2) An act or omission not in good faith or that involves intentional misconduct
or a knowing violation of law.
3) A transaction from which the director derived an improper personal benefit.
4) An act or omission occurring before the date on which the provision in the
articles or bylaws eliminating or limiting liability becomes effective.
5) A knowing violation of certain securities laws or illegal distributions of the
UCA's assets.
Unless the articles or bylaws provide otherwise, the bill requires a UCA to
indemnify certain current and former officers and agents of the UCA who are made
or threatened to be made a party to litigation. The bill includes procedures that must
be followed in determining whether a person is entitled to indemnification,
including, in some cases, a determination by a court. The indemnification required
under the bill must cover judgments, penalties, and fines applicable to a proceeding,
against excise taxes assessed against the current or former officer or agent with both
respect to an employee benefit plan and against settlements and reasonable
expenses, including certain attorney fees and disbursements. Generally,
indemnification is required only if another person is not already providing
indemnification against the same amounts, the current or former officer or agent
acted in good faith, and the current or former officer or agent did not receive an
improper personal benefit or commit an act for which liability cannot be eliminated
or limited under the laws governing the UCA.
In the case of a criminal proceeding, indemnification is only required if the
current or former officer or agent had no reasonable cause to believe the acts or
omissions were unlawful. Also, in the case of acts or omissions committed in an
official capacity, as defined in the bill, indemnification is only required if the current
or former officer or agent reasonably believed that the acts or omissions were in the
best interests of the UCA or predecessor UCA or were not opposed to the best
interests of the UCA or predecessor UCA. The bill further specifies that, if the acts
or omissions relate to conduct as a director, officer, trustee, employee, or agent of an
employee benefit plan, the conduct is not considered to be opposed to the best
interests of the UCA or predecessor UCA if the current or former officer or agent
reasonably believed that the conduct was in the best interests of the participants or
beneficiaries of the employee benefit plan.
Unless the articles or bylaws provide otherwise, the current or former officer
or agent is entitled, upon written request, to payment or reimbursement by the UCA
of reasonable expenses, including attorney fees and disbursements, incurred by the
current or former officer or agent in advance of the final disposition of the proceeding.
The current or former officer or agent must provide the UCA with a written
statement that he or she believes in good faith that the applicable criteria for
indemnification have been satisfied, along with a written undertaking to repay all
amounts so paid or reimbursed by the UCA if it is ultimately determined that the
criteria have not been satisfied. The UCA must accept the written undertaking
without reference to the current or former officer's or agent's financial ability to make
the repayment. If a court determines that the UCA unreasonably refused a director's
or officer's request for indemnification, the court must order the UCA to pay the
officer's or director's reasonable expenses incurred to obtain the court-ordered
indemnification.
The bill requires a UCA that indemnifies or advances expenses to a person
under these provisions to report to the members in writing the amount of the
indemnification or advance and to whom and on whose behalf it was paid not later
than the date of the first members' meeting occurring after the payment. In addition,
the bill allows a UCA to purchase and maintain insurance on behalf of a person in
that person's official capacity against any liability asserted against and incurred by
the person in or arising from that capacity, whether or not the UCA would otherwise
be required to indemnify the person against the liability.
Members
General provisions
The bill requires a UCA to have at least one patron member. Members may be
grouped in districts or units, or on another basis, as authorized in the articles or
bylaws. Under the bill, the board may require a member who knowingly,
intentionally, or repeatedly violates a provision of the articles or bylaws, or certain
contracts with the UCA, to surrender the member's membership interest or the
member's governance rights or financial rights. Under the bill, a person is not
personally liable for the acts, debts, liabilities, or obligations of a UCA merely on
account of the person's status as a member.
Inspection of records
The bill allows a member to inspect and copy any of the required records of the
UCA, if certain conditions are satisfied. However, a member generally may not
inspect or copy any records relating to the amount of equity capital in the UCA held
by any person or any accounts receivable or other amounts due the UCA from any
person, or any personnel records or employment records relating to any employee of
the UCA. The bill also includes a procedure that applies if the UCA refuses to allow
a person to inspect or copy records that the person is entitled to inspect or copy.
Annual members' meeting
Unless the articles or bylaws provide otherwise, a UCA must hold an annual
members' meeting. At the annual members' meeting, the officers must submit
reports to the members covering the business of the UCA for the previous fiscal year
and indicating the condition of the UCA at the close of the fiscal year. The bill
specifies notice requirements applicable to the annual members' meeting, which
apply to each member unless waived or limited as provided under the bill.
