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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.)

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§ 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.)

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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

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The general cooperative statute 1 (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

exemption from tax, and administrative application of the earlier statute did not embody the later provisions." (Riverdale Coop. Creamery Assoc. v. Commissioner of Internal Revenue, 18 B. T. A. 1159 (1930).)

A cooperative purchasing agency of a farm cooperative was held to be not exempt from income tax under section 231 (11) of Revenue Act 1921, as it also conducted a profitable side business of selling lumber to outsiders. Excess earnings which were not paid or set aside as patronage dividends, were not deductible in computing the tax. A fixed dividend of 6 percent was not deductible as "interest"; unlike interest it was to be paid, according to the bylaws, only when earned. (Fruit Growers Supply Co. v. Commissioner of Internal Revenue, 21 B. T. A. 315 (1930).)

[For additional cases on the subject of the Federal income tax, see annotation to sec. 8512-g30 of the Iowa Statute herein, ninth and tenth annotation to sec. 7834 of Minnesota Statute, annotation to sec. 185.23 of Wisconsin Statute, annotation to sec. 24-1302 of Nebraska Statute, and second annotation to sec. 17-1501 of Kansas Statute.]

Cooperatives organized for the purpose of marketing agricultural products for members and others were held, by the Federal District Court of California, not within the class of "moneyed, business or commercial" corporations subject to involuntary bankruptcy under the Federal Bankruptcy Act. (In re Wecks Poultry Community, Inc., 51 F. (2d) 123 (D. Ct. Calif., 1931).)

COLORADO

Statutes 1935 (Michie) Chapter 41

COOPERATIVE ASSOCIATIONS-GENERALLY

§ 210. Cooperative association defined.-For the purpose of this act, the words "cooperative company, corporation, or association" are defined to mean a company, corporation, or association which authorizes the distribution of its earnings in part or wholly, on the basis of, or in proportion to, the amount of property bought from or sold to members, or to members and other customers, or of labor performed, or other service rendered to the corporation. (S. L. 1913, p. 220, § 1; Comp. L. 1921, § 2413.)

1A contract between a city and an "Allied Architects Association" for architectural services in connection with planning and erecting a municipal building and courthouse was held illegal for several reasons, among which was the fact that being a corporation and not an individual, it could not become a licensed architect. There was no authority in the State statutes to license as architect anyone other than an individual. (Johnson-Olmstead Realty Co. v. City and County of Denver, 89 Colo. 250, 1 P. (2d) 928 (1931).) Note: The association here was organized under the cooperative statute.

§ 211. Number of incorporators; objects. Any number of persons, not less than 10, may be associated and incorporated for the cooperative transaction of any lawful business, including the construction of canals, railways, irrigation ditches, bridges, and other works of internal improvement. (S. L. 1913, p. 220, § 2; Comp. L. 1921, § 2414.) § 212. Powers. Every cooperative corporation as such has power: First. To have succession by its corporate name.

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

Third. To make and use a common seal, and alter same at pleasure. Fourth. To hold personal estate, and all such real estate as may be necessary for the legitimate business of the corporation.

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 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. (S. L. 1913, p. 220, § 3; Comp. L. 1921, § 2415.)

§ 213. Powers apply to all cooperative associations.-The powers enumerated in the preceding section shall vest in every cooperative corporation in this State, whether the same be formed without, or by legislative enactment, although they may not be specified in its charter or in its articles of association. (S. L. 1913, p. 220, § 4; Comp. L. 1921, § 2416.)

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