St. Peter Food Cooperative
Disclosure Statement for Conversion to 308B MinnesotaStatutes
One of the proposals that members will be voting on at the special meeting on November 15, 2007 that will be held at the Cooperative at 7:00 p.m. is to amend the Cooperative’s articles of incorporation to bring the Cooperative under 308B of Mn Statutes. At present the Cooperative is incorporated under 308A of MN Statutes, and it has been that way from the very beginning of the Cooperative. In 2003 the Minnesota Legislature adopted a new, separate co-op statute identified as 308B that, in the main, provides more organizational flexibility than does 308A. The Board of Directors is recommending that Members approve the amendment of the Cooperative’s articles of incorporation to bring the Cooperative under 308B.
One of the statutory requirements is to provide this disclosure statement to Members prior to their vote on the amendment to bring the Cooperative under 308B. This disclosure statement is published on the Cooperative’s website at and it must disclose the rights and obligations of the members, and the capital structure of the cooperative.
Overview
This proposed amendment to bring the Cooperative under 308B will not immediately alter the rights or obligations of the Cooperative’s Members. Each Member will continue to have one vote in governance, which is to say that Members will continue to elect the Board of Directors of the Cooperative. Members will also continue to receive financial entitlements as before the amendment.
The amendment bring the Cooperative under 308B provides flexibility in how governance and financial entitlements are allocated. This disclosure statement will review that new flexibility. Bear in mind as you read this statement that the flexibility is permissive rather than mandatory in that your Board of Directors and you as patrons members will ultimately decide if and how this flexibility is used by the Cooperative, if at all.
Governance - Rights and Obligations
If adopted, the amendments of the articles of incorporation will allow non-patron members to vote in governance affairs of the Cooperative if the Cooperative needs equity capital and then only if the Board of Directors approves the admission of non-patron members. The articles of incorporation prevent the patron members, who are all of the Cooperative’s existing voting members, from having less than eighty percent (80%) of the voting control.
In other words, non-patron members will never have more than twenty percent (20%) of the voting control unless the patron members approve an amendment of the articles of incorporation and bylaws. Further, the patron vote is counted as a block regardless of the number of participating patron members in any vote of the Membership. It is impossible, therefore, for patron members to cast less than 80% of the voting power, regardless of the number of patron members who participate in any vote of the membership.
Capital Structure– Rights and Obligations
Initially after the amendment, all patron member, who are all of the existing members, will receive all of the financial rights (100%) to any of the Cooperative’s net savings. If the amendment is adopted to bring the Cooperative under 308B, non-patron members could receive up to but no more than twenty percent (20%) of the financial rights to the Cooperative’s net savings but only if the Board of Directors approves the admission of non-patron members. The articles of incorporation and bylaws prevent the patron members, who again are all the existing members of the Cooperative, from enjoying less than eighty percent (80%) of the financial rights to the Cooperative’s net savings. In other words, non-patron members will never have more than twenty percent (20%) of the voting control unless the patron members approve an amendment of the articles of incorporation and bylaws. Further, the return on equity capital for non-patron members can never be more than 15% per annum, with the rate being set by the Board of Directors at as low of a rate as the Board determines necessary to secure equity capital.