AB327: Bill Text

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

Under the bill, all of the following occur when a merger or consolidation takes effect:

1) All business entities that are party to the merger or consolidation become the business entity surviving the merger or consolidation, as designated in the plan, and the separate existence of every business entity that is party to the merger or consolidation, except the business entity surviving the merger or consolidation, ceases.

2) The title to all property owned by each business entity that is party to the merger or consolidation is vested in the surviving business entity without reversion or impairment.

3) If, under the laws applicable to a business entity that is a party to the merger or consolidation, other than taxation laws, one or more of the owners thereof is liable for the debts and obligations of such business entity, such owner or owners shall continue to be liable for the debts and obligations of the business entity, but only for such debts and obligations accrued during the period or periods in which such laws are applicable to such owner or owners.

4) If, under the laws applicable to the surviving business entity other than taxation laws, one or more of the owners thereof is liable for the debts and obligations of such business entity, the owner or owners of a business entity that is party to the merger, other than the surviving business entity, who become subject to such laws shall be liable for the debts and obligations of the surviving business entity to the extent provided in such laws, but only for such debts and obligations accrued after the merger or consolidation.

5) The surviving business entity has all liabilities of each business entity that is party to the merger or consolidation.

6) A civil, criminal, administrative, or investigatory proceeding pending by or against any business entity that is a party to the merger or consolidation may be continued as if the merger or consolidation did not occur, or the surviving business entity may be substituted in the proceeding for the business entity whose existence ceased.

7) The articles or other similar governing document of the surviving business entity shall be amended to the extent provided in the plan.

8) The interests of each business entity that is party to the merger that are to be converted into shares, interests, obligations, or other securities of the surviving business entity or any other business entity or into cash or other property are converted, and the former holders of the interests are entitled only to the rights provided in the articles of merger or consolidation or to their dissenters' rights under applicable law.

The bill also includes a procedure that a UCA may follow to abandon a merger before it takes effect.

Dissolution

Voluntary dissolution

The bill creates a procedure by which a UCA may voluntarily dissolve. In order for a voluntary dissolution to be initiated, a notice of intent to dissolve must be approved by the affirmative vote of the members. The board must then file the notice with DFI; collect, or make provision for the collection of, all unpaid subscriptions for shares and all other debts owing to the UCA; and pay, or make provision for the payment of, all debts, obligations, and liabilities of the UCA. After a notice is filed, the board may lease or dispose of all or substantially all of the property and assets of the UCA without a vote of the members.

Any property of the UCA remaining after discharge of the UCA's debts, obligations, and liabilities may be distributed to the members and former members as provided in the bylaws. If authorized by the members, the UCA's property may be liquidated and disposed of at the discretion of the board. The bill allows certain unclaimed assets to be forfeited to the UCA. After the board has provided for payment of all debts, obligations, and liabilities of the UCA and the remaining property of the UCA has been distributed or otherwise legally disposed of, the board must file articles of dissolution with DFI, at which time the UCA is dissolved.

The bill provides a procedure by which dissolution proceedings may be revoked before the articles of dissolution are filed. The bill also provides for court-supervised voluntary dissolution in certain circumstances.

Involuntary dissolution

The bill allows member, creditors, and the attorney general, in certain circumstances, to sue to dissolve a UCA. Under the bill, a member may bring an action against a UCA for dissolution, liquidation, and equitable relief if any of the following apply:

1) The directors or the persons having the authority otherwise vested in the board are deadlocked in the management of the UCA's affairs and the members are unable to break the deadlock.

2) The directors or those in control of the UCA have acted fraudulently, illegally, or in a manner unfairly prejudicial toward one or more members in their capacities as members, directors, or officers.

3) For a period that includes the time when two consecutive regular members' meetings were held, the members failed to elect successors to directors whose terms expired or would have expired upon the election and qualification of their successors.

4) The UCA's assets are being misapplied or wasted.

5) The UCA's period of duration as provided in the articles has expired and has not been lawfully extended.

A creditor may bring an action against a UCA for dissolution, liquidation, and equitable relief if the creditor has obtained a money judgment against the UCA and an execution on that judgment has been returned unsatisfied or the UCA has admitted in writing that a claim of the creditor against the UCA is due and owing and that the UCA is unable to pay its debts in the ordinary course of business.

After giving a UCA 30 days to make a correction, the attorney general may bring an action against a UCA for dissolution and liquidation, and for equitable relief for persons other than the attorney general, if the articles and certificate of organization of the UCA were procured through fraud; the UCA was organized for a purpose prohibited by state law or not permitted under the law governing the UCA; the UCA has knowingly violated a law governing the UCA, with intentional disregard of the harm which the law is intended to avert; the UCA has violated more than once a law governing the UCA or has violated more than one law governing the UCA; or the actions of the UCA, or its failure to act, constitutes surrender or abandonment of the business of the UCA.

