be binding on associations incorporated at the time such regulations may be made, as well as on those thereafter incorporated. (C. C. 1895, § 880; R. C. 1907, § 4220; R. C. M. 1921, § 6385.)

§ 6386. Stockholders voting by mail.-At any regularly called general or special meeting of the stockholders of cooperative associations, a written vote received by mail from any absent stockholder, and signed by him, may be read in such meeting and shall be equivalent to a vote of each of the stockholders so signing: Provided, That he has been previously notified in writing of the exact motion or resolution upon which such vote is taken, and a copy of the same is forwarded with and attached to the vote so mailed by him. (L. 1915, ch. 83, § 1; R. C. M. 1921, § 6386.)

§ 6387. Disposal of earnings; dividends; reserve fund; educational fund. The directors of a cooperative association, subject to revision by the stockholders at a general or special meeting may apportion the earnings of the association by first paying dividends on the paidup capital stock, not exceeding 6 percent per annum on the par value thereof, from the remaining funds, if any, accessible for dividend purposes, not less than 5 percent of the net profits for a reserve fund until an amount has accumulated in said reserve fund amounting to 30 percent of the paid-up capital stock, and from the balance, if any, 5 percent for educational fund to be used for teaching cooperation, and the remainder of said profits, if any, by uniform dividends upon the amount of purchases of patrons and upon the wages and for salaries of employees, the amount of such uniform dividends on the amount of their purchases, which may be credited to the account of such patrons on account of capital stock of the association; but in production associations such as creameries, canneries, elevators, factories, and the like, dividends shall be on raw material delivered instead of on goods purchased. In case the association is both a selling and a productive concern, the dividends may be on both raw material delivered and on goods purchased by patrons. (L. 1915, ch. 83, § 2; R. C. M. 1921, § 6387; L. 1933, ch. 135, § 3.)

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See third paragraph of annotation to section 6379.

§ 6388. Distribution of profits or net earnings; dissolution of association. The profits or net earnings of such associations shall be distributed to those entitled thereto, at such times as the bylaws shall prescribe, which shall be as often as once in 12 months. If such associations for 5 consecutive years shall fail to declare a dividend upon the shares of its paid-up capital, the holders of the majority of the par value of the issued and outstanding capital stock, by petition, setting forth such fact, may apply to the district court of the county, wherein is situated its principal place of business in this State, for its dissolution. If, upon hearing, the allegations of the petition are found to be true, the court may adjudge a dissolution of the association. (L. 1915, ch. 83, § 3; R. C. M. 1921, § 6388.)

§ 6389. Benefits of act available to existing associations.--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 benefit of all of the provisions of this act, and be bound thereby on filing with the secretary of state a written declaration, signed and sworn to by the 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 to be bound by the provisions of this act. No association organized under this act shall be required to do or perform anything not specially required herein in order to become a corporation, or to continue its business as such. (L. 1915, ch. 83, ̄§ 4; R. C. M. 1921, § 6389.)

§ 6390. Consolidation of cooperative associations. It shall be lawful for two or more cooperative associations formed, or which may be hereafter formed under the laws of the State of Montana, organized and doing business in the same county, to consolidate their capital stock, debts, liabilities, assets, property, and franchises in such manner and upon such terms as may be agreed upon by the board of directors of such associations desiring to consolidate their interests; but no such consolidations shall be made except upon the written request of a majority of the stockholders of each of such associations. When the directors of the constituent associations shall have agreed upon the terms and manner of consolidation, and name by which the corporation formed by the consolidation shall be known, they shall cause to be published a notice thereof at least once a week for 4 consecutive weeks in some newspaper published in the county where said consolidation is to be had; said notice shall contain the names of the constituent associations and the manner and terms of such consolidation. The said directors shall also call, within 30 days after such consolidation, a meeting of the stockholders of such constituent associations, upon due notice of the time and place, for the purpose of electing a board of directors for the consolidated association; the number of and the term for which said directors are to be elected shall be determined by the board of directors of the constituent associations. (L. 1917, ch. 140, § 1; R. C. M. 1921, § 6390.) § 6391. Terms and certificate of consolidation.-Said terms of consolidation must provide that each stockholder in each association consolidating shall be given equal rights and privileges with every other stockholder in the same association. When said consolidation has been completed, a certificate thereof, showing the procedure and terms of said consolidation, and the names of the constituent associations, and the name adopted for the corporation formed by the consolidation, must be filed in the office of the county clerk of the county where said consolidation takes place; the said certificate shall also contain all the facts required by section 6375; said certificate shall be signed and acknowledged by at least a majority of the directors of each of the constituent associations. A copy of said certificate, duly certified by the county clerk and recorder, must also be filed in the office of the secretary of state. (L. 1917, ch. 140, § 2; R. C. M. 1921, § 6391.)

