LRB-0502/1
ARG:jld
2017 - 2018 LEGISLATURE
May 31, 2017 - Introduced by Representatives Tauchen, Nerison, E. Brooks,
Novak, Considine, Tusler, Kulp, Bernier, Quinn, Petryk, Meyers, Ripp,
Tranel, Ballweg, Krug, Edming, Summerfield, Vruwink, Doyle, Kolste,
VanderMeer, Mursau, Pronschinske and Goyke, cosponsored by Senators
Testin, Cowles, Bewley, Moulton, Harsdorf, Ringhand, Marklein and
Vinehout. Referred to Committee on Financial Institutions.
AB353,1,5 1An Act to repeal 185.21 (2) (c); to renumber and amend 185.31 (1); to amend
2185.01 (4) (a), 185.03 (10) (d), 185.38 (1) (intro.), 185.47 and 185.72 (1) (c); and
3to create 185.12 (5m), 185.31 (1) (b), 185.38 (1m) and 185.995 of the statutes;
4relating to: the organization and operation of cooperatives and extensions of
5credit by electric cooperatives.
Analysis by the Legislative Reference Bureau
This bill makes various changes related to the organization and operation of
cooperatives and includes provisions applicable to extensions of credit by electric
cooperatives.
Under current law, a cooperative may be formed by filing articles of
incorporation with the Department of Financial Institutions. A cooperative is
organized and owned by its members and managed by a board of directors. Directors
are elected by the members and each director must be a member or, if the member
is an entity and not an individual, a representative of that member.
This bill allows a cooperative to have a director that is not a member or member
representative (outside director) if the total number of outside directors does not
exceed two outside directors or 20 percent of all directors, whichever is less. A person
may not serve as an outside director on the board unless a majority of directors who
are not outside directors votes to approve the person as a director.
Current law generally provides that only cooperative members may vote at
member meetings and each member has one vote, regardless of the member's degree

of financial interest in the cooperative. Because a cooperative is formed to provide
services to its members, current law also requires a cooperative's board of directors,
at least once each year, to distribute the cooperative's proceeds, after deducting
various costs, other distributions, and reserves, to members based on their
patronage, which means business done with the cooperative. Some or all of this
distribution may be retained by the cooperative for future capital needs and credited
to a patronage equity account of the member.
This bill allows a cooperative holding company and its cooperative subsidiaries
to base members' voting power in whole or in part on members' current or recent
patronage activity, or on members' patronage equity in the cooperative, or on a
combination of both. The bill defines a “cooperative holding company” as a
cooperative that owns or controls subsidiaries operating on a cooperative basis as the
primary part of their business and activities.
Current law allows a cooperative to be organized with or without capital stock,
but if the cooperative issues stock any dividend on the stock cannot exceed 8 percent
per year. Current law also defines a “foreign cooperative" as a cooperative that is
incorporated under another state's cooperative law, that has members residing
within this state, and that meets certain operating requirements, including that no
member of the foreign cooperative who is an individual is allowed more than one vote
because of the amount of stock or membership capital the member owns or the
foreign cooperative does not pay dividends on stock or membership capital in excess
of 8 percent per year.
This bill removes the 8 percent dividend limit for domestic cooperatives and
removes the reference to an 8 percent dividend in the definition of “foreign
cooperative.”
Current law requires a cooperative to keep correct and complete financial
records. Upon giving at least one week's written notice stating the purpose for the
examination, a member may examine, at a reasonable time and for a proper purpose,
any financial records pertinent to the purpose specified in the notice. The board of
directors may deny a request to examine financial records if the board determines
that the purpose is not directly related to the business or affairs of the cooperative
and is contrary to the best interests of the cooperative.
Under this bill, a member's right to examine a cooperative's financial records
is limited to financial records covering the current or preceding three fiscal years.
The bill also specifies that this right of examination is subject to any legal duty to
preserve confidentiality or protect privacy. The bill further provides that the board
of directors may deny a request to examine financial records if the board determines
that the purpose is not directly related to the requester's interest as a member in the
business or affairs of the cooperative or is otherwise contrary to the best interests of
the cooperative. Under the bill, the cooperative may condition examination of
financial records on the member reimbursing the cooperative for the reasonable costs
to produce the financial records and make requested copies of them.
Under current law, a cooperative's board of directors may not dispose of all or
substantially all of the cooperative's fixed assets without the members'
authorization. The members may authorize the disposition of all or substantially all

of a cooperative's fixed assets if appropriate notice is given and the disposition is
approved by a two-thirds vote at the members' meeting.
