98TH GENERAL ASSEMBLY
State of Illinois
2013 and 2014
HB5877

 

Introduced , by Rep. Kenneth Dunkin

 

SYNOPSIS AS INTRODUCED:
 
New Act
805 ILCS 310/Act rep.

    Creates the Cooperative Association Act. Provides that a cooperative association may be organized for any lawful purpose. Contains provisions regarding: powers; indemnification; insurance; names; articles of incorporation; meetings; bylaws; membership; voting; directors and officers; limitations on liability; contracts; records; reports; duties of the Secretary of State and recorders of deeds; dissolution; fees; assets; division of cooperatives; admission of foreign cooperatives; and other matters. Authorizes worker cooperatives. Provides that the Act does not apply to residential cooperatives. Repeals the Co-operative Act.


LRB098 20083 JLS 55341 b

FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

HB5877LRB098 20083 JLS 55341 b

1    AN ACT concerning business.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 1. Short title. This Act may be cited as the
5Cooperative Association Act.
 
6    Section 5. Definitions. As used in this Act, unless the
7context otherwise requires:
8    "Articles" means the articles of incorporation of a
9cooperative, unless the context otherwise requires.
10    "Association" includes both cooperatives and foreign
11cooperatives.
12    "Board" means the board of directors of a cooperative.
13    "Bylaws" means the bylaws of a cooperative.
14    "Cooperative" means an association incorporated under this
15Act.
16    "Corporation" means a corporation and not an association.
17    "Foreign cooperative" means an association incorporated
18under a cooperative law of another state that has members
19residing within this State and that is operating on the
20following cooperative basis:
21        (1) either no member of the foreign cooperative who is
22    an individual is allowed more than one vote because of the
23    amount of stock or membership capital the member owns

 

 

HB5877- 2 -LRB098 20083 JLS 55341 b

1    therein or the foreign cooperative does not pay dividends
2    on stock or membership capital in excess of 8% per year;
3    and
4        (2) the foreign cooperative does not deal in the
5    products of or for nonmembers to an amount greater in value
6    than such as are handled by it for members.
7    "Member" means a person who has been qualified and accepted
8for membership in an association. If a cooperative has one or
9more classes of members not entitled to vote, "member" or
10"members", with respect to the right of a member to vote,
11voting procedure, the required proportion of member votes,
12actions that must or may be taken by members, the number of
13members required for a quorum, and the eligibility of
14directors, means a member or members entitled to vote, unless
15the bylaws provide otherwise.
16    "Membership stock" means any class of stock, continuous
17ownership of which is required for membership in a cooperative.
18    "Patronage" means business done by a patron with a
19cooperative and, if the bylaws provide, labor performed for a
20cooperative by a patron.
21    "Secretary" means the Illinois Secretary of State.
22    "Security" means any indebtedness, capital stock, or other
23equity interest in a cooperative's assets.
 
24    Section 10. Purposes. A cooperative association may be
25organized under this Act for any lawful purpose or purposes.
 

 

 

HB5877- 3 -LRB098 20083 JLS 55341 b

1    Section 15. General powers. Unless otherwise prohibited by
2its articles, a cooperative may:
3        (1) Exist perpetually.
4        (2) Sue and be sued, complain, and defend.
5        (3) Have a seal that may be altered at pleasure and use
6    the same by causing it, or a facsimile thereof, to be
7    impressed or affixed or in any other manner reproduced,
8    provided that the affixing of a corporate seal to an
9    instrument shall not give the instrument additional force
10    or effect or change the construction thereof.
11        (4) Make contracts, incur liabilities, and borrow
12    money; issue certificates representing indebtedness or
13    representing equity interests in its assets; acquire
14    property; and dispose of, mortgage, pledge, lease, or
15    otherwise use its property, or any interest therein,
16    wherever situated in any manner.
17        (5) Invest its funds, lend money for its purposes, and
18    hold any property as security for repayment.
19        (6) Have offices, conduct its business and affairs, and
20    exercise its powers in the United States or in any foreign
21    country.
22        (7) Elect officers and appoint agents, define their
23    duties, and fix their compensation.
24        (8) Make and alter bylaws consistent with its articles
25    and the laws of this State for the administration and

 

 

HB5877- 4 -LRB098 20083 JLS 55341 b

1    regulation of its affairs.
2        (9) Make donations for charitable, scientific,
3    educational, or religious purposes.
4        (10) Effect the forfeiture to the cooperative of
5    unclaimed funds, including all forms of distributions or
6    credits and unclaimed stock, membership fees, and
7    deposits, if all of the following conditions are met:
8            (A) No earlier than 3 years and no later than 5
9        years after the funds are first made available to their
10        owners, the board declares the funds forfeited to the
11        cooperative unless claimed by the date specified in
12        item (B).
13            (B) After the declaration under item (A), the
14        cooperative gives notice stating that the funds shall
15        be forfeited if not claimed by a specified date.
16            (C) The date specified in the notice under item (B)
17        is a business day at least 60 days after the date of
18        mailing of the notice.
19            (D) The notice under item (B) is mailed to the last
20        known address of each owner and is published in a
21        manner consistent with Section 5 of the Notice By
22        Publication Act on or before the date of mailing in a
23        newspaper published in the city, town, or county
24        containing the service area of the cooperative.
25            (E) The cooperative dedicates any funds remaining
26        unclaimed after the date specified in item (B) to

 

 

HB5877- 5 -LRB098 20083 JLS 55341 b

1        educational purposes, limited to providing
2        scholarships or loans to students, or to charitable
3        purposes, as the board determines, within one year
4        after the date the funds are declared forfeited under
5        item (A). In this item (E), "educational purposes" does
6        not include contributions as defined in Section 9-1.4
7        of the Election Code.
8        (11) Cease its activities and surrender its franchise.
9        (12) Exercise all powers necessary or convenient to
10    effect its purposes.
 
11    Section 20. Refunds after forfeiture. After a forfeiture
12under Section 15, the owner of the forfeited funds may submit a
13claim to the board. If the board determines that the person
14owned the funds at the time of the forfeiture, it shall refund
15the funds to the person.
 
16    Section 25. Restrictions on changes to articles. If the
17articles contain a prohibition on changes to the provision
18establishing the basis of distribution, no changes may be made
19to the provision including by amendment, approval of a plan of
20division, adoption of restated articles, approval of a plan of
21merger or consolidation, and conversion to a non-stock
22corporation. If, upon dissolution of a cooperative with
23articles containing a prohibition on changes in the basis of
24distribution, the distributions required are wholly or partly

 

 

HB5877- 6 -LRB098 20083 JLS 55341 b

1impossible of execution, the whole or part of the net proceeds
2shall be distributed as provided in Section 220.
 
3    Section 30. Definitions applicable to indemnification and
4insurance provisions. As used in Sections 30 through 65:
5    "Cooperative" means a domestic cooperative and any
6domestic or foreign predecessor of a domestic cooperative where
7the predecessor cooperative's existence ceased upon the
8consummation of a merger or other transaction.
9    "Director or officer" means any of the following:
10        (1) A natural person who is or was a director or
11    officer of a cooperative.
12        (2) A natural person who, while a director or officer
13    of a cooperative, is or was serving at the cooperative's
14    request as a director, officer, partner, trustee, member of
15    any governing or decision-making committee, manager,
16    employee, or agent of an association, corporation, limited
17    liability company, partnership, joint venture, trust, or
18    other enterprise.
19        (3) A natural person who is or was the chief executive,
20    managerial employee of a cooperative, regardless of the
21    person's title.
22        (4) Unless the context requires otherwise, the estate
23    or personal representative of a director or officer.
24    "Expenses" means fees, costs, charges, disbursements,
25attorney's fees, and any other expenses incurred in connection

 

 

HB5877- 7 -LRB098 20083 JLS 55341 b

1with a proceeding.
2    "Liability" means the obligation to pay a judgment,
3settlement, forfeiture, or fine and costs, fees, and surcharges
4imposed under the Clerks of Courts Act.
5    "Party" means a natural person who was or is, or who is
6threatened to be made, a named defendant or respondent in a
7proceeding.
8    "Proceeding" means any threatened, pending, or completed
9civil, criminal, administrative, or investigative action,
10suit, arbitration, or other proceeding, whether formal or
11informal, that involves foreign, federal, State, or local law
12and that is brought by or in the right of the cooperative or by
13any other person.
 