Insufficient notice does not invalidate any action taken at the annual members'
meeting.
Special members' meetings
The bill allows a special meeting of the members to be called by the board or,
if certain requirements are satisfied, by petition of the members. The bill specifies
notice requirements applicable to a special members' meeting, which apply to each
member unless waived or limited as provided under the bill. Insufficient notice does
not invalidate any action taken at the special members' meeting.
Virtual members' meeting
In addition to a typical meeting, the bill allows a UCA to hold a "virtual
members' meeting" in a manner similar to the way a virtual board meeting is held.
The bill requires a UCA that holds a virtual members' meeting to implement
reasonable measures to verify that each person participating in the meeting by a
means of communication is a member and to provide each member participating in
the meeting by a means of communication with a reasonable opportunity to actively
participate. A participating member must have an opportunity to read or hear the
proceedings of the meeting substantially concurrently with those proceedings, to
have his or her remarks heard or read by other participants in the meeting
substantially concurrently with the making of those remarks, if allowed by the
procedures governing the meeting, and, if otherwise entitled, to vote on matters
submitted to the members.
Actions without a members' meeting
Unless the articles or bylaws provide otherwise, this bill allows a UCA to take
any action required or permitted to be authorized at a members' meeting without
holding such a meeting, if that action is authorized by all members and is evidenced
by one or more written statements, signed by each member, describing and
consenting to the action. Also, the articles or bylaws may allow the members to
authorize any other action on behalf of the UCA, other than an action requiring board
approval, without a members' meeting, if the action is authorized by the number of
members that would be required to approve the action at a members' meeting at
which all members were present and if the action is evidenced by one or more written
statements, signed by each authorizing member, describing and consenting to the
action.
Quorum and voting requirements
Unless the articles or bylaws provide otherwise and with certain exceptions
relating to votes by class or series of membership interests, a quorum for the
transaction of business at a members' meeting is 10 percent of the total number of
members for a UCA with 100 or less members and 15 percent of the total number of
members for any other UCA. With certain exceptions, the bill allows the members
to take action by the affirmative vote of the greater of a majority of the voting power
of the membership interests present and entitled to vote on that item of business, a
majority of the voting power that would constitute a quorum, or the proportion of
voting power specified by law or in the articles or bylaws, or a specified contract
between the member and the UCA. Under the bill, any member who objects at the
beginning of a members' meeting to the transaction of business because the meeting
is not lawfully called or convened and who fails to participate in the meeting after
the objection may not be considered as present at the meeting for purposes of
determining whether quorum and voting requirements are satisfied.
Allocation of voting rights
Under the bill, all patron members collectively have one vote on each issue that
patron members may vote upon. Generally, the collective vote of the patron members
must be determined by the vote of the majority of patron members voting on the
issue. With certain exceptions, in determining the collective vote of patron members,
each patron member has one vote on the issue. The bill also provides for voting by
delegates if the UCA has districts or other units and, in certain cases, allows a patron
member to receive an an additional vote. Unless the articles or bylaws provide
otherwise, no issue that patron members may vote upon may be approved unless, in
determining the collective vote of the patron members, the number of patron
members voting to approve the issue is a majority of all members voting on the issue.
If nonpatron members are authorized, the articles or bylaws may not reduce the
required number of patron members voting to approve the issue to less than 51
percent of the total member vote.
The bill allows the board to limit voting rights to members as of a date certain.
Under the bill, the board may establish a date for the determination of membership
interests entitled to notice of and entitled to vote at a members' meeting. The date
established by the board may not be more than 60 days before the date of the meeting.
If such a date is established, only members as of that date are entitled to notice of
and may vote at that meeting.
Under the bill, if a membership interest is owned jointly by two or more persons,
any one of the owners may vote based upon that membership interest, unless the
UCA receives written notice from any of the owners denying the authority of that
person to vote. If a member has more than one vote, the member may allocate the
votes in any way the member chooses. The bill also specifies how votes may be cast
by proxies, business entities, subsidiaries of the UCA, and certain fiduciaries and
under what circumstances a UCA or its subsidiary may vote membership interests
held in a fiduciary capacity.
The bill also allows any nonmember or class of nonmember to vote at a
members' meeting in the same manner as patron members are permitted to vote, if
authorized by the articles or bylaws.