This bill applies this provision to all assets, not just fixed assets. Also under the
bill, a cooperative's board of directors may not, without the members' authorization,
dispose of a cooperative's assets 1) other than in the ordinary course of business; or
2) in a manner that jeopardizes the purpose for which the cooperative was created
or its financial vitality. The members may authorize the disposition under such
circumstances if appropriate notice is given and the disposition is approved by a
two-thirds vote at the members' meeting.
Under current law, a cooperative may effect the forfeiture to the cooperative of
unclaimed assets if certain conditions are met, including that notice is mailed to the
last-known address of each owner and published once in a newspaper. This bill
provides that the notice published in the newspaper may consist of either the owner's
name and address or an Internet site address where this information is posted,
together with a brief description of the reason for the notice.
Under this bill, an electric cooperative's extension of credit to its member or its
member's landlord to finance qualifying expenses is not subject to most provisions
of the Wisconsin Consumer Act if the electric cooperative enters into a written
agreement with the member or the member's landlord covering the extension of
credit and if the written agreement satisfies certain requirements, discussed below.
The bill defines “electric cooperative” as a cooperative that carries on the business
of generating, transmitting, or distributing electric energy to its members at
wholesale or retail. The bill defines “qualifying expenses” as expenses associated
with any project relating to energy efficiency, energy conservation, electric safety, or
emergency back-up generation (qualifying project). The written agreement between
the electric cooperative and the member or the member's landlord may not contain
any provision that does any of the following: 1) with exceptions, requires a schedule
of payments under which any one payment is not substantially equal to all other
payments or under which the intervals between any consecutive payments differ
substantially; 2) requires payment of a late charge for an installment payment that
is ten or fewer days late or a late charge that is greater than 1 percent of the unpaid
amount of the installment; 3) allows a charge of more than $30 for a dishonored
check; 4) requires the party who does not prevail in a court proceeding or other
dispute to pay the attorney fees of the prevailing party; or 5) authorizes the electric
cooperative to confess judgment against the member or member's landlord in any
action arising under the agreement. The written agreement must include a
provision that grants to the member or member's landlord the right to prepay,
without penalty, the unpaid balance of the extension of credit.
The bill also includes provisions relating to the electric cooperative's right to
recover costs associated with a qualifying project against the borrower and against
other persons. An electric cooperative that extends credit to its member or its
member's landlord to finance qualifying expenses may recover the costs, including
financing costs and repayment installments, as line item charges on its electric bills
issued to the member or member's landlord. The written agreement between the
electric cooperative and its member, or its member's landlord with the member's

written consent, may provide that costs, including financing costs and installment
repayments, must be recovered as a project electric account charge on the account
of the member associated with the property where the qualifying project will be
completed. The bill defines “project electric account charge” as the charge placed on
a member's account by which an electric cooperative may recover costs, including
financing costs of qualifying expenses. The written agreement may also provide that
project electric account charges will apply to subsequent owners or tenants of the
property, except that, if the agreement is with a member who is a tenant, the landlord
must also agree and must be given notice, in the agreement, of the landlord's
obligation to give notice to future tenants or purchasers (discussed below). If the
written agreement between the electric cooperative and its member or member's
landlord provides that project electric account charges will apply to subsequent
owners or tenants of the property, the electric cooperative may record a notice of
electric account charge in the office of the register of deeds for the county in which
the property is located. This notice must include certain information, including a
statement that the electric account associated with the property is subject to project
electric account charges and other information related to these charges. If this notice
is recorded and there is a subsequent transfer of ownership or change in tenancy of
the property, the electric cooperative may recover the project electric account charge
from the transferee or tenant as line item charges on the transferee or tenant's
electric bills. If the electric account associated with leased property is subject to a
project electric account charge pursuant to a written agreement between the electric
cooperative and its member or member's landlord, the property owner must provide
notice of the written agreement and a copy of the notice of electric account charge to
each subsequent lessee of the property responsible for paying the electric bills issued
by the electric cooperative. If a subsequent lessee is responsible for payment of
charges and, before entering into a lease for the property, the property owner failed
to provide the subsequent lessee with the required notice, the subsequent lessee may
deduct from the lessee's rent, for no more than one‐half of the term of the lease, the
amount of the charges for which the subsequent lessee is responsible.