14    Section 35. Mandatory indemnification.
15    (a) A cooperative shall indemnify a director or officer, to
16the extent he or she has been successful on the merits or
17otherwise in the defense of a proceeding, for all reasonable
18expenses incurred in the proceeding if the director or officer
19was a party because he or she is a director or officer of the
20cooperative.
21    (b) In cases not included under subsection (a), a
22cooperative shall indemnify a director or officer against
23liability incurred by the director or officer in a proceeding
24to which the director or officer was a party because he or she
25is a director or officer of the cooperative, unless liability

 

 

HB5877- 8 -LRB098 20083 JLS 55341 b

1was incurred because the director or officer breached or failed
2to perform a duty he or she owed to the cooperative and the
3breach or failure to perform constituted the following:
4        (1) a willful failure to deal fairly with the
5    cooperative, its members, or stockholders in connection
6    with a matter in which the director or officer has a
7    material conflict of interest;
8        (2) a violation of criminal law, unless the director or
9    officer had reasonable cause to believe his or her conduct
10    was lawful or no reasonable cause to believe his or her
11    conduct was unlawful;
12        (3) a transaction from which the director or officer
13    derived an improper personal profit; or
14        (4) willful misconduct.
15    Determination of whether indemnification is required under
16this subsection shall be made under Section 40 of this Act.
17    The termination of a proceeding by judgment, order,
18settlement, or conviction or upon a plea of no contest or an
19equivalent plea does not, by itself, create a presumption that
20indemnification of the director or officer is not required
21under this subsection.
22    (c) A director or officer who seeks indemnification under
23this Section shall make a written request to the cooperative.
24    (d) Indemnification under this Section is not required if
25the director or officer has previously received
26indemnification or allowance of expenses from any person,

 

 

HB5877- 9 -LRB098 20083 JLS 55341 b

1including the cooperative, in connection with the same
2proceeding.
 
3    Section 40. Determination of right to indemnification.
4Unless otherwise provided by the articles or bylaws or by
5written agreement between the director or officer and the
6cooperative, the director or officer seeking indemnification
7under Section 35 of this Act shall select one of the following
8means for determining his or her right to indemnification:
9        (1) by majority vote of a quorum of the board
10    consisting of directors not at the time parties to the same
11    or related proceedings. If a quorum of disinterested
12    directors cannot be obtained, by majority vote of a
13    committee duly appointed by the board and consisting solely
14    of 2 or more directors not at the time parties to the same
15    or related proceedings. Directors who are parties to the
16    same or related proceedings may participate in the
17    designation of members of the committee;
18        (2) by independent legal counsel selected by a quorum
19    of the board or its committee in the manner prescribed in
20    item (1) or, if unable to obtain such a quorum or
21    committee, by a majority vote of the full board, including
22    directors who are parties to the same or related
23    proceedings;
24        (3) by a panel of 3 arbitrators consisting of one
25    arbitrator selected by those directors entitled under item

 

 

HB5877- 10 -LRB098 20083 JLS 55341 b

1    (2) to select independent legal counsel, one arbitrator
2    selected by the director or officer seeking
3    indemnification, and one arbitrator selected by the 2
4    arbitrators previously selected;
5        (4) by a majority vote of a quorum of the members;
6    however, members who are at the time parties to the same or
7    related proceedings, whether as plaintiffs or defendants
8    or in any other capacity, may not vote in making the
9    determination;
10        (5) by a court under Section 55 of this Act; or
11        (6) by any other method provided for in any additional
12    right to indemnification permitted under Section 50 of this
13    Act.
 
14    Section 45. Allowance of expenses as incurred. Upon
15written request by a director or officer who is a party to a
16proceeding, a cooperative may pay or reimburse the director's
17reasonable expenses as incurred if the director or officer
18provides the cooperative with all of the following:
19        (1) a written affirmation of his or her good faith
20    belief that he or she has not breached or failed to perform
21    his or her duties to the cooperative; and
22        (2) a written undertaking, executed personally or on
23    his or her behalf, to repay the allowance and, if required
24    by the cooperative, to pay reasonable interest on the
25    allowance to the extent that it is ultimately determined

 

 

HB5877- 11 -LRB098 20083 JLS 55341 b

1    under Section 40 of this Act that indemnification under
2    subsection (b) of Section 35 is not required and that
3    indemnification is not ordered by a court under item (2) of
4    subsection (b) of Section 55. The undertaking under this
5    item (2) shall be an unlimited general obligation of the
6    director or officer and may be accepted without reference
7    to his or her ability to repay the allowance. The
8    undertaking may be secured or unsecured.
 
9    Section 50. Additional rights to indemnification and
10allowance of expenses.
11    (a) Except as provided in subsection (b), Sections 35 and
1245 do not preclude any additional right to indemnification or
13allowance of expenses that a director or officer may have under
14any of the following:
15        (1) the articles or bylaws;
16        (2) a written agreement between the director or officer
17    and the cooperative;
18        (3) a resolution of the board; or
19        (4) a resolution, after notice, adopted by a majority
20    vote of members who are entitled to vote.
21    (b) Regardless of the existence of an additional right
22under subsection (a), the cooperative may not indemnify a
23director or officer or permit a director or officer to retain
24any allowance of expenses unless it is determined by or on
25behalf of the cooperative that the director or officer did not

 

 

HB5877- 12 -LRB098 20083 JLS 55341 b

1breach or fail to perform a duty he or she owed to the
2cooperative which constituted conduct under item (1) of
3subsection (b) of Section 35. A director or officer who is a
4party to the same or a related proceeding for which
5indemnification or an allowance of expenses is sought may not
6participate in a determination under this subsection.
7    (c) Sections 30 through 55 do not affect a cooperative's
8power to pay or reimburse expenses incurred by a director or
9officer in any of the following circumstances:
10        (1) as a witness in a proceeding to which he or she is
11    not a party; or
12        (2) as a plaintiff or petitioner in a proceeding
13    because he or she is or was an employee, agent, director,
14    or officer of the cooperative.
 
15    Section 55. Court-ordered indemnification.
16    (a) Except as provided otherwise by written agreement
17between the director or officer and the cooperative, a director
18or officer who is a party to a proceeding may apply for
19indemnification to the court conducting the proceeding or to
20another court of competent jurisdiction. Application shall be
21made for an initial determination by the court under item (5)
22of Section 40, or for review by the court of an adverse
23determination under item (1), (2), (3), (4), or (6) of Section
2440. After receipt of an application, the court shall give any
25notice it considers necessary.

 

 

HB5877- 13 -LRB098 20083 JLS 55341 b

1    (b) The court shall order indemnification if it determines
2any of the following:
3        (1) That the director or officer is entitled to
4    indemnification under subsection (a) or (b) of Section 35.
5    If the court also determines that the cooperative
6    unreasonably refused the director's or officer's request
7    for indemnification, the court shall order the cooperative
8    to pay the director's or officer's reasonable expenses
9    incurred to obtain the court-ordered indemnification.
10        (2) That the director or officer is fairly and
11    reasonably entitled to indemnification in view of all the
12    relevant circumstances, regardless of whether
13    indemnification is required under subsection (b) of
14    Section 35.
 
15    Section 60. Indemnification and allowance of expenses of
16employees and agents. A cooperative may indemnify and allow
17reasonable expenses of an employee or agent who is not a
18director or officer to the extent provided by the articles or
19bylaws, by general or specific action of the board, or by
20contract.
 
21    Section 65. Insurance. A cooperative may purchase and
22maintain insurance on behalf of an individual who is an
23employee, agent, director, or officer of the cooperative
24against liability asserted against and incurred by the

 

 

HB5877- 14 -LRB098 20083 JLS 55341 b

1individual in his or her capacity as an employee, agent,
2director, or officer or arising from his or her status as an
3employee, agent, director, or officer regardless of whether the
4cooperative is required or authorized to indemnify or allow
5expenses to the individual against the same liability under
6Sections 35, 45, 50, and 60 of this Act.
 
7    Section 70. Incorporators. Five or more adults, of which
8one must be a resident, may form a cooperative by signing,
9acknowledging, and filing articles.
 
