S.B. 69

This document includes Senate Committee Amendments incorporated into the bill on Mon, Feb 4, 2008 at 10:27 AM by rday. --> 1

UNIFORM LIMITED COOPERATIVE
2 ASSOCIATION ACT
3 2008 GENERAL SESSION
4 STATE OF UTAH
5 Chief Sponsor: Lyle W. Hillyard
6 House Sponsor: Ben C. Ferry
7
8 LONG TITLE
9 General Description:
10 This bill enacts the Uniform Limited Cooperative Association Act.
11 Highlighted Provisions:
12 This bill:
13 . defines terms;
14 . addresses the nature, purpose, and duration of a limited cooperative association;
15 . outlines the relationship of the act to other law;
16 . provides for the adoption of various provisions governing a limited cooperative
17 association;
18 . addresses voting within a limited cooperative association;
19 . details the nature of membership in a limited cooperative association;
20 . provides for meetings of a limited cooperative association;
21 . addresses marketing contracts between the limited cooperative association and
22 another person;
23 . outlines the qualifications, election, service, and removal of a director;
24 . addresses liability and indemnification of a director;
25 . establishes requirements concerning contributions, allocations, and distributions to
26 and by a limited cooperative association;
27 . provides for the dissociation of a member of a limited cooperative association;

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- 2 - 28 . addresses dissolution of a limited cooperative association;
29 . allows a derivative action by a member of a limited cooperative association;
30 . provides for a foreign cooperative to do business in Utah;
31 . addresses the disposition of assets by a limited cooperative association;
32 . provides for the conversion to and from a limited cooperative association;
33 . addresses the merger of a limited cooperative association and another entity; and
34 . makes technical changes.
35 Monies Appropriated in this Bill:
36 None
37 Other Special Clauses:
38 None
39 Utah Code Sections Affected:
40 AMENDS:
41 16-6a-207, as enacted by Laws of Utah 2000, Chapter 300
42 ENACTS:
43 3-1-46, Utah Code Annotated 1953
44 16-16-101, Utah Code Annotated 1953
45 16-16-102, Utah Code Annotated 1953
46 16-16-103, Utah Code Annotated 1953
47 16-16-104, Utah Code Annotated 1953
48 16-16-105, Utah Code Annotated 1953
49 16-16-106, Utah Code Annotated 1953
50 16-16-107, Utah Code Annotated 1953
51 16-16-108, Utah Code Annotated 1953
52 16-16-109, Utah Code Annotated 1953
53 16-16-110, Utah Code Annotated 1953
54 16-16-111, Utah Code Annotated 1953
55 16-16-112, Utah Code Annotated 1953
56 16-16-113, Utah Code Annotated 1953
57 16-16-114, Utah Code Annotated 1953
58 16-16-115, Utah Code Annotated 1953

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- 3 - 59 16-16-116, Utah Code Annotated 1953
60 16-16-117, Utah Code Annotated 1953
61 16-16-118, Utah Code Annotated 1953
62 16-16-119, Utah Code Annotated 1953
63 16-16-120, Utah Code Annotated 1953
64 16-16-201, Utah Code Annotated 1953
65 16-16-202, Utah Code Annotated 1953
66 16-16-203, Utah Code Annotated 1953
67 16-16-204, Utah Code Annotated 1953
68 16-16-205, Utah Code Annotated 1953
69 16-16-206, Utah Code Annotated 1953
70 16-16-207, Utah Code Annotated 1953
71 16-16-208, Utah Code Annotated 1953
72 16-16-301, Utah Code Annotated 1953
73 16-16-302, Utah Code Annotated 1953
74 16-16-303, Utah Code Annotated 1953
75 16-16-304, Utah Code Annotated 1953
76 16-16-401, Utah Code Annotated 1953
77 16-16-402, Utah Code Annotated 1953
78 16-16-403, Utah Code Annotated 1953
79 16-16-404, Utah Code Annotated 1953
80 16-16-405, Utah Code Annotated 1953
81 16-16-406, Utah Code Annotated 1953
82 16-16-407, Utah Code Annotated 1953
83 16-16-501, Utah Code Annotated 1953
84 16-16-502, Utah Code Annotated 1953
85 16-16-503, Utah Code Annotated 1953
86 16-16-504, Utah Code Annotated 1953
87 16-16-505, Utah Code Annotated 1953
88 16-16-506, Utah Code Annotated 1953
89 16-16-507, Utah Code Annotated 1953

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- 4 - 90 16-16-508, Utah Code Annotated 1953
91 16-16-509, Utah Code Annotated 1953
92 16-16-510, Utah Code Annotated 1953
93 16-16-511, Utah Code Annotated 1953
94 16-16-512, Utah Code Annotated 1953
95 16-16-513, Utah Code Annotated 1953
96 16-16-514, Utah Code Annotated 1953
97 16-16-515, Utah Code Annotated 1953
98 16-16-516, Utah Code Annotated 1953
99 16-16-517, Utah Code Annotated 1953
100 16-16-601, Utah Code Annotated 1953
101 16-16-602, Utah Code Annotated 1953
102 16-16-603, Utah Code Annotated 1953
103 16-16-604, Utah Code Annotated 1953
104 16-16-605, Utah Code Annotated 1953
105 16-16-701, Utah Code Annotated 1953
106 16-16-702, Utah Code Annotated 1953
107 16-16-703, Utah Code Annotated 1953
108 16-16-704, Utah Code Annotated 1953
109 16-16-801, Utah Code Annotated 1953
110 16-16-802, Utah Code Annotated 1953
111 16-16-803, Utah Code Annotated 1953
112 16-16-804, Utah Code Annotated 1953
113 16-16-805, Utah Code Annotated 1953
114 16-16-806, Utah Code Annotated 1953
115 16-16-807, Utah Code Annotated 1953
116 16-16-808, Utah Code Annotated 1953
117 16-16-809, Utah Code Annotated 1953
118 16-16-810, Utah Code Annotated 1953
119 16-16-811, Utah Code Annotated 1953
120 16-16-812, Utah Code Annotated 1953

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- 5 - 121 16-16-813, Utah Code Annotated 1953
122 16-16-814, Utah Code Annotated 1953
123 16-16-815, Utah Code Annotated 1953
124 16-16-816, Utah Code Annotated 1953
125 16-16-817, Utah Code Annotated 1953
126 16-16-818, Utah Code Annotated 1953
127 16-16-819, Utah Code Annotated 1953
128 16-16-820, Utah Code Annotated 1953
129 16-16-821, Utah Code Annotated 1953
130 16-16-822, Utah Code Annotated 1953
131 16-16-823, Utah Code Annotated 1953
132 16-16-901, Utah Code Annotated 1953
133 16-16-1001, Utah Code Annotated 1953
134 16-16-1002, Utah Code Annotated 1953
135 16-16-1003, Utah Code Annotated 1953
136 16-16-1004, Utah Code Annotated 1953
137 16-16-1005, Utah Code Annotated 1953
138 16-16-1006, Utah Code Annotated 1953
139 16-16-1007, Utah Code Annotated 1953
140 16-16-1008, Utah Code Annotated 1953
141 16-16-1009, Utah Code Annotated 1953
142 16-16-1101, Utah Code Annotated 1953
143 16-16-1102, Utah Code Annotated 1953
144 16-16-1103, Utah Code Annotated 1953
145 16-16-1201, Utah Code Annotated 1953
146 16-16-1202, Utah Code Annotated 1953
147 16-16-1203, Utah Code Annotated 1953
148 16-16-1204, Utah Code Annotated 1953
149 16-16-1205, Utah Code Annotated 1953
150 16-16-1206, Utah Code Annotated 1953
151 16-16-1207, Utah Code Annotated 1953

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- 6 - 152 16-16-1208, Utah Code Annotated 1953
153 16-16-1209, Utah Code Annotated 1953
154 16-16-1210, Utah Code Annotated 1953
155 16-16-1211, Utah Code Annotated 1953
156 16-16-1212, Utah Code Annotated 1953
157 16-16-1213, Utah Code Annotated 1953
158 16-16-1214, Utah Code Annotated 1953
159 16-16-1215, Utah Code Annotated 1953
160 16-16-1301, Utah Code Annotated 1953
161 16-16-1302, Utah Code Annotated 1953
162 16-16-1303, Utah Code Annotated 1953
163 16-16-1304, Utah Code Annotated 1953
164 16-16-1305, Utah Code Annotated 1953
165 16-16-1401, Utah Code Annotated 1953
166 16-16-1402, Utah Code Annotated 1953
167 16-16-1403, Utah Code Annotated 1953
168 16-16-1404, Utah Code Annotated 1953
169 16-16-1405, Utah Code Annotated 1953
170 16-16-1406, Utah Code Annotated 1953
171 16-16-1407, Utah Code Annotated 1953
172 16-16-1408, Utah Code Annotated 1953
173 16-16-1501, Utah Code Annotated 1953
174 16-16-1502, Utah Code Annotated 1953
175 16-16-1503, Utah Code Annotated 1953
176 16-16-1504, Utah Code Annotated 1953
177 16-16-1601, Utah Code Annotated 1953
178 16-16-1602, Utah Code Annotated 1953
179 16-16-1603, Utah Code Annotated 1953
180 16-16-1604, Utah Code Annotated 1953
181 16-16-1605, Utah Code Annotated 1953
182 16-16-1606, Utah Code Annotated 1953

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- 7 - 183 16-16-1607, Utah Code Annotated 1953
184 16-16-1608, Utah Code Annotated 1953
185 16-16-1609, Utah Code Annotated 1953
186 16-16-1610, Utah Code Annotated 1953
187 16-16-1611, Utah Code Annotated 1953
188 16-16-1612, Utah Code Annotated 1953
189 16-16-1701, Utah Code Annotated 1953
190 16-16-1702, Utah Code Annotated 1953
191 16-16-1703, Utah Code Annotated 1953
192
193 Be it enacted by the Legislature of the state of Utah:
194 Section 1. Section 3-1-46 is enacted to read:
195 3-1-46. Conversion to a limited cooperative association.
196 An association under this title may convert to a limited cooperative association under
197 Title 16, Chapter 16, Uniform Limited Cooperative Association Act, by complying with that
198 chapter.
199 Section 2. Section 16-6a-207 is amended to read:
200 16-6a-207. Incorporation of cooperative association.
201 (1) (a) If a cooperative association meets the requirements of Subsection (1)(b), it may:
202 (i) be incorporated under this chapter; and
203 (ii) use the word "cooperative" as part of its corporate or business name.
204 (b) A cooperative association described in Subsection (1)(a):
205 (i) may not be:
206 (A) an association subject to the insurance or credit union laws of this state;
207 (B) a health insurance purchasing association as defined in Section 31A-34-103 ; or
208 (C) a health insurance purchasing alliance licensed under Title 31A, Chapter 34,
209 Voluntary Health Insurance Purchasing Alliance Act; and
210 (ii) shall state in its articles of incorporation that:
211 (A) a member may not have more than one vote regardless of the number or amount of
212 stock or membership capital owned by the member unless voting is based in whole or in part
213 on the volume of patronage of the member with the cooperative association; and