Member authority over UCA property
With certain exceptions, the bill allows a UCA to sell, lease, transfer, or
otherwise dispose of all or substantially all of its property and assets not in the usual
and regular course of its business, upon those terms and conditions that the board
considers expedient, when approved by the affirmative vote of the members owning
a majority of the voting power of the interests entitled to vote. The bill requires
written notice of any members' meeting at which such a vote will be taken to be given
to all members.
Membership interests
Generally
The bill generally permits a UCA to increase, decrease, establish, or alter the
authorized amount and divisions of membership interests by amending the articles
or the bylaws. A membership interest is personal property and does not give the
owner of the interest any interest in specific cooperative property. A UCA may issue
authorized membership interests on terms and conditions prescribed in the articles
or bylaws or, if authorized in the articles or bylaws, on terms and conditions
determined by the board. The bill specifies disclosures that a UCA must make to any
person to whom a membership interest is issued and to other members. A UCA may
not issue a membership interest to any person unless the subscription price of the
membership interest has been paid for in money or property. Any subscription price
paid for in property must be approved by the board. The bill includes provisions that
apply if records of membership interests or UCA securities are missing.
Patron membership interests
A UCA may have patron members, who must engage in certain transactions for
or with the UCA as a condition of receiving financial rights or distributions. A UCA
may also have nonpatron members. With certain exceptions, if a UCA has patron
members, all patron membership interests, collectively, must have not less than 51
percent of the UCA's financial rights to profit allocations and distributions. The bill
allows a UCA to amend its articles, by a majority vote of patron members, to reduce
this required percentage to as little as 30 percent. Any amendment to provide for a
reduced percentage must be approved by affirmative vote of the patron members.
Nonpatron membership interests
The bill requires each person to whom a membership interest, other than a
patron membership interest, is issued to sign a member control agreement (see below
for definition) or a statement agreeing to abide by any applicable conditions imposed
under the bylaws. Unless the bylaws contain a sufficient description, the UCA must
provide each person to whom a nonpatron membership interest is issued a
description of the rights and obligations applicable to holders of that nonpatron
membership interest, the transferability of that nonpatron membership interest,
and the manner in which profits and losses are divided and allocated among the
membership interests and membership classes.
Transfer and reacquisition of membership interests
A membership interest may be transferred with the approval of the board. The
bill, though, allows a restriction on the transfer or registration of a transfer of
membership interests to be imposed by various methods. Such a restriction is not
binding with respect to membership interests issued prior to the adoption of the
restriction, unless the holders of those membership interests are parties to the
agreement or voted in favor of the restriction. Such a restriction is enforceable only
if it is not manifestly unreasonable under the circumstances. In addition, such a
restriction is enforceable only if the restriction is disclosed as provided in the bill, is
imposed under the law governing the UCA or is included in the articles or bylaws,
or relates to an uncertificated membership interest and is included in information
sent to the holders of such a membership interest.
The articles or bylaws may provide the patron members, individually or
collectively, or the UCA with the first privilege of purchasing the membership
interests of any class of membership interests offered for sale. In addition, unless
the articles or bylaws provide otherwise, a nonpatron member may force the UCA to
acquire the member's nonpatron membership interests if the articles or bylaws are
amended in a manner that materially and adversely affects the rights and
preferences applicable to the nonpatron membership interests of the nonpatron
member. The bill provides a procedure that applies to a nonpatron member who
intends to force such an acquisition. The bill also contains provisions concerning the
wrongful transfer of certain UCA securities.
Allocation of profits, losses, and distributions
The bill specifies that, unless otherwise provided in the articles or bylaws, the
allocation of profits and losses among nonpatron membership interests individually
and patron membership interests collectively shall be based on the value of
contributions to capital made according to the patron membership interests
collectively and the nonpatron membership interests individually. Also, if not
otherwise provided in the articles or bylaws, distributions of the UCA must be made
on the basis of value of the capital contributions of the patron membership interests
collectively and the nonpatron membership interests individually.
Assignment of financial rights
With certain exceptions, a member's financial rights in a UCA are transferable
in whole or in part. An assignment of a member's financial rights under the bill
entitles the assignee to receive, to the extent assigned, only the share of profits and
losses and the distributions to which the assignor would otherwise be entitled. An
assignment does not dissolve the UCA and does not entitle or empower the assignee
to become a member, to exercise any governance rights, to receive any notices from
the UCA, or to cause dissolution. In addition, the assignment may not allow the
assignee to control the member's exercise of governance or voting rights.
