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Report of the Agricultural Law Committee

To the Council of Delegates:

The OSBA Agricultural Law Committee requests your favorable consideration of the following legislative proposal attached as Exhibit A.

A. A proposal to amend to Ohio’s Cooperative Law to clarify definitions and other changes to make the cooperative law modern and efficient.

Respectfully submitted,
Richard T. Ricketts, Columbus
Chair

Exhibit A

The purpose of the 1998 amendments to the Ohio Cooperative Law (ORC Chapter 1729) was to create a complete corporate statute that would provide a corporate organizational option under Ohio law for those whose purpose would best be served by a cooperative.

Prior to 1998, Chapter 1729 was a partially amended version of the original Ohio Cooperative Law adopted in 1923. It was available only for agricultural applications, except for an odd and inconsistent 1982 appendage designed for worker cooperatives. It was a partial corporate statute that made no provision for merger, dissolution, shareholder interests, and many other corporate law issues.

It was the intention of the 1998 amendments that the new Ohio Cooperative Law be consistent with other Ohio corporate statutes and the Revised Code in general; that it not disrupt or interfere with existing cooperatives; and that it provide a neutral modern cooperative organizational tool to any person seeking such an option for legitimate enterprise. The Ohio Cooperative Law is a modern Ohio corporate statute that covered those peculiar cooperative features that distinguish cooperatives from non-profit corporations and from other for-profit corporations.

In the 4-1/2 years of practical testing of the new Ohio Cooperative Law since 1998, Ohio cooperatives and many cooperative professionals across the country are quite pleased with the result. However, as with many such dramatically different first versions, there is room for improvement.

We recommend your favorable review and endorsement of the proposed revisions to ORC Chapter 1729.

Changes are proposed in the definitions section. The definition of "corporation" should be deleted because it suggests a false and confusing distinction between a cooperative association and a corporation. A corporation organized under the Ohio Cooperative Law or another other state’s cooperative law is a corporation. "Association" is a historic term used to identify cooperatives in state cooperative laws. However, a cooperative association is a corporation and should not to be confused with an unincorporated association (such as is referred to in R.C. Chapter 1745). The term "association" has caused some confusion with corporate law practitioners and with federal agencies and officials from other states. The statute should make it clear that "associations" are Ohio corporations.

Substitution of "cooperative" for "association" will mean that the references to "member," "membership stock" and "patronage stock" in Chapter 1729 will apply to both domestic and foreign associations.

A definition for patrons is added. Patrons are the primary object of a cooperative and doing business on a cooperative basis.

The proposal would expand the definition of "producer" to include lessors of either real property or personal property that is used for agricultural production.

Section 1729.01

As used in this chapter:

(A) "Agricultural cooperative" means a cooperative to which all of the following apply:

(1) The cooperative engages in any activity in connection with the propagation, raising, producing, harvesting, storing, drying, handling, processing, or marketing of agricultural products; procuring equipment and supplies or providing services for producers and others; bargaining; and any activity related to the foregoing.

(2) Producers or agricultural cooperatives exercise more than fifty per cent of the voting control of the cooperative.

(3) The cooperative does at least fifty per cent of its business with producers or agricultural cooperatives.

(B) "Agricultural products" includes aquacultural, horticultural, viticultural, forestry, dairy, livestock, poultry, bee, and farm products, and the produce or byproducts of any of such products.

(C) "Association" means any corporation organized under this chapter.

(D) "Bargaining" means the mutual obligation of a handler and a marketing cooperative to meet at reasonable times and confer and negotiate in good faith. Negotiations may include all terms relative to trading between handlers and producers. The obligation does not require either party to agree upon price, terms of sale, or any other marketing agreement, or to make a concession.

(E) "Board" means the board of directors of an association.

(F) "Cooperative" means an association or a foreign association.

(G) "Corporation" means any corporation, domestic or foreign, that is not a cooperative.

(H)"Entity," except as otherwise provided, means a foreign association, a foreign or domestic corporation other than a cooperative, or a foreign or domestic limited liability company.

(I)(H) "Foreign association" means a corporation organized under the cooperative laws of another state or the District of Columbia or a foreign corporation organized under the law other corporation laws of another state or the District of Columbia and operating that operates on a cooperative basis.

(J)(I) "Handler" means a person who acquires agricultural products under a sales contract for the purpose of processing or reselling the agricultural products.

(K)(J) "Marketing agreement" means an agreement, contract, or other arrangement between a cooperative and a member in which the member agrees to market all or a part of the products or produce produced by the member, or agrees to purchase all or a part of the member’s requirements for inputs, services, or supplies.

(L)(K) "Marketing cooperative" means any agricultural cooperative meeting the requirements of the "Co-operative Marketing Associations Act," 42 Stat. 388 (1922), 7 U.S.C.A. 291, that negotiates sales contracts with handlers on behalf of its members and is not in direct competition with any handler with which it negotiates such contracts.

(M)(L) "Member" means a person who has been qualified and accepted into membership in an association a cooperative.

(N)(M) "Membership stock" means any class of stock or other equity interest in an association a cooperative, continuous ownership of which is required for membership in an association. the cooperative.

(N) "Patron" means a person with whom a cooperative has made an enforceable agreement to allocate and distribute a per unit retain, patronage dividend, or patronage refund with respect to business conducted by th ecooperative with or for the person.

(O)"Patronage stock" means any stock or other equity interest in an association a cooperative that was originally issued by the association cooperative with respect to patronage transactions.

(P)"Person" includes a natural person, partnership, corporation, cooperative, or other entity.

(Q)"Processing" means changing the physical or chemical characteristics of agricultural products.

(R)"Producer" means a person engaged in the production of agricultural products for the market, including a lessor of land property used for production of agricultural products for the market who receives as rent part of the agricultural product of such land.

(S)"Sales contract" means a marketing agreement or other similar arrangement between a handler and a producer, negotiated by the producer or by an agricultural cooperative acting as agent for a producer, under which the producer agrees to grow or produce agricultural products for sale to the handler.

This revision is proposed to make clear that cooperative associations are Ohio corporations.

Section 1729.02

(A) An association may be organized under this chapter for any lawful purpose permitted to corporations by the laws of this state, except any such purpose that is inconsistent with the provisions of this chapter or other chapters of Title XVII of the Revised Code. This section does not authorize any professional services otherwise prohibited by law.

(B) Associations shall be corporations that are deemed nonprofit because they are not organized for the purpose of making a profit for themselves as such, or for the purpose of making a profit for their members as such, but for their members as patrons. Associations will be governed by the provisions of this Chapter and not Chapter 1702 of the Revised Code.

(C) This chapter shall be known as the "Ohio Cooperative Law."

The revisions to this section are proposed for clarification. Associations often issue substantial amounts of uncertificated non-stock equity interests. This change should make it clear that issuance of stock and non-stock equity interests and issuance of certificates for such equity interests are separate events. Since this section is permissive and not mandatory, the revisions make it clearer that there may be uncertificated stock and uncertificated non-stock equity interests.

Section 1729.03

Each association incorporated under this chapter shall have the following powers:

(A) It may make contracts, incur liabilities, and borrow money; issue capital stock and certificates representing other equity interests or indebtedness and issue certificates therefor; acquire property; and dispose of, mortgage, pledge, lease, or otherwise use in any manner, any of its property, or any interest in its property, wherever situated.

