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sections. (L. 1921, Act 84, pt. II, ch. 4, § 12; L. 1931, Act 327, § 109.)

1 Sections 10051-10058 herein.

§ 10052. Same; board of directors; officers.-Every such cooperative corporation shall be managed by a board of not less than five directors. The directors shall be elected by and from the shareholders of the corporation at such time and for such term of office as the bylaws may prescribe, and shall hold office for the time for which they were elected and until their successors are elected and shall enter upon the discharge of their duties; but a majority of the shareholders shall have the power at any regular or special shareholders' meeting legally called, to remove any director or officer for cause, and fill the vacancy, and thereupon the director or officer so removed shall cease to be a director or officer, as the case may be, of such corporation. The officers of every such corporation 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 such corporation. The office of secretary and treasurer may be combined, and when so combined the person filling the office shall be secretary-treasurer. (L. 1917, Act 239, §§ 10, 11; L. 1921, Act 84, pt. II, ch. 4, § 13; L. 1931, Act 327, §§ 191, 110.)

§ 10053. Same; may amend articles. Any such cooperative corporation may amend its articles by a majority vote of its shareholders at any regular meeting, or at any special meeting called for that purpose, on 10 days' notice to the shareholders. Said power to amend shall include the power to increase or diminish the amount of capital stock and the number of shares: Provided, That the amount of the capital stock shall not be diminished below the amount of paid-up capital at the time when the amendment is adopted. (L. 1917, Act 239, § 17 (cf. § 25); L. 1921, Act 84, pt. II, ch. 4, § 14; L. 1931, Act 327, § 111.)

§ 10054. Same; power to conduct certain businesses.-Any such cooperative corporation shall have power to conduct any agricultural, dairy, mercantile, mining, manufacturing, or mechanical business on the cooperative plan and may buy, sell, and deal in the products of any other similar cooperative corporation, heretofore organized or hereafter organized under or becoming subject to the provisions of this act. (L. 1921, Act 84, pt. II, ch. 84, § 15; L. 1931, Act 327, §§ 191, 112.)

§ 10055. Same; distribution of profits, etc. The profits or net earnings of such cooperative corporation shall be distributed to those entitled thereto, at such time as the bylaws shall prescribe, which shall be as often as once in 12 months, but no person or corporation from whom purchases of goods or materials incident only to the carrying on of the business of such cooperative corporation are made, or to whom produce in wholesale quantities is sold, shall in any case be included in the distribution of said profits. (L. 1913, Act 398, § 13; L. 1917, Act 239, § 22; L. 1921, Act 84, pt. II, ch. 4, § 16; L. 1931, Act 327, § 113.)

§ 10056. Same; voting by mail.-At any general or special meeting of the shareholders a written vote received by mail from any absent

shareholder and signed by him may be read in such meeting and shall be equivalent to a vote of each of the shareholders 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. 1913, Act. 398, § 11; L. 1917, Act 239, § 18; L. 1921, Act 84, pt. II, ch. 4, § 17; L. 1931, Act 327, § 114.)

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§ 10057. Same; apportionment of earnings. The directors, subject to revision by the shareholders of any such cooperative corporation at any general or special meeting, shall apportion the earnings by first paying dividends on the paid-up capital stock not exceeding 6 percent 1 per annum, then setting aside not less than 10 percent of the net profits for a reserve fund until an amount has accumulated in said reserve fund equal to 30 percent of the paid-up capital stock and the remainder of said net profits by uniform dividend upon the amount of purchases of shareholders, and to nonshareholders on the amount of their purchases at a percent one-half as great as that paid to shareholders, which may be credited to the account of such nonshareholders on account of capital stock of the association; but in productive associations such as creameries, canneries, elevators, factories, and the like dividends shall be on raw material delivered instead of on goods purchased. In such case such cooperative corporation is both a selling and a productive concern, the dividends may be on both raw material delivered and on goods purchased by patrons. (L. 1913, Act 398, § 12; L. 1927, Act 239, § 21; L. 1921, Act 84, pt. II, ch. 4, § 18; L. 1931, Act 327, § 115.)

1 See annotation to section 10048.

§ 10058. Same; shareholding and voting power of shareholders.-No shareholder in any such cooperative corporation shall own shares of a greater par value than $1,000, or be permitted to vote by proxy, or be entitled to more than one vote. Certificates of stock shall not be issued to any subscriber until fully paid, but the bylaws of such cooperative corporation may allow subscribers to vote as shareholders after 50 percent of the stock subscribed for has been paid in cash. (L. 1917, Act 239, §§ 12, 13, 15; L. 1921, Act 84, pt. II, ch. 4, § 19; L. 1931, Act 327, § 116.)

