HB3577sam001 102ND GENERAL ASSEMBLY

Sen. Laura M. Murphy

Filed: 5/11/2021

10200HB3577sam001 LRB102 13245 KTG 25971 a

AMENDMENT TO HOUSE BILL 3577

AMENDMENT NO. ______. Amend House Bill 3577 on page 1, by replacing lines 5 and 6 with the following:

"is amended by changing Sections 5, 10, 15, 20, 25, 30, 35, 40, 45, 50, 55, 60, 65, and 70 and adding Sections 12, 16, 21, 22, 36, 37, 51, 52, 61, 62, and 63 as follows:

(805 ILCS 317/5)

Sec. 5. Findings. The General Assembly finds and declares all of the following:

(1) the cooperative form of doing business provides an efficient and effective method for persons to transact business, offer, and obtain goods and services, and it is in the best interests of the people of the State of Illinois to promote, foster, and encourage the utilization of cooperatives in appropriate instances;

(2) the Co-operative Act and Agricultural Co-Operative Act have provided for the promotion, fostering, and encouragement of consumer and producer cooperatives; have made distribution of agricultural products between producer and consumer more efficient; have stabilized the marketing of agricultural products; and have provided for the organization and incorporation of cooperative corporations, all as contemplated at the time of the original adoption;

(3) it is in the best interests of the people of the State of Illinois to preserve the provisions of the Co-operative Act as it has been in force and interpreted in the State and to continue the provisions thereof for agriculture, but also to expand the provisions of Illinois cooperative law to provide greater direction and flexibility in its provisions and to enable all types of industries and enterprises to avail themselves of the benefits of the worker cooperative form of doing business in accordance with the provisions of this Act;

(4) a worker cooperative has the purpose of creating and maintaining sustainable jobs and generating wealth in order to improve the quality of life and economic security of its worker-members, dignify human work, allow workers' democratic self-management, and promote community and local development in this State;

(5) the purpose of this Act is to create a new business entity better suited for worker cooperatives and multi-stakeholder cooperatives, and to create more visibility and financing options for cooperatives. This Act is intended to provide a definition of worker cooperative for purposes of this Act, and not for purposes of other laws.

(Source: P.A. 101-292, eff. 1-1-20.)

(805 ILCS 317/10)

Sec. 10. Definitions. In this Act:

"Candidate" means a worker who is being considered for membership in a worker cooperative, as defined in the cooperative association's articles or cooperative agreement bylaws.

"Collective worker cooperative" means a limited worker cooperative association that only has one class of members consisting of worker-members who manage all of the affairs of the limited cooperative association. If an association's articles of organization or cooperative agreement provides that it is a collective worker cooperative, then all of the members shall be deemed managers.

"Community investor" means a person who is not a member and who holds a share or other proprietary interest in a limited cooperative association.

"Distribution" means a transfer of money or other property from a limited worker cooperative association to a member because of the member's financial rights or to a transferee of a member's financial rights.

"Investor member" means a person who holds a financial interest in a limited worker cooperative association. An investor member is either not required or not permitted by the articles or cooperative agreement to conduct patronage with the association in the member's capacity as an investor member in order to receive or retain the member's interest.

"Limited worker cooperative association" or "association" means an association organized under this Act.

"Member" means any person who, pursuant to a specific provision of a limited worker cooperative association's articles or cooperative agreement bylaws, has the right to vote for the election of a manager director or managing member directors, or possesses any proprietary interests in the limited worker cooperative association.

"Multi-stakeholder cooperative" means a cooperative organized under this Act that has different classes of members whose rights and proprietary interests shall be determined by the articles or bylaws. At least 51% of the members shall be worker-members or candidates. A multi-stakeholder cooperative is a worker cooperative for purposes of this Act.

"Patron member" means a member of a limited worker cooperative association that is required or permitted by the association's articles or cooperative agreement to conduct patronage with an association in the member's capacity as a patron member.

