws,
 39 17 the board shall appoint a director to fill the vacant position
 39 18 by majority vote of the remaining or then serving directors
 39 19 even though less than a quorum.  At the next regular or
 39 20 special members' meeting, the members or patron members shall
 39 21 elect a director to fill the unexpired term of the vacant
 39 22 director's position.
 39 23    Sec. 39.  NEW SECTION.  501A.705  REMOVAL OF DIRECTORS.
 39 24    1.  MODIFICATION.  The provisions of this section apply
 39 25 unless modified by the articles or the bylaws.
 39 26    2.  REMOVAL OF DIRECTORS.  A director may be removed at any
 39 27 time, with or without cause, if all of the following apply:
 39 28    a.  The director was named by the board to fill a vacancy.
 39 29    b.  The members have not elected directors in the interval
 39 30 between the time of the appointment to fill a vacancy and the
 39 31 time of the removal.
 39 32    c.  A majority of the remaining directors present
 39 33 affirmatively vote to remove the director.
 39 34    3.  REMOVAL BY MEMBERS.  Any one or all of the directors
 39 35 may be removed at any time, with or without cause, by the
 40  1 affirmative vote of the holders of a majority of the voting
 40  2 power of membership interests entitled to vote at an election
 40  3 of directors, provided that if a director has been elected
 40  4 solely by the patron members or the holders of a class or
 40  5 series of membership interests as stated in the articles or
 40  6 bylaws, then that director may be removed only by the
 40  7 affirmative vote of the holders of a majority of the voting
 40  8 power of the patron members for a director elected by the
 40  9 patron members or of all membership interests of that class or
 40 10 series entitled to vote at an election of that director.
 40 11    4.  ELECTION OF REPLACEMENTS.  New directors may be elected
 40 12 at a meeting at which directors are removed.
 40 13    Sec. 40.  NEW SECTION.  501A.706  BOARD OF DIRECTORS'
 40 14 MEETINGS.
 40 15    1.  TIME AND PLACE.  Meetings of the board may be held from
 40 16 time to time as provided in the articles or bylaws at any
 40 17 place within or without the state that the board may select or
 40 18 by any means described in subsection 2.  If the board fails to
 40 19 select a place for a meeting, the meeting must be held at the
 40 20 principal executive office, unless the articles or bylaws
 40 21 provide otherwise.
 40 22    2.  ELECTRONIC COMMUNICATIONS.
 40 23    a.  A conference among directors by any means of
 40 24 communication through which the directors may simultaneously
 40 25 hear each other during the conference constitutes a board
 40 26 meeting, if the same notice is given of the conference as
 40 27 would be required by subsection 3 for a meeting, and if the
 40 28 number of directors participating in the conference would be
 40 29 sufficient to constitute a quorum at a meeting.  Participation
 40 30 in a meeting by that means constitutes presence in person at
 40 31 the meeting.
 40 32    b.  A director may participate in a board meeting not
 40 33 described in paragraph "a" by any means of communication
 40 34 through which the director, other directors so participating,
 40 35 and all directors physically present at the meeting may
 41  1 simultaneously hear each other during the meeting.
 41  2 Participation in a meeting by that means constitutes presence
 41  3 in person at the meeting.
 41  4    3.  CALLING MEETINGS AND NOTICE.  Unless the articles or
 41  5 bylaws provide for a different time period, a director may
 41  6 call a board meeting by giving at least ten days' notice or,
 41  7 in the case of organizational meetings, at least three days'
 41  8 notice to all directors of the date, time, and place of the
 41  9 meeting.  The notice need not state the purpose of the meeting
 41 10 unless this chapter, the articles, or the bylaws require it.
 41 11    4.  PREVIOUSLY SCHEDULED MEETINGS.  If the day or date,
 41 12 time, and place of a board meeting have been provided in the
 41 13 articles or bylaws, or announced at a previous meeting of the
 41 14 board, no notice is required.  Notice of an adjourned meeting
 41 15 need not be given other than by announcement at the meeting at
 41 16 which adjournment is taken.
 41 17    5.  WAIVER OF NOTICE.  A director may waive notice of a
 41 18 meeting of the board.  A waiver of notice by a director
 41 19 entitled to notice is effective whether given before, at, or
 41 20 after the meeting, and whether given in writing, orally, or by
 41 21 attendance.  Attendance by a director at a meeting is a waiver
 41 22 of notice of that meeting, except where the director objects
 41 23 at the beginning of the meeting to the transaction of business
 41 24 because the meeting is not lawfully called or convened and
 41 25 does not participate in the meeting after the objection.
 41 26    6.  ABSENT DIRECTORS.  If the articles or bylaws so
 41 27 provide, a director may give advance written consent or
 41 28 opposition to a proposal to be acted on at a board meeting.
 41 29 If the director is not present at the meeting, consent or
 41 30 opposition to a proposal does not constitute presence for
 41 31 purposes of determining the existence of a quorum, but consent
 41 32 or opposition must be counted as the vote of a director
 41 33 present at the meeting in favor of or against the proposal and
 41 34 must be entered in the minutes or other record of action at
 41 35 the meeting, if the proposal acted on at the meeting is
 42  1 substantially the same or has substantially the same effect as
 42  2 the proposal to which the director has consented or objected.
 42  3    Sec. 41.  NEW SECTION.  501A.707  QUORUM.
 42  4    A majority, or a larger or smaller portion or number
 42  5 provided in the articles or bylaws, of the directors currently
 42  6 holding office is a quorum for the transaction of business.
 42  7 In the absence of a quorum, a majority of the directors
 42  8 present may adjourn a meeting from time to time until a quorum
 42  9 is present.  If a quorum is present when a duly called or held
 42 10 meeting is convened, the directors present may continue to
 42 11 transact business until adjournment, even though the
 42 12 withdrawal of a number of directors originally present leaves
 42 13 less than the proportion of number otherwise required for a
 42 14 quorum.
 42 15    Sec. 42.  NEW SECTION.  501A.708  ACT OF BOARD OF
 42 16 DIRECTORS.
 42 17    1.  Except as provided in subsection 2, the board shall
 42 18 only take action at a duly held meeting by the affirmative
 42 19 vote of any of the following:
 42 20    a.  A majority of directors present at the meeting.
 42 21    b.  A majority of the directors' voting power present at
 42 22 the meeting.
 42 23    2.  The articles or bylaws may require the affirmative vote
 42 24 of a larger vote than provided in subsection 1.  If the
 42 25 articles or bylaws require a larger vote than is required by
 42 26 this chapter for a particular action, the articles or bylaws
 42 27 control.
 42 28    Sec. 43.  NEW SECTION.  501A.709  ACTION WITHOUT A MEETING.
 42 29    1.  METHOD.  An action required or permitted to be taken at
 42 30 a board meeting may be taken by written action signed by all
 42 31 of the directors.  If the articles or bylaws so provide, any
 42 32 action, other than an action requiring member approval, may be
 42 33 taken by written action signed by the number of directors that
 42 34 would be required to take the same action at a meeting of the
 42 35 board at which all directors were present.
 43  1    2.  EFFECTIVE TIME.  The written action is effective when
 43  2 signed by the required number of directors, unless a different
 43  3 effective time is provided in the written action.
 43  4    3.  NOTICE AND LIABILITY.  When written action is permitted
 43  5 to be taken by less than all directors, all directors must be
 43  6 notified immediately of its text and effective date.  Failure
 43  7 to provide the notice does not invalidate the written action.
 43  8 A director who does not sign or consent to the written action
 43  9 has no liability for the action or actions taken by the
 43 10 written action.
 43 11    Sec. 44.  NEW SECTION.  501A.710  AUDIT COMMITTEE.
 43 12    The board shall establish an audit committee to review the
 43 13 financial information and accounting report of the
 43 14 cooperative.  The cooperative shall have the financial
 43 15 information audited for presentation to the members unless the
 43 16 cooperative's bylaws allow financial statements that are not
 43 17 audited and the financial statements clearly state that they
 43 18 are not audited and the difference between the financial
 43 19 statements and audited financial statements that are prepared
 43 20 according to generally accepted accounting procedures.  The
 43 21 directors shall elect members to the audit committee.  The
 43 22 audit committee shall ensure an independent review of the
 43 23 cooperative's finances and audit.
 43 24    Sec. 45.  NEW SECTION.  501A.711  COMMITTEES.
 43 25    1.  GENERALLY.  A resolution approved by the affirmative
 43 26 vote of a majority of the board may establish committees
 43 27 having the authority of the board in the management of the
 43 28 business of the cooperative only to the extent provided in the
 43 29 resolution.  Committees may include a special litigation
 43 30 committee consisting of one or more independent directors or
 43 31 other independent persons to consider legal rights or remedies
 43 32 of the cooperative and whether those rights and remedies
 43 33 should be pursued.  Committees other than special litigation
 43 34 committees are subject at all times to the direction and
 43 35 control of the board.
 44  1    2.  MEMBERSHIP.  Committee members must be natural persons.
 44  2 Unless the articles or bylaws provide for a different
 44  3 membership or manner of appointment, a committee consists of
 44  4 one or more persons, who need not be directors, appointed by
 44  5 affirmative vote of a majority of the directors present.
 44  6    3.  PROCEDURE.  The procedures for meetings of the board
 44  7 apply to committees and members of committees to the same
 44  8 extent as those sections apply to the board and individual
 44  9 directors.
 44 10    4.  MINUTES.  Minutes, if any, of committee meetings must
 44 11 be made available upon request to members of the committee and
 44 12 to any director.
 44 13    5.  STANDARD OF CONDUCT.  The establishment of, delegation
 44 14 of authority to, and action by a committee does not alone
 44 15 constitute compliance by a director with the standard of
 44 16 conduct set forth in section 501A.712.
 44 17    6.  COMMITTEE MEMBERS CONSIDERED DIRECTORS.  Committee
 44 18 members are considered to be directors for purposes of
 44 19 sections 501A.712, 501A.713, and 501A.715.
 44 20    Sec. 46.  NEW SECTION.  501A.712  STANDARD OF CONDUCT.
 44 21    1.  STANDARD AND LIABILITY.  A director shall discharge the
 44 22 duties of the position of director in good faith, in a manner
 44 23 the director reasonably believes to be in the best interests
 44 24 of the cooperative, and with the care an ordinarily prudent
 44 25 person in a like position would exercise under similar
 44 26 circumstances.  A person who so performs those duties is not
 44 27 liable by reason of being or having been a director of the
 44 28 cooperative.
 44 29    2.  RELIANCE.
 44 30    a.  A director is entitled to rely on information,
 44 31 opinions, reports, or statements, including financial
 44 32 statements and other financial data, in each case prepared or
 44 33 presented by any of the following:
 44 34    (1)  One or more officers or employees of the cooperative
 44 35 who the director reasonably believes to be liable and
 45  1 competent in the matters presented.
 45  2    (2)  Counsel, public accountants, or other persons as to
 45  3 matters that the director reasonably believes are within the
 45  4 person's professional or expert competence.
 45  5    (3)  A committee of the board upon which the director does
 45  6 not serve, duly established by the board, as to matters within
 45  7 its designated authority, if the director reasonably believes
 45  8 the committee to merit confidence.
 45  9    b.  Paragraph "a" does not apply to a director who has
 45 10 knowledge concerning the matter in question that makes the
 45 11 reliance otherwise permitted by paragraph "a" unwarranted.
 45 12    3.  PRESUMPTION OF ASSENT AND DISSENT.  A director who is
 45 13 present at a meeting of the board when an action is approved
 45 14 by the affirmative vote of a majority of the directors present
 45 15 is presumed to have assented to the action approved, unless
 45 16 any of the following applies:
 45 17    a.  The director objects at the beginning of the meeting to
 45 18 the transaction of business because the meeting is not
 45 19 lawfully called or convened and does not participate in the
 45 20 meeting after the objection, in which case the director is not
 45 21 considered to be present at the meeting for any purpose of
 45 22 this chapter.
 45 23    b.  The director votes against the action at the meeting.
 45 24    c.  The director is prohibited by a conflict of interest
 45 25 from voting on the action.
 45 26    4.  CONSIDERATIONS.  In discharging the duties of the
 45 27 position of director, a director may, in considering the best
 45 28 interests of the cooperative, consider the interests of the
 45 29 cooperative's employees, customers, suppliers, and creditors,
 45 30 the economy of the state, and long=term as well as short=term
 45 31 interests of the cooperative and its patron members, including
 45 32 the possibility that these interests may be best served by the
 45 33 continued independence of the cooperative.
 45 34    Sec. 47.  NEW SECTION.  501A.713  DIRECTOR CONFLICTS OF
 45 35 INTEREST.
 46  1    1.  CONFLICT AND PROCEDURE WHEN CONFLICT ARISES.
 46  2    a.  A contract or other transaction between a cooperative
 46  3 and one or more of its directors, or between a cooperative and
 46  4 a business entity in or of which one or more of its directors
 46  5 are governors, directors, managers, officers, or legal
 46  6 representatives or have a material financial interest, is not
 46  7 void or voidable because the director or directors or the
 46  8 other business entities are parties or because the director or
 46  9 directors are present at the meeting of the members or the
 46 10 board or a committee at which the contract or transaction is
 46 11 authorized, approved, or ratified, if any of the following
 46 12 applies:
 46 13    (1)  The contract or transaction was, and the person
 46 14 asserting the validity of the contract or transaction sustains
 46 15 the burden of establishing that the contract or transaction
 46 16 was, fair and reasonable as to the cooperative at the time it
 46 17 was authorized, approved, or ratified and all of the following
 46 18 apply:
 46 19    (a)  The material facts as to the contract or transaction
 46 20 and as to the director's or directors' interest are disclosed
 46 21 or known to the members.
 46 22    (b)  The material facts as to the contract or transaction
 46 23 and as to the director's or directors' interest are fully
 46 24 disclosed or known to the board or a committee, and the board
 46 25 or committee authorizes, approves, or ratifies the contract or
 46 26 transaction in good faith by a majority of the board or
 46 27 committee, but the interested director or directors are not
 46 28 counted in determining the presence of a quorum and must not
 46 29 vote.
 46 30    (2)  The contract or transaction is a distribution,
 46 31 contract, or transaction that is made available to all members
 46 32 or patron members as part of the cooperative's business.
 46 33    b.  If a committee is elected or appointed to authorize,
 46 34 ratify, or approve a contract or transaction under this
 46 35 section, the members of the committee must not have a conflict
 47  1 of interest and must be charged with representing the best
 47  2 interests of the cooperative.
 47  3    2.  MATERIAL FINANCIAL INTEREST.  For purposes of this
 47  4 section, all of the following apply:
 47  5    a.  A resolution fixing the compensation of a director or
 47  6 fixing the compensation of another director as a director,
 47  7 officer, employee, or agent of the cooperative is not void or
 47  8 voidable or considered to be a contract or other transaction
 47  9 between a cooperative and one or more of its directors for
 47 10 purposes of this section even though the director receiving
 47 11 the compensation fixed by the resolution is present and voting
 47 12 at the meeting of the board or a committee at which the
 47 13 resolution is authorized, approved, or ratified or even though
 47 14 other directors voting upon the resolution are also receiving
 47 15 compensation from the cooperative.
 47 16    b.  A director has a material financial interest in each
 47 17 organization in which the director or a family member of the
 47 18 director has a material financial interest.  A contract or
 47 19 other transaction between a cooperative and a family member of
 47 20 a director is considered to be a transaction between the
 47 21 cooperative and the director.  A family member of a director
 47 22 includes the spouse, parents, children and spouses of
 47 23 children, brothers and sisters and spouses of brothers and
 47 24 sisters, and the brothers and sisters of the spouse of the
 47 25 director or any combination of them.
 47 26    Sec. 48.  NEW SECTION.  501A.714  LIMITATION OF DIRECTOR'S
 47 27 LIABILITY.
 47 28    Except as otherwise provided in this chapter, a director,
 47 29 officer, employee, or member of the cooperative is not liable
 47 30 for the cooperative's debts or obligations, and a director,
 47 31 officer, member, or other volunteer is not personally liable
 47 32 in that capacity, for a claim based upon any action taken, or
 47 33 any failure to take action in the discharge of the person's
 47 34 duties, except for the amount of a financial benefit received
 47 35 by the person to which the person is not entitled, an
 48  1 intentional infliction of harm to the cooperative or its
 48  2 members or patrons, or an intentional violation of criminal
 48  3 law.
 48  4    Sec. 49.  NEW SECTION.  501A.715  INDEMNIFICATION.
 48  5    1.  DEFINITIONS.  As used in this section, all of the
 48  6 following apply:
 48  7    a.  "Official capacity" means any of the following:
 48  8    (1)  With respect to a director, the position of director
 48  9 in a cooperative.
 48 10    (2)  With respect to a person other than a director, the
 48 11 elective or appointive office or position held by the person,
 48 12 member of a committee of the board, the employment
 48 13 relationship undertaken by an employee of the cooperative, or
 48 14 the scope of the services provided by members of the
 48 15 cooperative who provide services to the cooperative.
 48 16    (3)  With respect to a director, chief executive officer,
 48 17 member, or employee of the cooperative who, while a director,
 48 18 chief executive officer, or member or employee of the
 48 19 cooperative, is or was serving at the request of the
 48 20 cooperative or whose duties in that position involve or
 48 21 involved service as a governor, director, manager, officer,
 48 22 member, partner, trustee, employee, or agent of another
 48 23 organization or employee benefit plan, the position of that
 48 24 person as a governor, director, manager, officer, member,
 48 25 partner, trustee, employee, or agent, as the case may be, of
 48 26 the other organization or employee benefit plan.
 48 27    b.  "Predecessor entity" includes a domestic cooperative or
 48 28 foreign cooperative that was the predecessor of the
 48 29 cooperative referred to in this section in a merger or other
 48 30 transaction in which the predecessor entity's existence ceased
 48 31 upon consummation of the transaction.
 48 32    c.  "Proceeding" means a threatened, pending, or completed
 48 33 civil, criminal, administrative, arbitration, or investigative
 48 34 proceeding, including a proceeding by or in the right of the
 48 35 cooperative.
 49  1    d.  "Special legal counsel" means counsel who has not
 49  2 represented the cooperative or a related organization, or a
 49  3 director, manager, member of a committee of the board, or
 49  4 employee whose indemnification is in issue.
 49  5    2.  INDEMNIFICATION.
 49  6    a.  Subject to the provisions of subsection 4, a
 49  7 cooperative shall indemnify a person made or threatened to be
 49  8 made a party to a proceeding by reason of the former or
 49  9 present official capacity of the person against judgments,
 49 10 penalties, fines, including, without limitation, excise taxes
 49 11 assessed against the person with respect to an employee
 49 12 benefit plan, settlements, and reasonable expenses, including
 49 13 attorney fees and disbursements incurred by the person in
 49 14 connection with the proceeding, if, with respect to the acts
 49 15 or omissions of the person complained of in the proceeding,
 49 16 any of the following applies:
 49 17    (1)  All of the following apply:
 49 18    (a)  The person has not been indemnified by another
 49 19 organization or employee benefit plan for the same judgments,
 49 20 penalties, fines, including, without limitation, excise taxes
 49 21 assessed against the person with respect to an employee
 49 22 benefit plan, settlements, and reasonable expenses, including
 49 23 attorney fees and disbursements incurred by the person in
 49 24 connection with the proceeding with respect to the same acts
 49 25 or omissions.
 49 26    (b)  The person acted in good faith.
 49 27    (c)  The person has not received an improper personal
 49 28 benefit.
 49 29    (d)  The person has not committed an act for which
 49 30 liability cannot be eliminated or limited under section
 49 31 501A.714.
 49 32    (e)  In the case of a criminal proceeding, the person had
 49 33 no reasonable cause to believe the conduct was unlawful.
 49 34    (2)  (a)  In the case of an act or omission occurring in
 49 35 the official capacity described in subsection 1, paragraph
 50  1 "a", subparagraph (1) or (2), the person reasonably believed
 50  2 that the conduct was in the best interests of the cooperative.
 50  3    (b)  In the case of an act or omission occurring in the
 50  4 official capacity described in subsection 1, paragraph "a",
 50  5 subparagraph (3), the person reasonably believed that the
 50  6 conduct was not opposed to the best interests of the
 50  7 cooperative.
 50  8    If the person's acts or omissions complained of in the
 50  9 proceeding relate to conduct as a director, officer, trustee,
 50 10 employee, or agent of an employee benefit plan, the conduct is
 50 11 not considered to be opposed to the best interests of the
 50 12 cooperative if the person reasonably believed that the conduct
 50 13 was in the best interests of the participants or beneficiaries
 50 14 of the employee benefit plan.
 50 15    b.  The termination of a proceeding by judgment, order,
 50 16 settlement, conviction, or upon a plea of nolo contendere or
 50 17 its equivalent does not, of itself, establish that the person
 50 18 did not meet the criteria set forth in this subsection.
