CORPORATIONS
Colorado Corporation Code
Editor's note: (1) Articles 1 to 10 were numbered as articles 1 to 10 of chapter 31, C.R.S. 1963. For amendments to these articles prior to their repeal in 1993, effective July 1, 1994, consult the Colorado statutory research explanatory note and the table itemizing the replacement volumes and supplements to the original volume of C.R.S. 1973 beginning on page vii in the front of this volume. A comparative table showing the relocation of subject matter to articles 101 to 117 as a result of the recodification of the Colorado Corporation Code in 1993 is found in the comparative tables located in the back of the index.
(2) Current provisions concerning the "Colorado Business Corporation Act" are located in articles 101 to 117 of this title.
ARTICLE 1 DEFINITIONS AND APPLICATION
7-1-101 to 7-1-108. (Repealed)
Editor's note: Section 7-1-108 provided for the repeal of this article, effective July 1, 1994. (See L. 93, p. 866 .)
ARTICLE 2 INCORPORATION - ARTICLES - AMENDMENTS
7-2-101 to 7-2-119. (Repealed)
Editor's note: Section 7-2-119 provided for the repeal of this article, effective July 1, 1994. (See L. 93, p. 866 .)
ARTICLE 3 CORPORATE POWERS AND LIMITATIONS
7-3-101 to 7-3-119. (Repealed)
Editor's note: Section 7-3-119 provided for the repeal of this article, effective July 1, 1994. (See L. 93, p. 866 .)
ARTICLE 4 SHAREHOLDERS AND SHARES OF STOCK
7-4-101 to 7-4-126. (Repealed)
Editor's note: Section 7-4-126 provided for the repeal of this article, effective July 1, 1994. (See L. 93, p. 866 .)
ARTICLE 5 DIRECTORS - OFFICERS - RECORDS
7-5-101 to 7-5-120. (Repealed)
Editor's note: Section 7-5-120 provided for the repeal of this article, effective July 1, 1994. (See L. 93, p. 866 .)
ARTICLE 6 STATED CAPITAL - AMOUNT AND REDUCTION
7-6-101 to 7-6-107. (Repealed)
Editor's note: Section 7-6-107 provided for the repeal of this article, effective July 1, 1994. (See L. 93, p. 866 .)
ARTICLE 7 MERGER OR CONSOLIDATION
7-7-101 to 7-7-109. (Repealed)
Editor's note: Section 7-7-109 provided for the repeal of this article, effective July 1, 1994. (See L. 93, p. 866 .)
ARTICLE 8 DISSOLUTION - VOLUNTARY AND INVOLUNTARY
7-8-101 to 7-8-126. (Repealed)
Editor's note: Section 7-8-126 provided for the repeal of this article, effective July 1, 1994. (See L. 93, p. 866 .)
ARTICLE 9 FOREIGN CORPORATIONS
7-9-101 to 7-9-120. (Repealed)
Editor's note: Section 7-9-120 provided for the repeal of this article, effective July 1, 1994. (See L. 93, p. 866 .)
ARTICLE 10 REPORTS, FEES, LICENSES, PENALTIES
7-10-101 to 7-10-114. (Repealed)
Editor's note: Section 7-10-114 provided for the repeal of this article, effective July 1, 1994. (See L. 93, p. 866 .)
Nonprofit Corporations
Editor's note: (1) Articles 20 to 29 were numbered as article 24 of chapter 31, C.R.S. 1963. For amendments to these articles prior to their repeal in 1997, effective July 1, 1998, consult the Colorado statutory research explanatory note and the table itemizing the replacement volumes and supplements to the original volume of C.R.S. 1973 beginning on page vii in the front of this volume.
(2) Current provisions concerning nonprofit corporations are located in articles 121 to 137 of this title.
ARTICLE 20 DEFINITIONS AND APPLICATION
7-20-101 to 7-20-109. (Repealed)
Editor's note: Section 7-20-109 provided for the repeal of this article, effective July 1, 1998. (See L. 97, p. 645 .)
ARTICLE 21 INCORPORATION - ARTICLES - AMENDMENTS
7-21-101 to 7-21-116. (Repealed)
Editor's note: Section 7-21-116 provided for the repeal of this article, effective July 1, 1998. (See L. 97, p. 645 .)
ARTICLE 22 CORPORATE POWERS AND LIMITATIONS
7-22-101 to 7-22-110. (Repealed)
Editor's note: Section 7-22-110 provided for the repeal of this article, effective July 1, 1998. (See L. 97, p. 645 .)
ARTICLE 23 MEMBERS
7-23-101 to 7-23-111. (Repealed)
Editor's note: Section 7-23-111 provided for the repeal of this article, effective July 1, 1998. (See L. 97, p. 645 .)
ARTICLE 24 DIRECTORS - OFFICERS - RECORDS
7-24-101 to 7-24-113. (Repealed)
Editor's note: Section 7-24-113 provided for the repeal of this article, effective July 1, 1998. (See L. 97, p. 645 .)
ARTICLE 25 MERGER OR CONSOLIDATION
7-25-101 to 7-25-108. (Repealed)
Editor's note: Section 7-25-108 provided for the repeal of this article, effective July 1, 1998. (See L. 97, p. 645 .)
ARTICLE 26 DISSOLUTION - VOLUNTARY AND INVOLUNTARY
7-26-101 to 7-26-123. (Repealed)
Editor's note: Section 7-26-123 provided for the repeal of this article, effective July 1, 1998. (See L. 97, p. 645 .)
ARTICLE 27 FOREIGN NONPROFIT CORPORATIONS
7-27-101 to 7-27-118. (Repealed)
Editor's note: Section 7-27-118 provided for the repeal of this article, effective July 1, 1998. (See L. 97, p. 645 .)
ARTICLE 28 REPORTS - FEES
7-28-101 to 7-28-107. (Repealed)
Editor's note: Section 7-28-107 provided for the repeal of this article, effective July 1, 1998. (See L. 97, p. 645 .)
ARTICLE 29 SECRETARY OF STATE - POWERS AND DUTIES
7-29-101 to 7-29-109. (Repealed)
Editor's note: Section 7-29-109 provided for the repeal of this article, effective July 1, 1998. (See L. 97, p. 645 .)
ARTICLE 30 UNIFORM UNINCORPORATED NONPROFIT ASSOCIATION ACT
Editor's note: The governor signed S-94-168 which enacted this article on May 22, 1994. Section 7-30-117 sets forth July 1, 1994, as the date the article shall take effect.
Law reviews: For article, "Colorado Choice of Form of Organization and Structure 2001", see 30 Colo. Law. 11 (Oct. 2001); for article "Entity and Trade Name Registration: 2001 Update", see 30 Colo. Law. 81 (Oct. 2001); for article, "No Paper Required: Business Entity Legislation Makes Life Easier for Business Lawyers", see 33 Colo. Law. 6 (June 2004); for article, "Entity and Trade Name Registration: 2004 Update", see 34 Colo. Law. 11 (Jan. 2005).
Section
UNIFORM UNINCORPORATED NONPROFIT ASSOCIATION ACT PREFATORY NOTE
This Act reforms the common law concerning unincorporated, nonprofit associations in three basic areas -- authority to acquire, hold, and transfer property, especially real property; authority to sue and be sued as an entity; and contract and tort liability of officers and members of the association.
At common law an unincorporated association, whether nonprofit or for-profit, was not a separate legal entity. It was an aggregate of individuals. In many ways it had the characteristics of a business partnership.
This approach obviously created problems. A gift of real property to an unincorporated association failed because no legal entity existed to receive it. For example, a gift of Blackacre to Somerset Social Club (an unincorporated, nonprofit association) would fail because in law there is no legal entity to receive title. Some courts in time became uncomfortable with this result. Some construed such a gift as a grant to the officers of the association to hold the real estate in trust and manage it for the benefit of the members of the association. Later, some legislatures provided various solutions, including treating the association for these purposes as an entity.
Proceedings by or against an unincorporated association presented similar problems. If it were not a legal entity, each of the members needed to be joined as party plaintiffs or defendants. Class action offered another approach. Again courts and legislatures, especially the latter, provided solutions. "Sue and be sued" statutes found their way on the law books of most states.
Unincorporated associations, not being legal entities, could not be liable in tort, contract, or otherwise for conduct taken in their names. On the other hand, their members could be. Courts borrowed from the law of partnership the concept that the members of the association, like partners, were co-principals. As co-principals they were individually liable. Again courts and legislatures, responding to concerns of their constituents about this result, modified these rules. Courts found that, in large membership associations, some members did not have the kind of control or participation in the decision process that made it reasonable and fair to view them as co-principals. Legislatures also took steps. Perhaps most striking are the statutes adopted in many states in the last decade excusing officers, directors, members, and volunteers of nonprofit organizations from liability for simple negligence. There is great variety in the details; a few statutes condition the immunity on the association carrying appropriate insurance or qualifying under Internal Revenue Code Section 501(c).
Related to liability is the question of enforcement of a judgment obtained against an unincorporated association, its members, and its property. If fewer than all members are liable in contract or tort, the property that members own jointly or in common may not be seized in execution of a judgment without severing the interest of those who are liable from those who are not. Again, courts using "joint debtor," "common property," and "common name" statutes fashioned more workable solutions. Some legislatures have also addressed the problem directly. For these purposes, unincorporated associations have been treated as legal entities -- like a corporation.
What is striking about the legislative treatment of these and other legal issues concerning unincorporated, nonprofit associations is that no state appears to have addressed them in a comprehensive, integrated, and internally consistent manner.
This Act deals with a limited number of the major issues relating to unincorporated, nonprofit associations in an integrated and consistent manner.
The American Bar Association first issued its Model Nonprofit Corporation Act in 1964; it was most recently revised in 1987. The act deals comprehensively with nonprofit corporations, including troublesome questions of governance and membership. This Act, on the other hand, does not treat these and other questions. Enactment of this Act would leave these matters to a jurisdiction's common law or its statutes on the subject. It should be noted, too, that many states have statutes on special kinds of unincorporated, nonprofit associations, such as churches, mutual benefit societies, social clubs, and veteran's organizations. Which of these acts should be repealed and which retained in whole or part may require careful consideration.
This Act applies to all unincorporated, nonprofit associations. Nonprofit organizations are often classified as public benefit, mutual benefit, or religious. For purposes of this Act, it is unnecessary to treat differently these three categories of unincorporated, nonprofit associations. Unlike some state laws, it is not confined to the nonprofit organizations recognized as nonprofit under Section 501(c) (3), (4), and (6) of the Internal Revenue Code. There is no principled basis for excluding any nonprofit association. Therefore, the Act covers unincorporated philanthropic, educational, scientific, and literary clubs, unions, trade associations, political organizations, cooperatives, churches, hospitals, condominium associations, neighborhood associations, and all other unincorporated, nonprofit associations. Their members may be individuals, corporations, other legal entities, or a mix.
The Act is designed to cover all of these associations to the extent possible. To the extent a jurisdiction decides to retain statutes dealing with specific kinds of nonprofit associations, this Act will supplement existing legislation. As is pointed out in the Comments, a state electing to adopt this Act will need to examine carefully its statutes to determine which its wants to repeal, which to amend, and which to retain.
The basic approach of the Act is that an unincorporated, nonprofit association is a legal entity for the purposes that the Act addresses. It does not make these associations legal entities for all purposes. It is left to the courts of an adopting state to determine whether to use this Act by analogy to conclude that an association is a legal entity for some other purpose.
It should be noted, too, that many of the provisions are intended to be supplemented by a jurisdiction's existing law. For example, Section 5 (numbered as section 7-30-105 in C.R.S.) which provides for the filing of a statement of association authority, does not provide details concerning the filing process. It leaves to other law such details as whether the filing officer returns a copy marked "filed" and stamps the hour and date thereof, and the amount of the filing fee.
Two sections are bracketed as optional -- Section 12 (numbered as section 7-30-112 in C.R.S.) on venue and Section 13 (numbered as section 7-30-113 in C.R.S.) on service of process. A jurisdiction may decide that its present rules are consistent with the entity view of an association and provide the appropriate rule. Therefore, it would not adopt Sections 12 and 13 (numbered as sections 7-30-112 and 7-30-113 in C.R.S.). Both sections deal with only a part of the questions of venue and service of process. This means that if they are adopted they are only a part of the jurisdiction's law on the subject. And perhaps they should be placed in the court rules or statutes on those subjects instead of in the state's code with the other sections of this Act.
A nonprofit organization wanting a comprehensive governance structure might consider incorporating under a nonprofit corporation statute, particularly one that follows the format of the ABA Model Nonprofit Corporation Act. These statutes provide, among other things, comprehensive governance provisions. As this Act contains none, adoption of a substantial charter and bylaws would be required to obtain similar internal rules and structure.
There has been concern that this Act may deter nonprofit organizations from incorporating and that failure to incorporate would deprive the public of protections incorporation would provide. Clearly, incorporation does provide governmental involvement that this Act does not.
Most jurisdictions regulate solicitation by charitable organizations. Many of these are comprehensive. See, for example, Ill. Ann. Stat. ch. 23, Sections 100-5121 (Smith-Hurd 1992); Minn. Stat. Ann. Sections 309.50-309.61 (West 1992); Uniform Management of Institutional Funds Act.
These statutes frequently require, among other things, filing of a comprehensive statement with the attorney general before soliciting funds, including a copy of contracts with any professional fundraisers, and registration of professional fundraisers. A range of civil and criminal sanctions are provided. These statutes apply to all persons soliciting for charitable purposes, incorporated or not. In short, this Act's nonprofit associations are covered.
It should be noted, too, that a nonprofit corporation or unincorporated, nonprofit association is not the only choice. The Uniform Law Foundation, like many Illinois foundations, is organized as a charitable trust. Ill. Ann. Stat. ch. 14, Sections 51-69, (Smith-Hurd 1992); Uniform Supervision of Trustees for Charitable Purposes Act. Finally, it should be repeated that this Act is needed for the informal nonprofit organizations that do not have legal advice and so may not consider whether to incorporate.
7-30-101. Definitions.
In this article:
- "Member" means a person who, under the rules or practices of a nonprofit association, may participate in the selection of persons authorized to manage the affairs of the nonprofit association or in the development of policy of the nonprofit association or who is considered to be a member by such person and the nonprofit association.
- "Nonprofit association" means an unincorporated organization consisting of two or more members joined by mutual consent for a common, lawful, nonprofit purpose. However, joint tenancy or tenancy in common does not by itself establish a nonprofit association, even if the co-owners share use of the property for a nonprofit purpose. "Nonprofit association" includes an acequia ditch association, whether or not the acequia ditch association is formed as an acequia ditch association as contemplated by section 7-42-101.5 (3) or is a ditch association operating as an acequia ditch association as contemplated by section 7-42-101.5 (3).
- and (4) Repealed.
Source: L. 94: Entire article added, p. 1271, § 1, effective May 22. L. 2003: (3)(b) and (4)(b) added by revision, pp. 2356, 2357, §§ 347, 348. L. 2013: (2) amended, (HB 13-1168), ch. 87, p. 280, § 2, effective August 7.
Editor's note: Subsections (3)(b) and (4)(b) provided for the repeal of subsections (3) and (4) respectively, effective July 1, 2004. (See L. 2003, pp. 2356, 2357.)
Cross references: For additional definitions applicable to this article, see § 7-90-102.
OFFICIAL COMMENT
1. With respect to relations external to a nonprofit association, whether a person is a member of the organization determines principally a member's responsibility to third parties. Internally, whether a person is a member might determine specified rights and responsibilities, including access to facilities, voting, and obligation to pay dues. This Act is concerned only with determining whether a person is a member for purposes of external relations, such as liability to third parties on a contract of the nonprofit association. Therefore, "member" is defined in terms appropriate to these purposes. "Member" includes a person who has sufficient right to participate in the affairs of a nonprofit association so that under common law the person would be considered a co-principal and so liable for contract and tort obligations of the nonprofit association.
The definition may reach somewhat beyond decisions of some courts. Either participation in the selection of the leadership or in the development of policy is enough. Both are not required. This broad definition of member ensures that the insulation from liability is provided in all cases in which the common law might have imposed liability on a person, simply because the person was a member.
2. A fundraising device commonly used by many nonprofit associations is the membership drive. In most cases the contributors are not members for purposes of this Act. They are not authorized to "participate in the selection of persons authorized to manage the affairs of the nonprofit association or in the development of policy." Simply because an association calls a person a member does not make the person a member under this Act.
Section 6 (numbered as section 7-30-106 in C.R.S.) nevertheless protects "a person considered to be a member by a nonprofit association" even though the person is not within the definition of member in paragraph (subsection) (1).
3. The role of a member in the affairs of an association is described as "may participate in the selection" instead of "may select or elect" the governing board and officers and "may participate ... in the development of policy" instead of "may determine" policy. This accommodates the Act to a great variation in practices and organizational structures. For example, some nonprofit associations permit the president or chair to name some members of the governing board, such as by naming the chairs of principal committees who are designated ex officio members of the governing board. Similarly, the role in determination of policy is described in general terms. "Persons authorized to manage the affairs of the association" is used in the definition instead of president, executive director, officer, member of governing board, and the like. Given the wide variety of organizational structures of nonprofit association to which this Act applies and the informality of some of them the more generic term is more appropriate.
4. "Person" instead of individual is used to make it clear that associations covered by this Act may have individuals, corporations, and other legal entities as members. Unincorporated, nonprofit trade associations, for example, commonly have corporations as members. Some national and regional associations of local government officials and agencies have governmental units or agencies as members.
5. Paragraph (Subsection) (2) defines "nonprofit association." The model American Bar Association acts deal with both for-profit and nonprofit corporations. Unincorporated, for-profit organizations are largely covered by the uniform partnership acts. The differences between for-profit and nonprofit, unincorporated organizations are so significant that it would be impractical to cover both in a single act. Therefore, this Act deals only with nonprofit organizations.
6. The term "nonprofit association" is used instead of "association" for several reasons. The risk that this Act when placed in a state's code would be construed to apply to both nonprofit and for-profit associations should thus be avoided. Acts dealing with one kind of association when placed in a code have sometimes lost their identification and been inadvertently applied to the other kind where the term "association" alone was used. For example, the New York Joint-Stock Association Act of 1894 used the term "association," which it defined to include only for-profit organizations. "Association" was held in 1938 to include an unincorporated political party and the act applied to it. Democratic Organization of Richmond County v. Democratic Organization of Richmond County , 1 N.Y.S.2d 349 (1938). Subsequent decisions applied the act to other unincorporated, nonprofit organizations. The use of "nonprofit association" instead of merely "association" should also avoid the risk of this Act being improperly used to develop a common law rule by analogy from this Act to apply in a case involving a for-profit association. Roscoe Pound, Common Law and Legislation , 21 Harv. L. Rev. 383 (1908); Robert F. Williams, Statutes as Sources of Law Beyond their Terms in Common Law Cases , 50 Geo. Wash. L. Rev. 554 (1982).
Legal issues concerning unincorporated, for-profit associations that are not partnerships and so not controlled by a partnership act would be governed by a state's other statutory or common law. Resort to one of the two partnership acts for the purposes of developing a common law rule by analogy would be appropriate. Resort for this purpose to this Act in the case of an unincorporated, for-profit association would not be appropriate.
7. Two or more persons is the common statutory requirement to constitute an unincorporated, nonprofit association. New Jersey, on the other hand, requires that there be seven or more members to be an association under its laws. This Act suggests the smaller number -- two. Consideration was given to specifying "one" instead of "two." For example, the developer of a condominium may have created a condominium association as an unincorporated nonprofit association. Before any units are sold the developer as owner of all units has all of the memberships in the association. Should it be treated as a nonprofit association under this Act from the beginning? It should not. Can one person be "joined by mutual consent for a common purpose?" To ask the question would seem to be to answer it. If the concern is to give the developer the entity protections provided by this Act, it is very likely that it already has some protection because it is a business corporation. Nevertheless, the number is placed in brackets, in part, to raise the question whether the number should be one or two or even a larger number.
The members must be joined together for a common purpose. Several states provide that they be "joined together for a stated common purpose" (emphasis added). Because of the informality of many ad hoc associations, it is prudent not to impose the requirement that the common purpose be "stated." Very probably, it is the small, informal, ad hoc associations and those third parties affected by them that most need this Act.
8. "Nonprofit" is not defined. A common definition -- it is an association whose net gains do not inure to the benefit of its members and which makes no distribution to its members, except on dissolution -- does not work for all nonprofit associations. Consumer cooperatives, for example, make distributions to their members; but they are not for-profit organizations. Those consumer cooperatives not organized under specific state or federal laws need the benefits of this Act.
It is instructive to note that the drafting committee for the ABA Model Nonprofit Corporation Act finally determined that it could not develop a satisfactory definition of nonprofit.
9. The final sentence of paragraph (subsection) (2) is adapted from Section 201(d)(1) of Revised Uniform Partnership Act (RUPA). This stresses that more than common ownership and use is required. For example, that three families own a lake cottage and share its use does not make the three families a nonprofit association. Paragraph (Subsection) (2) precludes arrangements that are merely common ownership from being a nonprofit association under this Act.
10. The definition of "person" in paragraph (subsection) (3) is a standard NCCUSL definition.
11. The definition of "state" in paragraph (subsection) (4) is a standard NCCUSL definition.
7-30-101.1. Suspended, defunct, and dissolved nonprofit corporations.
Any nonprofit corporation other than a nonprofit corporation that is governed by the "Colorado Revised Nonprofit Corporation Act", articles 121 to 137 of this title, that was suspended, declared defunct, administratively dissolved, or dissolved by operation of law, and the business or affairs of which are continued for nonprofit purposes, with or without knowledge of the suspension, declaration, or dissolution, and the business and affairs of which are not wound up, shall be deemed an unincorporated organization that qualifies as a nonprofit association for purposes of sections 7-30-101.2 and 7-30-106, unless such nonprofit corporation is reinstated as provided in part 10 of article 90 of this title.
Source: L. 97: Entire section added, p. 645, § 2, effective July 1, 1998. L. 2006: Entire section amended, p. 848, § 1, effective July 1.
7-30-101.2. Charitable nonprofit corporations - private foundations.
- As used in this section, "charitable purposes" means one or more charitable purposes enumerated in section 501(c)(3) of the federal "Internal Revenue Code of 1986", as amended, hereinafter referred to as "the internal revenue code" and formed exclusively for one or more charitable purposes.
- In the case of a deemed unincorporated organization, its articles of incorporation shall be presumed to be its principal governing document for the purposes of this section.
- Except as otherwise provided in its constitution, articles of association, or other principal governing document, the purposes of a charitable nonprofit association and the disposition of its assets upon liquidation shall be limited to charitable purposes.
-
Except as otherwise expressly provided in its constitution, articles of association, or a principal governing document, or otherwise determined by a court of competent jurisdiction, a charitable nonprofit association that is also a private foundation within the meaning of section 509 (a) of the internal revenue code:
- Shall distribute such amounts for each taxable year at such time and in such manner as not to subject the nonprofit corporation to tax under section 4942 of the internal revenue code;
- Shall not engage in any act of self-dealing as defined in section 4941(d) of the internal revenue code;
- Shall not retain any excess business holdings as defined in section 4943(c) of the internal revenue code;
- Shall not make any investments that would subject the nonprofit association to taxation under section 4944 of the internal revenue code;
- Shall not make any taxable expenditures as defined in section 4945(d) of the internal revenue code.
Source: L. 97: Entire section added, p. 645, § 2, effective July 1, 1998. L. 98: (4)(d) amended, p. 611, § 1, effective July 1. L. 2003: (1) amended, p. 2202, § 1, effective July 1, 2004.
7-30-102. Supplementary general principles of law and equity.
Principles of law and equity supplement this article unless displaced by a particular provision of it.
Source: L. 94: Entire article added, p. 1272, § 1, effective May 22.
OFFICIAL COMMENT
1. This section is adapted from Uniform Commercial Code Section 1-103. The reference in Section 1-103 to "the law merchant" and its examples of supplementary rules, such as those of principal and agent and estoppel, were deleted as irrelevant or incomplete and unnecessary. This change in language does not manifest any change in substance.
2. This Act contains no rules concerning governance. However, recourse to rules of governance must be had to apply some of the Act's rules. For example, whether a nonprofit association is liable under a contract made for it by an individual depends on whether the individual had the necessary authority to act as agent. Was the individual given the authority by someone empowered by the nonprofit association to give the authority? To decide a case like this a court must resort to the rules of the nonprofit association or, if there are none applicable or none at all, to the common law or other statutory law of the jurisdiction.
3. Efforts were made to develop default internal rules of governance -- applicable if an association had none or none that were applicable. This effort demonstrated the complexity and difficulty of fashioning rules that would reasonably fit a wide variety of nonprofit associations -- large and small, public benefit, mutual benefit, and religious, and of short and indefinite duration. It was thought best to leave this question to other law of the jurisdiction.
7-30-103. Territorial application.
Real and personal property in this state may be acquired, held, encumbered, and transferred by a nonprofit association, whether or not the nonprofit association or a member has any other relationship to this state.
Source: L. 94: Entire article added, p. 1272, § 1, effective May 22.
OFFICIAL COMMENT
This section is consistent with Restatement (Second) of Conflict of Laws Section 223 (1971). Section 3 (numbered as section 7-30-103 in C.R.S.) makes a conveyance or devise of land located in a state that has adopted this Act effective even though it would not be effective under the law of the state in which the nonprofit association has its principal office or other significant relationship. No relationship of the nonprofit association other than that the property is situated in the state is required.
7-30-104. Real and personal property - nonprofit association as legatee, devisee, or beneficiary.
- A nonprofit association in its name may acquire, hold, encumber, or transfer an estate or interest in real or personal property.
- A nonprofit association may be a legatee, devisee, or beneficiary of a trust or contract.
Source: L. 94: Entire article added, p. 1272, § 1, effective May 22.
OFFICIAL COMMENT
1. Subsection (a) (numbered as subsection (1) in C.R.S.) is based on Section 3-102(8), Uniform Common Interest Act. It reverses the common law rule. Inasmuch as an unincorporated, nonprofit association was not a legal entity at common law, it could not acquire, hold, or convey real or personal property. Harold J. Ford, Unincorporated Non-Profit Associations 1-45 (Oxford Univ. Press 1959), 15 A.L.R. 2d 1451 (1951); Warburton, The Holding of Property by Unincorporated Associations , Conveyancer 318 (September-October 1985).
2. This strict common law rule has been modified in various ways in most jurisdictions by courts and statutes. For example, courts have held that a gift by will or inter vivos transfer of real property to a nonprofit association is not effective to vest title in the nonprofit association but is effective to vest title in the officers of the association to hold as trustees for the members of the association. Matter of Anderson's Estate , 571 P.2d 880 (Okla. App. 1977).
A New York statute specifies that a grant by will of real or personal property to an unincorporated association is effective if within three years after probate of the will the association incorporates. McKinney's N.Y. Estates, Powers, & Trust Law, Section 3-1.3 (1981).
California gives any "unincorporated society or association and every lodge or branch of any such association, and any labor organization" full right to acquire, hold, or transfer any "real estate and other property as may be necessary for the business purposes and objects of the society," and acquire and hold any property not so necessary for 10 years. California Corporations Code, Title 3, Unincorporated Associations, Section 20001 (West 1991).
As is the case with many of the problems created by the view that an unincorporated association is not an entity the statutory solutions are often partial -- limited to special circumstances and associations. Subsection (a) (numbered as subsection (1) in C.R.S.) solves this problem for all nonprofit associations, for all kinds of transactions, and for both real and personal property.
3. Even if a nonprofit association's governing documents provide that it "may not acquire real property," subsection (a) (numbered as subsection (1) in C.R.S.) makes effective a transfer of Blackacre to the association. A different result would obviously disrupt real estate titles. The remedy for this violation of internal rules lies not in preventing title from passing but, as with other organizations, in an action by members against their association and its appropriate officers to undo the transaction.
4. Subsection (b) (numbered as subsection (2) in C.R.S.) is a necessary corollary of subsection (a) (numbered as subsection (1) in C.R.S.) and, thus, it may be unnecessary. However, several states expressly provide that an unincorporated, nonprofit association may be a legatee, devisee, or beneficiary. See, for example, Md. Estates & Trusts Code Ann. Section 4-301 (1991). Therefore, it is desirable to continue this as an express rule. Subsection (b) (numbered as subsection (2) in C.R.S.) applies to both trusts and contracts. Not all state statutes apply expressly to both.
7-30-105. Statement of authority as to real property.
- A nonprofit association is an entity for purposes of, and may execute and record a statement of authority pursuant to, section 38-30-172, C.R.S.
- In addition to the matters required or permitted to be contained therein pursuant to section 38-30-172, C.R.S., a statement of authority executed and recorded on behalf of a nonprofit association shall state any limitation that may exist upon the authority of the person named in the statement of authority, or holding the position described in the statement of authority, to execute instruments encumbering, conveying, or otherwise affecting title to the real property on behalf of the nonprofit association.
Source: L. 94: Entire article added, p. 1272, § 1, effective May 22. L. 2003: Entire section R&RE, p. 2202, § 2, effective July 1, 2004.
Editor's note: Colorado amended subsection (1) (numbered as subsection (a) in the uniform act) to require the execution and recording of the statement of authority, and, in subsection (2) (numbered as subsection (b) in the uniform act), required that the statement be recorded in the county in which the property is situated. Further, Colorado amended § 7-30-105 to specify that property may be encumbered in addition to being transferred, whereas the uniform act refers only to transferring. The official comment should be read with these changes in mind.
OFFICIAL COMMENT
1. This section is based on Revised Uniform Partnership Act (RUPA) Section 303. California Corporations Code, Title 3, Unincorporated Associations, Section 20002 (West 1991), is similar.
2. A statement of authority need not be filed to conclude an acquisition of or to hold real property. It is concerned only with the sale, lease, encumbrance, and other transfer of an estate or interest in real property. For this, it should, but need not, be filed. The filing provides important documentation.
3. Inasmuch as the statement relates to the authority of a person to act for the association in transferring real property, subsection (b) (numbered as subsection (2) in C.R.S.) requires that the statement be filed or recorded in the office where a transfer of the real property would be filed or recorded. This is usually the county in which the real estate is situated. This is where a title search concerning the real estate would be conducted. RUPA Section 303 provides for central filing, such as with the secretary of state, but its statement of partnership authority concerns authority of partners generally, not just with respect to real estate.
4. "Filed" and "recorded" are bracketed to direct an enacting state to choose. In most jurisdictions "recorded" will be the appropriate choice.
5. Subsection (c)(2) (numbered as subsection (3)(b) in C.R.S.) may present a problem for small, ad hoc, nonprofit associations. They may have no fixed office address. They may meet in the homes of their leaders. However, if they distribute literature or file petitions they are likely to have a mailing address.
6. Subsection (c)(3) (numbered as subsection (3)(c) in C.R.S.) permits the statement to identify as the person who can act for the association one who holds a particular office, such as president. This designation relieves the association from the need to make additional filings on each change of officers. Under local title standards and practices the transferee and filing or recording office are likely to require a certificate of incumbency if the statement designates the holder of an office.
7. Subsection (c)(4) (numbered as subsection (3)(d) in C.R.S.) requires the statement to document the authority of the person granted power to deal with the nonprofit association's real property and of the person authorized to execute the statement of authority.
8. Subsection (d) (numbered as subsection (4) in C.R.S.) is designed to reduce the risk of fraud and to reflect law and practice applicable to other organizations. It requires someone other than the person authorized to deal with the real property to execute the statement of authority on behalf of the nonprofit association.
9. Subsection (f) (numbered as subsection (6) in C.R.S.) makes a statement inoperative five years after its most recent recording or filing. This prevents a statement whose recording or filing is unknown by the association's current leadership from being effective. Reliance on a filing or recording this old is, in effect, not in good faith.
10. Subsection (g) (numbered as subsection (7) in C.R.S.) is based on RUPA Section 303(h). Its obvious purpose is to protect good faith purchasers for value without notice who rely on the statement, including those who acquire a security interest in the real property. There remains, of course, the risk that the statement itself was unauthorized.
ANNOTATION
Law reviews. For article, "Entity and Trade Name Filing Requirements and Customs in Colorado -- Part I", see 41 Colo. Law. 57 (Nov. 2012). For article, "Entity and Trade Name Filing Requirements and Customs in Colorado -- Part II", see 41 Colo. Law. 25 (Dec. 2012).
7-30-106. Liability in contract and tort.
- A nonprofit association is a legal entity separate from its members for the purposes of determining and enforcing rights, duties, and liabilities in contract and tort.
- A person is not liable for a breach of a nonprofit association's contract merely because the person is a member of the nonprofit association, is authorized to participate in the management of the affairs of the nonprofit association, or is a person considered to be a member by the nonprofit association.
- A person is not liable for a tortious act or omission for which a nonprofit association is liable merely because the person is a member of the nonprofit association, is authorized to participate in the management of the affairs of the nonprofit association, or is a person considered to be a member by the nonprofit association.
- A tortious act or omission of a member or other person for which a nonprofit association is liable is not imputed to a person merely because the person is a member of the nonprofit association, is authorized to participate in the management of the affairs of the nonprofit association, or is a person considered to be a member by the nonprofit association.
- A member of, or a person considered to be a member by, a nonprofit association may assert a claim against the nonprofit association. A nonprofit association may assert a claim against a member or a person considered to be a member by the nonprofit association.
Source: L. 94: Entire article added, p. 1273, § 1, effective May 22.
OFFICIAL COMMENT
1. At common law a nonprofit association was not a legal entity separate from its members. Borrowing from the law of partnership, the common law viewed a nonprofit association as an aggregate of its members. The members are co-principals. Subsection (a) (numbered as subsection (1) in C.R.S.) changes that. It makes a nonprofit association a legal entity separate from its members for purposes of contract and tort.
2. This Act does not deal with liability of a member or other person acting for a nonprofit association for their own conduct. With respect to contract and tort Section 6 (numbered as section 7-30-106 in C.R.S.) leaves that to the other law of the jurisdiction enacting this Act.
3. Subsections (b) through (e) (numbered as subsections (2) through (5) in C.R.S.) are applications to common cases of the basic principle in subsection (a) (numbered as subsection (1) in C.R.S.). Because a nonprofit association is made a separate legal entity, its members are not co-principals. Consequently they are not liable on contracts or for torts for which the association is liable. Subsection (b) (numbered as subsection (2) in C.R.S.) specifies that result with respect to contracts.
4. Subsection (b) (numbered as subsection (2) in C.R.S.) applies the principle in subsection (a) (numbered as subsection (1) in C.R.S.) to relieve members and others from vicarious liability for the contracts of a nonprofit association.
5. Subsections (a) and (b) (numbered as subsections (1) and (2) in C.R.S.) eliminate a risk that existed under common law. An agent makes an implied warranty of authority to the other contracting party. If the purported principal does not exist, the agent obviously breaches the warranty. Because an unincorporated, nonprofit association was not a legal entity; one purporting to act for it breached this implied warranty. Smith & Edwards v. Golden Spike Little League , 577 P.2d 132, 134 (Utah 1978). Subsection (b) (numbered as subsection (2) in C.R.S.) treats a nonprofit association as a legal entity; therefore, an agent who acts for it within her authority does not breach the warranty.
6. "Merely" because a person is a member does not make the person liable on an association's contract. This formulation means that there are special circumstances that may result in liability. For example, a member may expressly become a party to a contract with the nonprofit association. Subsection (b) (numbered as subsection (2) in C.R.S.) relieves members only of their vicarious liability. Liability for one's own conduct is left to the other law of the jurisdiction.
An agent with authority from a nonprofit association who negotiates a contract without disclosing the agent's representative status is liable on the contract. Under agency law an agent acting within the agent's scope of authority for an undisclosed or partially disclosed principal is personally liable on the contract along with the principal, unless the other contracting party agrees not to hold the agent liable. Restatement (Second) Of Agency 320-322; Reuschlein and Gregory, Agency & Partnership 161-163 (West 2d ed. 1990).
Courts have pierced the corporate veil of nonprofit corporations. Comment, Piercing the Nonprofit Corporate Veil , 66 Marq. L. Rev. 134 (1984). Section 6 (numbered as section 7-30-106 in C.R.S.) makes a nonprofit association a legal entity for these purposes. Therefore, as a matter of its other law a jurisdiction enacting this Act may appropriately apply this doctrine to a nonprofit association. In Macaluso v. Jenkins , 95 Ill. App. 3d 461, 420 N.E.2d 251 (1981), the president of a nonprofit corporation was found to have so commingled its funds and assets with his own and those of a business corporation he controlled and have treated them as his own for his benefit that the corporate veil must be pierced to promote justice. He was found liable for a debt contracted in the name of the nonprofit corporation. See also Harry G. Henn & John R. Alexander, Law of Corporations , pp. 344-352 (West 3d ed. 1983); Alfred F. Conard, Corporations in Perspective , pp. 424-433 (Foundation Press, 1976).
7. An example of a partial statutory solution of members' liability for contracts of a nonprofit association is California Corporations Code, Title 3, Nonprofit Associations, Section 21100 (West 1991). It relieves members from liability for "debts or liabilities contracted or incurred by the association in the acquisition of lands or leases or the purchase, leasing, designing, planning, architectural supervision, erection, contraction, repair, or furnishing of buildings or other structures, to be used for purposes of the association." As noted earlier, partial and uncoordinated statutory solutions of common law problems are typical.
8. Subsection (c) (numbered as subsection (3) in C.R.S.) applies the principle in subsection (a) (numbered as subsection (1) in C.R.S.) to relieve members and others from liability for torts for which the nonprofit association is liable. Inasmuch as Section 6 (numbered as section 7-30-106 in C.R.S.) provides that a member is not a co-principal, the member cannot be considered to be an employer of the employee who committed the tort. Again, only relief from vicarious liability is provided.
Liability of a member or other person who acts for the nonprofit association is governed by other law of the jurisdiction. That an employer is liable for a tort committed by its employee does not excuse the employee.
9. The immunity from vicarious liability provided by subsections (b) and (c) (numbered as subsections (2) and (3) in C.R.S.) does not depend on the remedy sought. Whether it is for damages for breach of contract or tort, unjust enrichment, or the like the immunity is provided.
10. Since the mid 1980's all states have enacted laws providing officers, board members, and other volunteers some protection from liability for their own negligence. The statutes vary greatly as to who is covered, for what conduct protection is given, and the conditions imposed for the freedom from liability. Some apply only to nonprofit corporations. State Liability Laws for Charitable Organizations and Volunteers (Nonprofit Risk Management & Insurance Institute, 1990); Developments, Nonprofit Corporations , 105 Harv. L. Rev. 1578, 1685-1696 (1992).
The 1987 Texas act, for example, relieves directors, officers, and other volunteers from liability for simple negligence that causes death, damage, or injury if the volunteer acted in the scope of her duties for a charitable organization exempt under Internal Revenue Code Section 501(c)(3) or (4). The act also limits the amounts that may be recovered from an employee or the organization if the organization carries requisite liability insurance. The constitutionality of the provision relieving volunteers from liability has been questioned under Article I, Section 13 of the Texas Constitution -- the Open Courts provision. Note, The Constitutionality of the Charitable Immunity and Liability Act 1987 , 40 Baylor L. Rev. 657 (1988). Some statutes premise all relief upon the organization having specified liability insurance.
Section 6 (numbered as section 7-30-106 in C.R.S.) does not affect these statutes. As noted earlier Section 6 deals only with vicarious liability. These statutes concern liability for one's own conduct.
11. Although not a concern of Section 6 (numbered as section 7-30-106 in C.R.S.), perhaps it should be noted that nonprofit organizations have been held liable for tortious acts and omissions not only of employees but also of members. In Guyton v. Howard , 525 So.2d 948 (Fl. App. 1988) a nonprofit organization was held liable for the negligence of members who acted for the organization in conducting an initiation that resulted in injury.
12. Subsection (d) (numbered as subsection (4) in C.R.S.) applies the principle in subsection (a) (numbered as subsection (1) in C.R.S.) to reverse the common law rule that the negligence of an employee of an association is imputed to its members. A member as co-principal was vicariously responsible for an employee's conduct within the scope of the employee's duties. Section 6 (numbered as section 7-30-106 in C.R.S.), however, makes the nonprofit association a legal entity. Thus, a member is not a co-principal and the employee's negligence is not imputed to a member.
Because the employee's negligence is not imputed, the member's suit against the nonprofit association for negligence by the employee is not subject to the defense of contributory negligence.
Some courts treated large nonprofit associations as entities for some purposes and so did not impute the negligence of an employee to a member. Therefore, a member could recover from the association. Marshall v. International Longshoreman's and Warehouseman's Union , 57 Cal.2d 781, 371 P.2d 987 (1962); Judson A. Crane, Liability of an Unincorporated Association for Tortious Injury to a Member , 16 Vand. L. Rev. 319, 323 (1963).
13. Subsection (e) (numbered as subsection (5) in C.R.S.) applies the principle in subsection (a) (numbered as subsection (1) in C.R.S.) to reverse the common law rule that a member may not sue the member's unincorporated, nonprofit association. A member as co-principal is logically a defendant as well as a plaintiff in such an action. The logic is that one may not sue oneself.
Subsection (a) (numbered as subsection (1) in C.R.S.) makes an unincorporated nonprofit association a legal entity. Therefore, a member is separate from the nonprofit association. There is thus no logical obstacle to either suing the other. A nonprofit association may, for example, sue a member for delinquent dues. See, for example, Section 6.13 ABA Nonprofit Corporation Act (1987).
14. The Texas Supreme Court recently overruled the common law rule and held that a member may sue the unincorporated, nonprofit association of which the person is a member. Cox v. Thee Evergreen Church , 836 S.W.2d 167 (Tex. 1992). The court also overturned the Texas common law rule that the negligence of an employee is imputed to a member. The court referred to a statute authorizing a nonprofit association to sue and be sued and other Texas statutes giving entity status for limited purposes to unincorporated, nonprofit associations. It did not, however, rely on them in overturning the historic common law rule. It simply found the old rule not suitable for present times. The court also followed recent developments in other courts.
15. Section 6 (numbered as section 7-30-106 in C.R.S.) relieves from vicarious liability not only members but also certain others. Persons who are "authorized to participate in the management of the affairs of the nonprofit association" are protected. Persons within this group -- largely directors and officers, however denominated -- are likely also to be members as defined in Section 1(1) (numbered as section 7-30-101 (1) in C.R.S.), and protected as such. If they are not members (i.e. not co-principals) they should not be found liable at common law. Section 6 (numbered as section 7-30-106 in C.R.S.) extends protection to this group out of abundant caution. It is possible that a court might misapply the common law rationale for liability to hold a non-member manager vicariously liable. Section 6 (numbered as section 7-30-106 in C.R.S.) prevents that somewhat remote possibility.
Section 6 (numbered as section 7-30-106 in C.R.S.) also extends protection to a person who is not within the definition of "member" in Section 1(1) (numbered as section 7-30-101 (1) in C.R.S.) but is "considered to be a member by the nonprofit association." A person within this clause is one who does not have the relationship to the nonprofit association that would permit a finding under the common law that the person is a co-principal. Also the person is not a director, officer, or manager within the preceding phrase. That a person not within the two preceding phrases but within the third phrase might be found vicariously liable seems quite remote. Nevertheless, Section 6 (numbered as section 7-30-106 in C.R.S.) accords this person protection.
As noted earlier, Section 6 (numbered as section 7-30-106 in C.R.S.) concerns vicarious liability only. Liability for one's own conduct is covered by other law of the enacting jurisdiction.
ANNOTATION
Candidate is not liable for contracts of his campaign committee, a nonprofit unincorporated association, merely because he was the candidate, was a member of the campaign committee, had management responsibilities, or negotiated the employment contracts on behalf of the campaign committee; therefore the candidate is not responsible to pay the committee's former employees. Mohr v. Kelley, 8 P.3d 543 (Colo. App. 2000).
7-30-107. Capacity to assert and defend - standing.
- A nonprofit association, in its name, may institute, defend, intervene, or participate in a judicial, administrative, or other governmental proceeding or in an arbitration, mediation, or any other form of alternative dispute resolution.
- A nonprofit association may assert a claim in its name on behalf of its members if one or more members of the nonprofit association have standing to assert a claim in their own right, the interests the nonprofit association seeks to protect are germane to its purposes, and neither the claim asserted nor the relief requested requires the participation of a member.
Source: L. 94: Entire article added, p. 1274, § 1, effective May 22.
OFFICIAL COMMENT
1. Subsection (a) (numbered as subsection (1) in C.R.S.) broadly recognizes the right of a nonprofit association to participate as an entity in judicial, administrative, and governmental proceedings, and in arbitration and mediation on behalf of it and its members. It may sue and be sued. Many states have enacted statutes granting unincorporated associations these rights. Many have rejected the argument that these acts made an unincorporated, nonprofit association a separate legal entity for other purposes.
2. Ohio Rev. Code Ann. Section 1745.01 (Baldwin 1991) provides that an unincorporated association may "sue or be sued as an entity under the name by which it is commonly known and called." This formulation has an element that subsection (a) (numbered as subsection (1) in C.R.S.) does not have -- a description of the association name to be used. Maryland requires that the unincorporated association have a "group name." Md. Estates & Trust Code Ann. Section 6-406(a) - (1991). As some of the informal nonprofit associations may not have fixed on a name but need the benefit of the rule, subsection (a) (numbered as subsection (1) in C.R.S.) does not require that it have a name.
3. Subsection (b) (numbered as subsection (2) in C.R.S.) describes an association's standing to represent the interests of its members in a proceeding. It is the federal standing rule. Hunt v. Washington Apple Advertising Comm'n , 432 U.S. 333, 343, 97 S. Ct. 2434, 53 L. Ed. 2d 383 (1977). A nonprofit association must meet the three requirements only if it seeks to represent the interests of its members. If the suit concerns only the nonprofit association's interests, subsection (b) (numbered as subsection (2) in C.R.S.) does not apply.
4. If participation of individual members is required, the nonprofit association does not have standing. If the injury for which a claim is made or the remedy sought is different for different members, their participation through testimony and presenting other evidence is required. The typical case in which a nonprofit association has standing is where it seeks only a declaration, injunction, or some form of prospective relief for injury to its members. Warth v. Seldin , 422 U.S. 490, 515, 95 S. Ct. 2197, 45 L. Ed. 2d 343 (1975).
5. Subsection (b) (numbered as subsection (2) in C.R.S.) does not require the nonprofit association to show that it suffered harm or has some interest to protect to have standing to represent the interests of its members. Warth v. Seldin , 422 U.S. 490, 511 95 S. Ct. 2197, 45 L. Ed. 2d 343 (1975). Some states require an association to have an interest to protect which is separate from that of its members. One court found that the probable loss of members if it did not take action on their behalf was a sufficient interest to protect to give it standing to represent its members. This approach certainly diminishes greatly the burden of satisfying the requirement. States have further modified the old standing rule. Recently many states have adopted the three-pronged federal rule, which is the rule in subsection (b) (numbered as subsection (1) in C.R.S.).
This section does not re-state rules of joinder because they will be governed by the jurisdiction's other law.
7-30-108. Effect of judgment or order.
A judgment or order against a nonprofit association is not by itself a judgment or order against a member or a person considered to be a member by the nonprofit association.
Source: L. 94: Entire article added, p. 1274, § 1, effective May 22.
OFFICIAL COMMENT
1. This section is consistent with Restatement (Second) of Judgments, Section 61(2), which provides: "If under applicable law an unincorporated association is treated as a jural entity distinct from its members, a judgment for or against the association has the same effects with respect to the association and its members as a judgment for or against a corporation ... ."
2. Section 8 (numbered as section 7-30-108 in C.R.S.) applies not only to judgments but also to orders, such as an award rendered in arbitration or an injunction.
3. Section 8 (numbered as section 7-30-108 in C.R.S.) reverses the common law rule. Under the common law's aggregate view of an unincorporated association, members, as co-principals, were individually liable for obligations of the association.
4. Some states changed the common law rule by statute. Ohio, for example, provides that the property of an unincorporated association is subject to judgment, execution, and other process and that a money judgment against the association may be "enforced only against the association as an entity" and not "against a member." Ohio Rev. Code Ann., Section 1745.02 (Baldwin 1991).
An obvious corollary of this section is that a judgment against a nonprofit association may not be satisfied against a member unless there is also a judgment against the member.
7-30-109. Disposition of personal property of inactive nonprofit association.
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If a nonprofit association has been inactive for three years or longer, a person in possession or control of personal property of the nonprofit association may transfer the property:
- If a document of the nonprofit association states a person to whom transfer is to be made under those circumstances, to that person; or
- If no person is so stated, to a nonprofit association or nonprofit corporation pursuing broadly similar purposes or to a government, governmental subdivision, agency, or instrumentality.
Source: L. 94: Entire article added, p. 1274, § 1, effective May 22. L. 2003: Entire section amended, p. 2203, § 3, effective July 1, 2004.
OFFICIAL COMMENT
1. Section 9 (numbered as section 7-30-109 in C.R.S.) is not a dissolution rule. An inactive nonprofit association may not be one that has dissolved. It may have just stopped functioning and have taken no formal steps to dissolve. It might possibly be revived.
Section 9 (numbered as section 7-30-109 in C.R.S.) gives a person in possession or control of personal property of a nonprofit association an opportunity to be relieved of responsibility for it. Compliance with the section provides a safe harbor.
2. "Inactive" is not defined. A nonprofit association that has accomplished its purpose, such as seeking approval in a school bond election, is very likely inactive. A nonprofit association that has stopped pursuing its purposes, collecting dues, holding elections of officers and board members, and conducting meetings, and has no employees would seem to be inactive.
"Inactive" does not describe a nonprofit association whose sole purpose is to act should a specific problem arise. That there has been no activity because the problem has not arisen does not make the standby organization "inactive."
A three year period of inactivity is suggested. It is unlikely that a nonprofit association that has been inactive for that period will begin functioning again. Thus, it is prudent to transfer its assets to someone likely to make appropriate use of them.
3. Section 9 (numbered as section 7-30-109 in C.R.S.) applies only to personal property -- tangible and intangible. Unclaimed property acts also apply to both kinds of personal property. All states have some form of unclaimed property act. Therefore, the relationship of these acts to this Act must be examined.
The Uniform Unclaimed Property Act (1981) applies to certain intangible and tangible personal property. If the property has been unclaimed by the owner for five or more years it is presumed abandoned. Intangible property, such as checking and savings accounts and uncollected dividends, is the main concern of these Acts. The obligor, such as a bank or other financial institution and corporation, is directed to report and turn over the property to the state administrator.
The only tangible personal property to which the Uniform Unclaimed Property Act (1981) applies is that in "a safe deposit box or any other safekeeping repository." Many states have additional statutes that apply to property abandoned in airport, bus, and railroad lockers and the like. Tangible personal property of an inactive nonprofit association in the control or possession of a member or other person is not likely to be in these places. Therefore, overlap of this Act with the other state acts with respect to tangible personal property is likely to be very limited.
Property of an inactive nonprofit association is likely to be in the possession or control of a former member, board member, officer, or employee. Especially with respect to intangible property, their relation to the property is unlike that of those regulated by the unclaimed property acts. They are custodians or fiduciaries and not obligors. Those upon whom duties are imposed by the unclaimed property acts are obligors on such intangible property as bank accounts, money orders, life insurance policies, and utility deposits. The person acting under Section 9 (numbered as section 7-30-109 in C.R.S.) is very unlikely to be in the position of an obligor on such intangible property. In summary, there appears to be limited overlap.
Other special statutes may apply, such as laws governing unexpended campaign funds. Texas, for example, permits a person to retain political contributions for six years after the person is no longer an office-holder or candidate. It gives the person six choices of transferees, including a "recognized tax exempt charitable organization formed for educational, religious or scientific purposes." Tex. Code Ann. Elections Section 251.012(d) and (e) (Vernon's 1986). Minnesota provides that if an unincorporated religious society "ceases to exist or to maintain its organization" title to its real and personal property vests in the "next higher governing or supervisory" body of the same denomination. Minn. Stat. Ann. Section 315.37 (West 1992).
4. Section 9 (numbered as section 7-30-109 in C.R.S.) does not address what should be done with real property of an inactive nonprofit association. This seems justified. A nonprofit association owning real property of significant value is unlikely to become inactive. In the rare case that it does, the assistance of a court may be obtained in making appropriate disposition of the real property, primarily to ensure good title.
5. To obtain a Section 501(c)(3) tax classification as a nonprofit organization an association must specify a distribution of assets on dissolution that satisfies the Internal Revenue Code. To avoid the interpretation that Section 9 (numbered as section 7-30-109 in C.R.S.) might be construed to override an approved distribution provision in an association's governing document the primacy of that distribution provision is expressly recognized in paragraph (1) (numbered as subsection (1)(a) in C.R.S.).
6. If there is no bylaw or other controlling document the person may transfer the personal property to another nonprofit organization or a government or governmental entity. The nonprofit organization need not have the same nonprofit purpose as the inactive one. It is enough that the transferee's purpose is "broadly similar." This requirement should not be construed narrowly. Otherwise, the risk of potential litigation over the transferor's choice will frustrate the section's purpose to provide a safe harbor.
There is no limitation with respect to the choice of a government or governmental entity.
7. Inasmuch as the transfer is made without consideration and the association almost certainly rendered insolvent, creditors of a nonprofit association would be protected by the Uniform Fraudulent Transfer Act Sections 4(a) and 5 and similar statutes. Whether they would also be protected if the transfer is made to the administrator of an unclaimed property statute depends on the terms of a jurisdiction's act. Uniform Unclaimed Property Act (1981) Sections 20 and 24 contemplate that a creditor may proceed against property in the hands of the administrator if the creditor claims an interest in the property, such as a security interest or judgment lien. However, a general creditor without some claim against the property would not be protected. It is unlikely that an inactive nonprofit association would have both unpaid creditors and a significant amount of property. Therefore, the two issues discussed above are unlikely to arise.
8. The person in possession or control is not required to give notice of the proposed transfer to anyone. An examination of to whom notice might reasonably be given reveals the difficulty with such a requirement. Almost by definition an inactive nonprofit association has no current members.
7-30-110. Appointment of agent to receive service of process.
- A nonprofit association may deliver to the secretary of state, for filing pursuant to part 3 of article 90 of this title, a statement appointing an agent authorized to receive service of process. If a nonprofit association has such an agent, part 7 of article 90 of this title shall apply as if the agent were a registered agent required to be appointed pursuant to said part.
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A statement appointing an agent authorized to receive service of process shall state:
- The true name of the nonprofit association;
- The principal office address of the principal office of the nonprofit association;
- The registered agent name and registered agent address of the agent; and
- A statement that the agent has consented to being so appointed.
- (Deleted by amendment, L. 2003, p. 2203 , § 4, effective July 1, 2004.)
- to (6) (Deleted by amendment, L. 2002, p. 1810 , § 3, effective July 1, 2002; p. 1674, § 1, effective October 1, 2002.)
Source: L. 94: Entire article added, p. 1274, § 1, effective May 22. L. 2002: (1) and (3) to (6) amended, p. 1810, § 3, effective July 1; (1) and (3) to (6) amended, p. 1674, § 1, effective October 1. L. 2003: (1), (2), and (3) amended, p. 2203, § 4, effective July 1, 2004. L. 2004: (1) and (2)(b) amended, p. 1399, § 1, effective July 1.
Editor's note: Colorado amended § 7-30-110 (numbered as Section 10 in the uniform act) by deleting the requirement for "acknowledgment" in subsection (3) (numbered as subsection (c) in the uniform act) and adding new language as set forth in subsection (6).
OFFICIAL COMMENT
1. This section authorizes but does not require a nonprofit association to file a statement authorizing an agent to receive service of process. It is, of course, not the equivalent of filing articles of incorporation. However, some nonprofit associations may find it prudent to file. Filing may assure that the nonprofit association's leadership gets prompt notice of any lawsuit filed against it. Also, depending upon the jurisdiction's other laws, filing gives some public notice of the nonprofit association's existence and address.
2. Central filing with a state official is provided. This is where parties will seek information of this kind and where this is commonly publicly filed.
3. The format of this section is very much like Section 5 (numbered as section 7-30-105 in C.R.S.), which concerns a statement of authority with respect to property. Because one requires local and other central filing they are not combined.
7-30-111. Claim not abated by change of members or officers.