The bill allows a restriction on such an assignment to be imposed in the articles,
in the bylaws, in a member control agreement (see below for definition), by a
resolution adopted by the members at a members' meeting, or by an agreement
among members and the UCA. A restriction may not affect financial rights reflected
in the required records of the UCA before the adoption of the restriction, unless the
owners of those financial rights are parties to the agreement or voted in favor of the
restriction. Also, a restriction generally is enforceable only if it is not manifestly
unreasonable under the circumstances and is noted conspicuously in the required
records of the UCA.
The bill also allows a security interest in a member's financial rights to be
foreclosed and otherwise enforced, and allows a secured party to assign a member's
financial rights in accordance with the chapter of the Uniform Commercial Code
dealing with investment securities, without the consent or approval of the member
whose financial rights are subject to the security interest.
Statement of membership interest
The bill requires a UCA, upon the request of any member, to state in writing
the particular membership interest owned by that member. The statement must also
describe the member's rights to vote, if any, and to share in profits, losses, and
distributions, restrictions on assignments of the member's financial rights or voting
rights, and any assignment of the member's rights then in effect other than a security
interest.
Terms of membership interests
Unless the articles or bylaws provide otherwise, all membership interests must
be of one class, without series. The membership interests must be patron
membership interests and, if authorized, nonpatron membership interests with
specified voting rights. Unless the articles or bylaws provide otherwise, the
membership interests must have equal rights and preferences in all matters not
otherwise provided for by the board. The rights and preferences of membership
interests may be made dependent upon facts ascertainable outside the articles or
bylaws, or outside the resolution or resolutions establishing the particular class or
series of membership interest, if certain disclosure requirements are satisfied. In
addition, the rights and preferences may include by reference some or all of the terms
of any agreements, contracts, or other arrangements entered into by the UCA in
connection with the establishment of the particular class or series of membership
interests, if the cooperative retains at its principal office a copy of the operative
provisions in the agreements, contracts, or other arrangements.
The bill allows a UCA to specify in the articles or bylaws, or by resolution, that
membership interests are subject to the right of the UCA to redeem the membership
interests at a price fixed in the articles or bylaws or by the board; that owners of the
membership interests may receive cumulative, partially cumulative, or
noncumulative distributions; that particular membership interests may have
preference over any other class or series of membership interests for the payment of
distributions; that the membership interests may be convertible into membership
interests of any other class or series; and that, with certain exceptions, the
membership interests may have full, partial, or no voting rights. The bill allows the
board, by resolution, to establish a class or series of membership interests, set forth
the designation of the class or series, and fix the relative rights and preferences of
the class or series.
The bill specifies that a subscriber for membership interests or a member is
under no obligation to the UCA or its creditors with respect to the membership
interests subscribed for or owned, except to pay to the UCA the full consideration for
which the membership interests are issued or to be issued.
Judgment creditors
The bill generally allows a court to order the payment of an unsatisfied
judgment from a member's or an assignee's financial rights in a UCA.
Powers of estates and fiduciaries
If a member who is an individual dies or a court adjudges the member to be
incompetent to manage his or her person or property, or an order for relief under a
judgment of bankruptcy is entered with respect to the member, the member's
executor, administrator, guardian, conservator, trustee, or other legal representative
may exercise all of the rights applicable to the member's membership interest for the
purpose of settling the estate or administering the member's property. In addition,
if a member is not an individual and is dissolved, terminated, or placed by a court
in receivership or bankruptcy, the member's legal representative or successor may
exercise all of the rights applicable to the member's membership interest. However,
in certain circumstances, if the member's membership interest is terminated, the
terminated member's interest is considered to be that of an assignee of financial
rights and the rights to be exercised by the executor, administrator, guardian,
conservator, trustee, legal representative, or successor are limited accordingly.
Certificated membership interests
The bill allows a UCA to issue certificated membership interests. The UCA
must provide each holder of a certificated membership interest with a certificate of
membership interest as described under the bill. Among other things, a certificate
of membership interest must contain the name of the cooperative; a statement that
the cooperative is organized under the laws of this state and the laws established in
this bill; the name of the person to whom the certificate is issued; the number and
class of membership interests, and the designation of the series, if any, that the
certificate represents; a statement that membership interests are subject to the
articles and bylaws; and any restrictions on transfer of the membership interests
that the certificate represents. This required information may be stated by reference
to the back of the certificate or to another document. A certificate of membership
interest is legally presumed to be proof of the ownership of the membership interest
that the certificate represents. The bill contains a procedure for the issuance of
replacement certificates of membership.