 50 19    3.  ADVANCES.  Subject to the provisions of subsection 4,
 50 20 if a person is made or threatened to be made a party to a
 50 21 proceeding, the person is entitled, upon written request to
 50 22 the cooperative, to payment or reimbursement by the
 50 23 cooperative of reasonable expenses, including attorney fees
 50 24 and disbursements incurred by the person in advance of the
 50 25 final disposition of the proceeding, as follows:
 50 26    a.  Upon receipt by the cooperative of a written
 50 27 affirmation by the person of a good=faith belief that the
 50 28 criteria for indemnification set forth in subsection 2 has
 50 29 been satisfied, and a written undertaking by the person to
 50 30 repay all amounts paid or reimbursed by the cooperative, if it
 50 31 is ultimately determined that the criteria for indemnification
 50 32 have not been satisfied.
 50 33    b.  After a determination that the facts then known to
 50 34 those making the determination would not preclude
 50 35 indemnification under this section.
 51  1    The written undertaking required by this subsection is an
 51  2 unlimited general obligation of the person making it, but need
 51  3 not be secured and shall be accepted without reference to
 51  4 financial ability to make the repayment.
 51  5    4.  PROHIBITION OR LIMIT ON INDEMNIFICATION OR ADVANCES.
 51  6 The articles or bylaws either may prohibit indemnification or
 51  7 advances of expenses otherwise required by this section or may
 51  8 impose conditions on indemnification or advances of expenses
 51  9 in addition to the conditions contained in subsection 2 or 3,
 51 10 including, without limitation, monetary limits on
 51 11 indemnification or advances of expenses if the conditions
 51 12 apply equally to all persons or to all persons within a given
 51 13 class.  A prohibition or limit on indemnification or advances
 51 14 of expenses shall not apply to or affect the right of a person
 51 15 to indemnification or advances of expenses with respect to any
 51 16 acts or omissions of the person occurring before the effective
 51 17 date of a provision in the articles or the date of adoption of
 51 18 a provision in the bylaws establishing the prohibition or
 51 19 limit on indemnification or advances of expenses.
 51 20    5.  REIMBURSEMENT TO WITNESSES.  This section does not
 51 21 require, or limit the ability of, a cooperative to reimburse
 51 22 expenses, including attorney fees and disbursements incurred
 51 23 by a person in connection with an appearance as a witness in a
 51 24 proceeding at a time when the person has not been made or
 51 25 threatened to be made a party to a proceeding.
 51 26    6.  DETERMINATION OF ELIGIBILITY.
 51 27    a.  All determinations whether indemnification of a person
 51 28 is required because the criteria set forth in subsection 2
 51 29 have been satisfied and whether a person is entitled to
 51 30 payment or reimbursement of expenses in advance of the final
 51 31 disposition of a proceeding as provided in subsection 3 must
 51 32 be made as follows:
 51 33    (1)  By the board by a majority of a quorum, if the
 51 34 directors who are, at the time, parties to the proceeding are
 51 35 not counted for determining either a majority or the presence
 52  1 of a quorum.
 52  2    (2)  If a quorum under subparagraph (1) cannot be obtained
 52  3 by a majority of a committee of the board consisting solely of
 52  4 two or more directors not at the time parties to the
 52  5 proceeding duly designated to act in the matter by a majority
 52  6 of the full board, including directors who are parties.
 52  7    (3)  If a determination is not made under subparagraph (1)
 52  8 or (2) by special legal counsel selected either by a majority
 52  9 of the board or a committee by vote under subparagraph (1) or
 52 10 (2) or if the requisite quorum of the full board cannot be
 52 11 obtained and the committee cannot be established by a majority
 52 12 of the full board, including directors who are parties.
 52 13    (4)  If a determination is not made under subparagraphs (1)
 52 14 through (3) by the affirmative vote of the members, but the
 52 15 membership interests held by parties to the proceeding must
 52 16 not be counted in determining the presence of a quorum, and
 52 17 are not considered to be present and entitled to vote on the
 52 18 determination.
 52 19    (5)  If an adverse determination is made under
 52 20 subparagraphs (1) through (4) or paragraph  "b" or if a
 52 21 determination is not made under subparagraphs (1) through (4)
 52 22 or paragraph "b" within sixty days either after the later to
 52 23 occur of the termination of a proceeding or a written request
 52 24 for indemnification to the cooperative, or a written request
 52 25 for an advance of expenses, as the case may be, by a court in
 52 26 this state, which may be the same court in which the
 52 27 proceeding involving the person's liability took place upon
 52 28 application of the person and any notice the court requires.
 52 29 The person seeking indemnification or payment or reimbursement
 52 30 of expenses under this subparagraph has the burden of
 52 31 establishing that the person is entitled to indemnification or
 52 32 payment or reimbursement of expenses.
 52 33    b.  With respect to a person who is not, and was not at the
 52 34 time of the act or omission complained of in the proceedings,
 52 35 a director, chief executive officer, or person possessing,
 53  1 directly or indirectly, the power to direct or cause the
 53  2 direction of the management or policies of the cooperative,
 53  3 the determination whether indemnification of this person is
 53  4 required because the criteria set forth in subsection 2 have
 53  5 been satisfied and whether such person is entitled to payment
 53  6 or reimbursement of expenses in advance of the final
 53  7 disposition of a proceeding as provided in subsection 3, may
 53  8 be made by an annually appointed committee of the board,
 53  9 having at least one member who is a director.  The committee
 53 10 shall report at least annually to the board concerning its
 53 11 actions.
 53 12    7.  INSURANCE.  A cooperative may purchase and maintain
 53 13 insurance on behalf of a person in that person's official
 53 14 capacity against any liability asserted against and incurred
 53 15 by the person in or arising from that capacity, whether or not
 53 16 the cooperative would have been required to indemnify the
 53 17 person against the liability under the provisions of this
 53 18 section.
 53 19    8.  DISCLOSURE.  A cooperative that indemnifies or advances
 53 20 expenses to a person in accordance with this section in
 53 21 connection with a proceeding by or on behalf of the
 53 22 cooperative shall report to the members in writing the amount
 53 23 of the indemnification or advance and to whom and on whose
 53 24 behalf it was paid not later than the next meeting of members.
 53 25    9.  INDEMNIFICATION OF OTHER PERSONS.  Nothing in this
 53 26 section must be construed to limit the power of the
 53 27 cooperative to indemnify persons other than a director, chief
 53 28 executive officer, member, employee, or member of a committee
 53 29 of the board of the cooperative by contract or otherwise.
 53 30    Sec. 50.  NEW SECTION.  501A.716  OFFICERS.
 53 31    1.  REQUIRED OFFICERS.
 53 32    a.  The board shall elect all of the following:
 53 33    (1)  A chairperson.
 53 34    (2)  One or more vice chairpersons.
 53 35    b.  The board shall elect or appoint all of the following:
 54  1    (1)  A records officer.
 54  2    (2)  A financial officer.
 54  3    c.  The officers, other than the chief executive officer,
 54  4 shall not have the authority to bind the cooperative except as
 54  5 authorized by the board.
 54  6    2.  ADDITIONAL OFFICERS.  The board may elect additional
 54  7 officers as the articles or bylaws authorize or require.
 54  8    3.  RECORDS OFFICER AND FINANCIAL OFFICER MAY BE COMBINED.
 54  9 The offices of records officer and financial officer may be
 54 10 combined.
 54 11    4.  OFFICERS THAT MUST BE MEMBERS.  The chairperson and
 54 12 first vice chairperson shall be directors and members.  The
 54 13 financial officer, records officer, and additional officers
 54 14 need not be directors or members.
 54 15    5.  CHIEF EXECUTIVE OFFICER.  The board may employ a chief
 54 16 executive officer to manage the day=to=day affairs and
 54 17 business of the cooperative, and if a chief executive officer
 54 18 is employed, the chief executive officer shall have the
 54 19 authority to implement the functions, duties, and obligations
 54 20 of the cooperative except as restricted by the board.  The
 54 21 chief executive officer shall not exercise authority reserved
 54 22 to the board or the members under this chapter, the articles,
 54 23 or the bylaws.
 54 24                          SUBCHAPTER 8
 54 25                             MEMBERS
 54 26    Sec. 51.  NEW SECTION.  501A.801  MEMBERS.
 54 27    1.  REQUIREMENT.  A cooperative shall have one or more
 54 28 patron members.
 54 29    2.  GROUPING OF MEMBERS.
 54 30    a.  A cooperative may group members and patron members in
 54 31 districts, units, or on another basis if and as authorized in
 54 32 its articles or bylaws.  The articles or bylaws may include
 54 33 authorization for the board to determine the groupings.
 54 34    b.  The board may implement the use of districts or units,
 54 35 including setting the time and place and prescribing the rules
 55  1 of conduct for holding meetings by districts or units to elect
 55  2 delegates to members' meetings.
 55  3    3.  MEMBER VIOLATIONS.
 55  4    a.  A member who knowingly, intentionally, or repeatedly
 55  5 violates a provision of this chapter, the articles or bylaws
 55  6 of the cooperative, or a member control agreement or marketing
 55  7 contract with the cooperative may be required by the board to
 55  8 surrender the member's voting power or the financial rights of
 55  9 membership interest of any class owned by the member, or both.
 55 10    b.  The cooperative shall refund to the member for the
 55 11 surrendered financial rights of membership interest the lesser
 55 12 of the book value or market value of the financial right of
 55 13 the membership interest payable in not more than seven years
 55 14 from the date of surrender or the board may transfer all of
 55 15 any patron member's financial rights to a class of financial
 55 16 rights held by members who are not patron members, or to a
 55 17 certificate of interest, which carries liquidation rights on
 55 18 par with membership interests and is redeemed within seven
 55 19 years after the transfer as provided in the certificate.
 55 20    c.  Membership interests required to be surrendered may be
 55 21 reissued or be retired and canceled by the board.
 55 22    4.  INSPECTION OF COOPERATIVE RECORDS BY MEMBER.
 55 23    a.  A member is entitled to inspect and copy, at the
 55 24 member's expense, during regular business hours at a
 55 25 reasonable location specified by the cooperative, any of the
 55 26 records described in section 501A.507 if the member meets the
 55 27 requirements of paragraph "b" and gives the cooperative
 55 28 written demand at least five business days before the date on
 55 29 which the member wishes to inspect and copy the records.
 55 30 Notwithstanding the provisions of this subsection or any
 55 31 provisions of section 501A.507, a member shall not have the
 55 32 right to inspect or copy any records of the cooperative
 55 33 relating to the amount of equity capital in the cooperative
 55 34 held by any person or any accounts receivable or other amounts
 55 35 due the cooperative from any person, or any personnel records
 56  1 or employment records of any employee.
 56  2    b.  To be entitled to inspect and copy permitted records,
 56  3 the member shall meet all of the following requirements:
 56  4    (1)  The member must have been a member for at least one
 56  5 year immediately preceding the demand to inspect or copy or
 56  6 must be a member holding at least five percent of all of the
 56  7 outstanding equity interests in the cooperative as of the date
 56  8 the demand is made.
 56  9    (2)  The demand is made in good faith and for a proper
 56 10 cooperative business purpose.
 56 11    (3)  The member describes with reasonable particularity the
 56 12 purpose and the records the member desires to inspect.
 56 13    (4)  The records are directly connected with the described
 56 14 purpose.
 56 15    c.  The right of inspection granted by this subsection
 56 16 shall not be abolished or limited by the articles, bylaws, or
 56 17 any actions of the board or the members.
 56 18    d.  This subsection does not affect any of the following:
 56 19    (1)  The right of a member to inspect records to the same
 56 20 extent as any other litigant if the member is in litigation
 56 21 with the cooperative.
 56 22    (2)  The power of a court to compel the production of the
 56 23 cooperative's records for examination.
 56 24    e.  Notwithstanding any other provision in this subsection,
 56 25 if the records to be inspected or copied are in active use or
 56 26 storage and, therefore, not available at the time otherwise
 56 27 provided for inspection or copying, the cooperative shall
 56 28 notify the member and shall set a date and hour within three
 56 29 business days of the date otherwise set in this subsection for
 56 30 the inspection or copying.
 56 31    f.  A member's agent or attorney has the same inspection
 56 32 and copying rights as the member.  The right to copy records
 56 33 under this subsection includes, if reasonable, the right to
 56 34 receive copies made by photographic copying, xerographic
 56 35 copying, or other means.  The cooperative may impose a
 57  1 reasonable charge, covering the costs of labor and material,
 57  2 for copies of any documents provided to the member.  The
 57  3 charge shall not exceed the estimated cost of production and
 57  4 reproduction of the records.
 57  5    g.  If a cooperative refuses to allow a member, or the
 57  6 member's agent or attorney, who complies with this subsection
 57  7 to inspect or copy any records that the member is entitled to
 57  8 inspect or copy within a prescribed time limit or, if none,
 57  9 within a reasonable time, the district court of the county in
 57 10 this state where the cooperative's principal office is located
 57 11 or, if it has no principal office in this state, the district
 57 12 court of the county in which its registered office is located
 57 13 may, on application of the member, summarily order the
 57 14 inspection or copying of the records demanded at the
 57 15 cooperative's expense.
 57 16    h.  If a court orders inspection or copying of the records
 57 17 demanded, unless the cooperative proves that it refused
 57 18 inspection or copying in good faith because it had a
 57 19 reasonable basis for doubt about the right of the member or
 57 20 the member's agent or attorney to inspect or copy the records
 57 21 demanded, all of the following shall apply:
 57 22    (1)  The court may order the losing party to pay the
 57 23 prevailing party's reasonable costs, including reasonable
 57 24 attorney fees.
 57 25    (2)  The court may order the losing party to pay the
 57 26 prevailing party for any damages the prevailing party shall
 57 27 have incurred by reason of the subject matter of the
 57 28 litigation.
 57 29    (3)  If inspection or copying is ordered under this
 57 30 paragraph "h", the court may order the cooperative to pay the
 57 31 member's inspection and copying expenses.
 57 32    (4)  The court may grant either party any other remedy
 57 33 provided by law.
 57 34    (5)  The court may impose reasonable restrictions on the
 57 35 use or distribution of the records by the demanding member.
 58  1    Sec. 52.  NEW SECTION.  501A.802  MEMBER NOT LIABLE FOR
 58  2 COOPERATIVE DEBTS.
 58  3    A member is not, merely on the account of that status,
 58  4 personally liable for the acts, debts, liabilities, or
 58  5 obligations of a cooperative.  A member is liable for any
 58  6 unpaid subscription for the membership interest, unpaid
 58  7 membership fees, or a debt for which the member has separately
 58  8 contracted with the cooperative.
 58  9    Sec. 53.  NEW SECTION.  501A.803  REGULAR MEMBERS'
 58 10 MEETINGS.
 58 11    1.  ANNUAL MEETING.  Regular members' meetings shall be
 58 12 held annually at a time determined by the board, unless
 58 13 otherwise provided for in the bylaws.
 58 14    2.  LOCATION.  The regular members' meeting shall be held
 58 15 at the principal place of business of the cooperative or at
 58 16 another conveniently located place as determined by the bylaws
 58 17 or the board.
 58 18    3.  BUSINESS AND FISCAL REPORTS.  The officers shall submit
 58 19 reports to the members at the regular members' meeting
 58 20 covering the business of the cooperative for the previous
 58 21 fiscal year that show the condition of the cooperative at the
 58 22 close of the fiscal year.
 58 23    4.  ELECTION OF DIRECTORS.  All directors shall be elected
 58 24 at the regular members' meeting for the terms of office
 58 25 prescribed in the bylaws, except for directors elected at
 58 26 district or unit meetings.
 58 27    5.  NOTICE.
 58 28    a.  The cooperative shall give notice of regular members'
 58 29 meetings by mailing the regular members' meeting notice to
 58 30 each member at the members' last known post office address or
 58 31 by other notification approved by the board and agreed to by
 58 32 the members.  The regular members' meeting notice shall be
 58 33 published or otherwise given by approved method at least two
 58 34 weeks before the date of the meeting or mailed at least
 58 35 fifteen days before the date of the meeting.
 59  1    b.  The notice shall contain a summary of any bylaw
 59  2 amendments adopted by the board since the last annual meeting.
 59  3    6.  WAIVER AND OBJECTIONS.  A member may waive notice of a
 59  4 meeting of members.  A waiver of notice by a member entitled
 59  5 to notice is effective whether given before, at, or after the
 59  6 meeting, and whether given in writing, orally, or by
 59  7 attendance.  Attendance by a member at a meeting is a waiver
 59  8 of notice of that meeting, except where the member objects at
 59  9 the beginning of the meeting to the transaction of business
 59 10 because the meeting is not lawfully called or convened, or
 59 11 objects before a vote on an item of business because the item
 59 12 cannot lawfully be considered at that meeting and does not
 59 13 participate in the consideration of the item at that meeting.
 59 14    Sec. 54.  NEW SECTION.  501A.804  SPECIAL MEMBERS'
 59 15 MEETINGS.
 59 16    1.  CALLING MEETING.  Special members' meetings of the
 59 17 members may be called by any of the following:
 59 18    a.  A majority vote of the board.
 59 19    b.  The written petition of at least twenty percent of the
 59 20 patron members and, if authorized by the articles or bylaws,
 59 21 twenty percent of the nonpatron members, twenty percent of all
 59 22 members, or members representing twenty percent of the
 59 23 membership interests collectively submitted to the
 59 24 chairperson.
 59 25    2.  NOTICE.  The cooperative shall give notice of a special
 59 26 members' meeting by mailing the special members' meeting
 59 27 notice to each member personally at the person's last known
 59 28 post office address or an alternative method approved by the
 59 29 board and agreed to by the member individually or the members
 59 30 generally.  For a member that is an entity, notice mailed or
 59 31 delivered by an alternative method shall be to an officer of
 59 32 the entity.  The special members' meeting notice shall state
 59 33 the time, place, and purpose of the special members' meeting.
 59 34 The special members' meeting notice shall be issued within ten
 59 35 days from and after the date of the presentation of a members'
 60  1 petition, and the special members' meeting shall be held
 60  2 within thirty days after the date of the presentation of the
 60  3 members' petition.
 60  4    3.  WAIVER AND OBJECTIONS.  A member may waive notice of a
 60  5 meeting of members.  A waiver of notice by a member entitled
 60  6 to notice is effective whether given before, at, or after the
 60  7 meeting, and whether given in writing, orally, or by
 60  8 attendance.  Attendance by a member at a meeting is a waiver
 60  9 of notice of that meeting, except where the member objects at
 60 10 the beginning of the meeting to the transaction of business
 60 11 because the meeting is not lawfully called or convened, or
 60 12 objects before a vote on an item of business because the item
 60 13 cannot lawfully be considered at that meeting and does not
 60 14 participate in the consideration of the item at that meeting.
 60 15    Sec. 55.  NEW SECTION.  501A.805  CERTIFICATION OF MEETING
 60 16 NOTICE.
 60 17    1.  CERTIFICATE OF MAILING.  After mailing special or
 60 18 regular members' meeting notices or otherwise delivering the
 60 19 notices, the cooperative shall execute a certificate
 60 20 containing the date of mailing or delivery of the notice and a
 60 21 statement that the special or regular members' meeting notices
 60 22 were mailed or delivered as prescribed by law.
 60 23    2.  MATTER OF RECORD.  The certificate shall be made a part
 60 24 of the record of the meeting.
 60 25    3.  FAILURE TO RECEIVE MEETING NOTICE.  Failure of a member
 60 26 to receive a special or regular members' meeting notice does
 60 27 not invalidate an action taken by the members at a members'
 60 28 meeting.
 60 29    Sec. 56.  NEW SECTION.  501A.806  QUORUM.
 60 30    1.  QUORUM.  The quorum for a members' meeting to transact
 60 31 business shall be by any of the following:
 60 32    a.  Ten percent of the total number of members of a
 60 33 cooperative with five hundred or fewer members.
 60 34    b.  Fifty members for cooperatives with more than five
 60 35 hundred members.
 61  1    2.  QUORUM FOR VOTING BY MAIL.  In determining a quorum at
 61  2 a meeting, on a question submitted to a vote by mail or an
 61  3 alternative method, members present in person or represented
 61  4 by mail vote or the alternative voting method shall be
 61  5 counted.  The attendance of a sufficient number of members to
 61  6 constitute a quorum shall be established by a registration of
 61  7 the members of the cooperative present at the meeting.  The
 61  8 registration shall be verified by the chairperson or the
 61  9 records officer of the cooperative and shall be reported in
 61 10 the minutes of the meeting.
 61 11    3.  MEETING ACTION INVALID WITHOUT QUORUM.  An action by a
 61 12 cooperative is not valid or legal in the absence of a quorum
 61 13 at the meeting at which the action was taken.
 61 14    Sec. 57.  NEW SECTION.  501A.807  REMOTE COMMUNICATIONS FOR
 61 15 MEMBERS' MEETINGS.
