HB5877 98TH GENERAL ASSEMBLY

LRB098 20083 JLS 55341 b

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.

FISCAL NOTE ACT MAY APPLY

A BILL FOR

AN ACT concerning business.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 1. Short title. This Act may be cited as the Cooperative Association Act.

Section 5. Definitions. As used in this Act, unless the context otherwise requires:

"Articles" means the articles of incorporation of a cooperative, unless the context otherwise requires.

"Association" includes both cooperatives and foreign cooperatives.

"Board" means the board of directors of a cooperative.

"Bylaws" means the bylaws of a cooperative.

"Cooperative" means an association incorporated under this Act.

"Corporation" means a corporation and not an association.

"Foreign cooperative" means an association incorporated under a cooperative law of another state that has members residing within this State and that is operating on the following cooperative basis:

(1) either no member of the foreign cooperative who is an individual is allowed more than one vote because of the amount of stock or membership capital the member owns therein or the foreign cooperative does not pay dividends on stock or membership capital in excess of 8% per year; and

(2) the foreign cooperative does not deal in the products of or for nonmembers to an amount greater in value than such as are handled by it for members.

"Member" means a person who has been qualified and accepted for membership in an association. If a cooperative has one or more classes of members not entitled to vote, "member" or "members", with respect to the right of a member to vote, voting procedure, the required proportion of member votes, actions that must or may be taken by members, the number of members required for a quorum, and the eligibility of directors, means a member or members entitled to vote, unless the bylaws provide otherwise.

"Membership stock" means any class of stock, continuous ownership of which is required for membership in a cooperative.

"Patronage" means business done by a patron with a cooperative and, if the bylaws provide, labor performed for a cooperative by a patron.

"Secretary" means the Illinois Secretary of State.

"Security" means any indebtedness, capital stock, or other equity interest in a cooperative's assets.

Section 10. Purposes. A cooperative association may be organized under this Act for any lawful purpose or purposes.

Section 15. General powers. Unless otherwise prohibited by its articles, a cooperative may:

(1) Exist perpetually.

(2) Sue and be sued, complain, and defend.

(3) Have a seal that may be altered at pleasure and use the same by causing it, or a facsimile thereof, to be impressed or affixed or in any other manner reproduced, provided that the affixing of a corporate seal to an instrument shall not give the instrument additional force or effect or change the construction thereof.

(4) Make contracts, incur liabilities, and borrow money; issue certificates representing indebtedness or representing equity interests in its assets; acquire property; and dispose of, mortgage, pledge, lease, or otherwise use its property, or any interest therein, wherever situated in any manner.

(5) Invest its funds, lend money for its purposes, and hold any property as security for repayment.

(6) Have offices, conduct its business and affairs, and exercise its powers in the United States or in any foreign country.

(7) Elect officers and appoint agents, define their duties, and fix their compensation.

(8) Make and alter bylaws consistent with its articles and the laws of this State for the administration and regulation of its affairs.

(9) Make donations for charitable, scientific, educational, or religious purposes.

(10) Effect the forfeiture to the cooperative of unclaimed funds, including all forms of distributions or credits and unclaimed stock, membership fees, and deposits, if all of the following conditions are met:

(A) No earlier than 3 years and no later than 5 years after the funds are first made available to their owners, the board declares the funds forfeited to the cooperative unless claimed by the date specified in item (B).

(B) After the declaration under item (A), the cooperative gives notice stating that the funds shall be forfeited if not claimed by a specified date.

(C) The date specified in the notice under item (B) is a business day at least 60 days after the date of mailing of the notice.

(D) The notice under item (B) is mailed to the last known address of each owner and is published in a manner consistent with Section 5 of the Notice By Publication Act on or before the date of mailing in a newspaper published in the city, town, or county containing the service area of the cooperative.

(E) The cooperative dedicates any funds remaining unclaimed after the date specified in item (B) to educational purposes, limited to providing scholarships or loans to students, or to charitable purposes, as the board determines, within one year after the date the funds are declared forfeited under item (A). In this item (E), "educational purposes" does not include contributions as defined in Section 9-1.4 of the Election Code.

(11) Cease its activities and surrender its franchise.

(12) Exercise all powers necessary or convenient to effect its purposes.

Section 20. Refunds after forfeiture. After a forfeiture under Section 15, the owner of the forfeited funds may submit a claim to the board. If the board determines that the person owned the funds at the time of the forfeiture, it shall refund the funds to the person.

Section 25. Restrictions on changes to articles. If the articles contain a prohibition on changes to the provision establishing the basis of distribution, no changes may be made to the provision including by amendment, approval of a plan of division, adoption of restated articles, approval of a plan of merger or consolidation, and conversion to a non-stock corporation. If, upon dissolution of a cooperative with articles containing a prohibition on changes in the basis of distribution, the distributions required are wholly or partly impossible of execution, the whole or part of the net proceeds shall be distributed as provided in Section 220.

Section 30. Definitions applicable to indemnification and insurance provisions. As used in Sections 30 through 65:

"Cooperative" means a domestic cooperative and any domestic or foreign predecessor of a domestic cooperative where the predecessor cooperative's existence ceased upon the consummation of a merger or other transaction.

"Director or officer" means any of the following:

(1) A natural person who is or was a director or officer of a cooperative.

(2) A natural person who, while a director or officer of a cooperative, is or was serving at the cooperative's request as a director, officer, partner, trustee, member of any governing or decision-making committee, manager, employee, or agent of an association, corporation, limited liability company, partnership, joint venture, trust, or other enterprise.

(3) A natural person who is or was the chief executive, managerial employee of a cooperative, regardless of the person's title.

(4) Unless the context requires otherwise, the estate or personal representative of a director or officer.

"Expenses" means fees, costs, charges, disbursements, attorney's fees, and any other expenses incurred in connection with a proceeding.

"Liability" means the obligation to pay a judgment, settlement, forfeiture, or fine and costs, fees, and surcharges imposed under the Clerks of Courts Act.

"Party" means a natural person who was or is, or who is threatened to be made, a named defendant or respondent in a proceeding.

"Proceeding" means any threatened, pending, or completed civil, criminal, administrative, or investigative action, suit, arbitration, or other proceeding, whether formal or informal, that involves foreign, federal, State, or local law and that is brought by or in the right of the cooperative or by any other person.

Section 35. Mandatory indemnification.

(a) A cooperative shall indemnify a director or officer, to the extent he or she has been successful on the merits or otherwise in the defense of a proceeding, for all reasonable expenses incurred in the proceeding if the director or officer was a party because he or she is a director or officer of the cooperative.