10    Section 75. Reserved or registered name. Sections 4.05 and
114.10 of the Business Corporation Act of 1983 apply to
12cooperatives. A cooperative shall comply with those Sections
13with the word "cooperative" being deemed the equivalent of the
14words "corporation", "company", "incorporated", or "limited",
15or an abbreviation of one of those words.
 
16    Section 80. Articles.
17    (a) The articles shall set forth:
18        (1) the name of the cooperative;
19        (2) the period of existence, which may be perpetual;
20        (3) the purposes for which organized. It is sufficient
21    to state that the cooperative may engage in any activity
22    within the purposes for which cooperatives may be
23    organized, and all such activities shall then be deemed

 

 

HB5877- 15 -LRB098 20083 JLS 55341 b

1    within its purposes, subject to express limitations;
2        (4) whether the cooperative is organized with or
3    without capital stock;
4        (5) the designation of classes of members, if more than
5    one;
6        (6) the number and par value of shares of each
7    authorized class of stock. If more than one class is
8    authorized, the designation, preferences, limitations, and
9    relative rights of each class shall also be set forth;
10        (7) which classes of stock are membership stock;
11        (8) as to each class of stock, the rate of dividend, or
12    that the rate of dividend may be fixed by the board, or
13    that no dividend will be paid. If the dividend on any class
14    of stock is to be cumulative, that fact shall also be
15    stated;
16        (9) any reservation of a right to acquire or recall any
17    stock;
18        (10) the basis of distribution of assets upon
19    liquidation and, if changes in the basis of distribution
20    are to be prohibited, a statement that this provision may
21    not be changed and a reference to the restriction under
22    Section 25;
23        (11) the complete address, including street number,
24    city, town, or village, county, and zip code of its
25    principal office or the name and complete address,
26    including street number, city, town, or village, county,

 

 

HB5877- 16 -LRB098 20083 JLS 55341 b

1    and zip code of its registered agent;
2        (12) the name and address of each incorporator; and
3        (13) the names and addresses of at least 5
4    incorporators who will act as the temporary board.
5    (b) It is not necessary to set forth in the articles any of
6the powers granted by this Act. The articles may include
7additional provisions, consistent with law, including
8provisions that are required or permitted to be set forth in
9the bylaws. Any provision required or permitted in the bylaws
10has equal force and effect if stated in the articles. Whenever
11a provision of the articles is inconsistent with a bylaw, the
12articles control.
13    (c) The articles shall be filed and recorded as provided in
14Section 235. The legal existence of a cooperative begins when
15the Secretary files the articles. Upon the filing of the
16articles, the Secretary shall issue a certificate of
17incorporation. The Secretary shall forward within 5 days a
18duplicate original of the articles to the recorder of deeds of
19the county of the cooperative's principal office or registered
20agent for recording.
21    (d) The certificate of incorporation shall be conclusive
22evidence, except as against the State, that all conditions
23precedent to the cooperative's existence have been met.
 
24    Section 85. Organization meetings.
25    (a) After articles have been filed, an organization meeting

 

 

HB5877- 17 -LRB098 20083 JLS 55341 b

1of the temporary board shall be held at the call of a majority
2of the incorporators or of a majority of the temporary
3directors for the adoption of bylaws, election of temporary
4officers, and transaction of other business.
5    (b) The first meeting of the members shall be called by the
6temporary president or a majority of the temporary directors.
7The meeting shall be held as soon as reasonably possible after
8the organization meeting of the temporary board, but not later
9than 6 months after filing the articles. Failure to hold the
10meeting within the time specified does not affect the validity
11of organization.
 
12    Section 90. Bylaws.
13    (a) The initial bylaws may be adopted by the temporary
14board. Thereafter, bylaws may be adopted and amended only by
15the members unless the members adopt a bylaw that permits the
16board to make and amend specified bylaws.
17    (b) A bylaw adopted or amended by the board shall be
18reported at the next regular member meeting. The bylaw shall be
19at any time subject to amendment or repeal by the members.
20    (c) Unless the bylaws provide otherwise, a bylaw may be
21adopted, amended, or repealed by a majority of the member votes
22cast at a meeting.
 
23    Section 95. Principal office, registered agent, and
24service of process.

 

 

HB5877- 18 -LRB098 20083 JLS 55341 b

1    (a) A cooperative shall maintain in the State either its
2principal office or a registered agent.
3    (b) The board may establish or change the location of the
4principal office or name and address of the registered agent by
5causing a statement in writing to be filed and recorded as an
6amendment to the articles as provided in Section 235. The
7statement shall set forth the name of the cooperative and the
8mailing address and county of its principal office or the name
9and address, including the county, of the registered agent as
10established or changed. If a statement under this subsection
11results from the action of a governmental agency in changing
12the address of the principal office or registered agent and
13there is no corresponding change in physical location, these
14facts shall be contained in the statement.
15    (c) A registered agent may resign by mailing a written
16notice to both the Secretary and the cooperative. The
17resignation becomes effective when the cooperative names a new
18registered agent or 60 days after the receipt of notice by the
19Secretary, whichever is sooner.
20    (d) Service of any process, notice, or demand upon a
21cooperative may be made as provided in Section 5.25 of the
22Business Corporation Act of 1983.
 
23    Section 100. Limitation on promotional expenses.
24Cooperative funds may not be used, nor any stock issued, in
25payment of any promotion expenses in excess of 5% of the

 

 

HB5877- 19 -LRB098 20083 JLS 55341 b

1paid-up capital stock or membership fees.
 
2    Section 105. Membership.
3    (a) A cooperative shall be organized on a membership basis
4with no capital stock or on a membership basis with capital
5stock.
6    (b) A cooperative may have one or more classes of members.
7The designation, qualifications, requirements, method of
8acceptance, and incidents of membership of each class shall be
9set forth in the bylaws. Any person, including a partnership,
10incorporated or unincorporated association, limited liability
11company, corporation, or body politic, may become a member in
12accordance with the bylaws.
13    (c) No member may transfer his or her membership except as
14permitted in the bylaws.
15    (d) The bylaws may provide for termination of membership
16and the conditions and terms thereof.
 
17    Section 110. Voting.
18    (a) Except as permitted in this Section, no person other
19than a member may vote at any member meeting. A person who has
20not fully paid for a membership may not vote except as
21expressly permitted in the bylaws. If the cooperative permits 2
22or more persons to hold one membership, the bylaws may provide
23how such member vote is to be cast.
24    (b) At any member meeting, each member entitled to vote

 

 

HB5877- 20 -LRB098 20083 JLS 55341 b

1shall have one vote, except that the articles may permit either
2or both:
3        (1) A member association to cast additional votes not
4    exceeding a number equal to its membership.
5        (2) A cooperative whose members include other
6    associations to base voting in whole or in part on a
7    patronage basis.
8    (c) Voting by proxy shall not be allowed in any
9cooperative.
10    (d) The bylaws may provide for representation of members by
11delegates apportioned territorially or by other districts or
12units. The bylaws shall specify either that a delegate may cast
13only one vote or that a delegate may cast one vote for each
14member represented by the delegate. The procedures set forth in
15this Act for voting by members apply to voting by delegates,
16except as provided in all of the following:
17        (1) if any delegate who may cast only one vote is
18    permitted to vote on a matter, only delegates may vote on
19    that matter;
20        (2) if delegates may cast only one vote, in calculating
21    the required proportion of votes on a matter, the number of
22    delegate votes shall be used, but the number of delegates
23    required for a quorum shall be as specified in the bylaws;
24    and
25        (3) if the bylaws provide for representation of members
26    by delegates who may cast one vote for each member

 

 

HB5877- 21 -LRB098 20083 JLS 55341 b

1    represented by the delegate, in calculating the required
2    proportion of votes on a matter and the number of delegates
3    required for a quorum, the number of members represented by
4    each delegate shall be used.
5    (e) Members entitled to vote on a motion but absent from
6the meeting at which the vote is taken may vote only as
7follows:
8        (1) if a cooperative provides ballots for the vote on
9    the motion to the members together with notice of the
10    meeting at which the vote will be taken and exact copies of
11    the motion and any resolution to which it pertains, an
12    absent member may vote on the motion by submitting a signed
13    ballot. If a signed ballot has been submitted on a motion
14    under this subsection, neither the motion nor any
15    resolution to which it pertains may be amended; or
16        (2) if a cooperative makes available ballots for the
17    vote on the motion together with exact copies of the motion
18    and any resolution to which it pertains to any member
19    entitled to vote on the motion, but does not comply fully
20    with the requirements of item (1), an absent member may
21    vote on the motion by submitting a signed ballot; however,
22    the motion and any resolution to which it pertains may be
23    amended at the meeting, and, if the motion or resolution is
24    amended, the ballot is void and may not be counted on any
25    motion to amend or adopt as amended the motion or
26    resolution.

