conveyances or clerk for the county in which such association shall have a business office. The board of corporators shall turn over to the proper officers of the association all subscriptions, lists, or other papers which they have taken as corporators, and all such papers shall be as valid as if taken and made by the corporators. (1915, p. 235, §7; Civ. C. 1922, § 4337.)

§ 8144. Powers of association.-Each association created under this article shall have power to conduct any agricultural, dairy, mercantile, manufacturing, or mechanical business on the cooperative plan, and may buy, sell, and deal in the products of any other cooperative company heretofore organized or hereafter organized under the provisions of this article. (1915, p. 235, § 8; Civ. C. 1922, § 4338.)

§ 8145. Investment of reserve fund. At any regular meeting, or at any duly called special meeting, at which at least a majority of all its stockholders shall be present, an association organized under this article may, by a majority vote of those present, authorize the investment of its reserve fund, or any part thereof, or of not to exceed 25 percent of its capital, in the capital stock of any other cooperative association. (1915, p. 35, § 9; Civ. C. 1922, § 4339.)

§ 8146. Apportionment of earnings. The directors of each such association, subject to revisions by the association at any general or duly called special meeting, shall apportion the earnings of the business in the following manner:

(1) They shall declare and pay dividends on the paid-up capital stock not exceeding 6 percent per annum, said dividends to be paid at such time as the bylaws shall prescribe.

(2) They shall set aside annually not less than 10 percent of the net profits of the association for a reserve fund until there is accumulated in said reserve fund an amount not less than 30 percent of the paid-up capital stock.

(3) They shall appropriate 5 percent of the net profits for an educational fund to be used in teaching cooperation.

(4) The remainder of said net profits shall be applied as a uniform dividend, as follows: (a) One-half of such uniform dividend upon the amount of purchase of shareholders, and upon the wages of employees, and (b) one-half of such uniform dividend to nonshareholders on the amount of their purchases from and through the association, which may be credited to the account of such nonshareholder on account of the capital stock of the association; but in productive associations, such as creameries, canneries, elevators, factories, and the like, such dividends shall be on the raw material delivered instead of on goods purchased. In case the association is both a selling and a productive concern, the dividend may be on both raw material delivered and on goods purchased by patrons. (1915, p. 235, § 10; Civ. C. 1922, § 4340.)

§ 8147. Report to commissioner of agriculture, commerce and industries. Every association organized under the terms of this article shall, annually, on or before the 1st day of January each year, make a report to the commissioner of agriculture, commerce, and industries. Such report shall contain the name of the association, its principal place of business, and generally a statement as to its business, showing total amount of business transacted, amount of capital stock subscribed for and paid in, number and names of

stockholders, total expenses of operation, amount of indebtedness or liabilities, and its profits and losses. This annual report to the commissioner of agriculture shall be for his confidential information. (1915, p. 235 § 11; Civ. C. 1922, § 4341.)

§ 8148. Other associations may accept benefits of this article.-All cooperative corporations, associations, or companies which have heretofore organized and are now doing business under the corporation statutes of this State, or which have attempted so to organize and so to do business, shall have the benefit of all the provisions of this article, and shall be bound thereby, on filing with the secretary of state a written declaration signed and sworn to by the president and by the secretary to the effect that said cooperative company or association has, by a majority vote of its stockholders, decided to accept the benefits of, and to be bound by, the provisions of this article. No association organized under this article shall be required to do or to perform anything not specially required herein in order to become a corporation or to continue its business as such. (1915, p. 235, § 12; Civ. C. 1922, § 4342.)

§ 8149. Restricted use of the term "cooperative."-No corporation or association hereafter organized or doing business for profit in this State shall be entitled to use the term "cooperative" as part of its corporate or other business name or title, unless it has complied with the provisions of this article; and any corporation or association violating the provisions of this section may be enjoined from doing business under such name at the instance of any stockholder of any association legally organized hereunder. (1915, p. 235, § 13; Civ. Č. 1922, § 4343.)