Uncertificated membership interests
Unless prohibited by the articles or bylaws, the board may adopt a resolution
permitting uncertificated membership interests. With certain exceptions, the UCA
must give each person who obtains an uncertificated membership interest a
statement containing the information required to be stated on certificates. Holders
of certificated and uncertificated membership interests of the same class and series
generally have identical rights and obligations.
Contributions, allocations, and distributions.
Generally
If authorized by the board, a UCA may accept a contribution, make agreements
requiring a member or potential member to make a contribution as a condition of
membership or receipt of a membership interest, and make agreements providing a
person with rights to make a contribution. A person may make a contribution to a
UCA under the bill by paying money or transferring property to the UCA or
performing services to or for the benefit of the UCA, or by promising, in writing, to
make such a payment or transfer or perform such services. Under the bill, no
purported contribution is an actual contribution until it is accepted by the board,
given a value, and recorded accordingly.
Value of contributions
Under the bill, the value accorded to a contribution by the board is legally
presumed to be proper if the board acted in good faith and on the basis of methods
that are reasonable under the circumstances. The bill specifies that directors who
are present and entitled to vote, and who, intentionally or without reasonable
investigation, fail to vote against approving a consideration that is unfair to the
UCA, or who overvalue property or services received or to be received by the UCA as
a contribution, are jointly and severally liable to the UCA for the benefit of the
members who did not consent to and are damaged by the consideration or
overvaluing of property or services.
The bill requires a UCA to restate the value of all existing contributions upon
acceptance of a new contribution. The bill requires the board to follow a specific
procedure to calculate the restated value of the contributions, unless a different
procedure is provided in the articles or bylaws.
Contribution agreements
As noted above, the board may make agreements requiring a member or
potential member to make a contribution as a condition of membership or receipt of
a membership interest. Such an agreement, called a contribution agreement, must
be in writing and signed by each person required to make a contribution under the
agreement. A person's rights under a contribution agreement generally may not be
assigned to nonmembers. Under the bill, a contribution agreement is irrevocable for
a period of six months, unless otherwise provided in the contribution agreement or
unless each person required to make a contribution under the agreement and, if in
existence, the UCA consents to a different period. Unless the contribution
agreement provides otherwise, all payments or other actions required under the
agreement must be made or taken at the time or times determined by the board. The
bill requires the board to ensure that any call for a person to make a payment or
perform an action required under a contribution agreement is made uniformly to all
membership interests of the same class or series.
Unless the contribution agreement provides otherwise, if a person fails to make
a payment required under the contribution agreement, the UCA may bring an action
for breach of contract, sell any membership interests that are subject to the
contribution agreement and bring an action to collect any deficiency, or cancel the
contribution agreement. The bill further requires any person who fails to make a
required contribution of property or services to pay to the UCA an amount equal to
that portion of the value of the contribution that has not been made, as stated in the
UCA's required records.
A UCA may sell membership interests as described above only if the amount
due under the contribution agreement relating to those membership interests
remains unpaid for a period of 20 days after the UCA gives written notice of demand
for payment. The total offering price of the membership interests in such a sale must
be at least the amount of the balance owed by the person, plus the expenses
incidental to the sale. After such a sale, the UCA must pay to the person whose
interest was sold either the amount by which the proceeds of the sale, less the
expenses incident to the sale and any additional amounts the person is required to
pay under the terms of the contribution agreement, exceeds the amount of the
payment the person failed to make or the total amount paid by the person under the
contribution agreement, whichever is less.
A UCA may cancel a contribution agreement as described above only if the
amount due under the contribution agreement remains unpaid for a period of 20 days
after the UCA gives written notice of demand for payment to the person required to
make the payment. Unless the contribution agreement provides otherwise, if the
UCA cancels a contribution agreement, the UCA may retain any payments made as
provided in the contribution agreement.
Contribution rights agreements
As noted above, the board may make agreements to provide a person rights to
contribute to the UCA. These agreements, called contribution rights agreements,
must be in writing, although they may incorporate terms by reference. A person's
rights under a contribution rights agreement generally may not be assigned to
nonmembers.
Allocations of profits, losses, and distributions between members
The bill generally requires profits and losses to be allocated between patron
membership interests collectively and nonpatron membership interests collectively
on the basis of the value of contributions received from patron membership interests
collectively and nonpatron membership interests collectively. However, the
allocation of profits to patron membership interests collectively in a fiscal year may
not be less than 51 percent of the total profits for that fiscal year, except that, in
certain circumstances, this allocation may be reduced to as little as 30 percent of the
total profits.