(B) It may invest its funds, lend money for its purposes, and hold any property as security for repayment.

(C) It may act as the agent or representative of any members or other patrons in any activities authorized by this chapter.

(D) It may conduct its business and affairs, have offices, and exercise its power in the United States or in any foreign country.

(E) It may establish reserves and invest these funds.

(F) It may buy, hold, and exercise all privileges of ownership over such real or personal property as is necessary, convenient, or incidental to the conduct of any authorized business of the association.

(G) It may establish, secure, own, and develop patents, trademarks, service marks and copyrights.

(H) Notwithstanding Chapter 169. of the Revised Code, it may effect the forfeiture of any unclaimed funds, including any unclaimed stocks stock or other equity interests, dividends, and patronage allocations, for which the owner cannot be found after a period of three years. Notice of the existence of these unclaimed funds and a request for written acknowledgment from the owner to the association shall be evidence of a bona fide attempt to deliver the unclaimed funds to the owner. If the notice is not acknowledged within thirty days after the notice is sent or within the period specified in the notice, if longer, all such unclaimed funds specified in the notice are thereafter forfeited and become the property of the association.

(I) It may make donations for charitable, scientific, educational, community development, or religious purposes, and may use all or part of the funds forfeited to the association under division (H) for these purposes.

(J) It may do everything necessary, suitable, or proper for the accomplishment of any of the purposes enumerated in this section. In addition it may exercise and possess all powers, rights, and privileges necessary or incidental to the purposes for which the association is organized or to the activities in which it is engaged, and any other powers, rights, and privileges granted to corporations by the laws of this state, except such as are inconsistent with the express provisions of this chapter.

(K)(1) An association may indemnify or agree to indemnify any person who was or is a party, or is threatened to be made a party, to any threatened, pending, or completed civil, criminal, administrative, or investigative action, suit, or proceeding, other than an action by or in the right of the association, by reason of the fact that the person is or was a director, officer, employee, agent or volunteer of the association, or is or was serving at the request of the association as a trustee, director, officer, employee, member, manager, agent or volunteer of another association, entity, partnership, joint venture, trust or other enterprise, against expenses, including attorney’s fees, judgments, fines, and amounts paid in settlement actually and reasonably incurred by the person in connection with such action, suit, or proceeding, if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the association, and with respect to any criminal action or proceeding, if the person had no reasonable cause to believe the conduct was unlawful. The termination of any action, suit, or proceeding by judgment, order, settlement, or conviction, or upon a plea of nolo contendere or its equivalent, shall not create, of itself, a presumption that the person did not act in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the association and, with respect to any criminal action or proceeding, a presumption that the person had reasonable cause to believe that the conduct was unlawful.

(2) An association may indemnify or agree to indemnify any person who was or is a party, or is threatened to be made a party, to any threatened, pending or completed action or suit by or in the right of the association to procure a judgment in its favor, by reason of the fact that the person is or was a director, officer, employee, agent or volunteer of the association, or is or was serving at the request of the association as a trustee, director, officer, employee, member, manager, agent or volunteer of another association, entity, partnership, joint venture, trust, or other enterprise against expenses, including attorney’s fees, actually and reasonably incurred by the person in connection with the defense or settlement of such action or suit, if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the association, except that no indemnification shall be made in respect of any of the following:

(a) Any claim, issue, or matter as to which such person is adjudged to be liable for negligence or misconduct in the performance of a duty to the association unless, and only to the extent that, the court of common pleas or the court in which the action or suit was brought determines, upon application, that, despite the adjudica tion of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses as the court of common pleas or such other court considers proper;

(b) Any action or suit in which liability is asserted against a director and that liability is asserted only pursuant to section 1729.25 of the Revised Code.

(3) To the extent that a person has been successful on the merits or otherwise in defense of any action, suit, or proceeding referred to in division (K)(1) or (2) of this section, or in defense of any claim, issue or matter in such an action, suit, or proceeding, such person shall be indemnified against expenses, including attorney’s fees, actually and reasonably incurred in connection with that action, suit, or proceeding.

(4) Unless ordered by a court and subject to division (K)(3) of this section, any indemnification under division (K)(1) or (2) of this section shall be made by the association only as authorized in the specific case, upon a determination that indemnification of the person is proper in the circumstances because the person has met the applicable standard of conduct set forth in division (K)(1) or (2) of this section. Such determination shall be made in any of the following manners:

(a) By a majority vote of a quorum consisting of directors of the indemnifying association who were not and are not parties to or threatened with the action, suit, or proceeding referred to in division (K)(1) or (2) of this section;

(b) Whether or not a quorum as described in division (K)(4)(a) of this section is obtainable, and if a majority of a quorum of disinterested directors so directs, in a written opinion by independent legal counsel other than an attorney, or a firm having associated with it an attorney, who has been retained by or who has per formed services for the association or any person to be indemnified within the past five years;

(c) By the members;

(d) By the court of common pleas or the court in which the action, suit, or proceed ing referred to in section (K)(1) or (2) of this section was brought.

(5)(a) Unless, at the time of a person’s act or omission that is the subject of an action, suit, or proceeding referred to in division (K)(1) or (2) of this section, the articles or bylaws of the association state, by specific reference to this division, that its provisions do not apply to the association, or unless the only liability asserted against a person in an action, suit, or proceeding referred to in division (K)(1) or (2) of this section is pursuant to section 1729.25 of the Revised Code, the expenses incurred by the person in defending the action, suit, or proceeding, including attorney’s fees, shall be paid by the association. Upon the request of the person and in accordance with division (K)(5)(b) of this section, those expenses shall be paid as they are incurred, in advance of the final disposition of the action, suit, or proceeding.

(b) Expenses, including attorney’s fees, incurred by a person in defending any action, suit, or proceeding referred to in division (K)(1) or (2) of this section may be paid by the association as they are incurred, in advance of the final disposition of the action, suit, or proceeding, as authorized by the board in the specific case, upon receipt of an undertaking by or on behalf of the person to repay the amount if it ultimately is determined that the person is not entitled to be indemnified by the association.

(6) The indemnification authorized by this section is not exclusive of, and shall be in addition to, any other rights granted to those seeking indemnification, pursuant to the articles or bylaws of the association, any agreement, a vote of members or disinterested directors of the association, or otherwise, both as to action in their official capacities and as to action in another capacity while holding their offices or positions, and shall continue as to a person who has ceased to be a director, officer, employee, member, manager, agent, or volunteer and shall inure to the benefit of the heirs, executors, and administrators of such person.

(7) An association may purchase and maintain insurance, or furnish similar protection, including, but not limited to, trust funds, letters of credit, or self-insurance, for or on behalf of any person who is or was a director, officer, employee, agent, or volunteer of the association, or is or was serving at the request of the association as a trustee, director, officer, employee, member, manager, agent, or volunteer or another association, entity, partnership, joint venture, trust or other enterprise, against any liability asserted against the person and incurred by the person in any such capacity, whether or not the association would have the power to indemnify such person against that liability under this section. Insurance may be so purchased from or so maintained with a person in which the association has a financial interest.