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- 8 - 214 (B) savings in excess of dividends and additions to reserves and surplus shall be
215 distributed or allocated to members or patrons on the basis of patronage.
216 (2) (a) Any cooperative association incorporated in accordance with Subsection (1):
217 (i) [shall have] has all the rights and [be] is subject to the limitations provided in
218 Section 3-1-11 ; and
219 (ii) may pay dividends on its stock, if it has stock, subject to the limitations of Section
220 3-1-11 .
221 (b) The articles of incorporation or the bylaws of a cooperative association
222 incorporated in accordance with Subsection (1) may provide for:
223 (i) the establishment and alteration of voting districts;
224 (ii) the election of delegates to represent:
225 (A) the districts described in Subsection (2)(b)(i); and
226 (B) the members of the districts described in Subsection (2)(b)(i);
227 (iii) the establishment and alteration of director districts; and
228 (iv) the election of directors to represent the districts described in Subsection (2)(b)(ii)
229 by:
230 (A) the members of the districts; or
231 (B) delegates elected by the members.
232 (3) (a) A corporation organized under Title 3, [Chapter 1,] Uniform Agricultural
233 Cooperative Association Act, or Title 16, Chapter 16, Uniform Limited Cooperative
234 Association Act, may convert itself into a cooperative association subject to this chapter by
235 adopting appropriate amendments to its articles of incorporation by which:
236 (i) it elects to become subject to this chapter; and
237 (ii) makes changes in its articles of incorporation that are:
238 (A) required by this chapter; and
239 (B) any other changes permitted by this chapter.
240 (b) The amendments described in Subsection (3)(a) shall be adopted and filed in the
241 manner provided by the law then applicable to the cooperative nonprofit corporation.
242 (4) Notwithstanding Subsection (1), a health insurance purchasing association may not
243 use the word "cooperative" or "alliance" but may use the word "association."
244 (5) Except as otherwise provided in this section [ 16-6a-207 ], a cooperative nonprofit

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- 9 - 245 corporation [shall be] is subject to this chapter.
246 (6) A corporation that is a cooperative under this chapter may convert to a limited
247 cooperative association under Title 16, Chapter 16, Uniform Limited Cooperative Association
248 Act, by complying with that chapter.
249 Section 3. Section 16-16-101 is enacted to read:
250 CHAPTER 16. UNIFORM LIMITED COOPERATIVE ASSOCIATION ACT
251 Part 1. General Provisions
252 16-16-101. Title.
253 This chapter is known as the "Uniform Limited Cooperative Association Act."
254 Section 4. Section 16-16-102 is enacted to read:
255 16-16-102. Definitions.
256 In this chapter:
257 (1) "Articles of organization" means the articles of organization of a limited
258 cooperative association required by Section 16-16-302 . The term includes the articles as
259 amended or restated.
260 (2) "Board of directors" means the board of directors of a limited cooperative
261 association.
262 (3) "Bylaws" means the bylaws of a limited cooperative association. The term includes
263 the bylaws as amended or restated.
264 (4) "Certificate of authority" means a certificate issued by the division for a foreign
265 cooperative to transact business in this state.
266 (5) "Contribution," except as used in Subsection 16-16-1008 (3), means a benefit that a
267 person provides to a limited cooperative association to become or remain a member or in the
268 person's capacity as a member.
269 (6) "Cooperative" means a limited cooperative association or an entity organized under
270 any cooperative law of any jurisdiction.
271 (7) "Designated office" means the office that a limited cooperative association or a
272 foreign cooperative is required to designate and maintain under Subsection 16-16-117 (1)(a).
273 (8) "Director" means a director of a limited cooperative association.
274 (9) "Distribution," except as used in Subsection 16-16-1007 (5), means a transfer of
275 money or other property from a limited cooperative association to a member because of the

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- 10 - 276 member's financial rights or to a transferee of a member's financial rights.
277 (10) "Division" means the Division of Corporations and Commercial Code.
278 (11) "Entity" means a person other than an individual.
279 (12) "Financial rights" means the right to participate in allocations and distributions as
280 provided in Part 10, Contributions, Allocations, and Distributions, and Part 12, Dissolution, but
281 does not include rights or obligations under a marketing contract governed by Part 7,
282 Marketing Contracts.
283 (13) "Foreign cooperative" means an entity organized in a jurisdiction other than this
284 state under a law similar to this chapter.
285 (14) "Governance rights" means the right to participate in governance of a limited
286 cooperative association.
287 (15) "Investor member" means a member that has made a contribution to a limited
288 cooperative association and:
289 (a) is not required by the organic rules to conduct patronage with the association in the
290 member's capacity as an investor member in order to receive the member's interest; or
291 (b) is not permitted by the organic rules to conduct patronage with the association in
292 the member's capacity as an investor member in order to receive the member's interest.
293 (16) "Limited cooperative association" means an association organized under this
294 chapter.
295 (17) "Member" means a person that is admitted as a patron member or investor
296 member, or both, in a limited cooperative association. The term does not include a person that
297 has dissociated as a member.
298 (18) "Member's interest" means the interest of a patron member or investor member
299 under Section 16-16-601 .
300 (19) "Members meeting" means an annual members meeting or special meeting of
301 members.
302 (20) "Organic law" means the statute providing for the creation of an entity or
303 principally governing its internal affairs.
304 (21) "Organic rules" means the articles of organization and bylaws of a limited
305 cooperative association.
306 (22) "Organizer" means an individual who signs the initial articles of organization.

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- 11 - 307 (23) "Patron member" means a member that has made a contribution to a limited
308 cooperative association and:
309 (a) is required by the organic rules to conduct patronage with the association in the
310 member's capacity as a patron member in order to receive the member's interest; or
311 (b) is permitted by the organic rules to conduct patronage with the association in the
312 member's capacity as a patron member in order to receive the member's interest.
313 (24) "Patronage" means business transactions between a limited cooperative
314 association and a person which entitle the person to receive financial rights based on the value
315 or quantity of business done between the association and the person.
316 (25) "Person" means an individual, corporation, business trust, cooperative, estate,
317 trust, partnership, limited partnership, limited liability company, limited cooperative
318 association, joint venture, association, public corporation, government or governmental
319 subdivision, agency, or instrumentality, or any other legal or commercial entity.
320 (26) "Principal office" means the principal executive office of a limited cooperative
321 association or foreign cooperative, whether or not in this state.
322 (27) "Record," used as a noun, means information that is inscribed on a tangible
323 medium or that is stored in an electronic or other medium and is retrievable in perceivable
324 form.
325 (28) "Required information" means the information a limited cooperative association is
326 required to maintain under Section 16-16-114 .
327 (29) "Sign" means, with present intent to authenticate or adopt a record:
328 (a) to execute or adopt a tangible symbol; or
329 (b) to attach to or logically associate with the record an electronic symbol, sound, or
330 process.
331 (30) "State" means a state of the United States, the District of Columbia, Puerto Rico,
332 the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction
333 of the United States.
334 (31) "Transfer" includes an assignment, conveyance, deed, bill of sale, lease, mortgage,
335 security interest, encumbrance, gift, and transfer by operation of law.
336 (32) "Voting group" means any combination of one or more voting members in one or
337 more districts or classes that under the organic rules or this chapter are entitled to vote and can

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- 12 - 338 be counted together collectively on a matter at a members meeting.
339 (33) "Voting member" means a member that, under the organic law or organic rules,
340 has a right to vote on matters subject to vote by members under the organic law or organic
341 rules.
342 (34) "Voting power" means the total current power of members to vote on a particular
343 matter for which a vote may or is to be taken.
344 Section 5. Section 16-16-103 is enacted to read:
345 16-16-103. Limited cooperative association subject to amendment or repeal of
346 chapter.
347 A limited cooperative association governed by this chapter is subject to any amendment
348 or repeal of this chapter.
349 Section 6. Section 16-16-104 is enacted to read:
350 16-16-104. Nature of limited cooperative association.
351 (1) A limited cooperative association organized under this chapter is an autonomous,
352 unincorporated association of persons united to meet their mutual interests through a jointly
353 owned enterprise primarily controlled by those persons, which permits combining:
354 (a) ownership, financing, and receipt of benefits by the members for whose interests
355 the association is formed; and
356 (b) separate investments in the association by members who may receive returns on
357 their investments and a share of control.
358 (2) The fact that a limited cooperative association does not have one or more of the
359 characteristics described in Subsection (1) does not alone prevent the association from being
360 formed under and governed by this chapter nor does it alone provide a basis for an action
361 against the association.
362 Section 7. Section 16-16-105 is enacted to read:
363 16-16-105. Purpose and duration of limited cooperative association.
364 (1) A limited cooperative association is an entity distinct from its members.
365 (2) A limited cooperative association may be organized for any lawful purpose,
366 whether or not for profit, except for the operation of a financial institution as defined in Section
367 7-1-103 .
368 (3) Unless the articles of organization state a term for a limited cooperative

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- 13 - 369 association's existence, the association has perpetual duration.
370 Section 8. Section 16-16-106 is enacted to read:
371 16-16-106. Powers.
372 A limited cooperative association may sue and be sued in its own name and do all
373 things necessary or convenient to carry on its activities. An association may maintain an action
374 against a member for harm caused to the association by the member's violation of a duty to the
375 association or of the organic law or organic rules.
376 Section 9. Section 16-16-107 is enacted to read:
377 16-16-107. Governing law.
378 The law of this state governs:
379 (1) the internal affairs of a limited cooperative association; and
380 (2) the liability of a member as member and a director as director for the debts,
381 obligations, or other liabilities of a limited cooperative association.
382 Section 10. Section 16-16-108 is enacted to read:
383 16-16-108. Supplemental principles of law.
384 Unless displaced by particular provisions of this chapter, the principles of law and
385 equity supplement this chapter.
386 Section 11. Section 16-16-109 is enacted to read:
387 16-16-109. Requirements of other laws.
388 (1) This chapter does not alter or amend any law that governs the licensing and
389 regulation of an individual or entity in carrying on a specific business or profession even if that
390 law permits the business or profession to be conducted by a limited cooperative association, a
391 foreign cooperative, or its members.
392 (2) A limited cooperative association may not conduct an activity that, under law of
393 this state other than this chapter, may be conducted only by an entity that meets specific
394 requirements for the internal affairs of that entity unless the organic rules of the association
395 conform to those requirements.
396 Section 12. Section 16-16-110 is enacted to read:
397 16-16-110. Relation to restraint of trade and antitrust laws.
398 To the extent a limited cooperative association or activities conducted by the
399 association in this state meet the material requirements for other cooperatives entitled to an

