S.B. 69 Enrolled

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;
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
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
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
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
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
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 on
213 the volume of patronage of the member with the cooperative association; and
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 Section
218 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
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 cooperative
258 association required by Section 16-16-302 . The term includes the articles as amended or
259 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
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, Marketing

282 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.
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 association
314 and a person which entitle the person to receive financial rights based on the value or quantity
315 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 association,
318 joint venture, association, public corporation, government or governmental subdivision, agency,
319 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 form.
324 (28) "Required information" means the information a limited cooperative association is
325 required to maintain under Section 16-16-114 .
326 (29) "Sign" means, with present intent to authenticate or adopt a record:
327 (a) to execute or adopt a tangible symbol; or
328 (b) to attach to or logically associate with the record an electronic symbol, sound, or
329 process.
330 (30) "State" means a state of the United States, the District of Columbia, Puerto Rico,
331 the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction
332 of the United States.
333 (31) "Transfer" includes an assignment, conveyance, deed, bill of sale, lease, mortgage,
334 security interest, encumbrance, gift, and transfer by operation of law.
335 (32) "Voting group" means any combination of one or more voting members in one or
336 more districts or classes that under the organic rules or this chapter are entitled to vote and can
337 be counted together collectively on a matter at a members meeting.

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

366 (3) Unless the articles of organization state a term for a limited cooperative
367 association's existence, the association has perpetual duration.
368 Section 8. Section 16-16-106 is enacted to read:
369 16-16-106. Powers.
370 A limited cooperative association may sue and be sued in its own name and do all things
371 necessary or convenient to carry on its activities. An association may maintain an action against
372 a member for harm caused to the association by the member's violation of a duty to the
373 association or of the organic law or organic rules.
374 Section 9. Section 16-16-107 is enacted to read:
375 16-16-107. Governing law.
376 The law of this state governs:
377 (1) the internal affairs of a limited cooperative association; and
378 (2) the liability of a member as member and a director as director for the debts,
379 obligations, or other liabilities of a limited cooperative association.
380 Section 10. Section 16-16-108 is enacted to read:
381 16-16-108. Supplemental principles of law.
382 Unless displaced by particular provisions of this chapter, the principles of law and equity
383 supplement this chapter.
384 Section 11. Section 16-16-109 is enacted to read:
385 16-16-109. Requirements of other laws.
386 (1) This chapter does not alter or amend any law that governs the licensing and
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