"Patronage" means business transactions between a limited worker cooperative association and a person that entitles the person to receive financial rights based on the value or quantity of business done between the association and the person. The patronage of worker-members may be measured by work performed, including, but not limited to, wages earned, number of hours worked, number of jobs created, or some combination of these measures.

"Worker cooperative" means a limited worker cooperative association formed under this Act where all patron members of an association that includes a class of worker-members who are natural persons whose patronage consists of labor contributed to or other work performed for the limited worker cooperative association. Election to be organized as a worker cooperative does not create a presumption that workers are employees of the corporation for any purposes. A worker cooperative formed under this Act may include additional classes of members whose rights and proprietary interests shall be determined by the articles or bylaws. At least 51% of the workers shall be worker-members or candidates.

"Worker" means a natural person contributing labor or services to a worker cooperative.

"Worker-member" means a member of a worker cooperative who is a natural person who is a member of an association formed under this Act whose patronage consists of labor contributed to or other work performed for the limited and also a patron of a worker cooperative association.

"Written notice of allocation" is defined as in 26 U.S.C. 1388 or its successor.

(Source: P.A. 101-292, eff. 1-1-20.)"; and

on page 1, by inserting immediately below line 19 the following:

"(805 ILCS 317/15)

Sec. 15. Purpose of limited worker cooperative association.

(a) A limited worker cooperative association is an entity distinct from its members.

(b) A limited worker cooperative association may be organized for any lawful purpose, whether or not for profit.

(c) An association organized as a worker cooperative under this Act elects to be a worker cooperative with the State of Illinois. Election to be organized as a worker cooperative does not create a presumption that workers are employees of the association corporation for any purposes.

(Source: P.A. 101-292, eff. 1-1-20.)"; and

on page 2, by inserting immediately below line 6 the following:

"(805 ILCS 317/20)

Sec. 20. Formation of limited worker cooperative association.

(a) A limited worker cooperative association must be organized by one or more organizers. Organizers need not be members or worker-members of the worker cooperative association.

(b) To form a limited worker cooperative association, one or more organizers of the association shall deliver or cause to be delivered articles of organization to the Secretary of State for filing.

(Source: P.A. 101-292, eff. 1-1-20.)"; and

on page 7, by replacing lines 13 through 26 with the following:

"(5.5) a statement that the association is a worker cooperative or a collective worker cooperative, if applicable; and

(6) any other provision, not inconsistent with law, that the worker-members, members, or organizers elect to set out in the articles for the regulation of the internal affairs of the limited worker cooperative association, including any provisions that, under this Act, are required or permitted to be set out in the cooperative agreement bylaws of the limited worker cooperative association."; and

on page 8, by deleting line 1; and

on page 8, by inserting immediately below line 2 the following:

"(805 ILCS 317/30)

Sec. 30. Organization of limited worker cooperative association.

(a) After a limited worker cooperative association is formed:

(1) if initial managers or managing members directors are named in the articles, the initial managers or managing members directors shall hold an organizational meeting to adopt initial cooperative agreement bylaws and carry on any other business necessary or proper to complete the organization of the association; or

(2) if initial managers or managing members directors are not named in the articles, the organizers shall designate the initial managers or managing members directors and call a meeting of the initial managers or managing members directors to adopt initial cooperative agreement bylaws and carry on any other business necessary or proper to complete the organization of the association.

(b) Unless the articles otherwise provide, the initial managers or managing members directors may cause the limited worker cooperative association to accept members, including those necessary for the association to begin business.

(c) Initial managers directors need not be members.

(d) An initial manager or managing member director serves until a successor is elected and qualified at a members' meeting or the manager or managing member director is removed, resigns, is adjudged incompetent, or dies.

