A. When a member of an association has paid his membership fee or stock subscription in full he shall receive, as the case may be, a certificate of membership or a stock certificate.

B. No association shall issue membership certificates or stock until they have been fully paid for, but an association in its bylaws may admit a member and allow him to vote and hold office as soon as twenty per centum (20%) of his membership fee or his stock certificate has been paid.

C. An association shall limit the interest it pays on membership capital or stock to an amount not greater than eight percent (8%) per annum. Such apportionment shall not be made until not less than ten (10%) percent of any undistributed balance accruing since the last apportionment, has been set aside in a surplus or reserve fund unless such surplus or reserve fund equal [equals] at least one hundred (100%) percent of the paid up membership fees or capital stock.

D. Undistributed balances from any source, in excess of additions to reserves and surplus, shall be distributed on the basis of patronage, that is according to the amount or value, as the association may decide, of the products sold to or through, and/or purchased from or through, the association by its patrons. The distribution of such balances may be restricted to members or be made at the same or a different rate for members and nonmembers. The bylaws may provide that any distribution to a nonmember, eligible for membership may be credited to such nonmember until the amount thereof equals the value of a membership certificate or a share of the association's common stock. Such a distribution credited to the account of a nonmember shall revert to the reserve fund to be used for educational purposes if, after two years, the amount is less than the value of a membership certificate or a share of common stock, or in case said person does not accept and exercise his membership privileges.

E. Ownership of common stock and/or membership certificates may be transferred by a member only to other associations or to persons engaged in the production of agricultural products, and who are eligible to hold same. Such transfer must be approved by the board of directors before it is binding on the association.

F. An association may issue and sell preferred stock to members or nonmembers. Preferred stock may be redeemable or retirable by the association on such terms and conditions as may be provided by the bylaws and printed on the stock certificate. Preferred stockholders shall not be entitled to vote. Whenever an association organized hereunder with preferred stock shall purchase the stock or any interest in any property of any person it may discharge the obligation so incurred wholly or in part by exchanging for the acquired interest shares of its preferred stock to an amount which would equal the fair market value of the stock or interest so purchased as determined by the board of directors.

History: Laws 1937, ch. 152, § 12; 1941 Comp., § 48-1312; 1953 Comp., § 45-14-12.

Bracketed material. — The bracketed material was inserted by the compiler and is not part of the law.

Intent of legislature in establishing required reserve in Subsection C was to assure protection of the association's creditors by establishing an adequate reserve fund and to establish a means for maintaining capital in the association. 1963 Op. Att'y Gen. No. 63-149.

Only common stock to be included in reserve fund requirement. — Because, in a stock association, the holders of common stock are the members of the association, but the preferred stockholders are not members and do not have a voice in the control of the corporation, the intention of the legislature was to include only common stock in the reserve fund requirement of Subsection C for stock associations. 1963 Op. Att'y Gen. No. 63-149.

Am. Jur. 2d, A.L.R. and C.J.S. references. — 18 Am. Jur. 2d Cooperative Associations § 22.

3 C.J.S. Agriculture § 142.