A claim for relief against a nonprofit association does not abate merely because of a change in its members, persons authorized to manage the affairs of the nonprofit association, or persons considered by the nonprofit association to be members.
Source: L. 94: Entire article added, p. 1275, § 1, effective May 22.
OFFICIAL COMMENT
This provision reverses the common law rule of partnerships, which courts often extended to unincorporated, nonprofit associations. Uniform Partnership Act Sections 29 and 31(4). This Act's entity approach requires this change of the old common law rule. Similar provisions are found in many state statutes. See, for example, Ohio Rev. Code Ann., Corporations, Section 1745.04 (Baldwin 1991); Md. Ann. Code art. 6-406(a)(2); and 12 Vt. Stat. Ann. Section 815 (Equity Pub. 1973).
7-30-112. Venue.
For purposes of venue, a nonprofit association is a resident of a county or city and county in which it has an office.
Source: L. 94: Entire article added, p. 1275, § 1, effective May 22.
OFFICIAL COMMENT
1. Venue, unlike service of process, is treated by statute. See for example Mont. Code Ann. Section 25-2-118(1) (1991); 28 USCA1391. A criterion used by all states for fixing venue is the county of residence of the defendant. Most states specify as many as eight additional grounds for venue, including the county in which the real estate that is the subject of the suit is situated and the county in which the act causing, in whole or in part, the personal injury or other tort occurred. None of these additional criteria present a special problem with respect to an unincorporated, nonprofit association.
2. If an aggregate view of a nonprofit association were taken, the association is resident in any county in which a member resides. See Wright, Miller, & Cooper, 15 Federal Procedure & Practice 3812 (1986). Conforming to the entity view of an association, Section 12 (numbered as section 7-30-112 in C.R.S.) rejects the common law view.
This section is bracketed because some states have already satisfactorily solved this problem.
States have by statute modified the common law rule. Illinois, for example, provides that "a voluntary unincorporated association sued in its own name is a resident of any county in which it has an office or if on due inquiry no office can be found, in which any officer resides." Ill. Code Civ. Prac. Section 2-102(c).
3. Section 12 (numbered as section 7-30-112 in C.R.S.) makes a nonprofit association a resident of any county (or city) in which it has an office. If it has an office in five counties, for example, it may be sued in any of the five counties.
4. "City," in brackets, is for use by those states, such as Virginia, in which there is territory that is not in a county but in a city only.
7-30-113. Summons and complaint - service on whom.
In an action or proceeding against a nonprofit association, a summons and complaint must be served on an agent authorized by appointment to receive service of process, an officer, a managing or general agent, or a person authorized to participate in the management of its affairs. If none of them can be served, service may be made on a member who may participate in the selection of persons authorized to manage the affairs of the nonprofit association or in the development of policy of the nonprofit association.
Source: L. 94: Entire article added, p. 1275, § 1, effective May 22.
Editor's note: Colorado amended § 7-30-113 (numbered as Section 13 in the uniform act) by adding a qualification in the last sentence that service may be made on a member "who may participate in the selection of persons authorized to manage the affairs of the nonprofit association or in the development of policy of the nonprofit association".
OFFICIAL COMMENT
1. In most states the law with respect to service of process is in court rules. Where that is the case, this section, if adopted, should be placed in these rules.
2. Some states have expressly addressed service of process on a nonprofit association. Those states may wish to continue their rules and so should not adopt this section. For this reason this section is bracketed.
Section 13 (numbered as section 7-30-113 in C.R.S.) adapts Rule 4 of the Federal Rules of Civil Procedure to this setting. However, it leaves to other applicable law details concerning service, such as who may make service and the kind of the mailing. It specifies only to or on whom the service of process must be addressed.
By rule or statute all jurisdictions have extensive law on service of process. The real question for nonprofit associations is which set of these rules should apply. This Act treats a nonprofit unincorporated association as a legal entity. Thus, the rules applicable to another legal entity, the corporation, seem most appropriate.
7-30-114. Uniformity of application and construction.
This article shall be applied and construed to effectuate its general purpose to make uniform the law with respect to the subject of this article among states enacting it.
Source: L. 94: Entire article added, p. 1275, § 1, effective May 22.
7-30-115. Short title.
This article may be cited as the "Uniform Unincorporated Nonprofit Association Act".
Source: L. 94: Entire article added, p. 1275, § 1, effective May 22.
7-30-116. Severability clause.
If any provision of this article or its application to any person or circumstance is held invalid, the invalidity does not affect any other provisions or applications of this article which can be given effect without the invalid provision or application, and to this end the provisions of this article are severable.
Source: L. 94: Entire article added, p. 1275, § 1, effective May 22.
7-30-117. Effective date.
This article shall take effect July 1, 1994.
Source: L. 94: Entire article added, p. 1276, § 1, effective May 22.
OFFICIAL COMMENT
This Act provides an unincorporated, nonprofit association and its members with a legal structure that conforms to the expectations of many of them. Therefore, the need by the nonprofit association for additional time to revise procedures and forms to conform to a significant change in the law is not necessary. However, this Act materially affects third parties, particularly creditors of nonprofit associations. Anecdotal evidence suggests that many creditors place little reliance on their rights against members in extending credit. If they have any reservations about the creditworthiness of a nonprofit association they obtain guarantees from creditworthy members or insist on cash. To the extent that this is true, no change in credit policies is needed and so no extra planning time is needed.
Unless a jurisdiction's usual effective date rule provides little time for affected parties to learn of a new law, it is unnecessary to extend this Act's effective date.
7-30-118. Transition concerning real and personal property.
If, before July 1, 1994, an estate or interest in real or personal property was purportedly transferred to a nonprofit association, on July 1, 1994, the estate or interest vests in the nonprofit association, unless the parties had treated the transfer as ineffective. No such purported transfer of real property shall impart notice pursuant to section 38-35-109, C.R.S., until the date after July 1, 1994, a deed or other proper instrument conveying such estate or interest in real property is recorded in the office of the clerk and recorder of the county or city and county in which such real property is located.
Source: L. 94: Entire article added, p. 1276, § 1, effective May 22.
Editor's note: Colorado amended § 7-30-118 (numbered as Section 19 in the uniform act) by adding a provision that specifies that the transfer of real property will not impart notice until the date a deed or other proper instrument is recorded after July 1, 1994, whether such transfer was effective prior to July 1, 1994, and by removing the language found in subsection (b) in the uniform act. The official comment should be read with these changes in mind.
OFFICIAL COMMENT
1. Section 19 (numbered as section 7-30-118 in C.R.S.) brings to fruition the parties' expectations that previous law frustrated. Inasmuch as the common law did not consider an unincorporated, nonprofit association to be a legal entity, it could not acquire property. A gift of real or personal property thus failed. Reference in subsection (a) (numbered as section 7-30-118 in C.R.S.) to the transfer as "purportedly" made identifies the document of transfer as one not effective under the law. Subsection (a) (numbered as section 7-30-118 in C.R.S.) gives effect to the gift. However, if parties were informed about the common law they may have treated the gift as ineffective. In that case, the final clause of subsection (a) (numbered as section 7-30-118 in C.R.S.) provides that the gift does not become effective when this Act takes effect.
2. Section 19 (numbered as section 7-30-118 in C.R.S.) should not be read as a retroactive rule. It applies to the facts existing when this Act takes effect. At that time subsection (a) (numbered as section 7-30-118 in C.R.S.) applies to a purported transfer of property that under the law of the jurisdiction could not be given effect at the time it was made. Subsection (a) (numbered as section 7-30-118 in C.R.S.) belatedly makes it effective -- effective when this Act takes effect and not when made. The practical result of this difference in when the purported transfer is effective is that the transfer is subject to interests in the property that came into being in the interim. The nonprofit association's interest is subject, for example, to a tax or judgment lien that became effective in the interim. An intervening transfer by the initial transferor may simply be evidence that the "parties had treated the transfer as ineffective." If so, subsection (a) (numbered as section 7-30-118 in C.R.S.) by its terms does not vest ownership in the nonprofit association.
3. Some courts gave effect to gift of property to an unincorporated, nonprofit association by determining that the gift lodged title in someone, often officers of the association, to hold the property in trust for the benefit of the association and its members. Subsection (b) (language removed in C.R.S.) addresses this situation. When the Act takes effect it authorizes the fiduciary to transfer the property to the association. If the fiduciary is unwilling or reluctant, the association may require the fiduciary to transfer the property to the association. In either case, the association will get a deed transferring the property to it which, in the case of real property, the association may record.
4. Jurisdictions may face one of three different legislative situations with respect to Section 19 (numbered as section 7-30-118 in C.R.S.). First, a jurisdiction may not have changed the common law. In that case, Section 19 (numbered as section 7-30-118 in C.R.S.) fits its situation well. Subsections (a) (numbered as section 7-30-118 in C.R.S.) and (b) (language removed in C.R.S.) address the two approaches taken by the courts under the common law. Secondly, a jurisdiction may have changed the common law so as to make effective transfers of real and personal property to some but not all nonprofit associations. In this case Section 19 (numbered as section 7-30-118 in C.R.S.) should be made applicable to those nonprofit associations that did not have the benefit of the special acts. Thirdly, some jurisdictions may have extended to all nonprofit associations the privilege of acquiring in their names real and personal property. In this case, the jurisdiction does not need Section 19 (numbered as section 7-30-118 in C.R.S.) and so should not adopt it.
5. Jurisdictions that have a statute like New York's concerning grants of property by will have a problem that needs special attention. The New York statute provides that a grant by will of real or personal property to an unincorporated association is effective only if the association incorporates within three years after probate of the will. McKinney's N.Y. Estates, Powers & Trust Law Section 3-1.3 (1991). The grants by will that need attention are those that have not become effective by incorporation of the association and have not become ineffective by the running of the three year period. These grants seem entitled to the benefits of Section 19 (numbered as section 7-30-118 in C.R.S.). If so, some modification of Section 19 (numbered as section 7-30-118 in C.R.S.) may be required.
7-30-119. Savings clause.
Except to the extent set forth in section 7-30-118, this article does not affect any right accrued before July 1, 1994, or any action or proceeding then pending.
Source: L. 94: Entire article added, p. 1276, § 1, effective May 22.
Editor's note: Colorado amended § 7-30-119 (numbered as Section 20 in the uniform act) by adding an exception to the savings clause to accommodate the provision added to § 7-30-118. The official comment should be read with this change in mind.
OFFICIAL COMMENT
1. Section 20 (numbered as section 7-30-119 in C.R.S.) is adapted from RUPA Section 1006(c). It continues the prior law after the effective date of this Act with respect to a (i) "right accrued" and (ii) pending "action or proceeding." But for this section the new law of this Act would displace the old in some circumstances. The power of a new act to displace the old statute with respect to conduct occurring before the new act's enactment is substantial. Millard H. Ruud, The Savings Clause -- Some Problems in Construction and Drafting , 33 Tex. L. Rev. 285, 286-293 (1955). A court generally applies the law that exists at the time it acts.
2. Almost all states have general savings statutes, usually as a part of their statutory construction acts. These are often very broad. See, for example, Model Statutory Construction Act, Section 53. As this Act is remedial, the more limited savings provisions in Section 20 (numbered as section 7-30-119 in C.R.S.) are more appropriate than the broad savings provisions of the usual general savings clause. Section 20 (numbered as section 7-30-119 in C.R.S.) and not a jurisdiction's general savings clause applies to the Act.
3. "Right Accrued." It is not always clear whether an alleged right has "accrued." Some courts have interpreted the phrase to mean that a "matured cause of action or legal authority to demand redress" exists. Estate of Hoover v. Iowa Dept. of Social Services , 299 Iowa 702, 251 N.W. 2d 529 (1977). In Nielsen v. State of Wisconsin , 258 Wis. 1110, 141 N.W. 2d 194 (1966), a landowner brought suit after the repeal of an act granting a landowner the right to recover from the state for damages to her land caused by the state's failure to install necessary culverts and the like to prevent flooding. Before the act's repeal the landowner's land had been damaged by flooding caused by the state's failures. The court held that the statutory saving of "rights of action accrued" saved her cause of action. In both of these cases, conduct that gave rise to a cause of action had occurred before the act was repealed. It is said that it is not enough that there is an inchoate right. Apparently, there is no "accrued right" under a contract, for example, until there is a breach.
4. "Action or Proceeding" Pending. The principal question is what is an "action or proceeding" for this purpose. "Action" refers to a judicial proceeding. "Proceeding" alone, especially when used with "action," is broader and so includes administrative and other governmental proceedings. It has been given the broader meaning. For example, in State ex rel. Carmean v. Board of Education of Hardin County , 170 Ohio 2d 415, 165 N.E. 2d 918 (1960) a petition to transfer certain land from one school district to another filed before a change in the law was a "pending proceeding" to be decided under the old law. Similarly, a request for permission to petition for an election to consolidate school districts was held to be a "proceeding commenced" so that the substance and procedure of the old law, which was materially different from the new, was preserved. Grant v. Norris , 249 Iowa 236, 85 N.W. 2d 261 (1957).
5. RUPA provides that the Act does not "impair obligations of contract existing." This is not carried forward. This phrase is intended to save only obligations protected by the contracts clauses of state and federal constitutions. However, as it might be construed more broadly and the constitution would protect without the phrase, the phrase is not present in Section 20 (numbered as section 7-30-119 in C.R.S.).
Special Purpose Corporations
ARTICLE 40 CORPORATIONS NOT FOR PROFIT
Cross references: For definitions applicable to this article, see § 7-90-102.
Section
7-40-101. Who may organize - certificate - fees.
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- Any three or more persons, who may or may not be residents of the state of Colorado, may associate themselves together to establish a corporation not for profit for any lawful business or to promote any legitimate object or purpose and may make, sign, and acknowledge and file in the office of the secretary of state of the state of Colorado and record in the office of the recorder of each county in which said corporation owns real estate in the state of Colorado a certificate in writing, setting forth the name of such corporation, the business, objects, or purposes for which it is formed, and the names of the first directors, trustees, or managers. The department of revenue shall collect a fee of five dollars for filing said certificate.
- Notwithstanding the amount specified for the fee in paragraph (a) of this subsection (1), the executive director of the department of revenue by rule or as otherwise provided by law may reduce the amount of the fee if necessary pursuant to section 24-75-402 (3), C.R.S., to reduce the uncommitted reserves of the fund to which all or any portion of the fee is credited. After the uncommitted reserves of the fund are sufficiently reduced, the executive director by rule or as otherwise provided by law may increase the amount of the fee as provided in section 24-75-402 (4), C.R.S.
- The provisions of this article shall not apply to any nonprofit corporation formed after December 31, 1967, nor shall they apply to any corporation not for profit formed prior to January 1, 1968, which is subject to the provisions of articles 121 to 137 of this title.
Source: G.L. § 224. G.S. § 367. R.S. 08: § 1013. C.L. § 2379. L. 31: p. 248, § 22. CSA: C. 41, § 172. L. 51: p. 282, § 1. CRS 53: § 31-20-1. C.R.S. 1963: § 31-19-1. L. 67: p. 658, § 10. L. 68: p. 2, § 2. L. 97: (2) amended, p. 756, § 7, effective July 1, 1998. L. 98: (1) amended, p. 1320, § 14, effective June 1.
ANNOTATION
Law reviews. For article, "When Corporate Stock Becomes Real Estate", see 21 Dicta 53 (1944). For a brief comment on the 1951 amendment to this section, see 28 Dicta 174 (1951). For article, "Highlights of the 1955 Legislative Session -- Corporations", see Rocky Mt. L. Rev. 60 (1955). For article, "Non-Profit and Charitable Corporations in Colorado", see 36 U. Colo. L. Rev. 9 (1963). For article, "Generation and Transmission Loan Policy Under the Rural Electrification Act", see 43 Den. L. J. 269 (1966).
Duty of secretary of state to file certificate. It is only upon the tender of a certificate properly setting forth what this section specifically requires that the secretary of state is under a duty to file it. Saunders v. People ex rel. Tyler, 99 Colo. 468 , 63 P.2d 1231 (1936).
An association organized under this section may compel issuance of a permit by writ of mandamus to establish and maintain an old folks' home for aged people in good health and an orphanage for children of the Negro race. City Council v. United Negroes Protective Ass'n, 76 Colo. 86, 230 P. 598 (1924).
The treatment of nonmembers comes within the general scope of the purposes of a nonprofit association, by implication, there is no express restriction against it. Union Gold Mining Co. v. Rocky Mt. Nat'l Bank, 2 Colo. 248 (1873); Denver & R.G.R.R. Employees' Relief Ass'n v. Rishmiller, 64 Colo. 306, 171 P. 501 (1918).
Consequently, a hospital established by a nonprofit corporation may receive nonmember patients. Where the ultimate object of an association organized under this section was to treat and care for injured members and there was nothing in the certificate, constitution, or bylaws which provided that the hospital established should be for the exclusive use of the members of the association, the receiving of nonmembers as patients was not carrying on or transacting a separate and distinct business from that for which the association was formed. Denver & R.G.R.R. Employees' Relief Ass'n v. Rishmiller, 64 Colo. 306, 171 P. 501 (1918).
7-40-102. Powers.
A corporation not for profit shall be a body corporate in the name stated in its certificate and may sue and be sued; make and enforce contracts in relation to its business, powers, and objects; have a seal; acquire, hold, encumber, and dispose of property, real, personal, or mixed; adopt and alter bylaws; amend its certificate of incorporation; consolidate or merge with any other corporation; have different classes of members with or without voting rights; and exercise every right and privilege necessary, incident, or appertaining to its business, objects, and purposes. Associations and societies which are intended to benefit the widows, orphans, heirs, and devisees of deceased members thereof, where the members thereof receive no money as profit or otherwise, shall not be deemed insurance companies.
Source: G.L. § 226. G.S. § 369. R.S. 08: § 1015. C.L. § 2381. CSA: C. 41, § 174. L. 51: p. 282, § 2. CRS 53: § 31-20-2. C.R.S. 1963: § 31-19-2.
ANNOTATION
Law reviews. For article, "Restrictions on Charitable Gifts in Colorado", see 23 Rocky Mt. L. Rev. 434 (1951). For a brief comment on the 1951 amendment to this section, see 28 Dicta 174 (1951).
This section is specifically for the benefit of corporations, associations and societies, not for pecuniary profit, founded under this section; and where the association is not a corporation, association, or society so founded, it does not come within the purview of this section and can claim no benefit or exemption from it. Head Camp, Pac. Jurisdiction, Woodmen of the World v. Sloss, 49 Colo. 177, 112 P. 49 (1910).
Hence the provisions of this section relating to nonprofit corporations not being deemed insurance companies have no application to a corporation not organized under this section or one insuring those not of the classes named herein. Head Camp, Pac. Jurisdiction, Woodmen of the World v. Sloss, 49 Colo. 177, 112 P. 49 (1910).
Corporate powers are to be determined from statute. The powers which can be exercised by a corporation organized under a special statute are to be determined from the provisions of the legislative act and not from the company's charter, for it is a mere creature of the act to which it owes its existence and it derives all of its powers therefrom. Int'l Serv. Union Co. v. People ex rel. Wettengel, 101 Colo. 1 , 70 P.2d 431 (1937).
Prohibiting life insurance companies organized on the mutual assessment plan from doing business in the state does not effect this section. Int'l Serv. Union Co. v. People ex rel. Wettengel 101 Colo. 1 , 70 P.2d 431 (1937).
7-40-103. Contents of certificate or bylaws.
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The certificate of incorporation or bylaws of the corporation shall provide:
- The number and term of office of trustees, directors, or managers of the corporation and the manner of their selection or election;
- The officers of the corporation and their term of office and the manner of their designation or selection;
- The kinds and classes of members and the rights and privileges of each; and
- The authority under which conveyance or encumbrance of all or any part of the corporate property may be made, and the persons who are authorized to execute the instruments of conveyance or encumbrance; and, if not contained in the certificate of incorporation or any amendment thereof, a certified copy of this authority shall be recorded in each county in which the corporation owns real estate.
Source: G.L. § 227. G.S. § 370. R.S. 08: § 1016. C.L. § 2382. CSA: C. 41, § 175. L. 51: p. 283, § 3. CRS 53: § 31-20-3. C.R.S. 1963: § 31-19-3. L. 2003: (1)(d) amended, p. 2203, § 5, effective July 1, 2004.
ANNOTATION
Law reviews. For a brief comment on the 1951 amendment to this section, see 28 Dicta 174 (1951).
Nonprofit corporation may sell assets and dissolve by majority vote. Since statutes requiring vote of two-thirds of outstanding authorized voting shares to sell corporation's assets and to adopt resolution of dissolution do not apply to nonprofit corporation, determination of these issues by simple majority vote is valid if in accordance with bylaws of nonprofit corporation. Morris Alpert & Sons v. Kahler, 31 Colo. App. 345, 502 P.2d 98 (1972).
7-40-104. Additional powers - indemnification - liability.
- The certificate of incorporation or the bylaws of the corporation may provide the authority for the amendment of the certificate of incorporation or the bylaws, for the merging or consolidation of the corporation with another corporation, and for the exercising of any corporate function, power, right, duty, or privilege.
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- The certificate of incorporation or the bylaws of the corporation may set forth a provision limiting or eliminating the personal liability of directors to the same extent and in the same manner as is provided for cooperative associations in section 7-55-107 (1)(h).
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[ Editor's note: This version of subsection (2)(b) is effective until July 1, 2020.] Any such corporation shall have the same powers, rights, and obligations and shall be subject to the same limitations as those that apply to domestic corporations, as set forth in article 109 of this title. Corporation directors, officers, employees, and agents shall have the same rights as directors, officers, employees, and agents, respectively, of domestic corporations, as set forth in article 109 of this title. Corporation directors and officers shall have the benefit of the same limitations on personal liability for any injury to person or property arising out of a tort, as set forth in section 7-108-402 (2), for directors and officers, respectively, of domestic corporations. Any reference in said sections to shareholders shall be construed to refer to voting members or voting stockholders, if any, for the purpose of this section.
(b) [ Editor's note: This version of subsection (2)(b) is effective July 1, 2020. ] Any such corporation shall have the same powers, rights, and obligations and shall be subject to the same limitations as those that apply to domestic corporations, as set forth in article 109 of this title 7. Corporation directors, officers, employees, and agents shall have the same rights as directors, officers, employees, and agents, respectively, of domestic corporations, as set forth in article 109 of this title 7. Corporation directors and officers shall have the benefit of the same limitations on personal liability for any injury to person or property arising out of a tort, as set forth in section 7-108-403, for directors and officers, respectively, of domestic corporations. Any reference in said sections to shareholders shall be construed to refer to voting members or voting stockholders, if any, for the purpose of this section.
Source: L. 51: p. 283, § 4. CSA: C. 41, § 175(1). CRS 53: § 31-20-4. C.R.S. 1963: § 31-19-4. L. 88: Entire section amended, p. 405, § 3, effective May 17. L. 93: (2)(b) amended, p. 855, § 7, effective July 1, 1994. L. 2003: (2)(b) amended, p. 2204, § 6, effective July 1, 2004. L. 2019: (2)(b) amended, (SB 19-086), ch. 166, p. 1964, § 62, effective July 1, 2020.
Editor's note: Section 72 of chapter 166 (SB 19-086), Session Laws of Colorado 2019, provides that the act changing this section applies to conduct occurring on or after July 1, 2020.
ANNOTATION
Law reviews. For a brief comment on the act which inserted this section, see 28 Dicta 174 (1951).
Nonprofit corporation may sell assets and dissolve by majority vote. Since statutes requiring vote of two-thirds of outstanding authorized voting shares to sell corporation's assets and to adopt resolution of dissolution do not apply to nonprofit corporation, determination of these issues by simple majority vote is valid, if in accordance with bylaws of nonprofit corporation. Morris Alpert & Sons v. Kahler, 31 Colo. App. 345, 502 P.2d 98 (1972).
7-40-105. Amendments - where filed - fees.
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- All amendments to the certificate of incorporation shall be filed in the office of the secretary of state of Colorado and recorded in the office of the recorder of each county in which said corporation owns real estate in the state of Colorado. The department of revenue shall collect a fee of five dollars for the filing of each amendment.
- Notwithstanding the amount specified for the fee in paragraph (a) of this subsection (1), the executive director of the department of revenue by rule or as otherwise provided by law may reduce the amount of the fee if necessary pursuant to section 24-75-402 (3), C.R.S., to reduce the uncommitted reserves of the fund to which all or any portion of the fee is credited. After the uncommitted reserves of the fund are sufficiently reduced, the executive director by rule or as otherwise provided by law may increase the amount of the fee as provided in section 24-75-402 (4), C.R.S.
- If a true copy of the certificate of incorporation of the corporation or any amendment to the certificate is presented to the secretary of state with a request that the same be certified, the secretary of state shall certify the same for a fee that shall be determined and collected pursuant to section 24-21-104 (3), C.R.S., which certificate or amendment shall contain, in addition to the usual statement, a statement that the same is a true copy of the original certificate or amendment, as the case may be, on file in the records of the secretary of state and a statement as to the date of filing of the original certificate or amendment.
Source: L. 51: p. 283, § 4. CSA: C. 41, § 175(2). CRS 53: § 31-20-5. C.R.S. 1963: § 31-19-5. L. 83: (2) amended, p. 869, § 19, effective July 1. L. 98: (1) amended, p. 1321, § 15, effective June 1. L. 2003: (2) amended, p. 2204, § 7, effective July 1, 2004. L. 2004: (2) amended, p. 1399, § 2, effective July 1.
ANNOTATION
Law reviews. For a brief comment on the act which inserted this section, see 28 Dicta 174 (1951).
7-40-106. Associations which can be formed.
Religious, educational, benevolent, charitable, and other nonprofit associations may incorporate under the provisions of this article or any other applicable law authorizing such incorporation.
Source: L. 51: p. 284, § 4. CSA: C. 41, § 175(3). CRS 53: § 31-20-6. C.R.S. 1963: § 31-19-6.
ANNOTATION
Law reviews. For a brief comment on the act which inserted this section, see 28 Dicta 174 (1951).
7-40-107. Dividend only on dissolution.
No dividend or distribution of the property of any such corporation, association, or society shall be made until all debts are fully paid and then only upon its final dissolution and surrender of organization and name, nor shall any distribution be made except by a vote of a majority of the members. When a distribution of any of their property is contemplated, the directors, trustees, or managers shall file a statement, under oath, in the office of the recorder of deeds in the county in which the business office is located that all debts of the corporation, association, or society are paid, and, in case a distribution is made before filing this statement under oath or if the statement is willfully false, said directors, trustees, or managers shall be jointly and severally liable for the debts of such corporation, association, or society. When a final dissolution of any such corporation, association, or society, formed by virtue of law, has been agreed upon, the directors, trustees, or managers shall file, in the office of the secretary of state, a certificate thereof under seal of the corporation, association, or society, and upon filing this certificate the organization shall cease to exist.
Source: G.L. § 228. G.S. § 371. R.S. 08: § 1017. C.L. § 2383. CSA: C. 41, § 176. CRS 53: § 31-20-7. C.R.S. 1963: § 31-19-7. L. 2003: Entire section amended, p. 2204, § 8, effective July 1, 2004.
ANNOTATION
An insurance company is in violation of this section when it issues certificates to its members entitling them to cash payments from a reserve or profit fund. Int'l Serv. Union Co. v. People ex rel. Wettengel, 101 Colo. 1 , 70 P.2d 431 (1937).
A complaint alleging that a terminated member of a nonprofit corporation had demanded an accounting and the right to inspect the books of the corporation to determine the member's fair share of the assets upon dissolution, which rights had been denied, is sufficient as against a motion to dismiss for failure to state a claim; inasmuch as a member of a nonprofit corporation has the right to inspect the books and records of the corporation, and a member of a nonprofit corporation is entitled to be informed concerning the business activities conducted by the corporation. Bill Reno, Inc. v. Rocky Mt. Ford Dealers' Adv. Ass'n, 151 Colo. 406 , 378 P.2d 206 (1963).
7-40-108. Procedure for merger. (Repealed)
Source: L. 59: p. 322, § 1. CRS 53: § 31-20-14. C.R.S. 1963: § 31-19-8. L. 2003: IP(2) amended, p. 2204, § 9, effective July 1, 2004. L. 2004: Entire section repealed, p. 1400, § 3, effective July 1.
7-40-109. Procedure for consolidation. (Repealed)
Source: L. 59: p. 322, § 1. CRS 53: § 31-20-15. C.R.S. 1963: § 31-19-9. L. 2003: IP(2) amended, p. 2205, § 10, effective July 1, 2004. L. 2004: Entire section repealed, p. 1400, § 4, effective July 1.
7-40-110. Approval of merger or consolidation. (Repealed)
Source: L. 59: p. 323, § 1. CRS 53: § 31-20-16. C.R.S. 1963: § 31-19-10. L. 2003: (1)(b) and (1)(c) amended, p. 2205, § 11, effective July 1, 2004. L. 2004: Entire section repealed, p. 1400, § 5, effective July 1.
7-40-111. Certificate of merger or consolidation. (Repealed)
Source: L. 59: p. 323, § 1. CRS 53: § 31-20-17. C.R.S. 1963: § 31-19-11. L. 83: (2) and (3) amended, p. 869, § 20, effective July 1. L. 2002: IP(1) and (2) to (4) amended, p. 1810, § 4, effective July 1; IP(1) and (2) to (4) amended, p. 1675, § 2, effective October 1. L. 2003: IP(1) amended, p. 2205, § 12, effective July 1, 2004. L. 2004: Entire section repealed, p. 1401, § 6, effective July 1.
7-40-112. Effect of merger or consolidation. (Repealed)
Source: L. 59: p. 324, § 1. CRS 53: § 31-20-18. C.R.S. 1963: § 31-19-12. L. 2002: (1) amended, p. 1811, § 5, effective July 1; (1) amended, p. 1675, § 3, effective October 1. L. 2004: Entire section repealed, p. 1401, § 7, effective July 1.
7-40-113. Merger and consolidation with religious, educational, and benevolent societies. (Repealed)
Source: L. 59: p. 324, § 1. CRS 53: § 31-20-19. C.R.S. 1963: § 31-19-13. L. 2003: Entire section amended, p. 2205, § 13, effective July 1, 2004. L. 2004: Entire section repealed, p. 1402, § 8, effective July 1.
ARTICLE 41 TELEGRAPH COMPANIES
7-41-101 to 7-41-104. (Repealed)
Source: L. 95: Entire article repealed, p. 192, § 3, effective April 13.
Editor's note: This article was numbered as article 13 of chapter 31, C.R.S. 1963. For amendments to this article prior to its repeal in 1995, consult the Colorado statutory research explanatory note and the table itemizing the replacement volumes and supplements to the original volume of C.R.S. 1973 beginning on page vii in the front of this volume.
Cross references: For current information relating to telegraph messages, see § 18-9-306.
ARTICLE 42 DITCH AND RESERVOIR COMPANIES
Cross references: For definitions applicable to this article, see § 7-90-102.
Law reviews: For article, "Cities and Ditch Companies: Can They Live Together? -- Parts I and II", see 16 Colo. Law. 815 and 996 (1987); for article, "Ownership of Mutual Ditch Company Assets", see 20 Colo. Law. 2081 (1991); for article, "Title Fight Avoiding a Water Right Conveyancing TKO", see 44 Colo. Law. 41 (March 2015).
Section
7-42-101. Additional statements in certificates.
- When three or more persons associate under the provisions of law to form a corporation for the purpose of constructing a ditch, reservoir, pipeline, or any part thereof to convey water from any natural or artificial stream, channel, or source whatever to any mines, mills, or lands or for storing the same, they shall in their articles of incorporation, in addition to the matters otherwise required, state: The stream, channel, or source from which the water is to be taken; the point or place at or near which the water is to be taken; the location, as near as may be, of any reservoir intended to be constructed; the line, as near as may be, of any ditch or pipeline intended to be constructed; and the use to which the water is intended to be applied.
- A corporation formed under the "Colorado Revised Nonprofit Corporation Act", articles 121 to 137 of this title, shall have all of the rights and powers granted by this article to the extent not inconsistent with said act, if such nonprofit corporation otherwise complies with the terms and provisions of this article.
- In the case of a municipal corporation, county, special district, or entity, as that term is defined in section 7-90-102, that is a member or stockholder of a corporation described in subsection (1) or (2) of this section, an individual officer, partner, member, manager, agent, or employee of the municipal corporation, county, special district, or entity as designated by the municipal corporation, county, special district, or entity is eligible for election to serve as a director of the corporation irrespective of the fact that such individual is not a member or stockholder of the corporation.
Source: G.L. § 274. G.S. § 308. L. 1891: p. 97, § 1. R.S. 08: § 988. C.L. § 2353. CSA: C. 41, § 141. CRS 53: § 31-14-1. C.R.S. 1963: § 31-14-1. L. 67: p. 656, § 5. L. 92: Entire section amended, p. 248, § 1, effective March 24. L. 97: (2) amended, p. 756, § 8, effective July 1, 1998. L. 2003: (1) and (2) amended, p. 2205, § 14, effective July 1, 2004. L. 2009: (3) amended, (HB 09-1248), ch. 252, p. 1136, § 23, effective May 14.
ANNOTATION
Law reviews. For article, "When Corporate Stock Becomes Real Estate", see 21 Dicta 53 (1944). For article, "Irrigation Corporations", see 32 Rocky Mt. L. Rev. 527 (1960). For comment, "Maximum Utilization Collides With Prior Appropriation in A-B Cattle Co. v. United States (196 Colo. 539 , 589 P.2d 57 (1978))", see 57 Den. L. J. 103 (1979). For article, "Water Rights -- How to Avoid Getting in Over Your Head", see 11 Colo. Law 2143 (1982).
Purpose. Mutual ditch companies were formed expressly for the purpose of furnishing water to shareholders, not for profit or hire. Jacobucci v. District Court, 189 Colo. 380 , 541 P.2d 667 (1975).
Purposes of mutual ditch companies discussed. Fort Lyon Canal Co. v. Catlin Canal Co., 642 P.2d 501 (Colo. 1982).
Convenience of members. Mutual ditch companies were organized solely for the convenience of their members in the management of the irrigation and reservoir systems. Jacobucci v. District Court, 189 Colo. 380 , 541 P.2d 667 (1975).
Mutual ditches and carrier ditches distinguished. Nelson v. Lake Canal Co., 644 P.2d 55 (Colo. App. 1981).
Powers of carrier ditches. Carrier ditches carry water for sale to consumers who have contracted with the company. Nelson v. Lake Canal Co., 644 P.2d 55 (Colo. App. 1981).
A carrier ditch owns the legal title to a decreed appropriation of water from a natural stream. Nelson v. Lake Canal Co., 644 P.2d 55 (Colo. App. 1981).
Ditch corporations are quasi-public carriers, a means to an end to be resorted to for the purpose of conveying water from the natural streams to places where it may be applied to beneficial uses. Farmers' Indep. Ditch Co. v. Agric. Ditch Co., 22 Colo. 513, 45 P. 444 (1896).
Mutual ditch companies in Colorado have been recognized as quasi-public carriers. Jacobucci v. District Court, 189 Colo. 380 , 541 P.2d 667 (1975).
And a corporation owning and operating a ditch becomes a trustee for its stockholders and is bound to protect their interests. Farmers' Indep. Co. v. Agric. Ditch Co., 22 Colo. 513, 45 P. 444 (1896).
Not under corporation statutes. Mutual ditch companies are not organized under the general Colorado corporations statutes, but under special legislation for ditch and reservoir companies. Jacobucci v. District Court, 189 Colo. 380 , 541 P.2d 667 (1975).
Because treatment differs. The unique character of mutual ditch corporations mandates different treatment which is not fully in accord with the principles applicable to corporations in general. Jacobucci v. District Court, 189 Colo. 380 , 541 P.2d 667 (1975).
Distinguishing rights of corporation and shareholders. The right of the mutual ditch corporation to hold title to the water rights and other property, and to manage the affairs of the corporation, should be distinguished from the right of the shareholders to use the water on their lands. Jacobucci v. District Court, 189 Colo. 380 , 541 P.2d 667 (1975).
A mutual ditch company does not own water rights in a traditional sense; however, a mutual ditch company owns contractual water delivery rights. E. Ridge of Fort Collins, LLC v. Larimer & Weld Irrig. Co., 109 P.3d 969 (Colo. 2005).
A mutual ditch corporation does not hold the actual "water rights" in trust. Jacobucci v. District Court, 189 Colo. 380 , 541 P.2d 667 (1975).
On the contrary, actual ownership of the water rights is in the shareholder. Jacobucci v. District Court, 189 Colo. 380 , 541 P.2d 667 (1975).
As well as interest in property and other works. The shares of stock owned by shareholders in a mutual ditch corporation represent a definite and specific water right, as well as a corresponding interest in the ditch, canal, reservoir, and other works by which the water right is utilized. Jacobucci v. District Court, 189 Colo. 380 , 541 P.2d 667 (1975).
Individual shareholders of a mutual ditch company are indispensable parties in an action to condemn the shareholders' decreed water priorities. Jacobucci v. District Court, 189 Colo. 380 , 541 P.2d 667 (1975).
Despite responsibility of corporation in maintaining actions. A mutual ditch corporation is responsible for maintaining actions in the corporate name to secure or protect the consumers' water rights or other property and to represent the shareholders in civil actions. Jacobucci v. District Court, 189 Colo. 380 , 541 P.2d 667 (1975).
Duty of court to join shareholders. Pursuant to C.R.C.P. 19 and the court's power under C.A.R. 21, the district court should join as parties to a condemnation action those shareholders in a mutual ditch corporation whose water rights would be affected by the condemnation action of the defendant as of the date of the initiation of the condemnation action and all parties in interest. Jacobucci v. District Court, 189 Colo. 380 , 541 P.2d 667 (1975).
7-42-101.5. Acequia ditch corporation - definition - powers.
-
For purposes of this section, "acequia" means a ditch that:
- Originated prior to Colorado's statehood;
- Has historically treated water diverted by the acequia as a community resource and has therefore attempted to allocate water in the acequia based upon equity in addition to priority;
- Relies essentially on gravity-fed surface water diversions;
- Repealed.
- Has historically been operated pursuant to a one landowner-one vote system; and
- Has historically relied on labor supplied by the owners of irrigated land served by the acequia.
- Subject to any contrary provision of subsection (3) of this section, the procedural and substantive requirements of this article other than this section that apply to the creation, powers, duties, and governance of a ditch corporation subject to this article shall be deemed to apply to the creation, powers, duties, and governance of an acequia ditch corporation.
-
An acequia ditch corporation may be organized pursuant to this article, a ditch corporation organized pursuant to this article may convert to an acequia ditch corporation, an unincorporated acequia ditch association may be formed, and an unincorporated ditch association may operate as an unincorporated acequia ditch association, if the ditch meets the definition of an acequia ditch and, as applicable:
- Repealed.
- Surface water rights provide all of the water rights used for irrigation in the ditch, and such water rights have had substantially uninterrupted use since before Colorado's statehood;
- The irrigated land served by the ditch is located wholly in one or more of the counties of Costilla, Conejos, Huerfano, and Las Animas; and
-
Either:
- As required pursuant to section 7-42-101, the stockholders of the ditch file articles of incorporation, or an amendment to the articles of incorporation, that state the stockholders' intention to create or convert to an acequia ditch corporation; or
- The members of an unincorporated ditch association have agreed to operate in accordance with this section.
-
An acequia ditch corporation, if its articles of incorporation so state, or an unincorporated acequia ditch association, may specify in its bylaws that:
- Its elections may be held pursuant to a one landowner-one vote system;
- Owners of land irrigated by the ditch can be required to contribute labor to the maintenance and repair of the acequia or, in the alternative, to pay an assessment in lieu of such labor;
- Water in the ditch may be allocated on a basis other than pro rata ownership of the corporation; and
- The corporation or association has a right of first refusal regarding the sale, lease, or exchange of any surface water right that has historically been used to irrigate land by the acequia.
Source: L. 2009: Entire section added, (HB 09-1233), ch. 168, p. 739, § 2, effective April 22. L. 2013: (1)(d) and (3)(a) repealed and IP(3), (3)(d), IP(4), and (4)(d) amended, (HB 13-1168), ch. 87, p. 279, § 1, effective August 7.
Cross references: For the legislative declaration contained in the 2009 act adding this section, see section 1 of chapter 168, Session Laws of Colorado 2009.
7-42-102. Work after organization.
- Any corporation formed under the provisions of law for the purpose of constructing any ditch, flume, bridge, ferry, or telegraph line, within ninety days from the effective date of its articles of incorporation, shall commence work on such ditch, flume, bridge, ferry, or telegraph line, as shall be named in the articles, and shall complete the work with due diligence. The time of the completion of any such ditch, bridge, ferry, or telegraph line shall not be extended beyond a period of two years from the time work was commenced.
- Any corporation failing to commence work within ninety days after the effective date of the articles of incorporation, or failing to complete the same within two years after the time of commencement, shall forfeit all right to the water so claimed, and the same shall be subject to be claimed by any other company. The time for the completion of any flume constructed under the provisions of law shall not be extended beyond a period of four years.
- This section shall not apply to any ditch or flume for mining or other purposes constructed through and upon any grounds owned by the corporation. Any company formed to construct a ditch for domestic, agricultural, irrigating, milling, and manufacturing purposes or any of them shall have three years from the time of commencing work thereon within which to complete the same but no longer.
Source: G.L. § 296. G.S. § 314. R.S. 08: § 989. C.L. § 2354. CSA: C. 41, § 142. CRS 53: § 31-14-2. C.R.S. 1963: § 31-14-2. L. 2008: (1) and (2) amended, p. 22, § 11, effective August 5.
ANNOTATION
Limitation for lack of due diligence. Whether a court limits a priority decree because of this section or whether upon general principles it holds that due diligence in the prosecution of the work was not observed is quite immaterial. Water Supply & Storage Co. v. Tenney, 24 Colo. 344, 51 P. 505 (1897).
Decree limiting priorities by court of proper jurisdiction may not be collaterally attacked. Under this section, a decree limiting the priorities of a ditch to the completion of the work pronounced by a court having jurisdiction of the subject matter, of the person, and to enter the particular judgment, which is not appealed from, cannot collaterally be attacked and set aside, even though an erroneous conclusion was reached. Water Supply & Storage Co. v. Tenney, 24 Colo. 344, 51 P. 505 (1897).
Applied in Jacobucci v. District Court, 189 Colo. 380 , 541 P.2d 667 (1975).
7-42-103. Right-of-way.
Any ditch, reservoir, or pipeline corporation formed under the provisions of law shall have the right-of-way over the line named in the articles of incorporation, and shall also have the right to run water from the stream, channel, or water source, whether natural or artificial, named in the articles through its ditch or pipeline, and store the same in any reservoir of the company when not needed for immediate use. The line proposed shall not interfere with any other ditch, pipeline, or reservoir having prior rights, except the right to cross by pipe or flume; nor shall the water of any stream, channel, or other water course, whether natural or artificial, be diverted from its original channel or source to the detriment of any person or persons having priority of right thereto, but this shall not be construed to prevent the appropriation and use of any water not utilized and applied to beneficial uses.
Source: G.L. § 275. G.S. § 309. L. 1891: p. 98, § 2. R.S. 08: § 990. C.L. § 2355. CSA: C. 41, § 143. CRS 53: § 31-14-3. C.R.S. 1963: § 31-14-3. L. 2008: Entire section amended, p. 22, § 12, effective August 5.
ANNOTATION
The priority of right mentioned in this section is acquired by priority of appropriation, and appropriations of water shall be subordinate to the use thereof by prior appropriators. Coffin v. Left Hand Ditch Co., 6 Colo. 443 (1882).
And "detriment" at the time of diversion can only exist where the water diverted has been previously appropriated or used; if there has been no previous appropriation or use thereof, there can be no present injury or "detriment". Coffin v. Left Hand Ditch Co., 6 Colo. 443 (1882).
For the "use" and "detriment" mentioned in this section are a use existing at the time of the diversion and a detriment resulting from that use. Coffin v. Left Hand Ditch Co., 6 Colo. 443 (1882).
And so future "use" and "detriment" are of no consequence. The general assembly did not intend to prohibit the diversion of water to the "detriment" of parties who might at some future period conclude to settle upon the stream, nor were they legislating with a view to preserving in such stream sufficient water for the "use" of individuals who might never come and, consequently, never have use for it. Coffin v. Left Hand Ditch Co., 6 Colo. 443 (1882).
Appropriation not dependent upon locus of application. In the absence of legislation to the contrary, the right to water acquired by priority of appropriation is not in any way dependent upon the locus of its application to the beneficial use designed. Coffin v. Left Hand Ditch Co., 6 Colo. 443 (1882).
Hence, water may be diverted from one watershed to another. Inasmuch as the doctrine of priority of right by priority of appropriation for agriculture is evoked by the imperative necessity for artificial irrigation of the soil, it would be an ungenerous and inequitable rule that would deprive one of its benefits simply because he has, by large expenditure of time and money, carried the water from one stream over an intervening watershed and cultivated land in the valley of another. Coffin v. Left Hand Ditch Co., 6 Colo. 443 (1882).
Section permits reservoir companies to store water already appropriated by others. That the purpose of this section is to permit reservoir corporations to store water of which it has not made an appropriation -- water already appropriated by others, but not then needed for immediate use -- is made clear by the concluding words of the section: "but this shall not be construed to prevent the appropriation and use of any water not theretofore utilized and applied to beneficial uses". People ex rel. Park Reservoir Co. v. Hinderlider, 98 Colo. 505 , 57 P.2d 894 (1936) (concurring opinion).
7-42-104. Assessment on stock.
- If any corporation owning any ditch or canal for conveying or reservoir for storing water for irrigation purposes deems it necessary to raise funds to keep its ditch, canal, or reservoir in good repair or to pay any indebtedness theretofore contracted or the interest thereon, the corporation shall have power to make an assessment on the capital stock thereof, to be levied pro rata on the shares of stock payable in money, labor, or both, for the purpose of keeping the property of the corporation in good repair and for the payment of any indebtedness or interest thereon.
- But no such assessment shall be made unless the question of making the assessment is first submitted to the stockholders of the corporation at an annual meeting or at a special meeting called for that purpose, if a quorum is present, and the majority of stock represented at such meeting, either by the owner in person or by proxy, entitled to vote thereon shall vote in favor of making such assessment; and if said stockholders fail to hold any such meeting or fail to make or authorize any assessment within ninety days after the close of the company's fiscal year, the directors shall have power to make any such assessment at any regular or special meeting called therefor for that year.
- Such corporation may provide for the sale and forfeiture of shares of stock for such assessment as provided in subsection (4) of this section and may have the benefit of said subsection (4) for the recovery of such assessments by forfeiture or sale of the stock in default, and such corporation shall have a perpetual lien upon such shares of stock and the water rights represented by the same for any and all such assessments until the same are fully paid. Such corporation may also provide that no water shall be delivered until all assessments are paid.
- The shares of stock shall be deemed personal property and transferable as such in the manner provided by the bylaws, and subscriptions thereof shall be made payable to the corporation and shall be payable in such installments and at such times as shall be determined by the directors or trustees. An action may be maintained in the name of the corporation to recover any installment which shall remain due and unpaid for the period of twenty days after personal demand therefor or, if personal demand is not made, within thirty days after a written or printed demand has been deposited in the post office properly addressed to the post office address of the delinquent stockholder. The directors or trustees may prescribe by bylaws for a forfeiture or sale of stock on failure to pay the installments or assessments that from time to time may become due, but no forfeiture of stock or of the amount paid thereon shall be declared as against any estate or against any stockholder before demand has been made for the amount due thereon either in person or by written or printed notice duly mailed to the last known address of such stockholder at least thirty days prior to the time the forfeiture is to take effect; but the proceeds of any sale, over and above the amount due on said shares, shall be paid to the delinquent stockholder.
Source: G.L. § 276. G.S. § 310. R.S. 08: § 991. L. 17: p. 149, § 1. C.L. § 2356. L. 27: p. 263, § 1. CSA: C. 41, § 144. CRS 53: § 31-14-4. C.R.S. 1963: § 31-14-4. L. 65: p. 443, § 1. L. 79: (2) R&RE, p. 333, § 1, effective June 15.
ANNOTATION
Mutual ditches and carrier ditches distinguished. Nelson v. Lake Canal Co., 644 P.2d 55 (Colo. App. 1981).
Treatment differs from corporation. The unique character of mutual ditch corporations mandates different treatment which is not fully in accord with the principles applicable to corporations in general. Jacobucci v. District Court, 189 Colo. 380 , 541 P.2d 667 (1975).
The relationship between the mutual ditch corporation and its shareholders arises out of contract, implied in a subscription for stock and construed by the provisions of a charter or articles of incorporation. Jacobucci v. District Court, 189 Colo. 380 , 541 P.2d 667 (1975).
Rights of corporation and shareholders distinguished. The right of the mutual ditch corporation to hold title to the water rights and other property, and to manage the affairs of the corporation, should be distinguished from the right of the shareholders to use the water on their lands. Jacobucci v. District Court, 189 Colo. 380 , 541 P.2d 667 (1975).
As well as interests. Furthermore, the interests of the shareholders, insofar as the actual appropriation of the water is concerned, are not identical to the mutual ditch corporation. Jacobucci v. District Court, 189 Colo. 380 , 541 P.2d 667 (1975).
A mutual ditch company does not own water rights in a traditional sense; however, a mutual ditch company owns contractual water delivery rights. E. Ridge of Fort Collins, LLC v. Larimer & Weld Irrig. Co., 109 P.3d 969 (Colo. 2005).
A mutual ditch corporation does not hold the actual "water rights" in trust. Jacobucci v. District Court, 189 Colo. 380 , 541 P.2d 667 (1975).
On the contrary, actual ownership of the water rights is in the shareholder. Jacobucci v. District Court, 189 Colo. 380 , 541 P.2d 667 (1975).
As well as interest in property and other works. The shares of stock owned by shareholders in a mutual ditch corporation represent a definite and specific water right, as well as a corresponding interest in the ditch, canal, reservoir, and other works by which the water right is utilized. Jacobucci v. District Court, 189 Colo. 380 , 541 P.2d 667 (1975).
The shares of stock in a mutual ditch corporation represent the consumer's interest in the reservoir, canal, and water rights. Jacobucci v. District Court, 189 Colo. 380 , 541 P.2d 667 (1975).
Shareholders in a mutual ditch corporation have the right to change the place of the use of water if other users are not injured thereby. Jacobucci v. District Court, 189 Colo. 380 , 541 P.2d 667 (1975).
But limitations on stockholder's right to change diversion point permitted. A mutual ditch company bylaw imposing reasonable limitations, additional to those contained in section 37-92-305, upon the right of a stockholder to obtain a change in the point of diversion, can be enforced. Fort Lyon Canal Co. v. Catlin Canal Co., 642 P.2d 501 (Colo. 1982).
Individual shareholders of a mutual ditch company are indispensable parties in an action to condemn the shareholders' decreed water priorities. Jacobucci v. District Court, 189 Colo. 380 , 541 P.2d 667 (1975).
Duty of court to join shareholders. Pursuant to C.R.C.P. 19 and the court's power under C.A.R. 21, the district court should join as parties to a condemnation action those shareholders in a mutual ditch corporation whose water rights would be affected by the condemnation action of the defendant as of the date of the initiation of the condemnation action and all parties in interest. Jacobucci v. District Court, 189 Colo. 380 , 541 P.2d 667 (1975).
Presumptions favor the acts of ditch company officials in assessing stock under this section for the purpose of keeping a ditch in repair, hence it will be assumed by the courts, in the absence of contrary allegations, that the officials have done their duty. Robinson v. Booth-Orchard Grove Ditch Co., 94 Colo. 515 , 31 P.2d 487 (1934).
Stockholder estopped to deny corporate existence and authority to levy assessments. A stockholder of a ditch company who votes in favor of extending its corporate life and for levying assessments on the shareholders is estopped thereafter to deny the corporate existence and its authority to levy assessments. Callahan v. Chilcott Ditch Co., 37 Colo. 331, 86 P. 123 (1906).
For a stockholder by implication enters into a contract with the company to pay all assessments upon his stock, which may be levied pursuant to this section and the bylaws of the company, of which bylaws the stockholder will be presumed to have had notice. Callahan v. Chilcott Ditch Co., 37 Colo. 331, 86 P. 123 (1906).
And stockholder is liable for additional assessment levied at adjourned meeting without notice. Where a stockholder paid an assessment levied at a stockholders' meeting, he ratified such meeting and thereby became liable for an additional assessment levied at an adjourned session of that meeting, although he received no notice of such adjourned session, as no notice of such adjournment is necessary. Callahan v. Chilcott Ditch Co., 37 Colo. 331 , 86 P.2d 123 (1906).
"Pro rata", as used in this section, means according to a measure which fixes proportions according to a certain rate, percentage, or proportion. Robinson v. Booth-Orchard Grove Ditch Co., 94 Colo. 515 , 31 P.2d 487 (1934).
Pro rata basis. The benefit derived from the ownership of stock in a mutual ditch corporation is the right to the exclusive use of the water it represents, the water being divided pro rata according to the number of shares of stock held by each shareholder. Jacobucci v. District Court, 189 Colo. 380 , 541 P.2d 667 (1975).
Pro rata assessments must be apportioned between classes of stock. Where ditch stock is divided into different classes, each entitled to a different use varying in benefits from maintenance, a pro rata mandate as to assessments on the different classes requires only that the cost of maintenance shall be equitably apportioned between the classes and that the assessment on each share in a given class by the same. Robinson v. Booth-Orchard Grove Ditch Co., 94 Colo. 515 , 31 P.2d 487 (1934).
Subsection (3) allows stoppage of water flow for nonpayment of the cost of upkeep and maintenance of a ditch in the case of formally incorporated ditch companies. Carson v. Williams, 173 Colo. 546 , 481 P.2d 725 (1971).
Assessment for restoration of levy was a repair cost authorized under statute and shareholder who refused to pay assessment was not entitled to return of his shares, nor entitled to damages or attorney fees. Watson v. Vouga Reservoir Ass'n, 969 P.2d 815 (Colo. App. 1998).
7-42-105. Right to purchase own stock.
- It is lawful for any corporation owning any ditch or canal for conveying or reservoir for storing water for irrigation purposes for its stockholders to purchase and acquire any of its outstanding capital stock, but no purchase of or payment for its own shares shall be made at a time when the purchase or payment would make it insolvent.
- Any sale, exchange, lease, or other disposition of any part or all of the business, assets, property, or franchise of any such corporation to any conservancy district, irrigation district, or to the United States or any agency of the United States shall be deemed to be in the usual course of the corporation's business.
Source: L. 21: p. 212, § 1. C.L. § 2357. CSA: C. 41, § 145. CRS 53: § 31-14-5. C.R.S. 1963: § 31-14-5. L. 67: p. 312, § 1.
ANNOTATION
Corporation may validly purchase own shares in settling assessment dispute. Where, in settlement of an assessment dispute, a corporation accepts cash and the surrender of a stockholder's shares, such a transaction, properly carried out, is a valid purchase by the corporation of its own shares. Guadalupe Main Ditch Co. v. Mannassa Land & Irrigation Co., 104 Colo. 380 , 91 P.2d 497 (1939).
7-42-106. Assessments to pay purchase price.
When any such stock has been purchased or contract entered into for the purchase of the same, the corporation shall have the power to use its funds and to levy and collect assessments on the remaining outstanding capital stock in the manner provided by law for the payment of any other indebtedness, for the purpose of paying the purchase price of the stock so purchased.
Source: L. 21: p. 212, § 2. C.L. § 2358. CSA: C. 41, § 146. CRS 53: § 31-14-6. C.R.S. 1963: § 31-14-6.
ANNOTATION
Law reviews. For article, "Curative Statutes of Colorado Respecting Titles to Real Estate", see 26 Dicta 321 (1949).
7-42-107. Shall furnish water to whom - rate.
Any corporation constructing a ditch under the provisions of law shall furnish water to the class of persons using the water in the way named in the articles of incorporation, in the way the water is designated to be used, whether to miners, millmen, farmers, or for domestic use, whenever it has water in its ditch unsold, and it shall at all times give the preference to use of the water in said ditch to the class named in the articles. The rates at which water shall be furnished are to be fixed by the board of county commissioners as soon as the ditch is completed and prepared to furnish water.