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Senate Committee Amendments 2-4-2008 rd/crp 400

exemption from or immunity under any provision of the restraint of trade or antitrust laws of
401 this state, the association and its activities are entitled to the exemption or immunity. This
402 section does not create any new exemption or immunity for an association or affect any
403 exemption or immunity provided to a cooperative organized under any other law.
404 Section 13. Section 16-16-111 is enacted to read:
405 16-16-111. Name.
406 (1) Use of the term "cooperative" or its abbreviation under this chapter is not a
407 violation of the provisions restricting the use of the term under any other law of this state.
408 (2) S. [ The ] Notwithstanding Section 48-2a-102, the .S name of a limited cooperative
408a association must contain the words "limited
409 cooperative association" or "limited cooperative" or the abbreviation "L.C.A." or "LCA".
410 "Limited" may be abbreviated as "Ltd.". "Cooperative" may be abbreviated as "Co-op" or
411 "Coop". "Association" may be abbreviated as "Assoc." or "Assn.". Use of the term
412 "cooperative" or its abbreviation as permitted by this chapter is not a violation of the provisions
413 restricting the use of the term under any other law of this state. A limited cooperative
414 association or a member may enforce the restrictions on the use of the term "cooperative" under
415 this chapter and any other law of this state. A limited cooperative association or a member may
416 enforce the restrictions on the use of the term "cooperative" under any other law of this state.
417 (3) Except as otherwise provided in Subsection (4), a limited cooperative association
418 may use only a name that is available. A name is available if it is distinguishable in the records
419 of the division from:
420 (a) the name of any entity organized or authorized to transact business in this state;
421 (b) a name reserved under Section 16-16-112 ; and
422 (c) an alternative name approved for a foreign cooperative authorized to transact
423 business in this state.
424 (4) A limited cooperative association may apply to the division for authorization to use
425 a name that is not available. The division shall authorize use of the name if:
426 (a) the person with ownership rights to use the name consents in a record to the use and
427 applies in a form satisfactory to the division to change the name used or reserved to a name that
428 is distinguishable upon the records of the division from the name applied for; or
429 (b) the applicant delivers to the division a certified copy of the final judgment of a
430 court establishing the applicant's right to use the name in this state.

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- 15 - 431 Section 14. Section 16-16-112 is enacted to read:
432 16-16-112. Reservation of name.
433 (1) A person may reserve the exclusive use of the name of a limited cooperative
434 association, including a fictitious name for a foreign cooperative whose name is not available
435 under Section 16-16-111 , by delivering an application to the division for filing. The
436 application must set forth the name and address of the applicant and the name proposed to be
437 reserved. If the division finds that the name applied for is available under Section 16-16-111 ,
438 the division shall reserve the name for the applicant's exclusive use for a nonrenewable period
439 of 120 days.
440 (2) A person that has reserved a name for a limited cooperative association may
441 transfer the reservation to another person by delivering to the division a signed notice of the
442 transfer which states the name, street address, and, if different, the mailing address of the
443 transferee. If the person is an organizer of the association and the name of the association is
444 the same as the reserved name, the delivery of articles of organization for filing by the division
445 is a transfer by the person to the association.
446 Section 15. Section 16-16-113 is enacted to read:
447 16-16-113. Effect of organic rules.
448 (1) The relations between a limited cooperative association and its members are
449 consensual. Unless required, limited, or prohibited by this chapter, the organic rules may
450 provide for any matter concerning the relations among the members of the association and
451 between the members and the association, the activities of the association, and the conduct of
452 its activities.
453 (2) The matters referred to in Subsections (2)(a) through (i) may be varied only in the
454 articles of organization. The articles may:
455 (a) state a term of existence for the association under Subsection 16-16-105 (3);
456 (b) limit or eliminate the acceptance of new or additional members by the initial board
457 of directors under Subsection 16-16-303 (2);
458 (c) vary the limitations on the obligations and liability of members for association
459 obligations under Section 16-16-504 ;
460 (d) require a notice of an annual members meeting to state a purpose of the meeting
461 under Subsection 16-16-508 (2);

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- 16 - 462 (e) vary the board of directors meeting quorum under Subsection 16-16-815 (1);
463 (f) vary the matters the board of directors may consider in making a decision under
464 Section 16-16-820 ;
465 (g) specify causes of dissolution under Subsection 16-16-1202 (1);
466 (h) delegate amendment of the bylaws to the board of directors pursuant to Subsection
467 16-16-405 (6);
468 (i) provide for member approval of asset dispositions under Subsection 16-16-1501 ;
469 and
470 (j) provide for any matters that may be contained in the organic rules, including those
471 under Subsection (3).
472 (3) The matters referred to in Subsections (3)(a) through (y) may be varied only in the
473 organic rules. The organic rules may:
474 (a) require more information to be maintained under Section 16-16-114 or provided to
475 members under Subsection 16-16-505 (11);
476 (b) provide restrictions on transactions between a member and an association under
477 Section 16-16-115 ;
478 (c) provide for the percentage and manner of voting on amendments to the organic
479 rules by district, class, or voting group under Subsection 16-16-404 (1);
480 (d) provide for the percentage vote required to amend the bylaws concerning the
481 admission of new members under Subsection 16-16-405 (5)(e);
482 (e) provide for terms and conditions to become a member under Section 16-16-502 ;
483 (f) restrict the manner of conducting members meetings under Subsections
484 16-16-506 (3) and 16-16-507 (5);
485 (g) designate the presiding officer of members meetings under Subsections
486 16-16-506 (5) and 16-16-507 (7);
487 (h) require a statement of purposes in the annual meeting notice under Subsection
488 16-16-508 (2);
489 (i) increase quorum requirements for members meetings under Section 16-16-510 and
490 board of directors meetings under Section 16-16-815 ;
491 (j) allocate voting power among members, including patron members and investor
492 members, and provide for the manner of member voting and action as permitted by Sections

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- 17 - 493 16-16-511 through 16-16-517 ;
494 (k) authorize investor members and expand or restrict the transferability of members'
495 interests to the extent provided in Sections 16-16-602 through 16-16-604 ;
496 (l) provide for enforcement of a marketing contract under Subsection 16-16-704 (1);
497 (m) provide for qualification, election, terms, removal, filling vacancies, and member
498 approval for compensation of directors in accordance with Sections 16-16-803 through
499 16-16-805 , 16-16-807 , 16-16-809 , and 16-16-810 ;
500 (n) restrict the manner of conducting board meetings and taking action without a
501 meeting under Sections 16-16-811 and 16-16-812 ;
502 (o) provide for frequency, location, notice and waivers of notice for board meetings
503 under Sections 16-16-813 and 16-16-814 ;
504 (p) increase the percentage of votes necessary for board action under Subsection
505 16-16-816 (2);
506 (q) provide for the creation of committees of the board of directors and matters related
507 to the committees in accordance with Section 16-16-817 ;
508 (r) provide for officers and their appointment, designation, and authority under Section
509 16-16-822 ;
510 (s) provide for forms and values of contributions under Section 16-16-1002 ;
511 (t) provide for remedies for failure to make a contribution under Subsection
512 16-16-1003 (2);
513 (u) provide for the allocation of profits and losses of the association, distributions, and
514 the redemption or repurchase of distributed property other than money in accordance with
515 Sections 16-16-1004 through 16-16-1007 ;
516 (v) specify when a member's dissociation is wrongful and the liability incurred by the
517 dissociating member for damage to the association under Subsections 16-16-1101 (2) and (3);
518 (w) provide the personal representative, or other legal representative of, a deceased
519 member or a member adjudged incompetent with additional rights under Section 16-16-1103 ;
520 (x) increase the percentage of votes required for board of director approval of:
521 (i) a resolution to dissolve under Subsection 16-16-1205 (1)(a);
522 (ii) a proposed amendment to the organic rules under Subsection 16-16-402 (1)(a);
523 (iii) a plan of conversion under Subsection 16-16-1603 (1);

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- 18 - 524 (iv) a plan of merger under Subsection 16-16-1607 (1); and
525 (v) a proposed disposition of assets under Subsection 16-16-1503 (1); and
526 (y) vary the percentage of votes required for members' approval of:
527 (i) a resolution to dissolve under Section 16-16-1205 ;
528 (ii) an amendment to the organic rules under Section 16-16-405 ;
529 (iii) a plan of conversion under Section 16-16-1603 ;
530 (iv) a plan of merger under Section 16-16-1608 ; and
531 (v) a disposition of assets under Section 16-16-1504 .
532 (4) The organic rules must address members' contributions pursuant to Section
533 16-16-1001 .
534 Section 16. Section 16-16-114 is enacted to read:
535 16-16-114. Required information.
536 (1) Subject to Subsection (2), a limited cooperative association shall maintain in a
537 record available at its principal office:
538 (a) a list containing the name, last known street address and, if different, mailing
539 address, and term of office of each director and officer;
540 (b) the initial articles of organization and all amendments to and restatements of the
541 articles, together with a signed copy of any power of attorney under which any article,
542 amendment, or restatement has been signed;
543 (c) the initial bylaws and all amendments to and restatements of the bylaws;
544 (d) all filed articles of merger and statements of conversion;
545 (e) all financial statements of the association for the six most recent years;
546 (f) the six most recent annual reports delivered by the association to the division;
547 (g) the minutes of members meetings for the six most recent years;
548 (h) evidence of all actions taken by members without a meeting for the six most recent
549 years;
550 (i) a list containing:
551 (i) the name, in alphabetical order, and last known street address and, if different,
552 mailing address of each patron member and each investor member; and
553 (ii) if the association has districts or classes of members, information from which each
554 current member in a district or class may be identified;