 61 16    1.  CONSTRUCTION AND APPLICATION.  This section shall be
 61 17 construed and applied to all of the following:
 61 18    a.  To facilitate remote communication consistent with
 61 19 other applicable law.
 61 20    b.  To be consistent with reasonable practices concerning
 61 21 remote communication and with the continued expansion of those
 61 22 practices.
 61 23    2.  MEMBERS' MEETINGS HELD SOLELY BY MEANS OF REMOTE
 61 24 COMMUNICATION.  To the extent authorized in the articles, a
 61 25 member control agreement, or the bylaws and determined by the
 61 26 board, a regular or special meeting of members may be held
 61 27 solely by any combination of means of remote communication
 61 28 through which the members may participate in the meeting, if
 61 29 notice of the meeting is given to every owner of membership
 61 30 interests entitled to vote as would be required by this
 61 31 chapter for a meeting, and if the membership interests held by
 61 32 the members participating in the meeting would be sufficient
 61 33 to constitute a quorum at a meeting.  Participation by a
 61 34 member by that means constitutes presence at the meeting in
 61 35 person or by proxy if all the other requirements of this
 62  1 chapter for the meeting are met.
 62  2    3.  PARTICIPATION IN MEMBERS' MEETINGS BY MEANS OF REMOTE
 62  3 COMMUNICATION.  To the extent authorized in the articles or
 62  4 the bylaws and determined by the board, a member not
 62  5 physically present in person or by proxy at a regular or
 62  6 special meeting of members may, by means of remote
 62  7 communication, participate in a meeting of members held at a
 62  8 designated place.  Participation by a member by that means
 62  9 constitutes presence at the meeting in person or by proxy if
 62 10 all the other requirements of this chapter for the meeting are
 62 11 met.
 62 12    4.  REQUIREMENTS FOR MEETINGS HELD SOLELY BY MEANS OF
 62 13 REMOTE COMMUNICATION AND FOR PARTICIPATION BY MEANS OF REMOTE
 62 14 COMMUNICATION.  In any meeting of members held solely by means
 62 15 of remote communication under subsection 2 or in any meeting
 62 16 of members held at a designated place in which one or more
 62 17 members participate by means of remote communication under
 62 18 subsection 3, all of the following shall apply:
 62 19    a.  The cooperative shall implement reasonable measures to
 62 20 verify that each person deemed present and entitled to vote at
 62 21 the meeting by means of remote communication is a member.
 62 22    b.  The cooperative shall implement reasonable measures to
 62 23 provide each member participating by means of remote
 62 24 communication with a reasonable opportunity to participate in
 62 25 the meeting, including an opportunity to do all of the
 62 26 following:
 62 27    (1)  Read or hear the proceedings of the meeting
 62 28 substantially concurrently with those proceedings.
 62 29    (2)  If allowed by the procedures governing the meeting,
 62 30 have the member's remarks heard or read by other participants
 62 31 in the meeting substantially concurrently with the making of
 62 32 those remarks.
 62 33    (3)  If otherwise entitled, vote on matters submitted to
 62 34 the members.
 62 35    5.  NOTICE TO MEMBERS.
 63  1    a.  Any notice to members given by the cooperative under
 63  2 any provision of this chapter, the articles, or the bylaws by
 63  3 a form of electronic communication consented to by the member
 63  4 to whom the notice is given is effective when given.  The
 63  5 notice is deemed given upon any of the following:
 63  6    (1)  If by facsimile communication, when directed to a
 63  7 telephone number at which the member has consented to receive
 63  8 notice.
 63  9    (2)  If by electronic mail, when directed to an electronic
 63 10 mail address at which the member has consented to receive
 63 11 notice.
 63 12    (3)  If by a posting on an electronic network on which the
 63 13 member has consented to receive notice, together with separate
 63 14 notice to the member of the specific posting, upon the later
 63 15 of any of the following:
 63 16    (a)  The posting.
 63 17    (b)  The giving of the separate notice.
 63 18    (4)  If by any other form of electronic communication by
 63 19 which the member has consented to receive notice, when
 63 20 directed to the member.
 63 21    b.  An affidavit of the secretary, other authorized
 63 22 officer, or authorized agent of the cooperative that the
 63 23 notice has been given by a form of electronic communication
 63 24 is, in the absence of fraud, prima facie evidence of the facts
 63 25 stated in the affidavit.
 63 26    c.  Consent by a member to notice given by electronic
 63 27 communication may be given in writing or by authenticated
 63 28 electronic communication.  The cooperative is entitled to rely
 63 29 on any consent so given until revoked by the member, provided
 63 30 that no revocation affects the validity of any notice given
 63 31 before receipt by the cooperative of revocation of the
 63 32 consent.
 63 33    6.  REVOCATION.  Any ballot, vote, authorization, or
 63 34 consent submitted by electronic communication under this
 63 35 chapter may be revoked by the member submitting the ballot,
 64  1 vote, authorization, or consent so long as the revocation is
 64  2 received by a director or the chief executive officer of the
 64  3 cooperative at or before the meeting or before an action
 64  4 without a meeting is effective.
 64  5    7.  WAIVER.  Waiver of notice by a member of a meeting by
 64  6 means of authenticated electronic communication may be given
 64  7 in the manner provided for the regular or special meeting.
 64  8 Participation in a meeting by means of remote communication
 64  9 described in subsections 2 and 3 is a waiver of notice of that
 64 10 meeting, except where the member objects at the beginning of
 64 11 the meeting to the transaction of business because the meeting
 64 12 is not lawfully called or convened, or objects before a vote
 64 13 on an item of business because the item cannot lawfully be
 64 14 considered at the meeting and does not participate in the
 64 15 consideration of the item at that meeting.
 64 16    Sec. 58.  NEW SECTION.  501A.808  ACT OF MEMBERS.
 64 17    1.  ACTION BY AFFIRMATIVE VOTE OF MEMBERS.
 64 18    a.  The members shall take action by the affirmative vote
 64 19 of the members of the greater of any of the following:
 64 20    (1)  A majority of the voting power of the membership
 64 21 interests present and entitled to vote on that item of
 64 22 business.
 64 23    (2)  A majority of the voting power that would constitute a
 64 24 quorum for the transaction of business at the meeting, except
 64 25 where this chapter, the articles or bylaws, or a member
 64 26 control agreement require a larger proportion.
 64 27    b.  If the articles, bylaws, or a member control agreement
 64 28 require a larger proportion than is required by this chapter
 64 29 for a particular action, the articles, bylaws, or the member
 64 30 control agreement shall have control over the provisions of
 64 31 this chapter.
 64 32    2.  CLASS OR SERIES OF MEMBERSHIP INTERESTS.  In any case
 64 33 where a class or series of membership interests is entitled by
 64 34 this chapter, the articles, bylaws, a member control
 64 35 agreement, or the terms of the membership interests to vote as
 65  1 a class or series, the matter being voted upon must also
 65  2 receive the affirmative vote of the owners of the same
 65  3 proportion of the membership interests present of that class
 65  4 or series; or of the total outstanding membership interests of
 65  5 that class or series, as the proportion required under
 65  6 subsection 1, unless the articles, bylaws, or the member
 65  7 control agreement require a larger proportion.  Unless
 65  8 otherwise stated in the articles, bylaws, or a member control
 65  9 agreement, in the case of voting as a class or series, the
 65 10 minimum percentage of the total voting power of membership
 65 11 interests of the class or series that must be present is equal
 65 12 to the minimum percentage of all membership interests entitled
 65 13 to vote required to be present under section 501A.707.
 65 14    3.  GREATER QUORUM OR VOTING REQUIREMENTS.
 65 15    a.  The articles or bylaws adopted by the members may
 65 16 provide for a greater quorum or voting requirement for members
 65 17 or voting groups than is provided for by this chapter.
 65 18    b.  An amendment to the articles or bylaws that adds,
 65 19 changes, or deletes a greater quorum or voting requirement
 65 20 shall meet the same quorum requirement and be adopted by the
 65 21 same vote and voting groups required to take action under the
 65 22 quorum and voting requirements then in effect or proposed to
 65 23 be adopted, whichever is greater.
 65 24    Sec. 59.  NEW SECTION.  501A.809  ACTION WITHOUT A MEETING.
 65 25    1.  METHOD.  An action required or permitted to be taken at
 65 26 a meeting of the members may be taken by written action
 65 27 signed, or consented to by authenticated electronic
 65 28 communication, by all of the members.  If the articles,
 65 29 bylaws, or a member control agreement so provide, any action
 65 30 may be taken by written action signed, or consented to by
 65 31 authenticated electronic communication, by the members who own
 65 32 voting power equal to the voting power that would be required
 65 33 to take the same action at a meeting of the members at which
 65 34 all members were present.
 65 35    2.  EFFECTIVE TIME.  The written action is effective when
 66  1 signed or consented to by authenticated electronic
 66  2 communication by the required members, unless a different
 66  3 effective time is provided in the written action.
 66  4    3.  NOTICE AND LIABILITY.  When written action is permitted
 66  5 to be taken by less than all members, all members must be
 66  6 notified immediately of its text and effective date.  Failure
 66  7 to provide the notice does not invalidate the written action.
 66  8 A member who does not sign or consent to the written action
 66  9 has no liability for the action or actions taken by the
 66 10 written action.
 66 11    Sec. 60.  NEW SECTION.  501A.810  MEMBER VOTING RIGHTS.
 66 12    1.  MEMBER HAS ONE VOTE OR PATRONAGE VOTING.  A patron
 66 13 member of a cooperative is only entitled to one vote on an
 66 14 issue to be voted upon by members holding patron membership
 66 15 interests.  However, if authorized in the cooperative's
 66 16 articles or bylaws, a patron member may be entitled to
 66 17 additional votes based on patronage criteria in section
 66 18 501A.811.  If nonpatron members are authorized by the patron
 66 19 members and granted voting rights on any matter voted on by
 66 20 the members of the cooperative, the entire patron members'
 66 21 voting power shall be voted collectively based upon the vote
 66 22 of the majority of patron members voting on the issue and the
 66 23 collective vote of the patron members shall be a majority of
 66 24 the vote cast unless otherwise provided in the bylaws.  The
 66 25 bylaws shall not reduce the collective patron member vote to
 66 26 less than fifteen percent of the total vote on matters of the
 66 27 cooperative.  A nonpatron member has the voting rights in
 66 28 accordance to the nonpatron member's nonpatron membership
 66 29 interests as granted in the bylaws, subject to the provisions
 66 30 of this chapter.
 66 31    2.  RIGHT TO VOTE AT MEETING.  A member or delegate may
 66 32 exercise voting rights on any matter that is before the
 66 33 members as prescribed in the articles or bylaws at a members'
 66 34 meeting from the time the member or delegate arrives at the
 66 35 members' meeting, unless the articles or bylaws specify an
 67  1 earlier and specific time for closing the right to vote.
 67  2    3.  VOTING METHOD.  A member's vote at a members' meeting
 67  3 shall be in person or by mail if a mail vote is authorized by
 67  4 the board or by alternative method if authorized by the board
 67  5 and not by proxy, except as provided in subsection 4.
 67  6    4.  MEMBERS REPRESENTED BY DELEGATES.
 67  7    a.  The provisions of this subsection apply to members
 67  8 represented by delegates.
 67  9    b.  A cooperative may provide in the articles or bylaws
 67 10 that units or districts of members are entitled to be
 67 11 represented at members' meetings by delegates chosen by the
 67 12 members of the unit or district.  The delegates may vote on
 67 13 matters at the members' meeting in the same manner as a
 67 14 member.  The delegates may only exercise the voting rights on
 67 15 a basis and with the number of votes as prescribed in the
 67 16 articles or bylaws.
 67 17    c.  If the approval of a certain portion of the members is
 67 18 required for adoption of amendments, a dissolution, a merger,
 67 19 a consolidation, or a sale of assets, the votes of delegates
 67 20 shall be counted as votes by the members represented by the
 67 21 delegate.
 67 22    d.  Patron members may be represented by the proxy of other
 67 23 patron members.
 67 24    e.  Nonpatron members may be represented by proxy if
 67 25 authorized in the bylaws.
 67 26    5.  ABSENTEE BALLOTS.
 67 27    a.  The provisions of this subsection apply to absentee
 67 28 ballots.
 67 29    b.  A member who is or will be absent from a members'
 67 30 meeting may vote by mail or by an approved alternative method
 67 31 on the ballot prescribed in this subsection on any motion,
 67 32 resolution, or amendment that the board submits for vote by
 67 33 mail or alternative method to the members.
 67 34    c.  The ballot shall be in the form prescribed by the board
 67 35 and contain all of the following:
 68  1    (1)  The exact text of the proposed motion, resolution, or
 68  2 amendment to be acted on at the meeting.
 68  3    (2)  The text of the motion, resolution, or amendment for
 68  4 which the member may indicate an affirmative or negative vote.
 68  5    d.  The member shall express a choice by marking an
 68  6 appropriate choice on the ballot and mail, deliver, or
 68  7 otherwise submit the ballot to the cooperative in a plain,
 68  8 sealed envelope inside another envelope bearing the member's
 68  9 name or by an alternative method approved by the board.
 68 10    e.  A properly executed ballot shall be accepted by the
 68 11 board and counted as the vote of the absent member at the
 68 12 meeting.
 68 13    Sec. 61.  NEW SECTION.  501A.811  PATRON MEMBER VOTING
 68 14 BASED ON PATRONAGE.
 68 15    1.  PATRON MEMBERS TO HAVE AN ADDITIONAL VOTE.  A
 68 16 cooperative may authorize by the articles or the bylaws for
 68 17 patron members to have an additional vote for all of the
 68 18 following:
 68 19    a.  A stipulated amount of business transacted between the
 68 20 patron member and cooperative.
 68 21    b.  A stipulated number of patron members in a member
 68 22 cooperative.
 68 23    c.   A certain stipulated amount of equity allocated to or
 68 24 held by a patron member in the cooperative's central
 68 25 organization.
 68 26    d.  A combination of methods provided in this subsection.
 68 27    2.  DELEGATES ELECTED BY PATRONS TO HAVE AN ADDITIONAL
 68 28 VOTE.  A cooperative that is organized into units or districts
 68 29 of patron members may, by the articles or the bylaws,
 68 30 authorize the delegates elected by its patron members to have
 68 31 an additional vote for any of the following:
 68 32    a.  A stipulated amount of business transacted between the
 68 33 patron members in the units or districts and the cooperative.
 68 34    b.  A certain stipulated amount of equity allocated to or
 68 35 held by the patron members of the units or districts of the
 69  1 cooperative.
 69  2    c.  A combination of methods in this subsection.
 69  3    Sec. 62.  NEW SECTION.  501A.812  VOTING RIGHTS.
 69  4    1.  DETERMINATION.  The board may fix a date not more than
 69  5 sixty days, or a shorter time period provided in the articles
 69  6 or bylaws, before the date of a meeting of members as the date
 69  7 for the determination of the owners of membership interests
 69  8 entitled to notice of and entitled to vote at the meeting.
 69  9 When a date is so fixed, only members on that date are
 69 10 entitled to notice of and permitted to vote at that meeting of
 69 11 members.
 69 12    2.  NONMEMBERS.  The articles or bylaws may give or
 69 13 prescribe the manner of giving a creditor, security holder, or
 69 14 other person a right to vote on patron membership interests
 69 15 under this section.
 69 16    3.  JOINTLY OWNED MEMBERSHIP INTERESTS.  Membership
 69 17 interests owned by two or more members may be voted by any one
 69 18 of them unless the cooperative receives written notice from
 69 19 any one of them denying the authority of that person to vote
 69 20 those membership interests.
 69 21    4.  MANNER OF VOTING AND PRESUMPTION.  Except as provided
 69 22 in subsection 3, an owner of a nonpatron membership interest
 69 23 or a patron membership interest with more than one vote that
 69 24 is entitled to vote may vote any portion of the membership
 69 25 interest in any way the member chooses.  If a member votes
 69 26 without designating the proportion voted in a particular way,
 69 27 the member is considered to have voted all of the membership
 69 28 interest in that way.
 69 29    Sec. 63.  NEW SECTION.  501A.813  VOTING BY ORGANIZATIONS
 69 30 AND LEGAL REPRESENTATIVES.
 69 31    1.  MEMBERSHIP INTERESTS HELD BY ANOTHER ORGANIZATION.
 69 32 Membership interests of a cooperative reflected in the
 69 33 required records as being owned by another domestic business
 69 34 entity or foreign business entity may be voted by the
 69 35 chairperson, chief executive officer, or another legal
 70  1 representative of that organization.
 70  2    2.  MEMBERSHIP INTERESTS HELD BY SUBSIDIARY.  Except as
 70  3 provided in subsection 3, membership interests of a
 70  4 cooperative reflected in the required records as being owned
 70  5 by a subsidiary are not entitled to be voted on any matter.
 70  6    3.  MEMBERSHIP INTERESTS CONTROLLED IN A FIDUCIARY
 70  7 CAPACITY.  Membership interests of a cooperative in the name
 70  8 of, or under the control of, the cooperative or a subsidiary
 70  9 in a fiduciary capacity are not entitled to be voted on any
 70 10 matter, except to the extent that the settler or beneficiary
 70 11 possesses and exercises a right to vote or gives the
 70 12 cooperative or, with respect to membership interests in the
 70 13 name of or under control of a subsidiary, the subsidiary,
 70 14 binding instructions on how to vote the membership interests.
 70 15    4.  VOTING BY CERTAIN REPRESENTATIVES.  Subject to section
 70 16 501A.810, membership interests under the control of a person
 70 17 in a capacity as a personal representative, an administrator,
 70 18 executor, guardian, conservator, or the like may be voted by
 70 19 the person, either in person or by proxy, without reflecting
 70 20 in the required records those membership interests in the name
 70 21 of the person.
 70 22    5.  VOTING BY TRUSTEES IN BANKRUPTCY OR RECEIVER.
 70 23 Membership interests reflected in the required records in the
 70 24 name of a trustee in bankruptcy or a receiver may be voted by
 70 25 the trustee or receiver either in person or by proxy.
 70 26 Membership interests under the control of a trustee in
 70 27 bankruptcy or a receiver may be voted by the trustee or
 70 28 receiver without reflecting in the required records the name
 70 29 of the trustee or receiver, if authority to do so is contained
 70 30 in an appropriate order of the court by which the trustee or
 70 31 receiver was appointed.  The right to vote of trustees in
 70 32 bankruptcy and receivers is subject to section 501A.810.
 70 33    6.  MEMBERSHIP INTERESTS HELD BY OTHER ORGANIZATIONS.
 70 34 Membership interests reflected in the required records in the
 70 35 name of a business entity not described in subsections 1
 71  1 through 5 may be voted either in person or by proxy by the
 71  2 legal representative of that business entity.
 71  3    7.  GRANT OF SECURITY INTEREST.  The grant of a security
 71  4 interest in a membership interest does not entitle the holders
 71  5 of the security interest to vote.
 71  6    Sec. 64.  NEW SECTION.  501A.814  PROXIES.
 71  7    1.  AUTHORIZATION.
 71  8    a.  A patron member may only grant a proxy to vote to
 71  9 another patron member.
 71 10    b.  A member may cast or authorize the casting of a vote by
 71 11 any of the following:
 71 12    (1)  Filing a written appointment of a proxy with the board
 71 13 at or before the meeting at which the appointment is to be
 71 14 effective.
 71 15    (2)  Telephonic transmission or authenticated electronic
 71 16 communication, whether or not accompanied by written
 71 17 instructions of the member, of an appointment of a proxy with
 71 18 the cooperative or the cooperative's duly authorized agent at
 71 19 or before the meeting at which the appointment is to be
 71 20 effective.
 71 21    c.  The telephonic transmission or authenticated electronic
 71 22 communication must set forth or be submitted with information
 71 23 from which it can be determined that the appointment was
 71 24 authorized by the member.  If it is reasonably concluded that
 71 25 the telephonic transmission or authenticated electronic
 71 26 communication is valid, the inspectors of election or, if
 71 27 there are not inspectors, the other persons making that
 71 28 determination shall specify the information upon which they
 71 29 relied to make that determination.  A proxy so appointed may
 71 30 vote on behalf of the member, or otherwise participate, in a
 71 31 meeting by remote communication under section 501A.807, to the
 71 32 extent the member appointing the proxy would have been
 71 33 entitled to participate by remote communication if the member
 71 34 did not appoint the proxy.
 71 35    d.  A copy, facsimile, telecommunication, or other
 72  1 reproduction of the original writing or transmission may be
 72  2 substituted or used in lieu of the original writing or
 72  3 transmission for any purpose for which the original
 72  4 transmission could be used, if the copy, facsimile,
 72  5 telecommunication, or other reproduction is a complete and
 72  6 legible reproduction of the entire original writing or
 72  7 transmission.