Source: G.L. § 277. G.S. § 311. R.S. 08: § 992. C.L. § 2359. CSA: C. 41, § 147. CRS 53: § 31-14-7. C.R.S. 1963: § 31-14-7. L. 2008: Entire section amended, p. 22, § 13, effective August 5.
Cross references: For the duty of county commissioners to fix rates for water, see Colo. Const., art. XVI, § 8; for the right to continue purchasing water, see § 37-85-102 et seq.
ANNOTATION
Analysis
I. GENERAL CONSIDERATION.
Law reviews. For article, "Curative Statutes of Colorado Respecting Titles to Real Estate", see 26 Dicta 321 (1949).
Purpose. Mutual ditch companies were formed expressly for the purpose of furnishing water to shareholders, not for profit or hire. Jacobucci v. District Court, 189 Colo. 380 , 541 P.2d 667 (1975).
Mutual ditches and carrier ditches distinguished. Nelson v. Lake Canal Co., 644 P.2d 55 (Colo. App. 1981).
Carrier ditches carry water for sale to consumers who have contracted with the company. Nelson v. Lake Canal Co., 644 P.2d 55 (Colo. App. 1981).
Carrier ditch owns title to decreed appropriation of water. A carrier ditch owns the legal title to a decreed appropriation of water from a natural stream. Nelson v. Lake Canal Co., 644 P.2d 55 (Colo. App. 1981).
A duality of effort exists between the mutual ditch corporation and its shareholders, unlike a trust. Jacobucci v. District Court, 189 Colo. 380 , 541 P.2d 667 (1975).
II. DUTY TO FURNISH WATER.
Distinguishing rights of corporation and shareholders. The right of the mutual ditch corporation to hold title to the water rights and other property, and to manage the affairs of the corporation, should be distinguished from the right of the shareholders to use the water on their lands. Jacobucci v. District Court, 189 Colo. 380 , 541 P.2d 667 (1975).
Appropriation of water to an actual beneficial use, and not mere ownership of stock, entitles a shareholder to his water rights. Jacobucci v. District Court, 189 Colo. 380 , 541 P.2d 667 (1975).
Pro rata water rights. The benefit derived from the ownership of stock in a mutual ditch corporation is the right to the exclusive use of the water it represents, the water being divided pro rata according to the number of shares of stock held by each shareholder. Jacobucci v. District Court, 189 Colo. 380 , 541 P.2d 667 (1975).
Shareholders in a mutual ditch corporation have the right to change the place of the use of water if other users are not injured thereby. Jacobucci v. District Court, 189 Colo. 380 , 541 P.2d 667 (1975).
Ditch companies, having unsold water in their canals, shall furnish the same to the class of persons using it, in the manner named by the articles of incorporation upon payment of the established rate. Wheeler v. Northern Colo. Irrigation Co., 10 Colo. 582, 17 P. 487 (1887).
And consumer is entitled to mandamus where refused. Upon tender of the rate fixed and compliance with reasonable regulations established, if the carrier has water undisposed of, the consumer is entitled to its use, and so mandamus lies where his demand is refused. Wheeler v. Northern Colo. Irrigation Co., 10 Colo. 582, 17 P. 487 (1887).
This section does not impliedly recognize any preferential right of a contract consumer over the rights of owners of the company with respect to reallocation of water previously used by other contract consumers. City of Westminster v. City of Broomfield, 769 P.2d 490 (Colo. 1989).
Liability and obligation. The mutual ditch corporation is not only obligated to furnish a proper proportion of water to each of its shareholders, but it is liable in damages for the failure to do so. Jacobucci v. District Court, 189 Colo. 380 , 541 P.2d 667 (1975); Nelson v. Lake Canal Co., 644 P.2d 55 (Colo. App. 1981).
Proceedings under this section to compel delivery of water must necessarily be somewhat summary in their nature, for to be effective the relief must be immediate; and to this end trial courts should be liberal in matters of pleading and practice lest, for example, the crops of a farmer burn while counsel contend over legal technicalities. Townsend v. Fulton Irrigating Ditch Co., 17 Colo. 142, 29 P. 453 (1891).
Corporation is not the only proper representative of shareholders' interests. Inasmuch as the right to "use water" vests solely in the shareholders, and the mutual ditch corporation neither administers nor participates in this actual use, the corporation cannot be deemed the trustee and only proper representative of the shareholders' interests in this matter. Jacobucci v. District Court, 189 Colo. 380 , 541 P.2d 667 (1975).
Individual shareholders of a mutual ditch company are indispensable parties in an action to condemn the shareholders' decreed water priorities. Jacobucci v. District Court, 189 Colo. 380 , 541 P.2d 667 (1975).
A carrier is entitled to compensation for carriage, but it cannot charge for the right to use water from its canal, nor can it exact in advance a part or all of its transportation charge for the remaining years of its corporate life as a condition precedent to use for the current irrigating season. Wheeler v. Northern Colo. Irrigation Co., 10 Colo. 582, 17 P. 487 (1887).
Moreover, a carrier does not have the rate-making power, and if the carrier assumes and exercises such power, its acts would be subject to a review and change by the county commissioners upon a proper showing. Montezuma Water & Land Co. v. McCracken, 62 Colo. 394 , 163 P. 286 (1917); Northern Colo. Irrigation Co. v. Bd. of Comm'rs, 95 Colo. 555 , 38 P.2d 889 (1934).
There mere failure of the owner of a water right to go to the irrigation company each season and pay the stipulated price for carrying his water does not entitle any other person to enter into a contract with the company for carrying such water and to thereby become the owner of the water right. Cooper v. Shannon, 36 Colo. 98, 85 P. 175 (1906).
However, this section does not apply to a proceeding between individuals in which no ditch company is a party, as where the question to be determined is whether a sheriff's deed includes a water right. Cooper v. Shannon, 36 Colo. 98, 85 P. 175 (1906).
III. COUNTY COMMISSIONERS FIX RATES.
Commissioners prescribe rates. This section provides that the county commissioners, when an irrigating ditch is completed and prepared to furnish water, are to prescribe the rates at which water shall be furnished. Northern Colo. Irrigation Co. v. Bd. of Comm'rs, 95 Colo. 555 , 38 P.2d 889 (1934).
But if a carrier has a rate of its own with which the consumer is satisfied, he is not required to apply to the commissioners to fix a maximum rate. Wheeler v. Northern Colo. Irrigation Co., 10 Colo. 582, 17 P. 487 (1887).
The rates fixed by the board of county commissioners are subject to judicial control. Wheeler v. Northern Colo. Irrigation Co., 10 Colo. 582, 17 P. 487 (1887); Montezuma Water & Land Co. v. McCracken, 62 Colo. 394, 163 P. 286 (1917).
And where a rate of charge fixed by the board has been judicially declared unreasonable and confiscatory, the board will not be permitted to evade the effect of such judgment by declaring and establishing the same rate of charge upon the same evidence. Montezuma Water & Land Co. v. McCracken, 62 Colo. 394, 163 P. 286 (1917).
However, a new reasonable maximum rate may be set. Where a rate prescribed by the board has been adjudged unreasonable and its enforcement enjoined, it is no violation of an injunction for the board to immediately prescribe a reasonable maximum rate. Montezuma Water & Land Co. v. McCracken, 62 Colo. 394, 163 P. 286 (1917).
7-42-108. Shall keep ditch in repair.
Every ditch corporation formed under the provisions of law shall be required to keep its ditch in good condition so that the water shall not be allowed to escape from the same to the injury of any mining claim, road, ditch, or other property. If it is necessary to convey any ditch over, across, or above any lode or mining claim or to keep the water so conveyed therefrom, the corporation, if necessary to keep the water of the ditch out or from any claim, shall flume the ditch so far as necessary to protect the claim or property from the water of said ditch.
Source: G.L. § 278. G.S. § 312. R.S. 08: § 993. C.L. § 2360. CSA: C. 41, § 148. CRS 53: § 31-14-8. C.R.S. 1963: § 31-14-8. L. 2003: Entire section amended, p. 2206, § 15, effective July 1, 2004.
Cross references: For the duty to maintain ditch in good repair, see § 37-84-119; for the duty to keep embankments in repair, see §§ 37-84-101 and 37-84-107.
ANNOTATION
Analysis
I. DUTY TO KEEP DITCHES IN GOOD CONDITION.
This section imposes upon ditch companies the duty of keeping their ditches in "good condition". North Sterling Irrigation Dist. v. Dickman, 59 Colo. 169, 149 P. 97 (1915).
The mutual ditch corporation must protect and preserve the interests of the shareholders by keeping the ditches, canals, reservoir, and other works in good repair, the expense of which is paid from the special assessment. Jacobucci v. District Court, 189 Colo. 380 , 541 P.2d 667 (1975).
And this duty to prevent injury to adjacent property is emphasized by the requirement that flumes be used where necessary to protect property from injury by escaping water. North Sterling Irrigation Dist. v. Dickman, 59 Colo. 169, 149 P. 97 (1915).
Duty to maintain ditch applies to improvements such as trash racks that are incorporated into a ditch. E. Meadows Co., LLC v. Greeley Irrig. Co., 66 P.3d 214 (Colo. App. 2003).
The care required of a ditch owner in the construction and management of his ditch to avoid injuries to others is ordinary care such as a man of ordinary prudence and intelligence would employ under like circumstances to protect his property. City of Boulder v. Fowler, 11 Colo. 396, 18 P. 337 (1888).
It was within the discretion of the court to rule that expert testimony was not required to establish the standard of care applicable to defendant. Oliver v. Amity Mut. Irrigation Co., 994 P.2d 495 (Colo. App. 1999).
What is meant by "good condition" is specified in the clause "so that the water shall not be allowed to escape, etc.", to the injury of the property of others. North Sterling Irrigation Dist. v. Dickman, 59 Colo. 169, 149 P. 97 (1915).
And if water does escape to the injury of property, that fact itself is evidence that the ditch is not in the "good condition" which the statute requires. North Sterling Irrigation Dist. v. Dickman, 59 Colo. 169, 149 P. 97 (1915).
II. LIABILITY FOR INJURY FROM SEEPAGE.
This section does not make the owner of a ditch absolutely liable for damages, only for negligence. Platte & Denver Ditch Co. v. Anderson, 8 Colo. 131, 6 P. 515 (1884); City of Boulder v. Fowler, 11 Colo. 396, 18 P. 337 (1888); Denver City Irrigation & Water Co. v. Middaugh, 12 Colo. 434, 21 P. 565 (1889); Greeley Irrigation Co. v. House, 14 Colo. 549, 24 P. 329 (1890); Grand Valley Irrigation Co. v. Pitzner, 14 Colo. App. 123, 59 P. 420 (1899); Garnet Ditch & Reservoir Co. v. Sampson, 48 Colo. 285, 110 P. 79 (1910); North Sterling Irrigation Dist. v. Dickman, 59 Colo. 169, 149 P. 97 (1915); Bridgeford v. Colo. Fuel & Iron Co., 63 Colo. 372, 167 P. 963 (1917).
And where there is a failure on the part of ditch owners to comply with this section as to maintenance or use of an irrigating ditch whereby injury results, there can be no question but an injured party is entitled to recover. Greeley Irrigating Co. v. House, 14 Colo. 549, 24 P. 329 (1890).
The measure of damages to lands by seepage is the difference between its value immediately before and immediately after the injury, with the cost of restoration a proper consideration in determining value after injury. North Sterling Irrigation Dist. v. Dickman, 59 Colo. 169, 149 P. 97 (1915).
Cause of action for seepage damage is within the six-year statute of limitations, with the statute running from the first appearance of seepage. Middlekamp v. Bessemer Irrigation Co., 46 Colo. 102, 103 P. 280 (1909).
Section 15 of article II, Colo. Const., does not apply to this section for this provision of the constitution is limited to proceedings under the eminent domain statute; it has not the effect to charge the owner of an irrigating ditch with the damages occasioned by seepage therefrom to the lands of another where negligence is shown. North Sterling Irrigation Dist. v. Dickman, 59 Colo. 169, 149 P. 97 (1915).
7-42-109. Penalty for damage.
Any person who willfully or maliciously damages or interferes with any road, ditch, flume, bridge, ferry, railroad, or telegraph line or any of the fixtures, tools, implements, appurtenances, or property of any corporation that is formed under the provisions of law is guilty of a misdemeanor and, upon conviction thereof, shall be punished by a fine of not more than five hundred dollars, or by imprisonment in the county jail for not more than one year, or by both such fine and imprisonment. Any such fine shall be paid into the county treasury, and the offender shall also pay all damages that any such corporation sustains, together with costs of suit.
Source: G.L. § 297. G.S. § 315. R.S. 08: § 994. C.L. § 2361. CSA: C. 41, § 149. CRS 53: § 31-14-9. C.R.S. 1963: § 31-14-9. L. 2003: Entire section amended, p. 2206, § 16, effective July 1, 2004.
Cross references: For the penalty for damaging a ditch or flume, see § 37-89-101.
7-42-110. Consolidation of ditch companies - repeal. (Repealed)
Source: L. 1876: p. 68, § 1. G.L. omitted. G.S. § 313. R.S. 08: § 995. C.L. § 2362. CSA: C. 41, § 150. CRS 53: § 31-14-10. C.R.S. 1963: § 31-14-10. L. 2002: Entire section amended, p. 1811, § 6, effective July 1; entire section amended, p. 1675, § 4, effective October 1. L. 2003: (2) added by revision, pp. 2356, 2357, §§ 347, 348.
Editor's note: Subsection (2) provided for the repeal of this section, effective July 1, 2004. (See L. 2003, pp. 2356, 2357.)
7-42-111. Extension of term.
When the term of years for which any corporation has been incorporated as a ditch company for the purpose of carrying water for irrigation purposes or as a reservoir company for the storage of water for irrigation purposes has expired or is about to expire by lawful limitation, and such corporation has not been administered upon as an expired corporation or gone into liquidation and settlement and division of its affairs, it may have its term of incorporation extended and continued the same as if originally incorporated, as provided in section 7-42-112.
Source: L. 1891: p. 96, § 1. R.S. 08: § 996. C.L. § 2363. CSA: C. 41, § 151. CRS 53: § 31-14-11. C.R.S. 1963: § 31-14-11.
7-42-112. Procedure to extend term.
- Whenever the corporate life of any such ditch or reservoir company has expired or is about to expire, the stockholders may vote upon the question of extending the life of such company for another twenty years, or for any other term provided by statute, by first giving notice of such intention by publication for two successive weeks in the newspaper printed nearest the place where the principal operations of said company are carried on. Such notice shall be signed by stockholders owning at least ten percent of the entire capital stock of said company, and shall state the place where and the time when the question of renewal shall be submitted to the votes of the stockholders of said company at the meeting held in pursuance of such notice, if a majority of the stock of the corporation is represented.
- The votes shall be taken by ballot, and each stockholder shall be entitled to as many votes as the stockholder owns shares of stock in the company or holds proxies therefor. If a majority of the votes cast is in favor of a renewal of the corporation, the president and secretary of the company, under the corporate seal of the company, shall certify the fact, and shall make as many certificates as may be necessary. The company shall record one certificate in the office of the recorder of deeds in each county in which the company does business and shall deliver to the secretary of state for filing pursuant to part 3 of article 90 of this title a statement of extension of term that states that the term of the company has been extended, the principal office address of the company, and the registered agent name and registered agent address of the company. The corporate life of the company shall be renewed upon such recording and filing of the declaration, and all stockholders shall have the same rights in the renewed corporation as they had in the company as originally formed.
Source: L. 1891: p. 96, § 2. R.S. 08: § 997. C.L. § 2364. L. 31: p. 247, § 21. CSA: C. 41, § 152. CRS 53: § 31-14-12. C.R.S. 1963: § 31-14-12. L. 83: (2) amended, p. 870, § 21, effective July 1. L. 2002: (2) amended, p. 1811, § 7, effective July 1; (2) amended, p. 1676, § 5, effective October 1. L. 2003: (2) amended, p. 2206, § 17, effective July 1, 2004. L. 2004: (2) amended, p. 1402, § 9, effective July 1. L. 2009: (2) amended, (HB 09-1248), ch. 252, p. 1128, § 1, effective December 1.
ANNOTATION
Law reviews. For article, "Curative Statutes of Colorado Respecting Titles to Real Estate", see 26 Dicta 321 (1949).
Participation of a stockholder in stockholder's meeting at which it is voted to extend the life of the company estops him to deny the existence of the corporation under its certificate extending its corporate life and also its authority to levy assessments. Hymphreys v. Mooney, 5 Colo. 282 (1880); Plummer v. Struby-Estabrooke Mercantile Co., 23 Colo. 190, 47 P. 294 (1896); Grande Londe Lumber Co. v. Cotton, 12 Colo. App. 375, 55 P. 610 (1898); Thompson v. Commercial Union Assurance Co., 20 Colo. App. 331, 78 P. 1073 (1904); Callahan v. Chilcott Ditch Co., 37 Colo. 331, 86 P. 123 (1906).
7-42-113. Duplicate certificate issued - when.
Any owner of capital stock, as shown by the records of a corporation formed under the law of this state, entitling the stockholder to the services of a ditch or to the use of water subject to the payment of assessments, the legal representative or assignee of any such stockholder, or any lienholder named in the books of the corporation as a lienholder on the lost certificate, whose stock certificate has been lost, mislaid, or destroyed, may have a duplicate certificate issued in accordance with sections 7-42-114 to 7-42-117.
Source: L. 51: p. 278, § 1. CSA: C. 41, § 152(1). CRS 53: § 31-14-13. C.R.S. 1963: § 31-14-13. L. 2003: Entire section amended, p. 2207, § 18, effective July 1, 2004. L. 2012: Entire section amended, (HB 12-1010), ch. 12, p. 30, § 1, effective August 8.
7-42-114. Statement of loss.
If a certificate of capital stock has been lost, mislaid, or destroyed, and the stockholder, legal representative, or assignee has paid all assessments levied by the corporation against the stock, the stockholder, the stockholder's legal representative or assignee, and any lienholder named in the books of the corporation as a lienholder on the lost certificate may file with the secretary of the corporation a statement under oath that the certificate of stock has been lost, mislaid, or destroyed and that the certificate is the property of the person making the statement and has not been transferred or hypothecated by the stockholder, and demand the issuance of a duplicate certificate in accordance with this section and sections 7-42-115 to 7-42-117.
Source: L. 51: p. 278, § 2. CSA: C. 41, § 152(2). CRS 53: § 31-14-14. C.R.S. 1963: § 31-14-14. L. 2004: Entire section amended, p. 1402, § 10, effective July 1. L. 2012: Entire section amended, (HB 12-1010), ch. 12, p. 30, § 2, effective August 8.
7-42-115. Publication of notice of demand.
Upon receipt of a demand pursuant to section 7-42-114, the corporation shall publish, at the expense of the person making the demand, at least once a week for five successive weeks, the fifth publication being on the twenty-eighth day after the first publication, in a newspaper of general circulation in the county in which the principal office of the corporation is located or, if there is no newspaper in such county, then in such a newspaper of an adjoining county, a notice that such a demand has been filed with the corporation in accordance with sections 7-42-114 to 7-42-117, stating the demand in full and stating that the corporation will issue, on or after a date therein stated, following the last publication of the notice by at least thirty days, a duplicate certificate to the registered owner, the registered owner's legal representative or assignee, or any lienholder named in the books of the corporation as a lienholder on the lost certificate unless a contrary claim is filed with the corporation prior to the date stated in the notice.
Source: L. 51: p. 278, § 3. CSA: C. 41, § 152(3). CRS 53: § 31-14-15. C.R.S. 1963: § 31-14-15. L. 2003: Entire section amended, p. 2207, § 19, effective July 1, 2004. L. 2004: Entire section amended, p. 1403, § 11, effective July 1. L. 2012: Entire section amended, (HB 12-1010), ch. 12, p. 31, § 3, effective August 8.
7-42-116. Duplicate conclusive against original.
If no claim of interest or ownership other than that made by the person filing a notice pursuant to section 7-42-114 or such person's legal representative or assignee is on file in the records of the secretary of the corporation prior to the date stated in the notice, the corporation shall issue, on or after said date, a duplicate certificate to the person, the person's legal representative or assignee, or any lienholder named in the books of the corporation as a lienholder on the lost certificate. All rights under the original certificate shall immediately cease and no person shall at any time thereafter assert any claim or demand against the corporation or any other person on account of the original certificate.
Source: L. 51: p. 279, § 4. CSA: C. 41, § 152(4). CRS 53: § 31-14-16. C.R.S. 1963: § 31-14-16. L. 2002: Entire section amended, p. 1812, § 8, effective July 1; entire section amended, p. 1676, § 6, effective October 1. L. 2003: Entire section amended, p. 2207, § 20, effective July 1, 2004. L. 2004: Entire section amended, p. 1403, § 12, effective July 1. L. 2012: Entire section amended, (HB 12-1010), ch. 12, p. 31, § 4, effective August 8.
7-42-117. Proof of right to certificate.
The corporation may require any legal representative or assignee of a stockholder of record to prove the stockholder's legal right to such certificate as a legal representative or assignee of the stockholder of record. The corporation may require any lienholder named in the books of the corporation as a lienholder on the lost certificate to prove the lienholder's legal right to such certificate.
Source: L. 51: p. 279, § 5. CSA: C. 41, § 152(5). CRS 53: § 31-14-17. C.R.S. 1963: § 31-14-17. L. 2004: Entire section amended, p. 1403, § 13, effective July 1. L. 2012: Entire section amended, (HB 12-1010), ch. 12, p. 31, § 5, effective August 8.
7-42-118. Liability of stockholders, directors, and officers.
Stockholders, directors, and officers of corporations formed under the provisions of this article shall enjoy the same measure of immunity from liability for corporate acts or omissions as stockholders, directors, and officers of corporations formed under the "Colorado Business Corporation Act", articles 101 to 117 of this title, or as members, directors, and officers of nonprofit corporations formed under the "Colorado Revised Nonprofit Corporation Act", articles 121 to 137 of this title.
Source: L. 86: Entire section added, p. 1092, § 2, effective May 16. L. 93: Entire section amended, p. 855, § 8, effective July 1, 1994. L. 97: Entire section amended, p. 756, § 9, effective July 1, 1998.
ARTICLE 43 FLUME AND PIPELINE COMPANIES
Cross references: For definitions applicable to this article, see § 7-90-102.
Section
7-43-101. Certificate for flume companies. (Repealed)
Source: G.L. § 279. G.S. § 316. R.S. 08: § 998. C.L. § 2365. CSA: C. 41, § 153. CRS 53: § 31-15-1. C.R.S. 1963: § 31-15-1. L. 69: p. 218, § 1. L. 96: Entire section repealed, p. 554, § 2, effective April 24.
7-43-102. Certificate for pipeline companies.
Whenever any three or more persons associate under the provisions of law to form a corporation for the purpose of constructing a pipeline for the conveyance of gas, water, or oil, they, in the articles of incorporation, in addition to the matters otherwise required, shall state the places from and to which it is intended to construct the proposed line. Any pipeline corporation formed under the provisions of law shall have the right-of-way over the line named in the articles and shall also have the right to convey gas, water, or oil by said line, as stated in the articles, through lands of the state of Colorado and lands of any persons, and to erect pump stations, storage tanks, and other buildings necessary for such business. If a corporation is unable to agree with the persons owning any of the lands for the purchase of any real estate required for the purpose of any such corporation or company, or the transaction of the business of the same, or for right-of-way, or any other lawful purpose connected with or necessary to the operation of said company, the corporation may acquire such title in the manner provided by law.
Source: L. 1891: p. 94, § 1. R.S. 08: § 999. C.L. § 2366. CSA: C. 41, § 154. CRS 53: § 31-15-2. C.R.S. 1963: § 31-15-2. L. 69: p. 218, § 2. L. 2003: Entire section amended, p. 2207, § 21, effective July 1, 2004. L. 2008: Entire section amended, p. 22, § 14, effective August 5.
Cross references: For the power of pipeline companies to exercise the power of eminent domain, see § 38-2-101; for pipeline company rights-of-way, see § 38-4-102.
ANNOTATION
This section does not define a pipeline company. Sinclair Transp. Co. v. Sandberg, 228 P.3d 198 (Colo. App. 2009), rev'd on other grounds sub nom. Larson v. Sinclair Transp. Co., 2012 CO 36, 284 P.3d 42.
The plain language of this section indicates the legislature intended to describe a process by which any domestic pipeline corporation shall be formed under Colorado law. Sinclair Transp. Co. v. Sandberg, 228 P.3d 198 (Colo. App. 2009), rev'd on other grounds sub nom. Larson v. Sinclair Transp. Co., 2012 CO 36, 284 P.3d 42.
Because Colorado cannot dictate or regulate how a foreign entity is formed, Wyoming corporation that has been authorized to do business in the state and that is in good standing is not subject to the pipeline formation requirements in this section. Sinclair Transp. Co. v. Sandberg, 228 P.3d 198 (Colo. App. 2009), rev'd on other grounds sub nom. Larson v. Sinclair Transp. Co., 2012 CO 36, 284 P.3d 42.
7-43-103. Nonprofit corporations - powers.
A nonprofit corporation subject to the "Colorado Revised Nonprofit Corporation Act", articles 121 to 137 of this title, shall have all of the rights and powers granted by this article to the extent not inconsistent with said act, if such nonprofit corporation otherwise complies with the terms and provisions of this article.
Source: L. 67: p. 657, § 6. C.R.S. 1963: § 31-15-3. L. 97: Entire section amended, p. 756, § 10, effective July 1, 1998.
ARTICLE 44 WATER USERS' ASSOCIATIONS
Cross references: For definitions applicable to this article, see § 7-90-102.
Section
7-44-101. Tax exemptions - fees.
Any water users' association that is organized in conformity with the requirements of the United States under the reclamation act of June 17, 1902, and that, under its articles of incorporation, is authorized to furnish water only to its stockholders, shall be exempt from the payment of any income tax and from the payment of any annual franchise tax but shall be required to pay, as preliminary to its incorporation, a fee that shall be determined and collected pursuant to section 24-21-104 (3), C.R.S., for the filing and recording of its articles of incorporation.
Source: L. 05: p. 360, § 1. R.S. 08: § 1000. C.L. § 2367. CSA: C. 41, § 155. CRS 53: § 31-16-1. C.R.S. 1963: § 31-16-1. L. 81: Entire section amended, p. 430, § 4, effective July 1. L. 2008: Entire section amended, p. 23, § 15, effective August 5.
Cross references: For the "Reclamation Act of 1902", see 43 U.S.C. § 371 et seq.
ANNOTATION
Law reviews. For article, "When Corporate Stock Becomes Real Estate", see 21 Dicta 53 (1944). For article, "Irrigation Confirmation Proceedings", see 21 Dicta 140 (1944). For article, "Curative Statutes of Colorado Respecting Titles to Real Estate", see 26 Dicta 321 (1949).
7-44-102. Stock subscription record.
Any water users' association organized in conformity with the requirements of the United States under the reclamation act of June 17, 1902, with the consent of the board of county commissioners, may furnish the clerk and recorder of any county in Colorado a book containing printed copies of its articles of incorporation and forms of subscription for stock; and the county clerk and recorder to whom such book is furnished shall use the same for recording the stock subscriptions in such association, and the charges for the recording thereof shall be made on the basis of the number of words actually written therein.
Source: L. 05: p. 361, § 2. R.S. 08: § 1001. C.L. § 2368. CSA: C. 41, § 156. CRS 53: § 31-16-2. C.R.S. 1963: § 31-16-2.
Cross references: For the "National Irrigation Act of 1902", also known as the "Reclamation Act" or the "Newlands Reclamation Act", see 43 U.S.C. § 371 et seq.
7-44-103. Organization - assessments.
A corporation known as a water users' association may be formed under the "Colorado Business Corporation Act", articles 101 to 117 of this title, or formed under or elect to be governed by the "Colorado Revised Nonprofit Corporation Act", articles 121 to 137 of this title, for the purpose of dealing, contracting, or cooperating with the United States under the provisions of the act of congress of June 17, 1902, and acts amendatory thereof or supplementary thereto for the securing of a water supply or irrigation works, or both. It has, in addition to the powers conferred by law upon ditch, canal, or irrigation companies, the power to make assessments other than on a pro rata basis for the purpose of raising funds to accomplish the purposes for which formed, or to pay its debts or obligations, or to secure reduction in the principal debt due the United States of America for reclamation project construction cost, or delinquent assessments, or charges already due and payable, when the articles of incorporation so permit, or when required under existing or future contracts between the United States and the association or between the association and its stockholders, or under any laws or regulations of the United States.
Source: L. 29: p. 291, § 1. CSA: C. 41, § 157. CRS 53: § 31-16-3. C.R.S. 1963: § 31-16-3. L. 67: p. 657, § 7. L. 97: Entire section amended, p. 757, § 11, effective July 1, 1998. L. 2003: Entire section amended, p. 2208, § 22, effective July 1, 2004.
Cross references: For the "National Irrigation Act of 1902", also known as the "Reclamation Act" or the "Newlands Reclamation Act", see 43 U.S.C. § 371 et seq.
7-44-104. Directors may file petition in district court.
- The board of directors of any water users' association formed under section 7-44-103 at any time may file a petition in the district court of the county in which the office of such water users' association is situated praying a judicial examination and determination of the question of the validity of the organization of the association, or of any power conferred by the articles of incorporation, or of any amendment to the articles of incorporation, or of any assessment levied, or of any act, proceeding, or contract of the association. Such petition shall state the facts wherein the validity of such organization, power conferred by the articles of incorporation, amendment to the articles of incorporation, assessment, act, proceeding, or contract is founded and shall be verified by a member of the board. Thereupon a notice in the nature of a summons shall issue under the hand and seal of the clerk of said court, directed to all stockholders, creditors, or other persons interested in said water users' association, naming it, which designation shall be deemed sufficient to give the court jurisdiction of all matters and parties involved and interested. Service shall be obtained by publication of such notice as in the case of publication of summons in an action to quiet title to real property.
- Any stockholder, creditor, or other interested person may answer such petition within the time allowed therefor. All persons filing answers shall be entered as defendants in the cause and their several defenses consolidated for hearing or trial. Upon hearing, the court shall examine all things affecting the validity of the matter in controversy, shall make a finding with reference thereto, and shall enter judgment and decree as the case warrants. In reaching its conclusions in such causes, the court shall follow a liberal interpretation of the law and shall disregard informalities or omissions not affecting the substantial rights of the parties, unless it is affirmatively shown that such informalities or omissions led to a different result than would have been otherwise obtained. The Colorado rules of civil procedure shall govern matters of pleading and practice as nearly as may be. Costs may be assessed or apportioned among contesting parties in the discretion of the trial court. Review of judgments of the district court shall be as provided by law and the Colorado appellate rules.
Source: L. 29: p. 292, § 2. CSA: C. 41, § 158. CRS 53: § 31-16-4. C.R.S. 1963: § 31-16-4. L. 2003: (1) amended, p. 2208, § 23, effective July 1, 2004.
7-44-105. Application to prior associations.
Sections 7-44-103 and 7-44-104 also apply to any water users' association formed under the law of this state prior to February 18, 1929.
Source: L. 29: p. 293, § 3. CSA: C. 41, § 159. CRS 53: § 31-16-5. C.R.S. 1963: § 31-16-5. L. 2003: Entire section amended, p. 2208, § 24, effective July 1, 2004.
7-44-106. Water users' association petition in district court - when.
- Where any water users' association formed under the law of this state has entered into or proposes to enter into a contract with the United States for the payment by the association of the construction and other charges of a federal reclamation project constructed or under construction within this state, and where the funds for the payment of such charges are to be obtained by the association from assessments levied upon the stock of such association and constituting liens upon the lands of such stockholders, the association, in any case where the said contract or proposed contract would modify or affect any individual contracts between the United States and such stockholders or between the association and such stockholders, may file in the district court of the county in which the office of such water users' association is situated, a petition entitled "........ water users' association against the stockholders of said association and the owners and mortgagees of land within the ........ federal reclamation project". No other or more specific description of the defendants shall be required.
- In the petition it may be stated that the association has entered into or proposes to enter into a contract with the United States, to be set out in full in said petition, with a prayer that the court find the contract to be valid, and a modification of any individual contracts between the United States and the stockholders of said association or between the association and its stockholders, insofar as any individual contracts are at variance with such association contract. Thereupon a notice in the nature of a summons shall issue under the hand and seal of the clerk of the court stating in brief outline the contents of said petition and showing where a full copy of the contract or proposed contract may be examined, such notice to be directed to the said defendants under the same general designations, which shall be deemed sufficient to give the court jurisdiction of all matters involved and parties interested.
- Service shall be obtained by publication of this notice as in the case of publication of summons in an action to quiet title to real property and by the posting of the notice and complete copy of the contract or proposed contract in the office of the association and at three other public places within the boundaries of such federal reclamation project. Any stockholder in the plaintiff association or owner or mortgagee of land within a federal reclamation project affected by the contract proposed to be made by the association may answer said petition within twenty days or such further time as may be allowed therefor by the court. The failure of any person affected by the said contract to answer shall be construed, so far as that person is concerned, as an acknowledgment of the validity of the said association contract and as a consent to the modification of the said individual contracts with the association or with the United States, to the extent that such modification is required to cause the said individual contracts to conform to the terms of the contract or proposed contract between the plaintiff and the United States. All persons filing answers shall be entered as defendants in said cause and their defenses consolidated for hearing or trial.
- At the hearing the court shall examine all matters in controversy and shall enter judgment and decree as the case warrants, showing how and to what extent, if any, the individual contracts of the defendants or under which they claim are modified by the association's contract or proposed contract with the United States. In reaching its conclusions in such causes, the court shall follow a liberal interpretation of the law and shall disregard informalities or omissions not affecting the substantial rights of the parties, unless it is affirmatively shown that these informalities or omissions led to a different result than would have been obtained otherwise. The Colorado rules of civil procedure shall govern matters of pleading and practice as nearly as may be. Costs may be assessed or apportioned among contesting parties in the discretion of the trial court. Review of the judgment of the district court shall be as provided by law and the Colorado appellate rules.
Source: L. 31: p. 265, § 1. CSA: C. 46, § 160. CRS 53: § 31-16-6. C.R.S. 1963: § 31-16-6. L. 2003: (1) amended, p. 2208, § 25, effective July 1, 2004.
7-44-107. Associations may extend corporate life.
Any water users' association formed under the law of this state may amend its articles of incorporation so as to extend the life of the association to any date not later than one hundred years from the date of the approval, February 13, 1931.
Source: L. 31: p. 268, § 2. CSA: C. 41, § 161. CRS 53: § 31-16-7. C.R.S. 1963: § 31-16-7. L. 2003: Entire section amended, p. 2209, § 26, effective July 1, 2004.
ARTICLE 45 TOLL ROAD COMPANIES
Editor's note: This article was numbered as article 17 of chapter 31, C.R.S. 1963. The substantive provisions of this article were repealed and reenacted in 2006, resulting in the addition, relocation, and elimination of sections as well as subject matter. For amendments to this article prior to 2006, consult the Colorado statutory research explanatory note and the table itemizing the replacement volumes and supplements to the original volume of C.R.S. 1973 beginning on page vii in the front of this volume.
Cross references: (1) For definitions applicable to this article, see § 7-90-102.
(2) For provisions regarding private toll roads, see part 3 of article 3 of title 43.
Section
7-45-101. Formation of toll road or toll highway company - description of corridor.
- A toll road or toll highway company shall be formed under Colorado law. On and after June 2, 2008, a toll road or toll highway company may not specify and map a transportation corridor in its filed formation document, and any corridor included in a filed formation document filed before June 2, 2008, shall not be deemed to give the filing toll road or toll highway company any property right or exclusive development right of any kind within the corridor other than as specified in section 7-45-103. If a toll road or toll highway company complies with the provisions of this article, it shall have the power to erect toll gates and set and collect tolls.
- The secretary of state shall maintain a list of all toll road and toll highway companies and shall make the list and the filed formation documents for all toll road and toll highway companies available to the public. To allow the secretary of state to efficiently compile and maintain an accessible list, a toll road or toll highway company shall include the designation "PTR" in its official name as specified in its filed formation document.
- and (4) (Deleted by amendment, L. 2008, p. 1707 , § 1, effective June 2, 2008.)
Source: L. 2006: Entire article R&RE, p. 1760, § 1, effective June 6. L. 2008: (1), (3), and (4) amended, p. 1707, § 1, effective June 2.
ANNOTATION
Law reviews. For article, "Forms Committee Presents Additional Standard Pleading Samples for Use in Foreclosures Through Public Trustee", see 29 Dicta 1 (1952).
Annotator's note. Since § 7-45-101 is similar to § 7-45-101 as it existed prior to the 2006 repeal and reenactment of this article and to laws antecedent thereto, relevant cases construing those provisions have been included in the annotations to this section.
The general assembly may delegate the power of collecting tolls in return for a supposed public good with such restrictions as it may see fit to impose, and the grantee takes subject to all such limitations. Virginia Canon Toll Rd. Co. v. People ex rel. Vivian, 22 Colo. 429, 45 P. 398 (1896).
And by virtue of this section the grant to exact tolls is conferred in express terms only upon corporations organized to construct and which do construct toll roads. Virginia Canon Toll Rd. Co. v. People ex rel. Vivian, 22 Colo. 429, 45 P. 398 (1896).
Right to locate road. The effect of this section, and the section giving right of condemnation for construction of roads, is to give a road company the right to locate its road on the general course designated in its articles of incorporation, and when so located, to construct, maintain, and operate the road on the line of location, subject to the conditions of condemnation, compensation, and other requirements of the provision. Riddell v. Animas Canon Toll Rd. Co., 5 Colo. 230 (1880).
But toll road cannot be located on any existing road. Under this section it is clear that a toll road company may not locate its road, or any part thereof, upon any toll road previously existing or upon any public highway heretofore and as the time of the organization of such company used and traveled as such, except as it might be necessary to cross such road or highway. Lyons & E. P. Toll Rd. Co. v. People ex rel. Sprague, 29 Colo. 434, 68 P. 275 (1902).
And such location results in forfeiture of franchise. Where a toll road company located a considerable part of its road upon and along a previously existing toll road which at the time had been abandoned by the former toll road company for a period of more than 14 months and which had been repaired and traveled by persons living in the vicinity, the location was in violation of this section and the company thereby forfeited its franchise and right to collect tolls. Lyons & E. P. Toll Rd. Co. v. People ex rel. Sprague, 29 Colo. 434, 68 P. 275 (1902).
Moreover, as long as the power to locate a road remains unexerted, the lands upon which the exercise of the right may ultimately cast the easement are uncertain, and no given tract or parcel of land can be designated as charged with the easement. Riddell v. Animas Canon Toll Rd. Co., 5 Colo. 230 (1880).
Only one toll gate each 10 miles. Under this section the board of county commissioners is powerless to authorize the erection of and taking of toll at more than "one gate to each ten miles". Central Rd. Co. v. People, 5, Colo. 39 (1879).
Hence, wherever there are 2 gates or more, the distance between them must be not less than 10 miles. Central Rd. Co. v. People, 5 Colo. 39 (1879).
A toll road company may alienate all its tangible property and also the franchise to collect tolls, but whatever limitations or burdens existed against it will still exist against its grantee. Virginia Canon Toll Rd. Co. v. People ex rel. Vivian, 22 Colo. 429, 45 P. 398 (1896).
But not the power to continue the franchise after it expires. A toll road company cannot by conveyance made during its corporate life impart to another corporation or to a natural person the power to continue the exercise of a franchise to collect tolls after the franchise itself has expired by operation of law. Virginia Canon Toll Rd. Co. v. People ex rel. Vivian, 22 Colo. 429, 45 P. 398 (1896).
For a toll road company cannot collect toll after the expiration of the term of its corporate existence. Virginia Canon Toll Rd. Co. v. People ex rel. Vivian, 22 Colo. 429, 45 P. 398 (1896).
And when the right to collect tolls ceases with the expiration of the term of a corporation constructing a road, the public may use the highway without charge. Virginia Canon Toll Rd. Co. v. People ex rel. Vivian, 22 Colo. 429, 45 P. 398 (1896).
7-45-102. Definitions.
As used in this article, unless the context otherwise requires:
- "Associated rail corridor" means a corridor for a proposed rail line and any related rail facilities necessary for the operation of a rail line that are to be located in the right-of-way of a toll road or toll highway.
- "Associated service area" means a gas station, restaurant, or other travel-related service that serves motorists using a toll road or toll highway.
- "Associated utility corridor" means a utility line or system and any related infrastructure used to convey gas, electricity, water, sewage, telecommunications signals, data, or other media located or to be located in the right-of-way of a toll road or toll highway.
- "Commenting state agencies" means the department of transportation, the department of public health and environment, the department of natural resources, the department of agriculture, and the department of local affairs.
- "Commercial, residential, and industrial development" means the development of offices, shops, stores, hotels, restaurants, bars, warehouses, factories, houses, apartments, condominiums, and other buildings and structures used for the sale and rental of goods or services, for the manufacture, fabrication, assembly, or storage of products, or for sleeping or dwelling.
- "Company" means a domestic corporation, general partnership, limited partnership, limited liability company, limited liability partnership, limited liability limited partnership, limited partnership association, nonprofit association, nonprofit corporation, cooperative, or other organization or association that is created under a statute or common law of this state and that is recognized under the law of this state as a separate legal entity.
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"Filed formation document" means articles of incorporation, articles of organization, a certificate of limited partnership, articles of association, a statement of registration, or any other document of similar import filed by an entity with the secretary of state under which the entity is formed or obtains its legal status in this state.
(7.3) "New toll road or toll highway company" means a toll road or toll highway company that, as of June 2, 2008, has not specified and mapped a three-mile corridor in its filed formation document as was required by section 7-45-101 (1) before June 2, 2008.
(7.5) "Preexisting toll road or toll highway company" means a toll road or toll highway company that, as of June 2, 2008, had specified and mapped a three-mile corridor in its filed formation document as was required by section 7-45-101 (1) before June 2, 2008.
- "Toll road" or "toll highway" means a series of improvements, including but not limited to paving, grading, landscaping, curbs, gutters, culverts, sidewalks, bikeways, lighting, bridges, overpasses, underpasses, frontage roads, access roads, interchanges, drainage facilities, mass transit lanes, park and ride facilities, toll collection facilities, administrative or maintenance facilities, and emergency response and law enforcement services. Nothing in this article shall be construed to affect any common carrier, as defined in section 40-1-102 (3), C.R.S., including, but not limited to, any railroad. Any utility line, system, or infrastructure shall be subject to a reasonable fee and reasonable relocation provisions.
- "Toll road or toll highway company" means a company that proposes to construct a toll road or toll highway in this state under the provisions of this article.
- "Toll road or toll highway project" or "project" means a proposed toll road or toll highway together with any associated rail corridor, associated service area, or associated utility corridor.
Source: L. 2006: Entire article R&RE, p. 1761, § 1, effective June 6. L. 2008: (7.3) and (7.5) added, p. 1708, § 2, effective June 2.
Cross references: For additional definitions applicable to this article, see § 7-90-102.
7-45-103. Deadline to commence work - maintenance of effort requirement.
A preexisting toll road or toll highway company shall commence work, including but not limited to planning, design, environmental mitigation, and other preconstruction work, on the toll road or toll highway proposed in its filed formation document no later than three years after the filing of the document or within one year after receiving all necessary approvals for construction. If any necessary approval is the subject of administrative or judicial review, then the one-year period shall be automatically extended until one year after all administrative or judicial review has been concluded. The preexisting toll road or toll highway company and any successor toll road or toll highway company shall continue the work from day to day until at least five hundred thousand dollars have been expended on the toll road or toll highway. If the preexisting toll road or toll highway company fails to perform the required work, it shall forfeit all rights to develop and construct the proposed toll road or toll highway. If the preexisting toll road or toll highway company performs the required work, it shall have the exclusive right to seek approval to develop a toll road or toll highway within the three-mile corridor specified in its filed formation document as required by section 7-45-101 (1) before June 2, 2008, and, only if such approval is granted, the exclusive right to develop a toll road or toll highway within the corridor.
Source: L. 2006: Entire article R&RE, p. 1762, § 1, effective June 6. L. 2008: Entire section amended, p. 1708, § 3, effective June 2.
7-45-104. Acquisition of right-of-way.
- Notwithstanding the provisions of section 38-2-101, C.R.S., on and after June 6, 2006, a preexisting toll road or toll highway company shall not have the power to exercise the right of eminent domain to acquire any part of the right-of-way of the three-mile corridor of a proposed toll road or toll highway specified in the filed formation document of the company as required by section 7-45-101 (1) and a new toll road or toll highway company shall not have the power to exercise the right of eminent domain to acquire any part of the right-of-way of a toll road or toll highway it proposes to construct. Nothing herein shall prohibit a preexisting or new toll road or toll highway company from entering into a public-private initiative with the department of transportation in accordance with the provisions of part 12 of article 1 of title 43, C.R.S., and as authorized in section 7-45-111 for the purpose of enabling the construction of a toll road or toll highway, but in such a case the power of eminent domain shall not be exercised by the toll road or toll highway company and may be exercised by the department only for purposes of acquiring property and rights-of-way necessary for the completion of a toll road or toll highway open to the public that is incorporated into the comprehensive statewide transportation plan prepared pursuant to section 43-1-1103 (5), C.R.S. The department may not use the power of eminent domain provided in this section to acquire a cemetery, as defined in section 10-15-102 (2), C.R.S., or property owned by or primarily used by a religious organization. In exercising the power of eminent domain, the department shall comply with all laws and administrative rules that govern the department's use of eminent domain for state highway projects, and the rights-of-way acquired shall form a corridor no larger than that approved by all affected metropolitan planning organizations, regional planning commissions, and the transportation commission pursuant to sections 7-45-105 and 7-45-106. In accordance with section 43-1-1204 (3)(b), C.R.S., the department may not sell or otherwise transfer ownership of property or rights-of-way acquired through the exercise of the power of eminent domain as authorized by this section to a toll road or toll highway company.
- As used in this section, "religious organization" means any organization, church, body of communicants, or group, not for pecuniary profit, gathered in common membership for mutual support and edification in piety, worship, and religious observances or a society, not for pecuniary profit, of individuals united for religious purposes at a definite place.
Source: L. 2006: Entire article R&RE, p. 1763, § 1, effective June 6. L. 2008: (1) amended, p. 1709, § 4, effective June 2.
Editor's note: This section was enacted by Senate Bill 06-078 prior to the repeal and reenactment of this article by House Bill 06-1003. For the text of this section in effect from March 31, 2006, to June 6, 2006, see section 1 of chapter 74, Session Laws of Colorado 2006.
7-45-105. Planning standards and project review.
- A preexisting or new toll road or toll highway company shall not commence the construction of a toll road or toll highway or of any other element of a toll road or toll highway project until the toll road or toll highway or other element has been reviewed by every metropolitan planning organization or regional planning commission that is located in whole or in part within the three-mile corridor designated by the preexisting toll road or toll highway company as required by section 7-45-101 (1) before June 2, 2008, or that is located in whole or in part within the proposed route of the toll road or toll highway proposed by the new toll road or toll highway company and has been included in the regional transportation plan in effect for the region pursuant to section 43-1-1103, C.R.S., and in the comprehensive statewide transportation plan required pursuant to section 43-1-1103 (5), C.R.S. In designated nonattainment areas for any pollutant pursuant to the federal "Clean Air Act", 42 U.S.C. sec. 7401 et seq., as amended, a metropolitan planning organization or regional planning commission shall not include a toll road or toll highway project in the regional transportation plan unless the organization or commission has performed an emissions analysis that demonstrates that regional emissions and local project emissions will continue to conform to the state implementation plan if the project is added to the regional transportation plan. The toll road or toll highway company shall pay the reasonable actual costs for the emissions analysis. Each organization or commission may condition its addition of a toll road or toll highway project into the regional transportation plan upon acceptable environmental mitigation activities and commitments to offset incremental costs of public services that will be necessary as a result of development of the project within the planning region.
- At least thirty days before a metropolitan planning organization or regional planning commission may amend its regional transportation plan pursuant to subsection (1) of this section, a toll road or toll highway company shall provide the organization or commission information on the toll road or toll highway project being considered for addition to the plan that includes the final environmental documentation required by section 7-45-106 (1)(b)(IV), the operating plan for the project, the technology to be utilized, an assessment of project feasibility, and an assessment of the long-term viability of the project.
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- At the discretion of a metropolitan planning organization or regional planning commission, a regional plan may initially be amended to include only environmental and preconstruction activities, excluding right-of-way acquisition, relating to a toll road or toll highway project and may later be amended to include actual construction and right-of-way acquisition of the project following agreement by the metropolitan planning organization or regional planning commission that acceptable environmental mitigation activities and commitments to offset incremental costs of public services are included in the project plans.
- Upon request of a local government located in whole or in part within the three-mile corridor of a proposed toll road or toll highway or toll road or toll highway project specified and mapped by a preexisting toll road or toll highway company in its filed formation document as required by section 7-45-101 (1) before June 2, 2008, or located in whole or in part within the proposed route of a toll road or toll highway proposed by a new toll road or toll highway company, a preexisting or new toll road or toll highway company shall consult with representatives from the local government and shall consider available mitigation of demonstrable negative impacts on the local government or its citizens that would result from the construction, operation, or financing of the toll road or toll highway or project.
Source: L. 2006: Entire article R&RE, p. 1763, § 1, effective June 6. L. 2008: (1) and (3)(b) amended, p. 1709, § 5, effective June 2.
7-45-106. Environmental standards and review.
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- Before constructing and operating a toll road or toll highway or any other element of a toll road or toll highway project, a toll road or toll highway company shall prepare, at its own expense, environmental documentation that complies with the environmental stewardship guide approved by the transportation commission in May 2005. The documentation shall describe the environmental, social, and economic effects of the proposed toll road, toll highway, or project, identify feasible measures to avoid or otherwise mitigate the adverse effects of the project, and estimate the financial costs to implement mitigation measures that are included in the project or have been previously recommended in writing by the commenting state agencies or an affected metropolitan planning organization or regional transportation commission and comply with federal and state air and water quality standards, approvals, and permits.
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- A toll road or toll highway company shall not begin work on environmental documentation required by paragraph (a) of this subsection (1) until it has obtained preliminary approval from the executive director of the department of transportation that the scope of the planned environmental documentation is consistent with the environmental stewardship guide issued by the department in May 2005 and all other requirements of paragraph (a) of this subsection (1).
- A toll road or toll highway company shall provide a copy of any draft environmental documentation it prepares as required by paragraph (a) of this subsection (1) to the commenting state agencies, affected metropolitan planning organizations and regional planning commissions, and affected local governments. The toll road or toll highway company shall also make the draft environmental documentation electronically or otherwise available to the public. The commenting state agencies may, within sixty days, provide the toll road or toll highway company and affected metropolitan planning organizations and regional planning commissions with their analyses of the adequacy of the environmental documentation and shall make the analyses available to the public.
- Each of the commenting agencies may charge a fee to a toll road or toll highway company to cover the reasonable expenses that it incurred in fulfilling the requirements of subparagraphs (I) and (II), as applicable, of this paragraph (b).
- A toll road or toll highway company shall prepare final environmental documentation that addresses comments received from the commenting state agencies, metropolitan planning organizations, regional planning commissions, and other interested parties. The final environmental documentation shall be made available to the department of transportation and the public at least thirty days prior to publication of any notice of hearing scheduled by the commission pursuant to subsection (2) of this section.
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The transportation commission created in section 43-1-106, C.R.S., shall not revise the comprehensive statewide transportation plan prepared pursuant to section 43-1-1103 (5), C.R.S., to include a toll road, toll highway, or toll road or toll highway project subject to the requirements of this section unless the commission, after holding a public hearing, determines that:
- The requirements of section 7-45-105 and subsection (1) of this section have been met;
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The toll road, toll highway, or project is:
- Necessary to meet the transportation needs of the state;
- Consistent with section 43-1-1103 (5), C.R.S., and the policies of the transportation commission;
- Consistent with 23 U.S.C. sec. 135; and
- In the public interest;
- The toll road, toll highway, or project sponsor has established a reserve fund, performance bond, or other appropriate mechanism to ensure full payment of the costs of compliance with federal and state air and water quality standards, other federal and state environmental requirements, and mitigation measures included in the toll road, toll highway, or project or required by the transportation commission, a metropolitan planning organization, or a regional planning commission; and
- The toll road, toll highway, or project sponsor has entered into enforceable agreements with the department of transportation, or agreements with affected local governments that are acceptable to the transportation commission, to ensure that mitigation measures included in the project or required by the transportation commission, a metropolitan planning organization, or a regional planning commission will be implemented.
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The transportation commission may condition its addition of a toll road or toll highway or a toll road or toll highway project into the comprehensive statewide transportation plan upon additional mitigation measures if the commission determines that the mitigation measures are in the best overall public interest taking into consideration:
- The need for fast, safe, and efficient transportation;
- Public services;
- The costs of eliminating or minimizing the adverse effects for which the mitigation measures are proposed;
- Environmental, social, and economic values; and
- The financial feasibility of the toll road, toll highway, or project.
Source: L. 2006: Entire article R&RE, p. 1764, § 1, effective June 6.
7-45-107. Construction safety standards.
When constructing and maintaining a toll road or toll highway or any other element of a toll road or toll highway project, a toll road or toll highway company shall comply with all department of transportation safety standards for state transportation projects.
Source: L. 2006: Entire article R&RE, p. 1767, § 1, effective June 6.
7-45-108. Notice requirements for proposed toll roads and toll highways - removal from titles and voiding of previously filed and recorded documents.
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Within ninety days of June 2, 2008:
- The county clerk and recorder of each county in which a preexisting toll road or toll highway company filed a disclaimer of interest and map pursuant to paragraph (b) of this subsection (1), as said paragraph (b) existed before June 2, 2008, shall transfer the map, but not the disclaimer of interest, to the board of county commissioners of the county; and
- A preexisting toll road or toll highway company shall provide a copy of the map, but not the disclaimer of interest, that the company filed pursuant to paragraph (b) of this subsection (1), as said paragraph (b) existed before June 2, 2008, to the governing body of each municipality that is included within the three-mile corridor specified and mapped in the company's filed formation document.
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- Any properly authorized written notice, disclaimer of interest, or map filed or recorded by a preexisting toll road or toll highway company as required by subsection (1) of this section, as said subsection (1) existed before June 2, 2008, is hereby declared void and of no effect. The voiding of a written notice, disclaimer of interest, or map pursuant to this paragraph (b) conclusively establishes that the written notice, disclaimer of interest, or map does not affect the title to any property or have any other legal effect, and a title insurance company or title insurance agent shall exclude a void written notice, disclaimer of interest, or map from any documents it prepares on or after June 2, 2008.
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No cause of action at law or in equity shall be maintained based upon:
- The act of preparing, filing, or recording a written notice, disclaimer of interest, or map filed or recorded by a preexisting toll road or toll highway company pursuant to subsection (1) of this section, as said subsection (1) existed before June 2, 2008, that was subsequently voided pursuant to subparagraph (I) of this paragraph (b);
- The voiding of such a written notice, disclaimer of interest, or map; or
- The inclusion or exclusion of such a written notice, disclaimer of interest, or map from any document prepared by a title insurance company or title insurance agent.
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Within ninety days of June 2, 2008:
- Within ninety days of the inclusion of a toll road or toll highway or any other element of a toll road or toll highway project proposed by a preexisting or new toll road or toll highway company in the comprehensive statewide transportation plan as required by section 7-45-105 (1), the toll road or toll highway company shall send written notice to each person who owns real property within the proposed route of the proposed toll road, toll highway, or project of the intent of the toll road or toll highway company to construct the proposed toll road, toll highway, or element of the project. The toll road or toll highway company shall send the notice by certified mail and shall describe the proposed toll road, toll highway, or project, including its location, termini, improvements, and operation.
Source: L. 2006: Entire article R&RE, p. 1767, § 1, effective June 6. L. 2008: Entire section R&RE, p. 1710, § 6, effective June 2.
7-45-109. Use of land by toll road or toll highway company - right to repurchase unneeded condemned property.