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- 19 - 555 (j) the federal income tax returns, any state and local income tax returns, and any tax
556 reports of the association for the six most recent years;
557 (k) accounting records maintained by the association in the ordinary course of its
558 operations for the six most recent years;
559 (l) the minutes of directors meetings for the six most recent years;
560 (m) evidence of all actions taken by directors without a meeting for the six most recent
561 years;
562 (n) the amount of money contributed and agreed to be contributed by each member;
563 (o) a description and statement of the agreed value of contributions other than money
564 made and agreed to be made by each member;
565 (p) the times at which, or events on the happening of which, any additional
566 contribution is to be made by each member;
567 (q) for each member, a description and statement of the member's interest or
568 information from which the description and statement can be derived; and
569 (r) all communications concerning the association made in a record to all members, or
570 to all members in a district or class, for the six most recent years.
571 (2) If a limited cooperative association has existed for less than the period for which
572 records must be maintained under Subsection (1), the period records must be kept is the period
573 of the association's existence.
574 (3) The organic rules may require that more information be maintained.
575 Section 17. Section 16-16-115 is enacted to read:
576 16-16-115. Business transactions of member with limited cooperative association.
577 Subject to Sections 16-16-818 and 16-16-819 and except as otherwise provided in the
578 organic rules or a specific contract relating to a transaction, a member may lend money to and
579 transact other business with a limited cooperative association in the same manner as a person
580 that is not a member.
581 Section 18. Section 16-16-116 is enacted to read:
582 16-16-116. Dual capacity.
583 A person may have both a patron member's interest and an investor member's interest.
584 When such person acts as a patron member, the person is subject to this chapter and the organic
585 rules governing patron members. When such person acts as an investor member, the person is

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- 20 - 586 subject to this chapter and the organic rules governing investor members.
587 Section 19. Section 16-16-117 is enacted to read:
588 16-16-117. Designated office and agent for service of process.
589 (1) A limited cooperative association, or a foreign cooperative that has a certificate of
590 authority under Section 16-16-1404 , shall designate and continuously maintain in this state:
591 (a) an office, as its designated office, which need not be a place of the association's or
592 foreign cooperative's activity in this state; and
593 (b) an agent for service of process at the designated office.
594 (2) An agent for service of process of a limited cooperative association or foreign
595 cooperative must be an individual who is a resident of this state or an entity that is authorized
596 to do business in this state.
597 Section 20. Section 16-16-118 is enacted to read:
598 16-16-118. Change of designated office or agent for service of process.
599 (1) Except as otherwise provided in Subsection 16-16-207 (5), to change its designated
600 office, its agent for service of process, or the street address or, if different, mailing address of
601 its principal office, a limited cooperative association must deliver to the division for filing a
602 statement of change containing:
603 (a) the name of the limited cooperative association;
604 (b) the street address and, if different, mailing address of its designated office;
605 (c) if the designated office is to be changed, the street address and, if different, mailing
606 address of the new designated office;
607 (d) the name of its agent for service of process; and
608 (e) if the agent for service of process is to be changed, the name of the new agent.
609 (2) Except as otherwise provided in Subsection 16-16-207 (5), to change its agent for
610 service of process, the address of its designated office, or the street address or, if different,
611 mailing address of its principal office, a foreign cooperative shall deliver to the division for
612 filing a statement of change containing:
613 (a) the name of the foreign cooperative;
614 (b) the name, street address and, if different, mailing address of its designated office;
615 (c) if the current agent for service of process or an address of the designated office is to
616 be changed, the new information;

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- 21 - 617 (d) the street address and, if different, mailing address of its principal office; and
618 (e) if the street address or, if different, the mailing address of its principal office is to
619 be changed, the street address and, if different, the mailing address of the new principal office.
620 (3) Except as otherwise provided in Section 16-16-204 , a statement of change is
621 effective when filed by the division.
622 Section 21. Section 16-16-119 is enacted to read:
623 16-16-119. Resignation of agent for service of process.
624 (1) To resign as an agent for service of process of a limited cooperative association or
625 foreign cooperative, the agent must deliver to the division for filing a statement of resignation
626 containing the name of the agent and the name of the association or foreign cooperative.
627 (2) After receiving a statement of resignation under Subsection (1), the division shall
628 file it and mail or otherwise provide or deliver a copy to the limited cooperative association or
629 foreign cooperative at its principal office.
630 (3) An agency for service of process of a limited cooperative association or foreign
631 cooperative terminates on the earlier of:
632 (a) the 31st day after the division files a statement of resignation under Subsection (2);
633 or
634 (b) when a record designating a new agent for service of process is delivered to the
635 division for filing on behalf of the association or foreign cooperative and becomes effective.
636 Section 22. Section 16-16-120 is enacted to read:
637 16-16-120. Service of process.
638 (1) An agent for service of process appointed by a limited cooperative association or
639 foreign cooperative is an agent of the association or foreign cooperative for service of process,
640 notice, or a demand required or permitted by law to be served upon the association or foreign
641 cooperative.
642 (2) If a limited cooperative association or foreign cooperative does not appoint or
643 maintain an agent for service of process in this state or the agent for service of process cannot
644 with reasonable diligence be found at the address of the designated office on file with the
645 division, the division is an agent of the association or foreign cooperative upon which process,
646 notice, or a demand may be served.
647 (3) Service of process, notice, or a demand on the division as agent of a limited

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- 22 - 648 cooperative association or foreign cooperative may be made by delivering to the division two
649 copies of the process, notice, or demand. The division shall forward one copy by registered or
650 certified mail, return receipt requested, to the association or foreign cooperative at its principal
651 office.
652 (4) Service is effected under Subsection (3) on the earliest of:
653 (a) the date the limited cooperative association or foreign cooperative receives the
654 process, notice, or demand;
655 (b) the date shown on the return receipt, if signed on behalf of the association or
656 foreign cooperative; or
657 (c) five days after the process, notice, or demand is deposited by the division for
658 delivery by the United States Postal Service, if mailed postage prepaid to the address of the
659 principal office on file with the division.
660 (5) The division shall keep a record of each process, notice, and demand served
661 pursuant to this section and record the time of, and the action taken regarding, the service.
662 (6) This section does not affect the right to serve process, notice, or a demand in any
663 other manner provided by law.
664 Section 23. Section 16-16-201 is enacted to read:
665 Part 2. Filing and Annual Reports
666 16-16-201. Signing of records delivered for filing to division.
667 (1) A record delivered to the division for filing pursuant to this chapter must be signed
668 as follows:
669 (a) The initial articles of organization must be signed by at least one organizer.
670 (b) A statement of cancellation under Subsection 16-16-302 (4) must be signed by at
671 least one organizer.
672 (c) Except as otherwise provided in Subsection (1)(d), a record signed on behalf of an
673 existing limited cooperative association must be signed by an officer.
674 (d) A record filed on behalf of a dissolved association must be signed by a person
675 winding up activities under Section 16-16-1206 or a person appointed under Section
676 16-16-1206 to wind up those activities.
677 (e) Any other record must be signed by the person on whose behalf the record is
678 delivered to the division.

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- 23 - 679 (2) Any record to be signed under this chapter may be signed by an authorized agent.
680 Section 24. Section 16-16-202 is enacted to read:
681 16-16-202. Signing and filing of records pursuant to judicial order.
682 (1) If a person required by this chapter to sign or deliver a record to the division for
683 filing does not do so, the district court, upon petition of an aggrieved person, may order:
684 (a) the person to sign the record and deliver it to the division for filing; or
685 (b) delivery of the unsigned record to the division for filing.
686 (2) An aggrieved person under Subsection (1), other than the limited cooperative
687 association or foreign cooperative to which the record pertains, shall make the association or
688 foreign cooperative a party to the action brought to obtain the order.
689 (3) An unsigned record filed pursuant to this section is effective.
690 Section 25. Section 16-16-203 is enacted to read:
691 16-16-203. Delivery to and filing of records by division -- Effective time and date.
692 (1) A record authorized or required by this chapter to be delivered to the division for
693 filing must be captioned to describe the record's purpose, be in a medium and format permitted
694 by the division, and be delivered to the division. If the filing fees have been paid, and unless
695 the division determines that the record does not comply with the filing requirements of this
696 chapter, the division shall file the record.
697 (2) The division, upon request and payment of the required fee, shall furnish a certified
698 copy of any record filed by the division under this chapter to the person making the request.
699 (3) Except as otherwise provided in Sections 16-16-118 and 16-16-204 , a record
700 delivered to the division for filing under this chapter may specify an effective time and a
701 delayed effective date that may include an effective time on that date. Except as otherwise
702 provided in Sections 16-16-118 and 16-16-204 , a record filed by the division under this chapter
703 is effective:
704 (a) if the record does not specify an effective time and does not specify a delayed
705 effective date, on the date and at the time the record is filed as evidenced by the division's
706 endorsement of the date and time on the record;
707 (b) if the record specifies an effective time but not a delayed effective date, on the date
708 the record is filed at the time specified in the record;
709 (c) if the record specifies a delayed effective date but not an effective time, at 12:01

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- 24 - 710 a.m. on the earlier of:
711 (i) the specified date; or
712 (ii) the 90th day after the record is filed; or
713 (d) if the record specifies an effective time and a delayed effective date, at the specified
714 time on the earlier of:
715 (i) the specified date; or
716 (ii) the 90th day after the record is filed.
717 Section 26. Section 16-16-204 is enacted to read:
718 16-16-204. Correcting filed record.
719 (1) A limited cooperative association or foreign cooperative may deliver to the division
720 for filing a statement of correction to correct a record previously delivered by the association or
721 foreign cooperative to the division and filed by the division if, at the time of filing, the record
722 contained inaccurate information or was defectively signed.
723 (2) A statement of correction may not state a delayed effective date and must:
724 (a) describe the record to be corrected, including its filing date, or have attached a copy
725 of the record as filed;
726 (b) specify the inaccurate information and the reason it is inaccurate or the manner in
727 which the signing was defective; and
728 (c) correct the inaccurate information or defective signature.
729 (3) When filed by the division, a statement of correction is effective:
730 (a) when filed as to persons relying on the inaccurate information or defective signature
731 before its correction and adversely affected by the correction; and
732 (b) as to all other persons, retroactively as of the effective date and time of the record
733 the statement corrects.
734 Section 27. Section 16-16-205 is enacted to read:
735 16-16-205. Liability for inaccurate information in filed record.
736 If a record delivered to the division for filing under this chapter and filed by the division
737 contains inaccurate information, a person that suffers a loss by reliance on the information may
738 recover damages for the loss from a person that signed the record or caused another to sign it
739 on the person's behalf and knew at the time the record was signed that the information was
740 inaccurate.

