MONTANA

Revised Codes, 1935

§ 6375. Incorporation of cooperative associations. Whenever any number of persons, not less than three, nor more than seven, may desire to become incorporated as a cooperative association for the purpose of trade, or of prosecuting any branch of industry, or the purchase and distribution of commodities for consumption, or in the borrowing or lending of money among members for industrial purposes, they shall make a statement to that effect under their hands, duly acknowledged by a notary public, in the manner provided for the acknowledgment of deeds, setting forth the name of the proposed corporation, its capital stock, its location, and duration of the association, and the particular branch or branches of industry which they intend to prosecute, which statement shall be filed in the office. of the secretary of state. The secretary of state shall thereupon issue to such persons a license as commissioners to open books for subscription to the capital stock of such corporation, at such time and place as they may determine, for which he shall receive the fee of $5. (C. C. 1895, § 870; R. C. 1907, § 4210; R. C. M. 1921, § 6375; Cal. Civ. C. § 653b.)

§ 6376. Limit on amount of common stock person may hold.-No person shall be permitted to subscribe for or control or own more or less than one share of the common stock of such association. (C. C. 1895, § 871; R. C. 1907, § 4211; R. C. M. 1921, § 6376; L. 1933, ch. 135, § 1.) § 6377. First meeting. As soon as 10 or more shares of the capital stock shall be subscribed, the commissioners shall convene a meeting of the subscribers for the purpose of electing directors, adopting bylaws, and transacting such other business as shall properly come before them. Notice thereof shall be given by depositing same in the postoffice, properly addressed, to each subscriber, at least 10 days before the time fixed, stating the object, time, and place of said meeting. Directors of associations organized under this act shall be elected by the stockholders, and hold their office for such period of time as shall be provided in the articles of association or bylaws. (C. C. 1895, § 872; R. C. 1907, §4212; R. C. M. 1921, § 6377.)

§ 6378. Certificate of incorporation. The commissioners shall make a full report of their proceedings, including therein a copy of the notice provided for in the preceding section, a copy of the subscription list, a copy of the bylaws adopted by the association, and the names of the directors elected and their respective terms of office, which report shall be sworn to by at least a majority of the commissioners, and shall be filed in the office of the secretary of state. The secretary of state shall thereupon issue a certificate of the complete organization of the association, making a part thereof a copy of all papers filed in his office, in and about the organization, and duly authenticated, under his hand and seal of the State, for which he

shall receive the sum of $5, and thereupon a certified copy of said certificates shall be filed in the office of the county clerk in which the principal office of the association is located. Upon the filing of said certified copy, the association shall be deemed to be fully organized and may proceed to business. (C. C. 1895, § 873; R. C. 1907, § 4213; R. C. M., 1921, § 6378.)

§ 6379. Powers of such associations.-Associations formed under this act shall be bodies corporate and politic for the period for which they are organized, not exceeding 40 years; may sue and be sued; may have a common seal, which they may alter or renew at pleasure; may own, possess, and enjoy so much real and personal property as shall be necessary for the transaction of their business, and may sell and dispose of the same. They may borrow money and may pledge their property, both real and personal, to secure the payment thereof, and they shall have and exercise all powers necessary and requisite to carry into effect the objects for which they may be formed, and such as are usually exercised by cooperative associations, subject to all duties, restrictions, and liabilities set forth in the general laws in relation to similar corporations, except so far as the same may be limited or enlarged by this act. (C. C. 1895, § 874; R. C. 1907, § 4214; R. C. M. 1921, § 6379; Cal. Civ. C. § 653b.)

1 Cooperatives organized under this statute are subject to section 6003 of the general corporation law (Rev. Code, 1921), which provides that directors or trustees of any corporation having capital stock, other than banks, trust companies, and building and loan associations, who fail to file an annual report of its condition with the county clerk and recorder of deeds in the county of its principal place of business, shall be jointly and severally liable for all corporation debts and judgments until such report is filed. (Anderson v. Equity Coop. Assoc., 67 Mont. 291, 215 Pac. 802 (1923).)

Contrary to the opinion of a former attorney general (Op. Atty. Gen. 19261928, p. 22) cooperatives organized under this statute are subject to filing fees provided in the general corporation law, where the matter is not covered by the Cooperative Act. (Op. Atty. Gen. (1932-34) 314.)