Any interest in real property that is obtained by a preexisting toll road or toll highway company, other than a leasehold interest in property or rights-of-way acquired and owned by the department of transportation as authorized in section 7-45-104, within the three-mile corridor specified and mapped in its filed formation document as was required by section 7-45-101 (1) before June 2, 2008, and any interest in real property that is obtained by a new toll road or toll highway company, other than a leasehold interest in property or rights-of-way acquired and owned by the department of transportation as authorized in section 7-45-104, within the proposed route of the toll road or toll highway proposed by the new toll road or toll highway company on or after June 2, 2008, and that is not used for a toll road or toll highway project shall not be used for commercial, residential, or industrial development; except that this limitation on use shall apply only during the period in which the toll road or toll highway company is developing or operating a toll road or toll highway within the corridor or proposed route. If the development or operation of a toll road or toll highway ceases after the department has exercised the power of eminent domain to acquire property deemed at the time of acquisition to be necessary for the completion of the toll road or toll highway as authorized in section 7-45-104, a person from whom the department acquired property through the exercise of eminent domain has an exclusive option to repurchase the property acquired at the price paid for the property as just compensation by the department. The person may exercise the option within eighteen months following the cessation of the development or operation of the toll road or toll highway.
Source: L. 2006: Entire article R&RE, p. 1767, § 1, effective June 6. L. 2008: Entire section amended, p. 1711, § 7, effective June 2.
7-45-110. Sale of interest in or assets of a toll road or toll highway company.
- If any interest in a preexisting or new toll road or toll highway company is sold or transferred, the toll road or toll highway company shall continue to comply with the limitations set forth in section 7-45-109.
- If a preexisting or new toll road or toll highway company sells or transfers any interest in its real property within the three-mile corridor specified in the filed formation document of the preexisting toll road or toll highway company or within the proposed route of the toll road or toll highway proposed by the new toll road or toll highway company that is not used for the toll road or toll highway, then the purchaser shall comply with the limitations set forth in section 7-45-109.
- If a toll road, toll highway, or toll road or toll highway project is included in the comprehensive statewide transportation plan required pursuant to section 43-1-1103 (5), C.R.S., before the toll road or toll highway company completes a subsequent sale or transfer of assets or rights generating more than twenty percent of the current revenue from the toll road, toll highway, or project, the purchaser must demonstrate to the transportation commission, and the commission must determine, that following the sale or transfer the resources needed to comply with federal and state water quality standards and other federal and state environmental requirements and to implement mitigation measures that were included in the toll road or toll highway project description or required by a metropolitan planning organization, a regional planning commission, or the transportation commission will still be available for those purposes.
Source: L. 2006: Entire article R&RE, p. 1768, § 1, effective June 6. L. 2008: (1) and (2) amended, p. 1712, § 8, effective June 2.
7-45-111. Public-private initiatives.
Nothing contained in this article shall prohibit a toll road or toll highway company from entering into a public-private initiative with the department of transportation in accordance with the provisions of part 12 of article 1 of title 43, C.R.S., for the purpose of enabling the construction of a toll road, toll highway, or project. Any such project shall comply with the requirements of this article.
Source: L. 2006: Entire article R&RE, p. 1768, § 1, effective June 6.
ARTICLE 46 BRIDGE AND FERRY COMPANIES
7-46-101 to 7-46-103. (Repealed)
Source: L. 95: Entire article repealed, p. 193, § 4, effective April 13.
Editor's note: This article was numbered as article 18 of chapter 31, C.R.S. 1963. For amendments to this article prior to its repeal in 1995, consult the Colorado statutory research explanatory note and the table itemizing the replacement volumes and supplements to the original volume of C.R.S. 1973 beginning on page vii in the front of this volume.
ARTICLE 47 CEMETERY COMPANIES
Cross references: (1) For definitions applicable to this article, see § 7-90-102.
(2) For preneed funeral contracts, see article 15 of title 10; for mortuaries, see article 54 of title 12.
Section
7-47-101. Who may organize - powers.
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Three or more persons may associate themselves together under the provisions of law, for the purpose of procuring and establishing a cemetery or place of sepulture, and they shall, upon association and compliance with the provisions of law, be a body politic and corporate; may sue and be sued; may have a common seal that may be altered at pleasure; may purchase, hold, and convey real and personal estate; may choose a president and other officers; may enact bylaws for regulating the affairs of the corporation, not inconsistent with the law of this state, and compel the observance thereof by suitable penalties; and may do all acts necessary for the well ordering of the affairs of such corporation.
- (1.5) (a) A board of directors for a nonprofit cemetery corporation shall include at least one director who owns a lot, grave space, niche, or crypt. If such an owner cannot be found to serve as a director, the board of directors shall maintain a vacancy until the director position can be filled with such an owner. A nonprofit cemetery corporation may wait until the first vacancy on the board of directors occurs after January 1, 2013, before appointing a director who owns a lot, grave space, niche, or crypt.
- This subsection (1.5) applies only to cemeteries as defined in section 6-24-101 (2).
- A nonprofit corporation subject to the "Colorado Revised Nonprofit Corporation Act", articles 121 to 137 of this title, shall have all of the rights and powers granted by this article to the extent not inconsistent with said act, if such nonprofit corporation otherwise complies with the terms and provisions of this article.
Source: G.L. § 236. G.S. § 379. R.S. 08: § 1047. C.L. § 2430. CSA: C. 41, § 227. CRS 53: § 31-26-1. C.R.S. 1963: § 31-22-1. L. 67: p. 659, § 13. L. 97: (2) amended, p. 757, § 14, effective July 1, 1998. L. 2003: (1) amended, p. 2209, § 28, effective July 1, 2004. L. 2012: (1.5) added, (HB 12-1068), ch. 229, p. 1008, § 1, effective August 8. L. 2017: (1.5)(b) amended, (HB 17-1244), ch. 239, p. 983, § 2, effective August 9.
ANNOTATION
Rules and regulations of a cemetery association are not open to the objection that they are arbitrary and discriminatory because they are applicable to all who acquire burial sites in the association's grounds in the same manner and under like circumstances. Gasser v. Crown Hill Cem. Ass'n, 103 Colo. 175 , 84 P.2d 67 (1938).
7-47-102. May acquire land.
Any corporation formed under the law of this state to establish and maintain a cemetery or burial place for the dead may acquire suitable and sufficient land therefor in the manner provided by articles 1 to 7 of title 38, C.R.S.
Source: L. 1887: p. 70, § 1. R.S. 08: § 1048. C.L. § 2431. CSA: C. 41, § 228. CRS 53: § 31-26-2. C.R.S. 1963: § 31-22-2. L. 2003: Entire section amended, p. 2209, § 29, effective July 1, 2004.
ANNOTATION
Law reviews. For article, "Eminent Domain in Colorado", see 29 Dicta 313 (1952).
7-47-103. Land surveyed and platted.
Such corporation shall cause its land, or such portion thereof as may, from time to time, become necessary for that purpose, to be surveyed into lots, avenues, and walks, and to be platted. The plat of ground as surveyed shall be acknowledged by some officer of the corporation and filed in the office of the recorder of the county in which the land is situated. Each lot shall be regularly numbered by the surveyor, and such number shall be marked on the plat.
Source: L. 1887: p. 70, § 2. R.S. 08: § 1049. C.L. § 2432. CSA: C. 41, § 229. CRS 53: § 31-26-3. C.R.S. 1963: § 31-22-3.
7-47-104. Disposition of proceeds of sales of lots.
The net proceeds arising from the sale of lots by such corporation and all other income and revenue thereof, after paying for cemetery ground, shall be exclusively applied, appropriated, and used in improving, preserving, and embellishing the cemetery and its appurtenances, and to paying the necessary expenses of the corporation, and shall not be appropriated for any purpose of profit to the corporation or its members.
Source: L. 1887: p. 70, § 3. R.S. 08: § 1050. C.L. § 2433. CSA: C. 41, § 230. CRS 53: § 31-26-4. C.R.S. 1963: § 31-22-4.
7-47-104.5. Reports.
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Each nonprofit cemetery corporation shall keep in its principal office and, upon reasonable request, shall make available for inspection and study to the owner of any grave space, niche, or crypt, or to a duly authorized representative of the owner, the following:
- An annual written report setting forth the number of interments and entombments maintained by the nonprofit cemetery corporation, the number of interments and entombments for the preceding year, and any other facts necessary to show the actual financial condition of the nonprofit cemetery corporation;
- A complete and current copy of any bylaws or articles of incorporation adopted by the board of directors;
- A copy of the minutes of each meeting of the board of directors for the last three years;
- A copy of each periodic report filed during the last three years with the Colorado secretary of state in accordance with section 7-90-501;
- A copy of internal revenue service form 990 reports, or any successor form or report, for the last three years; and
- A copy of the corporation's current balance sheet, income statement, and cash-flow statement.
- To comply with this section, the report must be attested to by the accountant, auditor, or other person preparing the report and verified by a vote of the board of directors.
- Upon written request for a specific list of documents, the nonprofit cemetery shall provide to any owner of a lot, grave space, niche, or crypt electronic or physical copies of any reports required by this section. The nonprofit cemetery shall fulfill the request within seven days after receipt of the request and payment of a copying charge, if paper copies are required or requested, not to exceed twenty-five cents per physical copied page. The nonprofit cemetery shall not charge for electronic copies.
Source: L. 2012: Entire section added, (HB 12-1068), ch. 229, p. 1008, § 2, effective August 8.
7-47-105. Rights of lot owners.
- If the grounds purchased or otherwise acquired for cemetery purposes have been previously used as a burial ground, those who are lot owners at the time of the purchase continue to own the lots and are members of the corporation.
- An owner of a lot, grave space, niche, or crypt may attend any meeting of the board of directors. The board of directors shall provide reasonable notice of any board meeting to owners of a lot, grave space, niche, or crypt, who may not participate in meetings of the board of directors without permission of the chairperson.
Source: L. 1887: p. 70, § 4. R.S. 08: § 1051. C.L. § 2434. CSA: C. 41, § 231. CRS 53: § 31-26-5. C.R.S. 1963: § 31-22-5. L. 2012: Entire section amended, (HB 12-1068), ch. 229, p. 1009, § 3, effective August 8.
7-47-106. Property exempt from taxes - attachment.
All the property of such corporation used or owned for the purposes of this article shall be exempt from taxation, assessment, lien, attachment, and levy and sale upon execution, except for the purchase price of the property.
Source: L. 1887: p. 71, § 5. R.S. 08: § 1052. C.L. § 2435. CSA: C. 41, § 232. CRS 53: § 31-26-6. L. 59: p. 532, § 7. C.R.S. 1963: § 31-22-6.
Cross references: For mortuaries located in cemeteries, see § 12-54-201.
ANNOTATION
Cemeteries not used or held for profit are exempt from taxation under this section. Grisard v. Roselawn Cem. Ass'n, 92 Colo. 289 , 19 P.2d 766 (1933).
As well as assessment, lien, or attachment. Concerned with the projection of § 5 of art. X, Colo. Const., exempting certain properties from taxation, the Colorado general assembly, as early as 1887, provided that cemetery property not only be exempt from taxation, but from assessment, lien, or attachment. Beth Medrosh Hagodol v. City of Aurora, 126 Colo. 267 , 248 P.2d 732 (1952).
Including local assessments. The law-making body possessing plenary legislative power over the subject of assessments may if it chooses, and as it has done, exempt cemeteries from local assessments. Other states by statutes have exempted cemeteries by a provision that they shall not be subject to "any tax or debt whatever". City & County of Denver v. Tihen, 77 Colo. 212, 235 P. 777 (1925).
And where cemetery property is erroneously assessed by a local government, an injunction is proper to grant relief. Grisard v. Roselawn Cem. Ass'n, 92 Colo. 289 , 19 P.2d 766 (1933).
Use of property as a cemetery, not use and ownership, is the test of the right of exemption under this statute. City & County of Denver v. Tihen, 77 Colo. 212, 235 P. 777 (1925).
7-47-107. Property not exempt - when.
The property of any corporation or association formed under the law of this state to establish and maintain a cemetery for the purposes of profit shall not be exempt from taxation, liens, or levy and sale until actually sold or disposed of for cemetery purposes; and when any block, lot, or parcel of land has been disposed of for cemetery purposes or burial sites for the dead, the same, with streets, walks, and avenues leading thereto, shall be exempt as provided by section 7-47-106.
Source: L. 1891: p. 58, § 1. R.S. 08: § 1053. C.L. § 2436. CSA: C. 41, § 233. CRS 53: § 31-26-7. C.R.S. 1963: § 31-22-7. L. 2003: Entire section amended, p. 2210, § 30, effective July 1, 2004.
7-47-108. Not applicable - when.
The provisions of section 7-47-104 shall not apply to any association or corporation formed under the law of this state to maintain a cemetery for profit.
Source: L. 1891: p. 58, § 1. R.S. 08: § 1054. C.L. § 2437. CSA: C. 41, § 234. CRS 53: § 31-26-8. C.R.S. 1963: § 31-22-8. L. 2003: Entire section amended, p. 2210, § 31, effective July 1, 2004.
7-47-109. Abandoned graves - right to reclaim.
- If there is a lot, grave space, niche, or crypt in a cemetery in which no remains have been interred, no burial memorial has been placed, and no other improvement has been made for a continuous period of no less than seventy-five years, the corporation that established or maintains the cemetery, referred to in this section as the "corporation", may initiate the process of reclaiming title to the lot, grave space, niche, or crypt in accordance with this section.
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A corporation seeking to reclaim a lot, grave space, niche, or crypt shall:
- Send written notice of the corporation's intent to reclaim title to the lot, grave space, niche, or crypt to the owner's last-known address by first-class mail; and
- Publish a notice of the corporation's intent to reclaim title to the lot, grave space, niche, or crypt in a newspaper of general circulation in the area in which the cemetery is located once per week for four weeks.
- The notice required by subsection (2) of this section shall clearly indicate that the corporation intends to terminate the owner's rights and title to the lot, grave space, niche, or crypt and include a recitation of the owner's right to notify the corporation of the owner's intent to retain ownership of the lot, grave space, niche, or crypt.
- If the corporation does not receive from the owner of the lot, grave space, niche, or crypt a letter of intent to retain ownership of the lot, grave space, niche, or crypt within sixty days after the last publication of the notice required by paragraph (b) of subsection (2) of this section, all rights and title to the lot, grave space, niche, or crypt shall transfer to the corporation. The corporation may then sell, transfer, or otherwise dispose of the lot, grave space, niche, or crypt without risk of liability to the prior owner of the lot, grave space, niche, or crypt.
- A corporation that reclaims title to a lot, grave space, niche, or crypt in accordance with this section shall retain in its records for no less than one year a copy of the notice sent pursuant to paragraph (a) of subsection (2) of this section and a copy of the notice published pursuant to paragraph (b) of subsection (2) of this section.
- If a person submits to a corporation a legitimate claim to a lot, grave space, niche, or crypt that the corporation has reclaimed pursuant to this section, the corporation shall transfer to the person at no charge a lot, grave space, niche, or crypt that, to the extent possible, is equivalent to the reclaimed lot, grave space, niche, or crypt.
- Notwithstanding any provision of law to the contrary, on and after August 7, 2006, a corporation shall not convey title to the real property surveyed as a lot in a cemetery for use as a burial space. A corporation may grant interment rights to a lot, grave space, niche, or crypt in a cemetery.
Source: L. 2006: Entire section added, p. 441, § 1, effective August 7.
ARTICLE 48 BUSINESS DEVELOPMENT CORPORATIONS
Section
7-48-101. Short title.
This article shall be known and may be cited as the "Colorado Business Development Corporation Act".
Source: L. 65: p. 447, § 1. C.R.S. 1963: § 31-23-1.
7-48-102. Definitions.
As used in this article, unless the context otherwise requires:
- "Board of directors" means the board of directors of a corporation created under this article.
- "Corporation" means a Colorado business development corporation created under the provisions of this article.
- "Financial institution" means any bank, trust company, savings and loan association, public or private pension or retirement fund, insurance company or related corporation, partnership, foundation, or other institution engaged in lending or investing funds.
- "Loan limit" for any member means the maximum amount permitted to be outstanding at one time on loans made by such member to a corporation as determined under the provisions of this article.
- "Member" means any financial institution which undertakes to lend money to a corporation created under this article, upon its call and in accordance with the provisions of this article.
Source: L. 65: p. 447, § 1. C.R.S. 1963: § 31-23-2 . L. 2013: (3) amended, (SB 13-154), ch. 282, p. 1469, § 23, effective July 1.
Cross references: For additional definitions applicable to this article, see § 7-90-102.
7-48-103. Incorporation - applicability of "Colorado Business Corporation Act".
A business development corporation may be incorporated in this state pursuant to the provisions of article 102 of this title, and all the provisions of the "Colorado Business Corporation Act", articles 101 to 117 of this title, not in conflict with or inconsistent with the provisions of this article shall apply to such corporation except as otherwise provided in this article. The purpose clause of the articles of incorporation shall recite that the purposes for which the corporation is formed are to stimulate and promote the business prosperity and economic welfare of this state and its citizens; to encourage and assist, through financial aid, advice, technical assistance, and other appropriate means, the location of new businesses and industries and the rehabilitation, improvement, and expansion of existing businesses and industries throughout the state; and, in furtherance of these purposes, to cooperate with the division of commerce and development of this state and with other organizations, public and private.
Source: L. 65: p. 448, § 1. C.R.S. 1963: § 31-23-3. L. 93: Entire section amended, p. 856, § 10, effective July 1, 1994.
7-48-104. Domestic entity name.
In addition to complying with part 6 of article 90 of this title, providing for entity names, each corporation created under this article shall have as part of its domestic entity name the words "Business Development".
Source: L. 65: p. 448, § 1. C.R.S. 1963: § 31-23-4. L. 2003: Entire section amended, p. 2210, § 32, effective July 1, 2004. L. 2004: Entire section amended, p. 1403, § 14, effective July 1.
7-48-105. Approval of governor.
The articles of incorporation shall not be filed by the secretary of state unless approved by the governor in writing. This approval shall not be given by the governor until the governor first has sought the advice of the division of commerce and development.
Source: L. 65: p. 448, § 1. C.R.S. 1963: § 31-23-5. L. 2004: Entire section amended, p. 1404, § 15, effective July 1.
7-48-106. Restrictions on powers.
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The powers of a corporation shall be subject to the following restrictions:
- It shall not approve any application for a loan until the applicant shall have shown that the applicant has applied to a financial institution that could lawfully lend the amount of money sought and that the financial institution has refused in writing to make the requested loan.
- It shall not incur any secondary liability for the debts of others but may assume primary liability therefor.
- It shall not give security for any loan made to it unless all loans to it are secured ratably in proportion to unpaid balances due.
Source: L. 65: p. 449, § 1. C.R.S. 1963: § 31-23-6. L. 2004: (1)(a) amended, p. 1404, § 16, effective July 1.
7-48-107. Acquisition or disposition of securities and capital stock.
Notwithstanding any other provision of law, any person, corporation, public utility, financial institution, or labor union may acquire, hold, sell, assign, transfer, mortgage, pledge, or otherwise dispose of any bonds, notes, debentures, securities, or other evidences of indebtedness or the shares of capital stock of a corporation created under this article; but the amount of capital stock which may be acquired by any member of such corporation shall not exceed ten percent of the loan limit of that member.
Source: L. 65: p. 449, § 1. C.R.S. 1963: § 31-23-7.
7-48-108. Membership - loans from members.
- Any financial institution is authorized to become a member of a corporation by making application to the board of directors on such form and in such manner as the board of directors may require, and membership shall become effective upon acceptance of the application by said board. Membership shall be for the duration of the corporation; but upon written notice given to the corporation two years in advance, a member may withdraw from membership at the expiration date of the notice and shall not thereafter be obligated to make any loans to the corporation.
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Every member shall make loans to the corporation as and when called upon by it to do so, upon such terms and conditions as approved from time to time by the board of directors, subject to the following conditions:
- All loans shall be evidenced by negotiable instruments of the corporation and shall bear interest at a rate of not less than one-half of one percent in excess of the rate of interest determined by the board of directors to be the prime rate on unsecured commercial loans as of the date of the loan.
- All loan limits shall be established at the thousand dollar amount nearest to the amount computed in accordance with the provisions of this section.
- No loan to a development corporation shall be made if immediately thereafter the total amount of the obligations of the said corporation would exceed ten times the amount then paid in on its outstanding capital stock.
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The total amount outstanding at any one time on loans to a development corporation made by any member must not exceed the lesser of twenty percent of the total amount then outstanding on loans to such development corporation by all members thereof, two hundred fifty thousand dollars, or the following limit to be determined as of the time a member becomes a member on the basis of figures contained in the most recent year-end statement prior to its application for membership:
- Three percent of the capital and permanent surplus of banks and trust companies;
- Three percent of the total reserve and surplus accounts of a savings and loan association;
- One percent of the capital and unassigned surplus of stock insurance companies, except fire insurance companies;
- One percent of the unassigned surplus of mutual insurance companies, except fire insurance companies;
- One-tenth of one percent of the assets of fire insurance companies; and
- Comparable limits for other financial institutions as established by the board of directors of the development corporation.
- All loan limits shall be recomputed as of the first day of January of each even-numbered year, but no member's loan limit shall be increased as the result of such recomputation without the consent of the member.
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The total amount outstanding at any one time on loans to a development corporation made by any member must not exceed the lesser of twenty percent of the total amount then outstanding on loans to such development corporation by all members thereof, two hundred fifty thousand dollars, or the following limit to be determined as of the time a member becomes a member on the basis of figures contained in the most recent year-end statement prior to its application for membership:
- Each call for loans made by the corporation shall be prorated among the members of the corporation in substantially the same proportion that the adjusted loan limit of each member bears to the aggregate of the adjusted loan limits of all members. The "adjusted loan limit" of a member shall be the amount of such member's loan limit reduced by the balance of outstanding loans made by the member to the corporation and the investment of such member in capital stock of the corporation at the time of the call.
- A member of a corporation created under this article shall not be a member of more than one such corporation.
Source: L. 65: p. 449, § 1. C.R.S. 1963: § 31-23-8. L. 2013: IP(2) and (2)(d) amended, (SB 13-154), ch. 282, p. 1469, § 24, effective July 1.
7-48-109. Capital stock - stockholders and members.
- Each share of stock of a corporation shall have a par value of one hundred dollars and shall be issued for cash. No preferred stock shall be issued. At least one hundred thousand dollars shall be paid into the treasury for capital stock before the corporation shall be authorized to transact any business other than that which relates to its organization.
- Each stockholder shall be entitled to one vote, in person or by proxy, for each share of capital stock held, and each member shall be entitled to one vote, in person or by proxy, for each one thousand dollars of the authorized loan limit of such member as determined under section 7-48-108 (2).
- The rights given by the "Colorado Business Corporation Act", articles 101 to 117 of this title, to stockholders to attend meetings and to receive notice thereof and exercise voting rights shall apply to members as well as to stockholders of a corporation created under this article. The voting rights of the members shall be the same as if they were a separate class of stockholders, and stockholders and members shall in all cases vote separately by classes. A quorum at a meeting shall require the presence in person or by proxy of a majority of the holders of the voting rights of each class.
Source: L. 65: p. 451, § 1. C.R.S. 1963: § 31-23-9. L. 2003: (3) amended, p. 2210, § 33, effective July 1, 2004.
7-48-110. Directors.
The business and affairs of a corporation shall be conducted by a board of directors. The number of directors shall be a multiple of three. Two-thirds of the directors shall be elected by the members and one-third shall be elected by the stockholders. Any vacancy in the office of a director elected by the members shall be filled by the directors elected by the members, and any vacancy in the office of a director elected by the stockholders shall be filled by the directors elected by the stockholders.
Source: L. 65: p. 451, § 1. C.R.S. 1963: § 31-23-10.
7-48-111. Amendments to articles of incorporation.
No amendment to the articles of incorporation shall be made which increases the obligation of a member to make loans to the corporation or which makes any change in the principal amount, interest rate, maturity date, or security or credit position of any outstanding loan made by a member to the corporation or which affects the right of a member to withdraw from membership or the voting rights of such member, without the consent of each member who would be affected by such amendment.
Source: L. 65: p. 451, § 1. C.R.S. 1963: § 31-23-11.
7-48-112. Earned surplus.
Each year the corporation shall set apart as earned surplus not less than ten percent of its net earnings for the preceding fiscal year until such surplus is equal in value to one-half of the amount paid in on the capital stock then outstanding. If the amount of surplus so established becomes impaired, it shall be built up again to the required amount in the manner provided for its original accumulation.
Source: L. 65: p. 452, § 1. C.R.S. 1963: § 31-23-12.
7-48-113. Members to have rights of stockholders.
The rights given to stockholders under the provisions of sections 7-102-106, 7-103-104, 7-110-203, and 7-114-102 shall apply to members as well as to stockholders of a corporation created under this article.
Source: L. 65: p. 452, § 1. C.R.S. 1963: § 31-23-13. L. 93: Entire section amended, p. 856, § 11, effective July 1, 1994. L. 2004: Entire section amended, p. 1404, § 17, effective July 1.
7-48-114. Deposit of funds.
No corporation formed under the provisions of this article shall at any time be authorized to receive money on deposit. The corporation shall not deposit any of its funds in any banking institution unless such institution has been designated as a depository by a vote of a majority of the directors present at an authorized meeting of the board of directors, exclusive of any director who is an officer or director of the depository so designated.
Source: L. 65: p. 452, § 1. C.R.S. 1963: § 31-23-14. L. 2003: Entire section amended, p. 2210, § 34, effective July 1, 2004.
7-48-115. Books and records.
A corporation shall keep, in addition to the books and records required by sections 7-116-101 and 7-116-102, a record showing the names and addresses of all members of the corporation and the current status of loans made by each to the corporation. Members shall have the same rights with respect to such books and records as are given to stockholders by sections 7-116-101 to 7-116-106.
Source: L. 65: p. 452, § 1. C.R.S. 1963: § 31-23-15. L. 93: Entire section amended, p. 856, § 12, effective July 1, 1994.
7-48-116. Credit of state not pledged.
Under no circumstances is the credit of the state pledged in this article.
Source: L. 65: p. 452, § 1. C.R.S. 1963: § 31-23-16.
ARTICLE 49 OLDER HOUSING
Section
7-49-101. Legislative declaration.
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The general assembly hereby finds and declares that:
- There exists in both the urban and rural areas of the state a substantial quantity of older houses which, while still structurally sound and safe, are in danger of deteriorating due to the lack of available private investment capital which would help ensure their purchase or rehabilitation;
- The purchase, repair, and restoration of such houses by interested persons will tend to stabilize the physical and social environment of the area in which such houses are located, preserve the economic base of the community of which they are a part, and help prevent the spread of blighted houses;
- A need exists for assistance to individuals and families in securing financing to purchase or rehabilitate such housing; that such purpose can best be met by coordination and cooperation among private lenders and insurers with state and local governments; that such assistance can be provided by stimulating the flow of private investment capital into the financing of such houses by providing a program of mortgage lending and insurance specifically designed to provide loans or insurance to individuals or families who would otherwise qualify for mortgage loans in areas of newer housing; and that local governments can further stimulate the upgrading of endangered older houses by minimizing the problems associated with over-restrictive and narrowly-defined and administered building codes and inspection procedures.
- It is further declared that a general law cannot be made applicable to the corporation authorized by this article because of the atypical and special nature of the corporation's powers, duties, privileges, rights, and liabilities.
Source: L. 75: Entire article added, p. 264, § 1, effective June 29.
7-49-102. Definitions.
As used in this article, unless the context otherwise requires:
- "Corporation" means the Colorado older housing preservation corporation authorized to be created in this article.
- "Eligible housing structure" or "eligible housing" means a structure occupied by the owner and used primarily for residential purposes, consisting of eight or less units, thirty years of age or older, and on land located in a recorded subdivision plat in which fifty percent or more of the residential housing structures are thirty years of age or older.
- "Financial institution", "member institution", or "institution" means any bank, trust company, savings and loan association, credit union, public or private pension or retirement fund, insurance company or corporation related thereto, partnership, foundation, or any other financial institution authorized to invest in or make mortgage loans or to provide insurance for mortgage loans.
- "Insured lender" or "lender" means any financial institution which makes a loan which is insured under this article.
- "Mortgage" means a written instrument evidencing or creating a lien against real property for the purpose of providing security for the repayment of a debt. For the purposes of this article, the term includes a deed of trust.
Source: L. 75: Entire article added, p. 265, § 1, effective June 29. L. 2013: (3) amended, (SB 13-154), ch. 282, p. 1470, § 25, effective July 1.
Cross references: For additional definitions applicable to this article, see § 7-90-102.
7-49-103. Corporation authorized.
A corporation, for the purposes enumerated in this article, may be incorporated upon approval of the governor and the state treasurer. The provisions of the "Colorado Business Corporation Act", articles 101 to 117 of this title, not in conflict with or inconsistent with the provisions of this article shall apply to such corporation. The purpose clause of the articles of incorporation shall recite that the purposes for which the corporation is formed are to stimulate the flow of private investment capital for the purchase and rehabilitation of eligible housing; to encourage and assist through financial aid, advice, technical assistance, and other appropriate means the improvement of existing housing throughout the state; and, in furtherance of these purposes, to cooperate with the division of housing of the department of local affairs and the Colorado housing and finance authority and with other organizations, public and private.
Source: L. 75: Entire article added, p. 265, § 1, effective June 29. L. 87: Entire section amended, p. 1196, § 15, effective May 20. L. 93: Entire section amended, p. 856, § 13, effective July 1, 1994.
7-49-104. Corporate name.
The corporation shall be called the Colorado older housing preservation corporation.
Source: L. 75: Entire article added, p. 265, § 1, effective June 29.
7-49-105. Approval of governor and state treasurer.
The articles of incorporation shall not be delivered to the secretary of state, for filing pursuant to part 3 of article 90 of this title, unless the governor and the state treasurer have approved in writing the method for selection of public members of the board of directors and the creation of the corporation.
Source: L. 75: Entire article added, p. 266, § 1, effective June 29. L. 2002: Entire section amended, p. 1812, § 9, effective July 1; entire section amended, p. 1676, § 7, effective October 1.
7-49-106. Election of board of directors.
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The business and affairs of the corporation shall be conducted by a board of directors comprised of:
- Four members elected by a vote of the eight participating financial institutions who have made or committed the largest contributions to the loan and insurance funds provided for in sections 7-49-108 and 7-49-109; and
- Two members elected by the remaining participating financial institutions; and
- Three members, elected under procedures established in the articles of incorporation at the time of incorporation and approved by the governor and state treasurer, representing the general public; and
- The executive director of the department of local affairs or the executive director's designee, the chairperson of the banking board, the commissioner of insurance, the executive director of the Colorado housing and finance authority, and the state treasurer, who shall serve as ex officio voting members of the board of directors.
- Except for the ex officio members, the terms of office for each member shall be four years; except that, at the time of incorporation, a majority of the members of the initial board shall be elected for four-year terms and the remainder for two-year terms. Any vacancy shall be filled in the same manner as the original election but shall be for the unexpired term.
Source: L. 75: Entire article added, p. 266, § 1, effective June 29. L. 87: (1)(d) amended, p. 1196, § 16, effective May 20. L. 88: (1)(d) amended, p. 417, § 8, effective April 11. L. 2004: (1)(d) amended, p. 1404, § 18, effective July 1.
7-49-107. Restrictions on powers.
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The powers of the corporation shall be subject to the following restrictions:
- It shall not approve any application for a loan until the applicant has shown that the applicant has applied to two or more financial institutions that could lawfully lend the amount of money sought and that the financial institutions have refused in writing to make the requested loan or would only make such loan under conditions substantially different from the prevailing rates and conditions available to persons borrowing for the purchase or remodeling of newer homes;
- It shall not give security for any loan made unless all loans are secured ratably in proportion to unpaid balances due.
- Nothing in this article shall be construed to empower the board of directors to adopt rules or regulations that are inconsistent with federal law governing financial institutions or any federal rules or regulations promulgated pursuant to such federal law.
Source: L. 75: Entire article added, p. 266, § 1, effective June 29. L. 2003: (2) amended, p. 2210, § 35, effective July 1, 2004. L. 2004: (1)(a) amended, p. 1404, § 19, effective July 1.
7-49-108. Membership - loans from members.
- Any financial institution is authorized to become a member of the corporation by making application to the board of directors on such form and in such manner as the board of directors may by rule require, and membership shall become effective upon approval of the application by said board. Membership shall be for the duration of the corporation; but, upon written notice given to the corporation two years in advance, a member may withdraw from membership at the expiration of the notice and shall not thereafter be obligated to make any loans as a member of the corporation.
- Every member shall agree to make, pledge, or commit loans to the corporation or to other borrowers as provided in this section when called upon by it to do so, upon such terms and conditions as shall be approved by rule from time to time by the board of directors.
-
- Pursuant to procedures established by rule at the time of incorporation, or as from time to time modified by the board of directors with the approval of a majority of the member institutions, the corporation shall have the right to ask every member to make, pledge, or commit loans up to two-tenths of one percent of its assets (or more if a greater amount is subsequently authorized) for rehabilitation, refinancing, or acquisition loans made under this article. A member's obligation to make, pledge, or commit loans in excess of two-tenths of one percent of its assets arises only with the consent of the individual member.
- Such request may be made by the corporation to a member institution asking that the member fulfill its obligations by making an insured loan to finance rehabilitation work, refinancing, or acquisition.
- If a member institution has made loans insured under this article, outstanding principal amounts of which equal or exceed two-tenths of one percent of such lending institution's assets or the amount of funds pledged, the institution may assign a loan application qualified under this article to another member institution which has not made loans insured under this article equal to the amount of funds pledged or committed to the corporation or two-tenths of one percent of its assets, and the member institution to which the assignment has been made will, if such member institution approves, make the insured loan.
- In the alternative, a member institution which has exceeded its two-tenths of one percent quota may place a loan application qualified under this article with the corporation which shall have the authority to assign such qualified loan application to any member institution which has not exceeded its commitments, and such institution shall make such loan if it approves thereof. The member institution to which such assignment is made need not be located in the municipality in which the housing facility mortgaged or to be mortgaged pursuant to such assigned loan is located.
- Each loan shall be subject to reasonable administrative discretion and approval by the lender, under rules established by the corporation, as to the structural soundness of the housing structure and the economic soundness of the proposed loan.
- If loans are made directly to the corporation by a member institution for use by the corporation pursuant to procedures established at the time of incorporation, the corporation may transfer amounts to each member institution for the purpose of making loans as provided in this article. Each such loan shall be subject to reasonable administrative discretion by the lender as to the structural soundness of the housing structure and the economic soundness of the proposed loan.
Source: L. 75: Entire article added, p. 266, § 1, effective June 29.
7-49-109. Loan insurance fund established.
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The articles of incorporation shall include provisions for the establishment of a loan insurance fund as follows:
- At the time of incorporation, and prior to initiating any loans under section 7-49-108, the corporation may call upon each member institution to contribute to the loan insurance fund. The contribution of each institution shall not exceed two-one hundredths of one percent of its assets, unless a greater amount is contributed voluntarily by a member institution or unless a greater amount is stated at the time of incorporation. The corporation may call for contributions to the loan insurance fund only as needed to meet its insurance obligations on loans insured under this article that are in default and for the purpose of maintaining a fund of cash in the loan insurance fund of five hundred thousand dollars. Calls for contributions shall be made upon each of the member institutions in an amount that bears, at the date of the call, the same proportion to the loan insurance fund as such institution's assets bear to the total assets owned by the institutions.
- The loan insurance fund may be maintained by mortgage insurance fees not to exceed one-half of one percent above the rate charged for the mortgage or rehabilitation loan.
- In the alternative, mortgage insurance may also be provided under the provisions of section 10-4-106, C.R.S.
Source: L. 75: Entire article added, p. 267, § 1, effective June 29. L. 2003: (1)(a) amended, p. 2211, § 36, effective July 1, 2004.
7-49-110. Mortgage loans eligible for insurance.
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Fund insurance may be made available under the following conditions:
- Fund insurance is applicable to loans originated by mortgagees approved by the corporation.
- Mortgage loans must be a first lien against subject property.
- Mortgage loans involving leaseholds must have a remaining lease term of not less than the mortgage term plus ten years.
- Mortgage loans on one- to eight-family properties are eligible only if owner-occupied.
- All mortgage loans shall bear interest at the rate agreed upon by the mortgagor and the corporation if the loan is made directly from funds held by the corporation and transferred to a participating lender, or by the mortgagor and the lending institution if the loan is made by the institution on call from the corporation.
- No mortgage loan shall be insured for a term in excess of forty years.
- The mortgage loan must contain amortization provisions satisfactory to the corporation for the complete amortization of the loan in monthly installments. Generally, the sum of principal and interest payments shall be substantially the same from month to month; however, special amortization programs involving increasing or decreasing monthly payments may be considered for insurance by the corporation.
- Mortgage loans submitted for insurance consideration to the corporation must conform to the exhibits, documentation, and eligibility criteria as required under the loan insurance program for which approval is being requested. The corporation may establish, from time to time, the maximum interest rate and term of the loan which it will permit as to any loan it will insure.
Source: L. 75: Entire article added, p. 268, § 1, effective June 29.
7-49-111. Percentage of insurance.
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The corporation may insure:
- Up to one hundred percent of the unpaid principal amount of loans for the purpose of purchasing, rehabilitating, or repairing eligible housing;
- Up to thirty percent of the original principal amount of refinancing loans, if the funds in excess of those required to discharge existing mortgages are used for rehabilitation of all dwelling units in structures refinanced and for no other purpose; and
- Up to thirty percent of the original principal amount of acquisition loans, if the insured loan together with other resources of the borrower is sufficient to acquire the property and to complete rehabilitation in accordance with the standards of this article. When the borrower of such an insured loan has repaid to the lender thirty percent of the original principal balance, the loan shall cease to be insured, and thereafter the borrower shall no longer be required to make mortgage insurance payments to the corporation.
Source: L. 75: Entire article added, p. 268, § 1, effective June 29.
7-49-112. Processing loans for insurance.
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Insurance on a loan qualifying for mortgage insurance under this article shall be in effect as of the date on which the lender has made a report to the corporation which shall document:
- The estimated cost of the rehabilitation work to be done;
- In the case of a refinancing loan or acquisition loan, that such loan shall not exceed one hundred percent of the fair market value of the property to be refinanced or acquired after rehabilitation work has been completed;
- That the estimated useful life of the housing accommodation, after rehabilitation, in the case of a rehabilitation loan, is greater than the term of the insurable mortgage;
- That the housing facility after purchase or rehabilitation will not contain any substantial violation of housing, building, or sanitary codes which would make the housing so unsafe that it presents a danger to the occupants or the public health or safety.
Source: L. 75: Entire article added, p. 269, § 1, effective June 29.
7-49-113. Eligible properties.
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Property which is the subject of mortgage insurance or a mortgage or rehabilitation loan must:
- Meet the provisions of section 7-49-102 (2);
- Be located in this state;
- Be primarily residential in nature and use.
- If the housing facility includes three or more units, the corporation or lending institution may require appraisal as an investment and include an income and operating statement. Approval may also be subject to satisfactory leases.
Source: L. 75: Entire article added, p. 269, § 1, effective June 29.
7-49-114. Working capital fund.
- The corporation shall, at the time of incorporation, establish a general fund, referred to in this article as the "working capital fund", and shall pay into such working capital fund any other moneys which may be available to the corporation for its general purposes from any source.
- All moneys held in the working capital fund, including, without limitation, any cash funds transferred directly to the corporation and any income or interest earned by or increment to such fund, shall be used by the corporation for its general purposes, and, to the extent authorized by it, any such moneys in excess of the amount required to make and keep the corporation self-supporting and to repay loans from member institutions shall be made available for the purposes of loans or for the loan insurance fund.
Source: L. 75: Entire article added, p. 269, § 1, effective June 29.
7-49-115. Division of housing - assistance.
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The division of housing of the department of local affairs is hereby authorized to assist individuals and the corporation as to:
- The nature, extent, and manner of repairs, remodeling, or rehabilitation financed under this article and the nature, extent, and manner of repairs required to ensure that the dwelling structure will not be structurally unsound and unsafe after such work is completed;
- The manner, method, or mode by which the mortgage recipient could undertake all or any portion of the work; and
- The progress of the work, including technical assistance regarding the quality of such work.
- The corporation may establish rules and regulations providing a schedule of the amount or percentage of the cost or any technical assistance provided by a lender or which may be done under contract to the division of housing of the department of local affairs or by a private firm. Said amount may be included in the loan; except that the total amount to be charged shall not exceed one-half of one percent of the total amount of a loan to finance repair or rehabilitation work only or one-half of one percent of the cost of the repair or rehabilitation work to be undertaken in conjunction with the refinancing of an existing mortgage or the financing of the acquisition of a housing facility.
Source: L. 75: Entire article added, p. 270, § 1, effective June 29. L. 2004: (1)(b) amended, p. 1405, § 20, effective July 1.
7-49-116. Nonliability of state for mortgage insurance commitments.
This state shall not be liable for mortgage insurance commitments of the fund beyond the reserves and fee revenues of the fund. The mortgage insurance commitments issued on the fund shall contain a statement to that effect.
Source: L. 75: Entire article added, p. 270, § 1, effective June 29.
7-49-117. Deposit of funds.
The corporation shall not deposit any of its funds in any banking institution unless such institution has been designated as a depository by a vote of a majority of the directors present at an authorized meeting of the board of directors, exclusive of any director who is an officer or director of the depository so designated.
Source: L. 75: Entire article added, p. 270, § 1, effective June 29.
7-49-118. Books and records.
In addition to the books and records required by sections 7-116-101 to 7-116-105, the corporation shall keep a record showing the names and addresses of all members of the corporation and the current status of loans made by each to the corporation. Members shall have the same rights with respect to such books and records as are given to stockholders by sections 7-116-101 to 7-116-106.
Source: L. 75: Entire article added, p. 270, § 1, effective June 29. L. 93: Entire section amended, p. 857, § 14, effective July 1, 1994.
ARTICLE 49.5 FOREIGN-TRADE ZONES
Section
7-49.5-101. Short title.
This article shall be known and may be cited as the "Colorado Foreign-trade Zones Act".
Source: L. 80: Entire article added, p. 447, § 1, effective March 26.
7-49.5-102. Legislative declaration.
The general assembly hereby finds and declares that it is in the best interests of the state of Colorado to maintain this state's economic and commercial viability in the world of national and international commerce by providing incentives to encourage growth in existing industries and to attract new industry. To that end, foreign-trade zones are established, operated, and maintained pursuant to a grant of privilege from the foreign-trade zones board upon proper application in accordance with the "Foreign-trade Zones Act of 1934", 19 U.S.C. sec. 81. This article is enacted to allow designated corporations, including the city and county of Denver, to make application for such grant of the privilege to establish such a foreign-trade zone in Colorado.
Source: L. 80: Entire article added, p. 447, § 1, effective March 26.
7-49.5-103. Definitions.
As used in this article, unless the context otherwise requires:
- "Act" means the congressional act commonly known as the "Foreign-trade Zones Act of 1934", 19 U.S.C. sec. 81.
- "Corporation" means a public corporation or a private corporation.
- "Foreign merchandise" means merchandise of any class that would be subject to United States customs law if and when entered into United States customs territory.
- "Foreign-trade zone" means a foreign-trade zone established under a grant of privilege from the foreign-trade zones board, as defined in the act, and includes foreign-trade subzones as designated by the United States department of commerce.
- "Private corporation" means any corporation (other than a public corporation) formed for the purpose of establishing, operating, and maintaining a foreign-trade zone in the state of Colorado under this article, in accordance with the act.
- "Public corporation" means the state of Colorado, any political subdivision, municipality, or city and county thereof, any public agency of the state of Colorado, any political subdivision, municipality, or city and county thereof, or any corporate municipal instrumentality of the state of Colorado or of the state of Colorado and one or more other states.
Source: L. 80: Entire article added, p. 447, § 1, effective March 26. L. 2003: (3) and (5) amended, p. 2211, § 37, effective July 1, 2004.
Cross references: For additional definitions applicable to this article, see § 7-90-102.
7-49.5-104. Foreign-trade zone - authority to establish, operate, and maintain.
Any corporation may apply for a grant of the privilege to establish, operate, and maintain a foreign-trade zone. If such grant of privilege is made, such corporation may accept the grant and do all things necessary and proper in furtherance of the establishment, operation, and maintenance of the foreign-trade zone. Any action taken under this section shall be in accordance with the act and any rules and regulations as may be promulgated thereunder.
Source: L. 80: Entire article added, p. 448, § 1, effective March 26.
7-49.5-105. Foreign-trade zone - site.
Any corporation making an application for a grant of the privilege to establish, operate, and maintain a foreign-trade zone may select and describe the site of such foreign-trade zone in accordance with the act and rules and regulations promulgated thereunder.
Source: L. 80: Entire article added, p. 448, § 1, effective March 26.
7-49.5-106. Taxation of merchandise.
Freeport merchandise and stocks of merchandise as defined in section 39-1-102 (15), C.R.S., brought as foreign merchandise into a foreign-trade zone, established pursuant to a grant of privilege under this article, are exempt from taxation by the state of Colorado or any political subdivision thereof to the extent that such taxation is inhibited by provisions of the United States constitution or law enacted thereunder pertaining to goods in international commerce.
Source: L. 80: Entire article added, p. 448, § 1, March 26. L. 83: Entire section amended, p. 1487, § 2, effective June 1. L. 2003: Entire section amended, p. 2211, § 38, effective July 1, 2004.
Editor's note: Section 39-1-102 (15), which defined "stocks of merchandise", was repealed by section 11 of chapter 425, Session Laws of Colorado 1983.
Cross references: For exemption from property tax of inventories of merchandise and materials and supplies that are held for consumption by a business or are held primarily for sale, see § 39-3-119.
7-49.5-107. Severability.
If any provision of this article or the application thereof to any person or circumstances is held invalid, such invalidity shall not affect other provisions or applications of the article which can be given effect without the invalid provision or application, and to this end the provisions of this article are declared to be severable.
Source: L. 80: Entire article added, p. 448, § 1, effective March 26.
Religious and Benevolent Organizations
ARTICLE 50 RELIGIOUS, EDUCATIONAL, AND BENEVOLENT SOCIETIES
Cross references: For definitions applicable to this article, see § 7-90-102.
Section
7-50-101. How organized.
- Any church, congregation, or society for religious, educational, or benevolent purposes may also become incorporated under this article by electing, appointing, or selecting, at a meeting held for the purpose, two or more of its members as directors, trustees, wardens, vestrymen, or other officers whose powers and duties are similar to those of trustees or directors of a corporation organized for profit, referred to in this article as the "governing board". Said organization may adopt a domestic entity name that complies with part 6 of article 90 of this title and a seal, and, upon the filing of an affidavit with the secretary of state substantially as provided in section 7-50-102, shall become a body politic and corporate by the domestic entity name adopted.
- The provisions of this article shall not apply to any religious, educational, or benevolent society formed after December 31, 1967, nor to any religious, educational, or benevolent society or corporation formed prior to January 1, 1968, which has elected to accept the provisions of articles 121 to 137 of this title.
Source: G.L. § 229. G.S. § 372. R.S. 08: § 1018. C.L. § 2384. CSA: C. 41, § 177. CRS 53: § 31-21-1. L. 55: p. 240, § 1. C.R.S. 1963: § 31-20-1. L. 67: p. 658, § 11. L. 68: p. 2, § 3. L. 97: (2) amended, p. 758, § 15, effective July 1, 1998. L. 2000: (1) amended, p. 948, § 1, effective July 1. L. 2003: (1) amended, p. 2211, § 39, effective July 1, 2004.
ANNOTATION
Law reviews. For article, "Summary of Denver Bar-Sponsored Bills Passed by General Assembly", see 28 Dicta 173 (1951). For article, "Nonprofit and Charitable Corporations in Colorado", see 36 U. Colo. L. Rev. 9 (1963).
Societies availing themselves of this section become civil corporations, as distinguished from ecclesiastical corporations in the sense of the English Law and, as such, are subject to the principles of the common law and the practice and procedure applicable to corporations under the general incorporation laws, so far as the same are pertinent. Horst v. Traudt, 43 Colo. 445, 96 P. 259 (1908).
And a society originally organized under this section must be held to be a charitable organization. In re Estate of Forrester, 86 Colo. 221, 279 P. 721 (1929).
But the question of a charity's capacity as an existing corporation is a matter for the state. Tomay v. Crist, 75 Colo. 437, 226 P. 156 (1924).
Trustees, wardens, vestrymen, or other officers are the managing officers and trustees of a religious corporation in the same sense that the directors and officers of a bank or a railroad company are officers and trustees of such corporation, and thus they are invested, in regard to the temporal affairs of the church or society, with the powers conferred by the statute and with the ordinary discretionary powers of similar corporate officers. Horst v. Traudt, 43 Colo. 445, 96 P. 259 (1908).
And the members are similar to stockholders. In incorporated religious societies the members thereof occupy the same relation to the incorporated body, insofar as its temporal affairs are concerned, as the shareholders or stockholders of a corporation organized for profit under the general incorporation laws occupy to it. Horst v. Traudt, 43 Colo. 445, 96 P. 259 (1908).
Thus, to entitle a member of an incorporated religious society to relief in the courts, it must appear that he has exhausted all the means within the corporation itself and to obtain redress a showing must be made in the complaint that such efforts were unavailing. Horst v. Traudt, 43 Colo. 445, 96 P. 259 (1908).
7-50-102. Affidavit of chairperson.
- The chairperson or secretary of such meeting, within a reasonable time after the meeting, shall file in the office of the secretary of state an affidavit substantially in the following form:
- A fee that shall be determined and collected pursuant to section 24-21-104 (3), C.R.S., shall be charged for filing the affidavit of incorporation. When a true copy of such affidavit is presented to the secretary of state, the secretary of state shall certify it for a fee that shall be determined and collected pursuant to section 24-21-104 (3), C.R.S., as a true copy of the original affidavit on file in the records of the secretary of state, showing the date the original affidavit was filed.
- A certified copy of such affidavit shall be recorded in the office of the clerk and recorder of the county in which the corporation was organized and also in every county in which the corporation owns real estate. The affidavit of incorporation may also contain other provisions for the management and conduct of the affairs of the corporation, creating, defining, limiting, and regulating the powers of the corporation, the governing board, officers, and members thereof.
STATE OF COLORADO ) ) ss. County of ................................................) I do solemnly swear (or affirm) that at a meeting of the members of the (here insert the name used by the church, congregation, or society before the incorporation) held at .........., in the county of .........., and State of Colorado, on the ........ day of ........, A.D. 20...., the following persons (here insert the names) were elected, appointed, or selected as members of the governing board (under whatever title the organization designates said members, whose powers and duties are similar to those of trustees or directors of a corporation organized for profit), adopted as its corporate name (here insert the name), and at said meeting this affiant acted as chairperson (or secretary, as the fact may be). ............................................... (Name of affiant) Subscribed and sworn to before me this ............. day of ........., A.D. 20....
Source: G.L. § 230. L. 1879: p. 32, § 1. G.S. § 373. R.S. 08: § 1019. C.L. § 2385. L. 31: p. 249, § 24. CSA: C. 41, § 178. CRS 53: § 31-21-2. L. 55: p. 240, § 2. C.R.S. 1963: § 31-20-2. L. 83: (2) amended, p. 870, § 22, effective July 1. L. 2003: (2) and (3) amended, p. 2212, § 40, effective July 1, 2004. L. 2004: (1) and (2) amended, p. 1405, § 21, effective July 1.
ANNOTATION
The affidavit prescribed by this section does not require mention of the purpose of the organization. Thus it is wholly different from that of a corporation formed for business purposes, in which the purpose must be stated. Tomay v. Crist, 75 Colo. 437, 226 P. 156 (1924).
Where the affidavit required by this section shows that affiant was acting as secretary, his signature without further designation is sufficient. Tomay v. Crist, 75 Colo. 437, 226 P. 156 (1924).
7-50-103. Bylaws.
The directors, trustees, wardens, or vestrymen of any such corporation shall adopt necessary bylaws to provide for the election of directors, trustees, wardens, or vestrymen and other officers and for the proper government in all respects of the congregation, church, or society, unless such corporation, in its articles of incorporation, reserves to itself the right to make and adopt such prudential bylaws as it deems necessary to provide for the election of directors, trustees, wardens, or vestrymen and other officers and for the proper government in all respects of such congregation, church, or society.
Source: G.L. § 231. L. 1881: p. 66, § 1. G.S. § 374. R.S. 08: § 1020. C.L. § 2386. CSA: C. 41, § 179. CRS 53: § 31-21-3. C.R.S. 1963: § 31-20-3.
Cross references: For bylaws of joint stock companies incorporated for religious, educational, and benevolent purposes, see § 7-51-103.
7-50-104. Trustees of educational institution.
Any corporation existing for educational purposes under the law of this state that maintains one or more institutions of higher education of the grade of a university or college shall be governed and controlled by its board of trustees, wardens, or directors, as the case may be, who shall have power at any time, by a vote of two-thirds of the full board of trustees elected, to increase the board of directors, trustees, or wardens to any number that they see fit and shall also have the power to decrease the same to any number not less than three. The terms of office of such directors, wardens, or trustees may be determined by said board of trustees, wardens, or directors as shall be adopted by them by a bylaw in which two-thirds of the whole number shall concur before the same shall be binding upon the board of trustees, directors, or wardens, as the case may be.
Source: L. 1893: p. 92, § 1. R.S. 08: § 1021. C.L. § 2387. CSA: C. 41, § 180. CRS 53: § 31-21-4. C.R.S. 1963: § 31-20-4. L. 2003: Entire section amended, p. 2212, § 41, effective July 1, 2004.
7-50-105. Educational institution may confer degrees.
Any corporation existing for educational purposes under the law of this state that maintains one or more institutions of higher education of the grade of a university or college shall have authority, by its directors, board of trustees, or such person or persons as may be designated by its constitution or bylaws, to confer degrees and grant diplomas and other marks of distinction as are usually conferred and granted by other universities and colleges of like grade.
Source: L. 1889: p. 121, § 1. R.S. 08: § 1022. C.L. § 2388. CSA: C. 41, § 181. CRS 53: § 31-21-5. C.R.S. 1963: § 31-20-5. L. 2003: Entire section amended, p. 2212, § 42, effective July 1, 2004.
7-50-106. Property vests in corporation.
Upon the due and lawful incorporation of any congregation, parish, church, or society, such corporation shall be entitled to all the real and personal property held by any person or trustees in trust for the use of the members thereof and immediately upon incorporation shall be entitled to a deed of conveyance to be executed by the person holding such property in trust, in order to vest the title thereto in the corporation. Such deed of conveyance shall state the object and purposes of the trust to be carried out according to the purpose and intent of its creation, which deed shall be recorded after the manner of conveyances in general, so that the title and trust declared may duly appear of record. Any self-supporting congregation, parish, church, or society may vest its real estate and personal property in such general incorporations as are provided for in section 7-50-109; except that, if the authorities of any church, sect, or religious body have caused a corporation to be formed for general missions and other purposes, as provided in this article, and it is in accordance with the usages and customs of the church, sect, or religious body to vest the property of mission stations in such corporation, then all such property that may have been held by any person or trustees for the use of the mission stations shall be vested in said general corporation; and whenever any mission station, from change of population or other cause, is suspended or abandoned, the general corporation, in its discretion, may sell or otherwise dispose of all such mission property, the proceeds of such sale or disposal to be used for the benefit of said church, sect, or religious body in the state of Colorado.
Source: G.L. § 232. L. 1881: p. 65, § 1. G.S. § 375. R.S. 08: § 1023. C.L. § 2389. CSA: C. 41, § 182. CRS 53: § 31-21-6. C.R.S. 1963: § 31-20-6. L. 2003: Entire section amended, p. 2212, § 43, effective July 1, 2004.
ANNOTATION
"Formal title" approach to resolving church property disputes. In resolving church property disputes, the appellate court applies the neutral principles approach, specifically the "formal title" approach. On this basis, the court can determine ownership by studying deeds, reverter clauses, and general state corporation laws. Dickey v. Snodgrass, 673 P.2d 51 (Colo. App. 1983).
7-50-107. May take, hold, and convey property.
Domestic and foreign religious, educational, charitable, and literary corporations or associations operating within the state may take by gift, devise, or purchase, and hold and convey real and personal property. All gifts, devises, and grants made prior to March 14, 1877, to such corporations or associations are hereby ratified.
Source: G.L. § 235. G.S. § 378. R.S. 08: § 1024. C.L. § 2390. CSA: C. 41, § 183. CRS 53: § 31-21-7. C.R.S. 1963: § 31-20-7.