(b) In cases not included under subsection (a), a cooperative shall indemnify a director or officer against liability incurred by the director or officer in a proceeding to which the director or officer was a party because he or she is a director or officer of the cooperative, unless liability was incurred because the director or officer breached or failed to perform a duty he or she owed to the cooperative and the breach or failure to perform constituted the following:

(1) a willful failure to deal fairly with the cooperative, its members, or stockholders in connection with a matter in which the director or officer has a material conflict of interest;

(2) a violation of criminal law, unless the director or officer had reasonable cause to believe his or her conduct was lawful or no reasonable cause to believe his or her conduct was unlawful;

(3) a transaction from which the director or officer derived an improper personal profit; or

(4) willful misconduct.

Determination of whether indemnification is required under this subsection shall be made under Section 40 of this Act.

The termination of a proceeding by judgment, order, settlement, or conviction or upon a plea of no contest or an equivalent plea does not, by itself, create a presumption that indemnification of the director or officer is not required under this subsection.

(c) A director or officer who seeks indemnification under this Section shall make a written request to the cooperative.

(d) Indemnification under this Section is not required if the director or officer has previously received indemnification or allowance of expenses from any person, including the cooperative, in connection with the same proceeding.

Section 40. Determination of right to indemnification.

Unless otherwise provided by the articles or bylaws or by written agreement between the director or officer and the cooperative, the director or officer seeking indemnification under Section 35 of this Act shall select one of the following means for determining his or her right to indemnification:

(1) by majority vote of a quorum of the board consisting of directors not at the time parties to the same or related proceedings. If a quorum of disinterested directors cannot be obtained, by majority vote of a committee duly appointed by the board and consisting solely of 2 or more directors not at the time parties to the same or related proceedings. Directors who are parties to the same or related proceedings may participate in the designation of members of the committee;

(2) by independent legal counsel selected by a quorum of the board or its committee in the manner prescribed in item (1) or, if unable to obtain such a quorum or committee, by a majority vote of the full board, including directors who are parties to the same or related proceedings;

(3) by a panel of 3 arbitrators consisting of one arbitrator selected by those directors entitled under item (2) to select independent legal counsel, one arbitrator selected by the director or officer seeking indemnification, and one arbitrator selected by the 2 arbitrators previously selected;

(4) by a majority vote of a quorum of the members; however, members who are at the time parties to the same or related proceedings, whether as plaintiffs or defendants or in any other capacity, may not vote in making the determination;

(5) by a court under Section 55 of this Act; or

(6) by any other method provided for in any additional right to indemnification permitted under Section 50 of this Act.

Section 45. Allowance of expenses as incurred. Upon written request by a director or officer who is a party to a proceeding, a cooperative may pay or reimburse the director's reasonable expenses as incurred if the director or officer provides the cooperative with all of the following:

(1) a written affirmation of his or her good faith belief that he or she has not breached or failed to perform his or her duties to the cooperative; and

(2) a written undertaking, executed personally or on his or her behalf, to repay the allowance and, if required by the cooperative, to pay reasonable interest on the allowance to the extent that it is ultimately determined under Section 40 of this Act that indemnification under subsection (b) of Section 35 is not required and that indemnification is not ordered by a court under item (2) of subsection (b) of Section 55. The undertaking under this item (2) shall be an unlimited general obligation of the director or officer and may be accepted without reference to his or her ability to repay the allowance. The undertaking may be secured or unsecured.

Section 50. Additional rights to indemnification and allowance of expenses.

(a) Except as provided in subsection (b), Sections 35 and 45 do not preclude any additional right to indemnification or allowance of expenses that a director or officer may have under any of the following:

(1) the articles or bylaws;

(2) a written agreement between the director or officer and the cooperative;

(3) a resolution of the board; or

(4) a resolution, after notice, adopted by a majority vote of members who are entitled to vote.

(b) Regardless of the existence of an additional right under subsection (a), the cooperative may not indemnify a director or officer or permit a director or officer to retain any allowance of expenses unless it is determined by or on behalf of the cooperative that the director or officer did not breach or fail to perform a duty he or she owed to the cooperative which constituted conduct under item (1) of subsection (b) of Section 35. A director or officer who is a party to the same or a related proceeding for which indemnification or an allowance of expenses is sought may not participate in a determination under this subsection.

(c) Sections 30 through 55 do not affect a cooperative's power to pay or reimburse expenses incurred by a director or officer in any of the following circumstances:

(1) as a witness in a proceeding to which he or she is not a party; or

(2) as a plaintiff or petitioner in a proceeding because he or she is or was an employee, agent, director, or officer of the cooperative.

Section 55. Court-ordered indemnification.

(a) Except as provided otherwise by written agreement between the director or officer and the cooperative, a director or officer who is a party to a proceeding may apply for indemnification to the court conducting the proceeding or to another court of competent jurisdiction. Application shall be made for an initial determination by the court under item (5) of Section 40, or for review by the court of an adverse determination under item (1), (2), (3), (4), or (6) of Section 40. After receipt of an application, the court shall give any notice it considers necessary.

(b) The court shall order indemnification if it determines any of the following:

(1) That the director or officer is entitled to indemnification under subsection (a) or (b) of Section 35. If the court also determines that the cooperative unreasonably refused the director's or officer's request for indemnification, the court shall order the cooperative to pay the director's or officer's reasonable expenses incurred to obtain the court-ordered indemnification.

(2) That the director or officer is fairly and reasonably entitled to indemnification in view of all the relevant circumstances, regardless of whether indemnification is required under subsection (b) of Section 35.

Section 60. Indemnification and allowance of expenses of employees and agents. A cooperative may indemnify and allow reasonable expenses of an employee or agent who is not a director or officer to the extent provided by the articles or bylaws, by general or specific action of the board, or by contract.

Section 65. Insurance. A cooperative may purchase and maintain insurance on behalf of an individual who is an employee, agent, director, or officer of the cooperative against liability asserted against and incurred by the individual in his or her capacity as an employee, agent, director, or officer or arising from his or her status as an employee, agent, director, or officer regardless of whether the cooperative is required or authorized to indemnify or allow expenses to the individual against the same liability under Sections 35, 45, 50, and 60 of this Act.

Section 70. Incorporators. Five or more adults, of which one must be a resident, may form a cooperative by signing, acknowledging, and filing articles.

Section 75. Reserved or registered name. Sections 4.05 and 4.10 of the Business Corporation Act of 1983 apply to cooperatives. A cooperative shall comply with those Sections with the word "cooperative" being deemed the equivalent of the words "corporation", "company", "incorporated", or "limited", or an abbreviation of one of those words.

Section 80. Articles.

