Title 5. Special Types of Corporations — Subtitle 5. Agricultural Cooperatives

In this subtitle the following words have the meanings indicated.

“Agricultural cooperative” means a corporation organized or converted under this subtitle, which operates for the mutual benefit of its members and conforms to the following requirements:

“Member” means a person who:

Collectively to produce, process, prepare for market, handle, store, and market the products of persons engaged in the production of agricultural or fishery products;

To act as a selling or buying agent for its members; and

To purchase or otherwise acquire goods or services for its members.

A cooperative may be organized by:

The cooperative may be organized with or without capital stock for any of the purposes enumerated in this subtitle.

Engage in or finance any activity in connection with:

Transport the products of its members or nonmember patrons, even if in competition with licensed common carriers;

Borrow money, give its notes, bonds, or other obligations for the debt, and secure payment of the debt;

Make advances to its members or nonmember patrons on their products held by the cooperative;

Act as an agent for or representative of any member or nonmember patron in any activity listed in items (1) through (4) of this section;

Deposit or invest surplus funds in:

Buy or otherwise acquire, hold, own, and exercise all rights of ownership in and sell, transfer, or pledge shares of the capital stock or bonds of any cooperative or any corporation or association engaged in any related activity, including the financing of the activities of cooperatives;

Establish and accumulate reserves and surplus to capital and any other funds authorized by its charter or bylaws;

Buy, hold, and exercise every privilege of ownership over any real or personal property necessary or convenient for or incidental to the conduct and operation of the business of the cooperative;

Sue, be sued, complain, and defend in all courts;

Issue stock of any class authorized by its charter;

Issue certificates of indebtedness;

Provide by contract with its members or nonmember patrons that any money due from the cooperative to them may be retained as necessary:

Issue to each nonmember patron a certificate or other evidence of his equity in any fund, capital investment, or other assets of the cooperative, which certificate or other evidence of equity may be transferred only to the cooperative or to another purchaser approved by the board of directors, on the terms and conditions provided in its bylaws and printed on the certificate or other evidence of equity;

Do anything necessary, suitable, or proper to accomplish the purposes mentioned in this section and exercise each power, right, and privilege necessary or incidental to the purposes for which the cooperative is organized or to the activities in which it is engaged; and

Exercise any other right, power, and privilege granted by the laws of the State to corporations in general, if not inconsistent with the provisions of this subtitle.

The incorporators of a cooperative shall sign, acknowledge, and file with the Department, articles of incorporation. The articles of incorporation shall include:

If the cooperative is organized without capital stock, the articles of incorporation shall state whether the property rights of its members are equal or unequal and, if unequal, the rule by which the property rights of members, including members admitted after the original organization, are to be determined.

An amendment which alters the contract or property rights of any outstanding stock or of any member is not valid unless approved in person or by mail by the affirmative vote of:

Notwithstanding any other provision of this article, the requirement of item (1) of this section for a two-thirds vote may not be lowered by the charter of the cooperative; and

Any objecting member whose contract or property rights are substantially adversely affected by the amendment, on compliance with the provisions of Title 3, Subtitle 2 of this article, has the same rights with respect to his contract and property rights as an objecting stockholder has with respect to his stock.

Any Maryland corporation organized under the Maryland General Corporation Law which does or intends to do business on a cooperative basis may convert itself into a cooperative by amending and restating its charter in accordance with Title 2, Subtitle 6 of this article.

The articles of amendment and restatement shall:

A cooperative may:

If a cooperative exercises an option to purchase or a right to redeem, it shall pay for the stock the greater of its book value or its par value.

A restriction on the ownership, transfer, or voting of stock authorized by this section is not valid unless the restriction is:

Except for an electric or transportation cooperative, a person may not use the term “cooperative” as part of his corporate or business name unless he has complied with the provisions of this subtitle.

A foreign corporation organized under and complying with the cooperative law of the place where it was organized may use the term “cooperative” in this State if it:

Every cooperative shall use the term “cooperative” as part of or affixed to its corporate name.

Within 30 days after the Department accepts for record the articles of incorporation of a cooperative or the articles of amendment and restatement of a corporation converting into a cooperative, the cooperative shall adopt bylaws not inconsistent with law or its charter for the regulation and management of its affairs.

The bylaws of a cooperative may be adopted, altered, amended, or repealed only by the affirmative vote of two thirds of the members voting in person or by mail.

The original or a certified copy of the bylaws and all amendments shall be kept at the principal office of the cooperative.

The business and affairs of a cooperative shall be managed under the direction of a board of directors.

Every cooperative shall have at least five directors, at least two of whom are residents of the State and each of whom is a member of the cooperative or of a member cooperative.

Until the first annual meeting of members and until successors are elected and qualify, the board of directors consists of:

Subject to the provisions of this section, the bylaws may provide for:

If there is a provision for election by districts, the bylaws shall specify:

If there is a provision for election by districts, the bylaws shall require that:

If a vacancy on the board of directors occurs other than by expiration of term, the remaining members of the board shall fill the vacancy by majority vote.

If the bylaws provide for an election of directors by districts, a replacement director shall represent the district for which the vacancy has occurred.