§ 6392. Effect of consolidation.-When the foregoing provisions have been complied with, the constituent associations named in said certificate shall be deemed and held to have become extinct, and said new associations, under the name adopted, shall be deemed and held to have succeeded to all their several capital stock, properties, assets, contracts, and rights of action, and to be entitled to possess, enjoy, and enforce the same, and every part thereof, as fully and completely as either and every of its constituent associations might have done

had no consolidation taken place. Said new association shall also be deemed and held to have become subrogated to its several constituents, and each thereof, in respect to all their contracts and agreements with other parties, and all their debts, obligations, and liabilities, of every kind and nature, to any person, persons, or corporations whomsoever or whatsoever, and said new association must sue or be sued in its own name in any and every case in which any or either of its constituents might have sued or may have been sued had no such consolidation been made. (L. 1917, ch. 140, § 3; R. C. M. 1921, § 6392.)

§ 6393. Obligations of contracts preserved.-Nothing in this act shall be construed to impair the obligation of any contract to which any of such constituents was a party at the date of said consolidation. (L. 1917, ch. 140, § 4; R. C. M. 1921, § 6393.)

§ 6394. Restrictions upon use of terms in corporate or firm name. No association, person, firm, corporation, or copartnership hereafter organized or doing business in this State shall be entitled to use the term "cooperative," "cooperation," "cooperator" as part of his, their, or its corporate firm, association, or other business name or title, unless incorporated under and in compliance with the provisions of this chapter; nor shall any corporation incorporated under the cooperative laws use the term "farmer" or "farmers" when less than one-half of its stockholders or members are farmers by occupation. (L. 1917, ch. 161, § 1; R. C. M. 1921, § 6394.)

§ 6395. Duty of secretary of state. The secretary of state shall not issue any certificate of incorporation to any corporation or association except in compliance with this act. (L. 1917, ch. 161, § 2; R. C. M. 1921, § 6395.)

§ 6396. Violation of law a misdemeanor; penalty.-Any person, firm, corporation, or association violating any of the provisions of this act shall be guilty of a misdemeanor, and, upon conviction thereof, shall be fined in a sum not less than $100 nor more than $1,000. (L. 1917, ch. 161, § 3; re-en., R. C. M. 1921, § 6396.)

NEBRASKA

Compiled Statutes, 1929

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§ 24-1301. Cooperative companies; 1 formation authorized.-Any number of persons, not less than 20, or any number of cooperative companies, not less than 5, may form and organize a cooperative corporation for the transaction of any lawful business by the adoption of articles of incorporation in the same manner and with like powers and duties as is required of other corporations except as herein provided. (1911, p. 195; Ann. § 4271; Comp. § 2241a; Ř. S. 1913, § 733; 1919, p. 161; 1921, p. 161; 1919, p. 879; C. S. 1922, § 642; 1925, p. 243.)

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1 See article 12, section 5 of the State Constitution which provides: "That the Legislature shall provide by general law for the organization, supervision, and general control, of mutual and cooperative companies and associations, and by such legislation shall insure the mutuality and cooperative features and functions thereof."

Cooperatives, as such, are not exempt from taxation, as they do not come within the clearly defined exemptions (certain types of nonprofit organizations) provided by the State Constitution. (Op. Atty. Gen. (1930) 112.)