 

 

HB5877- 22 -LRB098 20083 JLS 55341 b

1    (f) The bylaws may provide for voting on the election or
2removal of directors by signed ballots. Signed ballots may not
3be used for this purpose unless the bylaws authorize and
4prescribe the procedure for their use.
5    (g) The bylaws may set forth provisions, not inconsistent
6with this Act, relating to the methods and procedures for
7voting.
 
8    Section 115. Member meetings.
9    (a) Unless the bylaws provide otherwise, member meetings
10shall be held at the principal office or such other place as
11the board may determine.
12    (b) An annual member meeting shall be held at the time
13fixed in or pursuant to the bylaws. In the absence of a bylaw
14provision, the annual meeting shall be held within 6 months
15after the close of the fiscal year at the call of the president
16or board.
17    (c) Special member meetings may be called by the president,
18board, or members having one-fifth of the votes entitled to be
19cast at such meeting.
20    (d) Written notice, stating the place, day, and hour and,
21in case of a special member meeting, the purposes for which the
22meeting is called shall be given not less than 7 nor more than
2330 days before the meeting at the direction of the person
24calling the meeting. Notice need be given only to members
25entitled to vote. Notice shall be given to members having

 

 

HB5877- 23 -LRB098 20083 JLS 55341 b

1limited voting rights if they have or may have the right to
2vote at the meeting.
3    (e) At any meeting when members are to be represented by
4delegates, notice to such members may be given by notifying
5such delegates and their alternates. Notice may consist of a
6notice to all members or may be in the form of an announcement
7at the meeting at which such delegates or alternates were
8elected.
 
9    Section 120. Quorum.
10    (a) A quorum at a member meeting shall be 10% of the first
11100 members plus 5% of additional members.
12    (b) Unless the bylaws fix a larger number of members to
13constitute a quorum and except as provided in the bylaws in
14accordance with subsection (d) of Section 110, a quorum shall
15never be more than 50 members nor less than 5 members or a
16majority of all members, whichever is smaller. Members
17represented by signed ballots may be counted in computing a
18quorum only on those motions for which the signed ballots were
19submitted.
 
20    Section 125. Notice to members, stockholders, or other
21persons; waiver.
22    (a) Whenever notice is required by this Act to be given to
23any person, the notice shall be given either personally or by
24mail. If mailed, the notice is given when it or a newsletter or

 

 

HB5877- 24 -LRB098 20083 JLS 55341 b

1other publication of a cooperative or of an affiliated
2organization that includes the notice is deposited in the
3United States mail, with postage prepaid thereon, addressed to
4such person at his or her address as it appears on the records
5of the cooperative.
6    (b) A signed waiver is equivalent to personal notice to the
7person signing. The waiver may be signed at any time.
 
8    Section 130. Stock.
9    (a) A cooperative may be organized with or without capital
10stock.
11    (b) A cooperative organized with capital stock may issue
12the amount of stock stated in its articles. The stock may be
13divided into 2 or more classes with such designations,
14preferences, limitations, and relative rights as shall be
15stated in the articles, except that:
16        (1) stock as such has no voting power, except as stated
17    in Section 210;
18        (2) stock without par value shall not be authorized or
19    issued; and
20        (3) the rate of dividends upon stock shall not exceed
21    8% of its par value for any year, but dividends may be
22    cumulative.
23    (c) The articles may require that members own one or more
24shares of membership stock. The stock shall be issued or
25transferred only to a person eligible to become a member and

 

 

HB5877- 25 -LRB098 20083 JLS 55341 b

1only when the person satisfies other requisites for membership.
2Unless restricted by the articles, stock other than membership
3stock may be issued or transferred to any person.
4    (d) Each certificate for stock shall bear the manual or
5facsimile signature of a principal officer and shall state:
6        (1) the name of the cooperative, the number, par value,
7    and class of the shares represented by the certificate, and
8    whether the stock is membership stock;
9        (2) any restrictions on the issuance or transfer of
10    such stock, including those provided in subsection (c); and
11        (3) if more than one class of stock is authorized, the
12    designation of the several classes, their respective
13    preferences, limitations, and relative rights.
14    In lieu of the full statement, this information may be
15given in summary form or the certificate may state that the
16cooperative will, upon request, furnish the information
17required by this subsection.
18    (e) No stock certificate may be issued except upon payment
19of the par value of the stock it represents. Payment for stock
20may be in cash or other property. If in other property, the
21value thereof shall be determined by the board, and the
22determination, if made in good faith, shall be conclusive.
23    (f) Unless the articles provide otherwise, a cooperative
24may acquire, recall, exchange, redeem, and reissue its own
25stock. Provisions in the articles and on the stock certificate
26may reserve to the cooperative a prior right to acquire any

 

 

HB5877- 26 -LRB098 20083 JLS 55341 b

1stock offered for sale or a right to recall the stock of any
2stockholder, or both. The consideration paid for stock recalled
3by the cooperative shall be its par value and accrued unpaid
4dividends, provided that if the book value of such stock is
5less than the par value, the consideration shall be the book
6value. The cooperative may set off obligations of the
7stockholder to it. If the remaining assets would be less than
8the aggregate amount payable to creditors and persons holding
9stock with preferential rights upon liquidation, no stock shall
10be acquired, recalled, exchanged, or redeemed for a
11consideration other than stock or certificates of equity
12interest of equal or subordinate rank.
13    (g) When stock is acquired, recalled, exchanged, or
14redeemed by the cooperative, the stock is restored to the
15status of authorized but unissued stock.
16    (h) Stockholders as such have no preemptive right to
17purchase additional stock.
 
18    Section 135. Subscriptions and liability for stock.
19    (a) A subscription for stock of a cooperative is
20irrevocable for 6 months unless otherwise provided by the
21subscription agreement or unless all subscribers consent to the
22revocation.
23    (b) Except as provided in Section 170, a stockholder or
24subscriber is under no obligation to any person with respect to
25the stockholder's or subscriber's stock or subscription other

 

 

HB5877- 27 -LRB098 20083 JLS 55341 b

1than the obligation to pay to the cooperative the full
2consideration for which the stock was to be issued.
 
3    Section 140. Missing securities or records.
4    (a) When a security issued by a cooperative is missing, the
5cooperative shall issue a duplicate security if the owner so
6requests and furnishes an indemnity acceptable to the
7cooperative.
8    (b) When records showing ownership of securities of
9apportionment of equity interest in the assets are missing and
10the information therein contained is necessary to a proposed
11redemption of the interest, the cooperative may give notice and
12redeem as follows:
13        (1) the cooperative shall set aside an amount equal to
14    the value of the interests to be redeemed;
15        (2) the cooperative shall give notice of the redemption
16    to all owners of interests of which the cooperative has
17    knowledge; and
18        (3) if there are interests, the ownership of which is
19    unknown to the cooperative, it shall publish notice of the
20    redemption at least once a month for 4 months in a
21    publication circulated among members of cooperatives in
22    the area.
 
