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Senate Study Bill 3124 - IntroducedA Bill ForAn Act 1relating to multiple housing cooperatives, including
2by providing for the conversion to a cooperative under the
3Iowa cooperative associations Act and merger with a limited
4liability company.
5BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1 Section 1. Section 489.102, subsection 6, Code 2022, is
2amended to read as follows:
36. “Domestic cooperative” means an entity organized on a
4cooperative basis under chapter 497, 498, or 499, a cooperative
5organized under chapter 499A, or a cooperative organized under
6chapter 501 or 501A.
7 Sec. 2. Section 501A.102, subsections 10 and 26, Code 2022,
8are amended to read as follows:
910. “Domestic cooperative” means a cooperative association
10or other cooperative organized under this chapter or chapter
11497, 498, 499, 499A, or 501.
1226. “Traditional cooperative” means a cooperative or
13cooperative association organized under chapter 497, 498, 499,
14499A, or 501.
15EXPLANATION
16The inclusion of this explanation does not constitute agreement with
17the explanation’s substance by the members of the general assembly.
18BACKGROUND. This bill amends provisions in the Iowa
19cooperative associations Act (ICAA) (Code chapter 501A) that
20allows a cooperative association organized under that Code
21chapter (501A cooperative) to operate as a hybrid between an
22entity organized on a cooperative basis and a limited liability
23company (LLC) that operates on principles of investment and the
24return of profits (distributions) to investor-owners (members)
25under the revised uniform limited partnership Act (RULPA) (Code
26section 489.102(24)). A 501A cooperative is organized to
27produce, store, process, and market agricultural commodities
28(Code section 501A.501).
29Under general principles of agricultural cooperative law,
30shares of common stock (memberships) must be held by patrons,
31and specifically persons who meet certain requirements:
32(1) producing a product marketed by the association, (2)
33customarily consuming or using the supplies or commodities
34that the association handles, or (3) using the services that
35the association renders. Savings (margins) generated from
-1-1these arrangements (patronage) are refunded to members or used
2to provide capital for the cooperative’s operations. Thus,
3an important restriction is based on a principle of member
4participation, control, and benefits which also restricts
5outside investment. Under the ICAA, an investor (nonpatron
6member) is allowed to hold a nonpatron membership interest in
7the domestic cooperative (Code section 501A.102) which may
8involve limited member voting rights (Code section 501A.810).
9The ICAA provides for traditional cooperatives which
10are agricultural cooperatives organized under Code chapters
11497, 498, 499, and 501. A domestic cooperative includes a
12501A cooperative as well as a traditional cooperative. The
13ICAA allows a traditional cooperative to convert into a
14501A cooperative and for a 501A cooperative or traditional
15cooperative to consolidate or merge with an LLC (Code section
16501A.1101). Code chapter 489 also provides that a domestic
17cooperative (defined in the same manner as in Code chapter
18501A) may merge with an LLC (Code section 489.1015). In the
19case of a merger of a domestic cooperative with an LLC, the
20converting domestic cooperative must comply with requirements
21in the ICAA (Code section 501A.1101) and the RULPA (Code
22sections 489.1002 through 489.1005) which includes the adoption
23of a plan of merger.
24BILL’S PROVISIONS. The bill provides for a nonagricultural
25cooperative organized for purposes of owning multiple
26housing residential properties under Code chapter 499A (499A
27cooperative). The bill provides that a 499A cooperative
28is defined as both a traditional and domestic cooperative
29under the ICAA and as a domestic cooperative under the RULPA.
30 However, the bill does not amend a number of corresponding
31provisions in the ICAA relating to domestic business entities,
32foreign cooperatives, securities and liens held in connection
33with a conversion, and a 501A’s organizational purposes.
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2by providing for the conversion to a cooperative under the
3Iowa cooperative associations Act and merger with a limited
4liability company.
5BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1 Section 1. Section 489.102, subsection 6, Code 2022, is
2amended to read as follows:
36. “Domestic cooperative” means an entity organized on a
4cooperative basis under chapter 497, 498, or 499, a cooperative
5organized under chapter 499A, or a cooperative organized under
6chapter 501 or 501A.
7 Sec. 2. Section 501A.102, subsections 10 and 26, Code 2022,
8are amended to read as follows:
910. “Domestic cooperative” means a cooperative association
10or other cooperative organized under this chapter or chapter
11497, 498, 499, 499A, or 501.
1226. “Traditional cooperative” means a cooperative or
13cooperative association organized under chapter 497, 498, 499,
14499A, or 501.
15EXPLANATION
16The inclusion of this explanation does not constitute agreement with
17the explanation’s substance by the members of the general assembly.
18BACKGROUND. This bill amends provisions in the Iowa
19cooperative associations Act (ICAA) (Code chapter 501A) that
20allows a cooperative association organized under that Code
21chapter (501A cooperative) to operate as a hybrid between an
22entity organized on a cooperative basis and a limited liability
23company (LLC) that operates on principles of investment and the
24return of profits (distributions) to investor-owners (members)
25under the revised uniform limited partnership Act (RULPA) (Code
26section 489.102(24)). A 501A cooperative is organized to
27produce, store, process, and market agricultural commodities
28(Code section 501A.501).
29Under general principles of agricultural cooperative law,
30shares of common stock (memberships) must be held by patrons,
31and specifically persons who meet certain requirements:
32(1) producing a product marketed by the association, (2)
33customarily consuming or using the supplies or commodities
34that the association handles, or (3) using the services that
35the association renders. Savings (margins) generated from
-1-1these arrangements (patronage) are refunded to members or used
2to provide capital for the cooperative’s operations. Thus,
3an important restriction is based on a principle of member
4participation, control, and benefits which also restricts
5outside investment. Under the ICAA, an investor (nonpatron
6member) is allowed to hold a nonpatron membership interest in
7the domestic cooperative (Code section 501A.102) which may
8involve limited member voting rights (Code section 501A.810).
9The ICAA provides for traditional cooperatives which
10are agricultural cooperatives organized under Code chapters
11497, 498, 499, and 501. A domestic cooperative includes a
12501A cooperative as well as a traditional cooperative. The
13ICAA allows a traditional cooperative to convert into a
14501A cooperative and for a 501A cooperative or traditional
15cooperative to consolidate or merge with an LLC (Code section
16501A.1101). Code chapter 489 also provides that a domestic
17cooperative (defined in the same manner as in Code chapter
18501A) may merge with an LLC (Code section 489.1015). In the
19case of a merger of a domestic cooperative with an LLC, the
20converting domestic cooperative must comply with requirements
21in the ICAA (Code section 501A.1101) and the RULPA (Code
22sections 489.1002 through 489.1005) which includes the adoption
23of a plan of merger.
24BILL’S PROVISIONS. The bill provides for a nonagricultural
25cooperative organized for purposes of owning multiple
26housing residential properties under Code chapter 499A (499A
27cooperative). The bill provides that a 499A cooperative
28is defined as both a traditional and domestic cooperative
29under the ICAA and as a domestic cooperative under the RULPA.
30 However, the bill does not amend a number of corresponding
31provisions in the ICAA relating to domestic business entities,
32foreign cooperatives, securities and liens held in connection
33with a conversion, and a 501A’s organizational purposes.
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