ANNOTATION
Law reviews. For article, "Restrictions on Charitable Gifts in Colorado", see 23 Rocky Mt. L. Rev. 434 (1951).
"Formal title" approach to resolving church property disputes. In resolving church property disputes, the appellate court applies the neutral principles approach, specifically the "formal title" approach. On this basis, the court can determine ownership by studying deeds, reverter clauses, and general state corporation laws. Dickey v. Snodgrass, 673 P.2d 51 (Colo. App. 1983).
A library association is educational and therefore within the terms of this section; consequently, it may take property under a will. Tomay v. Crist, 75 Colo. 437, 226 P. 156 (1924).
Foreign corporation may act as trustee of charitable trust. A foreign corporation, if it possesses by the law of its creation the requisite power so to do, may act as trustee of a charitable trust where the subject matter thereof is personalty and may take lands as such trustee where not prohibited by the law of the state wherein the land is located. This section contains no such prohibition; rather, this section on its face is one of authorization to foreign as well as domestic corporations operating within the state. Galiger v. Armstrong, 114 Colo. 397 , 165 P.2d 1019 (1946).
Charitable organization may execute charitable trust. A charitable organization, being authorized to take, receive, and hold gifts for charitable purposes, is also capable of executing a charitable trust. Clayton v. Hallett, 30 Colo. 231, 70 P. 429 (1902); In re Estate of Forrester, 86 Colo. 221, 279 P. 721 (1929).
7-50-108. New corporation formed - when.
Any congregation, church, or society incorporated prior to March 14, 1877, under the provisions of any law for the incorporation of religious, educational, or benevolent societies may become incorporated under the provisions of articles 30 to 52 and 121 to 137 or articles 101 to 117 of this title, relative to religious, educational, and benevolent societies in the same manner as if it had not previously been incorporated, in which case the new corporation shall be entitled to and invested with all the real and personal estate of the old corporation, in like manner and to the same extent as the old corporation, subject to all the debts, contracts, and liabilities. The word "trustees", as used in articles 30 to 52 and 121 to 137 or articles 101 to 117 of this title relative to religious bodies, shall be construed to include wardens, vestrymen, or such other officers as perform the duties of trustees.
Source: G.L. § 233. G.S. § 376. R.S. 08: § 1025. C.L. § 2391. CSA: C. 41, § 188. CRS 53: § 31-21-8. C.R.S. 1963: § 31-20-8. L. 93: Entire section amended, p. 857, § 15, effective July 1, 1994. L. 97: Entire section amended, p. 758, § 16, effective July 1, 1998.
Cross references: For joint stock companies for religious, educational, and benevolent purposes, see § 7-51-112.
7-50-109. Incorporation of Christian governing organizations.
If any body of Christians has an organization according to its order or mode of government, whether known as synod, presbytery, conference, episcopate, or other name, with ecclesiastical or spiritual jurisdiction over its members throughout this state, and its authorities desire to engage in works of education, benevolence, charity, and missions, which works shall be of like extensive operation and benefit and not of limited or local service, and they shall deem an incorporation convenient for the more successful administration of said works, its said authorities, with such persons as they may associate with them, may cause such incorporation to be formed in the manner and with the powers provided for the incorporation of a church, congregation, or society.
Source: G.L. § 234. G.S. § 377. R.S. 08: § 1026. C.L. § 2392. CSA: C. 41, § 189. CRS 53: § 31-21-9. C.R.S. 1963: § 31-20-9.
Cross references: For the incorporation of joint stock companies for religious, educational, and benevolent purposes, see § 7-51-113.
7-50-110. Quorum of directors.
The bylaws of any such charitable corporation organized under the law of this state may declare the number of trustees or managers necessary to constitute a quorum at any meeting of the board.
Source: L. 1883: p. 115, § 4. G.S. § 383. R.S. 08: § 1030. C.L. § 2396. CSA: C. 41, § 193. CRS 53: § 31-21-10. C.R.S. 1963: § 31-20-10. L. 2003: Entire section amended, p. 2213, § 44, effective July 1, 2004.
7-50-111. Amendment of articles.
Any corporation organized under this article may amend its affidavit of incorporation at any regular or special meeting of its governing board by a two-thirds vote of the board members present.
Source: L. 07: p. 312, § 1. R.S. 08: § 1031. C.L. § 2397. CSA: C. 41, § 194. CRS 53: § 31-21-11. L. 55: p. 241, § 3. C.R.S. 1963: § 31-20-11.
7-50-112. Amendment filed before effective.
- When the affidavit of incorporation is amended, a copy of the amendment shall be delivered to the secretary of state, for filing pursuant to part 3 of article 90 of this title, and upon such filing, the amendment shall become effective.
- (Deleted by amendment, L. 2002, p. 1812 , § 10, effective July 1, 2002; p. 1676, § 8, effective October 1, 2002.)
- A certified copy of the amendment shall be recorded in the office of the clerk and recorder of the county in which the organization was organized and also in each county in which the corporation owns real estate.
Source: L. 07: p. 312, § 2. R.S. 08: § 1032. C.L. § 2398. L. 31: p. 251, § 25. CSA: C. 41, § 195. CRS 53: § 31-21-12. L. 55: p. 242, § 4. C.R.S. 1963: § 31-20-12. L. 83: (2) amended, p. 870, § 23, effective July 1. L. 2002: Entire section amended, p. 1812, § 10, effective July 1; entire section amended, p. 1676, § 8, effective October 1. L. 2003: (3) amended, p. 2213, § 45, effective July 1, 2004.
7-50-113. Articles of amendment evidence of amendment.
The articles of amendment, or copy thereof, duly certified by the secretary of state or by the recorder, shall be received as evidence of the change, alteration, or amendment of the articles of incorporation of the corporation.
Source: L. 07: p. 313, § 3. R.S. 08: § 1033. C.L. § 2399. CSA: C. 41, § 196. CRS 53: § 31-21-13. C.R.S. 1963: § 31-20-13. L. 2002: Entire section amended, p. 1812, § 11, effective July 1; entire section amended, p. 1677, § 9, effective October 1. L. 2008: Entire section amended, p. 23, § 16, effective August 5.
7-50-114. Dissolution.
When a majority of the members of any corporation organized pursuant to this article vote to dissolve the corporation, the corporation shall deliver to the secretary of state, for filing pursuant to part 3 of article 90 of this title, an affidavit of dissolution. Such affidavit shall state that all the debts of the corporation are fully paid or provided for. When such affidavit has been filed, the corporation shall be forever dissolved. The president shall obtain from the secretary of state a certified copy of the affidavit showing the filing date and shall record a copy thereof in the office of the clerk and recorder of the county in which the corporation was organized and also in every county in which the corporation owns real estate.
Source: L. 55: p. 242, § 5. CRS 53: § 31-21-14. C.R.S. 1963: § 31-20-14. L. 83: Entire section amended, p. 870, § 24, effective July 1. L. 2002: Entire section amended, p. 1812, § 12, effective July 1; entire section amended, p. 1677, § 10, effective October 1. L. 2003: Entire section amended, p. 2213, § 46, effective July 1, 2004.
ARTICLE 51 JOINT STOCK RELIGIOUS OR BENEVOLENT ASSOCIATIONS
Cross references: For definitions applicable to this article, see § 7-90-102.
Section
7-51-101. How organized.
- Any joint stock company or association organized in this state for religious, educational, or benevolent purposes may be incorporated under this article by electing or appointing, according to its usages or customs at any meeting held for that purpose, two or more of its members as directors, trustees, wardens, or vestrymen, or other officers whose powers and duties are similar to those of trustees, who shall be agreeable to the usages and customs and rules and regulation of the congregation, church, or society, and may adopt a corporate name, and upon the filing of the affidavit as provided in section 7-51-102, it shall be a body politic and corporate by the name so adopted.
- The provisions of this article shall not apply to any joint stock religious, educational, or benevolent association formed after December 31, 1967, nor to any joint stock religious, educational, or benevolent association formed prior to January 1, 1968, which is subject to the provisions of articles 121 to 137 of this title.
Source: L. 1879: p. 33, § 1. G.S. § 384. R.S. 08: § 1034. C.L. § 2400. CSA: C. 41, § 197. CRS 53: § 31-22-1. C.R.S. 1963: § 31-21-1. L. 67: p. 658, § 12. L. 68: p. 2, § 4. L. 97: (2) amended, p. 758, § 17, effective July 1, 1998.
ANNOTATION
Law reviews. For article, "Nonprofit and Charitable Corporations in Colorado", see 36 U. Colo. L. Rev. 9 (1963).
7-51-102. Affidavit of chairperson - where filed - effect.
-
The chairperson or secretary of the meeting, as soon as may be after such meeting, shall make and file, in the office of the recorder of deeds in the county in which the congregation, church, or society is organized, an affidavit, substantially in the following form:
(Name of affiant)
Subscribed and sworn to before me this ......... day of........., A.D., 20....
- Such certificate, or a copy thereof duly certified by the recorder, shall be received as evidence of the due incorporation of such society, church, or congregation.
STATE OF COLORADO ) ) ss. County of ................................................) I do solemnly swear (or affirm, as the case may be) that at a meeting of the members of the (here insert the name of the society as known before the incorporation), held at .........., in the county of .........., and State of Colorado, on the ........ day of ........, A.D., 20...., for that purpose the following persons were elected (or appointed) trustees (or wardens, vestrymen or other officers of whatever name they choose to adopt), with powers and duties similar to trustees, according to the rules and usages of such society, church, or congregation, viz.: (here insert the names); that at such a meeting, such society, church, or congregation adopted as its corporate name (here insert the name); that the amount of the capital stock of such society, church, or congregation is .......... dollars, divided into .......... shares of .......... dollars each, and that at such meeting this affiant acted as chairperson (secretary, as the case may be). ...............................................
Source: L. 1879: p. 34, § 2. G.S. § 385. R.S. 08: § 1035. C.L. § 2401. CSA: C. 41, § 198. CRS 53: § 31-22-2. C.R.S. 1963: § 31-21-2. L. 2004: (1) amended, p. 1405, § 22, effective July 1.
7-51-103. Bylaws.
The directors, trustees, wardens, or vestrymen of any such corporation shall adopt necessary bylaws to provide for the election of directors, trustees, wardens, or vestrymen and other officers and for the proper government in all respects of the congregation, church, or society.
Source: L. 1879: p. 34, § 3. G.S. § 386. R.S. 08: § 1036. C.L. § 2402. CSA: C. 41, § 199. CRS 53: § 31-22-3. C.R.S. 1963: § 31-21-3.
Cross references: For bylaws of regular religious, educational, or benevolent societies, see § 7-50-103.
7-51-104. Property vests in corporation.
Upon the incorporation of any such congregation, church, or society, all real and personal property held by any person or trustee for the use of the members thereof shall immediately vest in such corporation and be subject to its control, and may be used, mortgaged, sold, and conveyed the same as if it had been conveyed to such corporation by deed.
Source: L. 1879: p. 35, § 4. G.S. § 387. R.S. 08: § 1037. C.L. § 2403. CSA: C. 41, § 200. CRS 53: § 31-22-4. C.R.S. 1963: § 31-21-4.
7-51-105. Powers of corporation.
-
Corporations formed under this article:
- Shall be bodies corporate and politic in fact and in name, by the name stated in the affidavit, and by that name have succession for the period for which they are organized;
- May sue and be sued in any court in this state;
- May have a common seal which they may alter or renew at pleasure by filing an impression of the same in the office of the clerk and recorder of the county in which any such corporation may be formed under this article;
- May own, possess, and enjoy so much real and personal property as is necessary for the transaction of their business, whether acquired by purchase, grant, devise, gift, or otherwise;
- May from time to time sell and dispose of real and personal property or any part thereof when not required for the use of the corporation; and
- May borrow money and pledge their franchises and property, both real and personal, to secure the payment thereof and may exercise all the powers necessary and requisite to carry into effect the object for which they may be formed under this article.
Source: L. 1879: p. 35, § 5. G.S. § 388. R.S. 08: § 1038. C.L. § 2404. CSA: C. 41, § 201. CRS 53: § 31-22-5. C.R.S. 1963: § 31-21-5.
7-51-106. Shares of stock.
The shares of stock shall not be less than ten dollars nor more than one hundred dollars each and shall be deemed personal property and transferable as such in the manner provided by the bylaws. Subscriptions therefor shall be made payable in such installments and at such time as shall be determined by the directors, trustees, or other similar officers. The bylaws may provide for a forfeiture or sale of stock on failure to pay the installments or assessments that may from time to time become due; but no forfeiture of stock or of the amounts paid thereon shall be declared against any estate or stockholder before demand has been made for the amount due.
Source: L. 1879: p. 35, § 6. G.S. § 389. R.S. 08: § 1039. C.L. § 2405. CSA: C. 41, § 202. CRS 53: § 31-22-6. C.R.S. 1963: § 31-21-6.
ANNOTATION
The stock in ditch companies is personal property and subject to execution and sale the same as other personal property. Conway v. John, 14 Colo. 30, 23 P. 170 (1890); Strickler v. City of Colo. Springs, 16 Colo. 61, 26 P. 313 (1891); Struby-Estabrook Mercantile Co. v. Davis, 18 Colo. 93, 31 P. 495 (1892).
7-51-107. Board of directors.
The corporate powers of any such corporation shall be exercised by a board of directors, trustees, or other similar officers in the manner and for the time that may be prescribed in the constitution and bylaws of the corporation, but the same shall not be in conflict with any of the provisions of this article or the law of this state.
Source: L. 1879: p. 36, § 7. G.S. § 390. R.S. 08: § 1040. C.L. § 2406. CSA: C. 41, § 203. CRS 53: § 31-22-7. C.R.S. 1963: § 31-21-7. L. 2003: Entire section amended, p. 2213, § 47, effective July 1, 2004.
7-51-108. Election of directors.
If an election of directors, trustees, or other similar officers is not held on the day designated by the constitution or bylaws, the company shall not be dissolved for that reason, but it shall be proper to elect such directors, trustees, or other officers on any subsequent day as shall be prescribed by the constitution or bylaws.
Source: L. 1879: p. 36, § 8. G.S. § 391. R.S. 08: § 1041. C.L. § 2407. CSA: C. 41, § 204. CRS 53: § 31-22-8. C.R.S. 1963: § 31-21-8.
7-51-109. Liability of stockholders.
Each stockholder shall be liable for the debts of the corporation to the extent of the amount unpaid upon the stock held by the stockholder, to be collected in the manner provided in this section. If any action is brought to recover any indebtedness against the corporation, it shall be competent to proceed against any one or more of the stockholders at the same time, to the extent of the balance unpaid by such stockholders upon the stock owned by them respectively, as in cases of garnishment.
Source: L. 1879: p. 36, § 9. G.S. § 392. R.S. 08: § 1042. C.L. § 2408. CSA: C. 41, § 205. CRS 53: § 31-22-9. C.R.S. 1963: § 31-21-9. L. 2004: Entire section amended, p. 1406, § 23, effective July 1.
7-51-110. Certificate of full paid stock.
The president and a majority of the board of trustees, directors, or other similar officers, after the payment of the last installment of capital stock so fixed and limited by the company as required by this article, shall make a certificate stating the amount of the capital stock so fixed and paid in, which certificate shall be signed and sworn to by the president and a majority of the board of trustees, directors, or other similar officers, and record the same in the office of the clerk and recorder of the county within which the corporation is formed; and from the date of the recording of such certificate, the stockholders of that company shall not be liable for any of the debts of such corporation.
Source: L. 1879: p. 36, § 10. G.S. § 393. R.S. 08: § 1043. C.L. § 2409. CSA: C. 41, § 206. CRS 53: § 31-22-10. C.R.S. 1963: § 31-21-10.
7-51-111. Purchase of property.
The directors, trustees, or other similar officers of any such corporation may purchase real and personal property necessary for their business and issue stock to the amount of the value thereof in payment therefor; and the stock so issued shall be declared to be full-paid stock and not liable to any further calls or assessments thereon nor for any debt of the corporation.
Source: L. 1879: p. 37, § 11. G.S. § 394. R.S. 08: § 1044. C.L. § 2410. CSA: C. 41, § 207. CRS 53: § 31-22-11. C.R.S. 1963: § 31-21-11.
7-51-112. Any church may incorporate.
Any congregation, church, or society incorporated prior to February 20, 1879, under the provisions of any law for the incorporation of religious, educational, or benevolent societies may become incorporated under the provisions of this article in the same manner as if it had not been previously incorporated. The new corporation shall be entitled to and invested with all the real and personal property of the old corporation, subject to all its debts, contracts, and liabilities. The words "directors" and "trustees", as used in this article, shall be construed to include wardens, vestrymen, or such other officers as perform the duties of trustees or directors.
Source: L. 1879: p. 37, § 12. G.S. § 395. R.S. 08: § 1045. C.L. § 2411. CSA: C. 41, § 208. CRS 53: § 31-22-12. C.R.S. 1963: § 31-21-12.
Cross references: For religious, educational, and benevolent societies, see § 7-50-108.
7-51-113. Incorporation of religious organization.
If any body of Christians or other religious denomination has an organization according to its mode of government, whether known as synod, presbytery, conference, episcopate, or other name, with ecclesiastical or spiritual jurisdiction over its members throughout this state and its authorities desire to engage in works of education, benevolence, charity, and missions and deem an incorporation convenient for the more successful administration of such works, its said authorities, with such persons as they may associate with them, may cause such incorporation to be formed in the manner and with the powers provided in this article for the incorporation of a church, congregation, or society.
Source: L. 1879: p. 37, § 13. G.S. § 396. R.S. 08: § 1046. C.L. § 2412. CSA: C. 41, § 209. CRS 53: § 31-22-13. C.R.S. 1963: § 31-21-13.
Cross references: For religious, educational, and benevolent societies, see § 7-50-109.
ARTICLE 52 OFFICIALS OF CHURCHES AND RELIGIOUS SOCIETIES
Cross references: For definitions applicable to this article, see § 7-90-102.
Section
7-52-101. Execution of articles of incorporation.
The archbishop, bishop, president, trustee in trust, president of stake, president of congregation, overseer, presiding elder, or clergyman of any church or religious society who has been duly chosen, elected, or appointed in conformity with the constitutions, canons, rites, regulations, or discipline of said church or religious society and in whom shall be vested the legal title to the property of such church or religious society may deliver articles of incorporation to the secretary of state for filing pursuant to part 3 of article 90 of this title. The articles shall contain the name of the corporation, the purpose of the corporation, and the name and title of the person in whom is vested the legal title to the property.
Source: L. 67: p. 866, § 1. C.R.S. 1963: § 31-25-1. L. 2003: Entire section amended, p. 2214, § 48, effective July 1, 2004. L. 2004: Entire section amended, p. 1406, § 24, effective July 1.
7-52-102. Filing articles - corporate existence.
Upon the filing of the articles of incorporation with the secretary of state, the person subscribing the articles and the person's successor in office by the name or title stated in the articles is a corporation sole, with perpetual succession.
Source: L. 67: p. 866, § 2. C.R.S. 1963: § 31-25-2. L. 2003: Entire section amended, p. 2214, § 49, effective July 1, 2004. L. 2004: Entire section amended, p. 1406, § 25, effective July 1.
7-52-103. Corporate powers.
A corporation sole may hold and maintain real, personal, and mixed property; contract in the same manner and to the same extent as an individual; sue and be sued; acquire real and personal property by purchase, devise, bequest, gift, or otherwise and hold, own, use, lease, assign, convey, or otherwise dispose of the same in like manner and to the same extent as an individual; borrow money, issue notes or other negotiable paper, and secure the money borrowed by mortgage or by deed of trust on said real or personal property or any part thereof; borrow money without security; and perform all other acts in furtherance of the objects and purposes of the corporation not inconsistent with the statutes of this state.
Source: L. 67: p. 866, § 3. C.R.S. 1963: § 31-25-3. L. 2004: Entire section amended, p. 1407, § 26, effective July 1.
7-52-104. Succession to property upon death, resignation, or removal of person incorporated as corporation sole.
In the event of the death or resignation of the archbishop, bishop, president, trustee in trust, president of stake, president of congregation, overseer, presiding elder, or clergyman who has been incorporated as a corporation sole under sections 7-52-101 and 7-52-102, or such person's removal from office by the person or body having the authority for such removal, the person's successor in office as the corporation sole shall be vested with the title of all property held by the successor's predecessor with the same power and authority over the property, subject to all the legal liabilities and obligations with reference to the property, upon the filing by the secretary of state, pursuant to part 3 of article 90 of this title, of a certificate of the successor's commission or certified copy of the successor's letter of election or appointment. In the interim between the appointment of a successor in office to the corporation sole, the person who is charged by the church or religious society pursuant to its constitution, canons, rites, regulations, or discipline to administer the church or religious society shall be vested with the title to any property held by the corporation sole with like powers and authority upon the filing by the secretary of state, pursuant to part 3 of article 90 of this title, of a certificate of the successor's commission or certified copy of the successor's letter of appointment as such administrator.
Source: L. 67: p. 867, § 4. C.R.S. 1963: § 31-25-4. L. 2002: Entire section amended, p. 1813, § 13, effective July 1; entire section amended, p. 1677, § 11, effective October 1. L. 2004: Entire section amended, p. 1407, § 27, effective July 1.
7-52-105. Succession to property on death, resignation, or removal of person not incorporated as corporation sole.
Upon the death, resignation, or removal of an archbishop, bishop, president, trustee in trust, president of stake, president of congregation, overseer, presiding elder, or clergyman who at the time of death, resignation, or removal was holding the title to trust property for the use or benefit of a church or religious society but was not incorporated under this article as a corporation sole, the title to all such property held by such person shall not revert to the grantor nor pass to the heirs of the deceased person but shall be held in abeyance until the person's successor is appointed to fill the vacancy. Upon the appointment of the successor, the title of all the property held by the predecessor immediately vests in the person appointed to fill the vacancy.
Source: L. 67: p. 867, § 5. C.R.S. 1963: § 31-25-5. L. 2004: Entire section amended, p. 1407, § 28, effective July 1.
7-52-106. Applicability of revised nonprofit corporation act.
Except as this article is specifically in conflict therewith, the provisions of the "Colorado Revised Nonprofit Corporation Act", articles 121 to 137 of this title, shall be applicable to this article.
Source: L. 67: p. 867, § 6. C.R.S. 1963: § 31-25-6. L. 2003: Entire section amended, p. 2214, § 50, effective July 1, 2004.
ASSOCIATIONS
ARTICLE 55 COOPERATIVES - GENERAL
Editor's note: This article was numbered as article 1 of chapter 30, C.R.S. 1963. The substantive provisions of this article were repealed and reenacted in 1973, resulting in the addition, relocation, and elimination of sections as well as subject matter. For amendments to this article prior to 1973, consult the Colorado statutory research explanatory note beginning on page vii in the front of this volume.
Cross references: (1) For definitions applicable to this article, see § 7-90-102.
(2) For provisions concerning cooperative housing corporations, see article 33.5 of title 38; for provisions concerning regulation of cooperative electric associations, see article 9.5 of title 40.
Law reviews: For article, "The Long and Winding Road to Public Benefit Corporations in Colorado", see 43 Colo. Law. 39 (Jan. 2014).
Section
7-55-101. Cooperative association defined.
-
The terms "cooperative association" and "association" include any cooperative organization, association, company, or corporation formed under this article and may be further defined as follows:
- The distribution of its earnings is made wholly or in part on the basis of, or in proportion to, the amount of property bought from or sold to members, or to members and other patrons, or of labor performed or other service rendered by the association, but such association shall not deal in products, handle supplies, or provide services for nonmembers in an amount greater in value than as are handled by it for members.
- Dividends on stock or interest on equity capital shall be limited, as prescribed in the bylaws of the association.
- Voting rights shall be limited to members of the association.
- Such association and its business shall not be carried on for profit but for the mutual benefit of all the members. Any person, firm, or corporation of any other cooperative association may become a member of such association upon meeting uniform terms and conditions stated in its bylaws. The association shall issue a certificate of membership to all who become members, which shall not be assignable or transferable except upon consent of the board of directors. The association shall have the right by the bylaws to limit transfer or assignment of membership and the terms and conditions upon which transfer shall be allowed.
- Any association formed pursuant to this article may admit to membership any other association so formed or formed under the law of any other jurisdiction upon such terms and conditions as may be provided by the bylaws. Any association formed under the provisions of this article may acquire membership in any other association likewise formed under the provisions of this article when, in the judgment of the directors, such membership shall promote the interest and purpose for which such association is formed.
Source: L. 73: R&RE, p. 428, § 1. C.R.S. 1963: § 30-1-1. L. 96: IP(1) amended, p. 543, § 4, effective July 1. L. 2003: IP(1), (1)(a), (1)(d), and (1)(e) amended, p. 2214, § 51, effective July 1, 2004. L. 2004: IP(1) amended, p. 1408, § 29, effective July 1.
ANNOTATION
This section does not prohibit a cooperative association from owning a for-profit subsidiary. Bontrager v. La Plata Elec. Ass'n, 68 P.3d 555 (Colo. App. 2003).
7-55-101.5. Patronage capital for cooperative electric associations and cooperative telephone associations defined.
The term "patronage capital" includes any capital credit, patronage dividend, or patronage refund allocated by a cooperative electric association or cooperative telephone association to a member or patron thereof.
Source: L. 90: Entire section added, p. 413, § 1, effective March 9. L. 94: Entire section amended, p. 330, § 1, effective March 29.
ANNOTATION
This section describes the allocation of patronage capital to members based on their consumption of electric services and does not limit the board of directors' use of patronage capital. Bontrager v. La Plata Elec. Ass'n, 68 P.3d 555 (Colo. App. 2003).
7-55-102. Articles of incorporation - filing.
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Five persons or more, except as specified elsewhere in this article, a majority of whom are residents of Colorado, may be associated and incorporated pursuant to this article for the cooperative transaction of any lawful business, except banking. Persons desiring to avail themselves of the provisions of this article shall deliver to the secretary of state, for filing pursuant to part 3 of article 90 of this title, articles of incorporation stating:
- The domestic entity name of the association, which domestic entity name shall comply with part 6 of article 90 of this title;
- The purposes for which the association was formed;
- The principal office address of the association's principal office;
- The registered agent name and registered agent address of the association's initial registered agent;
- Repealed.
- The number and terms of directors, which number shall be not less than three;
- The authorized capital stock, the number of shares into which said stock is divided, and the par value of each;
- The number of memberships authorized, the capital subscription of each, and the method of determining property rights and interests of each member without capital stock;
- The true name and mailing address of each incorporator.
(1.5) The articles of incorporation may state a provision eliminating or limiting the personal liability of a director as provided in section 7-55-107 (1)(h).
Source: L. 73: R&RE, p. 429, § 1. C.R.S. 1963: § 30-1-2. L. 87: (1.5) added, p. 370, § 12, effective May 20. L. 96: IP(1) amended, p. 543, § 5, effective July 1. L. 2000: (1)(a) amended, p. 948, § 2, effective July 1. L. 2003: IP(1), (1)(a), (1)(c), and (1.5) amended and (1)(c.5) added, p. 2215, § 52, effective July 1, 2004. L. 2004: (1)(c) and (1)(d) amended, p. 1408, § 30, effective July 1. L. 2008: (1)(h) amended, p. 18, § 1, effective August 5. L. 2009: (1)(d) repealed, (HB 09-1248), ch. 252, p. 1128, § 2, effective December 1.
ANNOTATION
The phrase in subsection (1), granting a cooperative association the right to engage in "any lawful business, except banking", shall not be narrowly construed so as to put a restriction on an association from engaging in businesses other than banking. Bontrager v. La Plata Elec. Ass'n, 68 P.3d 555 (Colo. App. 2003).
7-55-103. Bylaws.
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Each association formed under this article shall, within thirty days after filing its articles of incorporation with the secretary of state, adopt bylaws for the government and management of its affairs that are not inconsistent with this article. Such bylaws may be amended or modified in such manner as the bylaws may provide. Such bylaws may include:
- The time, place, and manner of conducting its meetings;
- The number and term of directors and the time of their election;
- The mode and manner of removal of directors and the mode and manner of filling vacancies in the board caused by death, resignation, or removal;
- The power and authority of directors and number which shall constitute a quorum, which must be at least a majority;
- The compensation of directors and officers;
- The number of officers other than directors, if any, their term of office, the mode of removal, and the method of filling a vacancy;
- The mode and manner of conducting business;
- The mode and manner of conducting elections and provisions for voting by ballots forwarded by mail or otherwise;
- The qualifications for membership, manner of succession, and conditions for withdrawal or expulsion;
- The amount of membership fee, conditions of membership, procedures for acquiring capital, and the limitations of dividends on stock or interest on equity capital;
- The manner of collection or enforcement procedures and the forfeiture of property rights and interests for nonpayment or nonperformance;
- The method of determination of property rights and interests and time by which it shall be paid or delivered to such member or the member's representative upon withdrawal, expulsion, or death;
- Such other things as may be proper to carry out the purpose for which the association was formed.
Source: L. 73: R&RE, p. 429, § 1. C.R.S. 1963: § 30-1-3. L. 96: IP(1) amended, p. 543, § 6, effective July 1. L. 2004: (1)(l) amended, p. 1408, § 31, effective July 1.
7-55-104. Board of directors.
The board of directors of a cooperative association shall be stockholders or members of such association or the representatives duly authorized in writing of a legal entity which is a stockholder or member of said cooperative association; except that the articles of incorporation and bylaws may permit the election of any number of directors, less than a majority, who are not stockholders or members, to be elected as stated in the bylaws.
Source: L. 73: R&RE, p. 430, § 1. C.R.S. 1963: § 30-1-4.
7-55-105. Election of officers.
The officers of an association formed under this article shall consist of a president, one or more vice-presidents as may be prescribed by the bylaws, a secretary, and a treasurer, each of whom shall be elected by the board of directors at such time and in such manner as may be prescribed by the bylaws, and none of whom are required to be directors of such association unless the bylaws so provide. The bylaws may provide that any of such officers may not be directors of such an association. The bylaws may provide for the election by the board of directors, from among their number, of a chair of the board of directors and one or more vice-chairs. Such other officers and assistant officers and agents as are necessary may be elected or appointed by the board of directors or chosen in such manner as may be prescribed by the bylaws. The board may combine the offices of secretary and treasurer and designate the combined office as secretary-treasurer, or unite both functions and titles in one person. The treasurer may be a bank or any depository, and, as such, shall not be considered as an officer but as a function of the board of directors. In such case, the secretary shall perform the usual accounting duties of the treasurer; except that the funds shall be deposited only as authorized by the board of directors. All officers and agents of the association, as between themselves and the association, shall have such authority and perform such duties in the management of the association as may be provided in the bylaws, or as may be determined by resolution of the board of directors not inconsistent with the bylaws.
Source: L. 73: R&RE, p. 430, § 1. C.R.S. 1963: § 30-1-5. L. 2003: Entire section amended, p. 2215, § 53, effective July 1, 2004. L. 2004: Entire section amended, p. 1408, § 32, effective July 1.
7-55-106. Power of directors.
A majority of the board of directors of a cooperative association has full power or authority to authorize the execution and delivery of mortgages or deeds of trust upon, or the pledging of or encumbering of any or all of the property, assets, licenses, franchises, and permits or other things of value of, such association or corporation, whether acquired or to be acquired and wherever situated, as well as any revenues and incomes therefrom, all upon such terms and conditions as such board of directors determines, to secure any indebtedness of such corporation.
Source: L. 73: R&RE, p. 430, § 1. C.R.S. 1963: § 30-1-6.
7-55-107. Powers.
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Every cooperative association has the power:
- To have succession by its domestic entity name;
- To sue and be sued and to complain and defend in courts of law and equity;
- To make and use a common seal, and alter the same at its pleasure;
- To hold such real and personal property as may be necessary for the legitimate business of the corporation;
- To regulate and limit the right of stockholders or members to transfer their stock or member equity;
- To appoint such subordinate officers and agents as the business of the corporation shall require and to allow them suitable compensation therefor;
- To adopt bylaws for the management of its affairs and to provide therein for the terms and limitations of stock ownership or membership and for the distribution of its earnings;
- If so provided in the articles of incorporation, to eliminate or limit the personal liability of a director to the association or to its members or stockholders for monetary damages for breach of fiduciary duty as a director; except that such provision shall not eliminate or limit the liability of a director for: Any breach of the director's duty of loyalty to the association or its members or stockholders; acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; or any transaction from which the director derived an improper personal benefit. No such provision shall eliminate or limit the liability of a director to the association or to its members or stockholders for monetary damages for any act or omission occurring prior to the date when such provision becomes effective.
- Every cooperative electric association or cooperative telephone association formed pursuant to this article and any cooperative electric association or cooperative telephone association that is subject to articles 121 to 137 of this title has the power to use patronage capital that has been declared by such association to be distributable or payable to a member or patron for expenditures associated with the provision of electric service or telephone service, as the case may be, as directed by the board of directors of the association after the association has given notice thereof. Such notice may consist of a negotiable instrument that has not been claimed within three years of issuance or publication.
Source: L. 73: R&RE, p. 431, § 1. C.R.S. 1963: § 30-1-7. L. 87: (1)(h) added, p. 370, § 13, effective May 20. L. 90: (2) added, p. 413, § 2, effective March 9. L. 94: (2) amended, p. 330, § 2, effective March 29. L. 97: (2) amended, p. 758, § 18, effective July 1, 1998. L. 2000: (1)(a) amended, p. 948, § 3, effective July 1. L. 2003: (2) amended, p. 2216, § 54, effective July 1, 2004.
7-55-107.5. Indemnification and personal liability of directors, officers, employees, and agents.
[ Editor's note: This version of this section is effective until July 1, 2020. ] The association shall have the same powers, rights, and obligations and shall be subject to the same limitations as apply to domestic corporations as set forth in article 109 of this title. Association directors, officers, employees, and agents shall have the same rights as directors, officers, employees, and agents, respectively, of domestic corporations as set forth in article 109 of this title. Association directors and officers shall have the benefit of the same limitations on personal liability for any injury to person or property arising out of a tort as set forth in section 7-108-402 (2) for directors and officers, respectively, of domestic corporations. Any reference in said sections to shareholders shall be construed to refer to voting members or voting stockholders, if any, for the purpose of this section.
7-55-107.5. Indemnification and personal liability of directors, officers, employees, and agents.
[ Editor's note: This version of this section is effective July 1, 2020. ] The association shall have the same powers, rights, and obligations and shall be subject to the same limitations as apply to domestic corporations as set forth in article 109 of this title 7. Association directors, officers, employees, and agents shall have the same rights as directors, officers, employees, and agents, respectively, of domestic corporations as set forth in article 109 of this title 7. Association directors and officers shall have the benefit of the same limitations on personal liability for any injury to person or property arising out of a tort as set forth in section 7-108-403 for directors and officers, respectively, of domestic corporations. Any reference in said sections to shareholders shall be construed to refer to voting members or voting stockholders, if any, for the purpose of this section.
Source: L. 87: Entire section added, p. 371, § 14, effective May 20. L. 93: Entire section amended, p. 857, § 16, effective July 1, 1994. L. 2003: Entire section amended, p. 2216, § 55, effective July 1, 2004. L. 2019: Entire section amended, (SB 19-086), ch. 166, p. 1964, § 63, effective July 1, 2020.
Editor's note: Section 72 of chapter 166 (SB 19-086), Session Laws of Colorado 2019, provides that the act changing this section applies to conduct occurring on or after July 1, 2020.
7-55-108. Application of powers.
The powers enumerated in section 7-55-107 shall vest in every cooperative association in this state except those formed under or subject to article 56 of this title, although such powers may not be stated in its charter or in its articles of incorporation.
Source: L. 73: R&RE, p. 431, § 1. C.R.S. 1963: § 30-1-8. L. 96: Entire section amended, p. 544, § 7, effective July 1. L. 2003: Entire section amended, p. 2216, § 56, effective July 1, 2004.
7-55-109. Amendment of articles.
The articles of incorporation of a cooperative association or corporation may be amended at any regular or special meeting of the stockholders or members of such association. The proposed amendment must be first approved by a two-thirds majority of the directors. The notice of such meeting shall state or have attached thereto the proposed amendment and shall be mailed to each member of record at least ten days prior to the meeting date; except that cooperative associations with less than one hundred members may post notice of such meeting in a conspicuous place at its normal place of business for at least thirty days prior to such meeting. The proposed amendment shall be approved by an affirmative vote of a majority of the stockholders or members present or voting by mail. A certificate stating such amendment and the adoption thereof shall be delivered to the secretary of state for filing pursuant to part 3 of article 90 of this title.
Source: L. 73: R&RE, p. 431, § 1. C.R.S. 1963: § 30-1-9. L. 83: Entire section amended, p. 871, § 25, effective July 1. L. 2003: Entire section amended, p. 2216, § 57, effective July 1, 2004. L. 2004: Entire section amended, p. 1409, § 33, effective July 1.
ANNOTATION
The statutory notice provision does not require a cooperative association to explain potential future applications of an amendment to the articles of incorporation. Bontrager v. La Plata Elec. Ass'n, 68 P.3d 555 (Colo. App. 2003).
7-55-110. Vote of stockholders or members.
Stockholders or members of a cooperative association may vote either in person or by mail as provided in the bylaws. Proxy or cumulative voting shall be prohibited except as permitted by the articles of incorporation and the bylaws of organizations incorporated prior to July 6, 1973.
Source: L. 73: R&RE, p. 431, § 1. C.R.S. 1963: § 30-1-10.
7-55-111. Use of the term "cooperative" - penalty for unlawful use - repeal. (Repealed)
Source: L. 73: R&RE, p. 431, § 1. C.R.S. 1963: § 30-1-11. L. 80: (1) amended, p. 706, § 4, effective July 1. L. 96: Entire section amended, p. 544, § 8, effective July 1. L. 2000: (1) and (4) amended, p. 948, § 4, effective July 1. L. 2003: (5) added by revision, pp. 2356, 2357, §§ 347, 348.
Editor's note: Subsection (5) provided for the repeal of this section, effective July 1, 2004. (See L. 2003, pp. 2356, 2357.)
7-55-112. Merger, conversion, or consolidation.
Two or more corporations formed under articles 30 to 55 or subject to articles 121 to 137 or articles 101 to 117 of this title, or a similar law of any jurisdiction, may be merged or consolidated as a cooperative association, or any cooperative association may convert into any form of entity permitted by section 7-90-201, upon such terms and for such purpose and by such domestic entity name as may be agreed upon, which domestic entity name shall comply with part 6 of article 90 of this title. Such agreement shall also state all the matters necessary to a statement of merger, statement of conversion, or articles of consolidation and shall be approved by a two-thirds majority of the members of the boards of directors and a two-thirds majority vote of the members or stockholders of each association, nonprofit corporation, or corporation present and voting in person or by mail ballot at any regular or special meeting at which prior notice, with mail ballot attached, had been mailed to each member or stockholder stating the plan of merger, conversion, or consolidation; except that cooperative associations with less than one hundred members may post notice of such plan of merger or consolidation in a conspicuous place at its normal place of business for at least thirty days prior to such meeting. A statement of merger complying with section 7-90-203.7, a statement of conversion complying with section 7-90-201.7, or articles of consolidation shall be delivered to the secretary of state, for filing pursuant to part 3 of article 90 of this title, and a certificate of the secretary of state as to the fact of such filing shall be recorded in the office of each county in which each party to the merger, conversion, or consolidation is situated. From and after the filing of articles of consolidation, the former associations, nonprofit corporations, or corporations comprising the component parts shall cease to exist, and the consolidated cooperative association shall succeed to all rights, duties, and powers prescribed in the agreement of consolidated associations, nonprofit corporations, or corporations, not inconsistent with this article, and shall be subject to all liabilities and obligations of the former component associations, nonprofit corporations, or corporations and succeed to all property and interest thereof and may adopt bylaws and do all things permitted by this article. The effect of a conversion shall be as provided in section 7-90-202. The effect of a merger shall be as provided in section 7-90-204.
Source: L. 73: R&RE, p. 432, § 1. C.R.S. 1963: § 30-1-12. L. 83: Entire section amended, p. 871, § 26, effective July 1. L. 93: Entire section amended, p. 858, § 17, effective July 1, 1994. L. 96: Entire section amended, p. 544, § 9, effective July 1. L. 97: Entire section amended, p. 759, § 19, effective July 1, 1998. L. 2000: Entire section amended, p. 949, § 5, effective July 1. L. 2002: Entire section amended, p. 1813, § 14, effective July 1; entire section amended, p. 1678, § 12, effective October 1. L. 2003: Entire section amended, p. 2217, § 58, effective July 1, 2004. L. 2007: Entire section amended, p. 218, § 1, effective May 29.
7-55-113. Adoption of provisions of this article.
Every cooperative association, as defined in section 7-55-101 or formed or incorporated under any repealed Colorado statute pertaining to cooperative associations, except corporations or associations formed or incorporated under or subject to article 56 of this title, shall be conclusively presumed to have accepted and adopted the provisions of this article and shall be governed by the provisions of this article, unless such corporation or association or agricultural or livestock association has delivered to the secretary of state, for filing pursuant to part 3 of article 90 of this title, a copy of a resolution adopted by its board of directors, its members, or its stockholders stating that it has elected not to become subject to the provisions of this article. This section shall not apply to cooperative associations formed and incorporated under or subject to article 56 of this title.
Source: L. 73: R&RE, p. 432, § 1. C.R.S. 1963: § 30-1-13. L. 75: Entire section R&RE, p. 272, § 1, effective June 29. L. 83: Entire section amended, p. 872, § 27, effective July 1. L. 96: Entire section amended, p. 545, § 10, effective July 1. L. 2002: Entire section amended, p. 1814, § 15, effective July 1; entire section amended, p. 1678, § 13, effective October 1. L. 2003: Entire section amended, p. 2217, § 59, effective July 1, 2004.
7-55-114. Dissolution of association.
Any association formed under this article may be dissolved and its affairs terminated voluntarily by a two-thirds majority vote of the members present and voting in person or by mail ballot at a regular or special meeting, if the meeting notice, with a mail ballot attached, stated that dissolution would be discussed; except that cooperative associations with less than one hundred members may post notice of the discussion of such dissolution in a conspicuous place at their normal place of business for at least thirty days prior to such meeting. The board of directors by a two-thirds majority vote of its members shall first adopt a resolution recommending dissolution and submit it to the members, stating the reasons why the termination of the affairs of the association is deemed advisable, the time by which it should be accomplished, and shall also name three persons who are members of the association to act as trustees in liquidation who shall have full power to do all things necessary in liquidation and termination of the affairs of the association. Upon approval of the resolution to dissolve by the members, the association shall deliver to the secretary of state, for filing pursuant to part 3 of article 90 of this title, articles of dissolution. A certified copy of the articles of dissolution shall be filed with the county clerk in the county in which the principal business is transacted. All power of the directors shall cease and the persons appointed shall proceed to terminate the affairs of the association and realize upon its assets, pay its debts, and divide the remaining money among the members and holders of equity, as stated in the bylaws or, if not stated, in proportion to their property interests.
Source: L. 73: R&RE, p. 433, § 1. C.R.S. 1963: § 30-1-14. L. 83: Entire section amended, p. 872, § 28, effective July 1. L. 96: Entire section amended, p. 545, § 11, effective July 1. L. 2002: Entire section amended, p. 1814, § 16, effective July 1; entire section amended, p. 1679, § 14, effective October 1. L. 2003: Entire section amended, p. 2218, § 60, effective July 1, 2004. L. 2004: Entire section amended, p. 1409, § 34, effective July 1.
7-55-115. Exemption from securities laws.
Any security, patronage refund, per unit retain certificate, or evidence of membership issued or sold by a cooperative association as an investment in its stock or capital to the members of a cooperative association formed under this article or a similar law of any other state and authorized to transact business or conduct activities in this state is exempt from securities laws as contained in article 51 of title 11, C.R.S. Such securities, patronage refunds, per unit retain certificates, or evidence of membership may be sold lawfully by the issuer or its members or salaried employees without the necessity of being registered as a broker or dealer under the "Colorado Securities Act", article 51 of title 11, C.R.S.
Source: L. 73: R&RE, p. 433, § 1. C.R.S. 1963: § 30-1-15. L. 75: Entire section amended, p. 272, § 2, effective June 29. L. 84: Entire section amended, p. 1116, § 1, effective June 7. L. 90: Entire section amended, p. 740, § 2, effective July 1. L. 96: Entire section amended, p. 546, § 12, effective July 1. L. 2003: Entire section amended, p. 2218, § 61, effective July 1, 2004.
7-55-116. Application of corporation laws.
The provisions of articles 30 to 52, 101 to 117, and 121 to 137 of this title and all powers and rights thereunder shall apply to the associations organized under this article, except where such provisions are in conflict with or inconsistent with an express provision of this article.
Source: L. 73: R&RE, p. 433, § 1. C.R.S. 1963: § 30-1-16. L. 93: Entire section amended, p. 858, § 18, effective July 1, 1994. L. 97: Entire section amended, p. 759, § 20, effective July 1, 1998. L. 2007: Entire section amended, p. 219, § 2, effective May 29.
7-55-117. Associations not in restraint of trade.
No association formed under this article shall be deemed to be in restraint of trade or an illegal monopoly, or an attempt to lessen competition or to fix prices, nor shall the membership agreements or marketing contracts between the association and its members be illegal or in unlawful restraint of trade, or in any combination thereof to accomplish an improper or illegal purpose.
Source: L. 73: R&RE, p. 433, § 1. C.R.S. 1963: § 30-1-17. L. 2003: Entire section amended, p. 2219, § 62, effective July 1, 2004.
7-55-118. Associations of other jurisdictions.
Any cooperative corporation or association formed under generally similar law of another jurisdiction may carry on any proper activities, operations, and functions in this state upon compliance with part 8 of article 90 of this title, with all rights of cooperative associations formed pursuant to this article.
Source: L. 73: R&RE, p. 433, § 1. C.R.S. 1963: § 30-1-18. L. 2003: Entire section amended, p. 2219, § 63, effective July 1, 2004. L. 2004: Entire section amended, p. 1410, § 35, effective July 1.
7-55-119. Quorum.
A quorum for the election of directors, amending of the articles of incorporation, and conducting normal business at all meetings of the stockholders or members shall be five percent of the stockholders or members or fifty members or stockholders present in person, whichever is less. Nothing shall prevent the articles of incorporation or the bylaws of such association from requiring a larger percent as a quorum.
Source: L. 73: R&RE, p. 433, § 1. C.R.S. 1963: § 30-1-19.
7-55-120. Incorporation fees.
The fee for the incorporation of cooperative corporations or associations shall be determined and collected pursuant to section 24-21-104 (3), C.R.S., if formed with or without capital stock, payable to the secretary of state except as otherwise set forth in this article.
Source: L. 73: R&RE, p. 434, § 1. C.R.S. 1963: § 30-1-20. L. 81: Entire section amended, p. 430, § 5, July 1. L. 2003: Entire section amended, p. 2219, § 64, effective July 1, 2004.
7-55-121. Periodic report.
Part 5 of article 90 of this title, providing for periodic reports from reporting entities, applies to associations formed under or subject to this article.
Source: L. 73: R&RE, p. 434, § 1. C.R.S. 1963: § 30-1-21. L. 83: Entire section amended, p. 873, § 29, effective July 1. L. 2003: Entire section amended, p. 2219, § 65, effective July 1, 2004. L. 2010: Entire section amended, (HB 10-1403), ch. 404, p. 1993, § 2, effective August 11.
ARTICLE 56 COOPERATIVES
Editor's note: This article was numbered as article 3 of chapter 30, C.R.S. 1963. The substantive provisions of this article were repealed and reenacted in 1996, resulting in the addition, relocation, and elimination of sections as well as subject matter. For amendments to this article prior to 1996, consult the Colorado statutory research explanatory note and the table itemizing the replacement volumes and supplements to the original volume of C.R.S. 1973 beginning on page vii in the front of this volume. Former C.R.S. section numbers are shown in editor's notes following those sections that were relocated.
Law reviews: For article, "The New Colorado Cooperative Act: A Setting for a Business Structure", see 25 Colo. Law. 3 (Dec. 1996); for article, "Colorado Choice of Entity 1998", see 27 Colo. Law. 5 (June 1998); for article, "Colorado Choice of Form of Organization and Structure 2001", see 30 Colo. Law. 11 (Oct. 2001); for article, "Worker Cooperatives: Their Time Has Arrived", see 40 Colo. Law. 3 3 (Sept. 2011); for article, "The Long and Winding Road to Public Benefit Corporations in Colorado", see 43 Colo. Law. 39 (Jan. 2014).
Section
PART 1 GENERAL PROVISIONS
7-56-101. Short title.
This article shall be known and may be cited as the "Colorado Cooperative Act".
Source: L. 96: Entire article R&RE, p. 478, § 1, effective July 1.
Editor's note: This section is similar to former § 7-56-101 as it existed prior to 1996.
7-56-102. Legislative declaration.
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The general assembly finds and declares that:
- The cooperative form of doing business provides an efficient and effective method for persons to market their goods and services and to obtain services and supplies and it is in the best interests of the people of the state of Colorado to promote, foster, and encourage the utilization of cooperatives in appropriate instances;
- The cooperative marketing law of the state of Colorado has provided for the promotion, fostering, and encouragement of the intelligent and orderly marketing of agricultural products through cooperation; has eliminated speculation and waste; has made distribution of agricultural products between producer and consumer more efficient; has stabilized the marketing of agricultural products; and has provided for the organization and incorporation of cooperative marketing associations for the marketing of such products, all as contemplated at the time of the original adoption of the cooperative marketing law;
- It is in the best interests of the people of the state of Colorado to preserve the provisions of the cooperative marketing law as it has been in force and interpreted in the state and to continue the provisions thereof for agriculture, but also to expand the provisions of the law to provide greater direction and flexibility in its provisions and to enable all types of industries and enterprises to avail themselves of the benefits of the cooperative form of doing business in accordance with the provisions of this article;
- It is in the best interests of the people of the state of Colorado to allow those cooperatives that have been formed under or are subject to other articles of this title, such as article 55, to remain under said article or to elect to come under this article.
Source: L. 96: Entire article R&RE, p. 478, § 1, effective July 1. L. 2003: (1)(d) amended, p. 2219, § 66, effective July 1, 2004.
Editor's note: This section is similar to former § 7-56-102 as it existed prior to 1996.
ANNOTATION
Annotator's note. The following annotations include cases decided under former provisions similar to this section.
The basic conception of a cooperative marketing association is that of a group of farmers who reside in the same vicinity acting together for their mutual benefit in the cultivating, harvesting, and marketing of their agricultural products, the association itself being merely a convenient instrumentality in the hands of the farmers for carrying on such activities. Indus. Comm'n v. United Fruit Growers Ass'n, 106 Colo. 223 , 103 P.2d 15 (1940).
A cooperative marketing association is not required to pay contributions on the wages of individuals employed by it, under the provisions of title 8, since the labor involved in the activities of the association is "agricultural labor" and exempt from the operation of the federal unemployment tax act by § 8-70-103. Indus. Comm'n v. United Fruit Growers Ass'n, 106 Colo. 223 , 103 P.2d 15 (1940).
But a different result might attain where farm crops are marketed by a commercial profit corporation or are not marketed in an unmanufactured state. Indus. Comm'n v. United Fruit Growers Ass'n, 106 Colo. 223 , 103 P.2d 15 (1940).
Legislative declaration does not provide association members with an express right to purchase goods and services from an association store. Therefore, this section does not support a breach of contract claim. Arnold v. Anton Coop. Ass'n, 293 P.3d 99 (Colo. App. 2011).
7-56-103. Definitions.
As used in this article, unless the context otherwise requires:
- "Agricultural cooperative" means a cooperative in which the members, including landlords and tenants, are all producers of agricultural products.
- "Agricultural products" means agronomic, horticultural, viticultural, aquacultural, forestry, dairy, livestock, poultry, bee, and any other farm or ranch products.
- "Articles" means the articles of incorporation of a cooperative and includes amended articles of incorporation, restated articles of incorporation, and other organizational documents of other entities.
- "Board" or "board of directors" means the board of directors or other governing body of a cooperative or other entity.
- "Bylaws" means the bylaws adopted by a cooperative and includes amended bylaws and restated bylaws.
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"Cooperative" means any entity formed under or subject to this article by election or otherwise, including a cooperative formed under comparable law of another jurisdiction doing business in this state, and having the following characteristics:
- The business of the cooperative is operated at cost by adjusting the prices charged for goods or services or by returning any net margins at the end of a fiscal year on a patronage basis to members and other persons qualified to share in the net margins pursuant to the articles or bylaws;
- Dividends on stock or interest on equity capital is limited, as prescribed in the articles pursuant to section 7-56-201 or bylaws pursuant to section 7-56-208 of the cooperative;
- Voting rights are limited to members of the cooperative as prescribed in the articles or bylaws of the cooperative;
- The cooperative's business is carried on for the mutual benefit of its members; and
- Members are not liable for any debt, obligation, or liability of the cooperative.
- (Deleted by amendment, L. 2003, p. 2219 , § 67, effective July 1, 2004.)
- "Domestic", when referring to a cooperative or other entity, means an entity formed under the law of this state.
- "Equity capital" means all investments in the cooperative except loans or other types of indebtedness, whether made by direct investment, such as investment in stock or memberships, or by retention of amounts of net savings, net margins, or net profits allocated to members and other patrons of the cooperative, or charged to them as part of the transactions between them and the cooperative.
- "Foreign", when referring to a cooperative or other entity, means an entity formed under law other than the law of this state.
- "Member" means a person who has been received into the membership of a cooperative without common stock or a person who has acquired common stock in a cooperative formed with common stock and, in either case, is authorized to vote. This subsection (11) shall not preclude a cooperative from designating persons as both members and stockholders.
- "Net margins" means the receipts from operations less the expenses thereof.
- "Patron" means a person who may, but need not, be a member of a cooperative who utilizes the services of the cooperative through the purchase or sale of property or services to or from the cooperative.
- "Patronage" means the volume or dollar value of business transacted with the cooperative.
- "Patronage refund" means a portion of a cooperative's net margins paid or allocated to a patron based on the patron's patronage.
- "Per unit retain" means a deduction authorized by a patron to be made by the cooperative from proceeds of sale of a product or service by the patron to the cooperative or by the cooperative on behalf of the patron where the deduction is based on the value or quantity of the product or service sold to the cooperative or on behalf of the patron and is deducted as a contribution or investment by the patron in the capital of the cooperative.
- (Deleted by amendment, L. 2003, p. 2219 , § 67, effective July 1, 2004.)
Source: L. 96: Entire article R&RE, p. 479, § 1, effective July 1. L. 2003: IP(6), (7), (8), (10), (11), and (17) amended, p. 2219, § 67, effective July 1, 2004. L. 2004: (10) amended, p. 1410, § 36, effective July 1.
Editor's note: This section is similar to former §§ 7-55-101 and 7-56-103 as they existed prior to 1996.
Cross references: For additional definitions applicable to this article, see § 7-90-102.
7-56-104. Filings by the secretary of state.
- Part 3 of article 90 of this title, providing for the filing of documents, applies to any document filed or to be filed by the secretary of state pursuant to this article.
- Repealed.
- to (6) (Deleted by amendment, L. 2002, p. 1815 , § 17, effective July 1, 2002; p. 1679, § 15, October 1, 2002.)
Source: L. 96: Entire article R&RE, p. 481, § 1, effective July 1. L. 2002: Entire section amended, p. 1815, § 17, effective July 1; entire section amended, p. 1679, § 15, effective October 1. L. 2003: (1) amended, p. 2220, § 68, effective July 1, 2004. L. 2004: (2) repealed, p. 1410, § 37, effective July 1.
Editor's note: This section is similar to former §§ 7-56-104 and 7-56-132 as they existed prior to 1996.
7-56-105. Effective time and date of documents. (Repealed)
Source: L. 96: Entire article R&RE, p. 482, § 1, effective July 1. L. 2002: Entire section repealed, p. 1861, § 163, effective July 1; entire section repealed, p. 1728, § 163, effective October 1.
7-56-106. Periodic and other reports.
- Part 5 of article 90 of this title, providing for periodic reports from reporting entities, applies to cooperatives formed under or subject to this article.
- The commissioner of agriculture may, by regulation, require reports from any cooperative formed pursuant to this article that limits its membership to agricultural producers.