Under the bill, an electric cooperative may contract with any third party to
perform, on its behalf, a function permitted of the electric cooperative, including the
provision of financing, but the third party must comply with all requirements
applicable to the electric cooperative.
The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
AB353,1 1Section 1. 185.01 (4) (a) of the statutes is amended to read:
AB353,5,22 185.01 (4) (a) Either no No member of the foreign cooperative who is an
3individual is allowed more than one vote because of the amount of stock or

1membership capital the member owns therein, or the foreign cooperative does not
2pay dividends on stock or membership capital in excess of 8 percent per year
; and
AB353,2 3Section 2. 185.03 (10) (d) of the statutes is amended to read:
AB353,5,94 185.03 (10) (d) The notice under par. (b) is mailed to the last-known address
5of each owner, and the name and address of each owner to whom notice is mailed or
6an Internet site address where this information is posted, together with a brief
7description of the reason for the notice,
is published as a class 1 notice under ch. 985
8on or before the date of mailing in a newspaper published in the municipality
9containing the service area of the cooperative.
AB353,3 10Section 3. 185.12 (5m) of the statutes is created to read:
AB353,5,1311 185.12 (5m) (a) In this subsection, “cooperative holding company” means a
12cooperative that owns or controls subsidiaries operating on a cooperative basis as the
13primary part of their business and activities.
AB353,5,1714 (b) Notwithstanding sub. (2), a cooperative holding company and its
15cooperative subsidiaries may, in its articles or bylaws, permit members to base voting
16power in whole or in part on members' current or recent patronage activity, or on
17members' patronage equity in the cooperative, or on a combination of both.
AB353,5,2218 (c) If the articles or bylaws provide for voting power as described in par. (b),
19whenever this chapter requires an action to be approved by a majority vote of
20members or by a vote of a greater proportion of members, approval of the action is
21by, respectively, a majority of the member votes cast or such greater proportion of the
22member votes cast.
AB353,4 23Section 4. 185.21 (2) (c) of the statutes is repealed.
AB353,5 24Section 5. 185.31 (1) of the statutes is renumbered 185.31 (1) (a) and amended
25to read:
AB353,6,7
1185.31 (1) (a) All powers of the cooperative shall be exercised by or under
2authority of, and the business and affairs of a cooperative shall be managed under
3the direction of, the board, except as otherwise provided in this chapter. Every
4Except as provided in par. (b), every director shall be a member or a representative
5of a member who that is other than a natural person. The bylaws shall prescribe any
6other qualifications for directors and may provide that directors be from specified
7districts.
AB353,6 8Section 6. 185.31 (1) (b) of the statutes is created to read:
AB353,6,119 185.31 (1) (b) 1. In this paragraph, “outside director” means a director who is
10neither a member nor a representative of a member that is other than a natural
11person.
AB353,6,1312 2. Subject to subds. 3. and 4., the bylaws may allow for not more than 2 outside
13directors.
AB353,6,1514 3. The total number of outside directors may not exceed 20 percent of the total
15number of directors, as established under sub. (2).
AB353,6,1816 4. No person may serve as an outside director unless a majority of directors who
17are not outside directors votes to approve the person as a director. The board may
18not nominate outside directors.
AB353,6,2019 5. An outside director has the same voting rights as a director who is not an
20outside director.
AB353,7 21Section 7. 185.38 (1) (intro.) of the statutes is amended to read:
AB353,6,2522 185.38 (1) (intro.) Except as authorized by the members, the board may not
23dispose of all or substantially all of a cooperative's fixed assets. At any meeting the
24members may authorize the disposition of all or substantially all of a cooperative's
25fixed assets if:
AB353,8
1Section 8. 185.38 (1m) of the statutes is created to read:
AB353,7,32 185.38 (1m) (a) Except as authorized by the members, the board may not
3dispose of a cooperative's assets under any of the following circumstances:
AB353,7,44 1. Other than in the ordinary course of business.
AB353,7,65 2. In a manner that jeopardizes the purpose for which the cooperative was
6created or its financial vitality.
AB353,7,97 (b) At any meeting the members may authorize the disposition of a
8cooperative's assets under circumstances described in par. (a) if all of the following
9apply:
AB353,7,1110 1. Notice that the disposition will be considered at the meeting has been given
11to all persons entitled to vote on the matter.
AB353,7,1312 2. The disposition has been approved by two-thirds of those entitled to vote on
13the matter who vote at the meeting.
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