 72  8    e.  An appointment of a proxy for membership interests
 72  9 owned jointly by two or more members is valid if signed or
 72 10 consented to by authenticated electronic communication, by any
 72 11 one of them, unless the cooperative receives from any one of
 72 12 those members written notice or an authenticated electronic
 72 13 communication either denying the authority of that person to
 72 14 appoint a proxy or appointing a different proxy.
 72 15    2.  DURATION.  The appointment of a proxy is valid for
 72 16 eleven months unless a longer period is expressly provided in
 72 17 the appointment.  An appointment is not irrevocable unless the
 72 18 appointment is coupled with an interest in the membership
 72 19 interests or the cooperative.
 72 20    3.  TERMINATION.  An appointment may be terminated at will
 72 21 unless the appointment is coupled with an interest, in which
 72 22 case the appointment shall not be terminated except in
 72 23 accordance with the terms of an agreement, if any, between the
 72 24 parties to the appointment.  Termination may be made by filing
 72 25 written notice of the termination of the appointment with a
 72 26 manager of the cooperative or by filing a new written
 72 27 appointment of a proxy with a manager of the cooperative.
 72 28 Termination in either manner revokes all prior proxy
 72 29 appointments and is effective when filed with a manager of the
 72 30 cooperative.
 72 31    4.  REVOCATION BY DEATH OR INCAPACITY.  The death or
 72 32 incapacity of a person appointing a proxy does not revoke the
 72 33 authority of the proxy, unless written notice of the death or
 72 34 incapacity is received by a manager of the cooperative before
 72 35 the proxy exercises the authority under that appointment.
 73  1    5.  MULTIPLE PROXIES.  Unless the appointment specifically
 73  2 provides otherwise, if two or more persons are appointed as
 73  3 proxies for a member, all of the following apply:
 73  4    a.  Any one of them may vote the membership interests on
 73  5 each item of business in accordance with specific instructions
 73  6 contained in the appointment.
 73  7    b.  If no specific instructions are contained in the
 73  8 appointment with respect to voting the membership interests on
 73  9 a particular item of business, the membership interests must
 73 10 be voted as a majority of the proxies determine.  If the
 73 11 proxies are equally divided, the membership interests must not
 73 12 be voted.
 73 13    6.  VOTE OF PROXY ACCEPTED AND LIABILITY.  Unless the
 73 14 appointment of a proxy contains a restriction, limitation, or
 73 15 specific reservation of authority, the cooperative may accept
 73 16 a vote or action taken by a person named in the appointment.
 73 17 The vote of a proxy is final, binding, and not subject to
 73 18 challenge, but the proxy is liable to the member for damages
 73 19 resulting from a failure to exercise the proxy or from an
 73 20 exercise of the proxy in violation of the authority granted in
 73 21 the appointment.
 73 22    7.  LIMITED AUTHORITY.  If a proxy is given authority by a
 73 23 member to vote on less than all items of business considered
 73 24 at a meeting of members, the member is considered to be
 73 25 present and entitled to vote by the proxy only with respect to
 73 26 those items of business for which the proxy has authority to
 73 27 vote.  A proxy who is given authority by a member who abstains
 73 28 with respect to an item of business is considered to have
 73 29 authority to vote on the item of business for purposes of this
 73 30 subsection.
 73 31    Sec. 65.  NEW SECTION.  501A.815  SALE OF PROPERTY AND
 73 32 ASSETS.
 73 33    1.  MEMBER APPROVAL NOT REQUIRED.  A cooperative may, by
 73 34 affirmative vote of a majority of the board present, upon
 73 35 those terms and conditions and for those considerations, which
 74  1 may be money, securities, or other instruments for the payment
 74  2 of money or other property, as the board considers expedient
 74  3 and without member approval, do any of the following:
 74  4    a.  Sell, lease, transfer, or otherwise dispose of all or
 74  5 substantially all of its property and assets in the usual and
 74  6 regular course of its business.
 74  7    b.  Grant a security interest in all or substantially all
 74  8 of its property and assets whether or not in the usual and
 74  9 regular course of its business.
 74 10    c.  Transfer any or all of its property to a business
 74 11 entity all the ownership interests of which are owned by the
 74 12 cooperative.
 74 13    d.  For purposes of debt financing, transfer any or all of
 74 14 its property to a special purpose entity owned or controlled
 74 15 by the cooperative for an asset securitization.
 74 16    2.  MEMBER APPROVAL REQUIRED.  Except as provided in
 74 17 subsection 1, a cooperative, by affirmative vote of a majority
 74 18 of the board present, may sell, lease, transfer, or otherwise
 74 19 dispose of all or substantially all of its property and
 74 20 assets, including its goodwill, not in the usual and regular
 74 21 course of its business, upon those terms and conditions and
 74 22 for those considerations, which may be money, securities, or
 74 23 other instruments for the payment of money or other property,
 74 24 as the board considers expedient, when approved at a regular
 74 25 or special meeting of the members by the affirmative vote of
 74 26 two=thirds of the voting power voting at the meeting.  Ten
 74 27 days' written notice of the meeting must be given to all
 74 28 members whether or not they are entitled to vote at the
 74 29 meeting.  The written notice must state that a purpose of the
 74 30 meeting is to consider the sale, lease, transfer, or other
 74 31 disposition of all or substantially all of the property and
 74 32 assets of the cooperative.
 74 33    3.  CONFIRMATORY DOCUMENTS.  Confirmatory deeds,
 74 34 assignments, or similar instruments to evidence a sale, lease,
 74 35 transfer, or other disposition may be signed and delivered at
 75  1 any time in the name of the transferor by its current
 75  2 chairperson of the board or authorized agents.
 75  3    4.  LIABILITY OF TRANSFEREE.  The transferee is liable for
 75  4 the debts, obligations, and liabilities of the transferor only
 75  5 to the extent provided in the contract or agreement between
 75  6 the transferee and the transferor or to the extent provided by
 75  7 law.
 75  8    Sec. 66.  NEW SECTION.  501A.816  VOTE OF OWNERSHIP
 75  9 INTERESTS HELD BY COOPERATIVE.
 75 10    A cooperative that holds ownership interests of another
 75 11 business entity may, by direction of the cooperative's board,
 75 12 elect or appoint a person to represent the cooperative at a
 75 13 meeting of the business entity.  The representative has
 75 14 authority to represent the cooperative and may cast the
 75 15 cooperative's vote at the business entity's meeting.
 75 16                          SUBCHAPTER 9
 75 17                      MEMBERSHIP INTERESTS
 75 18    Sec. 67.  NEW SECTION.  501A.901  MEMBERSHIP INTERESTS.
 75 19    1.  PATRON MEMBERSHIP INTERESTS.  Patron membership
 75 20 interests shall be the only membership interest of a
 75 21 cooperative unless nonpatron memberships are authorized under
 75 22 subsection 2.  If nonpatron interests are authorized, the
 75 23 patron membership interests collectively shall have not less
 75 24 than fifty percent of the cooperative's financial rights to
 75 25 profit allocations and distributions.  However, the
 75 26 cooperative's articles or bylaws may be amended by the
 75 27 affirmative vote of patron members to allow the cooperative's
 75 28 financial rights to profit allocations and distributions to
 75 29 patron members collectively to be a lesser amount but in no
 75 30 case less than fifteen percent.
 75 31    2.  NONPATRONAGE MEMBERSHIP INTERESTS.
 75 32    a.  In order for a cooperative to have nonpatron membership
 75 33 interests, the patron members must approve articles or bylaw
 75 34 provisions authorizing the terms and conditions of the
 75 35 nonpatron membership interests, which may include authorizing
 76  1 the board to determine the terms and conditions of the
 76  2 nonpatron membership interests.
 76  3    b.  If nonpatron membership interests are authorized, the
 76  4 cooperative may solicit and issue nonpatron membership
 76  5 interests on terms and conditions determined by the board and
 76  6 disclosed in the articles, bylaws, or by separate disclosure
 76  7 to the members.  Each member acquiring nonpatron membership
 76  8 interests shall sign a member control agreement or otherwise
 76  9 agree to the conditions of the bylaws.  The control agreement
 76 10 or the bylaws shall describe the rights and obligations of the
 76 11 member as it relates to the nonpatron membership interests,
 76 12 the financial and governance rights, the transferability of
 76 13 the nonpatron membership interests, the division and
 76 14 allocation of profits and losses among the membership
 76 15 interests and membership classes, and financial rights upon
 76 16 liquidation.  If the articles or bylaws do not otherwise
 76 17 provide for the allocation of the profits and losses between
 76 18 patron membership interests and nonpatron membership
 76 19 interests, then the allocation of profits and losses among
 76 20 nonpatron membership interests individually and patron
 76 21 membership interests collectively shall be allocated on the
 76 22 basis of the value of contributions to capital made according
 76 23 to the patron membership interests collectively and the
 76 24 nonpatron memberships interests individually to the extent the
 76 25 contributions have been accepted by the cooperative.
 76 26 Distributions of cash or other assets of the cooperative shall
 76 27 be allocated among the membership interests as provided in the
 76 28 articles or bylaws, subject to the provisions of this chapter.
 76 29 If not otherwise provided in the articles or bylaws,
 76 30 distributions shall be made on the basis of value of the
 76 31 capital contributions of the patron membership interests
 76 32 collectively and the nonpatron membership interests to the
 76 33 extent the contributions have been accepted by the
 76 34 cooperative.
 76 35    3.  AMOUNTS AND DIVISIONS OF MEMBERSHIP INTERESTS.  The
 77  1 authorized amount and divisions of patron membership interests
 77  2 and, if authorized by the patron members, nonpatron membership
 77  3 interest, may be increased, decreased, established, or altered
 77  4 in accordance with the restrictions in this chapter by
 77  5 amending the articles or bylaws at a regular members' meeting
 77  6 or at a special members' meeting called for the purpose of the
 77  7 amendment.
 77  8    4.  ISSUANCE OF MEMBERSHIP INTERESTS.  Authorized
 77  9 membership interests may be issued on terms and conditions
 77 10 prescribed in the articles, bylaws, or if authorized in the
 77 11 articles or bylaws as determined by the board.  The
 77 12 cooperative shall disclose to any person acquiring membership
 77 13 interests to be issued by the cooperative, the organization,
 77 14 capital structure, and known business prospects and risks of
 77 15 the cooperative, the nature of the governance and financial
 77 16 rights of the membership interest being acquired and of other
 77 17 classes of membership and membership interests.  The
 77 18 cooperative shall notify all members of the membership
 77 19 interests being issued by the cooperative.  A membership
 77 20 interest shall not be issued until subscription price of the
 77 21 membership interest has been paid for in money or property
 77 22 with the value of the property to be contributed approved by
 77 23 the board.
 77 24    5.  TRANSFERRING OR SELLING MEMBERSHIP INTERESTS.  After
 77 25 issuance by the cooperative, membership interests in a
 77 26 cooperative may only be sold or transferred with the approval
 77 27 of the board.  The board may adopt resolutions prescribing
 77 28 procedures to prospectively approve transfers.
 77 29    6.  COOPERATIVE FIRST RIGHT TO PURCHASE MEMBERSHIP
 77 30 INTERESTS.  The articles or bylaws may provide that the
 77 31 cooperative or the patron members, individually or
 77 32 collectively, have the first privilege of purchasing the
 77 33 membership interests of any class of membership interests
 77 34 offered for sale.  The first privilege to purchase membership
 77 35 interests may be satisfied by notice to other members that the
 78  1 membership interests are for sale and a procedure by which
 78  2 members may proceed to attempt to purchase and acquire the
 78  3 membership interests.
 78  4    7.  PAYMENT FOR DISSENTING MEMBERSHIP INTERESTS.
 78  5    a.  Subject to the provisions in the articles and bylaws, a
 78  6 member may dissent from and obtain payment for the fair value
 78  7 of the member's membership interests in the cooperative if all
 78  8 of the following apply:
 78  9    (1)  The majority of the cooperative's member voting power
 78 10 is held by different classes of interests.
 78 11    (2)  The articles or bylaws are amended or the cooperative
 78 12 is merged or otherwise combined with another entity in a
 78 13 manner that materially and adversely affects the rights and
 78 14 preferences of the membership interests of the dissenting
 78 15 member.
 78 16    b.  The dissenting member shall file a notice of intent to
 78 17 demand fair value of the membership interest with the records
 78 18 officer of the cooperative within thirty days after the
 78 19 amendment of the bylaws and notice of the amendment to
 78 20 members; otherwise, the right of the dissenting member to
 78 21 demand payment of fair value for the membership interest is
 78 22 waived.  If a proposed amendment of the articles or bylaws
 78 23 must be approved by the members, a member who is entitled to
 78 24 dissent and who wishes to exercise dissenter's rights shall
 78 25 file a notice to demand fair value of the membership interest
 78 26 with the records officer of the cooperative; otherwise, the
 78 27 right to demand fair value for the membership interest by the
 78 28 dissenting member is waived.  After receipt of the dissenting
 78 29 member's demand notice and approval of the amendment, the
 78 30 cooperative has sixty days to rescind the amendment, or
 78 31 otherwise the cooperative shall remit the fair value for the
 78 32 member's interest to the dissenting member by one hundred
 78 33 eighty days after receipt of the notice.  Upon receipt of the
 78 34 fair value for the membership interest, the member has no
 78 35 further member rights in the cooperative.
 79  1    Sec. 68.  NEW SECTION.  501A.902  ASSIGNMENT OF FINANCIAL
 79  2 RIGHTS.
 79  3    1.  ASSIGNMENT OF FINANCIAL RIGHTS PERMITTED.  Except as
 79  4 provided in subsection 3, a member's financial rights are
 79  5 transferable in whole or in part.
 79  6    2.  EFFECT OF ASSIGNMENT OF FINANCIAL RIGHTS.  An
 79  7 assignment of a member's financial rights entitles the
 79  8 assignee to receive, to the extent assigned, only the share of
 79  9 profits and losses and the distributions to which the assignor
 79 10 would otherwise be entitled.  An assignment of a member's
 79 11 financial rights does not dissolve the cooperative and does
 79 12 not entitle or empower the assignee to become a member, to
 79 13 exercise any governance rights, to receive any notices from
 79 14 the cooperative, or to cause dissolution.  The assignment
 79 15 shall not allow the assignee to control the member's exercise
 79 16 of governance or voting rights.
 79 17    3.  RESTRICTIONS OF ASSIGNMENT OF FINANCIAL RIGHTS.
 79 18    a.  A restriction on the assignment of financial rights may
 79 19 be imposed in the articles, in the bylaws, in a member control
 79 20 agreement, by a resolution adopted by the members, by an
 79 21 agreement among or other written action by the members, or by
 79 22 an agreement among or other written action by the members and
 79 23 the cooperative.  A restriction is not binding with respect to
 79 24 financial rights reflected in the required records before the
 79 25 adoption of the restriction, unless the owners of those
 79 26 financial rights are parties to the agreement or voted in
 79 27 favor of the restriction.
 79 28    b.  Subject to paragraph "c", a written restriction on the
 79 29 assignment of financial rights that is not manifestly
 79 30 unreasonable under the circumstances and is noted
 79 31 conspicuously in the required records may be enforced against
 79 32 the owner of the restricted financial rights or a successor or
 79 33 transferee of the owner, including a pledgee or a legal
 79 34 representative.  Unless noted conspicuously in the required
 79 35 records, a restriction, even though permitted by this section,
 80  1 is ineffective against a person without knowledge of the
 80  2 restriction.
 80  3    c.  With regard to restrictions on the assignment of
 80  4 financial rights, a would=be assignee of financial rights is
 80  5 entitled to rely on a statement of membership interest issued
 80  6 by the cooperative under section 501A.903.  A restriction on
 80  7 the assignment of financial rights, which is otherwise valid
 80  8 and in effect at the time of the issuance of a statement of
 80  9 membership interest but which is not reflected in that
 80 10 statement, is ineffective against an assignee who takes an
 80 11 assignment in reliance on the statement.
 80 12    d.  Notwithstanding any provision of law, articles, bylaws,
 80 13 member control agreement, other agreement, resolution, or
 80 14 action to the contrary, a security interest in a member's
 80 15 financial rights may be foreclosed and otherwise enforced, and
 80 16 a secured party may assign a member's financial rights in
 80 17 accordance with the uniform commercial code, chapter 554,
 80 18 without the consent or approval of the member whose financial
 80 19 rights are subject to the security interest.
 80 20    Sec. 69.  NEW SECTION.  501A.903  NATURE OF A MEMBERSHIP
 80 21 INTEREST AND STATEMENT OF INTEREST OWNED.
 80 22    1.  GENERALLY.  A membership interest is personal property.
 80 23 A member has no interest in specific cooperative property.
 80 24 All property of the cooperative is property of the
 80 25 cooperative.
 80 26    2.  STATEMENT OF MEMBERSHIP INTEREST.  At the request of
 80 27 any member, the cooperative shall state in writing the
 80 28 particular membership interest owned by that member as of the
 80 29 date the cooperative makes the statement.  The statement must
 80 30 describe the member's rights to vote, if any, to share in
 80 31 profits and losses, and to share in distributions,
 80 32 restrictions on assignments of financial rights under section
 80 33 501A.902, subsection 3, or voting rights under section
 80 34 501A.810 then in effect, as well as any assignment of the
 80 35 member's rights then in effect other than a security interest.
 81  1    3.  TERMS OF MEMBERSHIP INTERESTS.  All the membership
 81  2 interests of a cooperative are subject to all of the
 81  3 following:
 81  4    a.  Membership interests shall be of one class, without
 81  5 series, unless the articles or bylaws establish or authorize
 81  6 the board to establish more than one class or series within
 81  7 classes.
 81  8    b.  Ordinary patron membership interests and, if
 81  9 authorized, nonpatron membership interest subject to this
 81 10 chapter are entitled to vote as provided in section 501A.810,
 81 11 and have equal rights and preferences in all matters not
 81 12 otherwise provided for by the board and to the extent that the
 81 13 articles or bylaws have fixed the relative rights and
 81 14 preferences of different classes and series.
 81 15    c.  Membership interests share profits and losses and are
 81 16 entitled to distributions as provided in sections 501A.1005
 81 17 and 501A.1006.
 81 18    4.  RIGHTS OF JUDGMENT CREDITOR.  On application to a court
 81 19 of competent jurisdiction by any judgment creditor of a
 81 20 member, the court may charge a member's or an assignee's
 81 21 financial rights with payment of the unsatisfied amount of the
 81 22 judgment with interest.  To the extent so charged, the
 81 23 judgment creditor has only the rights of an assignee of a
 81 24 member's financial rights under section 501A.902.  This
 81 25 chapter does not deprive any member or assignee of financial
 81 26 rights of the benefit of any exemption laws applicable to the
 81 27 membership interest.  This section is the sole and exclusive
 81 28 remedy of a judgment creditor with respect to the judgment
 81 29 debtor's membership interest.
 81 30    5.  a.  Subject to any restrictions in the articles or
 81 31 bylaws, the power granted in this subsection may be exercised
 81 32 by a resolution or resolutions establishing a class or series,
 81 33 setting forth the designation of the class or series, and
 81 34 fixing the relative rights and preferences of the class or
 81 35 series.  Any of the rights and preferences of a class or
 82  1 series established in the articles, bylaws, or by resolution
 82  2 of the board may do any of the following:
 82  3    (1)  Be made dependent upon facts ascertainable outside the
 82  4 articles or bylaws or outside the resolution or resolutions
 82  5 establishing the class or series, if the manner in which the
 82  6 facts operate upon the rights and preferences of the class or
 82  7 series is clearly and expressly set forth in the articles or
 82  8 bylaws or in the resolution or resolutions establishing the
 82  9 class or series.
 82 10    (2)  Include by reference some or all of the terms of any
 82 11 agreements, contracts, or other arrangements entered into by
 82 12 the cooperative in connection with the establishment of the
 82 13 class or series if the cooperative retains at its principal
 82 14 executive office a copy of the agreements, contracts, or other
 82 15 arrangements or the portions will be included by reference.
 82 16    b.  A statement setting forth the name of the cooperative
 82 17 and the text of the resolution and certifying the adoption of
 82 18 the resolution and the date of adoption must be given to the
 82 19 members before the acceptance of any contributions for which
 82 20 the resolution creates rights or preferences not set forth in
 82 21 the articles or bylaws.  Where the members have received
 82 22 notice of the creation of membership interests with rights or
 82 23 preferences not set forth in the articles or bylaws before the
 82 24 acceptance of the contributions with respect to the membership
 82 25 interests, the statement may be filed anytime within one year
 82 26 after the acceptance of the contributions.  The resolution is
 82 27 effective three days after delivery to the members is deemed
 82 28 effective by the board, or, if the statement is not required
 82 29 to be given to the members before the acceptance of
 82 30 contributions, on the date of its adoption by the directors.