(a) The articles shall set forth:

(1) the name of the cooperative;

(2) the period of existence, which may be perpetual;

(3) the purposes for which organized. It is sufficient to state that the cooperative may engage in any activity within the purposes for which cooperatives may be organized, and all such activities shall then be deemed within its purposes, subject to express limitations;

(4) whether the cooperative is organized with or without capital stock;

(5) the designation of classes of members, if more than one;

(6) the number and par value of shares of each authorized class of stock. If more than one class is authorized, the designation, preferences, limitations, and relative rights of each class shall also be set forth;

(7) which classes of stock are membership stock;

(8) as to each class of stock, the rate of dividend, or that the rate of dividend may be fixed by the board, or that no dividend will be paid. If the dividend on any class of stock is to be cumulative, that fact shall also be stated;

(9) any reservation of a right to acquire or recall any stock;

(10) the basis of distribution of assets upon liquidation and, if changes in the basis of distribution are to be prohibited, a statement that this provision may not be changed and a reference to the restriction under Section 25;

(11) the complete address, including street number, city, town, or village, county, and zip code of its principal office or the name and complete address, including street number, city, town, or village, county, and zip code of its registered agent;

(12) the name and address of each incorporator; and

(13) the names and addresses of at least 5 incorporators who will act as the temporary board.

(b) It is not necessary to set forth in the articles any of the powers granted by this Act. The articles may include additional provisions, consistent with law, including provisions that are required or permitted to be set forth in the bylaws. Any provision required or permitted in the bylaws has equal force and effect if stated in the articles. Whenever a provision of the articles is inconsistent with a bylaw, the articles control.

(c) The articles shall be filed and recorded as provided in Section 235. The legal existence of a cooperative begins when the Secretary files the articles. Upon the filing of the articles, the Secretary shall issue a certificate of incorporation. The Secretary shall forward within 5 days a duplicate original of the articles to the recorder of deeds of the county of the cooperative's principal office or registered agent for recording.

(d) The certificate of incorporation shall be conclusive evidence, except as against the State, that all conditions precedent to the cooperative's existence have been met.

Section 85. Organization meetings.

(a) After articles have been filed, an organization meeting of the temporary board shall be held at the call of a majority of the incorporators or of a majority of the temporary directors for the adoption of bylaws, election of temporary officers, and transaction of other business.

(b) The first meeting of the members shall be called by the temporary president or a majority of the temporary directors. The meeting shall be held as soon as reasonably possible after the organization meeting of the temporary board, but not later than 6 months after filing the articles. Failure to hold the meeting within the time specified does not affect the validity of organization.

Section 90. Bylaws.

(a) The initial bylaws may be adopted by the temporary board. Thereafter, bylaws may be adopted and amended only by the members unless the members adopt a bylaw that permits the board to make and amend specified bylaws.

(b) A bylaw adopted or amended by the board shall be reported at the next regular member meeting. The bylaw shall be at any time subject to amendment or repeal by the members.

(c) Unless the bylaws provide otherwise, a bylaw may be adopted, amended, or repealed by a majority of the member votes cast at a meeting.

Section 95. Principal office, registered agent, and service of process.

(a) A cooperative shall maintain in the State either its principal office or a registered agent.

(b) The board may establish or change the location of the principal office or name and address of the registered agent by causing a statement in writing to be filed and recorded as an amendment to the articles as provided in Section 235. The statement shall set forth the name of the cooperative and the mailing address and county of its principal office or the name and address, including the county, of the registered agent as established or changed. If a statement under this subsection results from the action of a governmental agency in changing the address of the principal office or registered agent and there is no corresponding change in physical location, these facts shall be contained in the statement.

(c) A registered agent may resign by mailing a written notice to both the Secretary and the cooperative. The resignation becomes effective when the cooperative names a new registered agent or 60 days after the receipt of notice by the Secretary, whichever is sooner.

(d) Service of any process, notice, or demand upon a cooperative may be made as provided in Section 5.25 of the Business Corporation Act of 1983.

Section 100. Limitation on promotional expenses.

Cooperative funds may not be used, nor any stock issued, in payment of any promotion expenses in excess of 5% of the paid-up capital stock or membership fees.

Section 105. Membership.

(a) A cooperative shall be organized on a membership basis with no capital stock or on a membership basis with capital stock.

(b) A cooperative may have one or more classes of members. The designation, qualifications, requirements, method of acceptance, and incidents of membership of each class shall be set forth in the bylaws. Any person, including a partnership, incorporated or unincorporated association, limited liability company, corporation, or body politic, may become a member in accordance with the bylaws.

(c) No member may transfer his or her membership except as permitted in the bylaws.

(d) The bylaws may provide for termination of membership and the conditions and terms thereof.

Section 110. Voting.

(a) Except as permitted in this Section, no person other than a member may vote at any member meeting. A person who has not fully paid for a membership may not vote except as expressly permitted in the bylaws. If the cooperative permits 2 or more persons to hold one membership, the bylaws may provide how such member vote is to be cast.

(b) At any member meeting, each member entitled to vote shall have one vote, except that the articles may permit either or both:

(1) A member association to cast additional votes not exceeding a number equal to its membership.

(2) A cooperative whose members include other associations to base voting in whole or in part on a patronage basis.

(c) Voting by proxy shall not be allowed in any cooperative.

(d) The bylaws may provide for representation of members by delegates apportioned territorially or by other districts or units. The bylaws shall specify either that a delegate may cast only one vote or that a delegate may cast one vote for each member represented by the delegate. The procedures set forth in this Act for voting by members apply to voting by delegates, except as provided in all of the following:

(1) if any delegate who may cast only one vote is permitted to vote on a matter, only delegates may vote on that matter;

(2) if delegates may cast only one vote, in calculating the required proportion of votes on a matter, the number of delegate votes shall be used, but the number of delegates required for a quorum shall be as specified in the bylaws; and

(3) if the bylaws provide for representation of members by delegates who may cast one vote for each member represented by the delegate, in calculating the required proportion of votes on a matter and the number of delegates required for a quorum, the number of members represented by each delegate shall be used.

(e) Members entitled to vote on a motion but absent from the meeting at which the vote is taken may vote only as follows:

(1) if a cooperative provides ballots for the vote on the motion to the members together with notice of the meeting at which the vote will be taken and exact copies of the motion and any resolution to which it pertains, an absent member may vote on the motion by submitting a signed ballot. If a signed ballot has been submitted on a motion under this subsection, neither the motion nor any resolution to which it pertains may be amended; or

(2) if a cooperative makes available ballots for the vote on the motion together with exact copies of the motion and any resolution to which it pertains to any member entitled to vote on the motion, but does not comply fully with the requirements of item (1), an absent member may vote on the motion by submitting a signed ballot; however, the motion and any resolution to which it pertains may be amended at the meeting, and, if the motion or resolution is amended, the ballot is void and may not be counted on any motion to amend or adopt as amended the motion or resolution.