(8) As used in division (K) of this section, "association" includes all constituent associations and entities in a consolidation or merger, and the new or surviving association or entity, so that any person who is or was a director, officer, employee, agent, or volunteer of a constituent association or is or was serving at the request of a constituent association as a trustee, director, officer, employee, member, manager, agent or volunteer of another association, entity, partnership, joint venture, trust, or other enterprise, shall stand in the same position under this section with respect to the new or surviving association or entity as the person would if the person had served the new or surviving association or entity in the same capacity.

The proposed revision makes this subsection more precise and therefore, clearer in its meaning. The proposed addition of subpart (4) is a recognition that credit unions are cooperatives and that many of them have used "cooperative" in their name since the beginning of the credit union movement.

Section 1729.04

(A) The name of any association organized under this chapter shall include the word or abbreviation "cooperative," "coop," "co-operative," "co-op," "association," "assn.," "company," "co.," "incorporated," "inc.," "corporation," or "corp."

(B) No corporation, association, or other person organized or applying to do business in this state shall use the word or abbreviation "cooperative," "coop," "co-operative," or "co-op" as a part of its corporate or other business name or title, unless at least one of the following applies:

(1) It is complied with organized under this chapter.

(2) It is organized and operating on a cooperative basis under Chapter 1702 of the Revised Code.

(3) It is organized and operating in accordance with the cooperative laws of another state, the District of Columbia, or the United States.

(4) It is a state or federally chartered credit union.

The proposed revision here and elsewhere is an attempt to provide associations with more assurance as to the official record of their corporate status

Section 1729.06

(A) Two or more individuals may form an association under this chapter.

(B)(1) Every association shall have and maintain a statutory agent upon whom any process, notice, or demand against the association may be served. The agent may be a natural person who is a resident of this state or a corporation that is authorized by its articles of incorporation to act as such agent and has a business address in this state.

(2) Whenever appointment or designation of a statutory agent is required by this chapter, the appointment or designation shall be on a form prescribed by the secretary of state for the administration of this chapter and shall conform with section 1702.06 of the Revised Code.

Elimination of the requirement for a domestic principal place of business eliminated one of the local (residential) restrictions that was part of the prior statute. This proposal will also clarify that the board of directors will be elected at the first member meeting. It makes no difference if that meeting is an "annual" meeting or a "special" meeting.

Section 1729.07

(A) The articles of incorporation of an association shall set forth all of the following:

(1) The name of the association;

(2) The association’s purposes, as permitted by this chapter. It is sufficient to state in the articles that the association may engage in any activity within the purposes for which associations may be organized under this chapter.;

(3) The county and municipal corporation or township where the association’s principal place of business will be located which need not be within this state.;

(4) The names and addresses of the incorporators;

(5) The number of its directors or a statement that the number of directors shall be as specified in the bylaws;

(6) The names and addresses of those who are to serve as directors until the first annual meeting of members or until the election and qualification of their succes sors;

(7) Whether the association is organized with or without capital stock.

(a) If the association is organized without capital stock, the articles shall set forth the general rules by which the property rights and interests of each member are to be determined.

(b) If the association is organized with capital stock, the total amount of the stock,the number and par value of the shares, and dividend rights, if any. If there is more than one class of stock, the articles shall set forth a statement of the number of shares in each class and a statement of the designations, preferences, rights, and limitations of the shares in each class.

(B) The articles may include additional provisions, consistent with law, including provisions that are required or permitted to be set forth in the bylaws.

(C) The articles shall be signed by the incorporators and filed with the secretary of state in accordance with section 1729.12 of the Revised Code. The articles shall be accompanied by the appointment of a statutory agent in accordance with division (B) of section 1729.06 of the Revised Code. The legal existence of an association begins upon the filing of the articles and, unless the articles provide otherwise, its period of existence is perpetual.

This revision is proposed to make the intended meaning of the first sentence clearer. This board restatement authority should be distinguished from the authority conferred in 1729.08(D), to amend the articles. The proposal also makes it clear that the board-authorized amendment may be made only after the deleted item is no longer operative.

Section 1729.08

(A) The articles of incorporation of an association may be altered or amended at any regular meeting of the association or at any special meeting called for that purpose, provided that the text of the proposed change, or a general description of the change, is contained in the notice of the meeting. An amendment shall first be approved by two thirds of the directors and shall then be adopted by an affirmative vote of sixty per cent of the member votes cast on the amendment or, if the articles provide or permit, by the affirmative vote of a greater majority or by the affirmative vote of a simple majority of all member votes eligible to be cast on the amendment.

(B) Amendments to the articles of incorporation, when so adopted, shall be filed in accordance with section 1729.12 of the Revised Code.

(C) The board of an association may adopt a restatement of the articles that without a member vote, if the restatement merely incorporates amendments previously approved by the board and adopted by the members. An association may, by action taken in the manner required for an amendment, adopt restated articles that contain amendments made at the time of the restatement. Restated articles shall state that they are restated, or restated and amended, if amendments are adopted with the restatement, and shall supersede the existing articles and amendments. Restated articles shall meet the requirements of section 1729.07 of the Revised Code, except that the names and addresses of the incorporators and initial directors may be omitted. A restatement of the articles shall be filed in the manner prescribed for an amendment of the articles.

(D) Except as provided in the articles of incorporation, the board may adopt an amendment to the articles of incorporation without a member vote in any of the following cases:

(1) To change the principal place of business of the association;

(2) To designate and determine the rights and restrictions of a series within a class of capital stock, if permitted by the articles;

(3) To reduce the authorized number of shares of any class or series of capital stock to any number down to and including the number of the shares issued and out standing, and to assign the authorization for the number of shares so reduced to another class or classes of capital stock previously authorized;

(4) After a merger, consolidation, conversion, division, or occurrence of any other contingent event referred to in the articles of incorporation, to eliminate from the articles any statement or provision pertaining exclusively to the merger, consolida tion, conversion, division, or occurrence, and to make other changes required by such elimination, but only after such deleted item has been superseded in accor dance with the terms of the articles of incorporation or is otherwise no longer in effect.

The proposed revision here and elsewhere is an attempt to provide associations with more assurance as to the official record of their corporate status.

Section 1729.11

(A) An association whose articles of incorporation have been canceled or an association that has been dissolved in a manner other than for a voluntary dissolution as provided in section 1729.55 of the Revised Code, or a judicial dissolution as provided in section 1729.61 of the Revised Code, may be reinstated by filing, on a form prescribed by the secretary of state for the administration of this chapter, an application for reinstatement and the required appointment of a statutory agent, and by paying a filing fee of ten dollars.

(B) Upon reinstatement of an association’s articles of incorporation, the rights, privileges, and franchises, including all real or personal property rights and credits and all contract and other rights, of the association existing at the time that its articles were canceled or the dissolution became effective shall be continued in effect as if the articles had not been canceled or the dissolution had not occurred; and the association shall again be entitled to exercise the rights, privileges, and franchises authorized by its articles.

"Member" is substituted for "annual" in the first sentence for same reason as the revision proposed for section 1729.07(A)(6). The other changes to these subsections are intended to clarify that an association may amend its bylaws by board action, subject to limits imposed by the association’s members and the Ohio Cooperative Law.