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- 25 - 741 Section 28. Section 16-16-206 is enacted to read:
742 16-16-206. Certificate of good standing or authorization.
743 (1) The division, upon request and payment of the required fee, shall furnish any
744 person that requests it a certificate of good standing for a limited cooperative association if the
745 records filed in the office of the division show that the division has filed the association's
746 articles of organization, that the association is in good standing, and that the division has not
747 filed a statement of termination.
748 (2) The division, upon request and payment of the required fee, shall furnish to any
749 person that requests it a certificate of authority for a foreign cooperative if the records filed in
750 the office of the division show that the division has filed the foreign cooperative's certificate of
751 authority, has not revoked nor has reason to revoke the certificate of authority, and has not filed
752 a notice of cancellation.
753 (3) Subject to any exceptions stated in the certificate, a certificate of good standing or
754 authority issued by the division establishes conclusively that the limited cooperative
755 association or foreign cooperative is in good standing or is authorized to transact business in
756 this state.
757 Section 29. Section 16-16-207 is enacted to read:
758 16-16-207. Annual report for division.
759 (1) A limited cooperative association or foreign cooperative authorized to transact
760 business in this state shall deliver to the division for filing an annual report that states:
761 (a) the name of the association or foreign cooperative;
762 (b) the street address and, if different, mailing address of the association's or foreign
763 cooperative's designated office and the name of its agent for service of process at the
764 designated office;
765 (c) the street address and, if different, mailing address of the association's or foreign
766 cooperative's principal office; and
767 (d) in the case of a foreign cooperative, the state or other jurisdiction under whose law
768 the foreign cooperative is formed and any alternative name adopted under Section 16-16-1405 .
769 (2) Information in an annual report must be current as of the date the report is delivered
770 to the division.
771 (3) The first annual report must be delivered to the division between January 1 and

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Senate Committee Amendments 2-4-2008 rd/crp 772

April 1 of the year following the calendar year in which the limited cooperative association is
773 formed or the foreign cooperative is authorized to transact business in this state. S. [ An ] For
773a subsequent years, an .S annual
774 report must be delivered to the division S. [ between January 1 and April 1 of each subsequent
775 calendar year ] during the month in which falls the anniversary of the limited cooperative
775a association's organization or the foreign cooperative's authorization to transact business .S .
776 (4) If an annual report does not contain the information required by Subsection (1), the
777 division shall promptly notify the reporting limited cooperative association or foreign
778 cooperative and return the report for correction. If the report is corrected to contain the
779 information required by Subsection (1) and delivered to the division not later than 30 days after
780 the date of the notice from the division, it is timely delivered.
781 (5) If a filed annual report contains an address of the designated office, name of the
782 agent for service of process, or address of the principal office which differs from the
783 information shown in the records of the division immediately before the filing, the differing
784 information in the annual report is considered a statement of change.
785 (6) If a limited cooperative association fails to deliver an annual report under this
786 section, the division may proceed under Section 16-16-1211 to dissolve the association
787 administratively.
788 (7) If a foreign cooperative fails to deliver an annual report under this section, the
789 division may revoke the certificate of authority of the cooperative.
790 Section 30. Section 16-16-208 is enacted to read:
791 16-16-208. Filing fees.
792 The filing fee for records filed under this part by the division shall be established by the
793 division in accordance with Section 63-38-3.2 .
794 Section 31. Section 16-16-301 is enacted to read:
795 Part 3. Formation and Initial Articles of Organization of Limited Cooperative
796 Association
797 16-16-301. Organizers.
798 A limited cooperative association must be organized by one or more organizers.
799 Section 32. Section 16-16-302 is enacted to read:
800 16-16-302. Formation of limited cooperative association -- Articles of
801 organization.
802 (1) To form a limited cooperative association, an organizer of the association must

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- 27 - 803 deliver articles of organization to the division for filing. The articles must state:
804 (a) the name of the association;
805 (b) the purposes for which the association is formed;
806 (c) the street address and, if different, mailing address of the association's initial
807 designated office and the name of the association's initial agent for service of process at the
808 designated office;
809 (d) the street address and, if different, mailing address of the initial principal office;
810 (e) the name and street address and, if different, mailing address of each organizer; and
811 (f) the term for which the association is to exist if other than perpetual.
812 (2) Subject to Subsection 16-16-113 (1), articles of organization may contain any other
813 provisions in addition to those required by Subsection (1).
814 (3) A limited cooperative association is formed after articles of organization that
815 substantially comply with Subsection (1) are delivered to the division, are filed, and become
816 effective under Subsection 16-16-203 (3).
817 (4) If articles of organization filed by the division state a delayed effective date, a
818 limited cooperative association is not formed if, before the articles take effect, an organizer
819 signs and delivers to the division for filing a statement of cancellation.
820 Section 33. Section 16-16-303 is enacted to read:
821 16-16-303. Organization of limited cooperative association.
822 (1) After a limited cooperative association is formed:
823 (a) if initial directors are named in the articles of organization, the initial directors shall
824 hold an organizational meeting to adopt initial bylaws and carry on any other business
825 necessary or proper to complete the organization of the association; or
826 (b) if initial directors are not named in the articles of organization, the organizers shall
827 designate the initial directors and call a meeting of the initial directors to adopt initial bylaws
828 and carry on any other business necessary or proper to complete the organization of the
829 association.
830 (2) Unless the articles of organization otherwise provide, the initial directors may cause
831 the limited cooperative association to accept members, including those necessary for the
832 association to begin business.
833 (3) Initial directors need not be members.

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- 28 - 834 (4) An initial director serves until a successor is elected and qualified at a members
835 meeting or the director is removed, resigns, is adjudged incompetent, or dies.
836 Section 34. Section 16-16-304 is enacted to read:
837 16-16-304. Bylaws.
838 (1) Bylaws must be in a record and, if not stated in the articles of organization, must
839 include:
840 (a) a statement of the capital structure of the limited cooperative association, including:
841 (i) the classes or other types of members' interests and relative rights, preferences, and
842 restrictions granted to or imposed upon each class or other type of member's interest; and
843 (ii) the rights to share in profits or distributions of the association;
844 (b) a statement of the method for admission of members;
845 (c) a statement designating voting and other governance rights, including which
846 members have voting power and any restriction on voting power;
847 (d) a statement that a member's interest is transferable if it is to be transferable and a
848 statement of the conditions upon which it may be transferred;
849 (e) a statement concerning the manner in which profits and losses are allocated and
850 distributions are made among patron members and, if investor members are authorized, the
851 manner in which profits and losses are allocated and how distributions are made among
852 investor members and between patron members and investor members;
853 (f) a statement concerning:
854 (i) whether persons that are not members but conduct business with the association
855 may be permitted to share in allocations of profits and losses and receive distributions; and
856 (ii) the manner in which profits and losses are allocated and distributions are made
857 with respect to those persons; and
858 (g) a statement of the number and terms of directors or the method by which the
859 number and terms are determined.
860 (2) Subject to Subsection 16-16-113 (3) and the articles of organization, bylaws may
861 contain any other provision for managing and regulating the affairs of the association.
862 (3) In addition to amendments permitted under Part 4, Amendment of Organic Rules of
863 Limited Cooperative Association, the initial board of directors may amend the bylaws by a
864 majority vote of the directors at any time before the admission of members.

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- 29 - 865 Section 35. Section 16-16-401 is enacted to read:
866 Part 4. Amendment of Organic Rules of Limited Cooperative Association
867 16-16-401. Authority to amend organic rules.
868 (1) A limited cooperative association may amend its organic rules under this part for
869 any lawful purpose. In addition, the initial board of directors may amend the bylaws of an
870 association under Section 16-16-304 .
871 (2) Unless the organic rules otherwise provide, a member does not have a vested
872 property right resulting from any provision in the organic rules, including a provision relating
873 to the management, control, capital structure, distribution, entitlement, purpose, or duration of
874 the limited cooperative association.
875 Section 36. Section 16-16-402 is enacted to read:
876 16-16-402. Notice and action on amendment of organic rules.
877 (1) Except as provided in Subsections 16-16-401 (1) and 16-16-405 (6), the organic
878 rules of a limited cooperative association may be amended only at a members meeting. An
879 amendment may be proposed by either:
880 (a) a majority of the board of directors, or a greater percentage if required by the
881 organic rules; or
882 (b) one or more petitions signed by at least 10% of the patron members or at least 10%
883 of the investor members.
884 (2) The board of directors shall call a members meeting to consider an amendment
885 proposed pursuant to Subsection (1). The meeting must be held not later than 90 days
886 following the proposal of the amendment by the board or receipt of a petition. The board must
887 mail or otherwise transmit or deliver in a record to each member:
888 (a) the proposed amendment, or a summary of the proposed amendment and a
889 statement of the manner in which a copy of the amendment in a record may be reasonably
890 obtained by a member;
891 (b) a recommendation that the members approve the amendment, or if the board
892 determines that because of conflict of interest or other special circumstances it should not make
893 a favorable recommendation, the basis for that determination;
894 (c) a statement of any condition of the board's submission of the amendment to the
895 members; and

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- 30 - 896 (d) notice of the meeting at which the proposed amendment will be considered, which
897 must be given in the same manner as notice for a special meeting of members.
898 Section 37. Section 16-16-403 is enacted to read:
899 16-16-403. Change to amendment of organic rules at meeting.
900 (1) A substantive change to a proposed amendment of the organic rules may not be
901 made at the members meeting at which a vote on the amendment occurs.
902 (2) A nonsubstantive change to a proposed amendment of the organic rules may be
903 made at the members meeting at which the vote on the amendment occurs and need not be
904 separately voted upon by the board of directors.
905 (3) A vote to adopt a nonsubstantive change to a proposed amendment to the organic
906 rules must be by the same percentage of votes required to pass a proposed amendment.
907 Section 38. Section 16-16-404 is enacted to read:
908 16-16-404. Voting by district, class, or voting group.
909 (1) This section applies if the organic rules provide for voting by district or class, or if
910 there is one or more identifiable voting groups that a proposed amendment to the organic rules
911 would affect differently from other members with respect to matters identified in Subsections
912 16-16-405 (5)(a) through (e). Approval of the amendment requires the same percentage of
913 votes of the members of that district, class, or voting group required in Sections 16-16-405 and
914 16-16-514 .
915 (2) If a proposed amendment to the organic rules would affect members in two or more
916 districts or classes entitled to vote separately under Subsection (1) in the same or a substantially
917 similar way, the districts or classes affected must vote as a single voting group unless the
918 organic rules otherwise provide for separate voting.
919 Section 39. Section 16-16-405 is enacted to read:
920 16-16-405. Approval of amendment.
921 (1) Subject to Section 16-16-404 and Subsections (3) and (4), an amendment to the
922 articles of organization must be approved by:
923 (a) at least two-thirds of the voting power of members present at a members meeting
924 called under Section 16-16-402 ; and
925 (b) if the limited cooperative association has investor members, at least a majority of
926 the votes cast by patron members, unless the organic rules require a greater percentage vote by