(f) The bylaws may provide for voting on the election or removal of directors by signed ballots. Signed ballots may not be used for this purpose unless the bylaws authorize and prescribe the procedure for their use.

(g) The bylaws may set forth provisions, not inconsistent with this Act, relating to the methods and procedures for voting.

Section 115. Member meetings.

(a) Unless the bylaws provide otherwise, member meetings shall be held at the principal office or such other place as the board may determine.

(b) An annual member meeting shall be held at the time fixed in or pursuant to the bylaws. In the absence of a bylaw provision, the annual meeting shall be held within 6 months after the close of the fiscal year at the call of the president or board.

(c) Special member meetings may be called by the president, board, or members having one-fifth of the votes entitled to be cast at such meeting.

(d) Written notice, stating the place, day, and hour and, in case of a special member meeting, the purposes for which the meeting is called shall be given not less than 7 nor more than 30 days before the meeting at the direction of the person calling the meeting. Notice need be given only to members entitled to vote. Notice shall be given to members having limited voting rights if they have or may have the right to vote at the meeting.

(e) At any meeting when members are to be represented by delegates, notice to such members may be given by notifying such delegates and their alternates. Notice may consist of a notice to all members or may be in the form of an announcement at the meeting at which such delegates or alternates were elected.

Section 120. Quorum.

(a) A quorum at a member meeting shall be 10% of the first 100 members plus 5% of additional members.

(b) Unless the bylaws fix a larger number of members to constitute a quorum and except as provided in the bylaws in accordance with subsection (d) of Section 110, a quorum shall never be more than 50 members nor less than 5 members or a majority of all members, whichever is smaller. Members represented by signed ballots may be counted in computing a quorum only on those motions for which the signed ballots were submitted.

Section 125. Notice to members, stockholders, or other persons; waiver.

(a) Whenever notice is required by this Act to be given to any person, the notice shall be given either personally or by mail. If mailed, the notice is given when it or a newsletter or other publication of a cooperative or of an affiliated organization that includes the notice is deposited in the United States mail, with postage prepaid thereon, addressed to such person at his or her address as it appears on the records of the cooperative.

(b) A signed waiver is equivalent to personal notice to the person signing. The waiver may be signed at any time.

Section 130. Stock.

(a) A cooperative may be organized with or without capital stock.

(b) A cooperative organized with capital stock may issue the amount of stock stated in its articles. The stock may be divided into 2 or more classes with such designations, preferences, limitations, and relative rights as shall be stated in the articles, except that:

(1) stock as such has no voting power, except as stated in Section 210;

(2) stock without par value shall not be authorized or issued; and

(3) the rate of dividends upon stock shall not exceed 8% of its par value for any year, but dividends may be cumulative.

(c) The articles may require that members own one or more shares of membership stock. The stock shall be issued or transferred only to a person eligible to become a member and only when the person satisfies other requisites for membership. Unless restricted by the articles, stock other than membership stock may be issued or transferred to any person.

(d) Each certificate for stock shall bear the manual or facsimile signature of a principal officer and shall state:

(1) the name of the cooperative, the number, par value, and class of the shares represented by the certificate, and whether the stock is membership stock;

(2) any restrictions on the issuance or transfer of such stock, including those provided in subsection (c); and

(3) if more than one class of stock is authorized, the designation of the several classes, their respective preferences, limitations, and relative rights.

In lieu of the full statement, this information may be given in summary form or the certificate may state that the cooperative will, upon request, furnish the information required by this subsection.

(e) No stock certificate may be issued except upon payment of the par value of the stock it represents. Payment for stock may be in cash or other property. If in other property, the value thereof shall be determined by the board, and the determination, if made in good faith, shall be conclusive.

(f) Unless the articles provide otherwise, a cooperative may acquire, recall, exchange, redeem, and reissue its own stock. Provisions in the articles and on the stock certificate may reserve to the cooperative a prior right to acquire any stock offered for sale or a right to recall the stock of any stockholder, or both. The consideration paid for stock recalled by the cooperative shall be its par value and accrued unpaid dividends, provided that if the book value of such stock is less than the par value, the consideration shall be the book value. The cooperative may set off obligations of the stockholder to it. If the remaining assets would be less than the aggregate amount payable to creditors and persons holding stock with preferential rights upon liquidation, no stock shall be acquired, recalled, exchanged, or redeemed for a consideration other than stock or certificates of equity interest of equal or subordinate rank.

(g) When stock is acquired, recalled, exchanged, or redeemed by the cooperative, the stock is restored to the status of authorized but unissued stock.

(h) Stockholders as such have no preemptive right to purchase additional stock.

Section 135. Subscriptions and liability for stock.

(a) A subscription for stock of a cooperative is irrevocable for 6 months unless otherwise provided by the subscription agreement or unless all subscribers consent to the revocation.

(b) Except as provided in Section 170, a stockholder or subscriber is under no obligation to any person with respect to the stockholder's or subscriber's stock or subscription other than the obligation to pay to the cooperative the full consideration for which the stock was to be issued.

Section 140. Missing securities or records.

(a) When a security issued by a cooperative is missing, the cooperative shall issue a duplicate security if the owner so requests and furnishes an indemnity acceptable to the cooperative.

(b) When records showing ownership of securities of apportionment of equity interest in the assets are missing and the information therein contained is necessary to a proposed redemption of the interest, the cooperative may give notice and redeem as follows:

(1) the cooperative shall set aside an amount equal to the value of the interests to be redeemed;

(2) the cooperative shall give notice of the redemption to all owners of interests of which the cooperative has knowledge; and

(3) if there are interests, the ownership of which is unknown to the cooperative, it shall publish notice of the redemption at least once a month for 4 months in a publication circulated among members of cooperatives in the area.

Section 145. Directors; number, election, removal, and vacancies.

(a) All powers of the cooperative shall be exercised by or under authority of, and the business and affairs of a cooperative shall be managed under the direction of, the board, except as otherwise provided in this Act. A director shall be a member or a representative of a member who is other than a natural person. The bylaws shall prescribe any other qualifications for directors.

(b) The number of directors shall not be less than 5, provided that, in a cooperative with less than 50 members, the number of directors shall not be less than 3. Subject to such limitation, the number shall be fixed in the articles, or if the articles so provide, in the bylaws.

(c) The directors constituting the temporary board, named in the articles, shall hold office until the first member meeting. At that meeting and thereafter, directors shall be elected by the members at a member meeting in the manner and for the terms provided in the bylaws. If the bylaws provide that directors be from specified districts, the articles may limit voting for any director to members from within the district from which the director is to be elected. Unless the bylaws provide otherwise, a director's term of office shall be one year. Each director shall hold office for the term for which elected and until a successor takes office. The bylaws may permit selection of alternates to take the place of directors absent at a meeting of the board. Whenever any change is made in the board, the cooperative shall file within 20 days with the Secretary a report showing the names and addresses of all directors.