23    Section 145. Directors; number, election, removal, and
24vacancies.

 

 

HB5877- 28 -LRB098 20083 JLS 55341 b

1    (a) All powers of the cooperative shall be exercised by or
2under authority of, and the business and affairs of a
3cooperative shall be managed under the direction of, the board,
4except as otherwise provided in this Act. A director shall be a
5member or a representative of a member who is other than a
6natural person. The bylaws shall prescribe any other
7qualifications for directors.
8    (b) The number of directors shall not be less than 5,
9provided that, in a cooperative with less than 50 members, the
10number of directors shall not be less than 3. Subject to such
11limitation, the number shall be fixed in the articles, or if
12the articles so provide, in the bylaws.
13    (c) The directors constituting the temporary board, named
14in the articles, shall hold office until the first member
15meeting. At that meeting and thereafter, directors shall be
16elected by the members at a member meeting in the manner and
17for the terms provided in the bylaws. If the bylaws provide
18that directors be from specified districts, the articles may
19limit voting for any director to members from within the
20district from which the director is to be elected. Unless the
21bylaws provide otherwise, a director's term of office shall be
22one year. Each director shall hold office for the term for
23which elected and until a successor takes office. The bylaws
24may permit selection of alternates to take the place of
25directors absent at a meeting of the board. Whenever any change
26is made in the board, the cooperative shall file within 20 days

 

 

HB5877- 29 -LRB098 20083 JLS 55341 b

1with the Secretary a report showing the names and addresses of
2all directors.
3    (d) Unless the bylaws provide otherwise, a director may be
4removed upon a majority vote of all members.
5    (e) Unless the bylaws provide otherwise, any vacancy
6existing in the board, including any vacancy created by an
7increase in the number of directors, may be filled until the
8next annual meeting by appointment by a majority vote of the
9directors then in office.
 
10    Section 150. Directors; meetings, quorum, and waiver of
11notice.
12    (a) Meetings of the board shall be held at such place and
13upon such notice as is prescribed in or pursuant to the bylaws.
14    (b) Unless a greater number is required in the bylaws, a
15majority of the directors in office shall constitute a quorum
16for transaction of business. Unless a greater number is
17required in the bylaws, an act of the majority of the directors
18present at a meeting at which a quorum is present shall be the
19act of the board.
20    (c) A signed waiver of notice of a board meeting is
21equivalent to personal notice to the person so signing. The
22waiver may be signed at any time. Attendance at a meeting is a
23waiver of notice of such meeting, except when a director
24attends the meeting and objects at the meeting to the
25transaction of business because the meeting was not lawfully

 

 

HB5877- 30 -LRB098 20083 JLS 55341 b

1convened.
2    (d) Unless the bylaws provide otherwise, the purposes of
3any meeting of the board need not be specified in the notice or
4waiver of notice of the meeting.
5    (e) Unless the articles or bylaws provide otherwise, the
6board may permit any or all directors to participate in a
7regular or special meeting or in a committee meeting, including
8an executive committee meeting, of the board by, or to conduct
9the meeting through the use of, any means of communication by
10which any of the following occurs:
11        (1) all participating directors may simultaneously
12    hear each other during the meeting; or
13        (2) all communication during the meeting is
14    immediately transmitted to each participating director,
15    and each participating director is able to immediately send
16    messages to all other participating directors.
17    (f) If a meeting will be conducted through the use of any
18means described in subsection (e), all participating directors
19shall be informed that a meeting is taking place at which
20official business may be transacted. A director participating
21in a meeting by any means described in subsection (e) is deemed
22to be present in person at the meeting. If requested by a
23director, minutes of the meeting shall be prepared and
24distributed to each director.
 
25    Section 155. Executive committee.

 

 

HB5877- 31 -LRB098 20083 JLS 55341 b

1    (a) If the bylaws so provide, the board may elect an
2executive committee to consist of 3 or more directors. When the
3board is not in session, the committee shall have all powers of
4the board except in respect to:
5        (1) powers reserved by the board to itself;
6        (2) apportionment or distribution of proceeds;
7        (3) election of officers;
8        (4) filling of vacancies in the board; and
9        (5) amendments to the bylaws.
10    (b) The board may elect other directors as alternates for
11members of the executive committee.
 
12    Section 160. Officers.
13    (a) Unless the articles of incorporation provide
14otherwise, the principal officers of a cooperative are a
15president, one or more vice presidents as prescribed in the
16bylaws, a secretary, and a treasurer. They shall be elected
17annually by the board at the time and in such manner as the
18bylaws provide. Upon original election and whenever any change
19is made in the officers, the cooperative shall file with the
20Secretary, within 20 days, a report showing the name and
21address of all officers. Each principal officer except the
22secretary and the treasurer must be a director of the
23cooperative. The offices of secretary and treasurer may be
24combined in one person.
25    (b) Any other officer may be chosen by the board or as

 

 

HB5877- 32 -LRB098 20083 JLS 55341 b

1provided in the bylaws.
2    (c) All officers shall have such authority and perform such
3duties as the bylaws provide or as the board may determine not
4inconsistent with the bylaws. An officer may be removed by the
5board whenever in its judgment the best interests of the
6cooperative will be served thereby. Election or appointment
7does not of itself create contract rights.
 
8    Section 165. Limited liability of directors and officers.
9    (a) Except as provided in subsections (b) and (c), a
10director or officer is not liable to the cooperative, its
11members, stockholders, or creditors, or any person asserting
12rights on behalf of the cooperative, its members, stockholders,
13or creditors, or any other person for damages, settlements,
14fees, fines, penalties, or other monetary liabilities arising
15from a breach of, or failure to perform, any duty resulting
16solely from his or her status as a director or officer, unless
17the person asserting liability proves that the breach or
18failure to perform constitutes any of the following:
19        (1) A willful failure to deal fairly with the
20    cooperative, its members, or stockholders in connection
21    with a matter in which the director or officer has a
22    material conflict of interest.
23        (2) A violation of criminal law, unless the director or
24    officer had reasonable cause to believe his or her conduct
25    was lawful or no reasonable cause to believe his or her

 

 

HB5877- 33 -LRB098 20083 JLS 55341 b

1    conduct was unlawful.
2        (3) A transaction from which the director or officer
3    derived an improper personal profit.
4        (4) Willful misconduct.
5    (b) Except as provided in subsection (c), this Section does
6not apply to any of the following:
7        (1) A civil or criminal proceeding brought by or on
8    behalf of any governmental unit, authority, or agency.
9        (2) A proceeding brought by any person for a violation
10    of State or federal law where the proceeding is brought
11    pursuant to an express private right of action created by
12    State or federal statute.
13        (3) The liability of a director under Section 170.
14    Items (1) and (2) of this subsection do not apply to a
15proceeding brought by a governmental unit, authority, or agency
16in its capacity as a private party or contractor.
 
17    Section 170. Liability of directors and members.
18    (a) Directors who negligently or in bad faith vote for any
19distribution of assets contrary to this Act or the articles are
20jointly and severally liable to the cooperative for the value
21of assets distributed in excess of the amount that could have
22been distributed without violating this Act or the articles.
23Section 165 does not apply to the liability of directors under
24this subsection.
25    (b) Members, stockholders, and patrons of a cooperative are

 

 

HB5877- 34 -LRB098 20083 JLS 55341 b

1neither obligated to pay, nor liable upon, any cooperative
2obligation, except that stockholders are liable to an amount
3equal to the par value of their shares for debts due an
4employee for not more than 6 months' service to the
5cooperative.
 
6    Section 175. Cooperative contracts.
7    (a) If otherwise lawful, contracts for any of the following
8purposes, whether written or contained in the bylaws, are valid
9when made between an association and any member in which the
10member agrees to:
11        (1) sell, market, or deliver all or any specified part
12    of products produced or to be produced either by the member
13    or under the member's control to or through the association
14    or any facilities furnished by it;
15         (2) authorize the association or any facilities
16    furnished by it to act for the member in any manner with
17    respect to all or any specified part of such products and
18    any services to be furnished by the member;
19        (3) buy or procure all or a specified part of goods or
20    services from or through the association or any facilities
21    furnished by it; or
22        (4) authorize the association or any facilities
23    furnished by it to act for the member in any manner in the
24    procurement of goods or services.
25    (b) The term of the contracts may not exceed 5 years, but

 

 

HB5877- 35 -LRB098 20083 JLS 55341 b

1they may be made self-renewing for periods not exceeding 5
2years each, subject to the right of either party to terminate
3at the end of the original and each renewal term upon giving
4written notice of such termination during a period specified in
5the contract. The period shall be of at least 30 days' duration
6during the last year of each term. The association shall
7furnish to each member-maker a completed original or copy of
8the member-maker's contract and, on the member-maker's request
9at any time, promptly furnish the member-maker information as
10to the member-maker's rights of termination. The 5-year
11limitation herein contained does not apply to contracts for the
12furnishing of electric energy or service involving an
13investment by the vendor in fixed assets to be amortized over a
14longer term.
15    (c) A contract may require liquidated damages to be paid by
16the member in the event of a breach of the contract. Liquidated
17damages may be either a percentage of the value of the
18products, goods, or services or a specific sum, but neither may
19be more than 30% of the value of the products, goods, or
20services subject to the breach. When a specific sum is provided
21as liquidated damages and the sum exceeds 30% of the value of
22the products, goods, or services that are the subject of the
23breach, the contract shall be construed as providing an amount
24equal to 30%.
25    (d) If any contract authorized by item (1) or (2) of
26subsection (a) contains an assignment to the association of any

 

 

HB5877- 36 -LRB098 20083 JLS 55341 b

1part or all of funds due or to become due the member during the
2life of the contract for a product produced or to be produced
3by the member or for a service performed or to be performed in
4producing a product, a person who accepts or receives the
5product from the member is bound by the assignment after
6receiving written notice from the association or the member of
7the amount and duration of the assignment. However, as to any
8seasonal crop, if no funds are paid or become payable by a
9person under such an assignment for a period of 2 consecutive
10years during the life of the contract, the assignment
11thereafter shall not be binding upon any person who receives or
12accepts the product from the member until the assignment is
13reaffirmed by the member in writing and written notice thereof
14is given by the association or the member. A reaffirmation
15shall continue to be effective during the life of the contract
16until another lapse of 2 consecutive years shall occur.
 
17    Section 180. Relief against breach or threatened breach.
18    (a) In the event of a breach or threatened breach of a
19contract authorized by Section 175 by a member, the association
20shall be entitled to an injunction to prevent the breach or any
21further breach thereof and to a decree of specific performance.
22Upon filing of a verified complaint showing a breach or
23threatened breach and upon filing a sufficient bond, the
24association shall be entitled to a temporary restraining order
25against the member.

 

 

HB5877- 37 -LRB098 20083 JLS 55341 b

1    (b) A person, with actual or constructive notice that a
2contract exists, who induces or attempts to induce any member
3to breach or repudiate the member's contract with the
4association or who in any manner aids a breach of the contract
5is liable to the aggrieved party for damages caused by such
6interference. The association is also entitled to an injunction
7to prevent any interference or further interference with the
8contract.
 
9    Section 185. Apportionment and distribution of proceeds.
10    (a) At least once annually the directors shall determine
11and distribute net proceeds as provided in this Section.
12    (b) There shall be deducted from the total proceeds the
13following:
14        (1) all operating expenses and costs;
15        (2) the cost of supplies, commodities, equipment, and
16    other property or services procured or sold for patrons;
17        (3) the cost of services performed for patrons;
18        (4) all taxes and all other expenses; and
19        (5) reasonable and necessary reserves for
20    depreciation, depletion, and obsolescence of physical
21    property, doubtful accounts, and other valuation reserves,
22    all of which shall be established in accordance with usual
23    and customary accounting practices.
24    (c) The remainder of the total proceeds are net proceeds
25and shall be distributed and paid as follows:

 

 

HB5877- 38 -LRB098 20083 JLS 55341 b

1        (1) An amount not to exceed 5% thereof may be set aside
2    as an educational fund to be used in teaching or promoting
3    cooperative organization or principles. The funds shall
4    for all purposes except the computation of net proceeds be
5    deemed an expense of operation of the cooperative.
6        (2) A share of the net proceeds may be set aside for or
7    paid to officers or employees, or both. The amount shall
8    for all purposes except the computation of net proceeds be
9    deemed an expense of operation of the cooperative.
10        (3) In a cooperative organized with capital stock such
11    dividend may be paid upon capital stock as is authorized by
12    the articles. No dividend may be paid if the capital is
13    impaired or if payment of the dividend would result in an
14    impairment of capital.
15    (d) Unless the articles or bylaws otherwise expressly
16provide, none of the remainder of the net proceeds shall
17constitute income of the cooperative, but all thereof shall be
18distributed and paid to patrons, whether members or not, as
19follows:
20        (1) Reasonable reserves for necessary purposes may be
21    created, which shall be credited to patrons in accordance
22    with the ratio which their patronage bears to total
23    patronage.
24        (2) The remainder of the net proceeds shall be
25    distributed and paid to patrons in accordance with the
26    ratio that their patronage bears to total patronage.

 

 

HB5877- 39 -LRB098 20083 JLS 55341 b

1        (3) There shall be no distinction between the persons
2    entitled thereto, but the reserves and distributions may be
3    based upon business done with particular departments or in
4    particular commodities, supplies, or services, or upon
5    classification of business according to the type or nature
6    thereof.
7    (e) If the articles or bylaws so provide:
8        (1) Any of the net proceeds may be credited to
9    allocated or unallocated surplus or reserves of the
10    cooperative.
11        (2) None of the remainder shall constitute income to
12    the cooperative, but all of it shall be distributed and
13    paid in accordance with the ratio that individual patronage
14    bears to total patronage, either to member patrons only, to
15    member patrons only with one or more classes receiving a
16    lower proportion than others, or to all patrons with
17    nonmembers receiving a lower proportion than members, as
18    the bylaws provide. There shall be no other distinction
19    between members and nonmembers, but distribution may be
20    based on business done with particular departments, or in
21    particular commodities, supplies, or services, or upon
22    classification of business according to type or nature.
23    (f) The distribution and payment of net proceeds under
24subsection (d) or (e) may be in cash, credits, stock,
25certificates of interest, revolving fund certificates, letters
26of advice, or other certificates or securities of the

 

 

HB5877- 40 -LRB098 20083 JLS 55341 b

1cooperative or of other associations, limited liability
2companies, or corporations, in other property, or in any
3combination thereof.
4    (g) All or any part of the net proceeds may be applied to
5losses incurred in prior years, and the bylaws may also include
6any reasonable provisions for the apportionment of losses.
 
7    Section 190. Books and records; penalty for refusal to
8produce.
9    (a) A cooperative shall keep correct and complete books and
10records of account and shall also keep minutes of the
11proceedings of meetings of its members, board, and executive
12committee. The cooperative shall keep at its principal office
13records of the names and addresses of all members and
14stockholders with the amount of stock held by each and of
15ownership of equity interests. At any reasonable time, any
16member or stockholder, or his or her agent or attorney, upon
17written notice stating the purposes thereof, delivered or sent
18to the cooperative at least one week in advance, may examine
19for a proper purpose any books or records pertinent to the
20purpose specified in the notice. The board may deny a request
21to examine books and records if the board determines that the
22purpose is not directly related to the business or affairs of
23the cooperative and is contrary to the best interests of the
24cooperative.
25    (b) In any proceeding or upon petition for such purpose,

 

 

HB5877- 41 -LRB098 20083 JLS 55341 b

1any court of record may, upon notice and after hearing at which
2proper cause is shown and upon suitable terms, order any of the
3cooperative's books or records and any other pertinent
4documents in its possession, or duly authenticated copies
5thereof, to be brought within this State. The documents shall
6be kept at such place and for such time and purposes as the
7order designates. A cooperative failing to comply with the
8order is subject to dissolution and its directors and officers
9are liable for contempt of court.
10    (c) Subject to the time, notice, and purpose requirements
11of subsection (a), a member or stockholder of a cooperative may
12examine the books and records of any other cooperative or other
13person that is a wholly owned subsidiary of the cooperative or
14in which the cooperative owns a controlling interest.
 