Section 1729.16

(A) The initial bylaws may be adopted by the association’s directors who are to serve until the first annual member meeting. After the initial bylaws are adopted, bylaws may be adopted and amended only by the members unless the members adopt a bylaw that permits the board to make and amend specified bylaws articles or bylaws provide that the board, by a two-thirds vote of the entire board, may adopt or amend the bylaws or any specified bylaw.

(B) Any bylaw adopted or amended by the board shall be reported at the next regular member meeting. Any such bylaw is member meeting. Any bylaw adopted or amended by the board shall not conflict with the association’s articles of incorporation or this chapter of the revised code. Any such bylaw shall be subject to amendment or repeal by the members at any time.

(C) Unless the bylaws provide otherwise, any bylaw may be adopted, amended, or repealed by a majority of the member votes cast on the adoption, amendment, or repeal.

The substitution of "cooperative" for "association" in this provision allowing one member cooperative subsidiaries expands the availability of this provision to foreign cooperative associations. This would be consistent with the Ohio Cooperative Law’s intent not to include unnecessary local restrictions.

Section 1729.18

(A) An association shall have two or more members. However, an association may have one member if that member is an association a cooperative that has two or more members.

(B) Each association shall hold an annual meeting of its members. The board may call a special meeting of the members at any time. Any meeting of the members may be held at one time or in a series of meetings at one or more locations.

(C) Twenty per cent of the members entitled to vote may file with the board a petition stating the specific business to be brought before the association and demanding a special meeting at any time for consideration of such business. Upon compliance with this division, the meeting shall be called by the board.

(D) Notice of every meeting, together with a statement of the purpose of the meeting, shall be sent to each member who is entitled to vote at the meeting and any affected stockholder at the member’s or stockholder’s current address, as shown in the records of the association, at least ten days prior to the meeting, in accordance with section 1729.20 of the Revised Code. The bylaws may provide that the notice be given by publication in a newspaper or newspapers of general circulation in the trade area of the association if notice to individual members and affected shareholders is impracticable.

Subsection (A) is intended to cover both Member actions without meetings and board/committee actions without meetings. The current version of this subsection makes no distinction between member action and board action. These revisions would provide separate procedures for Member actions and board/committee actions.

Revisions are also proposed to conform Subsections (B) and (C) to the proposed revision of Subsection (A).

Section 1729.19

(A) Unless prohibited in an association’s articles of incorporation or bylaws, any action that may be authorized or taken at a meeting of the members, affected stockholders, the board, or any committee of the board, may be authorized or taken without a meeting, with the affirmative vote or approval of, and in writing or writings signed by:

(1) In the case of members or affected stockholders, sixty per cent of the votes of the members or affected stockholders who would be entitled to vote on the action at a meeting for such purpose;

(2) In the case of the board of directors or a committee of the board, all of the directors on the board or all of the committee members on the committee in a writing or writings signed by each of the directors or committee members.

(B) A record of any such action without a meeting.

(B) Any such writing or writingsshall be included in the records of the association in the same manner as minutes of meetings of the association’s members, affected stockholders, board, or committee of the board.

(C) Any certificate with respect to the authorization or taking of any action without a meeting that is required to be filed in the office of the secretary of state shall state that the authorization or taking of such action was in writing or writings approved and signed as provided in this section.

This change will allow associations to make other provisions for filling board vacancies, while preserving the original provision as a statutory default procedure for filling board vacancies.

The second proposed revision to subsection (F) would confirm that the Members in a district or grouping would elect the successor director who represents their district or group, if the bylaws entitled that group to fill the director in the first place.

Section 1729.22

(A) Except where this chapter or an association’s articles of incorporation or bylaws require that action be otherwise authorized or taken, all of the authority of an association shall be exercised by or under the direction of the board. The board shall consist of not less than five directors, elected by and from the members, unless the number of members is less than five, in which case, the number of directors may equal the number of members.

(B) The bylaws may provide that the membership of an association be divided into districts or other groupings and that the directors shall be elected according to such districts or groupings. In such case, the bylaws shall specify the number of directors to be elected and the manner of reapportioning or redistricting the membership.

(C) The bylaws may provide that one or more directors may be appointed by the other directors. The appointed directors need not be members of the association, but shall have the same powers, rights, and responsibilities as other directors. The appointed directors shall not number more than one-fifth of the entire number of directors.

(D) The bylaws may provide for an executive committee and may allot to the executive committee any of the functions and powers of the board, subject to the general direction and control of the board.

(E) The association may provide a fair remuneration for the time actually spent by its officers and directors in its service, and for the services of the members of its executive committee.

(F) When Unless the bylaws provide otherwise, when a vacancy on the board occurs other than by expiration of term, the remaining directors on the board, by a majority vote, shall elect a director to fill the vacancy. If the bylaws provide for an election of directors by the members in a district or other grouping, the board may call a special meeting of the members in that district or group to fill the vacancy.

One of the unique features of a cooperative is the primary duty of the entity to its Members as patrons. It is appropriate to add this specific reference to the interests of Members to the list of interests that may be considered in evaluating the best interest of an association. The proposed expanded application of the definition of "best interests of the Association" to include 1729.03(K) as well as 1729.23 is appropriate because this subsection provides an important interpretation of the concept for the standards of indemnification in the proposed new subsection 1729.03(K).

Section 1729.23

(A) A director shall perform the duties of a director, including duties as a member of any committee of the directors upon which the director serves, in good faith, in a manner the director reasonably believes to be in or not opposed to the best interests of the association, and with the care that an ordinarily prudent person in a like position would use under similar circumstances. In performing these duties, a director is entitled to rely on information, opinions, reports, or statements, including financial statements and other financial data, that are prepared or presented by any of the following:

(1) One or more directors, officers, or employees of the association whom the director reasonably believes are reliable and competent in the matters prepared or presented;

(2) Counsel, public accountants, or other persons as to matters that the director reasonably believes are within the person’s professional or expert competence;

(3) A committee of the directors upon which the director does not serve, established in accordance with the association’s articles of incorporation or bylaws, as to matters within its designated authority, provided the director reasonably believes the committee merits confidence.

(B) For purposes of division (A) of this section:

(1) A director shall not be found to have failed to perform the duties in accordance with division (A) of this section, unless it is proved, by clear and convincing evidence, in an action brought against the director that the director has not acted in good faith, in a manner reasonably believed to be in or not opposed to the best interests of the association, or with the care that an ordinarily prudent person in a like position would use under similar circumstances. Such an action includes, but is not limited to, an action that involves or affects any of the following:

(a) A change or potential change in control of the association;

(b) A termination or potential termination of the director’s service to the association as a director;

(c) Service in any other position or relationship with the association.

(2) A director shall not be considered to be acting in good faith if the director has knowledge concerning the matter in question that would cause reliance on information, opinions, reports, or statements that are prepared or presented by the persons described in divisions (A)(1) to (3) of this section to be unwarranted.

(3) The provisions of division (B) of this section do not limit relief available under section 1729.24 of the Revised Code.

(C)(1) Subject to divisions (C)(2) and (3) of this section, a director is liable in damages for any act that the director takes or fails to take as director only if it is proved, by clear and convincing evidence, in an action brought against the director that the act or omission of the director was one undertaken with a deliberate intent to cause injury to the association or was one undertaken with a reckless disregard for the best interests of the association.