§ 24-1302. Same; articles of incorporation; provisions. Every such cooperative company shall provide in its articles of incorporation:

First. That the word "cooperative" shall be included in its corporate name, and that it proposes to organize as a cooperative corporation.

Second. That no one person shall own either directly or indirectly, more than 5 percent of the capital stock of the company: Provided, Cooperative companies owning capital stock in another such company shall in no event or manner own more than 40 percent of such stock. Third. That dividends on the capital stock shall be fixed but shall not exceed 8 percent per annum of the amount actually paid thereon. Fourth. That the company shall set aside each year to a surplus fund not less than 5 percent of the earnings or savings of the company over and above all expenses and dividends or interest upon capital stock as provided in part three, until such surplus fund equals at least 20 percent of the capital stock paid. This surplus may be used for conducting the business of the corporation.

Fifth. That the net earnings or savings of the company remaining after making the distribution provided in parts three and four shall be distributed on the basis of or in proportion to the amount or value of property bought from or sold to members, or members and other patrons, or of labor performed, or other services rendered to the corporation:1

Provided, That this paragraph shall not be so interpreted as to prevent a cooperative company from declaring patronage dividends at different rates upon different classes or kinds or varieties of goods handled, and further provided that nothing in this or the two pre

ceding paragraphs shall be so interpreted as to prevent a company from appropriating funds for the promotion of cooperation and improvement in agriculture.

Sixth. That the bylaws of the company shall give a detailed statement of the method followed in distributing earnings or savings. (1911, p. 196; Ann. § 4272; Comp. § 2241b; R. S. 1913, § 735; 1921, p. 161; C. S. 1922, § 643; 1925, p. 243; 1929, p. 226.)

1 The Board of Tax Appeals has held that, although under the regulations of the 1916 and 1918 Revenue Acts, paid patronage dividends are deductible, unpaid patronage dividends of a farm cooperative purchasing and selling agency organized under the general cooperative statute are not deductible, in the absence of evidence of definite liability to distribute such dividends; and a charter provision which authorized the bylaws to provide for patronage dividends is insufficient evidence of such liability. (Farmers Union State Exchange v. Comm. of Int. Rev., 30 B. T. A. 1051 (1934).)

The Board of Tax Appeals has held, however, that a cooperative marketing and purchasing association, obligated by its bylaws to pay patronage dividends when possible, may, in computing its Federal income tax, deduct such dividends although the books show that this obligation to the patrons has not yet been discharged. (Farmers Union Coop. Assn. v. Comm. of Int. Rev., 13 B. T. A. 959 (1928).) (For further cases on the subject of the Federal income tax see the fifth and sixth paragraphs of the annotation for California herein, and the cross-references there cited.)

When directors of a farmers' elevator company, organized under the general corporation statute and operating under articles which made dividends on stock the means of distributing profits, attempted to amend the company's articles to bring it within the cooperative statute, the amendment was held void, both because it was never passed on by the stockholders and because the contemplated distribution of dividends on a patronage basis would violate vested rights of stockholders in the method of profit distribution under the original articles. (Allen v. White, 103 Nebr. 256, 171 N. W. 52 (1919).)

§ 24-1303. Same; powers.-Every cooperative company which shall organize under this act shall have power:

First. To have succession by its corporate name.

Second. To sue and be sued, to complain and defend in courts of law and equity.

Third. To make and use a common seal, and alter the same at pleasure.

Fourth. To hold personal estate, and all such real estate as may be necessary for the legitimate business of the company.

Fifth. To regulate and limit the right of stockholders to transfer their stock.

Sixth. To appoint such subordinate officers and agents as the business of the corporation shall require, and to allow them suitable compensation.

Seventh. To adopt bylaws for the management and regulation of the affairs of the company.1

Eighth. To purchase, hold, sell, assign, or transfer the shares of the capital stock of other cooperative companies which it may own, and, while owner of such stock, to exercise all the rights, powers and privileges of ownership, including the right to vote thereon.

Ninth. To provide that each individual stockholder may be limited to one vote per person, regardless of the number of shares of stock which he may own, at any stockholders meeting.2

Tenth. To limit the amount or percentage of the total business which may be transacted with nonmembers.