of the corporation, until the corporation has become its own and sole stockholder;

Sixth. To appoint such subordinate officers and agents as the business may require and to allow them suitable compensation therefor:

Seventh. To make bylaws for the management of its affairs and to provide therein the terms and limitations of stock ownership and for the distribution of its earnings within the limits of this article. (S. L. 1917, ch. 26, § 5.)

§ 996. Board of directors; officers.-Every such association shall be managed by a board of not less than five directors. The officers of every such association shall be a president, one or more vice presidents, a secretary, and a treasurer, who shall be elected annually by the directors, and each of said officers must be a director of the association except the secretary, who may or may not be a director. The office of secretary and treasurer may be combined, the person filling the office shall be secretary-treasurer. (S. L. 1917, ch. 26, § 6.)

§ 997. Stockholder entitled to one vote only.-The members of every such association shall be entitled to one and only one vote each, regardless of the amount of capital stock held.1 (S. L. 1917, ch. 26, $ 7.)

1The business corporation law (sec. 911) provides that proxy voting shall be permitted at all stockholders' meetings.

§ 998. Apportionment of earnings. The directors, subject to revision by the association at any regular or special meeting and not less than once each year, shall apportion the earnings of the association by first paying a dividend on the paid-up capital stock, not exceeding 8 percent per annum, then setting aside not less than 10 percent of the net profits for a sinking fund, to be used in accordance with the bylaws of the association, and 5 percent thereof for an educational fund to be used in teaching cooperation, and the remainder of said net profits shall be prorated by a uniform dividend to its several stockholders or other customers upon their purchases from, or sales to, said association or both such purchases and sales, and upon salaries of employees. (S. L. 1917, ch. 26, § 8.)

ARKANSAS

Statutes, 1927

COOPERATIVE ASSOCIATIONS

§ 1700a. Purpose of act. The purpose of this act is to provide for the formation and carrying on of cooperative associations and to provide for the rights, powers, liabilities, and duties of such cooperative associations. The provisions of this act shall be administered by the commissioner1 of mines, manufactures, and agriculture, who shall have power to employ such help as in his judgment is necessary to carry into effect the provisions of this act. (A. 1921, p. 702, § 1.) 'The commissioner is not given authority to make audit of cooperatives. (Op. Atty. Gen. (1923-24) 44.)

§ 1700b. Business concerns; how created. Any number of persons, not less than 20, who are citizens of the State of Arkansas, may associate themselves together as a cooperative corporation for the purpose of conducting any agricultural, dairy, mercantile, banking, mining, manufacturing, or mechanical business on the cooperative plan. The title of such corporation shall begin with "the" and end with "association", "company", "corporation", "exchange", "society", or "union." For the purpose of this act the "cooperative plan" shall be construed to mean a business concern, that distributes the net profits of its business by: First, the payment of a fixed dividend upon its stock; second, the remainder of its profits are prorated to its several stockholders upon their purchases from or sales to said concern or both such purchases and sales. (A. 1921, p. 702, § 2.)

§ 1700c. Articles to contain what. They shall sign and acknowledge written articles of incorporation which shall contain: The name of the corporation; the name and residences of the persons forming the same; the purpose of the organization; the principal place of business; the amount of capital stock; the number of shares and the par value of each share; the number of directors and the names of those selected for the first term; the time for which the corporation is to continue, not to exceed 50 years. (A. 1921, p. 702, § 3.)

§ 1700d. Articles filed with secretary of state. The original articles of incorporation or a certified copy of the same shall be filed with the secretary of state, who shall return to the corporation a certified copy of the same, with the date of filing and attested with the seal of his office; Provided, That a certified copy of the same shall be filed by the secretary of state with the commissioner of mines, manufactures, and agriculture. (A. 1921, p. 702, § 4.)

§ 1700e. Fees for filing.--For filing the articles of incorporation and amendments thereto under this act the same fees shall be paid to the secretary of state as is now required under the general corporation law. (A. 1921, p. 702, § 5.)