In computing the corporation license tax based on net income, patronage dividends should be deducted as an expense. (Op. Atty. Gen. (1923) 184.)

Cooperatives may amend articles of incorporation in accordance with the general corporation law, there being no provision in the cooperative act for such amendment. (Op. Atty. Gen. (1914-16) 340.)

§ 6380. Board of directors.-The officers of the association shall consist of a board of directors, who shall exercise the corporate powers invested in such association, the number of which, not less than three, shall be fixed by the bylaws of the association; a president, vice president, secretary, and treasurer, to be elected by the stockholders as provided by the bylaws. All bylaws shall be adopted by the stockholders of the association. (C. C. 1895, § 875; R. C. 1907, § 4215; R. C. M. 1921, § 6380.)

§ 6381. Classes of stock; powers of preferred and common stock; forfeiture for nonpayment of installments.-The shares of stock shall not be less than $10 nor more than $5,000 per share, and may be made payable in installments. Every cooperative association may divide its shares of stock into preferred and common stock. The holders of preferred stock shall have no voting power and shall not participate in the management and affairs of the association, and the owners thereof shall share in the profits of the association to the extent of not exceeding 6 percent per annum on the par value thereof. The com

mon stock may be divided into classes of different values, and the owners thereof shall share in the profits of the association in proportion to the par value of their shares: Provided, however, That the owners of said common stock in the different classes shall have the same power and vote in the association. Forfeiture of the stock for nonpayment of instalments may be provided for in the bylaws and whenever a share of stock is forfeited, such share shall become the property of the association, and may be reissued to any person already a holder of common stock; but any proceeds received from such reissue, over and above the amount due on said share, by the association, shall be paid to the delinquent shareholder. The stock heretofore issued in classes of different par values by any cooperative association is hereby legalized and made valid. (C. C. 1895, § 876; R. C. 1907, § 4216; L. 1909, ch. 3, § 1; R. C. M. 1921, § 6381; L. 1933, ch. 135, § 2.)

§ 6382. Assignment of stock.-No assignment of stock shall be made to any person who already owns a share, and in no event except by the consent of a majority of the stockholders, but stock may be assigned to the association at any time with the consent of the directors. On no question shall a stockholder have more than one vote.1 Every assignment of stock on which there remains any portion unpaid shall be recorded in the books of the association, and each stockholder shall be jointly and severally liable with the association for the debts of the association to the extent of the amount which shall be unpaid upon the share held by him. No assignor shall be released from any such indebtedness by reason of any assignment of his share, but shall remain jointly liable therefor with the assignee. (C. C. 1895, § 877; R. C. 1907, § 4217; R. C. M. 1921, § 6382.)

See article XV, section 4 of the State Constitution which provides: "The legislative assembly shall provide by law that in all elections for directors or trustees of incorporated companies, every stockholder shall have the right to vote in person or by proxy, the number of shares of stock owned by him for as many persons as there are directors or trustees to be elected, or to cumulate said shares and give one candidate as many votes as the number of directors multiplied by the number of his shares of stock shall equal, or to distribute them, on the same principle, among as many candidates as he shall think fit and such directors or trustees shall not be elected in any other manner."

The business corporation law (sec. 5946, as amended by L. 1931, chap. 40, sec. 1) provides that proxy voting be permitted at all meetings.

§ 6383. Exemptions; shares of decedents.-The share, not exceeding the par value of $500, of each member shall be exempt from seizure on attachment, or sale under execution, and upon his death shall be sold by the association, and the proceeds, after deducting all liabilities to the association, shall be delivered to his heirs. (C. C. 1895, § 878; R. C. 1907, § 4218; L. 1909, ch. 3, § 2; R. C. M. 1921, § 6383.) § 6384. Increase of membership. An association licensed to operate under this act may, by a majority of its stockholders, increase its membership in such manner as may be provided in its bylaws, not inconsistent with any of the provisions of this act. (C. C. 1895, § 879; R. C. 1907, § 4219; R. C. M. 1921, § 6384.)

§ 6385. Reserved power of regulation. The legislative assembly hereby reserves the power to prescribe such regulations and provisions governing any and all associations incorporated under this act as it may deem advisable; and such regulations and provisions shall

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,1 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.)

§ 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