(2) Division (C)(1) of this section does not affect the liability of a director under section 1729.25 of the Revised Code.

(3) Subject to division (C)(2) of this section, division (C)(1) of this section does not apply if, and only to the extent that, at the time of an act or omission of the director, the association’s articles of incorporation or bylaws state, by specific reference to division (C)(1) of this section, that its provisions do not apply to the association.

(D) For purposes of this section and section 1729.03(K) of the Revised Code, in determining what is reasonably believed to be in or not opposed to the best interests of the association, a director shall consider the purposes of the association and may consider any of the following:

(1)The interests of the members as patrons of the association;

(2)The interests of the employees, suppliers, creditors, and customers of the association;

(2)(3) The economy of this state and of the United States;

(3)(4) Community and societal matters;

(4)(5) The long-term and short-term best interests of the association, including, but not limited to, the possibility that those interests may be best served by the continued independence of the association.

(E) Divisions (B) and (C) of this section do not affect the duties of a director who acts in any capacity other than as a director.

Cooperative associations have traditionally called the chairperson of their board "President." However, many cooperative associations have adopted the modern corporate practice of naming the chief executive officer "President" and the person who presides at board and Member meetings "Chairperson." Cooperative associations still almost universally observe the principal of separation of board authority and management authority. Therefore, it is important to reserve the chairperson position for a director. This change will clarify that the same reservation would apply to a vice chairperson.

Section 1729.26

(A) The officers of an association shall consist of a president, a secretary, a treasurer, and, if desired, a chairperson and one or more vice chairpersons of the board, one or more vice-presidents, and such other officers and assistant officers as necessary. The officers shall be elected by the board. The chairperson and any vice chairperson of the board shall be a director. Unless the association’s articles of incorporation or bylaws provide otherwise, none of the other officers need be a director. Any two or more offices may be held by the same person, but no officer shall execute, acknowledge, or verify any instrument in more than one capacity if the instrument is required by law or by the articles or bylaws to be executed, acknowledged, or verified by two or more officers. Unless the articles or the bylaws provide otherwise, all officers shall be elected annually.

(B) All officers shall have the authority to perform, and shall perform, the duties as the bylaws provide, or as the board may determine in accordance with the bylaws.

This proposed revision provides more precise language to clarify that the modified procedure in Subsection (B) for removal of a director applies only when the director has been elected by Members of a certain district or grouping rather than by the association’s entire membership at-large, as is common for many associations.

Section 1729.28

(A) Any member of an association may bring charges against an officer or director of the association by filing them in writing with the secretary of the association, together with a petition, signed by twenty per cent of the members, requesting the removal of the officer or director in question. The removal shall be voted upon at the next regular or special meeting of the association and, by a vote of a majority of the members, the association may remove the officer or director and fill the vacancy. The director or officer against whom such charges are brought shall be informed in writing of the charges previous to the meeting and shall have an opportunity at the meeting to be heard in person or by counsel and to present witnesses, and the persons bringing the charges against the director or officer shall have the same opportunity.

(B) In case If the bylaws provide for election of directors by districts the members in a district or other grouping, then the petition for removal of a director must be signed by twenty per cent of the members residing in the district or belonging to the group from which the director was elected. The board shall then call a special meeting of the members residing in that district or belonging to the group to consider and vote upon the removal of the director; and at such meeting, by a vote of the majority of the members of that district or belonging to the group, the director in question shall be removed from office.

Subsection (D) addresses mergers of subsidiary associations. These revisions are proposed to conform this Subsection with the proposed revision of Section 1729.18, wherein one member subsidiary associations would be available to foreign cooperatives as well as a domestic association.

Section 1729.35

(A) An association may merge or consolidate with one or more associations under this chapter. Before an association may merge or consolidate with any other association, a written agreement of merger or consolidation shall be approved by the board of each constituent association and by the members of each constituent association. The agreement shall set forth the terms of the merger or consolidation, including any provisions for amendment or abandonment of the agreement. In the case of a consolidation, the agreement also shall contain the articles of incorporation of the new association.

(B)(1) If the agreement of merger or consolidation provides that a holder of stock other than membership stock or patronage stock in a constituent association will be affected, all of the following apply:

(a) Unless the board of the constituent association provides that division (B)(1)(b) of this section applies, the affected stockholder shall be entitled to cast one vote on the agreement regardless of the par or stated value, the number of shares, or the number of affected classes of the stock held.

(b) The board of a constituent association may provide that a stockholder otherwise entitled to vote under division (B)(1)(a) of this section shall instead be entitled to payment of fair cash value of the affected stock held by the stockholder in accordance with section 1729.46 of the Revised Code.

(c) A member holding stock affected by a proposed agreement of merger or consolidation may vote only as a member and shall not be entitled to vote or demand fair cash value as an affected stockholder.

(2) For purposes of this section, a holder of stock is affected as to any class of stock owned by the holder only if the agreement of merger or consolidation does any of the following:

(a) Decreases the dividends to which that class may be entitled or changes the method by which the dividend rate on that class is fixed;

(b) Provides for additional restriction of rights to transfer shares of that class;

(c) Gives to another existing or any new class of stock or equity interest not previously entitled thereto any preference, as to dividends or upon dissolution, that is higher than preferences of that class;

(d) Changes the par value of shares of that class or of any other class having the same or higher preferences as to dividends or upon dissolution;

(e) Increases the number of authorized shares of any other class having the same or higher preferences as to dividends or upon dissolution beyond the aggregate authorizations for such classes in the constituent associations;

(f) Requires or permits an exchange of shares of any class with lower preferences as to dividends or upon dissolution for shares of any other class with higher preferences.

(C) The agreement is approved if both of the following conditions are met with respect to each constituent association:

(1) Notice of the meeting to vote on the agreement, the agreement, and a description of the method of voting have been sent to all members, and to all affected stockholders entitled either to vote on the agreement or to receive payment of fair cash value under division (B) of this section;

(2) Sixty per cent of the member votes cast approve the agreement, and a simple majority of the votes cast by the affected stockholders entitled to vote under division (B) of this section approve the agreement.

(D) Notwithstanding division (C) of this section, no vote of the members or stockholders of a constituent association shall be necessary to approve a merger of a wholly owned subsidiary association with and into its parent association cooperative or a merger or a consolidation of two or more subsidiary associations that are wholly owned by an association a cooperative.

(E) After approval of an agreement under this section, but before the merger or consolidation is effective, the agreement may be amended in accordance with any provision for amendment set forth in the agreement, provided that an amendment made subsequent to adoption of the agreement by the members of any constituent association shall not do any of the following:

(1) Change the membership rights, or the amount or kind of stock, securities, cash, property, or other rights to be received, exchanged, or converted in the merger or consolidation;

(2) Change the articles of incorporation or bylaws of the surviving or new association as provided for in the agreement;

(3) Change any provision of the agreement with respect to the rights of members or the manner of voting in the surviving or new association.

(F) After approval of an agreement under this section, but before the merger or consolidation is effective, the merger or consolidation may be abandoned in accordance with any provision for abandonment set forth in the agreement.

(G) The merger or consolidation shall take effect in accordance with sections 1729.37 and 1729.38 of the Revised Code.