'Under this section cooperative corporations are required to pay $5 for their certificate of incorporation. For filing their articles of incorporation, they are

138958°-37-2

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required to pay a fee of $25 for the first $10,000 or under of authorized capital stock, and, if the capital stock exceeds this amount, one-tenth of 1 percent on all amounts in excess of the $10,000. (Op. Atty. Gen. (1921-22) 46.)

§ 1700f. May begin business when.---No corporation organized under the provisions of this act shall commence business until at least 20 percent of its capital stock has been paid for in actual cash, and a sworn statement to that effect has been filed with the commissioner of mines, manufactures, and agriculture, and his receipt for same shall be construed as a permit to do business. (A. 1921, p. 702, § 6.) § 1700g. Board of directors; removal of.-Every such association shall be managed by a board of not less than five directors. The directors shall be elected by and from the stockholders of the association at such time and for such terms of office as the bylaws may prescribe, and shall hold office for the time for which elected and 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 director or official for cause, and fill the vacancy, and thereupon the director so removed shall cease to be director of said association. The officers of every such association shall be: A president, one or more vice presidents, a secretary, and a treasurer, who shall be elected annually by the directors, and each of said officers must be a director of the association. The office of secretary and treasurer may be combined, the person filling the office of secretarytreasurer. (A. 1921, p. 702, § 7.)

§ 1700h. Ownership of stock; limitation on.-No person shall be allowed to own or have an interest in more than 10 percent of the capital stock of such corporation. Voting upon all questions shall be by members and not by stock. (A. 1921, p. 702, § 8.)

§ 1700i. Duties of directors; distribution of profits.-Each corporation shall formulate bylaws prescribing the duties of the directors and officials; the manner of distributing the profits of its business; the manner of becoming a member; and such other rules and instructions to its officials and members as will tend to make the corporation an effective business organization. (A. 1921, p. 702, § 9.)

§ 1700j. Annual reports. Each corporation organized under the provisions of this act shall make an annual report to the commissioner of mines, manufactures, and agriculture, the same as is required of other corporations; Provided, Such cooperative corporation shall be required to report the names of its stockholders and the amount of the stock owned by each, for such years only as may be required by the commissioner of mines, manufactures, and agriculture. (A. 1921, p. 702, § 10.)

§ 1700k. Benefits of act; how secured.-All cooperative corporations, companies, or associations heretofore organized and doing business under prior statutes, or which have attempted to so organize and do business, shall have the benefits of all of the provisions of this act, and may be bound thereby on paying the fees provided for in this act and filing with the secretary of state, a written declaration signed and sworn to by its president and 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 be bound by the provisions of this act; Provided, A certified copy of this declaration

shall be filed with the commissioner of mines, manufactures, and agriculture. No association organized under this act shall be required to do or perform anything not specifically required herein, in order to become a corporation, or to continue its business as such. (A. 1921, p. 702, § 11.)

§ 17001. Form of receipts prescribed. The form for receipts and any other papers necessary for carrying into effect the provisions of this act shall be prescribed by the commissioner of mines, manufactures, and agriculture. (A. 1921, p. 702, § 12.)

§ 1700m. May pass bylaws.-Any association formed under this act may pass bylaws to govern itself in the carrying out of the provisions of this act, which are not inconsistent with the provisions of this act. (A. 1921, p. 702, § 13.)

§ 1700n. Subscription to stock in other cooperative association.-At any regular meeting or any regular called special meeting at which at least a majority of all the stockholders shall be present, or represented, an association organized under this act may by a majority vote of stockholders present or represented subscribe for shares of stock and invest its reserve fund or any part thereof in the capital stock of any other cooperative association organized under this act, not to exceed 5 percent of the stock of a similar association. This act permits the federation of cooperative business enterprise in Arkansas. (A. 1921, p. 702, § 14.)

1

The business corporation law (L. 1931, chap. 255, sec. 31) provides that proxy voting be permitted at any stockholders' meeting.

§ 17000. Constitutionality. If any section or part of a section of this act shall for any cause be held unconstitutional such fact shall not affect the remainder of this act. (A. 1921, p. 702, § 15.)

