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First Substitute H.B. 155

Representative Craig W. Buttars proposes the following substitute bill:




Sponsor: Craig W. Buttars

             6      LONG TITLE
             7      General Description:
             8          This bill clarifies the rights of withdrawing members from Agricultural Cooperative
             9      Associations to claim or receive assets.
             10      Highlighted Provisions:
             11          This bill:
             12          .    clarifies the rights of withdrawing members from Agricultural Cooperative
             13      Associations.
             14      Monies Appropriated in this Bill:
             15          None
             16      Other Special Clauses:
             17          None
             18      Utah Code Sections Affected:
             19      AMENDS:
             20          3-1-11, as last amended by Chapter 70, Laws of Utah 2003
             22      Be it enacted by the Legislature of the state of Utah:
             23          Section 1. Section 3-1-11 is amended to read:
             24           3-1-11. Certificates of and termination of membership -- Dividends and
             25      distribution of reserves -- Preferred stock -- Certificates of interest -- Unclaimed credits.

             26          (1) No certificate for membership or stock shall be issued until fully paid for, but
             27      bylaws may provide that a member may vote and hold office prior to payment in full for his
             28      membership or stock.
             29          (2) Dividends in excess of eight per centum per annum on the actual cash value of the
             30      consideration received by the association shall not be paid on common stock or membership
             31      capital, but dividends may be cumulative if so provided in the articles or bylaws.
             32          (3) (a) Savings in excess of dividends and additions to reserves and surplus shall be
             33      distributed on the basis of patronage.
             34          (b) The bylaws may provide that any distribution to a nonmember, who is eligible for
             35      membership, may be credited to that nonmember until the amount of the distribution equals the
             36      value of a membership certificate, or a share of the association's common stock.
             37          (c) The distribution credited to the account of the nonmember may be transferred to the
             38      membership fund at the option of the board, if, after two years, the amount is less than the
             39      value of the membership certificate or a share of common stock.
             40          (4) (a) The bylaws shall provide the time and manner of settlement of membership
             41      interests with members who withdraw from the association or whose membership is otherwise
             42      terminated.
             43          (b) Provisions for forfeiture of membership interests may be made in the bylaws.
             44          (c) After the termination of the membership, for whatever cause, the withdrawing
             45      member shall exercise no further control over the facilities, assets, or activities of the
             46      association. The withdrawing member may not claim or receive any assets of the association
             47      except as follows:
             48          (i) undistributed patronage allocated to the withdrawing member may be paid to the
             49      withdrawing member pursuant to the association's bylaws;
             50          (ii) the withdrawing member may be reimbursed for the par value of membership or
             51      stock in the association pursuant to the association's articles, bylaws, and membership
             52      agreement; and
             53          (iii) the withdrawing member shall receive any distributions to which the member is
             54      entitled pursuant to Subsection 3-1-20 (3)(d).
             55          (5) (a) An association may issue preferred stock to members and nonmembers.
             56          (b) Preferred stock may be redeemed or retired by the association on the terms and

             57      conditions as are provided in the articles or bylaws and printed on the stock certificates.
             58          (c) Preferred stockholders shall not be entitled to vote, but no change in their priority or
             59      preference rights shall be effective until the written consent of the holders of a majority of the
             60      preferred stock has been obtained.
             61          (d) Payment for preferred stock may be made in cash, services, or property on the basis
             62      of the fair value of the stock, services, and property, as determined by the board.
             63          (6) (a) The association may issue to each member a certificate of interest evidencing
             64      the member's interest in any fund, capital investment, or other assets of the association.
             65          (b) Those certificates may be transferred only to the association, or to other purchasers,
             66      as approved by the board of directors, under the terms and conditions provided for in the
             67      bylaws.
             68          (7) (a) As used in this Subsection (7), "reasonable effort" means:
             69          (i) a letter to a member's or former member's last-known address, a listing of
             70      unclaimed credits in an association publication, and the posting of a list of unclaimed credits at
             71      the association's principal place of business; and
             72          (ii) publishing a list of the unclaimed credits exceeding $25 each, or greater, in a
             73      newspaper of general circulation in the area where the association's principal offices are
             74      located.
             75          (b) The association may retain revolving certificates of interest described in this
             76      Subsection (7) as an exception to the provisions of Title 67, Chapter 4a, Unclaimed Property
             77      Act, if:
             78          (i) the board of directors of the association determines to revolve the certificates and
             79      the certificates remain unclaimed by the association's members or former members for five
             80      years after the credit is declared;
             81          (ii) the association is authorized to retain those credits by its bylaws;
             82          (iii) the board of directors of the association approves the retention; and
             83          (iv) before retaining the credits, the association makes a reasonable effort to locate and
             84      communicate the issuance of the credits to the members or former members.
             85          (c) (i) The board of directors may either add the unclaimed credits as a contribution to
             86      the capital fund, or use them to establish an agricultural educational program as described in
             87      Subsection (7)(c)(ii).

             88          (ii) If the board of directors chooses to use the unclaimed credits to establish an
             89      agricultural educational program, it shall establish an agricultural educational program to:
             90          (A) provide scholarships for low income and worthy students to colleges and
             91      universities;
             92          (B) provide funding for director training and education;
             93          (C) provide funds for cooperative education programs in secondary or higher education
             94      institutions; or
             95          (D) provide other educational opportunities.
             96          (iii) The board of directors may not distribute unclaimed credits to current patrons of
             97      the association.
             98          (iv) Upon dissolution of an association, the board of directors shall report and remit
             99      unclaimed credits to the Division of Unclaimed Property.
             100          (d) (i) Each association that applies credits under Subsection (7)(c) during a calendar
             101      year shall file an annual report with the State Treasurer by April 15 of the following year.
             102          (ii) The report shall specify:
             103          (A) the dollar amount of credits applied during the year;
             104          (B) the dollar amount of credit paid to claimants during the year; and
             105          (C) the aggregate dollar amount of credits applied since January 1, 1996.
             106          (e) At any time after the association retains credits under this Subsection (7), the
             107      association shall pay the members, former members, or their successors in interest, the value of
             108      the credit, without interest, if the members, former members, or their successors in interest:
             109          (i) file a written claim for payment with the association; and
             110          (ii) surrender the certificate issued by the association that evidences the credit.

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