(d) Unless the bylaws provide otherwise, a director may be removed upon a majority vote of all members.

(e) Unless the bylaws provide otherwise, any vacancy existing in the board, including any vacancy created by an increase in the number of directors, may be filled until the next annual meeting by appointment by a majority vote of the directors then in office.

Section 150. Directors; meetings, quorum, and waiver of notice.

(a) Meetings of the board shall be held at such place and upon such notice as is prescribed in or pursuant to the bylaws.

(b) Unless a greater number is required in the bylaws, a majority of the directors in office shall constitute a quorum for transaction of business. Unless a greater number is required in the bylaws, an act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the board.

(c) A signed waiver of notice of a board meeting is equivalent to personal notice to the person so signing. The waiver may be signed at any time. Attendance at a meeting is a waiver of notice of such meeting, except when a director attends the meeting and objects at the meeting to the transaction of business because the meeting was not lawfully convened.

(d) Unless the bylaws provide otherwise, the purposes of any meeting of the board need not be specified in the notice or waiver of notice of the meeting.

(e) Unless the articles or bylaws provide otherwise, the board may permit any or all directors to participate in a regular or special meeting or in a committee meeting, including an executive committee meeting, of the board by, or to conduct the meeting through the use of, any means of communication by which any of the following occurs:

(1) all participating directors may simultaneously hear each other during the meeting; or

(2) all communication during the meeting is immediately transmitted to each participating director, and each participating director is able to immediately send messages to all other participating directors.

(f) If a meeting will be conducted through the use of any means described in subsection (e), all participating directors shall be informed that a meeting is taking place at which official business may be transacted. A director participating in a meeting by any means described in subsection (e) is deemed to be present in person at the meeting. If requested by a director, minutes of the meeting shall be prepared and distributed to each director.

Section 155. Executive committee.

(a) If the bylaws so provide, the board may elect an executive committee to consist of 3 or more directors. When the board is not in session, the committee shall have all powers of the board except in respect to:

(1) powers reserved by the board to itself;

(2) apportionment or distribution of proceeds;

(3) election of officers;

(4) filling of vacancies in the board; and

(5) amendments to the bylaws.

(b) The board may elect other directors as alternates for members of the executive committee.

Section 160. Officers.

(a) Unless the articles of incorporation provide otherwise, the principal officers of a cooperative are a president, one or more vice presidents as prescribed in the bylaws, a secretary, and a treasurer. They shall be elected annually by the board at the time and in such manner as the bylaws provide. Upon original election and whenever any change is made in the officers, the cooperative shall file with the Secretary, within 20 days, a report showing the name and address of all officers. Each principal officer except the secretary and the treasurer must be a director of the cooperative. The offices of secretary and treasurer may be combined in one person.

(b) Any other officer may be chosen by the board or as provided in the bylaws.

(c) All officers shall have such authority and perform such duties as the bylaws provide or as the board may determine not inconsistent with the bylaws. An officer may be removed by the board whenever in its judgment the best interests of the cooperative will be served thereby. Election or appointment does not of itself create contract rights.

Section 165. Limited liability of directors and officers.

(a) Except as provided in subsections (b) and (c), a director or officer is not liable to the cooperative, its members, stockholders, or creditors, or any person asserting rights on behalf of the cooperative, its members, stockholders, or creditors, or any other person for damages, settlements, fees, fines, penalties, or other monetary liabilities arising from a breach of, or failure to perform, any duty resulting solely from his or her status as a director or officer, unless the person asserting liability proves that the breach or failure to perform constitutes any of the following:

(1) A willful failure to deal fairly with the cooperative, its members, or stockholders in connection with a matter in which the director or officer has a material conflict of interest.

(2) A violation of criminal law, unless the director or officer had reasonable cause to believe his or her conduct was lawful or no reasonable cause to believe his or her conduct was unlawful.

(3) A transaction from which the director or officer derived an improper personal profit.

(4) Willful misconduct.

(b) Except as provided in subsection (c), this Section does not apply to any of the following:

(1) A civil or criminal proceeding brought by or on behalf of any governmental unit, authority, or agency.

(2) A proceeding brought by any person for a violation of State or federal law where the proceeding is brought pursuant to an express private right of action created by State or federal statute.

(3) The liability of a director under Section 170.

Items (1) and (2) of this subsection do not apply to a proceeding brought by a governmental unit, authority, or agency in its capacity as a private party or contractor.

Section 170. Liability of directors and members.

(a) Directors who negligently or in bad faith vote for any distribution of assets contrary to this Act or the articles are jointly and severally liable to the cooperative for the value of assets distributed in excess of the amount that could have been distributed without violating this Act or the articles. Section 165 does not apply to the liability of directors under this subsection.

(b) Members, stockholders, and patrons of a cooperative are neither obligated to pay, nor liable upon, any cooperative obligation, except that stockholders are liable to an amount equal to the par value of their shares for debts due an employee for not more than 6 months' service to the cooperative.

Section 175. Cooperative contracts.

(a) If otherwise lawful, contracts for any of the following purposes, whether written or contained in the bylaws, are valid when made between an association and any member in which the member agrees to:

(1) sell, market, or deliver all or any specified part of products produced or to be produced either by the member or under the member's control to or through the association or any facilities furnished by it;

(2) authorize the association or any facilities furnished by it to act for the member in any manner with respect to all or any specified part of such products and any services to be furnished by the member;

(3) buy or procure all or a specified part of goods or services from or through the association or any facilities furnished by it; or

(4) authorize the association or any facilities furnished by it to act for the member in any manner in the procurement of goods or services.

(b) The term of the contracts may not exceed 5 years, but they may be made self-renewing for periods not exceeding 5 years each, subject to the right of either party to terminate at the end of the original and each renewal term upon giving written notice of such termination during a period specified in the contract. The period shall be of at least 30 days' duration during the last year of each term. The association shall furnish to each member-maker a completed original or copy of the member-maker's contract and, on the member-maker's request at any time, promptly furnish the member-maker information as to the member-maker's rights of termination. The 5-year limitation herein contained does not apply to contracts for the furnishing of electric energy or service involving an investment by the vendor in fixed assets to be amortized over a longer term.

(c) A contract may require liquidated damages to be paid by the member in the event of a breach of the contract. Liquidated damages may be either a percentage of the value of the products, goods, or services or a specific sum, but neither may be more than 30% of the value of the products, goods, or services subject to the breach. When a specific sum is provided as liquidated damages and the sum exceeds 30% of the value of the products, goods, or services that are the subject of the breach, the contract shall be construed as providing an amount equal to 30%.