 82 31    6.  SPECIFIC TERMS.  Without limiting the authority granted
 82 32 in this section, in regulating the membership interests of a
 82 33 class or series, a cooperative may do any of the following:
 82 34    a.  Subject to the right of the cooperative to redeem any
 82 35 of those membership interests at the price fixed for their
 83  1 redemption by the articles or bylaws or by the board.
 83  2    b.  Entitle the members to receive cumulative, partially
 83  3 cumulative, or noncumulative distributions.
 83  4    c.  Provide a preference over any class or series of
 83  5 membership interests for the payment of distributions of any
 83  6 or all kinds.
 83  7    d.  Convert into membership interests of any other class or
 83  8 any series of the same or another class.
 83  9    e.  Provide full, partial, or no voting rights, except as
 83 10 provided in section 501A.810.
 83 11    7.  GRANT OF A SECURITY INTEREST.  For the purpose of any
 83 12 law relating to security interests, membership interests,
 83 13 governance or voting rights, and financial rights are each to
 83 14 be characterized as provided in section 554.8103, subsection
 83 15 3.
 83 16    8.  POWERS OF ESTATE OF A DECEASED OR INCOMPETENT MEMBER.
 83 17    a.  If a member who is an individual dies or a court of
 83 18 competent jurisdiction adjudges the member to be incompetent
 83 19 to manage the member's person or property, or an order for
 83 20 relief under the bankruptcy code is entered with respect to
 83 21 the member, the member's executor, administrator, guardian,
 83 22 conservator, trustee, or other legal representative may
 83 23 exercise all of the member's rights for the purpose of
 83 24 settling the estate or administering the member's property.
 83 25 If a member is a business entity, trust, or other entity and
 83 26 is dissolved, terminated, or placed by a court in receivership
 83 27 or bankruptcy, the powers of that member may be exercised by
 83 28 its legal representative or successor.
 83 29    b.  If an event referred to in paragraph "a" causes the
 83 30 termination of a member's membership interest and the
 83 31 termination does not result in dissolution, then, subject to
 83 32 the articles and bylaws, all of the following apply:
 83 33    (1)  As provided in section 501A.902, the terminated
 83 34 member's interest will be considered to be merely that of an
 83 35 assignee of the financial rights owned before the termination
 84  1 of membership.
 84  2    (2)  The rights to be exercised by the legal representative
 84  3 of the terminated member shall be limited accordingly.
 84  4    9.  LIABILITY OF SUBSCRIBERS AND MEMBERS WITH RESPECT TO
 84  5 MEMBERSHIP INTERESTS.  A person who subscribes to or owns a
 84  6 membership interest in a cooperative is under no obligation to
 84  7 the cooperative or its creditors with respect to the
 84  8 membership interests subscribed for or owned, except to pay to
 84  9 the cooperative the full consideration for which the
 84 10 membership interests are issued or to be issued.
 84 11    Sec. 70.  NEW SECTION.  501A.904  CERTIFICATED MEMBERSHIP
 84 12 INTERESTS.
 84 13    1.  CERTIFICATED == UNCERTIFICATED.  The membership
 84 14 interests of a cooperative shall be either certificated or
 84 15 uncertificated.  Each holder of certificated membership
 84 16 interests issued is entitled to a certificate of membership
 84 17 interest.
 84 18    2.  SIGNATURE REQUIRED.  Certificates shall be signed by an
 84 19 agent or officer authorized in the articles or bylaws to sign
 84 20 share certificates or, in the absence of an authorization, by
 84 21 the chairperson or records officer of the cooperative.
 84 22    3.  SIGNATURE VALID.  If a person signs or has a facsimile
 84 23 signature placed upon a certificate while the chairperson, an
 84 24 officer, transfer agent, or records officer of a cooperative,
 84 25 the certificate may be issued by the cooperative, even if the
 84 26 person has ceased to have that capacity before the certificate
 84 27 is issued, with the same effect as if the person had that
 84 28 capacity at the date of its issue.
 84 29    4.  FORM OF CERTIFICATE.  A certificate representing
 84 30 membership interests of a cooperative shall contain on its
 84 31 face all of the following:
 84 32    a.  The name of the cooperative.
 84 33    b.  A statement that the cooperative is organized under the
 84 34 laws of this state and this chapter.
 84 35    c.  The name of the person to whom the certificate is
 85  1 issued.
 85  2    d.  The number and class of membership interests, and the
 85  3 designation of the series, if any, that the certificate
 85  4 represents.
 85  5    e.  A statement that the membership interests in the
 85  6 cooperative are subject to the articles and bylaws of the
 85  7 cooperative.
 85  8    f.  Any restrictions on transfer, including approval of the
 85  9 board, if applicable, first rights of purchase by the
 85 10 cooperative, and other restrictions on transfer, which may be
 85 11 stated by reference to the back of the certificate or to
 85 12 another document.
 85 13    5.  LIMITATIONS SET FORTH.  A certificate representing
 85 14 membership interests issued by a cooperative authorized to
 85 15 issue membership interests of more than one class or series
 85 16 shall set forth upon the face or back of the certificate, or
 85 17 shall state that the cooperative will furnish to any member
 85 18 upon request and without charge, a full statement of the
 85 19 designations, preferences, limitations, and relative rights of
 85 20 the membership interests of each class or series authorized to
 85 21 be issued, so far as they have been determined, and the
 85 22 authority of the board to determine the relative rights and
 85 23 preferences of subsequent classes or series.
 85 24    6.  PRIMA FACIE EVIDENCE.  A certificate signed as provided
 85 25 in subsection 2 is prima facie evidence of the ownership of
 85 26 the membership interests referred to in the certificate.
 85 27    7.  UNCERTIFICATED MEMBERSHIP INTERESTS.  Unless
 85 28 uncertificated membership interests are prohibited by the
 85 29 articles or bylaws, a resolution approved by the affirmative
 85 30 vote of a majority of the directors present may provide that
 85 31 some or all of any or all classes and series of its membership
 85 32 interests will be uncertificated membership interests.
 85 33    The resolution does not apply to membership interests
 85 34 represented by a certificate until the certificate is
 85 35 surrendered to the cooperative.  Within a reasonable time
 86  1 after the issuance or transfer of uncertificated membership
 86  2 interests, the cooperative shall send to the new member the
 86  3 information required by this section to be stated on
 86  4 certificates.  This information is not required to be sent to
 86  5 the new holder by a publicly held cooperative that has adopted
 86  6 a system of issuance, recordation, and transfer of its
 86  7 membership interests by electronic or other means not
 86  8 involving an issuance of certificates if the system complies
 86  9 with section 17A of the Securities Exchange Act of 1934, 15
 86 10 U.S.C. } 78a et seq.  Except as otherwise expressly provided
 86 11 by statute, the rights and obligations of the holders of
 86 12 certificated and uncertificated membership interests of the
 86 13 same class and series are identical.
 86 14    Sec. 71.  NEW SECTION.  501A.905  LOST CERTIFICATES ==
 86 15 REPLACEMENT.
 86 16    1.  ISSUANCE.  A new membership interest certificate may be
 86 17 issued under section 554.8405 in place of one that is alleged
 86 18 to have been lost, stolen, or destroyed.
 86 19    2.  NOT OVERISSUE.  The issuance of a new certificate under
 86 20 this section does not constitute an overissue of the
 86 21 membership interests the new certificate represents.
 86 22    Sec. 72.  NEW SECTION.  501A.906  RESTRICTION ON TRANSFER
 86 23 OR REGISTRATION OF MEMBERSHIP INTERESTS.
 86 24    1.  HOW IMPOSED.  A restriction on the transfer or
 86 25 registration of transfer of membership interests of a
 86 26 cooperative may be imposed in the articles, in the bylaws, by
 86 27 a resolution adopted by the members, or by an agreement among
 86 28 or other written action by a number of members or holders of
 86 29 other membership interests or among them and the cooperative.
 86 30 A restriction is not binding with respect to membership
 86 31 interests issued prior to the adoption of the restriction,
 86 32 unless the holders of those membership interests are parties
 86 33 to the agreement or voted in favor of the restriction.
 86 34    2.  RESTRICTIONS PERMITTED.  A written restriction on the
 86 35 transfer or registration of transfer of membership interests
 87  1 of a cooperative that is not manifestly unreasonable under the
 87  2 circumstances may be enforced against the holder of the
 87  3 restricted membership interests or a successor or transferee
 87  4 of the holder, including a pledgee or a legal representative,
 87  5 if the restriction is any of the following:
 87  6    a.  Noted conspicuously on the face or back of the
 87  7 certificate.
 87  8    b.  Included in this chapter or the articles or bylaws.
 87  9    c.  Included in information sent to the holders of
 87 10 uncertificated membership interests.
 87 11    Unless otherwise restricted by this chapter, the articles,
 87 12 bylaws, noted conspicuously on the face or back of the
 87 13 certificate, or included in information sent to the holders of
 87 14 uncertificated membership interests, a restriction, even
 87 15 though permitted by this section, is ineffective against a
 87 16 person without knowledge of the restriction.  A restriction
 87 17 under this section is deemed to be noted conspicuously and is
 87 18 effective if the existence of the restriction is stated on the
 87 19 certificate and reference is made to a separate document
 87 20 creating or describing the restriction.
 87 21                          SUBCHAPTER 10
 87 22          CONTRIBUTIONS, ALLOCATIONS, AND DISTRIBUTIONS
 87 23    Sec. 73.  NEW SECTION.  501A.1001  AUTHORIZATION, FORM, AND
 87 24 ACCEPTANCE OF CONTRIBUTIONS.
 87 25    1.  Subject to any restrictions in this chapter regarding
 87 26 patron and nonpatron membership interests or in the articles
 87 27 or bylaws, and only when authorized by the board, a
 87 28 cooperative may accept contributions, which may be patron or
 87 29 nonpatron membership contributions as determined by the board
 87 30 under subsections 2 and 3, make contribution agreements under
 87 31 section 501A.1003, and make contribution rights agreements
 87 32 under section 501A.1004.
 87 33    2.  PERMISSIBLE FORMS.  A person may make a contribution to
 87 34 a cooperative by any of following:
 87 35    a.  Paying money or transferring the ownership of an
 88  1 interest in property to the cooperative or rendering services
 88  2 to or for the benefit of the cooperative.
 88  3    b.  Executing a written obligation signed by the person to
 88  4 pay money or transfer ownership of an interest in property to
 88  5 the cooperative or to perform services to or for the benefit
 88  6 of the cooperative.
 88  7    3.  A purported contribution shall not be treated or
 88  8 considered as a contribution, unless all of the following
 88  9 apply:
 88 10    a.  The board accepts the contribution on behalf of the
 88 11 cooperative and in that acceptance describes the contribution,
 88 12 including terms of future performance, if any, and states the
 88 13 value being accorded to the contribution.
 88 14    b.   The fact of contribution and the contribution's
 88 15 accorded value are both reflected in the required records of
 88 16 the cooperative.
 88 17    4.  The determinations of the board as to the amount or
 88 18 fair value or the fairness to the cooperative of the
 88 19 contribution accepted or to be accepted by the cooperative or
 88 20 the terms of payment or performance, including under a
 88 21 contribution rights in section 501A.1003, and a contribution
 88 22 rights agreement in section 501A.1004, are presumed to be
 88 23 proper if they are made in good faith and on the basis of
 88 24 accounting methods, or a fair valuation or other method,
 88 25 reasonable in the circumstances.  Directors who are present
 88 26 and entitled to vote, and who, intentionally or without
 88 27 reasonable investigation, fail to vote against approving a
 88 28 consideration that is unfair to the cooperative, or overvalue
 88 29 property or services received or to be received by the
 88 30 cooperative as a contribution, are jointly and severally
 88 31 liable to the cooperative for the benefit of the then members
 88 32 who did not consent to and are damaged by the action to the
 88 33 extent of the damages of those members.  A director against
 88 34 whom a claim is asserted under this subsection, except in case
 88 35 of knowing participation in a deliberate fraud, is entitled to
 89  1 contribution on an equitable basis from other directors who
 89  2 are liable under this subsection.
 89  3    Sec. 74.  NEW SECTION.  501A.1002  RESTATEMENT OF VALUE OF
 89  4 PREVIOUS CONTRIBUTIONS.
 89  5    1.  DEFINITION.  As used in this section, an "old
 89  6 contribution" is a contribution reflected in the required
 89  7 records of a cooperative before the time the cooperative
 89  8 accepts a new contribution.
 89  9    2.  RESTATEMENT REQUIRED.  Whenever a cooperative accepts a
 89 10 new contribution, the board shall restate, as required by this
 89 11 section, the value of all old contributions.
 89 12    3.  RESTATEMENT AS TO PARTICULAR SERIES OR CLASS TO WHICH
 89 13 NEW CONTRIBUTION PERTAINS.
 89 14    a.  Unless otherwise provided in a cooperative's articles
 89 15 or bylaws, this subsection sets forth the method of restating
 89 16 the value of old contributions that pertain to the same series
 89 17 or class to which the new contribution pertains.  In restating
 89 18 the value, the cooperative shall do all of the following:
 89 19    (1)  State the value the cooperative has accorded to the
 89 20 new contribution under section 504A.1001, subsection 3,
 89 21 paragraph "a".
 89 22    (2)  Determine what percentage the value stated under
 89 23 subparagraph (1) will constitute, after the restatement
 89 24 required by this subsection, of the total value of all
 89 25 contributions that pertain to the particular series or class
 89 26 to which the new contribution pertains.
 89 27    (3)  Divide the value stated under subparagraph (1) by the
 89 28 percentage determined under subparagraph (2), yielding the
 89 29 total value, after the restatement required by this
 89 30 subsection, of all contributions pertaining to the particular
 89 31 series or class.
 89 32    (4)  Subtract the value stated under subparagraph (1) from
 89 33 the value determined under subparagraph (3), yielding the
 89 34 total value, after the restatement required by this
 89 35 subsection, of all the old contributions pertaining to the
 90  1 particular series or class.
 90  2    (5)  Subtract the value, as reflected in the required
 90  3 records before the restatement required by this subsection, of
 90  4 the old contributions from the value determined under
 90  5 subparagraph (4), yielding the value to be allocated among and
 90  6 added to the old contributions pertaining to the particular
 90  7 series or class.
 90  8    (6)  Allocate the value determined under subparagraph (5)
 90  9 proportionally among the old contributions pertaining to the
 90 10 particular series or class, add the allocated values to those
 90 11 old contributions, and change the required records
 90 12 accordingly.
 90 13    b.  The values determined under paragraph "a", subparagraph
 90 14 (5), and allocated and added under paragraph "a", subparagraph
 90 15 (6), may be positive, negative, or zero.
 90 16    4.  RESTATEMENT METHOD FOR OTHER SERIES OR CLASS.  Unless
 90 17 otherwise provided in a cooperative's articles or bylaws, this
 90 18 subsection sets forth the method of restating the value of old
 90 19 contributions that do not pertain to the same series or class
 90 20 to which the new contribution pertains.  In restating the
 90 21 value, the cooperative shall do all of the following:
 90 22    a.  Determine the percentage by which the restatement under
 90 23 subsection 3 has changed the total contribution value
 90 24 reflected in the required records for the series or class to
 90 25 which the new contribution pertains.
 90 26    b.  As to each old contribution that does not pertain to
 90 27 the same series or class to which the new contribution
 90 28 pertains, change the value reflected in the required records
 90 29 by the percentage determined under paragraph "a".  The
 90 30 percentage determined under paragraph "a" may be positive,
 90 31 negative, or zero.
 90 32    5.  NEW CONTRIBUTIONS MAY BE AGGREGATED.  If a cooperative
 90 33 accepts more than one contribution pertaining to the same
 90 34 series or class at the same time, then for the purpose of the
 90 35 restatement required by this section, the cooperative may
 91  1 consider all the new contributions a single contribution.
 91  2    Sec. 75.  NEW SECTION.  501A.1003  CONTRIBUTION AGREEMENTS.
 91  3    1.  SIGNED WRITING.  A contribution agreement, whether made
 91  4 before or after the formation of the cooperative, is not
 91  5 enforceable against the would=be contributor unless it is in
 91  6 writing and signed by the would=be contributor.
 91  7    2.  IRREVOCABLE PERIOD.  Unless otherwise provided in the
 91  8 contribution agreement, or unless all of the would=be
 91  9 contributors and, if in existence, the cooperative, consent to
 91 10 a shorter or longer period, a contribution agreement is
 91 11 irrevocable for a period of six months.
 91 12    3.  CURRENT AND DEFERRED PAYMENT.  A contribution
 91 13 agreement, whether made before or after the formation of a
 91 14 cooperative, must be paid or performed in full at the time or
 91 15 times, or in the installments, if any, specified in the
 91 16 contribution agreement.  In the absence of a provision in the
 91 17 contribution agreement specifying the time at which the
 91 18 contribution is to be paid or performed, the contribution must
 91 19 be paid or performed at the time or times determined by the
 91 20 board.  However, a call made by the board for payment or
 91 21 performance on contributions must be uniform for all
 91 22 membership interests of the same class or for all membership
 91 23 interests of the same series.
 91 24    4.  FAILURE TO PAY REMEDIES.
 91 25    a.  Unless otherwise provided in the contribution
 91 26 agreement, in the event of default in the payment or
 91 27 performance of an installment or call when due, the
 91 28 cooperative may proceed to collect the amount due in the same
 91 29 manner as a debt due the cooperative.  If a would=be
 91 30 contributor does not make a required contribution of property
 91 31 or services, the cooperative shall require the would=be
 91 32 contributor to contribute cash equal to that portion of the
 91 33 value, as stated in the cooperative's required records, of the
 91 34 contribution that has not been made.
 91 35    b.  If the amount due under a contribution agreement
 92  1 remains unpaid for a period of twenty days after written
 92  2 notice of demand for payment has been given to the delinquent
 92  3 would=be contributor, the membership interests that were
 92  4 subject to the contribution agreement may be offered for sale
 92  5 by the cooperative for a price in money equaling or exceeding
 92  6 the sum of the full balance owed by the delinquent would=be
 92  7 contributor plus the expenses incidental to the sale.
 92  8    If the membership interests that were subject to the
 92  9 contribution agreement are sold according to this paragraph
 92 10 "b", the cooperative shall pay to the delinquent would=be
 92 11 contributor or to the delinquent would=be contributor's legal
 92 12 representative the lesser of one of the following:
 92 13    (1)  The excess of net proceeds realized by the cooperative
 92 14 over the sum of the amount owed by the delinquent would=be
 92 15 contributor plus the expenses incidental to the sale, less any
 92 16 penalty stated in the contribution agreement, which may
 92 17 include forfeiture of the partial contribution.
 92 18    (2)  The amount actually paid by the delinquent would=be
 92 19 contributor.
 92 20    If the membership interests that were subject to the
 92 21 contribution agreement are not sold according to this
 92 22 paragraph "b", the cooperative may collect the amount due in
 92 23 the same manner as a debt due the cooperative or cancel the
 92 24 contribution agreement according to paragraph "c".
 92 25    c.  If the amount due under a contribution agreement
 92 26 remains unpaid for a period of twenty days after written
 92 27 notice of demand for payment has been given to the delinquent
 92 28 would=be contributor and the membership interests that were
 92 29 subject to the defaulted contribution agreement have not been
 92 30 sold according to paragraph "b", the cooperative may cancel
 92 31 the contribution agreement.  In addition, the cooperative may
 92 32 retain any portion of the contribution agreement price
 92 33 actually paid as provided in the contribution agreement.  The
 92 34 cooperative shall refund to the delinquent would=be
 92 35 contributor or the delinquent would=be contributor's legal
 93  1 representatives any portion of the contribution agreement
 93  2 price as provided in the contribution agreement.
 93  3    5.  RESTRICTIONS ON ASSIGNMENT.  Unless otherwise provided
 93  4 in the articles or bylaws, a would=be contributor's rights
 93  5 under a contribution agreement shall not be assigned, in whole
 93  6 or in part, to a person who was not a member at the time of
 93  7 the assignment, unless all the members approve the assignment
 93  8 by unanimous written consent.
 93  9    Sec. 76.  NEW SECTION.  501A.1004  CONTRIBUTION RIGHTS
 93 10 AGREEMENTS.
 93 11    1.  AGREEMENTS PERMITTED.  Subject to any restrictions in a
 93 12 cooperative's articles or bylaws, the cooperative may enter
 93 13 into contribution rights agreements under the terms,
 93 14 provisions, and conditions established by board resolution.
 93 15    2.  WRITING REQUIRED AND TERMS TO BE STATED.  Any
 93 16 contribution rights agreement must be in writing and the
 93 17 writing must state in full, summarize, or include by reference
 93 18 all the agreement's terms, provisions, and conditions of the
 93 19 rights to make contributions.