MINNESOTA

Mason's Statutes 1927, and 1936 Supplement

§ 7822.1 Formation; purposes.-A cooperative association may be formed for the purpose of engaging in any lawful mercantile, manufacturing, or agricultural business. Its certificate of incorporation shall be filed for record with the register of deeds of the county of its principal place of business, and thereupon it shall become a corporation. A majority of the incorporators shall be residents of the county of its principal place of business, and its duration without renewal shall not exceed 20 years. (R. L. 1905, § 3073; G. S. 1913, § 6479.)

1It should be noted that many provisions of these early sections are inapplicable to cooperatives formed after passage of chapter 382, Acts 1919 (secs. 7834-7846 herein). By section 7846 below, it is declared that provisions of sections 7822, 7824, 7826, 7828, 7831, and 7832, inconsistent with this later law are repealed. A subsequent 1933 act modified section 7831, and contained a repealing clause-for which see fourth annotation to section 7831. But cooperatives already organized under the early sections need not reorganize under the later Acts. By sections 7833-1 and 7833-2, it was enacted in 1935 that, notwithstanding inconsistent provisions of prior acts, cooperatives organized under the early sections whose period of corporate existence had not expired, could renew it upon expiration thereof for a period not exceeding 20 years.

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§ 7823. Formation; rural telephone business; powers.-Seven 1 or more persons of lawful age, inhabitants of this State, may, by written articles of agreement, associate themselves together for the purpose of trade or for carrying on an (any) lawful mercantile, manufacturing, agricultural, or rural telephone business within this State; and when such articles of association shall have been executed and recorded in the office of the clerk of the city or town in which the business is to be carried on, such persons shall be and become a corporation, and enjoy all the powers and privileges, and can buy and hold stock in other corporations organized for the same general purpose, and be subject to all duties, restrictions, and liabilities set forth in all general laws in relation to similar corporations, except so far as the same may be limited or enlarged by this act. (G. S. 1894, § 2903; 1905, ch. 276, § 1; G. S. 1913, § 6480.)

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Note: See Johnson case in third paragraph of the annotation to section 7824.

2 A cooperative telephone company about to organize should do so, for its own protection, under sections 7834-7846. However, it may organize under sections 7823-7833 if it wishes, but must be careful to note that any provisions of these sections which conflict with the former [7834-7846; have been repealed so far as newly forming cooperatives are concerned. (See sec. 7846.) (Op. Atty. Gen. (1934) 1203.)

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This section (7823) had been enacted as a separate act.

§ 7823. Same. A cooperative association may be formed for the purpose of engaging in any lawful mercantile, manufacturing, agricultural, or rural telephone business. Its certificate of incorporation

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shall be filed for record with the register of deeds of the county of its principal place of business, and thereupon it shall become a corporation. A majority of the incorporators that reside in this State shall be residents of the county of its principal place of business, and its duration without renewal shall not exceed 20 years. (G. S. 1894, § 2903; 1905, ch. 313, § 1; G. S. 1913, § 6481.)

1 Under the facts of the following case a certain cooperative association was held to be a "de facto" corporation, i. e., one which has failed to comply with all the organizational requirements of the statute under which it incorporated, but has done so sufficiently that no one but the State will be permitted to question the legality of its organization. Here the cooperative had never recorded its articles of incorporation in the clerk's office nor filed them with the register of deeds as required. However, the court considered as controlling the fact that the 12 farmers who formed the company subscribed to written articles; new members were taken in upon payment of a fee and signing of the articles; the company operated as a corporation; and there was testimony that some believed that they were forming a corporation. (Ebeling v. Rural Telephone Co., 187 Minn. 604, 246 N. W. 373 (1933).)

A "de facto" cooperative corporation was held to have been created under the then existing cooperative statute (Laws 1870, ch. 29) in spite of the fact that its articles of incorporation were never in fact recorded and there was no compliance with the requirement that stock issued be fully paid for in cash. The court considered as controlling the fact that: The "articles of agreement" stated that the signers associated together as a "cooperative association under the laws of Minnesota" and that the incorporators were more than seven and residents of Minnesota; the articles provided for a sinking fund and one vote for each member; the officers and directors were called "board of managers"; the articles were filed for recording in the town clerk's office (all of which were requirements peculiar to the existing cooperative statute); and the organization actually operated as a cooperative. (Healey v. Steele Center Creamery

Assn., 115 Minn. 451, 133 N. W. 69 (1911).)