(d) If any contract authorized by item (1) or (2) of subsection (a) contains an assignment to the association of any part or all of funds due or to become due the member during the life of the contract for a product produced or to be produced by the member or for a service performed or to be performed in producing a product, a person who accepts or receives the product from the member is bound by the assignment after receiving written notice from the association or the member of the amount and duration of the assignment. However, as to any seasonal crop, if no funds are paid or become payable by a person under such an assignment for a period of 2 consecutive years during the life of the contract, the assignment thereafter shall not be binding upon any person who receives or accepts the product from the member until the assignment is reaffirmed by the member in writing and written notice thereof is given by the association or the member. A reaffirmation shall continue to be effective during the life of the contract until another lapse of 2 consecutive years shall occur.

Section 180. Relief against breach or threatened breach.

(a) In the event of a breach or threatened breach of a contract authorized by Section 175 by a member, the association shall be entitled to an injunction to prevent the breach or any further breach thereof and to a decree of specific performance. Upon filing of a verified complaint showing a breach or threatened breach and upon filing a sufficient bond, the association shall be entitled to a temporary restraining order against the member.

(b) A person, with actual or constructive notice that a contract exists, who induces or attempts to induce any member to breach or repudiate the member's contract with the association or who in any manner aids a breach of the contract is liable to the aggrieved party for damages caused by such interference. The association is also entitled to an injunction to prevent any interference or further interference with the contract.

Section 185. Apportionment and distribution of proceeds.

(a) At least once annually the directors shall determine and distribute net proceeds as provided in this Section.

(b) There shall be deducted from the total proceeds the following:

(1) all operating expenses and costs;

(2) the cost of supplies, commodities, equipment, and other property or services procured or sold for patrons;

(3) the cost of services performed for patrons;

(4) all taxes and all other expenses; and

(5) reasonable and necessary reserves for depreciation, depletion, and obsolescence of physical property, doubtful accounts, and other valuation reserves, all of which shall be established in accordance with usual and customary accounting practices.

(c) The remainder of the total proceeds are net proceeds and shall be distributed and paid as follows:

(1) An amount not to exceed 5% thereof may be set aside as an educational fund to be used in teaching or promoting cooperative organization or principles. The funds shall for all purposes except the computation of net proceeds be deemed an expense of operation of the cooperative.

(2) A share of the net proceeds may be set aside for or paid to officers or employees, or both. The amount shall for all purposes except the computation of net proceeds be deemed an expense of operation of the cooperative.

(3) In a cooperative organized with capital stock such dividend may be paid upon capital stock as is authorized by the articles. No dividend may be paid if the capital is impaired or if payment of the dividend would result in an impairment of capital.

(d) Unless the articles or bylaws otherwise expressly provide, none of the remainder of the net proceeds shall constitute income of the cooperative, but all thereof shall be distributed and paid to patrons, whether members or not, as follows:

(1) Reasonable reserves for necessary purposes may be created, which shall be credited to patrons in accordance with the ratio which their patronage bears to total patronage.

(2) The remainder of the net proceeds shall be distributed and paid to patrons in accordance with the ratio that their patronage bears to total patronage.

(3) There shall be no distinction between the persons entitled thereto, but the reserves and distributions may be based upon business done with particular departments or in particular commodities, supplies, or services, or upon classification of business according to the type or nature thereof.

(e) If the articles or bylaws so provide:

(1) Any of the net proceeds may be credited to allocated or unallocated surplus or reserves of the cooperative.

(2) None of the remainder shall constitute income to the cooperative, but all of it shall be distributed and paid in accordance with the ratio that individual patronage bears to total patronage, either to member patrons only, to member patrons only with one or more classes receiving a lower proportion than others, or to all patrons with nonmembers receiving a lower proportion than members, as the bylaws provide. There shall be no other distinction between members and nonmembers, but distribution may be based on business done with particular departments, or in particular commodities, supplies, or services, or upon classification of business according to type or nature.

(f) The distribution and payment of net proceeds under subsection (d) or (e) may be in cash, credits, stock, certificates of interest, revolving fund certificates, letters of advice, or other certificates or securities of the cooperative or of other associations, limited liability companies, or corporations, in other property, or in any combination thereof.

(g) All or any part of the net proceeds may be applied to losses incurred in prior years, and the bylaws may also include any reasonable provisions for the apportionment of losses.

Section 190. Books and records; penalty for refusal to produce.

(a) A cooperative shall keep correct and complete books and records of account and shall also keep minutes of the proceedings of meetings of its members, board, and executive committee. The cooperative shall keep at its principal office records of the names and addresses of all members and stockholders with the amount of stock held by each and of ownership of equity interests. At any reasonable time, any member or stockholder, or his or her agent or attorney, upon written notice stating the purposes thereof, delivered or sent to the cooperative at least one week in advance, may examine for a proper purpose any books or records pertinent to the purpose specified in the notice. The board may deny a request to examine books and records if the board determines that the purpose is not directly related to the business or affairs of the cooperative and is contrary to the best interests of the cooperative.

(b) In any proceeding or upon petition for such purpose, any court of record may, upon notice and after hearing at which proper cause is shown and upon suitable terms, order any of the cooperative's books or records and any other pertinent documents in its possession, or duly authenticated copies thereof, to be brought within this State. The documents shall be kept at such place and for such time and purposes as the order designates. A cooperative failing to comply with the order is subject to dissolution and its directors and officers are liable for contempt of court.

(c) Subject to the time, notice, and purpose requirements of subsection (a), a member or stockholder of a cooperative may examine the books and records of any other cooperative or other person that is a wholly owned subsidiary of the cooperative or in which the cooperative owns a controlling interest.

Section 195. Annual reports; filing.

(a) A cooperative shall file an annual report signed by a principal officer or the general manager setting forth:

(1) its name and complete address;

(2) the names and addresses of its directors and principal officers;

(3) a statement, by class and par value, of the amount of stock which it has authority to issue, and the amount issued; and

(4) a statement as to the general type of business engaged in during the 12 months preceding the date of the report.

(b) The annual report shall be made on forms furnished by the Secretary, and the information therein contained shall be given as of the date of the execution of the report. The Secretary shall forward by first class mail report forms to each cooperative in good standing not later than 60 days prior to the date on which the cooperative is required to file an annual report under this Act.

(c) The annual report shall be delivered to the Secretary in each year following the year in which the cooperative's articles are filed by the Secretary, during the calendar year quarter in which the anniversary of the filing occurs. If the report does not conform to requirements, it shall be returned to the cooperative for necessary corrections. The penalties for failure to file the report shall not apply if it is corrected and returned within 30 days after receipt thereof.