Because the definition of "corporation" is eliminated in the proposed revision of Section 1729.01(G), the reference to corporation in this subsection should be further qualified.

Section 1729.36

(A) An association may merge or consolidate with one or more entities, if such merger or consolidation is permitted by the laws under which each constituent entity exists and the association complies with this section.

(B) Each constituent association shall comply with section 1729.35 of the Revised Code with respect to form and approval of an agreement of merger or consolidation, and each constituent entity shall comply with the applicable provisions of the laws under which it exists, except that the agreement of merger or consolidation, by whatever name designated, shall comply with divisions (C) and (D) of this section.

(C) The agreement of merger or consolidation shall set forth all of the following:

(1) The names of the states and the laws under which each constituent entity exists;

(2) All statements and matters required to be set forth in agreements of merger or consolidation by the laws under which any constituent entity exists;

(3) A statement that the surviving or new entity is to be an association, a foreign association, a corporation, or other than a cooperative, or a limited liability company;

(4) If the surviving or new entity is to be a foreign entity:

(a) The place where the principal office of the surviving or new entity is to be located in the state in which the surviving or new entity is to exist;

(b) The consent by the surviving or new entity that it may be sued and served with process in this state in any proceeding for the enforcement of any obligation of any constituent association or domestic entity;

(c) The consent by the surviving or new entity that it shall be subject to the applicable provisions of Chapter 1703. of the Revised Code, if it is a foreign corporation or foreign association, or to sections 1705.53 to 1705.58 of the Revised Code, if it is a foreign limited liability company;

(d) If it is desired that the surviving or new entity exercise its corporate privileges in this state as a foreign entity.

(D) The agreement may also set forth other provisions permitted by the laws of any state in which any constituent entity exists.

(E) If the surviving or new entity is an association, the merger or consolidation shall take effect in accordance with sections 1729.37 and 1729.38 of the Revised Code.

(F) If the surviving or new entity is an entity other than an association, the merger or consolidation shall take effect in accordance with the applicable provisions of the laws under which it exists.

This revision is proposed to distinguish the reference to corporations that are not associations from the corporations that are associations. This would be consistent with elimination of the defined term "corporation" by the proposed revision of Section 1729.01(G).

Section 1729.38

(A)(1) Upon adoption of an agreement of merger or consolidation under section 1729.35 or 1729.36 of the Revised Code, a certificate, signed by any authorized officer of each constituent association or entity, shall be filed with the secretary of state on a form prescribed by the secretary of state that sets forth the following:

(a) The name and form of each constituent association or entity and the state law under which each constituent entity exists;

(b) A statement that each constituent association or entity has adopted the agreement of merger or consolidation, the manner of adoption, and that the agreement was adopted in compliance with the laws applicable to each constituent association or entity;

(c) The effective date of the merger or consolidation, which date may be on or after the date of filing of the certificate;

(d) In the case of a merger, a statement that one or more specified constituent associations or entities will be merged into a specified surviving association or entity, or, in the case of a consolidation, a statement that the constituent associations or entities will be consolidated into a new association or entity;

(e) The name and address of the statutory agent upon whom any process, notice, or demand against any constituent association or entity, or the surviving or new association or entity may be served.

(2) In the case of a merger into an association or domestic entity, any amendments to the articles of incorporation or the articles or organization of the surviving association or entity shall be filed with the certificate.

(3) In the case of a consolidation to form a new domestic association or entity, the articles of incorporation or the articles of organization of the new association or entity shall be filed with the certificate.

(4) If the surviving or new entity is a foreign entity that desires to transact business in this state as a foreign entity, the certificate shall be accompanied by the information required for qualification of a foreign entity in this state by Chapter 1703. of the Revised Code, in the case of a foreign corporation or foreign cooperative, or by sections 1705.53 and 1705.54 of the Revised Code, in the case of a foreign limited liability company.

(B) A copy of the certificate of merger or consolidation, certified by the secretary of state, may be filed for record in the office of the county recorder of any county in this state. For such recording the county recorder shall charge and collect the same fee as in the case of deeds. The certified copy of the certificate of merger or consolidation shall be recorded in the records of deeds.

(C) For purposes of this section, "domestic entity" means a corporation or other than an association or a limited liability company organized under the laws of this state.

The revisions proposed for Subsections (A) and (B) are intended to clarify the reference to "domestic corporation." The distinction between a corporation that is not an association and a corporation that is an association is necessary because of the proposed elimination of the defined term "corporation" in 1729.01(G).

Section 1729.42

(A) A domestic corporation that is not an association may convert itself into an association by adopting an amendment to its articles of incorporation in which it elects to become subject to this chapter, together with any changes in its articles of incorporation and bylaws required by this chapter, and any other desirable changes permitted by this chapter. The amendment shall be adopted, filed, and recorded in the manner provided by the law under which the corporation exists.

(B) An association may convert itself to a domestic corporation that is not an association by adopting an amendment to its articles of incorporation in which it elects to become subject to any other chapter of Title XVII of the Revised Code, if so permitted by such chapter, together with any changes in its articles of incorporation and bylaws required by such chapter and any other desirable changes permitted by such chapter. The amendment shall be adopted, filed, and recorded under this chapter in the same manner as an amendment of the articles of incorporation under sections 1729.08 and 1729.09 of the Revised Code.

This revision is necessary because the current subsection (B)(2) concludes with an incorrect reference as to where the provisions for judicial determination may be found.

Section 1729.46 A

(2) The stockholder shall not transfer, encumber, pledge, or otherwise dispose of the stock that is the subject of the demand for fair cash value, or any certificate representing such stock, until the demand is finally resolved by agreement, withdrawal, or final judicial determination as provided in this section 1729.47 of the Revised Code.

An association’s "principal place of business" may not be in Ohio. Since it is doubtful that this statute could govern the conduct of a foreign court, this Subsection (A) should provide for an alternate Ohio court venue to serve this Section’s purpose.

Section 1729.47

(A) If the association’s articles of incorporation or bylaws do not provide a reasonable basis for determining and paying fair cash value of the stock that is the subject of the demand for payment of fair cash value and the affected stockholder has not agreed upon a fair cash value of the stock that is the subject of the demand within three months after delivery of the demand for payment of fair cash value, the affected stockholder, within thirty days thereafter, may file a complaint for recovery of fair cash value of the stock from the association or the surviving, new, or resulting association or entity in the court of common pleas of the county in which the principal place of business of the association that issued the stock is or was located, or, if the principal place of business of the association is not within this state, then in the court of common pleas of the county in which the association’s statutory agent resides. Other affected stockholders who have made timely demand for payment of fair cash value may join as plaintiffs in the proceeding and any two or more proceedings commenced by affected stockholders may be consolidated. The complaint shall contain a brief statement of the relevant facts, including the vote by members of the association, the facts entitling the stockholder to relief under this section, and a demand for that relief. Notwithstanding the Rules of Civil Procedure, no answer to a complaint filed under this section is required.

Because "board" is defined in section 1729.01, the words "of directors" is unnecessary in this subsection.

Section 1729.49

(A) As used in this section, "substantially all" means more than two-thirds of the association’s assets, measured, in the board’s discretion, either by value as recorded in the books and records of the association or by fair market value.