SOUTH DAKOTA

Compiled Laws, 1929, as amended by Session Laws, 1931, pages 77–78, and 1935, page 96

COOPERATIVE ASSOCIATIONS

§ 8839. Organization.1-Any number of persons, not less than five, may associate themselves together as a cooperative association,2 society, company, or exchange, for the purpose of conducting any agricultural, dairy, mercantile, mining, manufacturing, or mechanical business on the cooperative plan. For the purpose of this chapter, the word "association" shall be construed to include "company", "corporation", "exchange", "society", or "union." (L. 1913, ch. 145, § 1.)

1

1 Men employed, usually on full time, by a cooperative livestock shipping association to receive, sort, and ship livestock for the members, are not within any of the three categories of exceptions (farm laborers, domestic servants, and casual employees) to the Workmen's Compensation Law. (Op. Atty. Gen. (1924) 392.)

2

Cooperatives organized under this act must comply with the provisions of chapter 275 of the laws of 1915, relating to the Securities Commission (bluesky laws) which provide that a permit must be obtained from the commission before securities are offered for sale in this State. (Op. Atty. Gen. (1918) 174.)

§ 8840. Articles of incorporation. The persons forming such association shall sign and acknowledge written articles, which shall contain the name of the association and the names and residences of the persons forming the same. Such articles shall also contain a statement of the business and purposes of the association, and shall designate the city or town where its principal place of business shall be located. Such articles shall also state the amount of its capital stock, the number of shares it is divided into and the par value of each.i (L. 1913, ch. 145, § 2.)

'In view of the rigid method of apportionment provided in section 8849, the articles of incorporation of a cooperative may not provide for the issuance of preferred stock. (Op. Atty. Gen. (1926) 115.)

See also the second annotation to section 8839.

§ 8841. Directors. Every such association shall be managed by a board of not less than five directors,1 to be elected by and from the stockholders of the association, at such time and for such term as the bylaws may prescribe, and to hold office for the time for which they are elected, which time shall not exceed a period of 3 years, or until their successors are elected and shall enter upon the discharge of their duties; but a majority of the stockholders shall have power, at any regular or special stockholders' meeting, legally called, to remove any officer or director for cause and fill the vacancy, and thereupon the director or officer so removed shall cease to be a director of such association. The officers of every such association shall

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be a president, one or more vice presidents, a secretary, and a treasurer, who shall be elected annually by the directors, and each of such officers must be a director of the association. The office of secretary and treasurer may be combined, and when so combined the person filling the office shall be secretary-treasurer. (L. 1913, ch. 145, § 3.)

1

Where a cooperative has a bylaw providing that directors should have complete management of the affairs of the association, and there are no restrictions in the articles of incorporation, bylaws, or statutes, the directors of such a cooperative have implied power to borrow money for conducting its ordinary business. (Op. Atty. Gen. (1922) 77.)

Under the negotiable instruments law officers of a corporation who sign a note for the corporation in their representative capacity and are duly authorized to do so, are freed from personal liability on such note. In a case where officers of a farm cooperative organized under this statute, signed a note for the cooperative, it was contended that they were personally liable on the note because it created a debt beyond the amount of the subscribed capital stock contrary to section 8789 of the general corporation law, and hence was not duly authorized within the meaning of the negotiable instruments law. The court held there had been no violation of section 8789 because the note was executed for a preexisting rather than a new debt, and therefore the officers were not personally liable. (Tripp County State Bank of Colome v. Farmers' Coop. Union of Colome, 50 S. D. 461, 210 N. W. 674 (1926).)

§ 8842. Amendment of articles.-Any such association may amend its articles of incorporation by a majority vote of its stockholders, at any regular stockholders' meeting or at any special stockholders' meeting called for that purpose, on 10 days' written notice to the stockholders, a copy of such notice to be mailed separately to each stockholder at his last-known address, or to be published in the newspaper located nearest to such place of business for at least 2 weeks next preceding the time of holding such meeting, such notice to state the object of the meeting and the amendment or amendments to be proposed. Such power to amend shall include the power to increase or diminish the amount of capital stock and the number of shares:1 Provided, The amount of the capital stock of the association shall not be diminished below the amount of the paid-up capital stock at the time such amendment is adopted. Within 30 days after the adoption of an amendment to its articles of incorporation, the association shall cause a copy of such amendment to be recorded in the office of the secretary of the state, which amendment when so adopted and recorded shall be a part of the constitution and bylaws of the association. (L. 1913, ch. 145, § 4.)