The bill specifies procedures, including the appointment of a receiver, that apply to involuntary dissolution proceedings (the procedures also apply to court-supervised voluntary dissolution proceedings). In addition, the bill requires the court, in determining whether to order a remedy in an involuntary dissolution proceeding to consider the financial condition of the UCA. The court may not refuse to order a remedy solely on the ground that the UCA has accumulated operating profits or current operating profits. The court must also consider whether relief, other than dissolution, suggested by one or more parties would permanently remedy the cause of the action. If the court finds that a party to an involuntary dissolution proceeding has acted arbitrarily, vexatiously, or in bad faith, the court may award reasonable expenses, including attorney fees and disbursements, to any of the other parties.

With certain exceptions, the bill prohibits any creditor or claimant who does not file a claim or bring an action during the pendency of dissolution proceedings or who has not brought an action before the commencement of dissolution proceedings, and all those claiming through or under the creditor or claimant, from bringing an action to collect on that claim or otherwise enforcing it.

Other provisions

Administration

The bill specifies UCA filing fees and permits DFI to assess a larger fee by rule for documents filed in paper format. Also, if a UCA makes an erroneous filing, DFI may revoke and expunge the filing and authorize a curative filing. Under the bill, DFI must charge a $500 fee for any such curative filing.

Statutory references

The bill makes numerous changes to the statutes to incorporate references to UCA's in provisions that currently refer to cooperatives.

Because this bill creates a new crime or revises a penalty for an existing crime, the Joint Review Committee on Criminal Penalties may be requested to prepare a report concerning the proposed penalty and the costs or savings that are likely to result if the bill is enacted.

For further information see the state fiscal estimate, which will be printed as an appendix to this bill.

The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:

AB327, s. 1 Section 1. 11.29 (1) of the statutes is amended to read:

AB327,24,10 11.29 (1) Nothing in this chapter restricts any corporation, cooperative, unincorporated cooperative association, or voluntary association other than a political party or personal campaign committee from making disbursements for the purpose of communicating only with its members, shareholders or subscribers to the exclusion of all other persons, with respect to endorsements of candidates, positions on a referendum or explanation of its views or interests, without reporting such activity. No such corporation, cooperative, or voluntary association may solicit contributions from persons who are not members, shareholders or subscribers to be used for such purposes.

AB327, s. 2 Section 2. 11.29 (4) of the statutes is amended to read:

AB327,25,2 11.29 (4) For purposes of this section, the members of a local or regional cooperative or unincorporated cooperative association are deemed to be members of a state cooperative or unincorporated cooperative association if the local or regional cooperative or unincorporated cooperative association is a member of the state cooperative or unincorporated cooperative association.

AB327, s. 3 Section 3. 11.38 (1) (a) 1. of the statutes is amended to read:

AB327,25,8 11.38 (1) (a) 1. No foreign or domestic corporation, or association organized under ch. 185 or 193, may make any contribution or disbursement, directly or indirectly, either independently or through any political party, committee, group, candidate or individual for any purpose other than to promote or defeat a referendum.

AB327, s. 4 Section 4. 11.38 (2) (b) of the statutes is amended to read:

AB327,25,14 11.38 (2) (b) This section does not prohibit the publication of periodicals by a corporation or, a cooperative, or an unincorporated cooperative association in the regular course of its affairs which advise the members, shareholders or subscribers of the disadvantages or advantages to their interests of the election to office of persons espousing certain measures, without reporting such activity.

AB327, s. 5 Section 5. 11.38 (8) (a) of the statutes is amended to read:

AB327,25,19 11.38 (8) (a) A corporation or association organized under ch. 185 or 193 which accepts contributions or makes disbursements for the purpose of influencing the outcome of a referendum is a political group and shall comply with s. 11.23 and other applicable provisions of this chapter.

AB327, s. 6 Section 6. 11.38 (8) (b) of the statutes is amended to read:

AB327,26,6 11.38 (8) (b) Except as authorized in s. 11.05 (12) (b) and (13), prior to making any disbursement on behalf of a political group which is promoting or opposing a particular vote at a referendum and prior to accepting any contribution or making any disbursement to promote or oppose a particular vote at a referendum, a corporation or association organized under ch. 185 or 193 shall register with the appropriate filing officer specified in s. 11.02 and appoint a treasurer. The registration form of the corporation or association under s. 11.05 shall designate an account separate from all other corporation or association accounts as a campaign depository account, through which all moneys received or expended for the adoption or rejection of the referendum shall pass. The corporation or association shall file periodic reports under s. 11.20 providing the information required under s. 11.06 (1).