(B) Unless the articles of incorporation or the bylaws of an association otherwise provide, a lease, sale, exchange, transfer, or other disposition of any assets of an association may be made upon terms and for consideration, which may consist, in whole or in part, of money or other property, including shares or other securities or promissory obligations of any association or entity, as may be authorized by the board. If a lease, sale, exchange, transfer, or other disposition, or a series of such transactions, would dispose of all or substantially all of the assets of the association, then the disposition may be made only upon a written plan of disposition prepared by the board or by a committee selected by the board for that purpose, and adopted in the same manner as provided for the adoption of a resolution of dissolution in section 1729.55 of the Revised Code. A plan of disposition shall set forth a general description or summary of the assets subject to disposition, the method of disposition, the intended transferee of the assets, if known to the board of directors, and a general description of any material effect the board believes the disposition will have on the interests of the members and stockholders. Notice of a meeting of the members at which a plan of disposition will be voted on shall be given to all members, whether or not entitled to vote at the meeting. Such notice shall be accompanied by a copy or summary of the plan of disposition and a ballot for those members entitled to vote on the plan.

A requirement to identify an association’s principal office "in this state" would be inconsistent with Section 1729.07(A)(3), which permits an association’s principal place of business to be outside the state. Therefore, the words "in this state" should be deleted. Also, the term "principle office" and "principal place of business" appear to be interchangeable in this statute. The term "principal place of business" is substituted for "principal office" for consistency.

Section 1729.55

(A) An association may be dissolved voluntarily in the manner provided in this section.

(B) A resolution of dissolution for an association shall state both of the following:

(1) That the association elects to be dissolved;

(2) Any additional provision considered necessary with respect to the proposed dissolution and winding up.

(C) Before subscriptions for membership and any stock or other ownership interest have been received, the incorporators or a majority of the incorporators may adopt, by a writing signed by them, a resolution of dissolution.

(D) The directors may adopt a resolution of dissolution in the following cases:

(1) When the association has been adjudged bankrupt or has made a general assignment for the benefit of creditors;

(2) By leave of the court, when a receiver has been appointed in a general creditors’ suit or in any suit in which the affairs of the association are to be wound up;

(3) When substantially all of the assets have been sold at judicial sale or otherwise;

(4) When the articles of incorporation have been canceled for failure to file annual franchise or excise tax returns or for failure to pay franchise or excise taxes and the association has not been reinstated or does not desire to be reinstated;

(5) When the period of existence of the association specified in its articles has expired.

(E) At a meeting held for such purpose, the members may adopt a resolution of dissolution by the affirmative vote of sixty per cent of the member votes cast on such proposal or, if the articles provide or permit, by the affirmative vote of a greater or lesser proportion, though not less than a majority, of such voting power, of any particular class as is required by the articles of incorporation. Notice of the meeting of the members shall be given to all members and stockholders whether or not entitled to vote.

(F) Upon the adoption of a resolution of dissolution, a certificate shall be filed with the secretary of state, on a form prescribed by the secretary of state, stating all of the following:

(1) The name of the association;

(2) A statement that a resolution of dissolution has been adopted, its manner of adoption, and, in the case of its adoption by the incorporators or directors, a statement of the basis for such adoption;

(3) The place in this state where the association’s principal office place of business is located;

(4) The names and addresses of the association’s directors and officers, or if the resolution of dissolution is adopted by the incorporators, the names and addresses of the incorporators;

(5) The name and address of the association’s statutory agent.

(G) Such certificate shall be signed as follows:

(1) When the resolution of dissolution is adopted by the incorporators, the certificate shall be signed by not less than a majority of the incorporators;

(2) When the resolution is adopted by the directors or by the members, the certificate shall be signed by any authorized officer. However, if no authorized officer executes and files such certificate within thirty days after the adoption of the resolution or upon any date specified in the resolution as the date upon which such certificate is to be filed or upon the expiration of any period specified in the resolution as the period within which such certificate is to be filed, whichever is latest, the certificate of dissolution may be signed by any three members, or if there are less than three members, then by all of the members, and shall set forth a statement that the persons signing the certificate are members and are filing the certificate because of the failure of an authorized officer to do so.

(H) A certificate of dissolution, filed with the secretary of state, shall be accompanied by all of the following:

(1) An affidavit of one or more of the persons executing the certificate of dissolution or of any authorized officer of the association containing a statement of the counties, if any, in this state in which the association has personal property or a statement that the association is of a type required to pay personal property taxes to state authorities only;

(2) A receipt, certificate, or other evidence showing the payment of all franchise, sales, use, and highway use taxes accruing up to the date of such filing, or that such payment has been adequately guaranteed;

(3) A receipt, certificate, or other evidence showing the payment of all personal property taxes accruing up to the date of such filing;

(4) A receipt, certificate, or other evidence from the bureau of employment director of job and family services showing that all contributions due from the association as an employer have been paid, or that such payment has been adequately guaranteed, or that the association is not subject to such contributions;

(5) A receipt, certificate, or other evidence from the bureau of workers’ compensation showing that all premiums due from the association as an employer have been paid, or that such payment has been adequately guaranteed, or that the association is not subject to such premium payments;

(6) In lieu of the receipt, certificate, or other evidence described in division (H)(2), (3), (4), or (5) of this section, an affidavit of one or more persons executing the certificate of dissolution or of any authorized officer of the association containing a statement of the date upon which the particular department, agency, or authority was advised in writing of the scheduled date of filing of the certificate of dissolution and was advised in writing of the acknowledgment by the association of the applicability of section 1729.25 of the Revised Code.

(I) Upon the filing of a certificate of dissolution and the accompanying documents required by division (H) of this section, the association shall be dissolved.

Change "principal office" to "principal place of business" for consistency throughout Chapter 1729.

Section 1729.56

Following the filing of the certificate of dissolution, the directors or the incorporators who filed the certificate, as the case may be, shall cause a notice of voluntary dissolution to be published once a week on the same day of each week for two successive weeks, in a newspaper published and of general circulation in the county in which the principal office place of business of the association was to be or is located, and shall cause written notice of dissolution to be given to all known creditors of, and to all known claimants against, the dissolved association.

Because "board" is defined in section 1729.01, the words "of directors" is unnecessary in this subsection. The additional provision allowing the directors to "appoint" liquidators rather than to "employ" them, permits the appointment of volunteer or contract liquidators.

The addition of a subsection is proposed because some courts in Ohio are reluctant to permit priority payment of expenses incidental to dissolution and liquidation of an association without specific statutory authority.

Substituted "principal place of business" for "principal office" for consistency in the statute. This change also provides an alternate state court venue for associations that don’t have a principal place of business in Ohio.

Section 1729.58

(A) When an association is dissolved voluntarily, when the articles of incorporation of an association have been canceled, when a final order of a court of common pleas is made dissolving an association under section 1729.59 of the Revised Code, or when the period of existence of the association specified in its articles of incorporation has expired, the association shall cease to carry on business and shall do only such acts as are required to wind up its affairs, or to obtain reinstatement of the articles in accordance with section 1729.11 of the Revised Code.