(Source: P.A. 101-292, eff. 1-1-20.)"; and

on page 15, line 10, by changing "$150" to "$100"; and

on page 15, line 11, by changing "$50" to "$25"; and

on page 15, line 17, by changing "$25" to "$5"; and

on page 15, line 21, by changing "$75" to "$50"; and

on page 15, line 24, by changing "$200" to "$75"; and

on page 15, line 25, by changing "$100 plus $50" to "$75 plus $25"; and

on page 16, line 5, by changing "$50" to "$25"; and

on page 16, line 7, by changing "$10" to "$5"; and

on page 16, by inserting immediately below line 11 the following:

"(805 ILCS 317/40)

Sec. 40. Members.

(a) An association formed under this Act may include multiple classes of patron members whose rights and proprietary interests shall be determined by the articles or cooperative agreement.

(b) (a) To begin business, a limited worker cooperative association must have at least 3 members unless the sole member is a cooperative.

(c) (b) A person becomes a member:

(1) as provided in the articles or cooperative agreement bylaws;

(2) as the result of a merger or conversion under Section 65; or

(3) with the consent of all the members.

(d) (c) A member, solely by reason of being a member, may not act for or bind the limited worker cooperative association.

(e) (d) Unless the articles provide otherwise, a debt, obligation, or other liability of a limited worker cooperative association is solely that of the association and is not the debt, obligation, or liability of a member solely by reason of being a member.

(f) (e) The total voting membership body shall constitute the assembly of the limited worker cooperative association.

(g) (f) The assembly shall meet annually at a time provided in the articles or cooperative agreement bylaws or set by the board of managers or managing members directors not inconsistent with the articles and cooperative agreement bylaws.

(h) (g) Failure to hold an annual assembly meeting does not affect the validity of any action by the limited worker cooperative association.

(i) (h) A limited worker cooperative association shall notify each member of the time, date, and place of a members' meeting at least 10 and not more than 60 days before the meeting; except that, if the notice is of a meeting of the members in one or more districts or classes of members, the notice shall be given only to members in those districts or classes.

(Source: P.A. 101-292, eff. 1-1-20.)

(805 ILCS 317/45)

Sec. 45. Voting.

(a) The articles or cooperative agreement bylaws may allocate voting power among patron members on the basis of one or a combination of the following:

(1) one member, one vote;

(2) if a member is a cooperative, the number of its members; or

(3) on the basis of use or patronage unless the association is cooperative has elected to be a worker cooperative.

(b) If the articles or cooperative agreement bylaws allocate voting power to patron members on the basis of use or patronage and a patron member would be denied a vote because the patron member did not use the limited cooperative association or conduct patronage with the association it during the period on which the allocation of voting power is determined, the articles or cooperative agreement bylaws must provide that the patron member shall nevertheless be allocated a vote equal to at least the minimum voting power allocated to patron members who used the association or conducted patronage with the association it during the period.

(c) The articles or cooperative agreement bylaws may provide for the allocation of member voting power by districts or class or any combination thereof.

(d) The voting power of members who are not patron members may be limited or eliminated. Community investors are not entitled to vote unless the articles or bylaws provide otherwise.

(e) At no time shall worker-members the members have less than a majority of the total voting power of a the limited worker cooperative association.

(Source: P.A. 101-292, eff. 1-1-20.)

(805 ILCS 317/50)

Sec. 50. Board of managers or managing members directors.

(a) A limited worker cooperative association must have a board of managers or managing members directors of at least 3 individuals, unless the limited worker cooperative association is a collective worker cooperative. Subsections (b) through (e) do not apply to collective worker cooperatives.

(b) The affairs of a limited worker cooperative association must be managed by, or under the direction of, the board of managers or managing members directors unless the board delegates those duties to the assembly of the worker limited cooperative association. The board may adopt policies and procedures that do not conflict with the articles, cooperative agreement bylaws, or this Act.

(c) An individual is not an agent for a limited worker cooperative association solely by being a manager or managing member director.

(d) A debt, obligation, or other liability of a limited worker cooperative association is solely that of the association and is not a debt, obligation, or liability of a manager or managing member director solely by reason of being a manager or managing member director. An individual is not personally liable, directly or indirectly, for an obligation of an association solely by reason of being a manager or managing member director.