AB327, s. 7 Section 7 . 11.38 (8) (b) of the statutes, as affected by 2005 Wisconsin Act 2001 Wisconsin Act 109, is amended to read:

AB327,26,19 11.38 (8) (b) Except as authorized in s. 11.05 (12) (b) and (13), prior to making any disbursement on behalf of a political group which is promoting or opposing a particular vote at a referendum and prior to accepting any contribution or making any disbursement to promote or oppose a particular vote at a referendum, a corporation or association organized under ch. 185 or 193 shall register with the appropriate filing officer specified in s. 11.02 and appoint a treasurer. The registration form of the corporation or association under s. 11.05 shall designate an account separate from all other corporation or association accounts as a campaign depository account, through which all moneys received or expended for the adoption or rejection of the referendum shall pass. The corporation or association shall file reports under s. 11.20 and under s. 11.21 (16), if applicable, providing the information required under s. 11.06 (1).

AB327, s. 8 Section 8. 13.94 (4) (a) 1. of the statutes is amended to read:

AB327,27,10 13.94 (4) (a) 1. Every state department, board, examining board, affiliated credentialing board, commission, independent agency, council or office in the executive branch of state government; all bodies created by the legislature in the legislative or judicial branch of state government; any public body corporate and politic created by the legislature including specifically the Fox River Navigational System Authority, a professional baseball park district, a local professional football stadium district, a local cultural arts district and a family care district under s. 46.2895; every Wisconsin works agency under subch. III of ch. 49; every provider of medical assistance under subch. IV of ch. 49; technical college district boards; development zones designated under s. 560.71; every county department under s. 51.42 or 51.437; every nonprofit corporation or cooperative or unincorporated cooperative association to which moneys are specifically appropriated by state law; and every corporation, institution, association or other organization which receives more than 50% of its annual budget from appropriations made by state law, including subgrantee or subcontractor recipients of such funds.

AB327, s. 9 Section 9. 15.155 (4) (b) of the statutes is amended to read:

AB327,27,16 15.155 (4) (b) Members of the rural economic development board appointed under par. (a) 5. shall have experience operating a business located in a rural municipality, as defined in s. 560.17 (1) (d). At least one member shall have experience operating a cooperative or unincorporated cooperative association located in a rural municipality, as defined in s. 560.17 (1) (d).

AB327, s. 10 Section 10. 16.957 (1) (t) of the statutes is amended to read:

AB327,27,20 16.957 (1) (t) "Retail electric cooperative" means a cooperative association that is organized under ch. 185 or 193 for the purpose of providing electricity at retail to its members only and that owns or operates a retail electric distribution system.

AB327, s. 11 Section 11. 16.957 (1) (v) of the statutes is amended to read:

AB327,27,24 16.957 (1) (v) "Wholesale electric cooperative" means a cooperative association that is organized under ch. 185 or 193 for the purpose of providing electricity at wholesale to its members only.

AB327, s. 12 Section 12. 25.17 (3) (dg) 1. of the statutes is amended to read:

AB327,28,8 25.17 (3) (dg) 1. Direct obligations of the United States and of agencies of and corporations wholly owned by the United States, and direct obligations of federal land banks, federal home loan banks, central bank for cooperatives and banks for cooperatives or unincorporated cooperative associations, international bank for reconstruction and development, the international finance corporation, inter-American development bank, African development bank and Asian development bank, in each case maturing within one year or less from the date of investment.

AB327, s. 13 Section 13. 28.02 (4) (b) 5. of the statutes is amended to read:

AB327,28,13 28.02 (4) (b) 5. To public utilities and , cooperative associations, and unincorporated cooperative associations when needed for power and telecommunications substations, transformers, booster stations and similar installations.

AB327, s. 14 Section 14. 30.40 (9) of the statutes is amended to read:

AB327,28,19 30.40 (9) "Person" means a natural person, corporation, limited liability company, partnership, association, cooperative, unincorporated cooperative association, municipality or other local governmental unit, private or public utility, municipal power district, estate or trust, the United States, a federal agency, the state of Wisconsin or a state agency.

AB327, s. 15 Section 15. 32.02 (10) (intro.) of the statutes is amended to read:

AB327,28,22 32.02 (10) (intro.) Any rural electric cooperative association organized under ch. 185 or 193 which operates a rural electrification project to:

AB327, s. 16 Section 16. 32.22 (12) (a) (intro.) of the statutes is amended to read: