TITLE 3

Agriculture

Cooperative Agricultural Associations or Corporations

CHAPTER 85. CORPORATION LAW FOR COOPERATIVE AGRICULTURAL ASSOCIATIONS

Subchapter III. Stock and Stockholders; Financial Operations


An association may transact or do business with or for patron stockholders or patrons not stockholders, and may issue and sell its preferred stock to patrons or nonpatrons of the associations, but common stock of the association shall be sold to patrons only. The certificate of common stock shall contain a provision that the association shall have an option to redeem the stock at par value plus declared and unpaid dividends when the owner thereof has for a period of 12 months done no business with the association, and shall contain a further provision that no sale or transfer of stock shall be valid without the written consent of the association, and, if the association withholds its consent to such sale or transfer, then the association shall redeem such stock at par value plus declared and unpaid dividends.

41 Del. Laws, c. 132, § 6; 3 Del. C. 1953, § 8531.;

Dividends on the common stock shall be paid only after dividends are paid on the preferred stock, and the required surplus fund set aside, and shall be not greater than 6 percent per annum, except as provided in this chapter. Dividends on preferred stock shall be not greater than 12 percent per annum and shall be cumulative.

41 Del. Laws, c. 132, § 6; 3 Del. C. 1953, § 8532; 60 Del. Laws, c. 174, § 2.;

The officers and stockholders of an association, organized under and accepting this chapter, shall not be individually liable for the debts of the association otherwise than as provided in this chapter. Each common stockholder of an association shall be liable in his individual capacity to the amount of stock held by him for all work and labor done to carry on the operations of the association. The terms "work" and "labor" as used in this section mean only such obligations incurred by the association for salary and wages for actual labor and services performed by individuals.

41 Del. Laws, c. 132, §§ 8, 9; 3 Del. C. 1953, § 8533.;

Every common stockholder shall be entitled to 1 vote only, and no vote by proxy shall be permitted. This restriction shall not affect any powers granted to the representative body or council, or the delegates thereto.

41 Del. Laws, c. 132, § 7; 3 Del. C. 1953, § 8534.;

After payment of the dividend on the preferred stock, and after making provision from its net earnings for the reserve fund, as provided in this chapter, the remainder of the net earnings of the association, not required for dividends on the common stock, may, in the discretion of the directors, be distributed as a patronage refund. Patron stockholders may be entitled to patronage refunds at double the rate of patronage refunds to which nonstockholder patrons shall be entitled. Patronage refunds may be credited to the accounts of nonstockholders in the purchase of capital stock of the association.

41 Del. Laws, c. 132, § 6; 3 Del. C. 1953, § 8535.;

An association, after making provision for the payment of dividends on the preferred stock, and before payment of dividends on the common stock, or the distribution of any patronage refund or dividend shall set aside 10 percent of the total net earnings, annually, for a reserve fund, until the reserve fund equals at least 30 percent of the paid up capital stock. The reserve fund shall be available for such purposes as are designated and authorized by the vote of two-thirds of the members of the board of directors at a duly assembled meeting of the board, subject to the limitations and conditions provided for in the bylaws of the association.

41 Del. Laws, c. 132, § 16; 3 Del. C. 1953, § 8536.;

After payment of the dividend on preferred stock, and after making provision from its net earnings for the reserve fund, as provided in § 8536 of this title, the remainder of the net earnings of the association not required for dividends on the common stock and not distributable as a patronage refund may, at the discretion of the directors, be set up in a revolving reserve fund to be kept on the books of the association in the names of the patrons, according to the volume or value of their patronage. No stockholder or patron shall be entitled to payments from the revolving fund, except as provided by the board of directors, which shall have full and complete control of the expenditure and use of the funds therein, the provisions herein contained being merely authoritative and not mandatory.

41 Del. Laws, c. 132, § 6; 3 Del. C. 1953, § 8537.;

At the close of each fiscal year, a complete audit of the operations of the association shall be made by a qualified accountant employed by the board of directors. The written report of the accountant shall include statements of services rendered by the association, the balance sheet, the receipts and disbursements, and the assets and liabilities, the total number of stockholders, and other proper information, and shall be submitted to the members at the next regular meeting. Within 3 months after the expiration of the fiscal year for which made, the secretary of the association shall file one copy of the report of the audit with the Secretary of the Department of Agriculture of this State and one copy with the Dean of the School of Agriculture of the University of Delaware. No person shall, without consent of the association, except in obedience to judicial process, make or permit any disclosure whereby any information contained in the report may be identified as having been furnished by the association.

41 Del. Laws, c. 132, § 17; 3 Del. C. 1953, § 8538; 57 Del. Laws, c. 764, § 27.;