(e) Directors shall be elected for terms determined by the bylaws by a majority vote of the assembly.

(Source: P.A. 101-292, eff. 1-1-20.)

(805 ILCS 317/51 new)

Sec. 51. Earnings and losses.

(a) The net earnings and losses of an association formed under this Act shall be apportioned and distributed in such manner as the articles or cooperative agreement shall specify. Net earnings declared as patronage allocations with respect to a period of time, and paid or credited to patron members, shall be apportioned among the patron members in accordance with the ratio which each patron member's patronage during the applicable time period bears to the total patronage by all patron members during that period.

(b) The apportionment, distribution, and payment of net earnings required by subsection (a) of this Section may be in cash, credits, or written notices of allocation issued by the association.

(805 ILCS 317/52 new)

Sec. 52. System of internal capital accounts.

(a) A limited worker cooperative association may establish through its articles or cooperative agreement a system of internal capital accounts to reflect the book value and to determine the redemption price of membership interests and written notices of allocation.

(b) The articles or cooperative agreement of a limited worker cooperative association may permit the periodic redemption of written notices of allocation and shall provide for recall and redemption of membership interests upon termination of membership in the association.

(c) An association may allocate a portion of retained net earnings and net losses to a collective reserve account. Earnings assigned to the collective reserve account may be used for any and all purposes as determined by the board of managers or managing members.

(805 ILCS 317/55)

Sec. 55. Assembly.

(a) A limited worker cooperative association, other than a collective worker cooperative, must have an assembly as constituted by the body of voting members.

(b) An individual is not an agent for a limited worker cooperative association solely by being a member of the assembly.

(c) A debt, obligation, or other liability of a limited worker cooperative association is solely that of the association and is not a debt, obligation, or liability of a member of the assembly solely by reason of being a voting member. An individual is not personally liable, directly or indirectly, for an obligation of an association solely by reason of being a voting member.

(Source: P.A. 101-292, eff. 1-1-20.)"; and

on page 21, by inserting immediately below line 25 the following:

"(805 ILCS 317/65)

Sec. 65. Conversion. A limited worker cooperative association may convert into any form of entity permitted if the board of managers or managing members directors of the limited worker cooperative association adopts a plan of conversion and the assembly adopts such a plan by a two-thirds majority vote. In the case of a collective worker cooperative, a limited worker cooperative association may convert into any form of entity permitted if the members adopt a plan by a two-thirds majority vote. Conversions from other forms of entities to a limited worker cooperative association are governed by the Entity Omnibus Act.

(Source: P.A. 101-292, eff. 1-1-20.)

(805 ILCS 317/70)

Sec. 70. Exemption from securities laws. Any interest security, patronage refund, per unit retain certificate, or evidence of membership issued or sold by a limited worker cooperative association as an investment in its capital to the members of a cooperative association formed under this Act or a similar law of any other state and authorized to transact business or conduct activities in this State is exempt from the registration requirements of the Illinois Securities Law of 1953. Such interests securities, patronage refunds, per unit retain certificates, or evidence of membership may be sold lawfully by the issuer or its members or salaried employees without the necessity of being registered as a broker or dealer under the Illinois Securities Law of 1953.

(Source: P.A. 101-292, eff. 1-1-20.)

Section 10. The Entity Omnibus Act is amended by changing Section 111 as follows:

(805 ILCS 415/111)

Sec. 111. Application of other Acts. The Business Corporation Act of 1983, the General Not For Profit Corporation Act of 1986, the Limited Liability Company Act, the Uniform Limited Partnership Act (2001), and the Uniform Partnership Act (1997) and the Limited Worker Cooperative Association Act, as now or hereafter amended, shall govern all matters related to the entities named in each of those Acts and in this Act except where inconsistent with the letter and purpose of this Act. This Act controls in the event of any conflict with the provisions of the above-named Acts or other laws.

(Source: P.A. 101-491, eff. 8-23-19.)

Section 99. Effective date. This Act takes effect July 1, 2021.".