(d) Any report not filed as required by subsection (c) may be filed only upon payment to the Secretary of $25 or, if the report is filed in paper format, upon payment of such larger fee as the Secretary prescribes by rule.

(e) If the report is not filed within one year from the first day of the quarter calendar year in which the report is required under subsection (c) to be delivered, the cooperative is not in good standing. Within the next 6 months the Secretary shall mail to the cooperative a notice that it is no longer in good standing. If a cooperative has been out of good standing for more than 3 consecutive years, the Secretary shall provide proper notice. Until restored to good standing, the Secretary shall not accept for filing any document respecting the cooperative except those incident to its dissolution.

(f) A cooperative may be restored to good standing by delivering to the Secretary a current annual report and by paying the $25 late filing fee plus $15 for each calendar year or part thereof during which it was not in good standing, not exceeding a total of $175. The Secretary, by rule, may specify a larger fee for the filing of an annual report in paper format.

Section 200. Income or franchise tax returns. A cooperative association, society, company, corporation, exchange, or union organized under the provisions of this Act shall not be obliged to file a State income or franchise tax return unless the association, society, company, corporation, exchange, or union is at the time subject to a State income or franchise tax.

Section 205. Amendments to articles.

(a) At any member meeting a cooperative may adopt any amendment to its articles that is lawful under Section 80 if a statement of the nature of the amendment was contained in the notice of the meeting.

(b) Unless stockholders are entitled by Section 210 to vote on an amendment, an amendment is adopted when approved by two-thirds of the member votes cast thereon.

Section 210. Stockholder voting on amendments to articles.

(a) Whether or not permitted to vote by the articles, a holder of stock other than membership stock who is affected by a proposed amendment to articles shall be entitled to cast one vote on the amendment regardless of the dollar amount of stock, the number of shares, or the number of affected classes of stock he or she holds. A member holding stock affected by a proposed amendment may vote both as a member and as an affected stockholder.

(b) For purposes of this Section, a holder of stock is affected as to any class of stock owned by the holder only if an amendment would expressly:

(1) decrease the dividends to which that class may be entitled or change the method by which the dividend rate on that class is fixed;

(2) restrict rights to transfer that class;

(3) give to another existing or any new class of stock or equity interest not previously entitled thereto any preference as to dividends or upon dissolution that is the same or higher than preferences of that class;

(4) change the par value of shares of that class or of any other class having the same or higher preferences as to dividends or upon dissolution;

(5) increase the number of authorized shares of any class having a higher preference as to dividends or upon dissolution; or

(6) require or permit an exchange of shares of any class with lower preferences as to dividends or upon dissolution for shares of that class or any other class with the same or higher preferences.

(c) If stockholders are entitled to vote on an amendment, the amendment is adopted only if all of the following conditions are met:

(1) Notice of the meeting, an exact copy of the proposed amendment, and a ballot thereon have been sent to each member and each affected stockholder.

(2) Two-thirds of the member votes cast thereon approve.

(3) Two-thirds of the votes of affected stockholders cast thereon approve.

Section 215. Filing and recording of amendments.

(a) Amendments to articles shall be signed by the president or a vice president and the secretary or an assistant secretary, shall be sealed with the cooperative's seal, and shall set forth:

(1) the name of the cooperative and the county of the cooperative's principal office or of its registered agent;

(2) the amendment and date of adoption;

(3) the number of members;

(4) the number of member votes cast for and against the amendment; and

(5) if affected stockholders have the right to vote under Section 210, the number of votes of affected stockholders cast for and against the amendment.

(b) The amendment shall be filed and recorded as provided in Section 235. The amendment becomes effective upon filing and the Secretary may then issue a certificate of amendment.

(c) No amendment may affect any existing cause of action or proceeding to which the cooperative is a party or existing rights of persons other than members or stockholders.

(d) No action may be maintained to invalidate any amendment because of the manner of its adoption unless commenced within 2 years after the date of filing.

Section 220. Voluntary dissolution.

(a) At any member meeting, whether or not a quorum is present, a cooperative may dissolve if:

(1) notice that a resolution for dissolution will be considered and acted upon has been included in the notice of meeting; and

(2) the resolution is approved by three-fourths of the member votes cast thereon.

The articles may permit stockholders to vote on the resolution for dissolution.

(b) When the resolution is adopted, either a committee designated by the resolution or the board shall liquidate all assets and pay the net proceeds of the liquidation available for distribution to all persons entitled to them by law, the articles, and the bylaws.

(c) Any net proceeds of liquidation not subject to valid claims or owed to persons under subsection (b) shall be distributed to one or more organizations that are either:

(1) cooperatives with articles containing limitations on distribution of assets or payment of proceeds of liquidation equivalent to limitations in the articles of the liquidating cooperative; or

(2) organizations exempt from federal income taxation under 26 U.S.C. 501(c)(3).

(d) Articles of dissolution shall be signed by a majority of directors or of committee members and shall be sealed with the cooperative's seal. They shall set forth:

(1) the name of the cooperative and the county of the cooperative's principal office or of its registered agent;

(2) the name and address of each director or committee member;

(3) the date of adoption of the resolution of dissolution; and

(4) a statement that all liquidation activities have been completed in compliance with law, the articles, and the bylaws.

(e) The articles of dissolution shall be filed and recorded as provided in Section 235. Upon the filing of the articles the existence of the cooperative ceases.

(f) Within 7 years after the date of filing under subsection (e), an action may be brought against any person to whom proceeds were distributed under subsection (b) in violation of law, the articles, or the bylaws to recover the proceeds by any person entitled to the funds by law, the articles, or the bylaws in the circuit court of the county where the last principal office of the cooperative was located.

Section 225. Recording change of principal office or registered agent.

(a) If a document submitted to the Secretary for filing under this Act changes the county of the principal office or of the registered agent:

(1) an original of the document or a duplicate original endorsed by the Secretary shall be recorded in each county;

(2) the document shall specify the new county when:

(A) the county of the principal office or registered agent is changed; or

(B) the document makes a change from a principal office in one county to a registered agent's address in another county or vice versa.

(b) A certificate of the Secretary listing the type and date of filing of recordable documents previously filed by the cooperative shall be recorded in the county of the new principal office or of the registered agent.

Section 230. Procedure on filing and recording of documents.

(a) If a document is required to be filed and recorded under this Act, all of the following shall be included when the document is submitted for filing:

(1) Separate originals of the document for the Secretary and for the recorder of deeds of each county in which the document is required to be recorded.

(2) A check payable to the Secretary in the amount of the filing fee prescribed under Section 235.

(b) Unless the document does not conform to law, the Secretary shall endorse on each original "Filed" and the date of filing and shall file one original. A recorder of deeds receiving a check and document forwarded shall record the document. If the document is not articles, the recorder of deeds shall note on the margin of the record of the articles the volume and page where the document is recorded.

(c) Each week the Secretary shall forward to each recorder of deeds a listing of all documents received during the preceding week for filing and recording as required under this Act. For each document, the listing shall specify the type of document, the name of the cooperative, the name of the county of the cooperative's principal office or registered agent, and the date of filing.

(d) A document required to be filed and recorded under this Act is effective on filing with the Secretary. An error or omission in recording the document or a certificate with a recorder of deeds does not affect its effectiveness.

Section 235. Fees for filing.

(a) Except as provided under subsection (b), the Secretary shall charge and collect for:

(1) Filing articles for a new cooperative, $1.25 for each $1,000 of authorized stock, but in no case less than $25. A cooperative organized without capital stock shall pay a fee of $25.

(2) Filing an amendment to or restatement of the articles or articles of consolidation or division, $10, plus $1.25 for each $1,000 of authorized stock not authorized at the time of the amendment, restatement, consolidation, or division, except that no fee may be collected for any of the following:

(A) an amendment showing only a change of address resulting from the action of a governmental agency if there is no corresponding change in physical location and if 2 copies of the notice of the action are submitted to the Secretary; or

(B) an amendment filed to reflect only a change in the name of a registered agent.

(3) Filing articles or decree of dissolution, $5.

(4) Filing an annual report of a cooperative, $15.

(5) Filing a report of names and addresses of officers or directors, $3.

(b) The Secretary, by rule, may specify a larger fee for filing documents described in subsection (c) in paper format.

(c) No document may be filed or recorded until all fees therefor have been paid.

Section 240. Member or stockholder derivative actions.

(a) No action may be instituted or maintained in the right of any association by a member or stockholder unless the member or stockholder:

(1) alleges in the complaint that the member or stockholder was a member or registered stockholder when any part of the transaction of which the member or stockholder complains took place or that the member's or stockholder's stock thereafter devolved upon the member or stockholder by operation of law from a stockholder at such time;

(2) alleges in the complaint with particularity his or her efforts to secure from the board the action he or she desires and further alleges that he or she has either informed the association or board in writing of the ultimate facts of each cause of action against each director or that he or she has delivered to the association or board a copy of the complaint no fewer than 60 days prior to filing the complaint; and

(3) files the complaint in such action within 20 days after the action is commenced.

(b) The action shall not be dismissed or compromised without the approval of the court.

(c) If anything is recovered or obtained as the result of the action, whether by means of a compromise and settlement or by a judgment, the court may, out of the proceeds of the action, award the plaintiff the reasonable expenses of maintaining the action, including reasonable attorney fees, and may direct the plaintiff to account to the association for the remainder of such proceeds.

(d) In any action brought in the right of an association by less than 3% of the members or by holders of less than 3% of any class of stock outstanding, the defendants may require the plaintiff to give security for the reasonable expenses of defending such action, including attorney fees. The amount of such security may thereafter be increased or decreased in the discretion of the court upon showing that the security provided is or may be inadequate or is excessive.

Section 245. Disposition of assets; right to secure debts.

(a) Except as authorized by members, the board may not dispose of all or substantially all of a cooperative's fixed assets. At a meeting, the members may authorize the disposition of all or substantially all of a cooperative's fixed assets if:

(1) notice that the disposition will be considered at the meeting has been given to all persons entitled to vote upon the issue; and

(2) the disposition is approved by two-thirds of those entitled to vote upon the issue at the meeting.

(b) Unless the bylaws provide otherwise, the board may secure payment of a cooperative's debts by mortgaging the cooperative's rights, privileges, authority and franchises, revenues, and other property.

Section 250. Division of a cooperative.

(a) Any cooperative may divide itself into 2 or more cooperatives under this Act. A written plan of division shall be prepared by the board or by a committee selected by the board for that purpose. The plan shall set forth all the terms of the division and the proposed effect thereof on all members and stockholders of the cooperative. The plan shall also contain the articles of each new cooperative being formed and any amendments to the articles of the remaining cooperative.

(b) The members and the stockholders entitled to vote thereon shall approve the plan in the manner provided in Section 210 for amendments to articles.

(c) Articles of division shall set forth the approved plan and other information required by Section 215 and shall be filed and recorded as an amendment to the articles. Each part of the plan that contains the articles of a new cooperative shall be separately filed and recorded as articles for the new cooperative.

Section 255. Admission of foreign cooperatives. A foreign cooperative is entitled to all rights, exemptions, and privileges of a cooperative organized under this Act if it is authorized to do business in this State. A foreign cooperative may qualify for admission under this Act whether or not formed for profit and whether or not formed with stock. A foreign cooperative may be required to furnish the Secretary with such facts as the Secretary deems necessary to establish the foreign cooperative's rights under this Act.

Section 260. Worker cooperative.

(a) As used in this Section:

"Patronage" means the amount of work performed as a member of a worker cooperative.

"Worker cooperative" means a cooperative organized under the provisions of this Act and in which membership is restricted to individuals who work at the cooperative.

(b) All members of a worker cooperative must work for the cooperative on a regular full-time or part-time basis.

(c) A worker cooperative shall issue a class of voting stock designated as membership shares. The shares shall be issued only to a person eligible to become a member and only when the person satisfies other requisites for membership. A member may own only one membership share. Membership shares shall be issued for a fee according to the rules set forth in the bylaws or as determined by the board. A worker cooperative may allow for payment of the fee by payroll deduction, installments, or similar methods. A membership share may be issued to a person upon acceptance for membership regardless of whether the membership fee is fully paid.

(d) A worker cooperative may establish through its articles or bylaws a system of allocated equity accounts to reflect the book value and redemption price of membership shares, written notices of allocation, and any other credit reflected in the bylaws. The articles or bylaws may provide for the worker cooperative to pay or credit interest on the balance in each member's allocated equity account.

A worker cooperative may establish through its articles or bylaws a collective reserve account to reflect retained earnings and other cooperative equity. The articles or bylaws may authorize the board to assign of a portion of annual earnings to the collective reserve account. Earnings assigned to the collective account may be used for any and all corporate purposes as determined by the board.

A worker cooperative may designate a portion of its collective reserve account as an indivisible reserve account that shall, in a manner determined by the bylaws or board, be used as capital for the cooperative or distributed to one or more organizations that are either:

(1) worker cooperatives incorporated under this Act; or

(2) organizations exempt from federal income taxation under 26 U.S.C. 501(c)(3) and in support of the worker cooperative movement.

Section 265. Residential cooperatives exempted. This Act does not apply to residential cooperatives.

(805 ILCS 310/Act rep.)

Section 900. The Co-operative Act is repealed.