- Upon the dissolution of an agricultural cooperative formed under this article, the cooperative shall provide a copy of the articles of dissolution of the cooperative to the commissioner of agriculture.
Source: L. 96: Entire article R&RE, p. 483, § 1, effective July 1. L. 2003: Entire section amended, p. 2220, § 69, effective July 1, 2004. L. 2004: (1) and (3) amended, p. 1410, § 38, effective July 1. L. 2010: (1) amended, (HB 10-1403), ch. 404, p. 1993, § 3, effective August 11.
Editor's note: This section is similar to former § 7-56-122 as it existed prior to 1996.
7-56-107. Cooperative records.
- A cooperative shall keep as permanent records minutes of all meetings of its members and of the board, a record of all actions taken by the members or the board without a meeting by a written unanimous consent in lieu of a meeting, and a record of all waivers of notices of meetings of the members and of the board.
- A cooperative shall maintain appropriate accounting records.
- A cooperative shall maintain its records in written form or in another form capable of conversion into written form within a reasonable time.
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A cooperative shall keep a copy of each of the following records at its principal office:
- Its articles of incorporation or other governing instrument;
- Its bylaws or other similar instrument;
- A record of the names and addresses of its members, in a form that permits preparation of a list of members that is alphabetical and that shows each member's address and the investment qualifying a member to vote held by each member;
- The minutes of members' meetings, and records of all actions taken by members without a meeting by unanimous written consent in lieu of a meeting, for the past three years;
- All written communications within the past three years to members as a group or to any class of members as a group;
- A list of the names and business addresses of its current board of directors and officers;
- A copy of its most recent periodic report delivered to the secretary of state pursuant to part 5 of article 90 of this title; and
- All financial statements prepared for periods ending during the last fiscal year.
- Except as otherwise limited by this article, the board of directors of a cooperative shall have discretion to determine what records are appropriate for the purposes of the cooperative, the length of time records are to be retained, and policies relating to the confidentiality, disclosure, inspection and copying of the records of the cooperative.
Source: L. 96: Entire article R&RE, p. 483, § 1, effective July 1. L. 2000: (4)(g) amended, p. 950, § 6, effective July 1. L. 2003: (4)(g) amended, p. 2220, § 70, effective July 1, 2004. L. 2010: (4)(g) amended, (HB 10-1403), ch. 404, p. 1994, § 4, effective August 11.
Editor's note: This section is similar to former § 7-56-122 as it existed prior to 1996.
PART 2 INCORPORATION
7-56-201. Articles of incorporation.
- A cooperative may be formed pursuant to this article for the transaction of any lawful business. One or more persons may act as the incorporator or incorporators of a cooperative by delivering articles for the cooperative to the secretary of state for filing pursuant to part 3 of article 90 of this title. An incorporator who is an individual shall be eighteen years of age or older.
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The articles shall state:
- The domestic entity name of the cooperative, which domestic entity name shall comply with part 6 of article 90 of this title;
- The principal office address of the cooperative's principal office;
- The registered agent name and registered agent address of the cooperative's initial registered agent;
- Repealed.
- If formed without common voting stock, whether the property rights and interests of each member are equal or unequal and, if unequal, the general rule or rules applicable to all members by which the property rights and interests of each member are determined and fixed; provisions for the admission of new members who are entitled to share in the property of the cooperative with the old members in accordance with such general rules; and whether the cooperative is authorized to issue one or more classes of preferred stock or other equity interests and, if so authorized, a statement as to the number of shares of stock of each class or other equity interests and the nature and extent of the preferences, limitations, relative rights, and privileges granted to each;
- If formed with stock, the classes of shares and the number of shares of each class the cooperative is authorized to issue. The stock may be divided into preferred and common stock, voting and nonvoting stock, or into any other class of stock. If so divided, the articles must contain a statement as to the number of shares of stock in each class and the nature and extent of the preferences, limitations, relative rights, and privileges granted to each.
- The true name and mailing address of each incorporator.
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The articles may state:
- A provision eliminating or limiting the personal liability of a director as provided in this article;
- A provision permitting proportional voting rights based solely upon the patronage of a member with the cooperative, the amount of equity held by the member in the cooperative, or some combination of these methods, as provided in section 7-56-305 (3);
- The number and terms of the board of directors, which number shall be not less than three, together with the names and the street addresses of the initial directors. If the names of the initial directors are not stated in the articles, the initial board of directors shall be designated by the incorporator or incorporators following the delivery of the articles to the secretary of state for filing.
- The purpose or purposes for which the cooperative is incorporated which may state any lawful business;
- A par value for authorized shares of stock or classes of shares;
- Provisions defining, limiting, and regulating the powers of the cooperative, its board, and its members;
- Provisions limiting membership to producers of agricultural products;
- A limitation on the handling of products or services for its own members only, or for members and nonmembers, and whether nonmembers are entitled to share in allocations of net margins or are subject to per unit retains;
- Provisions for the removal for cause of any director by the members at any regular or special members' meeting;
- A provision eliminating or limiting the indemnification of directors, officers, employees, or agents of the cooperatives as otherwise provided in this article;
- Any provision that under this article is required or permitted to be stated in the bylaws;
- Any other provision not inconsistent with law.
- (Deleted by amendment, L. 2004, p. 1410 , § 39, effective July 1, 2004.)
- When incorporated, no member or shareholder as such shall be liable directly or indirectly, including by way of indemnification, contribution, or otherwise, under a judgment, decree, or order of a court, or in any other manner, for a debt, obligation, or liability of or chargeable to the cooperative.
- A member does not have any vested property right resulting from any provision in the articles that may exist from time to time or at any time, including any provision relating to management, control, capital structure, dividend entitlement, purpose, or duration of the cooperative.
Source: L. 96: Entire article R&RE, p. 484, § 1, effective July 1. L. 98: (3)(c) amended, p. 611, § 2, effective July 1. L. 2000: (2)(a) amended, p. 950, § 7, effective July 1. L. 2002: (1) amended, p. 1816, § 18, effective July 1; (1) amended, p. 1680, § 16, effective October 1. L. 2003: (1), IP(2), (2)(a) to (2)(f), IP(3), (3)(c), and (3)(k) amended, p. 2221, § 71, effective July 1, 2004. L. 2004: (1), (2)(b), (2)(d), (2)(g), and (4) amended, p. 1410, § 39, effective July 1. L. 2009: (2)(d) repealed, (HB 09-1248), ch. 252, p. 1129, § 3, effective December 1.
Editor's note: This section is similar to former § 7-56-109 as it existed prior to 1996.
7-56-202. Amendment of articles.
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A cooperative may amend its articles at any time to add or change a provision that is required or permitted in the articles or to delete a provision not required in the articles. Whether a provision is required or permitted in the articles is determined as of the effective date of the amendment.
(1.5) If a cooperative has not issued memberships or shares of stock, its board of directors or, if no directors have been designated or elected, its incorporators may adopt one or more amendments to the articles of incorporation.
- The articles of a cooperative may be amended at any regular or special meeting of the members of the cooperative. The proposed amendment must be first approved by a two-thirds majority of the directors. The notice of the meeting of members shall state or have attached to it the proposed amendment and shall be mailed to each member of record at least ten days prior to the meeting date. The proposed amendment shall be approved by an affirmative vote of a majority of the members present and voting in person or in any other manner authorized by the cooperative pursuant to section 7-56-305 (1), unless a higher percentage of approval is required in the articles.
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Unless otherwise provided in the articles, the board may adopt, without shareholder action, one or more amendments to the articles to:
- Delete the statement of names and addresses of the incorporators or of the initial directors;
- Delete the statement of the registered agent name and registered agent address of the initial registered agent or registered office, if a statement of change is on file in the records of the secretary of state containing the registered agent name and registered agent address of the cooperative's registered agent;
- Delete the statement of the names and addresses of any or all of the individuals named in the articles, pursuant to section 7-90-301 (6), as being individuals who caused the articles to be delivered for filing;
- Except as otherwise provided in section 9 of article XV of the state constitution, change each issued and unissued share of a class into a greater number of whole shares if the cooperative has only shares of that class outstanding; or
- Change the cooperative's domestic entity name by substituting the word "cooperative", "association", "incorporated", "company", or "limited", or any abbreviation thereof for a similar word or abbreviation in the domestic entity name, or by adding, deleting, or changing a geographical designation.
- (Deleted by amendment, L. 2004, p. 1411 , § 40, effective July 1, 2004.)
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A cooperative amending its articles shall deliver to the secretary of state, for filing pursuant to part 3 of article 90 of this title, articles of amendment stating:
- The domestic entity name of the cooperative; and
- The text of each amendment adopted.
- (Deleted by amendment, L. 2004, p. 1411 , § 40, effective July 1, 2004.)
- Any amendment to the articles may not be invalidated because of the manner of its adoption unless an action to do so is commenced within two years after the date of filing.
Source: L. 96: Entire article R&RE, p. 486, § 1, effective July 1. L. 2000: (3)(d) and (5)(a) amended, p. 950, § 8, effective July 1. L. 2002: (3)(b) and IP(5) amended, p. 1816, § 19, effective July 1; (3)(b) and IP(5) amended, p. 1681, § 17, effective October 1. L. 2003: (2), (3)(a), (3)(b), and IP(5) amended and (3)(b.5) added, p. 2222, § 72, effective July 1, 2004. L. 2004: (1.5) added and (3)(b), (3)(d), (4), and (5) amended, p. 1411, § 40, effective July 1.
Editor's note: This section is similar to former § 7-56-110 as it existed prior to 1996.
7-56-203. Restated articles.
- The board may restate the articles at any time with or without membership action.
- The restatement may include one or more amendments to the articles. If the restatement includes an amendment requiring approval by the members, it shall be adopted as provided in section 7-56-202.
- If the board submits a restatement for action by the members, the cooperative shall give notice, in accordance with section 7-56-202, to each member entitled to vote on the restatement at the members' meeting at which the restatement will be voted upon. The notice shall state that the purpose, or one of the purposes, of the meeting is to consider the restatement, and the notice shall contain or be accompanied by a copy of the restatement that identifies any amendment or other change it would make in the articles.
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A cooperative restating its articles shall deliver to the secretary of state, for filing pursuant to part 3 of article 90 of this title, articles of restatement stating:
- The domestic entity name of the cooperative; and
- The text of the restated articles of incorporation.
- (Deleted by amendment, L. 2004, p. 1412 , § 41, effective July 1, 2004.)
- (Deleted by amendment, L. 2002, p. 1817 , § 20, effective July 1, 2002; p. 1681, § 18, effective October 1, 2002.)
Source: L. 96: Entire article R&RE, p. 487, § 1, effective July 1. L. 2000: (4)(a) amended, p. 950, § 9, effective July 1. L. 2002: IP(4) and (4)(e) amended, p. 1817, § 20, effective July 1; IP(4) and (4)(e) amended, p. 1681, § 18, effective October 1. L. 2003: IP(4) amended, p. 2222, § 73, effective July 1, 2004. L. 2004: (4) amended, p. 1412, § 41, effective July 1.
7-56-204. Cooperatives desiring to relinquish provisions of this article.
- Any cooperative formed under or that has elected to be subject to this article may relinquish being bound by the provisions of this article by amending its articles in the manner provided in section 7-56-202 (2); except that the amendment shall be approved by a two-thirds majority of all the members present and voting in person or in any other manner authorized by the cooperative pursuant to section 7-56-305 (1) unless a greater vote is required by the articles or bylaws.
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The board shall present to the members for approval, as described in subsection (1) of this section, a plan to relinquish the provisions of this article, including:
- A statement as to what type of business entity the cooperative is to become after the plan has been adopted;
- A statement as to what will be the effect on equities of the cooperative after the plan has been adopted; and
- A statement as to the procedures and mechanisms for changing the cooperative to another type of entity.
- Amendments to the articles shall be delivered to the secretary of state for filing pursuant to part 3 of article 90 of this title.
Source: L. 96: Entire article R&RE, p. 488, § 1, effective July 1. L. 2002: (3) amended, p. 1817, § 21, effective July 1; (3) amended, p. 1681, § 19, effective October 1.
7-56-205. Entities formed under other law but subject to this article.
Any domestic entity or foreign entity authorized to transact business or conduct activities in this state and engaged in any of the activities enumerated in this article but formed under any other law may be considered for all purposes as subject to this article by amending its constituent operating document as necessary to conform to this article and delivering to the secretary of state, for filing pursuant to part 3 of article 90 of this title, a statement that the entity has determined to accept the benefits of and to be bound by the provisions of this article and has amended its constituent operating document as necessary to conform to this article by amendments adopted in accordance with applicable law and its constituent operating document.
Source: L. 96: Entire article R&RE, p. 488, § 1, effective July 1. L. 2002: Entire section amended, p. 1817, § 22, effective July 1; entire section amended, p. 1681, § 20, effective October 1. L. 2003: Entire section amended, p. 2222, § 74, effective July 1, 2004. L. 2004: Entire section amended, p. 1412, § 42, effective July 1.
Editor's note: This section is similar to former § 7-56-133 as it existed prior to 1996.
ANNOTATION
Annotator's note. The following annotations include cases decided under former provisions similar to this section.
This section recognizes two classes of corporations: First, those originally organized under this article, and second, those that have adopted its provisions as provided in this section. Colo. Wheat Growers' Ass'n v. Thede, 80 Colo. 529, 253 P. 30 (1927).
Association cannot accept benefits of article without being bound. This section conjoins the words "that the corporation or association has determined to accept the benefits and be bound by the provisions of this article", and one cannot untwine these interlaced words and accord the benefits of this article to an association out of the fold, without disregarding this proviso, which cannot be done. Colo. Wheat Growers' Ass'n v. Thede, 80 Colo. 529, 253 P. 30 (1927).
Hence, a corporation is not entitled to make a marketing contract without first complying with this section as a matter of public policy. Colo. Wheat Growers' Ass'n v. Thede, 80 Colo. 529, 253 P. 30 (1927).
And such a contract is void where there has been no compliance. An instrument in the form of a standing marketing contract which is entered into after this article took effect, but with an association not organized under it, and which at the time the association enters into the agreement with its member it has not complied with or taken advantage of this section is void. Colo. Wheat Growers' Ass'n v. Thede, 80 Colo. 529, 253 P. 30 (1927).
Moreover, a provision such as this section cannot legalize retroactively previously invalid contracts. Oliver v. Wilder, 27 Colo. App. 337, 149 P. 275 (1915); Atkinson v. Colo. Wheat Growers' Ass'n, 77 Colo. 559 , 238 P. 1117 (1925); Moore v. Chalmers-Galloway Live Stock Co., 90 Colo. 548 , 10 P.2d 950 (1932).
7-56-206. Cooperative name. (Repealed)
Source: L. 96: Entire article R&RE, p. 489, § 1, effective July 1. L. 97: (1)(f) amended, p. 759, § 21, effective July 1, 1998. L. 2000: Entire section repealed, p. 990, § 109, effective July 1.
7-56-207. Use of the term "cooperative" - penalty for unlawful use. (Repealed)
Source: L. 96: Entire article R&RE, p. 490, § 1, effective July 1. L. 2000: IP(1) amended, p. 950, § 11, effective July 1. L. 2003: (1)(a) and (2) amended, p. 2223, § 75, effective July 1, 2004. L. 2004: (2) amended, p. 1412, § 43, effective July 1; (1)(a) amended, p. 1010, § 18, effective August 4. L. 2008: Entire section repealed, p. 18, § 2, effective August 5.
Editor's note: This section was similar to former §§ 7-55-111 and 7-56-124 as they existed prior to 1996.
7-56-208. Bylaws.
- The initial board of each cooperative formed under this article shall, within thirty days after the articles become effective, adopt bylaws for the government and management of its affairs that are not inconsistent with law or the articles of the cooperative. Such bylaws may be amended or modified in such manner as the bylaws may provide. If the bylaws do not provide a manner for their amendment, the bylaws may be amended at any time upon a majority vote of the members present and voting in person or in any other manner authorized by the cooperative pursuant to section 7-56-305 (1) at a regular or special meeting, the notice of which meeting shall have stated that consideration would be given at the meeting to amending the bylaws and stating the proposed amendment or amendments.
- The bylaws of the cooperative shall prohibit the transfer of the voting common stock or membership in the cooperative to persons not eligible to be a member of the cooperative and, if the cooperative issues certificates of common stock or of membership, the restrictions must be printed upon every certificate of stock or certificate of membership subject to the restrictions. At the election of the cooperative, the restrictions may also be included in the articles.
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If not stated in the articles, the bylaws of the cooperative shall include:
- The qualifications for membership, manner of succession, and conditions for suspension, withdrawal, or expulsion;
- The amount of any membership fee or capital subscription required by the cooperative to become a member, conditions of membership, and procedures for acquiring and repayment of membership capital;
- Any limitations on dividends on stock or interest on equity capital;
- The time, place, and manner of conducting or determining membership meetings of the cooperative which shall be at least annually;
- The number, terms, and time of the election of directors, or the manner for determining the same;
- The number of directors that shall constitute a quorum for a meeting of the board, which must be at least a majority;
- The number, terms, and titles of officers, their authority and duties as well as the manner of election or appointment, the filling of vacancies, or removal of officers; and
- A requirement that the cooperative's business shall be conducted on a cooperative basis for the mutual benefit of the cooperative's members.
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In addition to the provisions set forth in subsection (3) of this section, the bylaws may include:
- The time, place, and manner of conducting its meetings;
- The mode and manner of removal of directors and the mode and manner of filling vacancies on the board caused by death, resignation, or removal;
- The compensation of directors and officers or the manner for determining compensation;
- The mode and manner of conducting business;
- The mode and manner of conducting elections and provisions for voting by ballots forwarded by mail or otherwise;
- The manner of assignment and transfer of interests in the cooperative;
- The manner of collection and enforcement for member nonpayment or nonperformance, including forfeiture of property rights and interests;
- The method of determination of property rights and interests in the cooperative and the value thereof;
- Methods and procedures for acquiring and returning equity capital to members and other patrons of the cooperative;
- Procedures pursuant to section 7-56-501 (1)(q) for the handling of unclaimed equity capital and other funds declared payable by the cooperative and unclaimed by the holder; and
- Such other things as may be proper to carry out the purpose for which the cooperative was formed or the governance of the cooperative.
Source: L. 96: Entire article R&RE, p. 490, § 1, effective July 1. L. 2003: (1) and IP(3) amended, p. 2223, § 76, effective July 1, 2004.
Editor's note: This section is similar to former § 7-56-111 as it existed prior to 1996.
7-56-209. Agricultural marketing cooperatives.
- It is hereby recognized that agriculture is characterized by individual production in contrast to the group or factory system that characterizes other forms of industrial production; that the ordinary form of corporate organization permits industrial groups to combine for the purpose of group production and the ensuing group marketing and that the public has an interest in permitting producers of agricultural products to bring to their industry the high degree of efficiency and merchandising skill evidenced in the manufacturing industries; that the public interest urgently needs to prevent the migration from rural to urban communities in order to enhance production of agricultural products and to preserve the agricultural supply of the nation; that the public interest demands that producers of agricultural products be encouraged to attain a more efficient system of marketing their products and procurement of the necessary equipment and supplies through cooperatives.
- Upon written request to the commissioner of agriculture by any three persons, the commissioner or a duly authorized representative of the commissioner may supply a written summary of the most current survey prepared by the department of agriculture, if any exists, of the business conditions affecting the proposed purposes of the cooperative, particularly the commodities to be handled. When such a summary is supplied, the commissioner or a representative of the commissioner may separately set forth an opinion, stating the reasons therefor, regarding the viability of the proposed venture.
- In addition, the department of agriculture may, at the discretion of the commissioner or a representative of the commissioner, provide other assistance to persons who seek to organize an agricultural cooperative.
Source: L. 96: Entire article R&RE, p. 492, § 1, effective July 1.
Editor's note: This section is similar to former §§ 7-56-105 and 7-56-106 as they existed prior to 1996.
7-56-210. Renewable energy cooperatives.
- It is the policy of this state to encourage local ownership of renewable energy generation facilities to improve the financial stability of rural communities.
- Subject to the provisions of this article, a renewable energy cooperative may be organized for the purpose of promoting electric energy efficiency technologies to its members, generating electricity from renewable resources and technologies, and transmitting and selling the electricity at wholesale.
- For purposes of this section, "renewable resources or technologies" means biomass, geothermal energy, solar energy, small hydroelectricity, and wind energy. Hydrogen derived from biomass, geothermal energy, solar energy, small hydroelectricity, and wind energy is also considered to be renewable energy for the purposes of this article. "Renewable resources or technologies" does not include pumped storage facilities; hydroelectricity other than small hydroelectricity; coal, natural gas, oil, propane, or any other fossil fuel; or nuclear energy. "Renewable resources or technologies" also does not include hydrogen derived from pumped storage facilities; hydroelectricity other than small hydroelectricity; coal, natural gas, oil, propane, or any other fossil fuel; or nuclear energy.
Source: L. 2004: Entire section added, p. 1121, § 1, effective May 27.
PART 3 MEMBERS AND OWNERSHIP
7-56-301. Members.
- Subject to the provisions of this section and under the terms and conditions prescribed in the articles or bylaws adopted by it, a cooperative may limit admission as members or issue common stock only to persons engaged in the particular business or utilizing the goods or services provided by or through the cooperative, including any entity formed under the law of this state or any other jurisdiction, or may admit as members or issue common stock to any person meeting uniform terms and conditions stated in its articles or bylaws.
- When any required membership fee or payment for stock as required in the articles, the bylaws, or a resolution of the board has been paid in full or a promissory note executed for the required membership fee or capital subscription, a cooperative may issue a certificate of membership or common stock evidencing the membership or ownership of the stock or may evidence the same on the books or other records of the cooperative as determined by the articles, the bylaws, or the board. Except for a cooperative formed with stock, promissory notes of members may not be accepted by the cooperative as full or partial payment for stock unless permitted by the bylaws and adequately secured. The cooperative shall hold the stock as security for the payment of the note, but such retention as security shall not affect the member's right to vote.
- No member shall have a right to vote until the required membership fee or payment for stock has been paid in full.
- A cooperative, in its articles or bylaws, may limit the amount of common stock that a member may own.
- No member shall be liable directly or indirectly, including by way of indemnification, contribution, or otherwise, under a judgment, decree, or order of a court, or in any other manner, for a debt, obligation, or liability of or chargeable to the cooperative while it is incorporated for an amount exceeding the sum remaining unpaid on the member's membership fee or the member's subscription to the stock, including any unpaid balance on any promissory note given in payment thereof; except that this subsection (5) shall not affect the liability of a member who is also a member of the board or an officer for such member's negligence, wrongful act, or misconduct in that capacity.
- A cooperative formed with or without capital stock under this article may issue or accept investments in nonvoting stock or equity that may have such rights and preferences, including being subject to per unit retains or allocations of net margins, as may be provided in the articles, the bylaws, or by the board. Such nonvoting stock or equity may be issued and sold by the cooperative to any person, including those persons not otherwise qualified to be members, and may be redeemable or retireable by the cooperative on such terms and conditions as are provided for in the articles, the bylaws, or a resolution of the board providing for the issuance of or the investment in the nonvoting stock or equity. The terms and conditions of redemption shall be printed on any certificate evidencing the stock or equity.
- A cooperative shall impose restrictions on the transfer of voting common stock or membership in the cooperative in its bylaws in accordance with section 7-56-208 (2), and may also impose such restrictions in its articles, and may impose restrictions on the transfer of other equity investments in the cooperative in its articles, bylaws, or by resolution of its board. Any such restriction shall be printed upon any certificate or other written evidence of the membership, voting common stock, or other equity investment if one is issued.
- Subject to the provisions of section 7-56-406 (2)(c), a cooperative may, at any time as stated in its articles, bylaws, or resolution of the board adopted at the time of issuance, acquire, recall, redeem, exchange, or reissue its common stock, memberships, preferred stock, preferred equity, memberships, or other equity capital. Consideration paid for stock, memberships, or other equity capital acquired, recalled, redeemed, exchanged, or reissued by the cooperative shall be the par value, stated value, price originally paid, or book value, whichever is less, as conclusively determined by the board, plus any accrued and unpaid dividends, if any, and, if the price originally paid for the stock, memberships, or other equity capital included an additional amount based upon the right of the holder to engage in business with the cooperative, the consideration shall include the additional amount. If stock, memberships, or other equity capital acquired, recalled, redeemed, or exchanged does not have a par value, then the par value shall not be considered in determining the consideration. The cooperative may set off against the consideration to be paid obligations to it of the holder of stock, membership, or other equity capital and shall have a continuing perfected security interest in the stock, membership, and other equity capital of a member, stockholder, or holder of other equity capital to secure payment of any indebtedness to the cooperative of the stockholder, member, or holder of other equity capital, whenever indebtedness is incurred. Notwithstanding any other provision of law, the security interest shall take priority over all other perfected security interests. No acquisition, recall, or redemption shall be made if the result of it would be to bring the value of the remaining assets of the cooperative below the aggregate of its indebtedness. The articles or bylaws may provide other limitations on the right of a cooperative to acquire, recall, redeem, exchange, or reissue its stock, memberships, or other equity capital.
- If a member of a cooperative is other than an individual, such member may be represented by any individual, associate, officer, manager, member, shareholder, or other equity holder thereof duly authorized in writing by the member's board or other governing body having the right to authorize the representation.
- If so prescribed in its articles or bylaws, a cooperative may group its members in districts, or other units, or by types of goods or services utilized, for administration or otherwise achieving the purposes of the cooperative.
- A cooperative, in its articles or bylaws, may limit the amount of common stock or other equity capital held by members or other persons.
- Repealed.
Source: L. 96: Entire article R&RE, p. 493, § 1, effective July 1. L. 98: (12) repealed, p. 612, § 3, effective July 1. L. 2003: (1), (2), (6), and (8) amended, p. 2224, § 77, effective July 1, 2004. L. 2004: (9) amended, p. 1413, § 44, effective July 1.
Editor's note: This section is similar to former §§ 7-56-108 and 7-56-116 as they existed prior to 1996.
ANNOTATION
The relation between a cooperative marketing association and its members is that existing between a trustee and his beneficiary or a principal and his agent. Mtn. States Beet Growers' Mkt. Ass'n v. Monroe, 84 Colo. 300, 269 P. 886 (1928).
7-56-302. Member meetings - how called - notice.
- In its bylaws, each cooperative shall provide for one or more regular member meetings annually. Either the board or such officers as are designated in the bylaws shall have the right to call a special meeting of the members at any time, and the president, or other officer designated in the bylaws, shall call a special meeting to be held within sixty days upon petition by ten percent of the total number of members stating the specific business to be brought before the meeting. The board or the person calling the special meeting shall determine the date, time, and place of the meeting.
- Written notice of all member meetings shall be mailed to each member at that member's last-known address or transmitted to each member in such other manner as may be provided in the bylaws at least ten days prior to the meeting. Notice of any special meeting shall include a statement of the purpose for the meeting. At all regular meetings of members of the cooperative, any and all lawful business may be brought before the meeting regardless of whether stated in the notice of the meeting; except that amendments to the articles or the bylaws of the cooperative or other action required to be stated in the notice of the meeting by this article shall not be subject to action unless notice thereof is stated in the notice of the meeting. At all special meetings of the members of the cooperative, business brought before the meeting shall be limited to the purpose stated in the notice.
- Actions taken or agreed to be taken during a member meeting shall not be invalidated on account of any member's failure to receive notice of a meeting if reasonable effort has been made to give notice in accordance with this section.
- Lawful actions or other membership votes may be taken by the cooperative in lieu of or without a member meeting if all members entitled to act or vote with respect to the action agree to that action by unanimous written consent.
Source: L. 96: Entire article R&RE, p. 495, § 1, effective July 1. L. 2003: (2) amended, p. 2225, § 78, effective July 1, 2004.
Editor's note: This section is similar to former § 7-56-112 as it existed prior to 1996.
7-56-303. Members' list for meeting.
- After fixing a record date for a meeting of the membership, the cooperative shall prepare a list of the names and addresses of all its members who are entitled to be given notice of the meeting. The members' list shall be available for inspection by any member or member's agent or attorney, for a proper corporate purpose, beginning the earlier of ten days before the meeting for which the list was prepared or two business days after notice of the meeting is given and continuing through the meeting, and any adjournment thereof. Section 7-56-307 is not applicable to this section.
- The cooperative shall make the members' list available at the meeting, and any member or member's agent or attorney is entitled to inspect the list at any time and for a proper corporate purpose during the meeting or any adjournment.
- If the cooperative refuses to allow a member or the member's agent or attorney to inspect the members' list before or at the meeting, as permitted by subsection (1) or (2) of this section, the member may apply to the district court for the county in this state in which the street address of the cooperative's principal office is located or, if the cooperative has no principal office in this state, to the district court for the county in which the street address of its registered agent is located or, if the cooperative has no registered agent, to the district court for the city and county of Denver for an order permitting the member or the member's agent or attorney to inspect the members' list.
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The court may order inspection of the members' list pursuant to subsection (3) of this section, unless the cooperative proves that it refused inspection or copying of the list in good faith because it had a reasonable basis for doubt about the right of the member or the agent or attorney of the member to inspect or copy the members' list. The court may also postpone or adjourn the meeting for which the list was prepared until the inspection ordered by the court is complete. In any such action:
- The court may order the losing party to pay the prevailing party's reasonable costs, including reasonable attorney fees;
- The court may order the losing party to pay the prevailing party for any damages the prevailing party shall have incurred by reason of the subject matter of the litigation;
- If inspection or copying is ordered pursuant to subsection (3) of this section, the court may order the cooperative to pay the member's inspection and copying expenses; and
- The court may grant either party any other remedy provided by law.
- If a court orders inspection of the members' list pursuant to subsection (3) of this section, the court may impose reasonable restrictions on the use or distribution of the list by the member.
- Failure to prepare or make available the members' list does not affect the validity of action taken at the meeting.
Source: L. 96: Entire article R&RE, p. 495, § 1, effective July 1. L. 2003: (3) amended, p. 2225, § 79, effective July 1, 2004.
Cross references: Section 7-56-307 (6) provides that the provisions of said section do not apply to this section.
7-56-304. Quorum.
- A quorum for conducting business at all meetings of the members shall be five percent of the total number of members or thirty members present in person at the meeting, whichever is less. Members present and voting in person or in any other manner authorized by the cooperative pursuant to section 7-56-305 (1) shall be counted toward the quorum with respect to that matter. Nothing shall prevent the articles or the bylaws of a cooperative from requiring a greater number of members or percentage thereof as a quorum.
- An action by a cooperative is not valid in the absence of a quorum at the meeting at which the action was taken, unless the action taken is subsequently ratified by the required number of members.
Source: L. 96: Entire article R&RE, p. 497, § 1, effective July 1.
7-56-305. Member voting.
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Members of a cooperative may vote either in person or, if provided in the articles or the bylaws of the cooperative or a resolution of the board with respect to a particular issue, by any of the following methods:
- Mail or electronic transmission if a means is provided to verify that a member so voting has received the exact wording of the matter upon which the vote is to be taken;
- Telecommunication; or
- Any other means by which all persons in the meeting may communicate with each other during the meeting.
- Whenever in this article reference is made to voting by membership, the vote may be taken in any manner established pursuant to this section unless specifically provided otherwise in this article or by the board with respect to a particular matter upon which the vote is to be taken.
- With respect to a matter where a vote has been cast by an authorized means other than the person being present and voting in person, the person casting the vote shall be counted as present and voting for purposes of those provisions in this article that refer to persons "present and voting".
- Proxy or cumulative voting shall be prohibited except as permitted by the articles or bylaws of organizations incorporated prior to July 6, 1973; except that, where a member is other than an individual, its vote may be cast by a representative authorized pursuant to this article.
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Members of a cooperative may vote either in person or, if provided in the articles or the bylaws of the cooperative or a resolution of the board with respect to a particular issue, by any of the following methods:
- Except as otherwise provided in subsection (3) of this section, each member of a cooperative formed under this article shall be entitled to one vote only.
- Any cooperative formed under this article may provide in its articles for proportional voting rights allowing members more than one vote based upon the patronage of a member with the cooperative, the amount of patronage equity held in the cooperative, or any combination of these methods. However, no member may be entitled to more than one vote in any case where a law of this state specifically requires otherwise. In no event shall any member have less than one vote and no member may have more than two and one-half percent of the total votes of members of the cooperative. If the number of members in the cooperative is such that, solely by virtue of the number of members, one member may have more than two and one-half percent based on proportional voting, then each member of the cooperative shall be entitled to one vote only.
- Unless otherwise provided in this article or in the cooperative's articles, when a cooperative has provided for proportional voting, it shall be deemed to have intended that the references in this article to a vote of a specified proportion of members or similar terminology as necessary for approval of a matter submitted to a membership vote shall mean a determination based on a proportion of the total votes entitled to be cast or actually cast by members as applicable in the particular reference.
Source: L. 96: Entire article R&RE, p. 497, § 1, effective July 1. L. 2003: (2) and (3) amended, p. 2225, § 80, effective July 1, 2004. L. 2004: (1)(d) amended, p. 1413, § 45, effective July 1.
7-56-306. Reserves, distributions, and patronage refunds.
- A cooperative shall periodically set aside a portion of net margins, per unit retains, or other funds that is reasonable as determined by the board or in accordance with the articles or bylaws, for reserves, distributions, patronage refunds, capital, or other lawful business purposes.
- Net margins, after deductions for reasonable reserves and for allowances for income tax, shall be calculated and allocated on a patronage basis at least once every twelve months to members or to members and other qualified persons on an equitable basis as determined by the board or in accordance with the articles or bylaws. This section shall not be construed as prohibiting the retention of net margins, excess per unit retains, or other funds allocated to members as a means of providing capital for the cooperative.
- If a cooperative has retained net margins or other funds allocated to members, the board shall have the right in accordance with the articles, bylaws, and policies established by the board to redeem or retire the net margins or other funds so retained. All decisions relating to the redemption or retirement of such funds shall be made solely by the board.
Source: L. 96: Entire article R&RE, p. 498, § 1, effective July 1.
7-56-307. Inspection of cooperative records by member.
- A member is entitled to inspect and copy, at the member's expense, during regular business hours at a reasonable location stated by the cooperative, any of the records described in section 7-56-107 (4) if the member meets the requirements of subsection (2) of this section and gives the cooperative written demand at least five business days before the date on which the member wishes to inspect and copy such records. Notwithstanding the provisions of this subsection (1) or any provisions of section 7-56-107 (4), no member shall have the right to inspect or copy any records of the cooperative relating to the amount of equity capital in the cooperative held by any person or any accounts receivable or other amounts due the cooperative from any person.
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To be entitled to inspect and copy permitted records, the member shall meet the following requirements:
- The member has been a member for at least one year immediately preceding the demand to inspect or copy or is a member holding at least five percent of all of the outstanding equity interests in the cooperative as of the date the demand is made;
- The demand is made in good faith and for a proper corporate business purpose;
- The member describes with reasonable particularity the purpose and the records the member desires to inspect; and
- The records are directly connected with the described purpose.
- The right of inspection granted by this section may not be abolished or limited by the articles, bylaws, or any actions of the board or the members.
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This section does not affect:
- The right of a member to inspect records to the same extent as any other litigant if the member is in litigation with the cooperative; or
- The power of a court to compel the production of the cooperative's records for examination.
- Notwithstanding any other provision in this section, if the records of the cooperative to be inspected or copied are in active use or storage and, therefore, not available at the time otherwise provided for inspection or copying, the cooperative shall notify the member of this fact and shall set a date and hour within three business days of the date otherwise set in this section for the inspection or copying.
- This section shall not apply to section 7-56-303.
Source: L. 96: Entire article R&RE, p. 499, § 1, effective July 1. L. 2003: (1) amended, p. 2226, § 81, effective July 1, 2004.
7-56-308. Scope of member's inspection right.
- A member's agent or attorney has the same inspection and copying rights as the member.
- The right to copy records under section 7-56-307 includes, if reasonable, the right to receive copies made by photographic, xerographic copying, or other means.
- The cooperative may impose a reasonable charge, covering the costs of labor and material, for copies of any documents provided to the member. The charge may not exceed the estimated cost of production and reproduction of the records.
Source: L. 96: Entire article R&RE, p. 500, § 1, effective July 1.
7-56-309. Court-ordered inspection.
- If a cooperative refuses to allow a member, or the member's agent or attorney, who complies with section 7-56-307 to inspect or copy any records that the member is entitled to inspect or copy by said section within a prescribed time limit or, if none, within a reasonable time, the district court for the county in this state in which the street address of the cooperative's principal office is located or, if the cooperative has no principal office in this state, the district court for the county in which the street address of its registered agent is located or, if the cooperative has no registered agent, the district court for the city and county of Denver, may, on application of the member, summarily order the inspection or copying of the records demanded at the cooperative's expense.
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If a court orders inspection or copying of the records demanded, unless the cooperative proves that it refused inspection or copying in good faith because it had a reasonable basis for doubt about the right of the member or the member's agent or attorney to inspect or copy the records demanded:
- The court may order the losing party to pay the prevailing party's reasonable costs, including reasonable attorney fees;
- The court may order the losing party to pay the prevailing party for any damages the prevailing party shall have incurred by reason of the subject matter of the litigation;
- If inspection or copying is ordered pursuant to subsection (1) of this section, the court may order the cooperative to pay the member's inspection and copying expenses notwithstanding the provisions of section 7-56-307 (1); and
- The court may grant either party any other remedy provided by law.
- If a court orders inspection or copying of records demanded, it may impose reasonable restrictions on the use or distribution of the records by the demanding member.
Source: L. 96: Entire article R&RE, p. 500, § 1, effective July 1. L. 2003: (1) amended, p. 2226, § 82, effective July 1, 2004.
PART 4 OFFICERS AND ELECTIONS
7-56-401. Directors - elections - remuneration - vacancy.
- The affairs of a cooperative formed under or subject to this article shall be managed by a board of not less than three directors as provided in the articles or bylaws elected by and from the members of the cooperative or designated representatives of members who are not individuals. If authorized by the articles or the bylaws, up to twenty percent of the board may consist of directors who are neither members nor representatives of members. Directors who are not members of the cooperative or representatives of members may be elected by a vote of two-thirds of the cooperative members present and voting. Nominations for the position of director shall be conducted in a manner provided in the bylaws or in a resolution of the board or of the members.
- The articles or bylaws may provide that the territory in which the cooperative has members shall be divided into districts and that the directors shall be elected according to such districts, either directly or by district delegates elected by the members in that district. In that case the articles or bylaws shall state the number of directors to be elected by each district and the manner and method of reapportioning the directors and of redistricting the territory covered by the cooperative. The bylaws may provide that primary elections shall be held in each district to elect the directors apportioned to such districts and that the result of all such primary elections shall be ratified at the next regular meeting of the cooperative or be considered final as to the cooperative.
- A cooperative may provide a reasonable remuneration for the time actually spent by its officers and directors in its service. No director, during the term of the director's office, shall be a party to a contract for profit with the cooperative differing in any way from the business relations accorded members of the cooperative.
- The articles or bylaws may limit directors from occupying any position in the cooperative on a regular salary or substantially full-time pay. The articles or bylaws may provide for an executive committee and may allot to the committee all the functions and powers of the board, subject to the general direction and control of the board.
- When a vacancy on the board occurs other than by expiration of term, the remaining members of the board, even though not a quorum, by a majority vote, shall fill the unexpired term, unless the articles or bylaws provide for an election of directors by district, in which event, unless the articles or bylaws provide for a different procedure, the board shall immediately call a special meeting of the members in the district to fill the vacancy.
Source: L. 96: Entire article R&RE, p. 501, § 1, effective July 1. L. 2003: (1) and (2) amended, p. 2226, § 83, effective July 1, 2004. L. 2004: (1) amended, p. 1413, § 46, effective July 1.
Editor's note: This section is similar to former § 7-56-113 as it existed prior to 1996.
7-56-402. Officers - titles - election - duties and authority - removal.
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- The bylaws shall provide for one or more officers and the titles of those officers. The offices may include a board chair, one or more vice-chairs, a president, one or more vice-presidents, a secretary, a treasurer, and assistant officers or other officers. The officers shall be elected by the board or in any other manner prescribed in the bylaws. At least one officer shall be an individual at least eighteen years of age. At least one officer shall be a member of the board. One individual may simultaneously hold more than one office, but may not concurrently hold the offices of president and secretary.
- The bylaws or board of each cooperative shall designate one or more officers responsible for preparing and maintaining the minutes of board and membership meetings and all records required to be kept by section 7-56-107 and for authenticating records.
- All officers and agents of the cooperative, as between themselves and the cooperative, shall have such authority and perform such duties in the management of the cooperative as may be provided in the bylaws, or as may be determined by resolution of the board of directors not inconsistent with federal, state, and local law, the articles, and the bylaws.
- Unless otherwise provided in the articles or bylaws, the board may remove any officer at any time with or without cause.
Source: L. 96: Entire article R&RE, p. 502, § 1, effective July 1. L. 2004: (1)(a) amended, p. 1413, § 47, effective July 1.
Editor's note: This section is similar to former § 7-56-114 as it existed prior to 1996.
7-56-403. Procedures for meetings of the board of directors.
- The board shall meet at least annually. The board may establish a time and place for regular board meetings and then may hold regular board meetings at such times without notice.
- Special meetings of the board shall require at least two days' notice of the date, time, and place. Unless otherwise provided by the articles or bylaws, purposes of a special meeting do not have to be stated in the notice of any special meeting.
- A director's attendance at a special meeting constitutes waiver of the notice requirement for that meeting unless the director objects to the lack of or method of notice and does not thereafter participate in the meeting or if notice of the purpose of the meeting was required but not given and the director objects to the transaction of business for that purpose and does not thereafter participate in the meeting with respect to that purpose.
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A director is considered to have assented to an action of the board unless:
- The director votes against it or abstains and causes the abstention to be recorded in the minutes of the meeting;
- The director objects at the beginning of the meeting and does not vote for it later;
- The director causes the director's dissent to be recorded in the minutes;
- The director does not attend the meeting at which the vote is taken; or
- The director gives notice of the director's objection in writing to the secretary within twenty-four hours after the meeting.
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Unless otherwise provided by the articles or bylaws:
- The board may permit any or all directors to participate in a regular or special meeting through the use of any means of communication by which all directors participating are able to communicate simultaneously with each other during the meeting;
- Actions of the board may be taken without a meeting if the action is agreed to by all members of the board and is evidenced by one or more written consents together signed by all directors and filed with the corporate records reflecting the action taken;
- Purposes of a special meeting do not have to be stated in the notice of any special meeting, but at least two days' notice of the date, time, and place shall be given.
Source: L. 96: Entire article R&RE, p. 502, § 1, effective July 1. L. 2004: (4)(c) and (4)(e) amended, p. 1413, § 48, effective July 1.
7-56-404. Removal of director by the membership or the board.
- At a meeting called expressly for that purpose, as well as any other proper purpose, a director may be removed by the members in the manner provided in this section upon an affirmative vote of a majority of the members present and voting in person or in any other manner authorized by the cooperative pursuant to section 7-56-305 (1) or, if removal of a director is by the board, then by a majority of the members of the board not subject to removal.
- The board may remove a director who does not meet the qualifications for board membership stated in the articles and bylaws of the cooperative.
- The members may remove one or more directors only for cause unless the articles or bylaws allow directors to be removed without cause.
- Removal of directors by the vote of the members shall be initiated by written petition signed by at least ten percent of the members stating the alleged causes or reasons for removing the director. No petition shall seek removal of more than one director.
- Within ninety days after receipt of a petition meeting the requirements of subsection (4) of this section, the board shall schedule the removal vote at a regular or special meeting of the membership upon determination by the board, if necessary, that cause has been stated. Any determination of cause shall be made by a majority of the directors not subject to removal petitions. If more than a majority of the board is subject to removal petitions, then the matter shall be promptly referred to an attorney who has been duly licensed to practice law in Colorado for at least five years and who has not previously represented the cooperative. The attorney's determination of whether cause has been stated shall be final for the purpose of whether to schedule a vote on removal.
- Any director subject to a removal petition under any provision of this section shall be promptly informed in writing by the board and shall have the opportunity, in person and by counsel, to be heard and present evidence at the meeting called for the vote. The persons seeking removal shall have the same opportunity.
Source: L. 96: Entire article R&RE, p. 503, § 1, effective July 1. L. 2003: (2) amended, p. 2227, § 84, effective July 1, 2004.
Editor's note: This section is similar to former § 7-56-117 as it existed prior to 1996.
7-56-405. Removal of director by judicial proceeding.
- A director may be removed by the district court for the county in this state in which the street address of the cooperative's principal office is located or, if the cooperative has no principal office in this state, by the district court for the county in which the street address of its registered agent is located or, if the cooperative has no registered agent, by the district court for the city and county of Denver, in a proceeding commenced either by the cooperative or by at least ten percent of the members, if the court finds that the director engaged in fraudulent or dishonest conduct or gross abuse of authority or discretion with respect to the cooperative, and that removal is in the best interests of the cooperative.
- If the members commence a proceeding under subsection (1) of this section, they shall make the cooperative a party defendant.
- The court that removes a director may bar the director from reelection for a period prescribed by the court.
Source: L. 96: Entire article R&RE, p. 504, § 1, effective July 1. L. 2003: (1) amended, p. 2227, § 85, effective July 1, 2004. L. 2004: (1) amended, p. 1414, § 49, effective July 1.
7-56-406. Indemnification and personal liability of directors, officers, employees, and agents.
- Unless limited in the cooperative's articles, the cooperative shall have the same powers, rights, and obligations and shall be subject to the same limitations with respect to indemnification and personal liability of directors, officers, employees, and agents as apply to domestic corporations as set forth in article 109 of this title. Cooperative directors, officers, employees, and agents shall have the same rights as directors, officers, employees, and agents of domestic corporations as set forth in article 109 of this title. For purposes of this section, any reference to shareholders having the right to vote in article 109 of this title shall be construed to refer to members of the cooperative having the right to vote.
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- The articles may eliminate or limit the liability of a director of the cooperative to the cooperative or its members for monetary damages for any breach of the duty of care arising after the date the provision in the articles became effective, including the effective date of any provision adopted under a prior statute, except any acts or omissions in bad faith or that involve intentional misconduct or a knowing violation of law; any transaction from which the director derived an improper personal benefit; any unlawful liquidating distributions of assets to members, unlawful loans to directors, or unlawful guarantees of loans to directors; unlawful dividends; unlawful stock or other equity repurchases; or any other unlawful distribution that was voted for or assented to if the director did not act in conformance with the standard of care as set forth in section 7-108-401.
- No provision pursuant to paragraph (a) of this subsection (2) shall eliminate or limit the liability of a director or officer to the cooperative or its members for monetary damages for any act or omission occurring prior to the date when such provision becomes effective.
- A distribution of stock or other equity repurchase is unlawful if it renders the cooperative unable to pay its debts as they become due in the usual course of business or, unless the articles permit otherwise, causes the assets to be less than the liabilities plus the amount necessary to satisfy the interests of the holders of securities or other equity capital preferential to those receiving the distribution, if dissolved at the time of the distribution.
- No director or officer shall be personally liable for any tort committed by an employee unless the director or officer was personally involved.
- Unless otherwise provided in the articles or bylaws, each director shall discharge the duties as a director, including duties as a member of a committee, in accordance with the provisions of section 7-108-401. Unless otherwise provided in the articles or bylaws, each officer with discretionary authority shall discharge such officer's duties under that authority in accordance with the provisions of section 7-108-401. For purposes of this subsection (2), references to "corporation" and "shareholders" in section 7-108-401 shall be construed as referring to "cooperative" and "members" respectively.
Source: L. 96: Entire article R&RE, p. 504, § 1, effective July 1. L. 98: (2)(e) added, p. 612, § 4, effective July 1. L. 2003: (1) amended, p. 2227, § 86, effective July 1, 2004. L. 2004: (2)(e) amended, p. 1414, § 50, effective July 1.
Editor's note: This section is similar to former § 7-56-107.5 as it existed prior to 1996.
7-56-407. Persons to be bonded.
At the discretion of the board of a cooperative, any officer, employee, or agent handling funds or negotiable instruments or property of or for the cooperative may be bonded for the faithful performance of the person's duties and obligations.
Source: L. 96: Entire article R&RE, p. 505, § 1, effective July 1.
Editor's note: This section is similar to former § 7-56-115 as it existed prior to 1996.
7-56-408. Registered office and registered agent - repeal. (Repealed)
Source: L. 96: Entire article R&RE, p. 505, § 1, effective July 1. L. 2002: IP(2), (3)(a), and (4) amended, p. 1817, § 23, effective July 1; IP(2), (3)(a), and (4) amended, p. 1682, § 21, effective October 1. L. 2003: (5) added by revision, pp. 2356, 2357, §§ 347, 348.
Editor's note: Subsection (5) provided for the repeal of this section, effective July 1, 2004. (See L. 2003, pp. 2356, 2357.)
7-56-409. Registered agent - service of process.
Part 7 of article 90 of this title, providing for registered agents and service of process, applies to cooperatives formed under or subject to this article.
Source: L. 2003: Entire section added, p. 2227, § 87, effective July 1, 2004.
PART 5 POWERS AND PURPOSES: APPLICATION OF OTHER LAWS
7-56-501. Powers.
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Every cooperative has the power, except as specifically limited by this article or by its own articles or bylaws:
- To have perpetual existence and succession by its domestic entity name unless limited by the articles;
- To sue and be sued and to complain and defend in courts of law and equity;
- To make and use a common seal, alter the same at its pleasure, and to use such seal or a facsimile thereof, including a rubber stamp, by impressing or affixing it or by reproducing it in any other manner;
- To purchase, receive, lease, and otherwise acquire, and to own, hold, improve, use, and otherwise deal with, real or personal property or any legal or equitable interest in property, wherever located;
- To sell, convey, mortgage, pledge, lease, exchange, and otherwise dispose of all or any part of its property;
- To purchase, receive, subscribe for, and otherwise acquire shares and other interests in, and obligations of, any other entity, including any other cooperative, and to own, hold, vote, use, sell, mortgage, lend, pledge, and otherwise dispose of, and deal in and with, the same;
- To make contracts and guarantees; incur liabilities; borrow money; issue notes, bonds, and other obligations, which may be convertible into or include the option to purchase other securities of the cooperative; and secure any of its obligations by mortgage or pledge of any of its property, franchises, or income;
- To lend money, invest and reinvest its funds, and receive and hold real and personal property as security for repayment;
- To be a partner, member, associate, trustee, promoter, or manager of, or to hold any similar position with, any entity;
- To conduct its business, locate offices, and exercise the powers granted by this article within or outside this state;
- To elect directors and officers and appoint employees and agents of the cooperative, define their duties, fix their compensation, and lend them money and credit;
- To pay pensions and establish pension plans, pension trusts, profit sharing plans, share bonus plans, share options and rights plans, and benefit or incentive plans for any or all of its current or former directors, officers, employees, and agents;
- To make payments or donations for the public welfare or for charitable, scientific, or educational purposes;
- To regulate and limit the right of members to transfer their memberships, stock, or other equity;
- To make and amend its articles and bylaws for the management of its affairs and to make provisions in its articles for the terms and limitations of stock ownership or membership and for the distribution of its earnings;
- To indemnify its directors, officers, employees, and agents to the extent provided or permitted in this article and to eliminate or limit the personal liability of a director, officers, employees, or agents of the cooperative, as provided in accordance with section 7-56-406; however, no such provision shall eliminate or limit the liability of a director or officer to the association or to its members for monetary damages for any act or omission occurring prior to the effective date of such provision;
- To establish in its bylaws procedures for the disposition of funds when declared payable by the cooperative and unclaimed by the holder three years after notification has been mailed to the holder's last-known address of record on the books of the cooperative, which disposition may consist of transferring the funds to the general operating account of the cooperative;
- To establish, secure, own, and develop patents, trademarks, and copyrights;
- To make advance payments and advances to members;
- To act as the agent or representative of any member for any lawful purpose or in any lawful transaction of the cooperative;
- To purchase or otherwise acquire and to hold, own, and exercise all rights of ownership in, and to sell, transfer, or pledge or guarantee the payment of dividends or interest on, or the retirement or redemption of shares of the stock or bonds of any person engaged in any lawful activity;
- To allocate earnings and pay patronage dividends;
- To use per unit retains;
- To prohibit or place limitations on amounts or rates of dividends payable on any class of capital stock or other equity investment in the cooperative;
- To engage in any activity in connection with the purchase, hiring, or use by its members or other patrons of goods, services, products, equipment, supplies, utilities, telecommunications, housing, or health care;
- To establish amounts for reasonable and necessary reserves for bad debts, obsolescence, grain, quality and grade, contingent losses, working capital, debt retirement, buildings and equipment, and ownership retirement and to provide that no member or other person entitled to share in the allocation of the cooperative's net margins or other funds shall have any rights except upon dissolution when the entire reserve funds of the cooperative shall be distributed in accordance with applicable federal, state, and local law and the articles and bylaws of the cooperative;
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To manufacture, sell, or supply goods, machinery, equipment, supplies, or services to its members and to other patrons or persons;
(aa.5) To adopt a trade name;
- To finance one or more of the activities in this section; and
- To perform every other form or type of act that is necessary or proper for accomplishing any lawful purpose of the cooperative not prohibited to it by law or its articles and bylaws or that is conducive to or expedient for the interest or benefit of the cooperative.
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In addition to the powers granted in subsection (1) of this section, each agricultural cooperative incorporated under this article has the following powers:
- To engage in any activity in connection with the marketing, selling, preserving, raising, harvesting, drying, processing, manufacturing, canning, packing, grading, storing, handling, and utilization of any products, by-products, or services produced or delivered to the cooperative by its members or other patrons;
- To engage in any activity in connection with agricultural education and research and to represent its members' interests in legislative and administrative forums.
- In addition to the powers specifically given in this article, a cooperative has all powers, rights, and privileges granted by the law of this state to domestic corporations or domestic nonprofit corporations that are not inconsistent with the provisions of this article.
- The powers enumerated in this article shall vest in every cooperative in this state formed under this article, or that has elected to be subject to this article, although they may not be stated in its charter or in its articles.
Source: L. 96: Entire article R&RE, p. 507, § 1, effective July 1. L. 98: (1)(aa.5) added, p. 612, § 5, effective July 1. L. 2000: (1)(a) amended, p. 951, § 12, effective July 1. L. 2003: (3) and (4) amended, p. 2228, § 88, effective July 1, 2004.
Editor's note: This section is similar to former § 7-56-107 as it existed prior to 1996.
7-56-502. Marketing or purchasing contracts.
Cooperatives limiting membership to agricultural producers may make and execute marketing or purchasing contracts requiring the members to sell or purchase, for any period of time not over ten years, all or any specified part of their agricultural products or specified commodities, goods, services, or input supplies exclusively to or through the cooperative or any facilities utilized or to be created by the cooperative. If such producers contract to sell to the cooperative, it shall be conclusively held that title to the products passes absolutely and unreservedly, except for recorded liens, to the cooperative upon delivery or at any other specified time if expressly and definitely agreed to in the contract. The contract may provide, among other things, that the cooperative may sell or resell the products delivered by its members with or without taking title to the products and pay over to its members the resale price, after deducting all necessary selling, overhead, and other costs and expenses, including interest or dividends on stock which shall not exceed eight percent per annum, and reserves for proper purposes.
Source: L. 96: Entire article R&RE, p. 510, § 1, effective July 1.
Editor's note: This section is similar to former § 7-56-119 as it existed prior to 1996.
ANNOTATION
Annotator's note: Since § 7-56-502 is similar to § 7-56-119 as it existed prior to the 1996 repeal and reenactment of this article, relevant cases construing that provision have been included in the annotations to this section.
Standard cooperative marketing agreements made before they were authorized by this article have been held to be void as in contravention of public policy because in restraint of trade or competition. Burns v. Wray Farmers' Grain Co., 65 Colo. 425, 176 P. 487 (1918); Campbell v. People, 72 Colo. 213, 210 P. 841 (1922); Johnson v. People, 72 Colo. 218, 210 P. 843 (1922); Atkinson v. Colo. Wheat Growers' Ass'n, 77 Colo. 559, 238 P. 1117 (1925); Colo. Wheat Growers' Ass'n v. Thede, 80 Colo. 529, 253 P. 30 (1927); Mtn. States Beet Growers' Mkt. Ass'n v. Monroe, 84 Colo. 300, 269 P. 886 (1928).