 93 20    3.  RESTRICTIONS ON ASSIGNMENT.  Unless otherwise provided
 93 21 in a cooperative's articles or bylaws, a would=be
 93 22 contributor's rights under a contribution rights agreement
 93 23 shall not be assigned, in whole or in part, to a person who
 93 24 was not a member at the time of the assignment, unless all the
 93 25 members approve the assignment by unanimous written consent.
 93 26    Sec. 77.  NEW SECTION.  501A.1005  ALLOCATIONS AND
 93 27 DISTRIBUTIONS TO MEMBERS.
 93 28    1.  ALLOCATION OF PROFITS AND LOSSES.  If nonpatron
 93 29 membership interests are authorized by the patrons, the bylaws
 93 30 shall prescribe the allocation of profits and losses between
 93 31 patron membership interests collectively and any other
 93 32 membership interests.  If the bylaws do not otherwise provide,
 93 33 the profits and losses between patron membership interests
 93 34 collectively and other membership interests shall be allocated
 93 35 on the basis of the value of contributions to capital made by
 94  1 the patron membership interests collectively and other
 94  2 membership interests accepted by the cooperative.  The
 94  3 allocation of profits to the patron membership interests
 94  4 collectively shall not be less than fifty percent of the total
 94  5 profits in any fiscal year, except if authorized in the
 94  6 cooperative's articles or bylaws that are adopted by an
 94  7 affirmative vote of the patron members, or in the articles or
 94  8 bylaws as amended by the affirmative vote of the patron
 94  9 members.  However, the allocation of profits to the patron
 94 10 membership interests collectively shall not be less than
 94 11 fifteen percent of the total profits in any fiscal year.
 94 12    2.  DISTRIBUTION OF CASH OR OTHER ASSETS.  A cooperative's
 94 13 bylaws shall prescribe the distribution of cash or other
 94 14 assets of the cooperative among the membership interests of
 94 15 the cooperative.  If nonpatron membership interests are
 94 16 authorized by the patrons and the bylaws do not provide
 94 17 otherwise, distributions and allocations shall be made to the
 94 18 patron membership interests collectively and other members on
 94 19 the basis of the value of contributions to capital made and
 94 20 accepted by the cooperative, by the patron membership
 94 21 interests collectively, and other membership interests.  The
 94 22 distributions to patron membership interests collectively
 94 23 shall not be less than fifty percent of the total
 94 24 distributions in any fiscal year, except if authorized in the
 94 25 articles or bylaws adopted by the affirmative vote of the
 94 26 patron members, or the articles or bylaws as amended by the
 94 27 affirmative vote of the patron members.  However, the
 94 28 distributions to patron membership interests collectively
 94 29 shall not be less than fifteen percent of the total
 94 30 distributions in any fiscal year.
 94 31    Sec. 78.  NEW SECTION.  501A.1006  ALLOCATIONS AND
 94 32 DISTRIBUTIONS TO PATRON MEMBERS.
 94 33    1.  DISTRIBUTION OF NET INCOME.  A cooperative may set
 94 34 aside a portion of net income allocated to the patron
 94 35 membership interests as the board determines advisable to
 95  1 create or maintain a capital reserve.
 95  2    2.  RESERVES.  In addition to a capital reserve, the board
 95  3 may, for patron membership interests, do any of the following:
 95  4    a.  Set aside an amount not to exceed five percent of the
 95  5 annual net income of the cooperative for promoting and
 95  6 encouraging cooperative organization.
 95  7    b.  Establish and accumulate reserves for new buildings,
 95  8 machinery and equipment, depreciation, losses, and other
 95  9 proper purposes.
 95 10    3.  PATRONAGE DISTRIBUTIONS.  Net income allocated to
 95 11 patron members in excess of dividends on equity and additions
 95 12 to reserves shall be distributed to patron members on the
 95 13 basis of patronage.  A cooperative may establish allocation
 95 14 units, whether the units are functional, divisional,
 95 15 departmental, geographic, or otherwise.  The cooperative may
 95 16 provide for pooling arrangements.  The cooperative may account
 95 17 for and distribute net income to patrons on the basis of
 95 18 allocation units and pooling arrangements.  A cooperative may
 95 19 offset the net loss of an allocation unit or pooling
 95 20 arrangement against the net income of other allocation units
 95 21 or pooling arrangements.
 95 22    4.  FREQUENCY OF DISTRIBUTION.  A distribution of net
 95 23 income shall be made at least annually.  The board shall
 95 24 present to the members at their annual meeting a report
 95 25 covering the operations of the cooperative during the
 95 26 preceding fiscal year.
 95 27    5.  FORM OF DISTRIBUTION.  A cooperative may distribute net
 95 28 income to patron members in cash, capital credits, allocated
 95 29 patronage equities, revolving fund certificates, or its own or
 95 30 other securities.
 95 31    6.  ELIGIBLE NONMEMBER PATRONS.  A cooperative may provide
 95 32 in the bylaws that nonmember patrons are allowed to
 95 33 participate in the distribution of net income, payable to
 95 34 patron members on equal terms with patron members.
 95 35    7.  PATRONAGE CREDITS FOR INELIGIBLE MEMBERS.  If a
 96  1 nonmember patron with patronage credits is not qualified or
 96  2 eligible for membership, a refund due may be credited to the
 96  3 nonmember patron's individual account.  The board may issue a
 96  4 certificate of interest to reflect the credited amount.  After
 96  5 the nonmember patron is issued a certificate of interest, the
 96  6 nonmember patron may participate in the distribution of income
 96  7 on the same basis as a patron member.
 96  8    Sec. 79.  NEW SECTION.  501A.1007  MEMBER CONTROL
 96  9 AGREEMENTS.
 96 10    1.  AUTHORIZATION.  A written agreement among persons who
 96 11 are then members, including a sole member, or who have signed
 96 12 subscription or contribution agreements, relating to the
 96 13 control of any phase of the business and affairs of the
 96 14 cooperative, its liquidation, dissolution and termination, or
 96 15 the relations among members or persons who have signed
 96 16 subscription or contribution agreements is valid as provided
 96 17 in subsection 2.  Other than the authorization of nonpatron
 96 18 membership interests as provided in section 501A.901 and
 96 19 nonpatron voting rights as provided in section 501A.810,
 96 20 whenever this chapter provides that a particular result may or
 96 21 must be obtained through a provision in a cooperative's
 96 22 articles or bylaws, the same result can be accomplished
 96 23 through a member control agreement valid under this section or
 96 24 through a procedure established by a member control agreement
 96 25 valid under this section.  However, the member control
 96 26 agreement must be authorized by the cooperative's articles or
 96 27 bylaws and cannot conflict with the cooperative's articles or
 96 28 bylaws.  Any result accomplished through a membership control
 96 29 agreement under this section must be properly disclosed as
 96 30 provided in section 501A.901.
 96 31    2.  VALID EXECUTION.  Other than patron member voting
 96 32 control under section 501A.810 and patron member allocation
 96 33 and distribution provisions under sections 501A.1005 and
 96 34 501A.1006, a written agreement among persons described in
 96 35 subsection 1 that relates to the control of or the
 97  1 liquidation, dissolution, and termination of the cooperative,
 97  2 the relations among them, or any phase of the business and
 97  3 affairs of the cooperative is valid if it meets the
 97  4 requirements of this subsection.  This includes but is not
 97  5 limited to the management of its business, the declaration and
 97  6 payment of distributions, the sharing of profits and losses,
 97  7 the election of directors, the employment of members by the
 97  8 cooperative, or the arbitration of disputes.  The written
 97  9 agreement must be signed by all persons who are then the
 97 10 members of the cooperative, whether or not the members all
 97 11 have voting power, and all those who have signed contribution
 97 12 agreements, regardless of whether those signatories will, when
 97 13 members, have voting power.
 97 14    3.  OTHER AGREEMENTS NOT AFFECTED.  This section does not
 97 15 apply to, limit, or restrict agreements otherwise valid, nor
 97 16 is the procedure set forth in this section the exclusive
 97 17 method of agreement among members or between the members and
 97 18 the cooperative with respect to any of the matters described.
 97 19    Sec. 80.  NEW SECTION.  501A.1008  REVERSION OF
 97 20 DISBURSEMENTS.
 97 21    1.  Once a person's membership interest or other member's
 97 22 equity in a cooperative is deemed abandoned under section
 97 23 556.5, the cooperative may retain any disbursement held by the
 97 24 cooperative for or owing to the person.  The cooperative may
 97 25 also deliver the disbursement to the treasurer of state for
 97 26 disposition as abandoned property pursuant to sections 556.5
 97 27 and 556.11.
 97 28    2.  If the cooperative elects to retain the disbursement
 97 29 under this section, the disbursement shall be deposited into a
 97 30 reversion fund established by the cooperative.
 97 31    3.  A disbursement having an aggregate value of fifty
 97 32 dollars or more that is retained by the cooperative shall be
 97 33 forfeited to the cooperative only if the cooperative publishes
 97 34 at least one notice of the abandoned property in a publication
 97 35 regularly distributed to its membership or in a newspaper
 98  1 having a general circulation in the county where the
 98  2 cooperative is located.  The notice shall include all of the
 98  3 following:
 98  4    a.  The name and address of the cooperative.
 98  5    b.  The name of the person who has an interest in the
 98  6 disbursement according to the records of the cooperative.
 98  7    c.  A brief description of the type of disbursement
 98  8 retained by the cooperative.
 98  9    d.  A statement that the disbursement will be forfeited to
 98 10 the cooperative unless the person files a claim for the
 98 11 disbursement within the period provided for in this section.
 98 12    4.  a.  Subject to this subsection, a person asserting an
 98 13 interest in the disbursement may file a claim for it with the
 98 14 cooperative in a manner and according to procedures required
 98 15 by the cooperative.  If a person is entitled to an abandoned
 98 16 membership interest, or other interest as provided in section
 98 17 556.20 or 556.21, the cooperative shall also pay the person
 98 18 the disbursement deposited in the reversion fund that is
 98 19 realized or accrued from the membership interest or other
 98 20 interest.
 98 21    b.  If a person has not filed a claim for the disbursement
 98 22 within six months after the first date that the notice of
 98 23 abandoned property is first published as provided in this
 98 24 section, the disbursement shall be forfeited to the
 98 25 cooperative.
 98 26    5.  The disbursements deposited into the reversion fund
 98 27 that are forfeited to the cooperative shall be used as
 98 28 provided in this subsection.  The cooperative may authorize
 98 29 the payment of forfeited disbursements to persons claiming
 98 30 interests in forfeited disbursements as provided in the
 98 31 cooperative's articles of organization or bylaws.  Otherwise,
 98 32 forfeited disbursements shall be used as the directors deem
 98 33 suitable for any of the following purposes:
 98 34    a.  Teaching and promoting cooperation.  The directors may
 98 35 deposit the amounts of disbursements into the education fund
 99  1 as established by the cooperative.
 99  2    b.  Economic development including private or joint public
 99  3 and private investments involving the creation of economic
 99  4 opportunities for its members or the retention of existing
 99  5 sources of income that would otherwise be lost.
 99  6                          SUBCHAPTER 11
 99  7                      MERGER AND CONVERSION
 99  8    Sec. 81.  NEW SECTION.  501A.1101  MERGER AND
 99  9 CONSOLIDATION.
 99 10    1.  AUTHORIZATION.  Unless otherwise prohibited,
 99 11 cooperatives organized under the laws of this state, including
 99 12 cooperatives organized under this chapter or traditional
 99 13 cooperatives, may merge or consolidate with each other, an
 99 14 Iowa limited liability company under the provisions of section
 99 15 490A.1207, or other business entities organized under the laws
 99 16 of another state by complying with the provisions of this
 99 17 section and the law of the state where the surviving or new
 99 18 business entity will exist.  A cooperative shall not merge or
 99 19 consolidate with a business entity organized under the laws of
 99 20 this state, other than a traditional cooperative unless the
 99 21 law governing the business entity expressly authorizes merger
 99 22 or consolidation with a cooperative.  This subsection does not
 99 23 authorize a foreign business entity to do any act not
 99 24 authorized by the law governing the foreign business entity.
 99 25    2.  PLAN.  To initiate a merger or consolidation of a
 99 26 cooperative, a written plan of merger or consolidation shall
 99 27 be prepared by the board or by a committee selected by the
 99 28 board to prepare a plan.  The plan shall state all of the
 99 29 following:
 99 30    a.  The names of the constituent domestic cooperative, the
 99 31 name of any Iowa limited liability company that is a party to
 99 32 the merger, to the extent authorized under section 490A.1207,
 99 33 and any foreign business entities.
 99 34    b.  The name of the surviving or new domestic cooperative,
 99 35 Iowa limited liability company as required by section
100  1 490A.1207, or other foreign business entity.
100  2    c.  The manner and basis of converting membership or
100  3 ownership interests of the constituent domestic cooperative,
100  4 the surviving Iowa limited liability company as provided in
100  5 section 490A.1207, or foreign business entity into membership
100  6 or ownership interests in the surviving or new domestic
100  7 cooperative, the surviving Iowa limited liability company as
100  8 authorized in section 490A.1207, or foreign business entity.
100  9    d.  The terms of the merger or consolidation.
100 10    e.  The proposed effect of the merger or consolidation on
100 11 the members and patron members of each constituent domestic
100 12 cooperative.
100 13    f.  For a consolidation, the plan shall contain the
100 14 articles of the entity or organizational documents to be filed
100 15 with the state in which the entity is organized or, if the
100 16 surviving organization is an Iowa limited liability company,
100 17 the articles of organization.
100 18    3.  NOTICE.  The following shall apply to notice:
100 19    a.  The board shall mail or otherwise transmit or deliver
100 20 notice of the merger or consolidation to each member.  The
100 21 notice shall contain the full text of the plan, and the time
100 22 and place of the meeting at which the plan will be considered.
100 23    b.  A cooperative with more than two hundred members may
100 24 provide the notice in the same manner as a regular members'
100 25 meeting notice.
100 26    4.  ADOPTION OF PLAN.
100 27    a.  A plan of merger or consolidation shall be adopted by a
100 28 domestic cooperative as provided in this subsection.
100 29    b.  The plan of merger or consolidation is adopted if all
100 30 of the following apply:
100 31    (1)  A quorum of the members eligible to vote is registered
100 32 as being present or represented by mail vote or alternative
100 33 ballot at the meeting.
100 34    (2)  The plan is approved by the patron members, or if
100 35 otherwise provided in the articles or bylaws, is approved by a
101  1 majority of the votes cast in each class of votes cast.  For a
101  2 domestic cooperative with articles or bylaws requiring more
101  3 than a majority of the votes cast or other conditions for
101  4 approval, the plan must be approved by a proportion of the
101  5 votes cast or a number of total members as required by the
101  6 articles or bylaws and the conditions for approval in the
101  7 articles or bylaws have been satisfied.
101  8    c.  After the plan has been adopted, articles of merger or
101  9 consolidation stating the plan and that the plan was adopted
101 10 according to this subsection shall be signed by the
101 11 chairperson, vice chairperson, records officer, or documents
101 12 officer of each cooperative merging or consolidating.
101 13    d.  The articles of merger or consolidation shall be filed
101 14 in the office of the secretary.
101 15    e.  For a merger, the articles of the surviving domestic
101 16 cooperative subject to this chapter are deemed amended to the
101 17 extent provided in the articles of merger.
101 18    f.  Unless a later date is provided in the plan, the merger
101 19 or consolidation is effective when the articles of merger or
101 20 consolidation are filed in the office of the secretary or the
101 21 appropriate office of another jurisdiction.
101 22    g.  The secretary shall issue a certificate of organization
101 23 of the merged or consolidated cooperative.
101 24    5.  EFFECT OF MERGER.  For a merger that does not involve
101 25 an Iowa limited liability company, the following shall apply
101 26 to the effect of a merger:
101 27    a.  After the effective date, the domestic cooperative,
101 28 Iowa limited liability company, if party to the plan, and any
101 29 foreign business entity that is a party to the plan become a
101 30 single entity.  For a merger, the surviving business entity is
101 31 the business entity designated in the plan.  For a
101 32 consolidation, the new domestic cooperative, the Iowa limited
101 33 liability company, if any, and any foreign business entity is
101 34 the business entity provided for in the plan.  Except for the
101 35 surviving or new domestic cooperative, Iowa limited liability
102  1 company, or foreign business entity, the separate existence of
102  2 each merged or consolidated domestic or foreign business
102  3 entity that is a party to the plan ceases on the effective
102  4 date of the merger or consolidation.
102  5    b.  The surviving or new domestic cooperative, Iowa limited
102  6 liability company, or foreign business entity possesses all of
102  7 the rights and property of each of the merged or consolidated
102  8 business entities and is responsible for all their
102  9 obligations.  The title to property of the merged or
102 10 consolidated domestic cooperative, Iowa limited liability
102 11 company, or foreign business entity is vested in the surviving
102 12 or new domestic cooperative, Iowa limited liability company,
102 13 or foreign business entity without reversion or impairment of
102 14 the title caused by the merger or consolidation.
102 15    c.  If a merger involves an Iowa limited liability company,
102 16 this subsection is subject to the provisions of section
102 17 490A.1207.
102 18    Sec. 82.  NEW SECTION.  501A.1102  MERGER OF SUBSIDIARY.
102 19    1.  WHEN AUTHORIZED == CONTENTS OF PLAN.  For purposes of
102 20 this section, "subsidiary" means a domestic cooperative, an
102 21 Iowa limited liability company, or a foreign cooperative.
102 22    2.  An Iowa limited liability company may only participate
102 23 in a merger under this section to the extent authorized under
102 24 section 490A.1207.  A parent domestic cooperative or a
102 25 subsidiary that is a domestic cooperative may complete the
102 26 merger of a subsidiary as provided in this section.  However,
102 27 if either the parent cooperative or the subsidiary is a
102 28 business entity organized under the laws of this state, the
102 29 merger of the subsidiary is not authorized under this section
102 30 unless the law governing the business entity expressly
102 31 authorizes merger with a cooperative.
102 32    a.  A parent cooperative owning at least ninety percent of
102 33 the outstanding ownership interests of each class and series
102 34 of a subsidiary directly, or indirectly through related
102 35 organizations, other than classes or series that, absent this
103  1 section, would otherwise not be entitled to vote on the
103  2 merger, may merge the subsidiary into itself or into any other
103  3 subsidiary at least ninety percent of the outstanding
103  4 ownership interests of each class and series of which is owned
103  5 by the parent cooperative directly, or indirectly through
103  6 related organizations, other than classes or series that,
103  7 absent this section, would otherwise not be entitled to vote
103  8 on the merger, without a vote of the members of itself or any
103  9 subsidiary or may merge itself, or itself and one or more of
103 10 the subsidiaries, into one of the subsidiaries under this
103 11 section.  A resolution approved by the affirmative vote of a
103 12 majority of the directors of the parent cooperative present
103 13 shall set forth a plan of merger that contains all of the
103 14 following:
103 15    (1)  The name of the subsidiary or subsidiaries, the name
103 16 of the parent cooperative, and the name of the surviving
103 17 cooperative.
103 18    (2)  The manner and basis of converting the membership
103 19 interests of the subsidiary or subsidiaries or parent
103 20 cooperative into securities of the parent cooperative,
103 21 subsidiary, or of another cooperative or, in whole or in part,
103 22 into money or other property.
103 23    (3)  If the parent cooperative is a constituent cooperative
103 24 but is not the surviving cooperative in the merger, a
103 25 provision for the pro rata issuance of membership interests of
103 26 the surviving cooperative to the holders of membership
103 27 interests of the parent on surrender of any certificates for
103 28 shares or membership interests of the parent cooperative.
103 29    (4)  If the surviving cooperative is a subsidiary, a
103 30 statement of any amendments to the articles of the surviving
103 31 cooperative that will be part of the merger.
103 32    b.  If the parent is a constituent cooperative and the
103 33 surviving cooperative in the merger, the parent cooperative
103 34 may change its cooperative name, without a vote of its
103 35 members, by the inclusion of a provision to that effect in the
104  1 resolution of merger setting forth the plan of merger that is
104  2 approved by the affirmative vote of a majority of the
104  3 directors of the parent cooperative present.  Upon the
104  4 effective date of the merger, the name of the parent
104  5 cooperative shall be changed.
104  6    c.  If the parent cooperative is a constituent cooperative
104  7 but is not the surviving cooperative in the merger, the
104  8 resolution is not effective unless the resolution is also
104  9 approved by the affirmative vote of the holders of a majority
104 10 of the voting power of all membership interests of the parent
104 11 entitled to vote at a regular or special meeting if the parent
104 12 is a cooperative, or in accordance with the laws under which
104 13 the parent is organized if the parent is a foreign business
104 14 entity or foreign cooperative.
104 15    3.  NOTICE TO MEMBERS OF SUBSIDIARY.  Notice of the action,
104 16 including a copy of the plan of merger, shall be delivered to
104 17 each member, other than the parent cooperative and any
104 18 subsidiary of each subsidiary that is a constituent
104 19 cooperative in the merger before, or within ten days after,
104 20 the effective date of the merger.