The bill requires the articles or bylaws to prescribe the manner in which cash
or other assets of a UCA will be distributed among the membership interests of the
UCA. Unless the articles or bylaws provide otherwise, a UCA must distribute cash
or other assets to patron membership interests collectively and nonpatron
membership interests collectively on the basis of the value of contributions received
from patron membership interests collectively and nonpatron membership interests
collectively. As above, the distributions to patron membership interests collectively
in any fiscal year may not be less than 51 percent of the total distributions for that
fiscal year, except that in certain circumstances this required distribution may be
reduced to as little as 30 percent of the total distributions.
Allocations and distributions of profit to patron members
The bill allows a UCA to set aside any portion of profits allocated to the patron
membership interests that the board determines is advisable for the purpose of
creating or maintaining a capital reserve. The bill also allows the board to set aside,
from the portion of profits allocated to the patron membership interests, an amount
not to exceed 5 percent of the annual net income of the UCA for promoting and
encouraging cooperative organization and any amount for reserves for new
buildings, machinery and equipment, depreciation, losses, and other proper
purposes.
At least once per year, a UCA must allocate and distribute to patron members
(and, if authorized in the bylaws, to nonmember patrons) all profits allocated to
patron members in excess of dividends on equity and additions to reserves. These
distributions must be made on the basis of patronage, except that any distributions
to nonmember patrons must be made as provided in the bylaws. A cooperative may
establish allocation units and pooling arrangements and may account for and
distribute net income to patrons on the basis of allocation units and pooling
arrangements. A cooperative may offset the net loss of an allocation unit or pooling
arrangement against the net income of other allocation units or pooling
arrangements. Distributions may be made in the form of cash, capital credits,
allocated patronage equities, revolving fund certificates, or securities. In addition,
if a nonmember patron with patronage credits is not qualified or eligible for
membership, the UCA may credit to the nonmember patron's account a refund due
to the nonmember patron. The board may issue a certificate of interest to reflect any
such credit and, after the board issues such a certificate, the patron may receive
distributions of profits in the same manner as a patron member.
Member control agreements
With certain exceptions, the bill allows any person who has entered into a
subscription or contribution agreement, or any member, to enter into a written
agreement with the UCA that relates to the control of or the liquidation, dissolution,
or termination of the UCA, or any phase of the business and affairs of the UCA. Such
an agreement, called a member control agreement, may not take effect unless it is
signed by all persons who are then members and all persons who have entered into
contribution agreements. A member control agreement may not relate to voting
rights of patron members or patron member allocation and distribution provisions.
The bill allows any result that is required or permitted to be accomplished through
a provision in the bylaws to also be accomplished through a member control
agreement.
Unclaimed property
The bill allows a UCA to distribute any abandoned property in its possession
to an entity that is exempt from taxation under section
501 (a) of the Internal
Revenue Code, rather than delivering the property to the state treasurer under the
unclaimed property law. The bill allows the articles or bylaws to extinguish the
rights of the owner of the abandoned property upon distribution to the tax exempt
entity.
Merger and consolidation
Generally
The bill generally allows a UCA to merge or consolidate with any business
entity to the extent permitted by the applicable law of the jurisdiction under whose
laws the surviving business entity will be organized. To execute a merger or
consolidation, the board must prepare a plan of merger or consolidation and notify
each member of the proposed merger or consolidation. The plan must then be
approved by a specified vote of the members and articles or merger or consolidation
must be filed with DFI.
Merger of subsidiary or parent without member approval
The bill generally allows a parent UCA that owns at least 90 percent of the
outstanding ownership interests of each class and series of a subsidiary business
entity to merge the subsidiary into the parent or the parent into the subsidiary
without a vote of the members of the parent or the subsidiary. The bill also generally
allows a parent UCA that owns at least 90 percent of the outstanding ownership
interests of each class and series of two or more subsidiary business entities to merge
the subsidiaries into one another without a vote of the members. However, in neither
case may a UCA merge with a business entity organized under the laws of this state,
other than a cooperative or UCA, unless the law governing the business entity
specifically authorizes merger with a UCA. To execute either type of merger, the
board must prepare a plan, give notice of the merger and other information to each
member of each applicable subsidiary no later than ten days after the effective date
of the merger, and file articles of merger with DFI. If, immediately prior to either
type of merger, a business entity that is party to the merger is owned, at least in part,
by persons other than the parent UCA or an affiliate of the parent UCA, those
persons have dissenters' rights under the law governing the business entity's
organization.
Effect of merger or consolidation