But such contracts are valid where there is a concurrence of the following conditions: The agreement was made after this article was passed; it was authorized by this law and executed in compliance therewith; it was made by and between an association formed under this article and a member of such association. Rifle Potato Growers' Coop. Ass'n v. Smith, 78 Colo. 171, 240 P. 937 (1925); Colo. Wheat Growers' Ass'n v. Thede, 80 Colo. 529, 253 P. 30 (1927).
Rejection of a contract for the growing of a crop is held within the discretionary powers of the marketing association of which the growers are members, where such power is not arbitrarily exercised. Mtn. States Beet Growers' Mkt. Ass'n v. Monroe, 84 Colo. 300, 269 P. 886 (1928).
But rejection by a marketing association of a growing contract and its refusal to release a member from his obligations under his membership contract was arbitrary and without just grounds or excused where the association, in its negotiations, had stated that the tendered contract was acceptable in all its terms and would be approved by the association on condition that another contract be entered into with it for the purchase of its members' crops for the three subsequent years, which the purchaser declined to do. Mtn. States Beet Growers' Mkt. Ass'n v. Monroe, 84 Colo. 300, 269 P. 886 (1928).
Marketing contract based on good consideration. A marketing contract between an association and producer by which the former agrees to buy, resell, and give the latter something out of the proceeds is based on a good consideration. Rifle Potato Growers' Coop. Ass'n v. Smith, 78 Colo. 171, 240 P. 937 (1925).
And a marketing contract was not breached by a marketing association because it turned sales over to brokers, the contract giving it power to sell to dealers, shippers, or otherwise. Rifle Potato Growers' Coop. Ass'n v. Smith, 78 Colo. 171, 240 P. 937 (1925).
An assignment of a claim in a marketing contract by a member is not against public policy or unconstitutional, for an assignment of a chose in action is neither against public policy nor unconstitutional; and although the cooperative contract itself might be against public policy and unconstitutional, that matter is of no concern, for whether other parts of a contract are open to these objections is irrelevant to the propriety of such an assignment. Austin v. Colo. Dairymen's Coop. Ass'n, 81 Colo. 546, 256 P. 640 (1927).
A tenant who leases with the knowledge that his landlord has entered into a contract with a cooperative association for the marketing of his products is charged with knowledge of the provisions of this article concerning such contracts. Wilson v. Monte Vista Potato Growers' Coop. Ass'n, 82 Colo. 428, 260 P. 1080 (1927).
For the provisions of this article constitute an essential part of a lease between the owner of land, who is a party to such a contract, and his tenant, who has knowledge of the contract, as much so as if its provisions were incorporated in the lease. Wilson v. Monte Vista Potato Growers' Coop. Ass'n, 82 Colo. 428, 260 P. 1080 (1927).
7-56-503. Remedies for breach of marketing or purchasing contract.
- The bylaws or the marketing or purchasing contracts of an agricultural cooperative may fix as liquidated damages specific sums to be paid by a member to the cooperative upon the breach by the member of any provision of the marketing or purchasing contract regarding the sale, purchase, receipt, or delivery or withholding of products or other goods and may further provide that the member will pay all costs, premiums for bonds, expenses, and fees if any action is brought upon the contract by the cooperative. All such provisions shall be valid and enforceable in the courts of this state, and clauses providing for liquidated damages shall be enforceable as such and shall not be regarded as penalties.
- In the event of any breach or threatened breach of a marketing or purchasing contract by a member, the cooperative shall be entitled to an injunction to prevent the further breach of the contract and to a decree of specific performance of the contract. Pending the adjudication of the action and upon filing a sufficient bond and verified complaint showing the breach or threatened breach, the cooperative shall be entitled to a temporary restraining order and preliminary injunction against the member.
- In any action upon a marketing contract, it shall be conclusively presumed that a landowner, landlord, or lessor is able to control the delivery of products or other goods produced on such landowner's, landlord's, or lessor's land by tenants or others whose tenancy or possession or work on such land or the terms of whose tenancy or possession or labor on such land was created or changed after execution by the landowner, landlord, or lessor of such marketing contract. The remedies provided in this section for nondelivery or breach shall lie and be enforceable against such landowner, landlord, or lessor in any such action upon a marketing contract.
Source: L. 96: Entire article R&RE, p. 510, § 1, effective July 1.
Editor's note: This section is similar to former § 7-56-120 as it existed prior to 1996.
ANNOTATION
Analysis
I. GENERAL CONSIDERATION.
Law reviews. For article, "One Year Review of Cases on Contracts", see 33 Dicta 57 (1956).
Annotator's note: Since § 7-56-503 is similar to § 7-56-120 as it existed prior to the 1996 repeal and reenactment of this article, relevant cases construing that provision have been included in the annotations to this section.
II. LIQUIDATED DAMAGES.
This section provides that the bylaws or the marketing contract may fix as liquidated damages for the breach of marketing contracts specific sums to be paid by the members or stockholders to the association upon the breach of any of the provisions of the marketing contract regarding the sale, delivery, or withholding of products. Marvin v. Pueblo Dairymen's Coop., 131 Colo. 601 , 284 P.2d 238 (1955).
And the term "liquidated damages" indicates the amount which the contracting parties agree is to be in satisfaction on account of the breach, with the amount thus agreed upon being enforceable. Marvin v. Pueblo Dairymen's Coop., Inc., 131 Colo. 601 , 284 P.2d 238 (1955).
Thus, since the payment or collection of the amount of liquidated damages specified puts an end to all claims in connection therewith, the matter of the right to a restraining order or injunction would depend entirely upon the conditions of the marketing agreement. Marvin v. Pueblo Dairymen's Coop., 131 Colo. 601 , 284 P.2d 238 (1955).
III. INJUNCTIONS AND SPECIFIC PERFORMANCE.
Contract not invalid for permitting injunction or specific performance. A marketing contract drawn under the provisions of this article is not invalid because it permits an injunction or specific performance for the enforcement of its terms. Rifle Potato Growers' Coop. Ass'n v. Smith, 78 Colo. 171, 240 P. 937 (1925).
If there is a conspiracy between a party to a marketing association contract and another to escape the obligations of the contract, then an injunction is properly granted against both of them. Monte Vista Potato Growers' Coop. Ass'n v. Bond, 80 Colo. 516, 252 P. 813 (1927).
7-56-504. Inducing breach of marketing or purchasing contract.
Any person who knowingly induces any member of an agricultural cooperative formed under this article, or under similar statutes of another jurisdiction with similar restrictions and rights and operating in this state, to break the member's marketing or purchasing contract or agreement with the cooperative shall be subject to all available civil remedies, including but not limited to injunctive relief.
Source: L. 96: Entire article R&RE, p. 511, § 1, effective July 1. L. 2003: Entire section amended, p. 2228, § 89, effective July 1, 2004. L. 2004: Entire section amended, p. 1414, § 51, effective July 1.
Editor's note: This section is similar to former § 7-56-128 as it existed prior to 1996.
ANNOTATION
Annotator's note: Since § 7-56-504 is similar to § 7-56-128 as it existed prior to the 1996 repeal and reenactment of this article, relevant cases construing that provision have been included in the annotations to this section.
The intent to protect cooperative marketing associations against unlawful interference is clear, and this section is intended to cover just such situations. Rinnander v. Denver Milk Producers, 114 Colo. 506 , 116 P.2d 984 (1946).
For one who carries on a lawful business has a property right therein and is entitled to protection against unlawful interference with that right. Fort v. Coop. Farmers' Exch., 81 Colo. 431, 256 P. 319 (1927).
The provision as to liability in a civil suit in a penal sum is deemed a civil statute. Rinnander v. Denver Milk Producers, 114 Colo. 506 , 166 P.2d 984 (1946).
And thus this provision is not to be strictly construed. Rinnander v. Denver Milk Producers, 114 Colo. 506 , 166 P.2d 984 (1946).
Such interference is actionable civilly. The general assembly has power to make solicitation from, and interference with, members of a cooperative marketing association by another actionable civilly. Fort v. Coop. Farmers' Exch., 81 Colo. 431, 256 P. 319 (1927).
And may be restrained by court order. Knowingly to induce or to attempt to induce a member of a cooperative marketing association to break his marketing contract with the association is a misdemeanor, and being an unlawful interference such act may be restrained by order of court. Fort v. People ex rel. Coop. Farmers' Exch., 81 Colo. 420, 256 P. 325 (1927); Fort v. Coop. Farmers' Exch., 81 Colo. 431, 256 P. 319 (1927).
Where facts reveal that one "knowingly" induces an association member to breach his contract, the association is entitled to recover. Rinnander v. Denver Milk Producers, 114 Colo. 506 , 166 P.2d 984 (1946).
Furthermore, one may not escape liability on ground he is not an association member. One may not knowingly and designedly join in an attempt to breach a marketing contract and escape liability on the grounds that he is not a member of the association and not a party to the contract. Monte Vista Potato Growers' Coop. Ass'n v. Bond, 80 Colo. 516, 252 P. 813 (1927).
7-56-505. Purchases of property or other interests.
If a cooperative with preferred stock or preferred equity purchases or otherwise acquires any interest in any property, stock, or interest in another entity, it may, with the consent of the person or persons from whom the property or interests are being acquired, discharge the obligations incurred in the purchase or other acquisition, wholly or in part, by exchanging for the acquired property, stock, or interest shares or amounts of its preferred stock or preferred equity in an amount that, at par or stated value, would equal the value of the property, stock, or interest so purchased, as determined by the board. A transfer to the cooperative of the property, stock, or interest purchased or otherwise acquired shall be equivalent to payment in cash for the shares or amounts of preferred stock or preferred equity issued by the cooperative.
Source: L. 96: Entire article R&RE, p. 511, § 1, effective July 1.
7-56-506. Warehouse receipts - interest in warehouse entities.
If a cooperative formed under or that has elected to be subject to this article organizes, forms, operates, owns, controls, has an interest in, owns stock of, or is a member of any commodities warehouse, the warehouse may issue legal warehouse receipts to the cooperative against the commodities delivered by it or to any other person, and any legal warehouse receipt shall be considered as adequate collateral to the extent of the usual and current value of the commodity represented by the receipt. If the warehouse is licensed or licensed and bonded under the law of this state, any other state, or the United States, its warehouse receipt delivered to the cooperative on commodities of the cooperative or its members or delivered by the cooperative or its members shall not be challenged or discriminated against because of ownership or control, wholly or in part, by the cooperative.
Source: L. 96: Entire article R&RE, p. 511, § 1, effective July 1. L. 2003: Entire section amended, p. 2228, § 90, effective July 1, 2004.
Editor's note: This section is similar to former § 7-56-125 as existed prior to 1996.
Cross references: For other duties and liabilities of warehouses, see article 7 of title 4 and article 16 of title 12.
7-56-507. Application of other laws.
- If a matter is not addressed in this article, the "Colorado Business Corporation Act", articles 101 to 117 of this title, shall apply to the cooperatives formed under or subject to this article; except that a cooperative may elect to have the provisions of the "Colorado Revised Nonprofit Corporation Act", articles 121 to 137 of this title, apply to it if such cooperative does so in its articles or by a resolution of its members that is delivered to the secretary of state for filing pursuant to part 3 of article 90 of this title that states that the cooperative elects to have the provisions of the "Colorado Revised Nonprofit Corporation Act", articles 121 to 137 of this title, apply to it. A cooperative may revoke such election by amending its articles or by delivering to the secretary of state, for filing pursuant to part 3 of article 90 of this title, a statement of change that states that the cooperative revokes its election to have the provisions of the "Colorado Revised Nonprofit Corporation Act", articles 121 to 137 of this title, apply to it and that the revocation of such election has been approved by resolution of its members.
- Any exemptions under any existing law applying to goods or agricultural products in the possession or under the control of an individual producer shall apply similarly and completely to such goods or products when delivered by its members to, and in the possession or under the control of, the cooperative.
Source: L. 96: Entire article R&RE, p. 511, § 1, effective July 1. L. 97: (1) amended, p. 760, § 22, effective July 1, 1998. L. 2002: (1) amended, p. 1818, § 24, effective July 1; (1) amended, p. 1682, § 22, effective October 1. L. 2003: Entire section amended, p. 2228, § 91, effective July 1, 2004.
Editor's note: This section is similar to former §§ 7-55-116 and 7-56-130 as they existed prior to 1996.
7-56-508. Cooperatives not in restraint of trade.
No cooperative formed under or subject to this article shall solely by its organization and existence be deemed to be a conspiracy or a combination in restraint of trade, an illegal monopoly, or an attempt to lessen competition or to fix prices arbitrarily, nor shall the marketing or purchasing contracts and agreements between any cooperative and its members or any agreements authorized in this article be considered illegal as such, in unlawful restraint of trade, or as part of a conspiracy or combination to accomplish an improper or illegal purpose.
Source: L. 96: Entire article R&RE, p. 512, § 1, effective July 1. L. 2003: Entire section amended, p. 2229, § 92, effective July 1, 2004.
Editor's note: This section is similar to former § 7-56-129 as it existed prior to 1996.
ANNOTATION
Annotator's note: Since § 7-56-508 is similar to § 7-56-129 as it existed prior to the 1996 repeal and reenactment of this article, relevant cases construing that provision have been included in the annotations to this section.
This section exempts cooperative marketing associations from the penalties and restrictions of the state's anti-trust law. Rifle Potato Growers' Coop. Ass'n v. Smith, 78 Colo. 171, 240 P. 937 (1925); Beatrice Creamery Co. v. Cline, 9 F.2d 176 (D. Colo. 1925).
And the general assembly does have the power to exempt such combinations from prosecution and dissolution as unlawful trusts. Rifle Potato Growers' Coop. Ass'n v. Smith, 78 Colo. 171, 240 P. 937 (1925); Beatrice Creamery Co. v. Cline, 9 F.2d 176 (D. Colo. 1925).
7-56-509. Exemption from securities laws.
Any security, patronage refund, per unit retain certificate, capital credit, evidence of membership, preferred equity certificate, or other equity instrument issued, sold, or reported by a cooperative as an investment in its stock or capital to the patrons of a cooperative formed under or subject to this article or a similar law of any other jurisdiction and authorized to transact business or conduct activities in this state is exempt from the securities laws contained in the "Colorado Securities Act", article 51 of title 11, C.R.S. Such securities, patronage refunds, per unit retain certificates, capital credits, or evidences of membership, preferred equity certificates or other equity instruments may be issued, sold, or reported lawfully by the issuer or its directors, officers, members, or salaried employees without the necessity of the issuer or its directors, officers, members, or employees being registered as brokers or dealers under the "Colorado Securities Act", article 51 of title 11, C.R.S.
Source: L. 96: Entire article R&RE, p. 512, § 1, effective July 1. L. 2003: Entire section amended, p. 2229, § 93, effective July 1, 2004.
Editor's note: This section is similar to former § 7-55-115 as it existed in 1996.
7-56-510. Renewable energy cooperatives - powers.
- In addition to the powers granted in this article, renewable energy cooperatives may generate electricity from renewable resources or technologies and transmit and sell electricity at wholesale.
- No renewable energy cooperative shall sell electricity at retail or have a certificated territory in the state except as allowed for its own service or pursuant to public utility law or other legal authority.
Source: L. 2004: Entire section added, p. 1122, § 2, effective May 27.
PART 6 PROPERTY ENCUMBRANCES, BUSINESS COMBINATIONS, AND PROPERTY SALES
7-56-601. Encumbering property.
The board of a cooperative has full power and authority, without approval of its members, to mortgage, pledge, encumber, dedicate to the repayment of indebtedness, whether with or without recourse, or otherwise encumber any or all of the cooperative's property, whether or not in the usual and regular course of business, and to execute and deliver mortgages, deeds of trust, security agreements, or other instruments for such purposes.
Source: L. 96: Entire article R&RE, p. 512, § 1, effective July 1.
7-56-602. Merger, conversion, or consolidation or share or equity capital exchange.
- One or more cooperatives formed under or that have elected to be subject to this article may be merged, consolidated, or shares or equity capital exchanged with another domestic cooperative or another domestic entity, or may convert to any form of entity permitted by section 7-90-201, upon such terms, for such purpose, and by such domestic entity name as may be agreed upon, which domestic entity name shall comply with part 6 of article 90 of this title.
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- With respect to a cooperative that is a party to a plan of merger, conversion, consolidation, or share or equity capital exchange, unless a different vote is required by the articles or bylaws, the plan shall be approved by a two-thirds majority of all the members of the board of the cooperative and by a two-thirds majority of the members present and voting in person or in any other manner authorized by the cooperative pursuant to section 7-56-305 (1). If a higher or lower percentage vote of members is required by the articles or bylaws for approval, not less than a majority of those present and voting in person or in any other manner authorized by the cooperative pursuant to section 7-56-305 (1) nor more than a two-thirds majority of all voting members of the cooperative shall be required.
- A cooperative shall not permit proportional voting to apply to a vote of members on a plan of merger, conversion, consolidation, or share or equity capital exchange pursuant to this section.
- If voting by mail is permitted, the notice of the meeting shall be mailed to each member and have a mail ballot attached to it.
- A cooperative may establish different requirements for plans between or among two or more cooperatives and for plans where a noncooperative entity is a party to the plan.
- The vote required for approval of a plan by an entity that is a party to the plan and that is not a cooperative entity shall be governed by the law applicable to the noncooperative entity.
- If a party to the merger, conversion, consolidation, or share or equity capital exchange is the owner of real property in the state of Colorado and the merger, conversion, consolidation, or share or equity capital exchange would affect the title to the real property, a copy of a statement of merger, conversion, consolidation, or share or equity capital exchange, certified by the secretary of state, shall be filed for record in the office of the county clerk and recorder in the county or counties in which the real property is situated.
Source: L. 96: Entire article R&RE, p. 512, § 1, effective July 1. L. 2002: (3) amended, p. 1818, § 25, effective July 1; (3) amended, p. 1682, § 23, effective October 1. L. 2003: (1) and (2)(e) amended, p. 2229, § 94, effective July 1, 2004. L. 2004: (3) amended, p. 1414, § 52, effective July 1. L. 2006: (3) amended, p. 848, § 2, effective July 1. L. 2007: (1), (2)(a), (2)(b), and (3) amended, p. 219, § 3, effective May 29.
Editor's note: This section is similar to former §§ 7-55-112, 7-56-108, 7-56-121, and 7-56-126 as they existed prior to 1996.
7-56-603. Procedure for consolidation, share or equity capital exchange, conversion, and merger.
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[ Editor's note: This version of the introductory portion to subsection (1) is effective until July 1, 2020.] A plan for consolidation or share or equity capital exchange shall state the following:
(1) [ Editor's note: This version of the introductory portion to subsection (1) is effective July 1, 2020. ] A plan for consolidation or share or equity capital exchange must state the following:
- The entity name of each entity planning to consolidate or exchange shares or equity capital and the principal office address of its principal office;
- The entity name of the surviving entity, or of the acquiring entity, and the principal office address of its principal office;
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[ Editor's note: This version of subsection (1)(c) is effective until July 1, 2020.] A statement that the consolidating entities are consolidated with the surviving entity, or that the acquiring entity is acquiring shares or equity capital of the other entities, and the section of this article pursuant to which the consolidation or share exchange is effected;
(c) [ Editor's note: This version of subsection (1)(c) is effective July 1, 2020. ] A statement that the consolidating entities are consolidated with the surviving entity, or that the acquiring entity is acquiring shares or equity capital of the other entities, and the section of this article pursuant to which the consolidation or exchange is effected;
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[ Editor's note: This version of subsection (1)(d) is effective until July 1, 2020.] Any amendments to the articles of the surviving party to be effected by the consolidation or share or equity capital exchange; and
(d) [ Editor's note: This version of subsection (1)(d) is effective July 1, 2020. ] Any amendments to the articles of the surviving party to be effected by the consolidation or equity capital exchange; and
- With respect to agricultural and other cooperatives exempted from the operation of laws such as the federal and state securities or antitrust laws, any steps necessary to maintain such exemption if the cooperative wishes to maintain such status.
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The plan of consolidation or share or equity capital exchange may state any other provisions relating to the consolidation or share or equity capital exchange.
(2.3) A plan of conversion shall comply with section 7-90-201.3.
(2.7) A plan of merger shall comply with section 7-90-203.3.
- Nothing in this section shall be deemed to limit the power of a cooperative or other entity to acquire all or part of the shares or equity capital of another cooperative through a voluntary exchange or through an agreement with the members of such other cooperative.
Source: L. 96: Entire article R&RE, p. 513, § 1, effective July 1. L. 2003: IP(1), (1)(a) to (1)(d), and (2) amended, p. 2230, § 95, effective July 1, 2004. L. 2004: (1)(d) RC&RE, p. 1415, § 53, effective July 1. L. 2007: IP(1), (1)(a), (1)(c), (1)(d), and (2) amended and (2.3) and (2.7) added, p. 220, § 4, effective May 29. L. 2019: IP(1), (1)(c), and (1)(d) amended, (SB 19-086), ch. 166, p. 1964, § 64, effective July 1, 2020.
Editor's note: (1) This section is similar to former §§ 7-55-112, 7-56-108, 7-56-121, and 7-56-126 as they existed prior to 1996.
(2) Section 72 of chapter 166 (SB 19-086), Session Laws of Colorado 2019, provides that the act changing this section applies to conduct occurring on or after July 1, 2020.
7-56-604. Merger of parent and subsidiary.
- Notwithstanding the provisions of sections 7-56-602 and 7-56-603, by complying with the provisions of this section, any parent cooperative owning one hundred percent of the voting shares, memberships, or interests and having a right to vote of a subsidiary may either merge such subsidiary into itself or merge itself into such subsidiary.
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The boards of the parent cooperative and of the subsidiary shall adopt by resolution, and the members of both the parent cooperative and the subsidiary shall approve, a plan of merger that states the following:
- The entity names of the parent cooperative and subsidiary and the entity name of the surviving party;
- The terms and conditions of the proposed merger;
- The manner and basis of converting the shares of the parent cooperative and subsidiary into shares, obligations, or other securities of the surviving party or any other cooperative into money or other property in whole or part;
- Any amendments to the articles of the surviving party to be effected by the merger; and
- Any other provisions relating to the merger as are deemed necessary or desirable.
- The members of the parent cooperative shall not be required to vote on the merger unless the articles, bylaws, or the board requires otherwise; except that if, as a result of the merger, the voting shares, memberships, or other interests of members of the parent cooperative would be materially altered, then the members of the parent cooperative shall have the right to vote on the plan of merger. If the members of the parent cooperative have the right to vote on the plan of merger, the parent cooperative shall mail a copy or summary of the plan of merger to each member of the parent cooperative who has the right to vote on the plan and all parties to the merger. Notice and meeting requirements as provided for in this article shall apply.
- If the members of the parent cooperative have the right to vote on the plan of merger, unless the articles, bylaws, or the board requires a greater or lesser vote, the plan of merger, consolidation, or share or equity capital exchange shall be approved by a majority of the members of the parent cooperative present and voting on the plan in person or in any other manner authorized by the cooperative pursuant to section 7-56-305 (1). Upon approval of a plan of merger pursuant to this section, a statement of merger shall be delivered to the secretary of state, for filing pursuant to part 3 of article 90 of this title, and a copy of the statement of merger, certified by the secretary of state, shall be filed for record in each of the counties, if any, in which such filing is required by section 7-56-602 (3).
- (Deleted by amendment, L. 98, p. 612 , § 6, effective July 1, 1998.)
Source: L. 96: Entire article R&RE, p. 514, § 1, effective July 1. L. 98: IP(2), (3), (4), and (5) amended, p. 612, § 6, effective July 1. L. 2002: (4) amended, p. 1818, § 26, effective July 1; (4) amended, p. 1682, § 24, effective October 1. L. 2003: IP(2) and (2)(a) amended, p. 2230, § 96, effective July 1, 2004. L. 2004: (2)(a) amended, p. 1415, § 54, effective July 1. L. 2006: (4) amended, p. 849, § 3, effective July 1.
Editor's note: This section is similar to former §§ 7-55-112, 7-56-108, 7-56-121, and 7-56-126 as they existed prior to 1996.
7-56-604.5. Statement of merger or conversion.
- After a plan of merger is approved, the surviving entity shall deliver to the secretary of state, for filing pursuant to part 3 of article 90 of this title, a statement of merger pursuant to section 7-90-203.7. If the plan of merger provides for amendments to the articles of incorporation of the surviving entity, the surviving entity shall deliver to the secretary of state, for filing pursuant to part 3 of article 90 of this title, articles of amendment effecting the amendments.
- After a plan of conversion is approved, the converting entity shall deliver to the secretary of state, for filing pursuant to part 3 of article 90 of this title, a statement of conversion pursuant to section 7-90-201.7.
Source: L. 2004: Entire section added, p. 1415, § 55, effective July 1. L. 2007: Entire section amended, p. 220, § 5, effective May 29.
7-56-605. Statement of consolidation or share or equity capital exchange.
- (Deleted by amendment, L. 2004, p. 1415 , § 56, effective July 1, 2004.)
-
[ Editor's note: This version of the introductory portion to subsection (2) is effective until July 1, 2020.] After a plan of consolidation or share or equity capital exchange is approved by all necessary action of all parties, the acquiring entity shall deliver to the secretary of state, for filing pursuant to part 3 of article 90 of this title, a statement of consolidation or a statement of share exchange stating:
(2)
[
Editor's note: This version of the introductory portion to subsection (2) is effective July 1, 2020.
]
After a plan of consolidation or share or equity capital exchange is approved by all necessary action of all parties, the acquiring entity shall deliver to the secretary of state, for filing pursuant to part 3 of article 90 of this title, a statement of consolidation or a statement of exchange stating:
- The entity name of each entity that is a party to the consolidation or the shares of which will be acquired and the principal office address of its principal office;
- The entity name of the consolidated or acquiring entity and the principal office address of its principal office; and
- The effective date of the consolidation or share or equity capital exchange.
- and (d) (Deleted by amendment, L. 2004, p. 1415 , § 56, effective July 1, 2004.)
- The consolidation or share or equity capital exchange shall be effective as provided in section 7-90-304.
Source: L. 96: Entire article R&RE, p. 515, § 1, effective July 1. L. 2002: (1), IP(2), and (3) amended, p. 1818, § 27, effective July 1; (1), IP(2), and (3) amended, p. 1683, § 25, effective October 1. L. 2003: IP(2), (2)(c), and (2)(d) amended and (2)(c.5) added, p. 2230, § 97, effective July 1, 2004. L. 2004: Entire section amended, p. 1415, § 56, effective July 1. L. 2019: IP(2) amended, (SB 19-086), ch. 166, p. 1965, § 65, effective July 1, 2020.
Editor's note: (1) This section is similar to former §§ 7-55-112, 7-56-108, 7-56-121, and 7-56-126 as they existed prior to 1996.
(2) Section 72 of chapter 166 (SB 19-086), Session Laws of Colorado 2019, provides that the act changing this section applies to conduct occurring on or after July 1, 2020.
7-56-606. Effect of merger, conversion, consolidation, or share or equity capital exchange.
- The effect of a merger is determined by section 7-90-204.
- The effect of a conversion is determined by section 7-90-202.
-
When a consolidation takes effect:
- Each nonsurviving party to the consolidation consolidates into the surviving party, and the separate existence of every party to the consolidation except the surviving party ceases;
- The title to all real estate and other property owned by each nonsurviving party is transferred to and vested in the surviving party without reversion or impairment. Such transfer to and vesting in the surviving party shall be deemed to occur by operation of law, and no consent or approval of any other person shall be required in connection with any such transfer or vesting unless such consent or approval is specifically required in the event of consolidation by law or by express provision in any contract, agreement, decree, order, or other instrument to which any of the parties so consolidated is a party or by which it is bound.
- The surviving party has all liabilities of each party to the consolidation;
- A proceeding pending against any party to the consolidation may be continued as if the consolidation did not occur or the surviving party may be substituted in the proceeding for the party whose existence ceased;
- The articles of the surviving party are amended to the extent provided in the plan of consolidation; and
- The shares of each such party to the consolidation that are to be converted into shares, obligations, or other securities of the surviving or any other party or into money or other property are converted, and the former holders of the shares or equity capital are entitled only to the rights provided in the statement of consolidation.
- When a share or equity capital exchange takes effect, the shares or equity capital of each acquired party are exchanged as provided in the plan, and the former holders of the shares or equity capital are entitled only to the exchange rights provided in the articles of share or equity capital exchange.
Source: L. 96: Entire article R&RE, p. 515, § 1, effective July 1. L. 2004: (1) amended, p. 1416, § 57, effective July 1. L. 2007: Entire section amended, p. 220, § 6, effective May 29.
Editor's note: This section is similar to former §§ 7-55-112, 7-56-108, 7-56-121, and 7-56-126 as they existed prior to 1996.
7-56-606.5. Merger with foreign entity.
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One or more domestic cooperatives may merge with one or more foreign entities if:
- The merger is permitted by section 7-90-203 (2);
- The foreign entity complies with section 7-90-203.7 if it is the surviving entity of the merger; and
- Each domestic cooperative complies with the applicable provisions of sections 7-56-602 and 7-56-603 and, if it is the surviving cooperative of the merger, with section 7-56-604.5.
- Upon the merger taking effect, the surviving foreign entity of a merger shall comply with section 7-90-204.5.
Source: L. 2007: Entire section added, p. 222, § 7, effective May 29.
7-56-607. Consolidation or share or equity capital exchange with foreign business.
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One or more domestic cooperatives may consolidate or enter into a share or equity capital exchange with one or more foreign entities if:
- In a consolidation, the consolidation is permitted by the law of the jurisdiction under which each foreign entity is formed and each foreign entity complies with that law in effecting the consolidation;
- In a share or equity capital exchange, the cooperative whose shares or equity will be acquired is a domestic or foreign cooperative, and if a share or equity capital exchange is permitted by the law of the jurisdiction under the law of which the acquiring entity is formed;
- The foreign entity complies with the provisions of section 7-56-605 if it is the surviving or new entity in a consolidation or acquiring entity in a share or equity capital exchange; and
- The foreign entity is the surviving entity in the consolidation or the acquiring entity of the share or equity capital exchange and it complies with section 7-56-605 .
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Upon the consolidation or share or equity capital exchange taking effect, the surviving foreign entity of a consolidation and the acquiring foreign entity of a share or equity capital exchange:
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Shall either:
- Appoint a registered agent if the foreign entity has no registered agent and maintain a registered agent pursuant to part 7 of article 90 of this title, whether or not the foreign entity is otherwise subject to that part, to accept service in any proceeding based on a cause of action arising with respect to any domestic entity that is merged into the foreign entity or the ownership interests of which are acquired in a share or equity capital exchange; or
- Be deemed to have authorized service of process on it in connection with any such proceeding by mailing in accordance with section 7-90-704 (2); and
- Shall comply with part 8 of article 90 of this title if it is to transact business or conduct activities in this state.
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Shall either:
- (Deleted by amendment, L. 2004, p. 1417 , § 58, effective July 1, 2004.)
- Subsection (2) of this section does not prescribe the only means, or necessarily the required means, of serving a surviving foreign entity in a consolidation or an acquiring foreign entity in a share or equity capital exchange.
- This section does not limit the power of a foreign entity to acquire all or part of the shares of one or more classes or series of a domestic cooperative through a voluntary exchange of shares or otherwise.
Source: L. 96: Entire article R&RE, p. 516, § 1, effective July 1. L. 2002: (2)(a)(II) amended, p. 1819, § 28, effective July 1; (2)(a)(II) amended, p. 1683, sect; 26, effective October 1. L. 2003: (1)(a), (1)(b), and (2) amended, p. 2231, § 98, effective July 1, 2004. L. 2004: (1)(c), (1)(d), IP(2), (2)(a)(II), (3), and (4) amended and (1.5) added, p. 1417, § 58, effective July 1. L. 2006: (1)(d) amended, p. 1488, § 4, effective June 1. L. 2007: (1), (1.5), and (2)(a)(I) amended, p. 222, § 8, effective May 29.
Editor's note: This section is similar to former §§ 7-55-112, 7-56-108, 7-56-121, and 7-56-126 as they existed prior to 1996.
7-56-608. Dissenters' rights - definitions.
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As used in this section:
- "Dissenter" means a member eligible to vote who exercises the right to dissent provided in this section at the time and in the manner required by this section.
- "Interest" means interest required to be paid pursuant to this section at the average rate currently paid by the cooperative subject to this section on its principal bank loans or, if none, at the legal rate specified in section 5-12-101, C.R.S.
- "Stated value" means the original cost paid by a person for capital stock or membership fees, as recorded in the records of the cooperative, in order to qualify for membership and the right to vote in the cooperative, and for other equity capital the amount stated in the records of the cooperative that is required to make a payment under this section.
- If the board of a cooperative subject to this article submits to the members of the cooperative for approval a plan of merger, conversion, consolidation, or share or equity capital exchange and if following the merger, conversion, consolidation, or share or equity capital exchange there will be members of any cooperative involved in the proposed transaction who would no longer be eligible for membership or other voting interest in the surviving or resulting entity, the ineligible members shall be entitled to repayment of their equity interests in the cooperative in accordance with this section.
- If the board of a cooperative subject to this article submits to the members of the cooperative for approval a plan to sell all or substantially all of the cooperative's assets and not dissolve following the sale, the members of the cooperative shall be entitled to repayment of their equity interests in the cooperative in accordance with this section.
- A cooperative that proposes to be a party to a merger, conversion, consolidation, share or equity capital exchange, or a sale of assets, as described in subsection (2) or (3) of this section, shall include in the notice of the membership meeting at which the vote of the members is taken thereon an explanation of the right to dissent and the requirement to give written notice of intent to demand payment by a member having the right to do so under this section.
- A member who may be entitled to repayment of the member's equity interests in the cooperative in accordance with this section shall give written notice of the member's intention to demand payment before the vote is taken at the membership meeting at which a vote on the proposed merger, conversion, consolidation, share or equity capital exchange, or sale of assets is to be taken. Upon giving notice, the member shall no longer be entitled to vote on the proposed transaction. The written notice shall include the name of the member in which the stock or membership is held on the records of the cooperative and the member's address and social security or federal tax identification number. Failure to give written notice of intention to demand payment in the prescribed manner disqualifies the member from demanding payment under this section.
- If the merger, conversion, consolidation, share or equity capital exchange, or sale of assets described in subsection (2) or (3) of this section is approved by the members of the cooperative in the manner applicable to any other entity that is a party to the transaction, the surviving, resulting, or new entity, including a cooperative that is to sell all or substantially all of its assets, shall be required to make the payments provided in this section. The surviving, resulting, or new entity shall give written notice to all dissenters who have given notice to dissent pursuant to this section. The notice shall include the address at which the surviving, resulting, or new entity will receive payment demands, the requirement to submit stock or membership certificates or certification of the loss or destruction thereof, the period in which demands will be received which shall be not less than thirty days from the date of the notice, and where applicable, a statement of qualifications for membership or other voting interest in the surviving or new entity.
- Within the period stated in the notice described in subsection (6) of this section, a dissenter may deliver a written demand for payment to the surviving, resulting, or new entity, or in the case of a sale of assets subject to this section, to the cooperative selling its assets, stating the address to which payment is to be made and, where applicable, a statement as to the reasons why the dissenter no longer qualifies for membership or a voting interest in the surviving, resulting, or new entity.
-
Within thirty days after receipt of a demand for payment, the surviving, resulting, or new entity or, in the case of a sale of assets subject to this section, the cooperative selling its assets shall pay to the dissenter:
- The stated value of the initial investment of the dissenter in stock or membership fees in the cooperative as recorded in the records of the cooperative made to qualify the dissenter to be a member of the cooperative; and
- The stated value of all other equity capital of the dissenter in the cooperative as recorded in the records of the surviving, resulting, or new entity, or in the case of a sale of assets subject to this section, of the cooperative selling its assets; except that, in the case of any merger, conversion, consolidation, or share or equity capital exchange, if the surviving, resulting, or new entity has, by written agreement or operation of law other than this section, become liable to repay the other equity capital of the dissenter, the repayment of other equity capital shall be made by the surviving, resulting, or new entity under the same conditions and time frame, but not more than fifteen years, that would have applied if the member or equity holder had withdrawn or been terminated from the cooperative that is not the surviving, resulting, or new entity immediately prior to the effective date of the merger, conversion, consolidation, or share or equity capital exchange. If payment is not made on the date required by this subsection (8), the recipient shall be entitled to interest from the date the payment should have been made until the date payment is actually made.
- Notwithstanding any provisions of law to the contrary, holders of equity capital who are not members of the cooperative shall under no circumstances be entitled to dissenter's rights.
- Section 7-90-206 (2) applies to a conversion in which the cooperative is the converting entity.
Source: L. 96: Entire article R&RE, p. 517, § 1, effective July 1. L. 2003: (7) amended, p. 2232, § 99, effective July 1, 2004. L. 2006: (10) added, p. 849, § 4, effective July 1. L. 2007: (2), (4), (5), (6), (7), IP(8), and (8)(b) amended, p. 223, § 9, effective May 29.
Editor's note: This section is similar to former §§ 7-55-112, 7-56-108, 7-56-121, and 7-56-126 as they existed prior to 1996.
Cross references: For additional definitions applicable to this article, see § 7-90-102.
7-56-609. Sale or other disposition of property without member approval.
-
A cooperative may, on the terms and conditions and for the consideration determined by the board:
- Sell, lease, exchange, or otherwise dispose of any of its property in the usual and regular course of business; except that a sale, lease, exchange, or other disposition of all, or substantially all, of its property shall never be considered to be in the usual and regular course of business;
- Transfer to itself any or all of the property of a domestic or foreign entity when all the voting rights of the transferor are owned, directly or indirectly, by the transferee cooperative.
- Unless otherwise provided in the articles or bylaws, approval by the members of a transaction described in subsection (1) of this section is not required.
Source: L. 96: Entire article R&RE, p. 520, § 1, effective July 1.
7-56-610. Sale or other disposition of property requiring member approval.
- A cooperative may sell, lease, exchange, or otherwise dispose of all, or substantially all, of its property, with or without its good will, only on the terms and conditions and for the consideration determined by the board and if the board proposes or submits and the members approve the transaction. A sale, lease, exchange, or other disposition of all, or substantially all, of the property of a cooperative, with or without its good will, in connection with its dissolution, other than pursuant to a court order, shall be subject to the requirements of this section; but a sale, lease, exchange, or other disposition of all, or substantially all, of the property of a cooperative, with or without its good will, pursuant to a court order shall not be subject to the requirements of this section. If a resolution to dissolve the cooperative that is adopted by the members of a cooperative pursuant to section 7-56-702 contemplates the sale of all or substantially all of the cooperative's property in connection with the dissolution, the adoption of that resolution by the members shall also be an authorization to sell all or substantially all of the cooperative's property pursuant to this section.
- If a cooperative is entitled to vote or otherwise consent, other than in the usual and regular course of its business, with respect to the sale, lease, exchange, or other disposition of all, or substantially all, of its property with or without the good will of another entity that it controls, and if the shares or other interests held by the cooperative in such other entity constitute all, or substantially all, of the property of the cooperative, then the cooperative shall consent to such transaction only if its board proposes and its members approve the giving of consent.
-
For a transaction described in subsection (1) of this section or a consent described in subsection (2) of this section to be approved by the members:
- The board, by a two-thirds majority vote of all its members, shall recommend the transaction or the consent to the members unless the board determines that, because of conflict of interest or other special circumstances, it should make no recommendation and communicates the basis for its determination to the members with the submission of the transaction or the consent; and
- The members entitled to vote on the transaction or the consent shall approve the transaction or the consent as provided in subsection (6) of this section.
- The board may condition the effectiveness of the transaction or the consent on any basis.
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The cooperative shall give proper notice to each member entitled to vote on the transaction described in subsection (1) of this section or the consent described in subsection (2) of this section of the members' meeting at which the transaction or the consent will be voted upon. The notice shall:
-
State that the purpose, or one of the purposes, of the meeting is to consider:
- In the case of action pursuant to subsection (1) of this section, the sale, lease, exchange, or other disposition of all, or substantially all, of the property of the cooperative; or
- In the case of action pursuant to subsection (2) of this section, the cooperative's consent to the sale, lease, exchange, or other disposition of all, or substantially all, of the property of another entity, which entity shall be identified in the notice, shares or other interests of which are held by the cooperative and constitute all, or substantially all, of the property of the cooperative; and
- Contain or be accompanied by a description of the transaction, in the case of action pursuant to subsection (1) of this section, or by a description of the transaction underlying the consent, in the case of action pursuant to subsection (2) of this section.
-
State that the purpose, or one of the purposes, of the meeting is to consider:
- Member approval of a transaction or consent described in subsections (1) and (2) of this section shall require an affirmative vote of two-thirds majority of the members present and voting in person or in any other manner authorized by the cooperative pursuant to section 7-56-305 (1); but the two-thirds voting requirement may be reduced to not less than a majority of the members present and voting in person or in any other manner authorized by the cooperative pursuant to section 7-56-305 (1), or may be increased to up to two-thirds of all members entitled to vote, by a provision contained in the articles or bylaws of the cooperative. The cooperative may also provide in its articles or bylaws for different voting requirements with respect to a transaction between one or more cooperatives subject to this article or similar law of other states and between the cooperative and one or more entities formed under or subject to different law of this or other states. A cooperative may not permit proportional voting to apply to a vote of members with respect to the sale of all or substantially all of the property of the cooperative pursuant to this section.
- After a transaction described in subsection (1) of this section or a consent described in subsection (2) of this section is authorized, the transaction may be abandoned or the consent withheld or revoked, subject to any contractual rights or other limitations on such abandonment, withholding, or revocation, by a unanimous vote of the board or the vote of two-thirds of all the members.
- If the members do not approve of a transaction or consent as described in subsections (1) and (2) of this section, the board may prohibit the consideration and submittal of a similar proposal to the members for a period of two years following the members' vote.
Source: L. 96: Entire article R&RE, p. 520, § 1, effective July 1. L. 2003: (6) amended, p. 2232, § 100, effective July 1, 2004.
PART 7 DISSOLUTION
SUBPART 1 VOLUNTARY DISSOLUTION
7-56-701. Authorization of dissolution before issuance of memberships.
If a cooperative has not yet issued memberships, a majority of its directors or, if the initial directors designated in the articles have not met or if not designated in the articles have not been elected, a majority of its incorporators, may authorize the dissolution of the cooperative.
Source: L. 96: Entire article R&RE, p. 522, § 1, effective July 1.
Editor's note: This section is similar to former § 7-55-114 as it existed prior to 1996.
7-56-702. Authorization of dissolution after issuance of memberships.
-
After memberships have been issued, dissolution of a cooperative may be authorized in the following manner:
- The board, by a two-thirds majority vote of all its members, shall first adopt a resolution recommending dissolution that conforms to the requirements of paragraph (c) of this subsection (1);
- The board shall submit the resolution adopted pursuant to paragraph (a) of this subsection (1) to the members;
- The resolution adopted pursuant to paragraph (a) of this subsection (1) shall state the reasons why the termination of the affairs of the cooperative is deemed advisable, the time by which it should be accomplished, whether or not the board may revoke dissolution, and the names of three persons and two alternates to act as trustees in liquidation who shall have all the powers of the board to do all things they deem necessary for the efficient distribution of claims to creditors, in liquidation and termination of the affairs of the cooperative, including the sale of all or substantially all of the cooperative's property as they deem necessary if the resolution also provides for a sale of the property. Such trustees and alternates need not be members of the cooperative. Any vacancies in the trusteeship shall be first filled by the designated alternates and then may be filled by such persons as may be designated by the remaining trustees.
- The board may condition the effectiveness of the dissolution on any basis.
- The cooperative shall give notice to each member of the regular or special meeting at which the resolution to dissolve will be voted upon. The notice shall state that the purpose, or one of the purposes, of the meeting is to consider the proposal to dissolve the cooperative. The notice shall contain or be accompanied by a copy of the proposal or a summary thereof, including a description of the proposed distribution of the cooperative's assets and, if voting by mail is permitted, with a mail ballot attached to it.
- The proposal to dissolve shall be approved by a two-thirds majority vote of the members present and voting in person or in any other manner authorized by the cooperative pursuant to section 7-56-305 (1) at a regular or special meeting called for such purpose. A cooperative shall not permit proportional voting to apply to a vote of members on a resolution to dissolve pursuant to this section.
Source: L. 96: Entire article R&RE, p. 522, § 1, effective July 1. L. 98: (1)(a) amended, p. 613, § 7, effective July 1. L. 2007: (3) amended, p. 224, § 10, effective May 29.
Editor's note: This section is similar to former § 7-55-114 as it existed prior to 1996.
7-56-703. Articles of dissolution.
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At any time after dissolution is authorized, the cooperative may dissolve by delivering to the secretary of state, for filing pursuant to part 3 of article 90 of this title, articles of dissolution stating:
- The domestic entity name of the cooperative;
- The principal office address of the cooperative's principal office; and
- That the cooperative is dissolved.
- (Deleted by amendment, L. 2004, p. 1418 , § 59, effective July 1, 2004.)
- A cooperative is dissolved upon the effective date of its filed articles of dissolution.
- (Deleted by amendment, L. 2003, p. 2232 , § 101, effective July 1, 2004.)
Source: L. 96: Entire article R&RE, p. 523, § 1, effective July 1. L. 2002: IP(1) amended, p. 1819, § 29, effective July 1; IP(1) amended, p. 1683, § 27, effective October 1. L. 2003: IP(1), (1)(a), (1)(b), and (3) amended, p. 2232, § 101, effective July 1, 2004. L. 2004: (1) amended, p. 1418, § 59, effective July 1.
Editor's note: This section is similar to former § 7-55-114 as it existed prior to 1996.
7-56-704. Revocation of dissolution. (Repealed)
Source: L. 96: Entire article R&RE, p. 524, § 1, effective July 1. L. 2002: IP(3) and (4) amended, p. 1819, § 30, effective July 1; IP(3) and (4) amended, p. 1684, § 28, effective October 1. L. 2003: IP(3), (3)(a), and (4) amended and (5) added, p. 2232, § 102, effective July 1, 2004. L. 2004: Entire section repealed, p. 1418, § 60, effective July 1.
Editor's note: This section was similar to former § 7-55-114 as it existed prior to 1996.
7-56-705. Effect of dissolution.
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A dissolved cooperative continues its existence but may not carry on any business except as is appropriate to wind up and liquidate its business and affairs, including:
- Collecting its assets;
- Disposing of its assets that will not be distributed in kind to its members or equity holders;
- Discharging or making provision for discharging its liabilities;
- Distributing its remaining assets among its members or equity holders according to their interests; and
- Doing every other act necessary to wind up and liquidate its business and affairs.
-
Unless otherwise stated in the articles or bylaws, the assets shall be used to pay, in the following order:
- Liquidation expenses, including reasonable payment and reimbursement for the time and expenses of the trustees in liquidation and their consultants;
- All debts and liabilities according to their respective priorities;
- Amounts invested in the cooperative that have a specific preference in liquidation over other amounts invested in the cooperative;
- Without priority and on a pro rata basis, amounts invested in the cooperative, whether as membership fees, common stock, or otherwise, which are required by the cooperative to be invested in order for a person to be a member or to be subject to per unit retains or be entitled to participate in the allocation of net margins on terms and conditions established in the cooperative's bylaws or by the cooperative's board;
- Without priority and on a pro rata basis, retained patronage, per unit retains, other amounts withheld from or allocated to a patron of the cooperative, or any direct contributions to the capital of the cooperative not described in paragraph (d) of this subsection (2), all as shown on the books and records of the cooperative;
- Any remaining assets, including reserves, if any, shall be distributed among such members of the cooperative, as shown in the records of the cooperative, without priority and on a pro rata basis, as shall be practicable as determined by the trustees in liquidation. In making their determination, the trustees in liquidation may limit those persons entitled to share in the distribution to persons entitled to share in the allocation of the cooperative's net margins during a limited specified period of time.
- With respect to paragraphs (e) and (f), the amounts to be distributed shall be paid to the persons entitled to them as promptly as reasonably possible after the filing of the articles of dissolution by the secretary of state, but in no event shall the distributions be made later than seven years following the filing of the articles of dissolution by the secretary of state unless distribution is prevented by circumstances beyond the control of the trustees in liquidation.
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Dissolution of a cooperative does not:
- Transfer title to the cooperative's property;
- Prevent transfer of its memberships or securities, although the authorization to dissolve may provide for closing the cooperative's membership, stock, or other equity transfer records;
- Subject its directors or officers to standards of conduct different from those otherwise applicable to them prior to dissolution;
- Change quorum or voting requirements for its board or members; change provisions for selection, resignation, or removal of its directors or officers, or both; or change provisions for amending its bylaws or its articles;
- Prevent commencement of a proceeding by or against the cooperative in its cooperative name; or
- Abate or suspend a proceeding pending by or against the cooperative on the effective date of dissolution.
- A dissolved cooperative may dispose of claims against it pursuant to sections 7-90-911 and 7-90-912.
Source: L. 96: Entire article R&RE, p. 525, § 1, effective July 1. L. 2006: (4) added, p. 849, § 5, effective July 1.
Editor's note: This section is similar to former § 7-55-114 as it existed prior to 1996.
7-56-706. Disposition of known claims by notification. (Repealed)
Source: L. 96: Entire article R&RE, p. 526, § 1, effective July 1. L. 2006: Entire section repealed, p. 884, § 87, effective July 1.
Editor's note: This section was similar to former § 7-55-114 as it existed prior to 1996.
7-56-707. Disposition of claims by publication. (Repealed)
Source: L. 96: Entire article R&RE, p. 527, § 1, effective July 1. L. 2003: (2)(a) amended, p. 2233, § 103, effective July 1, 2004. L. 2006: Entire section repealed, p. 884, § 87, effective July 1.
Editor's note: This section was similar to former § 7-55-114 as it existed prior to 1996.
7-56-708. Enforcement of claims against dissolved cooperative. (Repealed)
Source: L. 96: Entire article R&RE, p. 528, § 1, effective July 1. L. 2006: Entire section repealed, p. 884, § 87, effective July 1.
Editor's note: This section was similar to former § 7-55-114 as it existed prior to 1996.
7-56-709. Service on dissolved cooperative - repeal. (Repealed)
Source: L. 96: Entire article R&RE, p. 528, § 1, effective July 1. L. 2003: (4) added by revision, pp. 2356, 2357, §§ 347, 348.
Editor's note: (1) This section was similar to former § 7-55-114 as it existed prior to 1996.
(2) Subsection (4) provided for the repeal of this section, effective July 1, 2004. (See L. 2003, pp. 2356, 2357.)
SUBPART 2 ADMINISTRATIVE DISSOLUTION
7-56-710. Grounds for administrative dissolution. (Repealed)
Source: L. 96: Entire article R&RE, p. 529, § 1, effective July 1. L. 2000: (1)(b) amended, p. 951, § 13, effective July 1. L. 2003: (1)(b), (1)(c), and (1)(d) amended, p. 2233, § 104, effective July 1, 2004. L. 2004: (1)(b) amended, p. 1419, § 61, effective July 1. L. 2005: Entire section repealed, p. 1218, § 26, effective October 1.
7-56-711. Procedure for and effect of administrative dissolution. (Repealed)
Source: L. 96: Entire article R&RE, p. 529, § 1, effective July 1. L. 2003: (2) to (5) amended, p. 2233, § 105, effective July 1, 2004. L. 2005: Entire section repealed, p. 1218, § 26, effective October 1.
7-56-712. Reinstatement following administrative dissolution. (Repealed)
Source: L. 96: Entire article R&RE, p. 530, § 1, effective July 1. L. 2000: (1)(c) amended, p. 951, § 14, effective July 1. L. 2002: IP(1), (2), and (3) amended, p. 1819, § 31, effective July 1; IP(1), (2), and (3) amended, p. 1684, § 29, effective October 1. L. 2004: Entire section repealed, p. 1419, § 62, effective July 1.
7-56-713. Appeal from denial of reinstatement. (Repealed)
Source: L. 96: Entire article R&RE, p. 531, § 1, effective July 1. L. 2004: Entire section repealed, p. 1420, § 63, effective July 1.
SUBPART 3 JUDICIAL DISSOLUTION
7-56-714. Grounds for judicial dissolution.
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A cooperative may be dissolved in a proceeding brought in court by the attorney general if it is established that:
- The cooperative obtained its organization through fraud; or
- The cooperative has exceeded or abused the authority conferred upon it by law.
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A cooperative may be dissolved in a proceeding brought in court by not less than ten percent of the total number of members if it is established that:
- The directors are deadlocked in the management of the cooperative's affairs, the members are unable to break the deadlock, and irreparable injury to the cooperative is threatened or suffered, or the business and affairs of the cooperative can no longer be conducted to the advantage of the members generally;
- The directors or those in control of the cooperative have acted, are acting, or will act in a manner that is illegal, oppressive, or fraudulent; or
- The members are deadlocked in voting power and have failed for a period that includes at least two consecutive annual meeting dates, to elect successors to directors whose terms have expired or would have expired upon the election of their successors.
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A cooperative may be dissolved in a proceeding brought in court by a creditor if it is established that:
- A creditor's claim has been reduced to judgment, the execution on the judgment has been returned unsatisfied, and the cooperative is insolvent; or
- The cooperative is insolvent and the cooperative has admitted in writing that a creditor's claim is due and owing.
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If a cooperative has been dissolved by voluntary action taken under sections 7-56-701 to 7-56-705:
- The cooperative may bring a proceeding in court to wind up and liquidate its business and affairs under judicial supervision in accordance with section 7-56-716; or
- The attorney general, a member, or a creditor, as the case may be, may bring a proceeding in court to wind up and liquidate the business and affairs of the cooperative under judicial supervision in accordance with section 7-56-716, upon establishing the grounds set forth for such person, respectively, in subsections (1) to (3) of this section.
- As used in sections 7-56-715 to 7-56-717, a "proceeding to dissolve the cooperative" includes a proceeding brought under this subsection (4), and a "decree of dissolution" includes an order of court entered in a proceeding under this subsection (4) that directs that the business and affairs of a cooperative be wound up and liquidated under judicial supervision.
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If a cooperative has been dissolved by voluntary action taken under sections 7-56-701 to 7-56-705:
Source: L. 96: Entire article R&RE, p. 531, § 1, effective July 1. L. 2003: IP(4)(a) amended, p. 2234, § 106, effective July 1, 2004. L. 2004: (4)(b) amended, p. 1420, § 64, effective July 1. L. 2005: IP(4)(a) amended, p. 1218, § 27, effective October 1. L. 2006: IP(4)(a) amended, p. 849, § 6, effective July 1.
7-56-715. Procedure for judicial dissolution.
- A proceeding to dissolve a cooperative brought by the attorney general shall be brought in the district court for the county in this state in which the street address of the cooperative's principal office is located or, if the cooperative has no principal office in this state, in the district court for the county in which the street address of its registered agent is located or, if the cooperative has no registered agent, in the district court for the city and county of Denver. A proceeding brought by any other party named in section 7-56-714 shall be brought in the district court for the county in this state in which the street address of the cooperative's principal office is located or, if the cooperative has no principal office in this state, in the district court for the county in which the street address of its registered agent is located or, if the cooperative has no registered agent, in the district court for the city and county of Denver.
- A court in a proceeding brought to dissolve a cooperative may issue injunctions, appoint a receiver or custodian pendente lite with all powers and duties the court directs, take other action required to preserve the cooperative's assets, wherever located, and carry on the business of the cooperative until a full hearing can be held.
Source: L. 96: Entire article R&RE, p. 532, § 1, effective July 1. L. 2003: (1) amended, p. 2234, § 107, effective July 1, 2004. L. 2004: (1) amended, p. 1421, § 65, effective July 1.
7-56-716. Receivership or custodianship.
- A court in a proceeding to dissolve a cooperative may appoint one or more receivers to wind up and liquidate, or one or more custodians to manage the business and affairs, of the cooperative. The court shall hold a hearing, after giving notice to all parties to the proceeding and any interested persons designated by the court, before appointing a receiver or custodian pursuant to this section. The court appointing a receiver or custodian has exclusive jurisdiction over the cooperative and all of its property, wherever located.
- The court may appoint an individual, a domestic entity, or a foreign entity or other entity authorized to transact business or conduct activities in this state as a receiver or custodian. The court may require the receiver or custodian to post bond, with or without sureties, in an amount the court directs.