(B) Any claim existing or action or proceeding pending by or against the association or which would have accrued against it may be prosecuted to judgment, with right of appeal as in other cases, but any proceeding, execution, or process, or the satisfaction or performance of any order, judgment, or decree, may be stayed as provided in section 1729.59 of the Revised Code.

(C) Any process, notice, or demand against the association may be served by delivering a copy to an officer, director, liquidator, or person having charge of its assets or, if no such person can be found, to the statutory agent.

(D) The directors of the association or their successors shall act as a the board of directors in accordance with the articles of incorporation and bylaws until the affairs of the association are completely wound up. Subject to the orders of courts of this state having jurisdiction over the association, the directors shall proceed as speedily as is practicable to a complete winding up of the affairs of the association and, to the extent necessary or expedient to that end, shall exercise all the authority of the association. Without limiting the generality of such authority, the directors may fill vacancies, elect officers, carry out contracts of the association, make new contracts, borrow money, mortgage or pledge the property of the association as security, sell its assets at public or private sale, make conveyances in the association’s name, lease real estate for any term, including ninety-nine years renewable forever, settle or compromise claims in favor of or against the association, appoint or employ one or more persons as liquidators to wind up the affairs of the association with such authority as the directors see fit to grant, cause the title to any of the assets of the association to be conveyed to such liquidators for that purpose, apply assets to the payment of obligations, and, after paying or adequately providing for the payment of all known obligations of the association, distribute the remainder of the assets either in cash or in kind among the members, patrons, and stockholders according to their respective rights and interests. In addition, the directors may perform all other acts necessary or expedient to the winding up of the affairs of the association.

(E)The directors, or any liquidator to whom the directors grant such authority, shall, in the course of winding up the association’s affairs, apply the assets of the association: first, to expenses incidental to winding up the association’s affairs; second, to all legally enforceable liabilities and obligations of the association to claimants and creditors; third, to the stockholders, members and patrons of the association as provided in the association’s articles of incorporation or bylaws.

(F)Without limiting the authority of the directors, any action within the purview of this section that is authorized or approved at a meeting of the members by sixty per cent of the member votes cast thereon shall be conclusive for all purposes upon all members, patrons, and stockholders of the association.

(F)(G) All deeds and other instruments of the association shall be in the name of the association and shall be executed, acknowledged, and delivered by the officers appointed by the directors.

(G)(H) At any time during the winding up of its affairs, the association by its directors may make application to the court of common pleas of the county in this state in which the principal office place of business of the association is located to have the winding up continued under supervision of the court, as provided in section 1729.59 of the Revised Code, or, if the association has no principal place of business within this state, such application may be made to the court of common pleas of the county in this state where the statutory agent resides.

Because an association may have a principal place of business outside of Ohio, the proposed revision of this section provides an alternate Ohio court venue for associations that have a principal place of business elsewhere.

Section 1729.59

(A) Without limiting the generality of its authority, the court of common pleas of the county in this state in which is located the principal office place of business of a voluntarily dissolved association or of an association whose articles have been canceled or whose period of existence has expired, or, if such association has no principal place of business within this state, the court of common pleas of the county in this state where the statutory agent resides, upon the complaint of the association, or a majority of the directors, or ten per cent of the members or twenty members, whichever is less, and upon such notice to all the directors and such other persons interested as the court considers proper, at any time may order and adjudge any of the following matters:

Because an association may have a principal place of business outside of Ohio, this revision is proposed to provide an alternate Ohio court venue for an association whose principal place of business is elsewhere. Also, because an association may have a principal place of business outside of Ohio, it is appropriate to delete the requirement of identifying such location "in this state."

Section 1729.61

(A) An association may be dissolved judicially and its affairs wound up by an order of the court of common pleas of the county in this state in which the association has its principal office place of business or, if the association has no principal place of business within this state, the court of common pleas of the county in this state where the association’s statutory agent resides, in an action brought by the members having sixty per cent of the voting power of the association on such proposal, or the holders of such lesser proportion as are entitled by the articles of incorporation to dissolve the association voluntarily, when it is established that it is beneficial to the members, patrons, and stockholders that the association be judicially dissolved.

(B) A complaint for judicial dissolution shall be verified by any of the complainants and shall set forth facts showing that the case is as specified in this section. Unless the complainants set forth in the complaint that they are unable to annex a list of members, patrons, or stockholders, a schedule shall be annexed to the complaint setting forth the name and address of each member, patron, and stockholder, if it is known, or the fact that it is not known.

(C) Upon the filing of a complaint for judicial dissolution, the court with which it is filed shall have power to issue injunctions, to appoint a receiver with such authority and duties as the court from time to time may direct, to take such other proceedings as may be necessary to protect the property or the rights of the members, patrons, and stockholders, and to carry on the business of the association until a full hearing can be conducted. Upon or after the filing of a complaint for judicial dissolution, the court, by injunction or order, may stay the prosecution of any proceeding against the association or involving any of its property and require the parties to the proceeding to present and prove their claims, demands, rights, interests, or liens, at the time and in the manner required of creditors or others. The court may refer the complaint to a special master commissioner.

(D) After a hearing upon such notice as the court may direct to be given to all parties to the proceeding and to any other parties in interest designated by the court, a final order based either upon the evidence, or upon the report of the special master commissioner if one has been appointed, shall be made dissolving the association or dismissing the complaint. An order or judgment for the judicial dissolution of an association shall contain a concise statement of the proceedings leading up to the order or judgment, the name of the association, the place in this state where its principal office place of business is located, the names and addresses of its directors and officers, the name and address of a statutory agent, and, if desired, such other provisions with respect to the judicial dissolution and winding up as are considered necessary or desirable. A certified copy of such order shall be filed in the office of the secretary of state, whereupon the association shall be dissolved. To the extent consistent with orders entered in such proceeding, the effect of such judicial dissolution shall be the same as in the case of voluntary dissolution, and the provisions of sections 1729.58, 1729.59, and 1729.60 of the Revised Code relating to the authority and duties of directors during the winding up of the affairs of an association dissolved voluntarily, with respect to the jurisdiction of courts over the winding up of the affairs of an association, and with respect to receivers for winding up the affairs of an association, shall be applicable to associations judicially dissolved.

(E) A proceeding under this section for judicial dissolution of an association is a special proceeding, and final orders in it may be vacated, modified, or reversed on appeal pursuant to the Rules of Appellate Procedure and, to the extent not in conflict with those rules, Chapter 2505. of the Revised Code.

Substitute "cooperative" for "association" to provide a consistent term throughout this Section.

Section 1729.69

(A) No handler shall commit an unfair marketing practice, as defined in division (B) of this section, whenever a marketing cooperative has been authorized by its members to bargain on behalf of its members for sales contracts with the handler and any of the following conditions exist:

(1) Members of the marketing cooperative are obligated to produce and deliver agricultural products or produce under sales contracts negotiated by the marketing association cooperative.

This exemption from Ohio securities regulation was included because membership stock and patronage stock do not possess material attributes of regulated securities. This would also be true of such stock and equity interests issued by a foreign association. Therefore, it is appropriate to substitute "cooperative" for "association" in this Section in order to extend the same exemption to foreign associations.

Section 1729.85

Membership stock and patronage stock of an association a cooperative are not to be considered securities under Chapter 1707. of the Revised Code.

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