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- 31 - 927 patron members.
928 (2) Subject to Section 16-16-404 and Subsections (3), (4), (5), and (6), an amendment
929 to the bylaws must be approved by:
930 (a) at least a majority vote of the voting power of all members present at a members
931 meeting called under Section 16-16-402 , unless the organic rules require a greater percentage;
932 and
933 (b) if a limited cooperative association has investor members, a majority of the votes
934 cast by patron members, unless the organic rules require a larger affirmative vote by patron
935 members.
936 (3) The organic rules may require that the percentage of votes under Subsection (1)(a)
937 or (2)(a) be:
938 (a) a different percentage that is not less than a majority of members voting at the
939 meeting;
940 (b) measured against the voting power of all members; or
941 (c) a combination of Subsections (3)(a) and (b).
942 (4) Consent in a record by a member must be delivered to a limited cooperative
943 association before delivery of an amendment to the articles of organization or restated articles
944 of organization for filing pursuant to Section 16-16-407 , if as a result of the amendment the
945 member will have:
946 (a) personal liability for an obligation of the association; or
947 (b) an obligation or liability for an additional contribution.
948 (5) The vote required to amend bylaws must satisfy the requirements of Subsection (1)
949 if the proposed amendment modifies:
950 (a) the equity capital structure of the limited cooperative association, including the
951 rights of the association's members to share in profits or distributions, or the relative rights,
952 preferences, and restrictions granted to or imposed upon one or more districts, classes, or
953 voting groups of similarly situated members;
954 (b) the transferability of a member's interest;
955 (c) the manner or method of allocation of profits or losses among members;
956 (d) the quorum for a meeting and the rights of voting and governance; or
957 (e) unless otherwise provided in the organic rules, the terms for admission of new

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- 32 - 958 members.
959 (6) Except for the matters described in Subsection (5), the articles of organization may
960 delegate amendment of all or a part of the bylaws to the board of directors without requiring
961 member approval.
962 (7) If the articles of organization delegate amendment of bylaws to the board of
963 directors, the board shall provide a description of any amendment of the bylaws made by the
964 board to the members in a record not later than 30 days after the amendment, but the
965 description may be provided at the next annual members meeting if the meeting is held within
966 the 30-day period.
967 Section 40. Section 16-16-406 is enacted to read:
968 16-16-406. Restated articles of organization.
969 A limited cooperative association, by the affirmative vote of a majority of the board of
970 directors taken at a meeting for which the purpose is stated in the notice of the meeting, may
971 adopt restated articles of organization that contain the original articles as previously amended.
972 Restated articles may contain amendments if the restated articles are adopted in the same
973 manner and with the same vote as required for amendments to the articles under Subsection
974 16-16-405 (1). Upon filing, restated articles supersede the existing articles and all amendments.
975 Section 41. Section 16-16-407 is enacted to read:
976 16-16-407. Amendment or restatement of articles of organization--Filing.
977 (1) To amend its articles of organization, a limited cooperative association must deliver
978 to the division for filing an amendment of the articles, or restated articles of organization or
979 articles of conversion or merger pursuant to Part 16, Conversion and Merger, which contain
980 one or more amendments of the articles of organization, stating:
981 (a) the name of the association;
982 (b) the date of filing of the association's initial articles; and
983 (c) the changes the amendment makes to the articles as most recently amended or
984 restated.
985 (2) Before the beginning of the initial meeting of the board of directors, an organizer
986 who knows that information in the filed articles of organization was inaccurate when the
987 articles were filed or has become inaccurate due to changed circumstances shall promptly:
988 (a) cause the articles to be amended; or

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- 33 - 989 (b) if appropriate, deliver an amendment to the division for filing pursuant to Section
990 16-16-203 .
991 (3) If restated articles of organization are adopted, the restated articles may be
992 delivered to the division for filing in the same manner as an amendment.
993 (4) Upon filing, an amendment of the articles of organization or other record
994 containing an amendment of the articles which has been properly adopted by the members is
995 effective as provided in Subsection 16-16-203 (3).
996 Section 42. Section 16-16-501 is enacted to read:
997 Part 5. Members
998 16-16-501. Members.
999 To begin business, a limited cooperative association must have at least two patron
1000 members unless the sole member is a cooperative.
1001 Section 43. Section 16-16-502 is enacted to read:
1002 16-16-502. Becoming a member.
1003 A person becomes a member:
1004 (1) as provided in the organic rules;
1005 (2) as the result of a merger or conversion under Part 16, Conversion and Merger; or
1006 (3) with the consent of all the members.
1007 Section 44. Section 16-16-503 is enacted to read:
1008 16-16-503. No power as member to bind association.
1009 A member, solely by reason of being a member, may not act for or bind the limited
1010 cooperative association.
1011 Section 45. Section 16-16-504 is enacted to read:
1012 16-16-504. No liability as member for association's obligations.
1013 Unless the articles of organization otherwise provide, a debt, obligation, or other
1014 liability of a limited cooperative association is solely that of the association and is not the debt,
1015 obligation, or liability of a member solely by reason of being a member.
1016 Section 46. Section 16-16-505 is enacted to read:
1017 16-16-505. Right of member and former member to information.
1018 (1) Not later than ten business days after receipt of a demand made in a record, a
1019 limited cooperative association shall permit a member to obtain, inspect, and copy in the

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- 34 - 1020 association's principal office required information listed in Subsections 16-16-114 (1)(a)
1021 through (h) during regular business hours. A member need not have any particular purpose for
1022 seeking the information. The association is not required to provide the same information listed
1023 in Subsections 16-16-114 (1)(b) through (h) to the same member more than once during a
1024 six-month period.
1025 (2) On demand made in a record received by the limited cooperative association, a
1026 member may obtain, inspect, and copy in the association's principal office required information
1027 listed in Subsections 16-16-114 (1)(i), (j), (l), (m), (p), and (r) during regular business hours, if:
1028 (a) the member seeks the information in good faith and for a proper purpose reasonably
1029 related to the member's interest;
1030 (b) the demand includes a description with reasonable particularity of the information
1031 sought and the purpose for seeking the information;
1032 (c) the information sought is directly connected to the member's purpose; and
1033 (d) the demand is reasonable.
1034 (3) Not later than ten business days after receipt of a demand pursuant to Subsection
1035 (2), a limited cooperative association shall provide, in a record, the following information to
1036 the member that made the demand:
1037 (a) if the association agrees to provide the demanded information:
1038 (i) what information the association will provide in response to the demand; and
1039 (ii) a reasonable time and place at which the association will provide the information;
1040 or
1041 (b) if the association declines to provide some or all of the demanded information, the
1042 association's reasons for declining.
1043 (4) A person dissociated as a member may obtain, inspect, and copy information
1044 available to a member under Subsection (1) or (2) by delivering a demand in a record to the
1045 limited cooperative association in the same manner and subject to the same conditions
1046 applicable to a member under Subsection (2) if:
1047 (a) the information pertains to the period during which the person was a member in the
1048 association; and
1049 (b) the person seeks the information in good faith.
1050 (5) A limited cooperative association shall respond to a demand made pursuant to

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- 35 - 1051 Subsection (4) in the manner provided in Subsection (3).
1052 (6) Not later than ten business days after receipt by a limited cooperative association of
1053 a demand made by a member in a record, but not more often than once in a six-month period,
1054 the association shall deliver to the member a record stating the information with respect to the
1055 member required by Subsection 16-16-114 (1)(q).
1056 (7) A limited cooperative association may impose reasonable restrictions, including
1057 nondisclosure restrictions, on the use of information obtained under this section. In a dispute
1058 concerning the reasonableness of a restriction under this Subsection (7), the association has the
1059 burden of proving reasonableness.
1060 (8) A limited cooperative association may charge a person that makes a demand under
1061 this section reasonable costs of copying, limited to the costs of labor and material.
1062 (9) A person that may obtain information under this section may obtain the information
1063 through an attorney or other agent. A restriction imposed on the person under Subsection (7)
1064 or by the organic rules applies to the attorney or other agent.
1065 (10) The rights stated in this section do not extend to a person as transferee.
1066 (11) The organic rules may require a limited cooperative association to provide more
1067 information than required by this section and may establish conditions and procedures for
1068 providing the information.
1069 Section 47. Section 16-16-506 is enacted to read:
1070 16-16-506. Annual meeting of members.
1071 (1) Members shall meet annually at a time provided in the organic rules or set by the
1072 board of directors not inconsistent with the organic rules.
1073 (2) An annual members meeting may be held inside or outside this state at the place
1074 stated in the organic rules or selected by the board of directors not inconsistent with the organic
1075 rules.
1076 (3) Unless the organic rules otherwise provide, members may attend or conduct an
1077 annual members meeting through any means of communication if all members attending the
1078 meeting can communicate with each other during the meeting.
1079 (4) The board of directors shall report, or cause to be reported, at the association's
1080 annual members meeting the association's business and financial condition as of the close of
1081 the most recent fiscal year.

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- 36 - 1082 (5) Unless the organic rules otherwise provide, the board of directors shall designate
1083 the presiding officer of the association's annual members meeting.
1084 (6) Failure to hold an annual members meeting does not affect the validity of any
1085 action by the limited cooperative association.
1086 Section 48. Section 16-16-507 is enacted to read:
1087 16-16-507. Special meeting of members.
1088 (1) A special meeting of members may be called only:
1089 (a) as provided in the organic rules;
1090 (b) by a majority vote of the board of directors on a proposal stating the purpose of the
1091 meeting;
1092 (c) by demand in a record signed by members holding at least 20% of the voting power
1093 of the persons in any district or class entitled to vote on the matter that is the purpose of the
1094 meeting stated in the demand; or
1095 (d) by demand in a record signed by members holding at least 10% of the total voting
1096 power of all the persons entitled to vote on the matter that is the purpose of the meeting stated
1097 in the demand.
1098 (2) A demand under Subsection (1)(c) or (d) must be submitted to the officer of the
1099 limited cooperative association charged with keeping its records.
1100 (3) Any voting member may withdraw its demand under Subsection (1)(c) or (d) before
1101 receipt by the limited cooperative association of demands sufficient to require a special
1102 meeting of members.
1103 (4) A special meeting of members may be held inside or outside this state at the place
1104 stated in the organic rules or selected by the board of directors not inconsistent with the organic
1105 rules.
1106 (5) Unless the organic rules otherwise provide, members may attend or conduct a
1107 special meeting of members through the use of any means of communication if all members
1108 attending the meeting can communicate with each other during the meeting.
1109 (6) Only business within the purpose or purposes stated in the notice of a special
1110 meeting of members may be conducted at the meeting.
1111 (7) Unless the organic rules otherwise provide, the presiding officer of a special
1112 meeting of members shall be designated by the board of directors.