'See article 17, section 8 of the State Constitution, which provides: "No corporation shall issue stocks or bonds except for money, labor done, or money or property actually received; and all fictitious increase of stock or indebtedness shall be void. The stock and indebtedness of corporations shall not be increased except in pursuance of general law, nor without the consent of the persons holding the larger amount in value of the stock first obtained, at a meeting to be held after 60 days' notice given in pursuance of law."

A corporation operating as a cooperative although organized under the general corporation law, and wishing to amend its articles of incorporation so as to increase its capital stock, should do so in accordance with the cooperative instead of the general corporation statute, and the company should be given time formally to accept the provisions of the cooperative law. In voting on the amendment the cooperative must meet the requirements not only of the cooperative statute but also of the State Constitution, which provides that the consent of those holding the larger amount in value of stock must be obtained. (Art. XVII, sec. 8.) Where the corporation did not meet both these require

ments the amendment is unauthorized and the issuance of a certificate of amendment by the secretary of state will not cure the defect. Subscribers for shares of stock are stockholders and entitled to vote as well as those who have paid in full. (Op. Atty. Gen. (1920) 81.)

The requirement in the general corporation statute that an increase of capital stock shall be by vote of two-thirds of the outstanding stock is inapplicable to cooperatives. (Op. Atty. Gen. (1920) 86.)

§ 8843. Powers. Any association created under the provisions of this chapter shall have power to conduct any agricultural, dairy, mercantile, mining, manufacturing, or mechanical business on the cooperative plan. (L. 1913, ch. 145, § 5.

§ 8844. Limitations on ownership of shares.-No stockholder in any such association shall be entitled to more than one vote,1 and no stockholder in any such association shall be entitled to hold shares of stock of a greater par value than $1,000 in any such association having a par value capital of $100,000 or less: Provided, That in associations having a par value capital of more than $100,000 each stockholder shall be entitled to hold not to exceed 1 percent of the par value capital stock of such association. (L. 1913, ch. 145, § 6; L. 1921, ch. 153; L. 1923, ch. 131; L. 1931, ch. 104.)

1 See article 17, section 5 of the State Constitution which provides: "In all elections for directors or managers of a corporation, each member or shareholder may cast the whole number of his votes for one candidate, or distribute them upon two or more candidates, as he may prefer."

The business corporation law (secs. 8782, 8792) provides that proxy voting be permitted.

§ 8845. Investment of capital.-At any regular meeting or at any regularly called special meeting an association organized under the provisions of this chapter may subscribe such shares and invest its reserve and 25 percent of its capital in the capital stock of any other cooperative association complying with the cooperative law of the State of South Dakota, by a majority vote of the stockholders of such corporation present at such regular or special meeting at which a quorum is present: Provided, That notice of such regular or special meeting shall be mailed to each stockholder of such association at his last known address, by its secretary at least 10 days before the date fixed for such meeting, which notice shall state the time and place of the meeting and the purposes and objects of the same. (L. 1913, ch. 15, §7; L. 1921, ch. 153; L. 1931, ch. 103.)

§ 8846. May purchase business of another association. Whenever an association, organized under the provisions of this chapter, shall purchase the business of another association or person, it may pay for the same, in whole or in part, by issuing to the vendor shares of its capital stock to an amount which at par value would equal the fair market value of the business so purchased, and in such case the transfer to the association of such business, at such valuation, shall be equivalent to payment in cash for the shares of stock so issued. (L. 1913, ch. 145, § 8.)

§ 8847. May hold shares in trust.-In case the cash value of such purchased business exceeds $1,000, the directors of the association are authorized to hold the shares in excess of $1,000 in trust for the vendor, and dispose of the same to such persons and within such time as may be mutually satisfactory to the parties in interest, and pay the proceeds thereof, as currently received, to the former owner