A cooperative may provide a fair remuneration for the time its officers and directors spend in its service.

During his term of office, a director may not be a party to a contract for profit with the cooperative if the contract differs in any way from the business relations with the cooperative accorded its other members.

Each cooperative shall have the following officers:

In addition to the required officers, a cooperative may have any other officer provided for in the bylaws.

The president and vice president shall be elected from among the directors.

The bylaws may provide for additional regular meetings.

Notice of each meeting shall be mailed to each member at least ten days before the meeting and, if a special meeting is called, the notice shall state the purpose of the meeting.

The bylaws of a cooperative shall state the number or percentage of the members necessary to constitute a quorum at a meeting.

A member who votes by mail may not be counted in computing a quorum.

A member of a cooperative organized without capital stock and a holder of stock, whether common or preferred, is entitled to only one vote.

Voting by proxy is prohibited in any cooperative. Voting by mail is not voting by proxy.

At any meeting of members, a signed written vote received by mail from any absent member may be read at the meeting and is equivalent to a vote of the member if:

If otherwise lawful, a member may contract with his cooperative to sell his products to or through or buy goods from or through the cooperative or its facilities.

The contract may be made self-renewing for periods up to five years, subject to notice to be given by either party at least 60 days before the contract expires if he desires not to renew.

The contract may provide for liquidated damages to be paid by the member for breach of contract.

In the event of a breach or threatened breach of the contract by a member, the cooperative may obtain an injunction to prevent the breach and a decree for specific performance of the contract.

The board of directors of a cooperative by resolution may authorize the cooperative to enter into agreements for conducting its business with any other Maryland or foreign cooperative, association, or corporation formed on a cooperative basis.

These cooperatives, associations, and corporations may agree to unite in using or may separately use the same methods, means, and agencies for conducting their respective business.

These cooperatives, associations, and corporations may use common marketing agencies and their members may make any necessary agreements to effect these purposes.

At the time and in the manner which its bylaws provide, each cooperative shall apportion and distribute its net proceeds or savings to the persons entitled to receive them on the basis of their patronage.

The bylaws may provide:

An apportionment and distribution of net proceeds or savings may be in cash, credits, capital stock, certificates of interest, certificates of equity, revolving fund certificates, letters of advice, or other securities or certificates issued by the cooperative or by any affiliated Maryland or foreign cooperative.

Apportionment and distribution of net proceeds, savings, or losses may be separately determined and based on:

For purposes of this section, net proceeds, savings, or losses shall be computed in accordance with generally accepted accounting principles applicable to cooperatives, after deducting from gross proceeds or savings all costs and expenses of operation and any dividends paid on capital stock and interest paid on certificates or other evidence of equity in any fund, capital investment, or other assets of the cooperative.

A cooperative desiring to purchase goods or obtain or perform services under this subtitle may operate on a nonprofit basis in a manner similar to that described in this section.

A cooperative may consolidate, merge, participate in a share exchange, transfer assets, or dissolve in the manner provided in Title 3 of this article for stock corporations in general.

For purposes of this section, an objecting member has the same rights with respect to his contract and property rights as an objecting stockholder has with respect to his stock under Title 3, Subtitle 2 of this article.

If a cooperative purchases the business of another person, it may pay for the purchase in whole or in part by issuing to the seller certificates of indebtedness or shares of its capital stock in an amount which at par value would equal the fair market value of the business purchased.

A transfer to the cooperative of the business at this valuation is equivalent to payment in cash for the stock issued.

The directors of the purchasing cooperative may hold the stock in trust for the seller and dispose of it in a manner mutually satisfactory to the parties in interest. The directors also may pay the proceeds from the stock to the seller as they are received.

If raw agricultural products are delivered by members to a cooperative association under marketing contracts which entitle the members to net proceeds from the sale of the products in their raw or processed state and subject the members to assessments in the event of an operating loss, the financial statements for associations engaged in handling raw agricultural products shall be audited by the association’s independent certified public accountant. The audit shall be made in accordance with generally accepted auditing standards. Copies of the financial statements together with the independent certified public accountant’s report on the examination of the association’s financial statements shall be furnished to each member or stockholder of the association and the Maryland Secretary of Agriculture on an annual basis. An independent certified public accountant and legal counsel shall be appointed by the association’s board of directors. The certified public accountant shall explain the report orally to the board of directors and shall also certify to the Secretary of Agriculture that the audit has been made in accordance with generally accepted auditing standards.

The requirements of this section shall be met also by all foreign cooperative associations engaged in handling raw agricultural products that have one or more Maryland residents as members or stockholders.

A cooperative is not a combination in restraint of trade, an illegal monopoly, or an attempt to lessen competition or fix prices arbitrarily.

A marketing agreement authorized by this subtitle is not illegal or in restraint of trade.

Expressly exempts cooperatives; or

Is contrary to or inconsistent with the provisions of this subtitle.

Any cooperative which violates any provision of this subtitle or of the Maryland General Corporation Law applicable to cooperatives shall have its right to do business in this State revoked in a proceeding brought in the circuit court of the county where its office is located.