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- 37 - 1113 Section 49. Section 16-16-508 is enacted to read:
1114 16-16-508. Notice of members meeting.
1115 (1) A limited cooperative association shall notify each member of the time, date, and
1116 place of a members meeting at least 15 and not more than 60 days before the meeting.
1117 (2) Unless the articles of organization otherwise provide, notice of an annual members
1118 meeting need not include any purpose of the meeting.
1119 (3) Notice of a special meeting of members must include each purpose of the meeting
1120 as contained in the demand under Subsection 16-16-507 (1)(c) or (d) or as voted upon by the
1121 board of directors under Subsection 16-16-507 (1)(b).
1122 (4) Notice of a members meeting must be given in a record unless oral notice is
1123 reasonable under the circumstances.
1124 Section 50. Section 16-16-509 is enacted to read:
1125 16-16-509. Waiver of members meeting notice.
1126 (1) A member may waive notice of a members meeting before, during, or after the
1127 meeting.
1128 (2) A member's participation in a members meeting is a waiver of notice of that
1129 meeting unless the member objects to the meeting at the beginning of the meeting or promptly
1130 upon the member's arrival at the meeting and does not thereafter vote for or assent to action
1131 taken at the meeting.
1132 Section 51. Section 16-16-510 is enacted to read:
1133 16-16-510. Quorum of members.
1134 Unless the organic rules otherwise require a greater number of members or percentage
1135 of the voting power, the voting member or members present at a members meeting constitute a
1136 quorum.
1137 Section 52. Section 16-16-511 is enacted to read:
1138 16-16-511. Voting by patron members.
1139 Except as provided by Subsection 16-16-512 (1), each patron member has one vote.
1140 The organic rules may allocate voting power among patron members as provided in Subsection
1141 16-16-512 (1).
1142 Section 53. Section 16-16-512 is enacted to read:
1143 16-16-512. Determination of voting power of patron member.

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- 38 - 1144 (1) The organic rules may allocate voting power among patron members on the basis of
1145 one or a combination of the following:
1146 (a) one member, one vote;
1147 (b) use or patronage;
1148 (c) equity; or
1149 (d) if a patron member is a cooperative, the number of its patron members.
1150 (2) The organic rules may provide for the allocation of patron member voting power by
1151 districts or class, or any combination thereof.
1152 Section 54. Section 16-16-513 is enacted to read:
1153 16-16-513. Voting by investor members.
1154 If the organic rules provide for investor members, each investor member has one vote,
1155 unless the organic rules otherwise provide. The organic rules may provide for the allocation of
1156 investor member voting power by class, classes, or any combination of classes.
1157 Section 55. Section 16-16-514 is enacted to read:
1158 16-16-514. Voting requirements for members.
1159 (1) If a limited cooperative association has both patron and investor members, the
1160 following rules apply:
1161 (a) the total voting power of all patron members may not be less than a majority of the
1162 entire voting power entitled to vote; and
1163 (b) action on any matter is approved only upon the affirmative vote of at least a
1164 majority of:
1165 (i) all members voting at the meeting unless more than a majority is required by this
1166 chapter or the organic rules; and
1167 (ii) votes cast by patron members unless the organic rules require a larger affirmative
1168 vote by patron members.
1169 (2) The organic rules may provide for the percentage of the affirmative votes that must
1170 be cast by investor members to approve the matter.
1171 Section 56. Section 16-16-515 is enacted to read:
1172 16-16-515. Manner of voting.
1173 (1) Unless the organic rules otherwise provide, voting by a proxy at a members
1174 meeting is prohibited. This Subsection (1) does not prohibit delegate voting based on district

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- 39 - 1175 or class.
1176 (2) If voting by a proxy is permitted, a patron member may appoint only another patron
1177 member as a proxy and, if investor members are permitted, an investor member may appoint
1178 only another investor member as a proxy.
1179 (3) The organic rules may provide for the manner of and provisions governing the
1180 appointment of a proxy.
1181 (4) The organic rules may provide for voting on any question by ballot delivered by
1182 mail or voting by other means on questions that are subject to vote by members.
1183 Section 57. Section 16-16-516 is enacted to read:
1184 16-16-516. Action without a meeting.
1185 (1) Unless the organic rules require that action be taken only at a members meeting,
1186 any action that may be taken by the members may be taken without a meeting if each member
1187 entitled to vote on the action consents in a record to the action.
1188 (2) Consent under Subsection (1) may be withdrawn by a member in a record at any
1189 time before the limited cooperative association receives a consent from each member entitled
1190 to vote.
1191 (3) Consent to any action may specify the effective date or time of the action.
1192 Section 58. Section 16-16-517 is enacted to read:
1193 16-16-517. Districts and delegates -- Classes of members.
1194 (1) The organic rules may provide for the formation of geographic districts of patron
1195 members and:
1196 (a) for the conduct of patron member meetings by districts and the election of directors
1197 at the meetings; or
1198 (b) that districts may elect district delegates to represent and vote for the district at
1199 members meetings.
1200 (2) A delegate elected under Subsection (1)(b) has one vote unless voting power is
1201 otherwise allocated by the organic rules.
1202 (3) The organic rules may provide for the establishment of classes of members, for the
1203 preferences, rights, and limitations of the classes, and:
1204 (a) for the conduct of members meetings by classes and the election of directors at the
1205 meetings; or

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- 40 - 1206 (b) that classes may elect class delegates to represent and vote for the class in members
1207 meetings.
1208 (4) A delegate elected under Subsection (3)(b) has one vote unless voting power is
1209 otherwise allocated by the organic rules.
1210 Section 59. Section 16-16-601 is enacted to read:
1211 Part 6. Member's Interest in Limited Cooperative Association
1212 16-16-601. Member's interest.
1213 A member's interest:
1214 (1) is personal property;
1215 (2) consists of:
1216 (a) governance rights;
1217 (b) financial rights; and
1218 (c) the right or obligation, if any, to do business with the limited cooperative
1219 association; and
1220 (3) may be in certificated or uncertificated form.
1221 Section 60. Section 16-16-602 is enacted to read:
1222 16-16-602. Patron and investor members' interests.
1223 (1) Unless the organic rules establish investor members' interests, a member's interest
1224 is a patron member's interest.
1225 (2) Unless the organic rules otherwise provide, if a limited cooperative association has
1226 investor members, while a person is a member of the association, the person:
1227 (a) if admitted as a patron member, remains a patron member;
1228 (b) if admitted as an investor member, remains an investor member; and
1229 (c) if admitted as a patron member and investor member, remains a patron and investor
1230 member if not dissociated in one of the capacities.
1231 Section 61. Section 16-16-603 is enacted to read:
1232 16-16-603. Transferability of member's interest.
1233 (1) The provisions of this chapter relating to the transferability of a member's interest
1234 are subject to Title 70A, Uniform Commercial Code.
1235 (2) Unless the organic rules otherwise provide, a member's interest other than financial
1236 rights is not transferable.

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- 41 - 1237 (3) Unless a transfer is restricted or prohibited by the organic rules, a member may
1238 transfer the member's financial rights in the limited cooperative association.
1239 (4) The terms of any restriction on transferability of financial rights must be:
1240 (a) set forth in the organic rules and the member records of the association; and
1241 (b) conspicuously noted on any certificates evidencing a member's interest.
1242 (5) A transferee of a member's financial rights, to the extent the rights are transferred,
1243 has the right to share in the allocation of profits or losses and to receive the distributions to the
1244 member transferring the interest to the same extent as the transferring member.
1245 (6) A transferee of a member's financial rights does not become a member upon
1246 transfer of the rights unless the transferee is admitted as a member by the limited cooperative
1247 association.
1248 (7) A limited cooperative association need not give effect to a transfer under this
1249 section until the association has notice of the transfer.
1250 (8) A transfer of a member's financial rights in violation of a restriction on transfer
1251 contained in the organic rules is ineffective as to a person having notice of the restriction at the
1252 time of transfer.
1253 Section 62. Section 16-16-604 is enacted to read:
1254 16-16-604. Security interest and set-off.
1255 (1) A member or transferee may create an enforceable security interest in its financial
1256 rights in a limited cooperative association.
1257 (2) Unless the organic rules otherwise provide, a member may not create an
1258 enforceable security interest in the member's governance rights in a limited cooperative
1259 association.
1260 (3) The organic rules may provide that a limited cooperative association has a security
1261 interest in the financial rights of a member to secure payment of any indebtedness or other
1262 obligation of the member to the association. A security interest provided for in the organic
1263 rules is enforceable under, and governed by, Title 70A, Chapter 9a, Uniform Commercial Code
1264 - Secured Transactions.
1265 (4) Unless the organic rules otherwise provide, a member may not compel the limited
1266 cooperative association to offset financial rights against any indebtedness or obligation owed to
1267 the association.