§ 1700p. Liability for debts of association.-Except for debts lawfully contracted between him and the association, no members shall be liable for the debts of the association to an amount exceeding the sum remaining unpaid on his membership fee or his subscription to the capital stock, including any unpaid balance on any promissory notes given in payment thereof. (A. 1921, p. 702, § 16.)

1700q. Construction of act.--The provisions of this act shall not be construed to in any manner limit, restrict, enlarge, modify, change, conflict with, or in any manner whatever affect the provisions of the act entitled, "An Act to promote, foster, and encourage the intelligent and orderly marketing of agricultural products through cooperation, and to eliminate speculation and waste; and to make the distribution of agricultural products as direct as can be efficiently done between producer and consumer, and to stabilize the marketing problems of agricultural products; being Act No. 116 of the Forty-third General Assembly of the State of Arkansas, it being the intent of the Legislature that each of said acts shall be independent of each other; Provided, That nothing in this act shall invalidate Act No. 266 of the Acts of 1917, an act to establish and regulate bonded warehouses, and this act shall be in effect from and after its passage. (A. 1921, p. 702, § 17.)

CALIFORNIA

The general cooperative statute (Code 1931, secs. 653a to 6531) was repealed in 1931 (Statutes and Amendments, 1931, p. 1839), it being declared that "all nonprofit cooperative business corporations and cooperative business associations organized and existing under and by virtue of" the repealed sections "are to be deemed organized and existing under and by virtue of the general corporation law of the State of California."

'In the course of an opinion involving a farm cooperative, the court observed that a clause in a subscription agreement giving the cooperative about to be organized thereunder the option to purchase its shares from any stockholders at any time, at a price equal to the current book value of shares, is illegal and unenforceable. (Poultry Producers of Southern California, Inc. v. Barlow, 189 Cal. 278, 208 Pac. 93 (1922).) Also, Poultry Producers of Central California, Inc. v. Murphy, 64 Cal. App. 450, 221 Pac. 962 (1923).)

A cooperative organized without capital stock cannot levy assessments on members if the cooperative statute does not specifically grant such power. The general corporation law providing for assessments is not applicable since it relates exclusively to assessments on capital stock. (Alfalfa Growers of California, Inc. v. Icardo et al., 82 Cal. App. 641, 256 Pac. 287 (1927).)

A cooperative telephone company organized under the cooperative statute, for exclusive use of members, is not subject to statutory provisions regulating incorporation of telephone companies, nor to the Public Utilities Act. (People ex rel. Knowlton v. Orange County F. & M. Association, 56 Cal. App. 205, 204 Pac. 873 (1922).)

The United States Court of Appeals for the District of Columbia, recently held that the Stanford University Cooperative Bookstore was subject to the Federal income tax, as it did not come within the exemption in Revenue Act 1928, section 103 (6) to "corporations and any community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes, or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private shareholder or individual."

The book store had been organized to carry on "a general mercantile business for accommodation of students and faculty of Leland Stanford University.” Its membership was restricted to faculty members, who paid a $1 membership fee, receiving no interest or dividends on such fee and receiving the fee back on terminating membership. Members selected officers who served without pay and who appointed a paid manager. Sales were made at current retail prices and, periodically, rebates were made based on patronage. Only about 1 percent of the total sales were to persons not connected with the university. Amounts not consumed as operating expenses or rebates were placed in a surplus account for working capital and emergencies. Bylaws provided that in case of dissolution the "net assets may, by vote of two-thirds of members, be transferred to an organization with purposes similar to those of the book store, or applied to any educational, charitable, or benevolent institution or purpose." The court held that the "dividends" or "rebates" were "a part of the profits of the association, and thereby inured to the benefit of a private individual." (Stanford University Bookstore v. Helvering, 83 F. (2d) 710 (U. S. Ct. of App., Dist. of Col., 1936.) Justice Groner dissented.

In affirming, as applied to a California cooperative creamery, an exemption from the Federal income tax provided by an earlier revenue act, the Board of Tax Appeals held, among other things, that it is not possible to "apply later enactments to a period prior to their adoption by assuming that they supply earlier inadvertent omissions, particularly where the question is one of absolute