104 21    4.  ARTICLES OF MERGER == CONTENTS OF ARTICLES.  Articles
104 22 of merger shall be prepared that contain all of the following:
104 23    a.  The plan of merger.
104 24    b.  The number of outstanding membership interests of each
104 25 series and class of each subsidiary that is a constituent
104 26 cooperative in the merger, other than the series or classes
104 27 that, absent this section, would otherwise not be entitled to
104 28 vote on the merger, and the number of membership interests of
104 29 each series and class of the subsidiary or subsidiaries, other
104 30 than series or classes that, absent this section, would
104 31 otherwise not be entitled to vote on the merger, owned by the
104 32 parent directly, or indirectly through related organizations.
104 33    c.  A statement that the plan of merger has been approved
104 34 by the parent under this section.
104 35    5.  ARTICLES SIGNED, FILED.  The articles of merger shall
105  1 be signed on behalf of the parent and filed with the
105  2 secretary.
105  3    6.  CERTIFICATE.  The secretary shall issue a certificate
105  4 of merger to the parent or its legal representative or, if the
105  5 parent is a constituent cooperative but is not the surviving
105  6 cooperative in the merger, to the surviving cooperative or its
105  7 legal representative.
105  8    7.  NONEXCLUSIVITY.  A merger among a parent and one or
105  9 more subsidiaries or among two or more subsidiaries of a
105 10 parent may be accomplished under section 501A.1101 instead of
105 11 this section, in which case this section does not apply.
105 12    Sec. 83.  NEW SECTION.  501A.1103  ABANDONMENT.
105 13    1.  ABANDONMENT BY MEMBERS OF PLAN.  After a plan of merger
105 14 has been approved by the members entitled to vote on the
105 15 approval of the plan and before the effective date of the
105 16 plan, the plan may be abandoned by the same vote that approved
105 17 the plan.
105 18    2.  ABANDONMENT OF MERGER.
105 19    a.  A merger may be abandoned upon any of the following:
105 20    (1)  The members of each of the constituent domestic
105 21 cooperatives entitled to vote on the approval of the plan have
105 22 approved the abandonment at a meeting by the affirmative vote
105 23 of the holders of a majority of the voting power of the
105 24 membership interests entitled to vote.
105 25    (2)  The merger is with a domestic cooperative and an Iowa
105 26 limited liability company or foreign business entity.
105 27    (3)  The abandonment is approved in such manner as may be
105 28 required by section 490A.1207 for the involvement of an Iowa
105 29 limited liability company, or for a foreign business entity by
105 30 the laws of the state under which the foreign business entity
105 31 is organized.
105 32    (4)  The members of a constituent domestic cooperative are
105 33 not entitled to vote on the approval of the plan, and the
105 34 board of the constituent domestic cooperative has approved the
105 35 abandonment by the affirmative vote of a majority of the
106  1 directors present.
106  2    (5)  The plan provides for abandonment and all conditions
106  3 for abandonment set forth in the plan are met.
106  4    (6)  The plan is abandoned before the effective date of the
106  5 plan by a resolution of the board of any constituent domestic
106  6 cooperative abandoning the plan of merger approved by the
106  7 affirmative vote of a majority of the directors present,
106  8 subject to the contract rights of any other person under the
106  9 plan.  If a plan of merger is with a domestic business entity
106 10 or foreign business entity, the plan of merger may be
106 11 abandoned before the effective date of the plan by a
106 12 resolution of the foreign business entity adopted according to
106 13 the laws of the state under which the foreign business entity
106 14 is organized, subject to the contract rights of any other
106 15 person under the plan.  If the plan of merger is with an Iowa
106 16 limited liability company, the plan of merger may be abandoned
106 17 by the Iowa limited liability company as provided in section
106 18 490A.1207, subject to the contractual rights of any other
106 19 person under the plan.
106 20    b.  If articles of merger have been filed with the
106 21 secretary, but have not yet become effective, the constituent
106 22 organizations, in the case of abandonment under paragraph "a",
106 23 subparagraphs (1) through (4), the constituent organizations
106 24 or any one of them, in the case of abandonment under paragraph
106 25 "a", subparagraph (5), or the abandoning organization in the
106 26 case of abandonment under paragraph "a", subparagraph (6),
106 27 shall file with the secretary articles of abandonment that
106 28 include all of the following:
106 29    (1)  The names of the constituent organizations.
106 30    (2)  The provisions of this section under which the plan is
106 31 abandoned.
106 32    (3)  If the plan is abandoned under paragraph "a",
106 33 subparagraph (6), the text of the resolution abandoning the
106 34 plan.
106 35    Sec. 84.  NEW SECTION.  501A.1104  CONVERSION == AMENDMENT
107  1 OF ORGANIZATIONAL DOCUMENTS TO BE GOVERNED BY THIS CHAPTER.
107  2    1.  AUTHORITY.
107  3    a.  A traditional cooperative organized may convert to a
107  4 cooperative and become subject to this chapter by amending its
107  5 organizational documents to conform to the requirements of
107  6 this chapter.
107  7    b.  A traditional cooperative becoming a converted
107  8 cooperative must provide its members with a disclosure
107  9 statement of the rights and obligations of the members and the
107 10 capital structure of the cooperative before becoming subject
107 11 to this chapter.  A traditional cooperative, upon distribution
107 12 of the disclosure required in this subsection and approval of
107 13 its members as necessary for amending its articles under the
107 14 respective chapter of its organization, may amend its articles
107 15 to comply with this chapter.
107 16    c.  A traditional cooperative becoming a converted
107 17 cooperative must prepare a certificate stating all of the
107 18 following:
107 19    (1)  The date on which the traditional cooperative was
107 20 first organized.
107 21    (2)  The name of the traditional cooperative and, if the
107 22 name is changed, the name of the cooperative becoming
107 23 converted.
107 24    (3)  The future effective date and time, which must be a
107 25 date and time certain, that the traditional cooperative will
107 26 be governed by this chapter, if the effective date and time is
107 27 not to be the date and time of filing.
107 28    d.  Upon filing with the secretary of the articles for
107 29 compliance with this chapter and the certificate required
107 30 under paragraph "c", a traditional cooperative is converted
107 31 and governed by this chapter unless a later date and time is
107 32 specified in the certificate under paragraph "c".
107 33    e.  In connection with a conversion under which a
107 34 traditional cooperative becomes governed by this chapter, the
107 35 rights, securities, or interests of the traditional
108  1 cooperative as provided in chapter 497, 498, 499, or 501 may
108  2 be exchanged or converted into rights, property, securities,
108  3 or interests in the converted cooperative.
108  4    2.  EFFECT OF BEING GOVERNED BY THIS CHAPTER.  The
108  5 conversion of a traditional cooperative to a cooperative
108  6 governed by this chapter does not affect any obligations or
108  7 liabilities of the cooperative before the conversion or the
108  8 personal liability of any person incurred before the
108  9 conversion.
108 10    a.  When the conversion is effective, the rights,
108 11 privileges, and powers of the cooperative, real and personal
108 12 property of the cooperative, debts due to the cooperative, and
108 13 causes of action belonging to the traditional cooperative
108 14 remain vested in the converted cooperative and are the
108 15 property of the converted cooperative and governed by this
108 16 chapter.  Title to real property vested by deed or otherwise
108 17 in the traditional cooperative does not revert and is not
108 18 impaired by reason of the cooperative being converted and
108 19 governed by this chapter.
108 20    b.  Rights of creditors and liens upon property of the
108 21 traditional cooperative are preserved unimpaired, and debts,
108 22 liabilities, and duties of the traditional cooperative remain
108 23 attached to the converted cooperative and may be enforced
108 24 against the converted cooperative to the same extent as if the
108 25 debts, liabilities, and duties had originally been incurred or
108 26 contracted by the cooperative as organized under this chapter.
108 27    c.  The rights, privileges, powers, and interests in
108 28 property of the traditional cooperative as well as the debts,
108 29 liabilities, and duties of the traditional cooperative are not
108 30 deemed, as a consequence of the conversion, to have been
108 31 transferred for any purpose by the laws of this state.
108 32                          SUBCHAPTER 12
108 33                           DISSOLUTION
108 34    Sec. 85.  NEW SECTION.  501A.1201  METHODS OF DISSOLUTION.
108 35    A cooperative may be dissolved by the members or by
109  1 administrative or court order as provided in this chapter.
109  2    Sec. 86.  NEW SECTION.  501A.1202  WINDING UP.
109  3    1.  COLLECTION AND PAYMENT OF DEBTS.  After the notice of
109  4 intent to dissolve has been filed with the secretary, the
109  5 board, or the officers acting under the direction of the
109  6 board, shall proceed as soon as possible to do all of the
109  7 following:
109  8    a.  Collect or make provision for the collection of all
109  9 debts due or owing to the cooperative, including unpaid
109 10 subscriptions for membership interests.
109 11    b.  Pay or make provision for the payment of all debts,
109 12 obligations, and liabilities of the cooperative according to
109 13 their priorities.
109 14    2.  TRANSFER OF ASSETS.  After the notice of intent to
109 15 dissolve has been filed with the secretary, the board may
109 16 sell, lease, transfer, or otherwise dispose of all or
109 17 substantially all of the property and assets of the dissolving
109 18 cooperative without a vote of the members.
109 19    3.  DISTRIBUTION TO MEMBERS.  Tangible and intangible
109 20 property, including money, remaining after the discharge of
109 21 the debts, obligations, and liabilities of the cooperative
109 22 shall be distributed to the members and former members as
109 23 provided in the cooperative's articles or bylaws, unless
109 24 otherwise provided by law.  If previously authorized by the
109 25 members, the tangible and intangible property of the
109 26 cooperative may be liquidated and disposed of at the
109 27 discretion of the board.
109 28    Sec. 87.  NEW SECTION.  501A.1203  REVOCATION OF
109 29 DISSOLUTION PROCEEDINGS.
109 30    1.  AUTHORITY TO REVOKE.  Dissolution proceedings may be
109 31 revoked before the articles of dissolution are filed with the
109 32 secretary.
109 33    2.  REVOCATION BY MEMBERS.  The chairperson may call a
109 34 members' meeting to consider the advisability of revoking the
109 35 dissolution proceedings.  The question of the proposed
110  1 revocation shall be submitted to the members at the members'
110  2 meeting called to consider the revocation.  The dissolution
110  3 proceedings are revoked if the proposed revocation is approved
110  4 at the members' meeting by a majority of the members of the
110  5 cooperative or, for a cooperative with articles or bylaws
110  6 requiring a greater number of members, the number of members
110  7 required by the articles or bylaws.
110  8    3.  FILING WITH THE SECRETARY.  Revocation of dissolution
110  9 proceedings is effective when a notice of revocation is filed
110 10 with the secretary.  After the notice is filed, the
110 11 cooperative may resume business.
110 12    Sec. 88.  NEW SECTION.  501A.1204  STATUTE OF LIMITATIONS.
110 13    The claim of a creditor or claimant against a dissolving
110 14 cooperative is barred if the claim has not been enforced by
110 15 initiating legal, administrative, or arbitration proceedings
110 16 concerning the claim by two years after the date the notice of
110 17 intent to dissolve is filed with the secretary.
110 18    Sec. 89.  NEW SECTION.  501A.1205  ARTICLES OF DISSOLUTION.
110 19    1.  CONDITIONS TO FILE.  Articles of dissolution of a
110 20 cooperative shall be filed with the secretary after payment of
110 21 the claims of all known creditors and claimants has been made
110 22 or provided for and the remaining property has been
110 23 distributed by the board.  The articles of dissolution shall
110 24 state all of the following:
110 25    a.  The name of the cooperative.
110 26    b.  All debts, obligations, and liabilities of the
110 27 cooperative have been paid or discharged or adequate
110 28 provisions have been made for them or time periods allowing
110 29 claims have run and other claims are not outstanding.
110 30    c.  The remaining property, assets, and claims of the
110 31 cooperative have been distributed among the members or under a
110 32 liquidation authorized by the members.
110 33    d.  Legal, administrative, or arbitration proceedings by or
110 34 against the cooperative are not pending or adequate provision
110 35 has been made for the satisfaction of a judgment, order, or
111  1 decree that may be entered against the cooperative in a
111  2 pending proceeding.
111  3    2.  DISSOLUTION EFFECTIVE ON FILING.  The cooperative is
111  4 dissolved when the articles of dissolution have been filed
111  5 with the secretary.
111  6    3.  CERTIFICATE.  The secretary shall issue to the
111  7 dissolved cooperative or its legal representative a
111  8 certificate of dissolution that contains all of the following:
111  9    a.  The name of the dissolved cooperative.
111 10    b.  The date the articles of dissolution were filed with
111 11 the secretary.
111 12    c.  A statement that the cooperative is dissolved.
111 13    Sec. 90.  NEW SECTION.  501A.1206  APPLICATION FOR COURT=
111 14 SUPERVISED VOLUNTARY DISSOLUTION.
111 15    After a notice of intent to dissolve has been filed with
111 16 the secretary and before a certificate of dissolution has been
111 17 issued, the cooperative or, for good cause shown, a member or
111 18 creditor may apply to a court within the county where the
111 19 registered address is located to have the dissolution
111 20 conducted or continued under the supervision of the court.
111 21    Sec. 91.  NEW SECTION.  501A.1207  COURT=ORDERED REMEDIES
111 22 FOR DISSOLUTION.
111 23    1.  CONDITIONS FOR RELIEF.  A court may grant equitable
111 24 relief that the court deems just and reasonable in the
111 25 circumstances or may dissolve a cooperative and liquidate its
111 26 assets and business as follows:
111 27    a.  In a supervised voluntary dissolution that is applied
111 28 for by the cooperative.
111 29    b.  In an action by a member when it is established that
111 30 any of the following apply:
111 31    (1)  The directors or the persons having the authority
111 32 otherwise vested in the board are deadlocked in the management
111 33 of the cooperative's affairs and the members are unable to
111 34 break the deadlock.
111 35    (2)  The directors or those in control of the cooperative
112  1 have acted fraudulently, illegally, or in a manner unfairly
112  2 prejudicial toward one or more members in their capacities as
112  3 members, directors, or officers.
112  4    (3)  The members of the cooperative are so divided in
112  5 voting power that, for a period that includes the time when
112  6 two consecutive regular members' meetings were held, they have
112  7 failed to elect successors to directors whose terms have
112  8 expired or would have expired upon the election and
112  9 qualification of their successors.
112 10    (4)  The cooperative assets are being misapplied or wasted.
112 11    (5)  The period of duration as provided in the articles has
112 12 expired and has not been extended as provided in this chapter.
112 13    c.  In an action by a creditor when any of the following
112 14 applies:
112 15    (1)  The claim of the creditor against the cooperative has
112 16 been reduced to judgment and an execution on the judgment has
112 17 been returned unsatisfied.
112 18    (2)  The cooperative has admitted in writing that the claim
112 19 of the creditor against the cooperative is due and owing and
112 20 it is established that the cooperative is unable to pay its
112 21 debts in the ordinary course of business.
112 22    (3)  In an action by the attorney general to dissolve the
112 23 cooperative in accordance with this chapter when it is
112 24 established that a decree of dissolution is appropriate.
112 25    2.  CONDITION OF COOPERATIVE OR ASSOCIATION.  In
112 26 determining whether to order equitable relief or dissolution,
112 27 the court shall take into consideration the financial
112 28 condition of the cooperative, but shall not refuse to order
112 29 equitable relief or dissolution solely on the grounds that the
112 30 cooperative has accumulated operating net income or current
112 31 operating net income.
112 32    3.  DISSOLUTION AS REMEDY.  In deciding whether to order
112 33 dissolution of the cooperative, the court shall consider
112 34 whether lesser relief suggested by one or more parties, such
112 35 as a form of equitable relief or a partial liquidation, would
113  1 be adequate to permanently relieve the circumstances
113  2 established under subsection 1, paragraph  "b", subparagraph
113  3 (1) or (2).  Lesser relief may be ordered if it would be
113  4 appropriate under the facts and circumstances of the case.
113  5    4.  EXPENSES.  If the court finds that a party to a
113  6 proceeding brought under this section has acted arbitrarily,
113  7 vexatiously, or otherwise not in good faith, the court may in
113  8 its discretion award reasonable expenses, including attorney
113  9 fees and disbursements to any of the other parties.
113 10    5.  VENUE.  Proceedings under this section shall be brought
113 11 in a court within the county where the registered address of
113 12 the cooperative is located.
113 13    6.  PARTIES.  It is not necessary to make members parties
113 14 to the action or proceeding unless relief is sought against
113 15 them personally.
113 16    Sec. 92.  NEW SECTION.  501A.1208  PROCEDURE IN INVOLUNTARY
113 17 OR COURT=SUPERVISED VOLUNTARY DISSOLUTION.
113 18    1.  ACTION BEFORE HEARING.  Before a hearing is completed
113 19 in dissolution proceedings, a court may do any of the
113 20 following:
113 21    a.  Issue injunctions.
113 22    b.  Appoint receivers with all powers and duties that the
113 23 court directs.
113 24    c.  Take actions required to preserve the cooperative's
113 25 assets, wherever located.
113 26    d.  Carry on the business of the cooperative.
113 27    2.  ACTION AFTER HEARING.  After a hearing is completed,
113 28 upon notice to parties to the proceedings and to other parties
113 29 in interest designated by the court, the court may appoint a
113 30 receiver to collect the cooperative's assets, including
113 31 amounts owing to the cooperative by subscribers on account of
113 32 an unpaid portion of the consideration for the issuance of
113 33 membership interests.  A receiver has authority, subject to
113 34 the order of the court, to continue the business of the
113 35 cooperative and to sell, lease, transfer, or otherwise dispose
114  1 of the property and assets of the cooperative, either at
114  2 public or private sale.
114  3    3.  DISCHARGE OF OBLIGATIONS.  The assets of the
114  4 cooperative or the proceeds resulting from a sale, lease,
114  5 transfer, or other disposition shall be applied in the
114  6 following order of priority:
114  7    a.  The costs and expense of the proceedings, including
114  8 attorney fees and disbursements.
114  9    b.  Debts, taxes, and assessments due the United States,
114 10 this state, and other states in that order.
114 11    c.  Claims duly proved and allowed to employees under the
114 12 provisions of the workers' compensation law, except that
114 13 claims under this paragraph shall not be allowed if the
114 14 cooperative carried workers' compensation insurance, as
114 15 provided by law, at the time the injury was sustained.
114 16    d.  Claims, including the value of all compensation paid in
114 17 a medium other than money, proved and allowed to employees for
114 18 services performed within three months preceding the
114 19 appointment of the receiver.
114 20    e.  Other claims that are proved and allowed by the court.
114 21    4.  REMAINDER TO MEMBERS.  After payment of the expenses of
114 22 receivership and claims of creditors are proved, the remaining
114 23 assets, if any, may be distributed to the members or
114 24 distributed under an approved liquidation plan.
114 25    Sec. 93.  NEW SECTION.  501A.1209  RECEIVER QUALIFICATIONS
114 26 AND POWERS.
114 27    1.  QUALIFICATIONS.  A receiver shall be a natural person
114 28 or a domestic business entity or a foreign business entity
114 29 authorized to transact business in this state.  A receiver
114 30 shall give a bond as directed by the court with the sureties
114 31 required by the court.
114 32    2.  POWERS.  A receiver may sue and defend in all courts as
114 33 receiver of the cooperative.  The court appointing the
114 34 receiver has exclusive jurisdiction of the cooperative and its
114 35 property.
115  1    Sec. 94.  NEW SECTION.  501A.1210  DISSOLUTION ACTION BY
115  2 ATTORNEY GENERAL == ADMINISTRATIVE DISSOLUTION.
115  3    1.  CONDITIONS TO BEGIN ACTION.  A cooperative may be
115  4 dissolved involuntarily by a decree of a court in this state
115  5 in an action filed by the attorney general if it is
115  6 established that any of the following applies:
115  7    a.  The articles and certificate of organization were
115  8 procured through fraud.
115  9    b.  The cooperative was organized for a purpose not
115 10 permitted by this chapter or prohibited by state law.
115 11    c.  The cooperative has flagrantly violated a provision of
115 12 this chapter, has violated a provision of this chapter more
115 13 than once, or has violated more than one provision of this
115 14 chapter.
115 15    d.  The cooperative has acted, or failed to act, in a
115 16 manner that constitutes surrender or abandonment of the
115 17 cooperative's franchise, privileges, or enterprise.
115 18    2.  NOTICE TO COOPERATIVE.  An action shall not be
115 19 commenced under subsection 1 until thirty days after notice to
115 20 the cooperative by the attorney general of the reason for the
115 21 filing of the action.  If the reason for filing the action is
115 22 an act that the cooperative has done, or omitted to do, and
115 23 the act or omission may be corrected by an amendment of the
115 24 articles or bylaws or by performance of or abstention from the
115 25 act, the attorney general shall give the cooperative thirty
115 26 additional days to make the correction before filing the
115 27 action.