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- 42 - 1268 Section 63. Section 16-16-605 is enacted to read:
1269 16-16-605. Charging orders for judgment creditor of member or transferee.
1270 (1) On application by a judgment creditor of a member or transferee, a court may enter
1271 a charging order against the financial rights of the judgment debtor for the unsatisfied amount
1272 of the judgment. A charging order issued under this Subsection (1) constitutes a lien on the
1273 judgment debtor's financial rights and requires the limited cooperative association to pay over
1274 to the creditor or receiver, to the extent necessary to satisfy the judgment, any distribution that
1275 would otherwise be paid to the judgment debtor.
1276 (2) To the extent necessary to effectuate the collection of distributions pursuant to a
1277 charging order under Subsection (1), the court may:
1278 (a) appoint a receiver of the share of the distributions due or to become due to the
1279 judgment debtor under the judgment debtor's financial rights, with the power to make all
1280 inquiries the judgment debtor might have made; and
1281 (b) make all other orders that the circumstances of the case may require to give effect
1282 to the charging order.
1283 (3) Upon a showing that distributions under a charging order will not pay the judgment
1284 debt within a reasonable time, the court may foreclose the lien and order the sale of the
1285 financial rights. The purchaser at the foreclosure sale obtains only the financial rights that are
1286 subject to the charging order, does not thereby become a member, and is subject to Section
1287 16-16-603 .
1288 (4) At any time before a sale pursuant to a foreclosure, a member or transferee whose
1289 financial rights are subject to a charging order under Subsection (1) may extinguish the
1290 charging order by satisfying the judgment and filing a certified copy of the satisfaction with the
1291 court that issued the charging order.
1292 (5) At any time before sale pursuant to a foreclosure, the limited cooperative
1293 association or one or more members whose financial rights are not subject to the charging order
1294 may pay to the judgment creditor the full amount due under the judgment and succeed to the
1295 rights of the judgment creditor, including the charging order. Unless the organic rules
1296 otherwise provide, the association may act under this Subsection (5) only with the consent of
1297 all members whose financial rights are not subject to the charging order.
1298 (6) This chapter does not deprive any member or transferee of the benefit of any

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- 43 - 1299 exemption laws applicable to the member's or transferee's financial rights.
1300 (7) This section provides the exclusive remedy by which a judgment creditor of a
1301 member or transferee may satisfy the judgment from the member's or transferee's financial
1302 rights.
1303 Section 64. Section 16-16-701 is enacted to read:
1304 Part 7. Marketing Contracts
1305 16-16-701. Authority.
1306 In this part, "marketing contract" means a contract between a limited cooperative
1307 association and another person, that need not be a patron member:
1308 (1) requiring the other person to sell, or deliver for sale or marketing on the person's
1309 behalf, a specified part of the person's products, commodities, or goods exclusively to or
1310 through the association or any facilities furnished by the association; or
1311 (2) authorizing the association to act for the person in any manner with respect to the
1312 products, commodities, or goods.
1313 Section 65. Section 16-16-702 is enacted to read:
1314 16-16-702. Marketing contracts.
1315 (1) If a marketing contract provides for the sale of products, commodities, or goods to
1316 a limited cooperative association, the sale transfers title to the association upon delivery or at
1317 any other specific time expressly provided by the contract.
1318 (2) A marketing contract may:
1319 (a) authorize a limited cooperative association to create an enforceable security interest
1320 in the products, commodities, or goods delivered; and
1321 (b) allow the association to sell the products, commodities, or goods delivered and pay
1322 the sales price on a pooled or other basis after deducting selling costs, processing costs,
1323 overhead, expenses, and other charges.
1324 (3) Some or all of the provisions of a marketing contract between a patron member and
1325 a limited cooperative association may be contained in the organic rules.
1326 Section 66. Section 16-16-703 is enacted to read:
1327 16-16-703. Duration of marketing contract.
1328 The initial duration of a marketing contract may not exceed ten years, but the contract
1329 may be self-renewing for additional periods not exceeding five years each. Unless the contract

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- 44 - 1330 provides for another manner or time for termination, either party may terminate the contract by
1331 giving notice in a record at least 90 days before the end of the current term.
1332 Section 67. Section 16-16-704 is enacted to read:
1333 16-16-704. Remedies for breach of contract.
1334 (1) Damages to be paid to a limited cooperative association for breach or anticipatory
1335 repudiation of a marketing contract may be liquidated, but only at an amount or under a
1336 formula that is reasonable in light of the actual or anticipated harm caused by the breach or
1337 repudiation. A provision that so provides is not a penalty.
1338 (2) Upon a breach of a marketing contract, whether by anticipatory repudiation or
1339 otherwise, a limited cooperative association may seek:
1340 (a) an injunction to prevent further breach; and
1341 (b) specific performance.
1342 (3) The remedies in this section are in addition to any other remedies available to an
1343 association under law other than this chapter.
1344 Section 68. Section 16-16-801 is enacted to read:
1345 Part 8. Directors and Officers
1346 16-16-801. Board of directors.
1347 (1) A limited cooperative association must have a board of directors of at least three
1348 individuals, unless the association has fewer than three members. If the association has fewer
1349 than three members, the number of directors may not be fewer than the number of members.
1350 (2) The affairs of a limited cooperative association must be managed by, or under the
1351 direction of, the board of directors. The board may adopt policies and procedures that do not
1352 conflict with the organic rules or this chapter.
1353 (3) An individual is not an agent for a limited cooperative association solely by being a
1354 director.
1355 Section 69. Section 16-16-802 is enacted to read:
1356 16-16-802. No liability as director for limited cooperative association's obligations.
1357 A debt, obligation, or other liability of a limited cooperative association is solely that of
1358 the association and is not a debt, obligation, or liability of a director solely by reason of being a
1359 director. An individual is not personally liable, directly or indirectly, for an obligation of an
1360 association solely by reason of being a director.

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- 45 - 1361 Section 70. Section 16-16-803 is enacted to read:
1362 16-16-803. Qualifications of directors.
1363 (1) Unless the organic rules otherwise provide, and subject to Subsection (3), each
1364 director of a limited cooperative association must be an individual who is a member of the
1365 association or an individual who is designated by a member that is not an individual for
1366 purposes of qualifying and serving as a director. Initial directors need not be members.
1367 (2) Unless the organic rules otherwise provide, a director may be an officer or
1368 employee of the limited cooperative association.
1369 (3) If the organic rules provide for nonmember directors, the number of nonmember
1370 directors may not exceed:
1371 (a) one, if there are two through four directors;
1372 (b) two, if there are five through eight directors; or
1373 (c) 1/3 of the total number of directors if there are at least nine directors.
1374 (4) The organic rules may provide qualifications for directors in addition to those in
1375 this section.
1376 Section 71. Section 16-16-804 is enacted to read:
1377 16-16-804. Election of directors and composition of board.
1378 (1) Unless the organic rules require a greater number:
1379 (a) the number of directors that must be patron members may not be fewer than:
1380 (i) one, if there are two or three directors;
1381 (ii) two, if there are four or five directors;
1382 (iii) three, if there are six through eight directors; or
1383 (iv) 1/3 of the directors if there are at least nine directors; and
1384 (b) a majority of the board of directors must be elected exclusively by patron members.
1385 (2) Unless the organic rules otherwise provide, if a limited cooperative association has
1386 investor members, the directors who are not elected exclusively by patron members are elected
1387 by the investor members.
1388 (3) Subject to Subsection (1), the organic rules may provide for the election of all or a
1389 specified number of directors by one or more districts or classes of members.
1390 (4) Subject to Subsection (1), the organic rules may provide for the nomination or
1391 election of directors by districts or classes, directly or by district delegates.

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- 46 - 1392 (5) If a class of members consists of a single member, the organic rules may provide
1393 for the member to appoint a director or directors.
1394 (6) Unless the organic rules otherwise provide, cumulative voting for directors is
1395 prohibited.
1396 (7) Except as otherwise provided by the organic rules, Subsection (5), or Sections
1397 16-16-303 , 16-16-516 , 16-16-517 , and 16-16-809 , member directors must be elected at an
1398 annual members meeting.
1399 Section 72. Section 16-16-805 is enacted to read:
1400 16-16-805. Term of director.
1401 (1) Unless the organic rules otherwise provide, and subject to Subsections (3) and (4)
1402 and Subsection 16-16-303 (3), the term of a director expires at the annual members meeting
1403 following the director's election or appointment. The term of a director may not exceed three
1404 years.
1405 (2) Unless the organic rules otherwise provide, a director may be reelected.
1406 (3) Except as otherwise provided in Subsection (4), a director continues to serve until a
1407 successor director is elected or appointed and qualifies or the director is removed, resigns, is
1408 adjudged incompetent, or dies.
1409 (4) Unless the organic rules otherwise provide, a director does not serve the remainder
1410 of the director's term if the director ceases to qualify to be a director.
1411 Section 73. Section 16-16-806 is enacted to read:
1412 16-16-806. Resignation of director.
1413 A director may resign at any time by giving notice in a record to the limited cooperative
1414 association. Unless the notice states a later effective date, a resignation is effective when the
1415 notice is received by the association.
1416 Section 74. Section 16-16-807 is enacted to read:
1417 16-16-807. Removal of director.
1418 Unless the organic rules otherwise provide, the following rules apply:
1419 (1) Members may remove a director with or without cause.
1420 (2) A member or members holding at least 10% of the total voting power entitled to be
1421 voted in the election of a director may demand removal of the director by one or more signed
1422 petitions submitted to the officer of the limited cooperative association charged with keeping

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- 47 - 1423 its records.
1424 (3) Upon receipt of a petition for removal of a director, an officer of the association or
1425 the board of directors shall:
1426 (a) call a special meeting of members to be held not later than 90 days after receipt of
1427 the petition by the association; and
1428 (b) mail or otherwise transmit or deliver in a record to the members entitled to vote on
1429 the removal, and to the director to be removed, notice of the meeting which complies with
1430 Section 16-16-508 .
1431 (4) A director is removed if the votes in favor of removal are equal to or greater than
1432 the votes required to elect the director.
1433 Section 75. Section 16-16-808 is enacted to read:
1434 16-16-808. Suspension of director by board.
1435 (1) A board of directors may suspend a director if, considering the director's course of
1436 conduct and the inadequacy of other available remedies, immediate suspension is necessary for
1437 the best interests of the association and the director is engaging, or has engaged, in:
1438 (a) fraudulent conduct with respect to the association or its members;
1439 (b) gross abuse of the position of director;
1440 (c) intentional or reckless infliction of harm on the association; or
1441 (d) any other behavior, act, or omission as provided by the organic rules.
1442 (2) A suspension under Subsection (1) is effective for 30 days unless the board of
1443 directors calls and gives notice of a special meeting of members for removal of the director
1444 before the end of the 30-day period in which case the suspension is effective until adjournment
1445 of the meeting or the director is removed.
1446 Section 76. Section 16-16-809 is enacted to read:
1447 16-16-809. Vacancy on board.
1448 (1) Unless the organic rules otherwise provide, a vacancy on the board of directors
1449 must be filled:
1450 (a) within a reasonable time by majority vote of the remaining directors until the next
1451 annual members meeting or a special meeting of members called to fill the vacancy; and
1452 (b) for the unexpired term by members at the next annual members meeting or a
1453 special meeting of members called to fill the vacancy.

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- 48 - 1454 (2) Unless the organic rules otherwise provide, if a vacating director was elected or
1455 appointed by a class of members or a district:
1456 (a) the new director must be of that class or district; and
1457 (b) the selection of the director for the unexpired term must be conducted in the same
1458 manner as would the selection for that position without a vacancy.
1459 (3) If a member appointed a vacating director, the organic rules may provide for that
1460 member to appoint a director to fill the vacancy.
1461 Section 77. Section 16-16-810 is enacted to read:
1462 16-16-810. Remuneration of directors.
1463 Unless the organic rules otherwise provide, the board of directors may set the
1464 remuneration of directors and of nondirector committee members appointed under Subsection
1465 16-16-817