15    Section 195. Annual reports; filing.
16    (a) A cooperative shall file an annual report signed by a
17principal officer or the general manager setting forth:
18        (1) its name and complete address;
19        (2) the names and addresses of its directors and
20    principal officers;
21        (3) a statement, by class and par value, of the amount
22    of stock which it has authority to issue, and the amount
23    issued; and
24        (4) a statement as to the general type of business
25    engaged in during the 12 months preceding the date of the

 

 

HB5877- 42 -LRB098 20083 JLS 55341 b

1    report.
2    (b) The annual report shall be made on forms furnished by
3the Secretary, and the information therein contained shall be
4given as of the date of the execution of the report. The
5Secretary shall forward by first class mail report forms to
6each cooperative in good standing not later than 60 days prior
7to the date on which the cooperative is required to file an
8annual report under this Act.
9    (c) The annual report shall be delivered to the Secretary
10in each year following the year in which the cooperative's
11articles are filed by the Secretary, during the calendar year
12quarter in which the anniversary of the filing occurs. If the
13report does not conform to requirements, it shall be returned
14to the cooperative for necessary corrections. The penalties for
15failure to file the report shall not apply if it is corrected
16and returned within 30 days after receipt thereof.
17    (d) Any report not filed as required by subsection (c) may
18be filed only upon payment to the Secretary of $25 or, if the
19report is filed in paper format, upon payment of such larger
20fee as the Secretary prescribes by rule.
21    (e) If the report is not filed within one year from the
22first day of the quarter calendar year in which the report is
23required under subsection (c) to be delivered, the cooperative
24is not in good standing. Within the next 6 months the Secretary
25shall mail to the cooperative a notice that it is no longer in
26good standing. If a cooperative has been out of good standing

 

 

HB5877- 43 -LRB098 20083 JLS 55341 b

1for more than 3 consecutive years, the Secretary shall provide
2proper notice. Until restored to good standing, the Secretary
3shall not accept for filing any document respecting the
4cooperative except those incident to its dissolution.
5    (f) A cooperative may be restored to good standing by
6delivering to the Secretary a current annual report and by
7paying the $25 late filing fee plus $15 for each calendar year
8or part thereof during which it was not in good standing, not
9exceeding a total of $175. The Secretary, by rule, may specify
10a larger fee for the filing of an annual report in paper
11format.
 
12    Section 200. Income or franchise tax returns. A
13cooperative association, society, company, corporation,
14exchange, or union organized under the provisions of this Act
15shall not be obliged to file a State income or franchise tax
16return unless the association, society, company, corporation,
17exchange, or union is at the time subject to a State income or
18franchise tax.
 
19    Section 205. Amendments to articles.
20    (a) At any member meeting a cooperative may adopt any
21amendment to its articles that is lawful under Section 80 if a
22statement of the nature of the amendment was contained in the
23notice of the meeting.
24    (b) Unless stockholders are entitled by Section 210 to vote

 

 

HB5877- 44 -LRB098 20083 JLS 55341 b

1on an amendment, an amendment is adopted when approved by
2two-thirds of the member votes cast thereon.
 
3    Section 210. Stockholder voting on amendments to articles.
4    (a) Whether or not permitted to vote by the articles, a
5holder of stock other than membership stock who is affected by
6a proposed amendment to articles shall be entitled to cast one
7vote on the amendment regardless of the dollar amount of stock,
8the number of shares, or the number of affected classes of
9stock he or she holds. A member holding stock affected by a
10proposed amendment may vote both as a member and as an affected
11stockholder.
12    (b) For purposes of this Section, a holder of stock is
13affected as to any class of stock owned by the holder only if
14an amendment would expressly:
15        (1) decrease the dividends to which that class may be
16    entitled or change the method by which the dividend rate on
17    that class is fixed;
18        (2) restrict rights to transfer that class;
19        (3) give to another existing or any new class of stock
20    or equity interest not previously entitled thereto any
21    preference as to dividends or upon dissolution that is the
22    same or higher than preferences of that class;
23        (4) change the par value of shares of that class or of
24    any other class having the same or higher preferences as to
25    dividends or upon dissolution;

 

 

HB5877- 45 -LRB098 20083 JLS 55341 b

1        (5) increase the number of authorized shares of any
2    class having a higher preference as to dividends or upon
3    dissolution; or
4        (6) require or permit an exchange of shares of any
5    class with lower preferences as to dividends or upon
6    dissolution for shares of that class or any other class
7    with the same or higher preferences.
8    (c) If stockholders are entitled to vote on an amendment,
9the amendment is adopted only if all of the following
10conditions are met:
11        (1) Notice of the meeting, an exact copy of the
12    proposed amendment, and a ballot thereon have been sent to
13    each member and each affected stockholder.
14        (2) Two-thirds of the member votes cast thereon
15    approve.
16        (3) Two-thirds of the votes of affected stockholders
17    cast thereon approve.
 
18    Section 215. Filing and recording of amendments.
19    (a) Amendments to articles shall be signed by the president
20or a vice president and the secretary or an assistant
21secretary, shall be sealed with the cooperative's seal, and
22shall set forth:
23        (1) the name of the cooperative and the county of the
24    cooperative's principal office or of its registered agent;
25        (2) the amendment and date of adoption;

 

 

HB5877- 46 -LRB098 20083 JLS 55341 b

1        (3) the number of members;
2        (4) the number of member votes cast for and against the
3    amendment; and
4        (5) if affected stockholders have the right to vote
5    under Section 210, the number of votes of affected
6    stockholders cast for and against the amendment.
7    (b) The amendment shall be filed and recorded as provided
8in Section 235. The amendment becomes effective upon filing and
9the Secretary may then issue a certificate of amendment.
10    (c) No amendment may affect any existing cause of action or
11proceeding to which the cooperative is a party or existing
12rights of persons other than members or stockholders.
13    (d) No action may be maintained to invalidate any amendment
14because of the manner of its adoption unless commenced within 2
15years after the date of filing.
 
16    Section 220. Voluntary dissolution.
17    (a) At any member meeting, whether or not a quorum is
18present, a cooperative may dissolve if:
19        (1) notice that a resolution for dissolution will be
20    considered and acted upon has been included in the notice
21    of meeting; and
22        (2) the resolution is approved by three-fourths of the
23    member votes cast thereon.
24    The articles may permit stockholders to vote on the
25resolution for dissolution.

 

 

HB5877- 47 -LRB098 20083 JLS 55341 b

1    (b) When the resolution is adopted, either a committee
2designated by the resolution or the board shall liquidate all
3assets and pay the net proceeds of the liquidation available
4for distribution to all persons entitled to them by law, the
5articles, and the bylaws.
6    (c) Any net proceeds of liquidation not subject to valid
7claims or owed to persons under subsection (b) shall be
8distributed to one or more organizations that are either:
9        (1) cooperatives with articles containing limitations
10    on distribution of assets or payment of proceeds of
11    liquidation equivalent to limitations in the articles of
12    the liquidating cooperative; or
13        (2) organizations exempt from federal income taxation
14    under 26 U.S.C. 501(c)(3).
15    (d) Articles of dissolution shall be signed by a majority
16of directors or of committee members and shall be sealed with
17the cooperative's seal. They shall set forth:
18        (1) the name of the cooperative and the county of the
19    cooperative's principal office or of its registered agent;
20        (2) the name and address of each director or committee
21    member;
22        (3) the date of adoption of the resolution of
23    dissolution; and
24        (4) a statement that all liquidation activities have
25    been completed in compliance with law, the articles, and
26    the bylaws.

 

 

HB5877- 48 -LRB098 20083 JLS 55341 b

1    (e) The articles of dissolution shall be filed and recorded
2as provided in Section 235. Upon the filing of the articles the
3existence of the cooperative ceases.
4    (f) Within 7 years after the date of filing under
5subsection (e), an action may be brought against any person to
6whom proceeds were distributed under subsection (b) in
7violation of law, the articles, or the bylaws to recover the
8proceeds by any person entitled to the funds by law, the
9articles, or the bylaws in the circuit court of the county
10where the last principal office of the cooperative was located.
 
11    Section 225. Recording change of principal office or
12registered agent.
13    (a) If a document submitted to the Secretary for filing
14under this Act changes the county of the principal office or of
15the registered agent:
16        (1) an original of the document or a duplicate original
17    endorsed by the Secretary shall be recorded in each county;
18        (2) the document shall specify the new county when:
19            (A) the county of the principal office or
20        registered agent is changed; or
21            (B) the document makes a change from a principal
22        office in one county to a registered agent's address in
23        another county or vice versa.
24    (b) A certificate of the Secretary listing the type and
25date of filing of recordable documents previously filed by the

 

 

HB5877- 49 -LRB098 20083 JLS 55341 b

1cooperative shall be recorded in the county of the new
2principal office or of the registered agent.
 