115 28    Sec. 95.  NEW SECTION.  501A.1211  FILING CLAIMS IN COURT=
115 29 SUPERVISED DISSOLUTION PROCEEDINGS.
115 30    1.  FILING UNDER OATH.  In proceedings to dissolve a
115 31 cooperative, the court may require all creditors and claimants
115 32 of the cooperative to file their claims under oath with the
115 33 clerk of court or with the receiver in a form prescribed by
115 34 the court.
115 35    2.  DATE TO FILE A CLAIM.  If the court requires the filing
116  1 of claims, the court shall do all of the following:
116  2    a.  Set a date, by order, at least one hundred twenty days
116  3 after the date the order is filed as the last day for the
116  4 filing of claims.
116  5    b.  Prescribe the notice of the fixed date that shall be
116  6 given to creditors and claimants.
116  7    3.  FIXED DATE OR EXTENSION FOR FILING.  Before the fixed
116  8 date, the court may extend the time for filing claims.
116  9 Creditors and claimants failing to file claims on or before
116 10 the fixed date may be barred, by order of court, from claiming
116 11 an interest in or receiving payment out of the property or
116 12 assets of the cooperative.
116 13    Sec. 96.  NEW SECTION.  501A.1212  DISCONTINUANCE OF COURT=
116 14 SUPERVISED DISSOLUTION PROCEEDINGS.
116 15    The involuntary or supervised voluntary dissolution of a
116 16 cooperative may be discontinued at any time during the
116 17 dissolution proceedings if it is established that cause for
116 18 dissolution does not exist.  The court shall dismiss the
116 19 proceedings and direct the receiver, if any, to redeliver to
116 20 the cooperative its remaining property and assets.
116 21    Sec. 97.  NEW SECTION.  501A.1213  COURT=SUPERVISED
116 22 DISSOLUTION ORDER.
116 23    1.  CONDITIONS FOR DISSOLUTION ORDER.  In an involuntary or
116 24 supervised voluntary dissolution the court shall enter an
116 25 order dissolving the cooperative upon the following
116 26 conditions:
116 27    a.  After the costs and expenses of the proceedings and all
116 28 debts, obligations, and liabilities of the cooperative have
116 29 been paid or discharged and the remaining property and assets
116 30 have been distributed to its members.
116 31    b.  If the property or other assets are not sufficient to
116 32 satisfy and discharge the costs, expenses, debts, obligations,
116 33 and liabilities, when all the property and assets have been
116 34 applied so far as they will go to their payment according to
116 35 their priorities.
117  1    2.  DISSOLUTION EFFECTIVE ON FILING ORDER.  When the order
117  2 dissolving the cooperative has been entered, the cooperative
117  3 is dissolved.
117  4    Sec. 98.  NEW SECTION.  501A.1214  FILING COURT'S
117  5 DISSOLUTION ORDER.
117  6    After the court enters an order dissolving a cooperative,
117  7 the clerk of court shall cause a certified copy of the
117  8 dissolution order to be filed with the secretary.  The
117  9 secretary shall not charge a fee for filing the dissolution
117 10 order.
117 11    Sec. 99.  NEW SECTION.  501A.1215  BARRING OF CLAIMS.
117 12    1.  CLAIMS BARRED.  A person who is or becomes a creditor
117 13 or claimant before, during, or following the conclusion of
117 14 dissolution proceedings, who does not file a claim or pursue a
117 15 remedy in a legal, administrative, or arbitration proceeding
117 16 during the pendency of the dissolution proceeding or has not
117 17 initiated a legal, administrative, or arbitration proceeding
117 18 before the commencement of the dissolution proceedings and all
117 19 those claiming through or under the creditor or claimant, are
117 20 forever barred from suing on that claim or otherwise realizing
117 21 upon or enforcing it, except as provided in this section.
117 22    2.  CERTAIN UNFILED CLAIMS ALLOWED.  Within one year after
117 23 articles of dissolution have been filed with the secretary
117 24 under this chapter or a dissolution order has been entered, a
117 25 creditor or claimant who shows good cause for not having
117 26 previously filed the claim may apply to a court in this state
117 27 to allow a claim for any of the following:
117 28    a.  Against the cooperative to the extent of undistributed
117 29 assets.
117 30    b.  If the undistributed assets are not sufficient to
117 31 satisfy the claim, the claim may be allowed against a member
117 32 to the extent of the distributions to members in dissolution
117 33 received by the member.
117 34    3.  OMITTED CLAIMS ALLOWED.  Debts, obligations, and
117 35 liabilities incurred during dissolution proceedings shall be
118  1 paid or provided for by the cooperative before the
118  2 distribution of assets to a member.  A person to whom this
118  3 kind of debt, obligation, or liability is owed but is not paid
118  4 may pursue any remedy against the offenders, directors, or
118  5 members of the cooperative before the expiration of the
118  6 applicable statute of limitations.  This subsection does not
118  7 apply to dissolution under the supervision or order of a
118  8 court.
118  9    Sec. 100.  NEW SECTION.  501A.1216  RIGHT TO SUE OR DEFEND
118 10 AFTER DISSOLUTION.
118 11    After a cooperative has been dissolved, any of its former
118 12 officers, directors, or members may assert or defend, in the
118 13 name of the cooperative, a claim by or against the
118 14 cooperative.
118 15                           DIVISION II
118 16                       CONFORMING CHANGES
118 17    Sec. 101.  Section 10B.1, subsection 2, Code 2005, is
118 18 amended to read as follows:
118 19    2.  "Cooperative association" means any entity organized on
118 20 a cooperative basis, including an association of persons
118 21 organized under chapter 497, 498, or 499; an entity composed
118 22 of entities organized under those chapters; or a cooperative
118 23 organized under chapter 501 or 501A.
118 24    Sec. 102.  Section 15.333, subsection 1, Code 2005, is
118 25 amended to read as follows:
118 26    1.  An eligible business may claim a corporate tax credit
118 27 up to a maximum of ten percent of the new investment which is
118 28 directly related to new jobs created by the location or
118 29 expansion of an eligible business under the program.  Any
118 30 credit in excess of the tax liability for the tax year may be
118 31 credited to the tax liability for the following seven years or
118 32 until depleted, whichever occurs earlier.  Subject to prior
118 33 approval by the department of economic development in
118 34 consultation with the department of revenue, an eligible
118 35 business whose project primarily involves the production of
119  1 value=added agricultural products may elect to receive a
119  2 refund of all or a portion of an unused tax credit.  For
119  3 purposes of this section, an eligible business includes a
119  4 cooperative described in section 521 of the Internal Revenue
119  5 Code which is not required to file an Iowa corporate income
119  6 tax return.  The refund may be used against a tax liability
119  7 imposed under chapter 422, division II, III, or V.  If the
119  8 business is a partnership, S corporation, limited liability
119  9 company, cooperative organized under chapter 501 or 501A and
119 10 filing as a partnership for federal tax purposes, or estate or
119 11 trust electing to have the income taxed directly to the
119 12 individual, an individual may claim the tax credit allowed.
119 13 The amount claimed by the individual shall be based upon the
119 14 pro rata share of the individual's earnings of the
119 15 partnership, S corporation, limited liability company,
119 16 cooperative organized under chapter 501 or 501A and filing as
119 17 a partnership for federal tax purposes, or estate or trust.
119 18    Sec. 103.  Section 15.385, subsection 3, paragraph a, Code
119 19 2005, is amended to read as follows:
119 20    a.  An eligible business may claim a tax credit equal to a
119 21 percentage of the new investment directly related to new jobs
119 22 created by the location or expansion of an eligible business
119 23 under the program.  The tax credit shall be allowed against
119 24 taxes imposed under chapter 422, division II, III, or V.  If
119 25 the business is a partnership, S corporation, limited
119 26 liability company, cooperative organized under chapter 501 and
119 27 filing as a partnership for federal tax purposes, or estate or
119 28 trust electing to have the income taxed directly to the
119 29 individual, an individual may claim the tax credit allowed.
119 30 The amount claimed by the individual shall be based upon the
119 31 pro rata share of the individual's earnings of the
119 32 partnership, S corporation, limited liability company,
119 33 cooperative organized under chapter 501 or 501A, and filing as
119 34 a partnership for federal tax purposes, or estate or trust.
119 35 The percentage shall be equal to the amount provided in
120  1 paragraph "d".  Any tax credit in excess of the tax liability
120  2 for the tax year may be credited to the tax liability for the
120  3 following seven years or until depleted, whichever occurs
120  4 first.
120  5    Subject to prior approval by the department of economic
120  6 development, in consultation with the department of revenue,
120  7 an eligible business whose project primarily involves the
120  8 production of value=added agricultural products or uses
120  9 biotechnology=related processes may elect to receive a refund
120 10 of all or a portion of an unused tax credit.  For purposes of
120 11 this subsection, such an eligible business includes a
120 12 cooperative described in section 521 of the Internal Revenue
120 13 Code which is not required to file an Iowa corporate income
120 14 tax return, and whose project primarily involves the
120 15 production of ethanol.  The refund may be applied against a
120 16 tax liability imposed under chapter 422, division II, III, or
120 17 V.  If the business is a partnership, S corporation, limited
120 18 liability company, cooperative organized under chapter 501 or
120 19 501A, and filing as a partnership for federal tax purposes, or
120 20 estate or trust electing to have the income taxed directly to
120 21 the individual, an individual may claim the tax credit
120 22 allowed.  The amount claimed by the individual shall be based
120 23 upon the pro rata share of the individual's earnings of the
120 24 partnership, S corporation, limited liability company,
120 25 cooperative organized under chapter 501 and filing as a
120 26 partnership for federal tax purposes, or estate or trust.
120 27    Sec. 104.  Section 15E.202, subsection 17, paragraph b,
120 28 Code 2005, is amended to read as follows:
120 29    b.  A cooperative organized under chapter 501 or 501A.
120 30    Sec. 105.  Section 203.1, subsection 10, paragraph i, Code
120 31 2005, is amended to read as follows:
120 32    i.  A cooperative organized under chapter 501 or 501A, if
120 33 the cooperative only purchases grain from its members who are
120 34 producers or from a licensed grain dealer, and the cooperative
120 35 does not resell that grain.
121  1    Sec. 106.  Section 490A.102, subsection 4, Code 2005, is
121  2 amended to read as follows:
121  3    4.  "Constituent entity" means each limited liability
121  4 company, limited partnership, or corporation, or domestic
121  5 cooperative which is party to a plan of merger pursuant to
121  6 subchapter XII.
121  7    Sec. 107.  Section 490A.102, Code 2005, is amended by
121  8 adding the following new subsection:
121  9    NEW SUBSECTION.  7A.  "Domestic cooperative" means a
121 10 cooperative organized under chapter 497, 498, 499, 501, or
121 11 501A.
121 12    Sec. 108.  Section 490A.1201, Code 2005, is amended by
121 13 striking the section and inserting in lieu thereof of the
121 14 following:
121 15    490A.1201  CONSTITUENT ENTITY.
121 16    As used in this section, unless the context otherwise
121 17 requires, "constituent entity", as used in sections 490A.1202,
121 18 490A.1204, 490A.1205, and 490A.1207, includes a domestic
121 19 cooperative.  However, as used in section 490A.1203,
121 20 "constituent entity" does not include a domestic cooperative.
121 21    Sec. 109.  NEW SECTION.  490A.1201A  MERGER.
121 22    With or without a business purpose, a limited liability
121 23 company may merge with any of the following:
121 24    1.  Another domestic limited liability company pursuant to
121 25 a plan of merger approved in the manner provided in sections
121 26 490A.1202 through 490A.1205.
121 27    2.  A domestic corporation under a plan of merger approved
121 28 in the manner provided in sections 490A.1202 through
121 29 490A.1205, and in chapter 490.
121 30    3.  A domestic limited partnership pursuant to a plan of
121 31 merger approved in the manner provided in sections 490A.1202
121 32 through 490A.1207, and in chapter 487.
121 33    4.  One or more cooperatives organized under chapter 497,
121 34 498, 499, 501, or 501A, in the manner provided by and subject
121 35 to the limitations in section 490A.1207.
122  1    5.  A foreign corporation, foreign limited liability
122  2 company, or foreign limited partnership pursuant to a plan of
122  3 merger approved in the manner provided in section 490A.1206.
122  4    Sec. 110.  Section 490A.1202, Code 2005, is amended by
122  5 adding the following new subsection:
122  6    NEW SUBSECTION.  0A.  As used in this section, "interests"
122  7 includes but is not limited to membership interests in a
122  8 domestic cooperative.
122  9    Sec. 111.  NEW SECTION.  490A.1207  MERGER OF DOMESTIC
122 10 COOPERATIVE INTO A DOMESTIC LIMITED LIABILITY COMPANY.
122 11    1.  A limited liability company may merge with a domestic
122 12 cooperative only as provided by this section.  A limited
122 13 liability company may merge with one or more domestic
122 14 cooperatives if all of the following apply:
122 15    a.  Only one limited liability company and one or more
122 16 domestic cooperatives are parties to the merger.
122 17    b.  When the merger becomes effective, the separate
122 18 existence of each domestic cooperative ceases and the limited
122 19 liability company is the surviving entity per organization.
122 20    c.  As to each domestic cooperative, the plan of merger is
122 21 initiated and adopted, and the merger is effectuated, as
122 22 provided in section 501A.1101.
122 23    d.  As to the limited liability company, the plan of merger
122 24 complies with section 490A.1202, the plan of merger is
122 25 approved as provided in section 490A.1203, and the articles of
122 26 merger are prepared, signed, and filed as provided in section
122 27 490A.1204.
122 28    e.  Notwithstanding section 490A.1202, 490A.1205, or
122 29 490A.1206, the surviving organization must be the limited
122 30 liability company.
122 31    2.  Section 501A.1103 governs the abandonment by a domestic
122 32 cooperative of a merger authorized by this section.  Section
122 33 490A.1203, subsection 2, governs the abandonment by a limited
122 34 liability company of a merger authorized by this section,
122 35 except that for the purposes of a merger authorized by this
123  1 section, the requirements stated in section 490A.1203,
123  2 subsection 2, paragraphs "b" and "c", do not apply and instead
123  3 the abandonment must have been approved by the domestic
123  4 cooperative.
123  5    Sec. 112.  Section 499.4, unnumbered paragraph 1, Code
123  6 2005, is amended to read as follows:
123  7    No A person or firm, and no including a corporation
123  8 hereafter organized, which is not an association as defined in
123  9 this chapter or a cooperative as defined in chapter 501 or
123 10 501A, shall not use the word "cooperative" or any abbreviation
123 11 thereof in its name or advertising or in any connection with
123 12 its business, except foreign associations admitted under
123 13 section 499.54.  The attorney general or any association or
123 14 any member thereof may sue and enjoin such use.
123 15    Sec. 113.  Section 502.102, subsection 20, Code 2005, is
123 16 amended to read as follows:
123 17    20.  "Person" means an individual; corporation; business
123 18 trust; estate; trust; partnership; limited liability company;
123 19 association; cooperative; joint venture; government;
123 20 governmental subdivision, agency, or instrumentality; public
123 21 corporation; or any other legal or commercial entity.
123 22    Sec. 114.  Section 556.1, subsection 3, Code 2005, is
123 23 amended to read as follows:
123 24    3.  "Cooperative association" means an any of the
123 25 following:
123 26    a.  An entity which is structured and operated on a
123 27 cooperative basis, including an association of persons
123 28 organized under chapter 497, 498, or 499; or an entity
123 29 composed of entities organized under those chapters; a.
123 30    b.  A cooperative organized under chapter 501;.
123 31    c.  A cooperative organized under chapter 501A.
123 32    d.  a A cooperative association organized under chapter
123 33 490; or any.
123 34    e.  Any other entity recognized pursuant to 26 U.S.C. }
123 35 1381(a) which meets the definitional requirements of an
124  1 association as provided in 12 U.S.C. } 1141(j)(a) or 7 U.S.C.
124  2 } 291.
124  3    Sec. 115.  Section 556.5, subsection 4, paragraph b, Code
124  4 2005, is amended to read as follows:
124  5    b.  A disbursement held by a cooperative association shall
124  6 not be deemed abandoned under this chapter if the disbursement
124  7 is retained by a cooperative association organized under
124  8 chapter 490 as provided in section 490.629, or by a
124  9 cooperative association organized under chapter 499 as
124 10 provided in section 499.30A, or by a cooperative as provided
124 11 in section 501A.1008.
124 12    Sec. 116.  Section 501A.102, as enacted in this Act, is
124 13 amended by striking from the section the word and figure "or
124 14 487".
124 15    Sec. 117.  EFFECTIVE DATES.  This Act takes effect July 1,
124 16 2005, except that section 116 of this Act takes effect January
124 17 1, 2006.
124 18                           EXPLANATION
124 19    This bill creates a new Code chapter 501A authorizing
124 20 persons to organize as a new form of cooperative.  Generally,
124 21 cooperatives or cooperative associations in Iowa are formed
124 22 under Code chapter 499 (older Code chapters include 497 and
124 23 498).  Traditionally, a cooperative is a business association
124 24 organized for purposes of providing economic services to its
124 25 members (sometimes referred to as shareholders) that does
124 26 business with patrons on a nonprofit or "cooperative" basis
124 27 and is taxed under special provisions.
124 28    Cooperatives are usually formed for agricultural purposes
124 29 or for providing utilities.  Code chapter 501 provides for a
124 30 hybrid between a cooperative and corporation which is
124 31 organized for purposes of attracting outside capital.  The
124 32 bill establishes another hybrid organization which includes
124 33 provisions and terms common to both cooperative associations
124 34 and limited liability companies.  Its purpose is to allow the
124 35 formation of these types of business associations which are
125  1 organized and may be taxed as a limited liability company.
125  2    DIVISION I.  The bill provides for administrative
125  3 provisions (governing the state's administration of
125  4 cooperative associations organized under the bill), its powers
125  5 and duties, including the powers and duties of its members and
125  6 directors, the equity interests (or membership interests) of
125  7 its members, the allocations and distributions of profits and
125  8 losses, mergers and conversions, and dissolution.
125  9    Specifically, the bill divides members up into investors
125 10 who do not patronize the cooperative and patrons who do.  It
125 11 provides that an outside investor member may hold an equity
125 12 position in a cooperative, and to receive profits from its
125 13 business endeavors.  Generally, patrons are provided control
125 14 of the cooperative through its board of directors unless the
125 15 patrons grant equal control to nonpatron members.  A patron
125 16 member is entitled to one vote on issues.  However, the
125 17 cooperative may allow patron members additional votes based on
125 18 patronage criteria.
125 19    The bill requires the allocations and distributions to
125 20 patron members to be not less than 50 percent of the total
125 21 profits or distributions in any fiscal year unless the patron
125 22 members authorize a lesser amount which may not be less than
125 23 15 percent.  The bill provides that a cooperative may be
125 24 formed to grant voting rights to members or directors who are
125 25 patrons and nonpatrons (bloc voting).  It also provides that,
125 26 collectively, nonpatron members may control up to 85 percent
125 27 of financial rights, if provided in its bylaws.  Under
125 28 subchapter T of the federal Internal Revenue Code, income
125 29 generated by an agricultural cooperative may be taxed at the
125 30 cooperative level or the patron level.  The bill enables a
125 31 cooperative to elect to be taxed as a partnership under
125 32 subchapter K or under subchapter T.  The bill also provides
125 33 that a cooperative organized under another chapter may elect
125 34 to convert to a cooperative organized under Code chapter 501A,
125 35 assuming that it meets the requirement of federal antitrust
126  1 provisions.
126  2    The bill provides for mergers between cooperatives into
126  3 Code chapter 501A business entities or into Iowa limited
126  4 liability companies or foreign business entities.
126  5    DIVISION II.  The bill also provides a number of changes to
126  6 other provisions of the Code.  It makes changes to economic
126  7 development provisions, including those in Code section
126  8 15.333, which provides that an eligible business under the new
126  9 jobs and income program may claim a tax credit of up to 10
126 10 percent of a new investment that involves the creation of new
126 11 jobs.  The bill amends provisions in Code chapter 15E, which
126 12 includes the Iowa agricultural industry finance Act, by
126 13 allowing Code chapter 501A cooperatives to participate in
126 14 loans extended by an agricultural industry finance
126 15 corporation.
126 16    The bill amends various provisions in Code chapter 490A,
126 17 which provides for limited liability companies, by providing
126 18 for mergers between such companies and cooperatives organized
126 19 under Code chapter 501A.
126 20    Generally, the bill takes effect on July 1, 2005, but one
126 21 provision relating to the repeal of Iowa's uniform limited
126 22 partnership Act takes effect on January 1, 2006.
126 23 LSB 1021HV 81
126 24 da:rj/cf/24