Where a creditor of a cooperative association attempted to claim that the cooperative was not a corporation because it had not complied with the organizational requirements of the statute under which it had incorporated and therefore the members were personally liable as partners, the court held that the cooperative had complied sufficiently to make it a "de facto" corporation, even though its articles of incorporation were not executed by seven persons as required and were not recorded but merely filed in the clerk's office. The court considered as controlling the fact that the cooperative transacted its business in good faith as a corporation, including execution of the notes on which the creditor was suing, and held as admissible, oral evidence that after adoption of the articles, meetings were held, bylaws adopted, officers elected, stock issued, and that more than seven had previously agreed to form the corporation. (Johnson v. Okerstrom, 70 Minn. 303, 73 N. W. 147 (1897).)

§ 7825. Officers; management.-Every such association shall have a president, a treasurer, and not less than three directors, who shall together constitute a board of managers and conduct its business. Such officers shall be chosen annually by the stockholders, and hold their offices until others have been chosen and qualified. The association shall make its own bylaws, not inconsistent with law, and may therein provide for any other officers deemed necessary, and the mode of their selection. It may amend its certificate of incorporation at any general stockholders' meeting, or at any special meeting called for that purpose, upon 10 days' notice to the stockholders. 1905, § 3074, G. S. 1913, § 6482.)

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In the absence of specific authority, either by statute, articles, or bylaws, the board of directors of a cooperative cannot fill a vacancy on its own board caused by the resignation of a director. (Op. Atty. Gen., Dec. 12, 1934; Mason's Minn. Annot., vol. 7, no. 4, p. 75.)

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§ 7826. Capital; limit of interest; shares.-The amount of capital stock shall be fixed by the certificate of incorporation, which amount and the number of shares may be increased or diminished at a stockholders' meeting specially called for that purpose; but the whole amount of stock shall never exceed $100,000, and, in case of a creamery association, shall not exceed $25,000. Within 30 days after the adoption of an amendment increasing or diminishing its capital, it shall cause the vote so adopting it to be recorded in the office of the register of deeds where its original certificate is on record. No share shall be issued for less than its par value, and no member shall own shares of greater par value than $1,000, or be entitled to more than one vote. It may commence business whenever 20 percent of the stock has been subscribed for and paid in,2 but no certificate of shares shall be issued to any person until the full amount thereof has been paid in cash, and no person shall become a shareholder therein except by consent of the managers.3 (R. L. 1905, § 3075; G. S. 1913, § 6483.)

1 In an action by the receiver of an insolvent cooperative company for assessment of the stockholders to pay the corporation's debts, an increase of the capital stock beyond the $100,000 limit established by the articles and by this section was held invalid by the court because the cooperative did not use the proper method for amending its articles to bring itself under the act embodied in section 7834-7846 and to establish such increase. (See annotation to section 7843.) The stockholders were, therefore, held liable, under their constitutional double-liability, only for the amount of their shares which were a part of the $100,000 of stock issued and not beyond. The court observed, in passing, “We don't mean to say that the stock of a corporation such as plaintiff, could never be increased to an amount beyond $100,000." (Maclaren v. Wold, 172 Minn. 334, 215 N. W. 428 (1927) (on rehearing).)

2 The transfer of the stock of an insolvent business corporation in exchange for stock in a cooperative association formed to take over the assets and liabilities of the insolvent corporation is not such a subscription and purchase as required by this section before a cooperative can commence business and hold property as such. Hence, the new company did not get title to a note previously held by the old company, so that upon insolvency of such new company its receiver cannot now claim title to such note. (Zander v. Holm, 159 Minn. 51, 197 N. W. 967 (1924).)

In an assessment action against an alleged stockholder to enforce his statutory liability for the debts of an insolvent cooperative (it was the same cooperative as that involved in Zander v. Holm, above), he defended on the ground that he was not a stockholder. But his presence at a meeting of the stockholders of the old company, which passed a resolution to form the new corporation, a cooperative (see case above), and his signing articles of the new corporation, was held to be equivalent to subscribing for stock in such new corporation. Hence he is liable as a stockholder for assessment. (Zander v. Schunaman, 170 Minn. 353, N. W. 587, (1927).) Note: No reference was made to Zander v. Holm case, above.

3A bylaw of a de facto cooperative corporation (organized under an earlier statute) which provides that the managers must approve of new members was held a valid restriction on transfer of stock and not subject to the provisions of the general corporation law on stock transferability. Therefore one who, with knowledge of the bylaw, purchased stock from a member, was subject thereto. (Healey v. Steele Center Creamery Assoc., 155 Minn. 451, 133 N. W. 69 (1911).)

§ 7827. Liability of officers; dissolution.-If such board of managers, or the directors or officers having control of such association, for 5 consecutive years after its organization shall fail to declare a dividend upon its capital or shares, five or more stockholders, by petition setting forth such facts, may apply to the district court of

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