3    Section 230. Procedure on filing and recording of
4documents.
5    (a) If a document is required to be filed and recorded
6under this Act, all of the following shall be included when the
7document is submitted for filing:
8        (1) Separate originals of the document for the
9    Secretary and for the recorder of deeds of each county in
10    which the document is required to be recorded.
11        (2) A check payable to the Secretary in the amount of
12    the filing fee prescribed under Section 235.
13    (b) Unless the document does not conform to law, the
14Secretary shall endorse on each original "Filed" and the date
15of filing and shall file one original. A recorder of deeds
16receiving a check and document forwarded shall record the
17document. If the document is not articles, the recorder of
18deeds shall note on the margin of the record of the articles
19the volume and page where the document is recorded.
20    (c) Each week the Secretary shall forward to each recorder
21of deeds a listing of all documents received during the
22preceding week for filing and recording as required under this
23Act. For each document, the listing shall specify the type of
24document, the name of the cooperative, the name of the county
25of the cooperative's principal office or registered agent, and

 

 

HB5877- 50 -LRB098 20083 JLS 55341 b

1the date of filing.
2    (d) A document required to be filed and recorded under this
3Act is effective on filing with the Secretary. An error or
4omission in recording the document or a certificate with a
5recorder of deeds does not affect its effectiveness.
 
6    Section 235. Fees for filing.
7    (a) Except as provided under subsection (b), the Secretary
8shall charge and collect for:
9        (1) Filing articles for a new cooperative, $1.25 for
10    each $1,000 of authorized stock, but in no case less than
11    $25. A cooperative organized without capital stock shall
12    pay a fee of $25.
13        (2) Filing an amendment to or restatement of the
14    articles or articles of consolidation or division, $10,
15    plus $1.25 for each $1,000 of authorized stock not
16    authorized at the time of the amendment, restatement,
17    consolidation, or division, except that no fee may be
18    collected for any of the following:
19            (A) an amendment showing only a change of address
20        resulting from the action of a governmental agency if
21        there is no corresponding change in physical location
22        and if 2 copies of the notice of the action are
23        submitted to the Secretary; or
24            (B) an amendment filed to reflect only a change in
25        the name of a registered agent.

 

 

HB5877- 51 -LRB098 20083 JLS 55341 b

1        (3) Filing articles or decree of dissolution, $5.
2        (4) Filing an annual report of a cooperative, $15.
3        (5) Filing a report of names and addresses of officers
4    or directors, $3.
5    (b) The Secretary, by rule, may specify a larger fee for
6filing documents described in subsection (c) in paper format.
7    (c) No document may be filed or recorded until all fees
8therefor have been paid.
 
9    Section 240. Member or stockholder derivative actions.
10    (a) No action may be instituted or maintained in the right
11of any association by a member or stockholder unless the member
12or stockholder:
13        (1) alleges in the complaint that the member or
14    stockholder was a member or registered stockholder when any
15    part of the transaction of which the member or stockholder
16    complains took place or that the member's or stockholder's
17    stock thereafter devolved upon the member or stockholder by
18    operation of law from a stockholder at such time;
19        (2) alleges in the complaint with particularity his or
20    her efforts to secure from the board the action he or she
21    desires and further alleges that he or she has either
22    informed the association or board in writing of the
23    ultimate facts of each cause of action against each
24    director or that he or she has delivered to the association
25    or board a copy of the complaint no fewer than 60 days

 

 

HB5877- 52 -LRB098 20083 JLS 55341 b

1    prior to filing the complaint; and
2        (3) files the complaint in such action within 20 days
3    after the action is commenced.
4    (b) The action shall not be dismissed or compromised
5without the approval of the court.
6    (c) If anything is recovered or obtained as the result of
7the action, whether by means of a compromise and settlement or
8by a judgment, the court may, out of the proceeds of the
9action, award the plaintiff the reasonable expenses of
10maintaining the action, including reasonable attorney fees,
11and may direct the plaintiff to account to the association for
12the remainder of such proceeds.
13    (d) In any action brought in the right of an association by
14less than 3% of the members or by holders of less than 3% of any
15class of stock outstanding, the defendants may require the
16plaintiff to give security for the reasonable expenses of
17defending such action, including attorney fees. The amount of
18such security may thereafter be increased or decreased in the
19discretion of the court upon showing that the security provided
20is or may be inadequate or is excessive.
 
21    Section 245. Disposition of assets; right to secure debts.
22    (a) Except as authorized by members, the board may not
23dispose of all or substantially all of a cooperative's fixed
24assets. At a meeting, the members may authorize the disposition
25of all or substantially all of a cooperative's fixed assets if:

 

 

HB5877- 53 -LRB098 20083 JLS 55341 b

1        (1) notice that the disposition will be considered at
2    the meeting has been given to all persons entitled to vote
3    upon the issue; and
4        (2) the disposition is approved by two-thirds of those
5    entitled to vote upon the issue at the meeting.
6    (b) Unless the bylaws provide otherwise, the board may
7secure payment of a cooperative's debts by mortgaging the
8cooperative's rights, privileges, authority and franchises,
9revenues, and other property.
 
10    Section 250. Division of a cooperative.
11    (a) Any cooperative may divide itself into 2 or more
12cooperatives under this Act. A written plan of division shall
13be prepared by the board or by a committee selected by the
14board for that purpose. The plan shall set forth all the terms
15of the division and the proposed effect thereof on all members
16and stockholders of the cooperative. The plan shall also
17contain the articles of each new cooperative being formed and
18any amendments to the articles of the remaining cooperative.
19    (b) The members and the stockholders entitled to vote
20thereon shall approve the plan in the manner provided in
21Section 210 for amendments to articles.
22    (c) Articles of division shall set forth the approved plan
23and other information required by Section 215 and shall be
24filed and recorded as an amendment to the articles. Each part
25of the plan that contains the articles of a new cooperative

 

 

HB5877- 54 -LRB098 20083 JLS 55341 b

1shall be separately filed and recorded as articles for the new
2cooperative.
 
3    Section 255. Admission of foreign cooperatives. A foreign
4cooperative is entitled to all rights, exemptions, and
5privileges of a cooperative organized under this Act if it is
6authorized to do business in this State. A foreign cooperative
7may qualify for admission under this Act whether or not formed
8for profit and whether or not formed with stock. A foreign
9cooperative may be required to furnish the Secretary with such
10facts as the Secretary deems necessary to establish the foreign
11cooperative's rights under this Act.
 
12    Section 260. Worker cooperative.
13    (a) As used in this Section:
14    "Patronage" means the amount of work performed as a member
15of a worker cooperative.
16    "Worker cooperative" means a cooperative organized under
17the provisions of this Act and in which membership is
18restricted to individuals who work at the cooperative.
19    (b) All members of a worker cooperative must work for the
20cooperative on a regular full-time or part-time basis.
21    (c) A worker cooperative shall issue a class of voting
22stock designated as membership shares. The shares shall be
23issued only to a person eligible to become a member and only
24when the person satisfies other requisites for membership. A

 

 

HB5877- 55 -LRB098 20083 JLS 55341 b

1member may own only one membership share. Membership shares
2shall be issued for a fee according to the rules set forth in
3the bylaws or as determined by the board. A worker cooperative
4may allow for payment of the fee by payroll deduction,
5installments, or similar methods. A membership share may be
6issued to a person upon acceptance for membership regardless of
7whether the membership fee is fully paid.
8    (d) A worker cooperative may establish through its articles
9or bylaws a system of allocated equity accounts to reflect the
10book value and redemption price of membership shares, written
11notices of allocation, and any other credit reflected in the
12bylaws. The articles or bylaws may provide for the worker
13cooperative to pay or credit interest on the balance in each
14member's allocated equity account.
15    A worker cooperative may establish through its articles or
16bylaws a collective reserve account to reflect retained
17earnings and other cooperative equity. The articles or bylaws
18may authorize the board to assign of a portion of annual
19earnings to the collective reserve account. Earnings assigned
20to the collective account may be used for any and all corporate
21purposes as determined by the board.
22    A worker cooperative may designate a portion of its
23collective reserve account as an indivisible reserve account
24that shall, in a manner determined by the bylaws or board, be
25used as capital for the cooperative or distributed to one or
26more organizations that are either:

 

 

HB5877- 56 -LRB098 20083 JLS 55341 b

1        (1) worker cooperatives incorporated under this Act;
2    or
3        (2) organizations exempt from federal income taxation
4    under 26 U.S.C. 501(c)(3) and in support of the worker
5    cooperative movement.
 
6    Section 265. Residential cooperatives exempted. This Act
7does not apply to residential cooperatives.
 
8    (805 ILCS 310/Act rep.)
9    Section 900. The Co-operative Act is repealed.