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The court shall describe the powers and duties of the receiver or custodian in its appointing order, which may be amended from time to time. Among other powers:
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The receiver may:
- Dispose of all or any part of the property of the cooperative, wherever located, at a public or private sale, if authorized by the court; and
- Sue and defend in the receiver's own name as receiver of the cooperative in all courts; or
- The custodian may exercise all of the powers of the cooperative, through or in place of its board or officers, to the extent necessary to manage the affairs of the cooperative in the best interests of its members and creditors.
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The receiver may:
- The court, during a receivership, may redesignate the receiver as custodian, and during a custodianship may redesignate the custodian as receiver if doing so is in the best interests of the cooperative and its members and creditors.
- The court from time to time during the receivership or custodianship may order compensation paid and expense disbursements or reimbursements made to the receiver or custodian and such person's counsel from the assets of the cooperative or proceeds from the sale of the assets.
Source: L. 96: Entire article R&RE, p. 533, § 1, effective July 1. L. 2003: (1) and (2) amended, p. 2235, § 108, effective July 1, 2004. L. 2004: (1) amended, p. 1421, § 66, effective July 1.
7-56-717. Decree of dissolution.
- If after a hearing the court determines that one or more grounds for judicial dissolution described in section 7-56-714 exist, it may enter a decree dissolving the cooperative and stating the effective date of the dissolution, and the clerk of the court shall deliver a certified copy of the decree to the secretary of state, who shall file it pursuant to part 3 of article 90 of this title.
- After entering the decree of dissolution, the court shall direct the winding up and liquidation of the cooperative's business and activities in accordance with section 7-56-705 or 7-56-716 and the giving of notice to the cooperative's registered agent, or to the secretary of state if it has no registered agent, and to claimants in accordance with sections 7-90-911 and 7-90-912.
- The assets of the dissolved cooperative, after payment of administrative expenses, shall be distributed in accordance with the provisions of section 7-56-705.
- The court's order or decision may be appealed as in other civil proceedings.
Source: L. 96: Entire article R&RE, p. 533, § 1, effective July 1. L. 2002: (1) amended, p. 1820, § 32, effective July 1; (1) amended, p. 1684, § 30, effective October 1. L. 2003: (1) and (2) amended, p. 2235, § 109, effective July 1, 2004. L. 2006: (2) amended, p. 849, § 7, effective July 1.
SUBPART 4 MISCELLANEOUS
7-56-718. Certain assignments of assets in dissolution.
In the winding up of the affairs of a cooperative when certain assets are not liquid and secured creditors having claim on these assets have been satisfied, the trustees in liquidation or other persons charged with winding up the cooperative's affairs are authorized to make assignment of such assets to the unsecured creditors in settlement of their claims. If assignment is refused in writing, and in the judgment of the trustees there is no liquidity or market value and the costs involved in delaying the winding up of the affairs of the cooperative exceed the potential benefits, the trustees are authorized to assign the assets or future proceeds to any local or statewide nonprofit organization that has as one of its principal purposes education or community service. The trustees shall under no circumstances be liable to any member or equity holder in the cooperative for any claim on any assets assigned by the trustees pursuant to the authority of this section.
Source: L. 96: Entire article R&RE, p. 534, § 1, effective July 1.
PART 8 FOREIGN COOPERATIVES
Editor's note: This article was repealed and reenacted in 1996, and this part 8 was subsequently repealed and reenacted in 2003, effective July 1, 2004, resulting in the addition, relocation, and elimination of sections as well as subject matter. For amendments to this part 8 prior to 2004, consult the Colorado statutory research explanatory note beginning on page vii in the front of this volume and the editor's note following the article heading.
7-56-801. Authority to transact business or conduct activities required.
Part 8 of article 90 of this title, providing for the transaction of business or the conduct of activities by foreign entities, applies to foreign cooperatives.
Source: L. 2003: Entire part R&RE, p. 2235, § 110, effective July 1, 2004.
7-56-802. Registered agent - service of process.
Part 7 of article 90 of this title, providing for registered agents and service of process, applies to foreign cooperatives.
Source: L. 2003: Entire part R&RE, p. 2236, § 110, effective July 1, 2004.
PART 9 TRANSITION PROVISIONS
7-56-901. Application to existing cooperatives.
- A domestic corporation, association, or cooperative formed under this article before July 1, 1996, shall be governed by the provisions of this article.
- A cooperative formed under article 57 of this title before July 1, 1996, until it elects to be governed by the provisions of this article pursuant to section 7-56-205, shall be deemed to have been formed under, and shall be governed by, the provisions of article 55 of this title as in effect immediately prior to July 1, 1996.
Source: L. 96: Entire article R&RE, p. 542, § 1, effective July 1. L. 2003: (2) amended, p. 2236, § 111, effective July 1, 2004.
ARTICLE 57 AGRICULTURAL AND LIVESTOCK ASSOCIATIONS
7-57-101 to 7-57-106. (Repealed)
Source: L. 96: Entire article repealed, p. 543, § 2, effective July 1.
Editor's note: (1) This article was numbered as article 4 of chapter 30, C.R.S. 1963. For amendments to this article prior to its repeal in 1996, consult the Colorado statutory research explanatory note and the table itemizing the replacement volumes and supplements to the original volume of C.R.S. 1973 beginning on page vii in the front of this volume.
(2) Section 7-56-901 (2) of the "Colorado Cooperative Act" provides that cooperatives organized under this article prior to its repeal on July 1, 1996, shall be deemed to be organized under article 55 of this title until the cooperative elects to be governed by the "Colorado Cooperative Act", article 56 of this title.
ARTICLE 58 UNIFORM LIMITED COOPERATIVE ASSOCIATION ACT
Section
PART 1 GENERAL PROVISIONS
7-58-101. Short title.
This article shall be known and may be cited as the "Colorado Uniform Limited Cooperative Association Act".
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 761, § 1, effective April 2, 2012.
7-58-102. Definitions.
As used in this article, unless this article states a different definition:
- The terms defined in article 90 of this title have the meanings stated in that article unless this article states a different definition.
- "Articles of organization" or "articles" means the articles of organization of a limited cooperative association required by section 7-58-302 containing provisions required or permitted by sections 7-58-303 and 7-58-306. The term includes the articles of organization as amended or restated.
- "Board of directors" means the board of directors of a limited cooperative association.
- "Bylaws" means the bylaws of a limited cooperative association required by section 7-58-304 containing provisions required or permitted by sections 7-58-305 and 7-58-306. The term includes the bylaws as amended or restated.
- "Contribution", except as used in section 7-58-1008 (3), means a benefit that a person provides to a limited cooperative association to become or remain a member or in the person's capacity as a member.
- "Cooperative" means a limited cooperative association or an entity organized under any cooperative law of any jurisdiction.
- "Director" means a director of a limited cooperative association.
- "Distribution", except as used in section 7-58-1007 (5), means a transfer of money or other property from a limited cooperative association to a member because of the member's financial rights or to a transferee of a member's financial rights.
- "Financial rights" means the right to participate in allocations and distributions as provided in parts 10 and 12 of this article but does not include rights or obligations under a marketing contract governed by part 7 of this article.
- "Governance rights" means the right to participate in governance of a limited cooperative association.
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"Investor member" means a member that has made a contribution to a limited cooperative association and that:
- Is not required by the articles or bylaws to conduct patronage with the association in the member's capacity as an investor member in order to receive or retain the member's interest; or
- Is not permitted by the articles or bylaws to conduct patronage with the association in the member's capacity as an investor member in order to receive or retain the member's interest.
- "Limited cooperative association" or "association" means an association organized under this article.
- "Member" means a person that is admitted as a patron member or investor member, or both, in a limited cooperative association. The term does not include a person that has dissociated as a member.
- "Member's interest" means the interest of a patron member or investor member with the attributes stated in section 7-58-601.
- "Members meeting" means an annual members meeting or special meeting of members.
- "Organizer" means a person who is named in the articles as an organizer.
- "Patronage" means business transactions between a limited cooperative association and a person that entitle the person to receive financial rights based on the value or quantity of business done between the association and the person.
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"Patron member" means a member that has made a contribution to a limited cooperative association and that:
- Is required by the articles or bylaws to conduct patronage with the association in the member's capacity as a patron member in order to receive or retain the member's interest; or
- Is permitted by the articles or bylaws to conduct patronage with the association in the member's capacity as a patron member in order to receive or retain the member's interest.
- "Proper court" means the district court for the county in this state in which the street address of the limited cooperative association's principal office is located or, if the association has no principal office in this state, the district court for the county in which the street address of its registered agent is located, or, if the association has no registered agent, the district court for the city and county of Denver.
- "Record", used as a noun, means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.
- "Required information" means the information a limited cooperative association is required to maintain under section 7-58-112.
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"Sign" means, with present intent, to authenticate or adopt a record by:
- Executing or adopting a tangible symbol; or
- Attaching to or logically associating with the record an electronic symbol, sound, or process.
- "Transfer" includes an assignment, conveyance, deed, bill of sale, lease, mortgage, security interest, encumbrance, gift, and transfer by operation of law.
- "Voting group" means any combination of one or more voting members in one or more districts or classes that, under this article or the articles or bylaws, are entitled to vote and can be counted together collectively on a matter at a members meeting.
- "Voting member" means a member that, under this article or the articles or bylaws, has a right to vote on matters subject to vote by members under this article or the articles or bylaws.
- "Voting power" means the total current power of members to vote on a particular matter for which a vote may or is to be taken.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 761, § 1, effective April 2, 2012.
Cross references: For additional definitions applicable to this article, see § 7-90-102.
7-58-103. Reservation of power to amend or repeal.
The general assembly has the power to amend or repeal all or part of this article at any time, and all domestic and foreign limited cooperative associations subject to this article shall be governed by the amendment or repeal.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 764, § 1, effective April 2, 2012.
7-58-104. Nature of limited cooperative association.
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A limited cooperative association organized under this article is an autonomous, unincorporated association of persons united to meet their mutual interests through a jointly owned enterprise primarily controlled by those persons, the patronage of which is carried on for the mutual benefit of the patron members and that permits combining:
- Ownership, financing, and receipt of benefits by the patron members for whose patronage the association is formed; and
- Separate investments in the association by investor members who invest in the limited cooperative association and may receive returns on their investments and a share of control.
- The fact that a limited cooperative association does not have more than one of the characteristics described in paragraph (a) of subsection (1) of this section or any of the characteristics described in paragraph (b) of subsection (1) of this section does not alone prevent the association from being formed under and governed by this article, nor does it alone provide a basis for an action against the association or a member.
- The relations between a limited cooperative association and its members are consensual and contractual. Unless required, limited, or prohibited by this article or other applicable law, the articles and bylaws of an association may provide for any matter concerning the relations among the members of the association and between the members and the association, the activities of the association, and the conduct of its activities.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 764, § 1, effective April 2, 2012.
7-58-105. Purpose of limited cooperative association.
- A limited cooperative association is an entity distinct from its members.
- A limited cooperative association may be organized for any lawful purpose, whether or not for profit.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 764, § 1, effective April 2, 2012.
7-58-106. Powers.
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Unless otherwise provided in the articles, every limited cooperative association has perpetual duration and succession in its domestic entity name and has the powers to do all things necessary or convenient to carry out its business and affairs, including without limitation:
- To sue and be sued, complain, and defend in its entity name, and to maintain an action against a member for harm caused to the association by the member's violation of a duty to the association or of this article or the articles or bylaws;
- To have a seal, which may be altered at will, and to use the seal, or a facsimile thereof, including a rubber stamp, by impressing or affixing it or by reproducing it in any other manner;
- To amend its articles and make and amend bylaws;
- To purchase, receive, lease, and otherwise acquire, and to own, hold, improve, use, and otherwise deal with, real or personal property or any legal or equitable interest in property, wherever located;
- To sell, convey, mortgage, pledge, lease, exchange, and otherwise dispose of all or any part of its property;
- To purchase, receive, subscribe for, and otherwise acquire shares and other interests in, and obligations of, any other entity; and to own, hold, vote, use, sell, mortgage, lend, pledge, and otherwise dispose of, and deal in and with, the same;
- To make contracts and guarantees; incur liabilities; borrow money; issue notes, bonds, and other obligations, which may be convertible into or include the option to purchase other interests or securities of the association; and secure any of its obligations by mortgage or pledge of any of its property, franchises, or income;
- To lend money, invest and reinvest its funds, and receive and hold real and personal property as security for repayment;
- To be an agent, an associate, a fiduciary, a manager, a member, a partner, an equity owner, a promoter, or a trustee of, or to hold any similar position with, any entity;
- To conduct its business and activities, locate offices, and exercise the powers granted by this article within or without this state;
- To elect and appoint directors, officers, employees, and agents of the association, define their duties, fix their compensation, and lend them money and credit;
- To pay pensions and establish pension plans, pension trusts, profit-sharing plans, share bonus plans, share options and rights plans, and benefit or incentive plans for any of its current or former directors, officers, employees, and agents;
- To make donations for the public welfare or for charitable, scientific, or educational purposes;
- To make payments or donations and to do any other act, not inconsistent with law, that furthers the business and affairs of the association;
- To establish conditions for admission of members, admit members, and issue or transfer memberships;
- To impose dues, assessments, and admission and transfer fees upon its members;
- To impose restrictions on the transfer of its membership interests or other interests in the association;
- To carry on its business and affairs;
- To indemnify current or former directors, officers, employees, fiduciaries, or agents as provided in part 9 of this article;
- To limit the liability of its directors as provided in section 7-58-818; and
- To cease its activities and dissolve.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 764, § 1, effective April 2, 2012.
7-58-107. Governing law.
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The law of this state governs:
- The internal affairs of a limited cooperative association; and
- The liability of a member as member and a director as director for the debts, obligations, or other liabilities of a limited cooperative association.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 766, § 1, effective April 2, 2012.
7-58-108. Supplemental principles of law.
Unless displaced by particular provisions of this article, the principles of law and equity supplement this article.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 766, § 1, effective April 2, 2012.
7-58-109. Requirements of other laws.
- This article does not alter or amend any law that governs the licensing and regulation of an individual or entity in carrying on a specific business or profession even if that law permits the business or profession to be conducted by a limited cooperative association, a foreign cooperative, or its members.
- A limited cooperative association shall not conduct an activity that, under the law of this state other than this article, may be conducted only by an entity that meets specific requirements for the internal affairs of that entity unless the articles or bylaws of the association conform to those requirements.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 766, § 1, effective April 2, 2012.
7-58-110. Relation to restraint of trade and antitrust law.
No limited cooperative association formed under or subject to this article shall, solely by its organization and existence, be deemed to be a conspiracy or a combination in restraint of trade, an illegal monopoly, or an attempt to lessen competition or to fix prices arbitrarily, nor shall the marketing or purchasing contracts and agreements authorized in this article be considered illegal as such, in unlawful restraint of trade, or as part of a conspiracy or combination to accomplish an improper or illegal purpose.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 766, § 1, effective April 2, 2012.
7-58-111. Name.
- Use of the term "cooperative" or its abbreviation under this article or section 7-90-601 is not a violation of the provisions restricting the use of the term under section 7-90-601 (7)(a).
- A limited cooperative association or a member may enforce the restrictions on the use of the term "cooperative" under section 7-90-601 (7).
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 767, § 1, effective April 2, 2012.
7-58-112. Required information.
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Subject to subsection (2) of this section, a limited cooperative association shall maintain in a record available at its principal office:
- A list containing the name, last-known street address and, if different, mailing address, and term of office of each director and officer;
- The initial articles and all amendments to and restatements of the articles;
- The initial bylaws and all amendments to and restatements of the bylaws;
- All filed statements of merger and statements of conversion;
- All annual financial statements of the association for the three most recent fiscal years;
- The minutes of members meetings and records of all action taken by members without a meeting for the three most recent years;
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A list containing:
- The name, in alphabetical order, and last-known street address and, if different, mailing address of each patron member and each investor member; and
- If the association has districts or classes of members, information from which each member in a district or class may be identified;
- The federal income tax returns and any state and local income tax returns of the association for the three most recent years;
- Accounting records maintained by the association in the ordinary course of its operations for the three most recent years;
- The minutes of all directors meetings and records of all action taken by directors without a meeting for the three most recent years;
- The amount of money contributed and agreed to be contributed by each member;
- A description and statement of the agreed value of contributions other than money made and agreed to be made by each member;
- The times at which, or events on the happening of which, any additional contribution is to be made by each member;
- For each member, a description and statement of the member's interest or information from which the description and statement can be derived; and
- All communications concerning the association made in a record to all members, or to all members in a district or class, for the three most recent years.
- If a limited cooperative association has existed for less than the period for which records must be maintained under subsection (1) of this section, the period for which records must be kept is the period of the association's existence.
- The articles or bylaws may require that more information be maintained.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 767, § 1, effective April 2, 2012.
7-58-113. Business transactions of member with limited cooperative association.
Subject to sections 7-58-818 and 7-58-819 and except as otherwise provided in the articles or bylaws or a specific contract relating to a transaction, a member may lend money to and transact other business with a limited cooperative association in the same manner as a person that is not a member.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 768, § 1, effective April 2, 2012.
7-58-114. Dual capacity.
A person may have a patron member's interest and an investor member's interest. When such person acts as a patron member, the person is subject to this article and the articles and bylaws governing patron members. When such person acts as an investor member, the person is subject to this article and the articles and bylaws governing investor members.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 768, § 1, effective April 2, 2012.
PART 2 REGISTERED AGENTS, FILING, ANNUAL REPORTS, AND STATEMENT OF FOREIGN ENTITY AUTHORITY
7-58-201. Limited cooperative associations - registered agents - service of process - annual reports.
- Part 7 of article 90 of this title, providing for registered agents and service of process, applies to limited cooperative associations formed under this article.
- Part 5 of article 90 of this title, providing for periodic reports, applies to limited cooperative associations formed under this article.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 768, § 1, effective April 2, 2012.
7-58-202. Foreign entity authority.
Part 8 of article 90 of this title, providing for the transaction of business or the conduct of activities by foreign entities, applies to foreign limited cooperative associations formed under substantially similar laws of another jurisdiction.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 769, § 1, effective April 2, 2012.
PART 3 FORMATION AND INITIAL ARTICLES OF LIMITED COOPERATIVE ASSOCIATION - BYLAWS
7-58-301. Organizers.
A limited cooperative association must be organized by one or more organizers.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 769, § 1, effective April 2, 2012.
7-58-302. Formation of limited cooperative association.
- To form a limited cooperative association, one or more organizers of the association shall deliver or cause to be delivered articles to the secretary of state for filing.
- A limited cooperative association is formed after articles that substantially comply with section 7-58-303 (1) become effective under section 7-90-304.
- If articles filed by the secretary of state state a delayed effective date, a limited cooperative association is not formed if, before the articles take effect, a statement of correction is filed pursuant to section 7-90-304 (3) that revokes the articles.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 769, § 1, effective April 2, 2012.
7-58-303. Articles.
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The articles shall state:
- The domestic entity name of the limited cooperative association;
- The purposes for which the limited cooperative association is formed, which may be for any lawful purpose;
- The registered agent name and registered agent address of the association's initial registered agent;
- The street address and, if different, mailing address of the association's initial principal office; and
- The true name and street address and, if different, mailing address of each organizer.
- The articles may contain any other provisions in addition to those required by subsection (1) of this section, including any matters referred to in subsection (3) of this section, section 7-58-305 (1), or section 7-58-305 (3).
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The matters referred to in this subsection (3) may be varied only in the articles. The articles may:
- State a term of duration, less than perpetual, of the limited cooperative association under section 7-58-106 (1);
- Limit or eliminate the acceptance of new or additional members by the initial board of directors under section 7-58-304 (2);
- Vary the percentage of votes required for members to approve an amendment to the articles under section 7-58-405;
- Vary the limitations on the obligations and liability of members for association obligations under section 7-58-504;
- Require a notice of an annual members meeting to state a purpose of the meeting under section 7-58-508 (2);
- Provide for less than unanimous consent to action by members without a members meeting under section 7-58-516 (1)(a);
- Vary the matters the board of directors may consider in making a decision under section 7-58-820;
- Specify causes of dissolution under section 7-58-1202 (1);
- Delegate amendment of the bylaws to the board of directors pursuant to section 7-58-405 (6);
- Provide for member approval of asset dispositions under section 7-58-1501;
- Subject to section 7-58-820, provide for the elimination or limitation of liability of a director to the association or its members for money damages pursuant to section 7-58-818; and
- Provide for permitting or requiring indemnification under section 7-58-901 (1).
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 769, § 1, effective April 2, 2012.
7-58-304. Organization of limited cooperative association.
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After a limited cooperative association is formed:
- If initial directors are named in the articles, the initial directors shall hold an organizational meeting to adopt initial bylaws and carry on any other business necessary or proper to complete the organization of the association; or
- If initial directors are not named in the articles, the organizers shall designate the initial directors and call a meeting of the initial directors to adopt initial bylaws and carry on any other business necessary or proper to complete the organization of the association.
- Unless the articles otherwise provide, the initial directors may cause the limited cooperative association to accept members, including those necessary for the association to begin business.
- Initial directors need not be members.
- An initial director serves until a successor is elected and qualified at a members meeting or the director is removed, resigns, is adjudged incompetent, or dies.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 770, § 1, effective April 2, 2012.
7-58-305. Bylaws.
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Bylaws shall be in a record and, if not stated in the articles, shall include:
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A statement of the capital structure of the limited cooperative association, including:
- The classes or other types of members' interests and relative rights, preferences, and restrictions granted to or imposed upon each class or other type of member's interest; and
- The rights to share in profits or distributions of the association;
- A statement of the method for admission of members;
- A statement designating voting and other governance rights, including which members have voting power and any restriction on voting power;
- A statement that a member's interest is transferable, if it is to be transferable, and a statement of the conditions upon which it may be transferred;
- A statement concerning the manner in which profits and losses are allocated and distributions are made among patron members and, if investor members are authorized, the manner in which profits and losses are allocated and how distributions are made among investor members and between patron members and investor members;
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A statement concerning:
- Whether persons that are not members but conduct business with the association may be permitted to share in allocations of profits and losses and receive distributions; and
- The manner in which profits and losses are allocated and distributions are made with respect to those persons; and
- A statement of the number and terms of directors or the method by which the number and terms are determined.
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A statement of the capital structure of the limited cooperative association, including:
- Subject to subsection (3) of this section and the articles, bylaws may contain any other provision for managing and regulating the affairs of the association.
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The matters referred to in this subsection (3) may be varied only in the bylaws, in the articles, or in the bylaws and the articles. The bylaws may:
- Require more information to be maintained under section 7-58-112 or provided to members under section 7-58-505 (11);
- Provide restrictions on transactions between a member and an association under section 7-58-113;
- Provide for the percentage and manner of voting on amendments to the articles and bylaws by district, class, or voting group under section 7-58-404 (1);
- Provide for the percentage vote required to amend the bylaws concerning the admission of new members under section 7-58-405 (5)(e);
- Provide for terms and conditions to become a member under section 7-58-502;
- Restrict the manner of conducting members meetings under sections 7-58-506 (3) and 7-58-507 (5);
- Designate the presiding officer of members meetings under sections 7-58-506 (5) and 7-58-507 (7);
- Require a statement of purposes in the annual meeting notice under section 7-58-508 (2);
- Increase quorum requirements for members meetings under section 7-58-510 and board of directors meetings under section 7-58-815;
- Allocate voting power among members, including patron members and investor members, and provide for the manner of member voting and action as permitted by sections 7-58-511 to 7-58-517;
- Authorize investor members and expand or restrict the transferability of members' interests to the extent provided in sections 7-58-602 to 7-58-604;
- Provide for enforcement of a marketing contract under section 7-58-704 (1);
- Provide for qualification, election, terms, removal, filling vacancies, and member approval for compensation of directors in accordance with sections 7-58-803 to 7-58-805, 7-58-807, 7-58-809, and 7-58-810;
- Restrict the manner of conducting board meetings and taking action without a meeting under sections 7-58-811 and 7-58-812;
- Provide for frequency, location, notice, and waivers of notice for board meetings under sections 7-58-813 and 7-58-814;
- Increase the percentage of votes necessary for board action under section 7-58-816 (2);
- Provide for the creation of committees of the board of directors and matters related to the committees in accordance with section 7-58-817;
- Provide for officers and their appointment, designation, and authority under section 7-58-822;
- Provide for forms and values of contributions under section 7-58-1002;
- Provide for remedies for failure to make a contribution under section 7-58-1003;
- Provide for the allocation of profits and losses of the association, distributions, and the redemption or repurchase of distributed property other than money in accordance with sections 7-58-1004 to 7-58-1007;
- Specify when a member's dissociation is wrongful and the liability incurred by the dissociating member for damage to the association under section 7-58-1101 (2) and (3);
- Provide the personal representative, or other legal representative of, a deceased member or a member adjudged incompetent with additional rights under section 7-58-1103;
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Increase the percentage of votes required for board of director approval of:
- A resolution to dissolve under section 7-58-1205;
- A proposed amendment to the articles or bylaws under section 7-58-402 (1)(a);
- A plan of conversion under section 7-58-1603 (1);
- A plan of merger under section 7-58-1607 (1); and
- A proposed disposition of assets under section 7-58-1503 (1); and
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Vary the percentage of votes required for members' approval of:
- A resolution to dissolve under section 7-58-1205;
- An amendment to the bylaws under section 7-58-405;
- A plan of conversion under section 7-58-1603;
- A plan of merger under section 7-58-1608; and
- A disposition of assets under section 7-58-1504.
- In addition to amendments permitted under part 4 of this article, the initial board of directors may amend the bylaws by a majority vote of the directors at any time before the admission of members.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 771, § 1, effective April 2, 2012.
7-58-306. Required provision for members' contributions.
The articles or the bylaws shall address members' contributions pursuant to section 7-58-1001.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 774, § 1, effective April 2, 2012.
PART 4 AMENDMENT OF ARTICLES AND BYLAWS OF LIMITED COOPERATIVE ASSOCIATIONS
7-58-401. Authority to amend articles and bylaws.
- A limited cooperative association may amend its articles and bylaws under this part 4 for any lawful purpose. In addition, the initial board of directors may amend the bylaws of an association under section 7-58-304.
- Unless the articles or bylaws otherwise provide, a member does not have a vested property right resulting from any provision in the articles or bylaws, including a provision relating to the management, control, capital structure, distribution, entitlement, purpose, or duration of the limited cooperative association.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 774, § 1, effective April 2, 2012.
7-58-402. Notice and action on amendment of articles and bylaws.
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Except as provided in this subsection (1) and section 7-58-405 (6), the articles and bylaws of a limited cooperative association may be amended only at a members meeting. An amendment requiring membership approval may be proposed by either:
- A majority of the board of directors, or a greater percentage if required by the articles or bylaws; or
- One or more petitions signed by at least ten percent of the patron members or at least ten percent of the investor members.
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The board of directors shall call a members meeting to consider an amendment proposed pursuant to subsection (1) of this section. The meeting shall be held not later than ninety days following the proposal of the amendment by the board or receipt of a petition or petitions satisfying the requirements of this section. The board shall mail or otherwise transmit or deliver in a record to each member:
- The proposed amendment, or a summary of the proposed amendment and a statement of the manner in which a copy of the amendment in a record may be reasonably obtained by a member;
- A recommendation that the members approve the amendment, or, if the board determines that because of conflict of interest or any other reason it should not make a favorable recommendation, the basis for that determination;
- A statement of any condition of the board's submission of the amendment to the members; and
- Notice of the meeting at which the proposed amendment will be considered, which shall be given in the same manner as notice for a special meeting of members.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 774, § 1, effective April 2, 2012.
7-58-403. Method of voting on amendment of articles and bylaws.
- A substantive change to a proposed amendment of the articles or bylaws may not be made at the members meeting at which a vote on the amendment occurs.
- A nonsubstantive change to a proposed amendment of the articles or bylaws may be made at the members meeting at which the vote on the amendment occurs and need not be separately voted upon by the board of directors.
- A vote to adopt a nonsubstantive change to a proposed amendment to the articles or bylaws shall be by the same percentage of votes required to pass a proposed amendment.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 775, § 1, effective April 2, 2012.
7-58-404. Voting by district, class, or voting group.
- This section applies if the articles or bylaws provide for voting by district or class, or if there is one or more identifiable voting groups that a proposed amendment to the articles or bylaws would affect differently from other members with respect to matters identified in section 7-58-405 (1). Approval of the amendment requires the same percentage of votes of the members of that district, class, or voting group required in sections 7-58-405 and 7-58-514.
- If a proposed amendment to the articles or bylaws would affect members in two or more districts or classes entitled to vote separately under subsection (1) of this section in the same or a substantially similar way, the districts or classes affected shall vote as a single voting group unless the articles or bylaws otherwise provide for separate voting.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 775, § 1, effective April 2, 2012.
7-58-405. Approval of amendment.
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Subject to section 7-58-404 and subsections (3) and (4) of this section, an amendment to the articles must be approved by:
- At least a majority vote of the voting power of all members present at a members meeting called under section 7-58-402, unless the articles require a greater percentage; and
- If the limited cooperative association has investor members, at least a majority of the votes cast by patron members, unless the articles require a greater percentage vote by patron members.
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Subject to section 7-58-404 and subsections (3), (4), (5), and (6) of this section, an amendment to the bylaws must be approved by:
- At least a majority vote of the voting power of all members present at a members meeting called under section 7-58-402, unless the articles or bylaws require a greater percentage; and
- If a limited cooperative association has investor members, a majority of the votes cast by patron members, unless the articles or bylaws require a larger affirmative vote by patron members.
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The articles may require that the percentage of votes required under paragraph (a) of subsection (1) of this section, or the articles or bylaws may require that the percentage of votes required under paragraph (a) of subsection (2) of this section, be:
- A different percentage that is not less than a majority of members voting at the meeting;
- Measured against the voting power of all members; or
- A combination of paragraphs (a) and (b) of this subsection (3).
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Consent in a record by a member shall be delivered to a limited cooperative association before delivery of an amendment to the articles or restated articles for filing pursuant to section 7-58-407, or before or at the same time as a members vote is taken on an amendment to the bylaws or adoption of restated bylaws submitted to members for a vote, if, as a result of the amendment or restatement:
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The member will have:
- Personal liability for an obligation of the association; or
- An obligation or liability for an additional contribution; or
- The relative rights of the member in the association will be adversely affected or diminished by the amendment.
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The member will have:
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The vote required to amend bylaws must satisfy the requirements of subsection (1) of this section if the proposed amendment modifies:
- The equity capital structure of the limited cooperative association, including the rights of the association's members to share in profits or distributions, or the relative rights, preferences, and restrictions granted to or imposed upon one or more districts, classes, or voting groups of similarly situated members;
- The transferability of a member's interest;
- The manner or method of allocation of profits or losses among members;
- The quorum for a meeting and the rights of voting and governance; or
- Unless otherwise provided in the articles or bylaws, the terms for admission of new members.
- Except for the matters described in subsection (5) of this section, the articles may delegate amendment of all or a part of the bylaws to the board of directors without requiring member approval.
- If the articles delegate amendment of bylaws to the board of directors, the board shall provide a description of any amendment of the bylaws made by the board to the members in a record not later than thirty days after the amendment, but the description may be provided at the next annual members meeting if the meeting is held within the thirty-day period.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 775, § 1, effective April 2, 2012.
7-58-406. Restated articles.
- The board of directors may restate the articles at any time with or without action by the members. If the limited cooperative association does not have both members and directors, its organizers may restate the articles at any time.
- The restatement may include one or more amendments to the articles. If the restatement includes an amendment requiring approval of the members, it must be approved in the same manner as an amendment to the articles under section 7-58-405 (1).
- If the board of directors submits a restatement for action by the members, the board shall call a meeting of members and mail or otherwise transmit or deliver in a record the information and give notice of the meeting in accordance with section 7-58-402 (2) to each member entitled to vote on the restatement. The copy of the restatement provided to members must identify any amendment or other change the restatement would make in the articles.
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A limited cooperative association restating its articles shall deliver to the secretary of state, for filing pursuant to part 3 of article 90 of this title, articles of restatement stating:
- The domestic entity name of the association;
- The text of the restated articles; and
- If the restatement was adopted by the board of directors or organizers without member action, a statement to that effect and that member action was not required.
- Upon filing by the secretary of state or at any later effective date determined pursuant to section 7-90-304, restated articles supersede the original articles and all prior amendments to them.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 777, § 1, effective April 2, 2012.
7-58-407. Amendment of articles - filing.
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A limited cooperative association amending its articles shall deliver to the secretary of state, for filing pursuant to part 3 of article 90 of this title, articles of amendment stating:
- The domestic name of the association; and
- The text of each amendment adopted.
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Before the beginning of the initial meeting of the board of directors, an organizer who knows that information in the filed articles was inaccurate when the articles were filed or has become inaccurate due to changed circumstances shall promptly:
- Cause the articles to be amended; and
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If appropriate, deliver a statement of:
- Change to the secretary of state for filing pursuant to section 7-90-305.5; or
- Correction to the secretary of state for filing pursuant to section 7-90-305.
- Upon filing, an amendment of the articles that has been properly adopted by the members is effective as provided in section 7-90-304.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 778, § 1, effective April 2, 2012.
PART 5 MEMBERS
7-58-501. Members.
To begin business, a limited cooperative association must have at least two patron members unless the sole member is a cooperative.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 778, § 1, effective April 2, 2012.
7-58-502. Becoming a member.
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A person becomes a member:
- As provided in the articles or bylaws;
- As the result of a merger or conversion under part 16 of this article; or
- With the consent of all the members.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 778, § 1, effective April 2, 2012.
7-58-503. No power as member to bind association.
A member, solely by reason of being a member, may not act for or bind the limited cooperative association.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 779, § 1, effective April 2, 2012.
7-58-504. No liability as member for association's obligations.
Unless the articles otherwise provide, a debt, obligation, or other liability of a limited cooperative association is solely that of the association and is not the debt, obligation, or liability of a member solely by reason of being a member.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 779, § 1, effective April 2, 2012.
7-58-505. Right of member and former member to information.
- Not later than ten business days after receipt of a demand made in a record, a limited cooperative association shall permit a member to obtain, inspect, and copy in the association's principal office required information listed in section 7-58-112 (1)(a) to (1)(f) during regular business hours. A member need not have any particular purpose for seeking the information. The association is not required to provide the information listed in section 7-58-112 (1)(b) to (1)(f) to the same member more than once during a six-month period.
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On demand made in a record received by the limited cooperative association, a member may obtain, inspect, and copy in the association's principal office required information listed in section 7-58-112 (1)(g), (1)(h), (1)(j), and (1)(o) during regular business hours, if:
- The member seeks the information in good faith and for a proper purpose reasonably related to the member's interest;
- The demand includes a description, with reasonable particularity, of the information sought and the purpose for seeking the information;
- The information sought is directly connected to the member's purpose; and
- The demand is otherwise reasonable.
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Not later than ten business days after receipt of a demand pursuant to subsection (2) of this section, a limited cooperative association shall provide, in a record, the following information to the member that made the demand:
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If the association agrees to provide the demanded information:
- What information the association will provide in response to the demand; and
- A reasonable time and reasonable place at which the association will provide the information; or
- If the association declines to provide some or all of the demanded information, the association's reasons for declining.
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If the association agrees to provide the demanded information:
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A person dissociated as a member may obtain, inspect, and copy information available to a member under subsection (1) or (2) of this section by delivering a demand in a record to the limited cooperative association, in the same manner and subject to the same conditions applicable to a member under subsection (2) of this section, if:
- The information pertains to the period during which the person was a member in the association; and
- The person seeks the information in good faith.
- A limited cooperative association shall respond to a demand made pursuant to subsection (4) of this section in the manner provided in subsection (3) of this section.
- Not later than ten business days after receipt by a limited cooperative association of a demand made by a member in a record, but not more often than once in a six-month period, the association shall deliver to the member a record stating the information with respect to the member required by section 7-58-112 (1)(n).
- A limited cooperative association may impose reasonable restrictions, including nondisclosure restrictions, on the use of information obtained under this section. In a dispute concerning the reasonableness of a restriction under this subsection (7), the association has the burden of proving reasonableness.
- A limited cooperative association may charge a person that makes a demand under this section reasonable costs of copying, limited to the costs of equipment, labor, and material.
- A person that may obtain information under this section may obtain the information through an attorney or other agent. A restriction imposed on the person under subsection (7) of this section or by the articles or bylaws applies to the attorney or other agent.
- The rights stated in this section do not extend to a person as transferee.
- The articles or bylaws may require a limited cooperative association to provide more information than required by this section and may establish conditions and procedures for providing the information.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 779, § 1, effective April 2, 2012.
7-58-506. Annual meeting of members.
- Members shall meet annually at a time provided in the articles or bylaws or set by the board of directors not inconsistent with the articles and bylaws.
- An annual members meeting may be held inside or outside this state at the place stated in the articles or bylaws or selected by the board of directors not inconsistent with the articles and bylaws.
- Unless the articles or bylaws otherwise provide, members may attend or conduct an annual members meeting through any means of communication if all members attending the meeting can communicate with each other during the meeting.
- The board of directors shall report, or cause to be reported, at the association's annual members meeting the association's business and financial condition as of the close of the most recent fiscal year.
- Unless the articles or bylaws otherwise provide, the board of directors shall designate the presiding officer of the association's annual members meeting.
- Failure to hold an annual members meeting does not affect the validity of any action by the limited cooperative association.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 780, § 1, effective April 2, 2012.
7-58-507. Special meeting of members.
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A special meeting of members may be called only:
- As provided in the articles or bylaws;
- By a majority vote of the board of directors on a proposal stating the purpose of the meeting;
- By demand in a record signed by members holding at least twenty percent of the voting power of the persons in any district or class entitled to vote on the matter that is the purpose of the meeting stated in the demand; or
- By demand in a record signed by members holding at least ten percent of the total voting power of all the persons entitled to vote on the matter that is the purpose of the meeting stated in the demand.
- A demand under paragraph (c) or (d) of subsection (1) of this section must be submitted to the officer of the limited cooperative association charged with keeping its records.
- Any voting member may withdraw its demand under paragraph (c) or (d) of subsection (1) of this section before receipt by the limited cooperative association of demands sufficient to require a special meeting of members.
- A special meeting of members may be held inside or outside this state at the place stated in the articles or bylaws or selected by the board of directors not inconsistent with the articles and bylaws.
- Unless the articles or bylaws otherwise provide, members may attend or conduct a special meeting of members through the use of any means of communication if all members attending the meeting can communicate with each other during the meeting.
- Only business within the purpose or purposes stated in the notice of a special meeting of members may be conducted at the meeting.
- Unless the articles or bylaws otherwise provide, the presiding officer of a special meeting of members shall be designated by the board of directors.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 781, § 1, effective April 2, 2012.
7-58-508. Notice of members meeting.
- A limited cooperative association shall notify each member of the time, date, and place of a members meeting at least ten and not more than sixty days before the meeting; except that, if the notice is of a meeting of the members in one or more districts or classes of members, the notice shall be given only to members in those districts or classes.
- Unless this article or the articles otherwise provide, notice of an annual members meeting need not include any purpose of the meeting.
- Notice of a special meeting of members shall include each purpose of the meeting as contained in the demand under section 7-58-507 (1)(c) or (1)(d) or as voted upon by the board of directors under section 7-58-507 (1)(b).
- Notice of a members meeting shall be given in a record unless oral notice is reasonable under the circumstances.
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Notwithstanding any other provision of this section, whenever notice is required to be given under this section or under any other provision of this article to any member, such notice shall not be required to be given to a member if:
- Notice of two consecutive annual meetings, and all notices of meetings during the period between the two consecutive annual meetings, have been sent to the member at the member's address as shown on the records of the limited cooperative association and have been returned undeliverable; or
- All, but not less than two, payments of distributions during a twelve-month period, or two consecutive payments of distributions during a period of more than twelve months, have been sent to the member at the member's address as shown on the records of the association and have been returned undeliverable.
- If any such member delivers to the association a notice in a record setting forth the member's then-current address, the requirement that notice be given to the member shall be reinstated.
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Notwithstanding any other provision of this section, whenever notice is required to be given under this section or under any other provision of this article to any member, such notice shall not be required to be given to a member if:
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 782, § 1, effective April 2, 2012.
7-58-509. Waiver of members meeting notice.
- A member may waive notice of a members meeting before, during, or after the meeting.
- A member's participation in a members meeting is a waiver of notice of that meeting unless the member objects to the meeting at the beginning of the meeting or promptly upon the member's arrival at the meeting and does not thereafter vote for or assent to action taken at the meeting.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 782, § 1, effective April 2, 2012.
7-58-510. Quorum of members.
Unless the articles or bylaws otherwise require a different number of members or percentage of the voting power, a quorum for conducting business at all meetings of the members consists of five percent of the total number of members or thirty members present at the meeting, whichever is less. Nothing prevents the articles or bylaws from requiring a greater or lesser number or percentage of members, or members of classes, districts, or voting groups as a quorum.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 783, § 1, effective April 2, 2012.
7-58-511. Voting by patron members.
Except as provided by section 7-58-512 (1), each patron member has one vote. The articles or bylaws may allocate voting power among patron members as provided in section 7-58-512 (1).
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 783, § 1, effective April 2, 2012.
7-58-512. Determination of voting power of patron member.
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The articles or bylaws may allocate voting power among patron members on the basis of one or a combination of the following:
- One member, one vote;
- Use or patronage;
- Equity; or
- If a patron member is a cooperative, the number of its patron members.
- If the articles or bylaws allocate voting power on the basis of use or patronage and a member would be denied a vote because the member did not use the limited cooperative association or conduct patronage with it during the period on which the allocation of voting power is determined, the articles or bylaws must provide that the member shall nevertheless be allocated a vote equal to at least the minimum voting power allocated to members who used the association or conducted patronage with it during the period.
- The articles or bylaws may provide for the allocation of patron member voting power by districts or class or any combination thereof.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 783, § 1, effective April 2, 2012.
7-58-513. Voting by investor members.
If the articles or bylaws provide for investor members, each investor member has one vote unless the articles or bylaws otherwise provide. The articles or bylaws may provide for the allocation of investor member voting power by class, classes, or any combination of classes.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 783, § 1, effective April 2, 2012.
7-58-514. Voting requirements for members.
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If a limited cooperative association has both patron and investor members, the following rules apply:
- The total voting power of all patron members must not be less than a majority of the entire voting power entitled to vote.
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Action on any matter is approved only upon the affirmative vote of at least a majority of:
- All members voting at the meeting unless more than a majority is required or permitted by parts 4, 12, 15, and 16 of this article or the articles or bylaws; and
- Votes cast by patron members unless the articles or bylaws require a larger affirmative vote by patron members.
- The articles or bylaws may provide for the percentage of the affirmative votes that must be cast by investor members to approve the matter.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 784, § 1, effective April 2, 2012.
7-58-515. Manner of voting.
- Unless the articles or bylaws otherwise provide, voting by a proxy at a members meeting is prohibited. This subsection (1) does not prohibit delegate voting based on district or class.
- If voting by a proxy is permitted, a patron member may appoint only another patron member as a proxy and, if investor members are permitted, an investor member may appoint only another investor member as a proxy.
- The articles or bylaws may provide for the manner of and provisions governing the appointment of a proxy.
- The articles or bylaws may provide for voting on any question by ballot delivered by mail or voting by other means on questions that are subject to vote by members.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 784, § 1, effective April 2, 2012.
7-58-516. Action without a meeting.
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Unless the articles or bylaws require that action be taken at a members meeting, any action required or permitted by this article to be taken at a members meeting may be taken without a meeting if notice of the proposed action is given as provided in subsection (6) of this section, and:
- All of the members entitled to vote thereon consent to the action in a record; or
- If expressly provided for in the articles, the members holding membership interests having not less than the minimum number of votes that would be necessary to authorize or take the action at a meeting at which all of the membership interests entitled to vote thereon were present and voted consent to the action in a record.
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- No action taken pursuant to this section is effective unless, within sixty days after the date the limited cooperative association first receives a record describing and consenting to the action and signed by a member, the association has received records that describe and consent to the action, signed by members holding at least the number of votes entitled to be voted on the action as required by subsection (1) of this section, disregarding any record that has been revoked pursuant to subsection (3) of this section. The articles or bylaws may provide for the receipt of any record by the association by electronically transmitted facsimile or other form of wire or wireless communication providing the association with a complete copy thereof, including a copy of the signature thereon.
- Action taken pursuant to this section is effective as of the date the limited cooperative association receives the last record necessary to effect the action unless all of the records necessary to effect the action state another date as the effective date of the action, in which case the stated date is the effective date of the action.
- Any member who has signed a record describing and consenting to action taken pursuant to this section may revoke the consent by a record signed and dated by the member describing the action and stating that the member's prior consent thereto is revoked, if the record is received by the limited cooperative association prior to the effectiveness of the action.
- If not otherwise fixed under subsection (7) of this section, the record date for determining members entitled to take action pursuant to this section or entitled to be given notice under subsection (6) of this section of action taken pursuant to this section is the date the limited cooperative association first receives a writing upon which the action is taken pursuant to this section.
- Action taken under this section has the same effect as action taken at a members meeting and may be described as such.
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If action is to be taken under subsection (1) of this section, the limited cooperative association shall give notice of the proposed action to the members entitled to vote thereon. The notice must:
- Be given in a record;
- Describe the proposed action; and
- Specify the date on or before which consents to be given pursuant to subsection (1) of this section must be received by the association.
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Notwithstanding paragraph (a) of this subsection (6), whenever notice is required to be given under this subsection (6) to any member, the notice is not required to be given to a member if:
- Notice of two consecutive annual meetings, and all notices of meetings during the period between the two consecutive annual meetings, have been sent to the member at the member's address as shown on the records of the limited cooperative association and have been returned undeliverable; or
- All, but not less than two, payments of distributions during a twelve-month period, or two consecutive payments of distributions during a period of more than twelve months, have been sent to the member at the member's address as shown on the records of the association and have been returned undeliverable.
- If any such member delivers to the association a notice in a record setting forth the member's then-current address, the requirement that notice be given to the member is reinstated.
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Notwithstanding paragraph (a) of this subsection (6), whenever notice is required to be given under this subsection (6) to any member, the notice is not required to be given to a member if:
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If action is to be taken under subsection (1) of this section, the limited cooperative association shall give notice of the proposed action to the members entitled to vote thereon. The notice must:
- The proper court may, upon application of the association or any member who would be entitled to vote on the action at a members meeting, summarily state a record date for determining members entitled to sign records consenting to an action under this section and may enter other orders necessary or appropriate to effect the purposes of this section.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 784, § 1, effective April 2, 2012.
7-58-517. Districts and delegates - classes of members.
- The articles or bylaws may provide for the formation of geographic districts of patron members, the conduct of patron member meetings by districts, the election of directors at the meetings, the election of district delegates to represent and vote for the district at members meetings, or any combination thereof.
- A delegate elected under subsection (1) of this section has one vote unless voting power is otherwise allocated by the articles or bylaws.
- The articles or bylaws may provide for the establishment of classes of members; the preferences, rights, and limitations of the classes; the conduct of members meetings by classes and the election of directors at the meetings; the election of class delegates to represent and vote for the district at members meetings; or any combination thereof.
- A delegate elected under subsection (3) of this section has one vote unless voting power is otherwise allocated by the articles or bylaws.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 786, § 1, effective April 2, 2012.
PART 6 MEMBER'S INTEREST IN LIMITED COOPERATIVE ASSOCIATION
7-58-601. Member's interest.
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A member's interest:
- Is personal property;
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Consists of:
- Governance rights;
- Financial rights; and
- The right or obligation, if any, to do business with the limited cooperative association; and
- May be in certificated or uncertificated form.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 786, § 1, effective April 2, 2012.
7-58-602. Patron and investor members' interests.
- Unless the articles or bylaws establish investor members' interests, a member's interest is a patron member's interest.
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Unless the articles or bylaws otherwise provide, if a limited cooperative association has investor members, while a person is a member of the association, the person:
- If admitted as a patron member, remains a patron member;
- If admitted as an investor member, remains an investor member; and
- If admitted as a patron member and investor member, remains a patron and investor member if not dissociated in one of the capacities.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 787, § 1, effective April 2, 2012.
7-58-603. Transferability of member's interest.
- Section 7-90-104 applies to this article.
- Unless the articles or bylaws otherwise provide, a member's interest other than financial rights is not transferable.
- Unless a transfer is restricted or prohibited by the articles or bylaws, a member may transfer its financial rights in the limited cooperative association.
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The terms of any restriction on transferability of financial rights must be:
- Set forth in the articles or bylaws and the member records of the association; and
- Conspicuously noted on any certificates evidencing a member's interest.
- A transferee of a member's financial rights, to the extent the rights are transferred, has the right to share in the allocation of profits or losses and to receive the distributions to the member transferring the interest to the same extent as the transferring member.
- A transferee of a member's financial rights does not become a member upon transfer of the rights unless the transferee is admitted as a member by the limited cooperative association.
- A limited cooperative association need not give effect to a transfer under this section until the association has notice of the transfer.
- A transfer of a member's financial rights in violation of a restriction on transfer contained in the articles or bylaws is ineffective as to a person having notice of the restriction at the time of transfer.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 787, § 1, effective April 2, 2012.
7-58-604. Security interest and set-off.
- A member or transferee may create an enforceable security interest in its financial rights in a limited cooperative association.
- Unless the articles or bylaws otherwise provide, a member may not create an enforceable security interest in the member's governance rights in, or in the right or obligation, if any, to do business with, a limited cooperative association.
- The articles or bylaws may provide that a limited cooperative association has a security interest in the financial rights of a member to secure payment of any indebtedness or other obligation of the member to the association. A security interest provided for in the articles or bylaws is enforceable under, and governed by, article 9 of title 4, C.R.S.
- Unless the articles or bylaws otherwise provide, a member may not compel the limited cooperative association to offset financial rights against any indebtedness or obligation owed to the association.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 788, § 1, effective April 2, 2012.
7-58-605. Charging orders for judgment creditor of member or transferee.
- On application by a judgment creditor of a member or transferee, a court may enter a charging order against the financial rights of the judgment debtor for the unsatisfied amount of the judgment. A charging order issued under this subsection (1) constitutes a lien on the judgment debtor's financial rights and requires the limited cooperative association to pay over to the creditor or receiver, to the extent necessary to satisfy the judgment, any distribution that would otherwise be paid to the judgment debtor.
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To the extent necessary to effectuate the collection of distributions pursuant to a charging order under subsection (1) of this section, the court may:
- Appoint a receiver of the share of the distributions due or to become due to the judgment debtor under the judgment debtor's financial rights, with the power to make all inquiries the judgment debtor might have made; and
- Make all other orders that the circumstances of the case may require to give effect to the charging order.
- Upon a showing that distributions under a charging order will not pay the judgment debt within a reasonable time, the court may foreclose the lien and order the sale of the financial rights. The purchaser at the foreclosure sale obtains only the financial rights that are subject to the charging order, does not thereby become a member, and is subject to section 7-58-603.
- At any time before a sale pursuant to a foreclosure, a member or transferee whose financial rights are subject to a charging order under subsection (1) of this section may extinguish the charging order by satisfying the judgment and filing a certified copy of the satisfaction with the court that issued the charging order.
- At any time before sale pursuant to a foreclosure, the limited cooperative association or one or more members whose financial rights are not subject to the charging order may pay to the judgment creditor the full amount due under the judgment and succeed to the rights of the judgment creditor, including the charging order. Unless the articles or bylaws otherwise provide, the association may act under this subsection (5) only with the consent of all members whose financial rights are not subject to the charging order.
- This article does not deprive any member or transferee of the benefit of any exemption laws applicable to the member's or transferee's financial rights.
- This section provides the exclusive remedy by which a judgment creditor of a member or transferee may satisfy the judgment from the member's or transferee's financial rights.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 788, § 1, effective April 2, 2012.
PART 7 MARKETING CONTRACTS
7-58-701. Authority.
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In this part 7, "marketing contract" means a contract between a limited cooperative association and another person, which person need not be a patron member:
- Requiring the other person to sell, or deliver for sale or marketing on the person's behalf, a specified part of the person's products, commodities, or goods exclusively to or through the association or any facilities furnished by the association; or
- Authorizing the association to act for the person in any manner with respect to the products, commodities, or goods.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 789, § 1, effective April 2, 2012.
7-58-702. Marketing contracts.
- If a marketing contract provides for the sale of products, commodities, or goods to a limited cooperative association, the sale transfers title to the association upon delivery or at any other specific time expressly provided by the contract.
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A marketing contract may:
- Authorize a limited cooperative association to create an enforceable security interest in the products, commodities, or goods delivered; and
- Allow the association to sell the products, commodities, or goods delivered and pay the sales price on a pooled or other basis after deducting selling costs, processing costs, overhead, expenses, and other charges.
- Some or all of the provisions of a marketing contract between a patron member and a limited cooperative association may be contained in the articles or bylaws.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 789, § 1, effective April 2, 2012.
7-58-703. Duration of marketing contract.
The initial duration of a marketing contract may not exceed ten years, but the contract may be self-renewing for additional periods not exceeding five years each. Unless the contract provides for another manner or time for termination, either party may terminate the contract by giving notice in a record at least ninety days before the end of the current term.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 790, § 1, effective April 2, 2012.
7-58-704. Remedies for breach of contract.
- Damages to be paid to a limited cooperative association for breach or anticipatory repudiation of a marketing contract may be liquidated, but only at an amount or under a formula that is reasonable in light of the actual or anticipated harm caused by the breach or repudiation. A provision that so provides is not a penalty.
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Upon a breach of a marketing contract, whether by anticipatory repudiation or otherwise, a limited cooperative association may seek:
- An injunction to prevent further breach; and
- Specific performance.
- The remedies in this section are in addition to any other remedies available to an association under law other than this part 7.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 790, § 1, effective April 2, 2012.
PART 8 DIRECTORS AND OFFICERS
7-58-801. Board of directors.
- A limited cooperative association must have a board of directors of at least three individuals unless the association has fewer than three members. If the association has fewer than three members, the number of directors may not be fewer than the number of members.
- The affairs of a limited cooperative association must be managed by, or under the direction of, the board of directors. The board may adopt policies and procedures that do not conflict with the articles, bylaws, or this article.
- An individual is not an agent for a limited cooperative association solely by being a director.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 790, § 1, effective April 2, 2012.
7-58-802. No liability as director for limited cooperative association's obligations.
A debt, obligation, or other liability of a limited cooperative association is solely that of the association and is not a debt, obligation, or liability of a director solely by reason of being a director. An individual is not personally liable, directly or indirectly, for an obligation of an association solely by reason of being a director.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 791, § 1, effective April 2, 2012.
7-58-803. Qualifications of directors.
- Unless the articles or bylaws otherwise provide, and subject to subsection (3) of this section, each director of a limited cooperative association must be an individual who is a member of the association or an individual who is designated by a member that is not an individual for purposes of qualifying and serving as a director; except that initial directors need not be members or designees of a member. A director must be at least eighteen years of age.
- Unless the articles or bylaws otherwise provide, a director may be an officer or employee of the limited cooperative association.
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If the articles or bylaws provide for nonmember directors, the number of nonmember directors may not exceed:
- One, if there are two to four directors;
- Two, if there are five to eight directors; or
- One-third of the total number of directors if there are at least nine directors.
- The articles or bylaws may provide qualifications for directors in addition to those in this section.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 791, § 1, effective April 2, 2012.
7-58-804. Election of directors and composition of board.
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Unless the articles or bylaws require a greater number:
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The number of directors that must be patron members may not be fewer than:
- One, if there are two or three directors;
- Two, if there are four or five directors;
- Three, if there are six to eight directors; or
- One-third of the directors if there are at least nine directors; and
- A majority of the board of directors must be elected exclusively by patron members.
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The number of directors that must be patron members may not be fewer than:
- Unless the articles or bylaws otherwise provide, if a limited cooperative association has investor members, directors who are investor members and who are not elected exclusively by patron members must be elected by the investor members.
- Unless the articles or bylaws otherwise provide, all nonmember directors, if any, must be elected by the patron members and the investor members.
- Subject to subsection (1) of this section, the articles or bylaws may provide for the election of all or a specified number of directors by one or more districts or classes of members.
- Subject to subsection (1) of this section, the articles or bylaws may provide for the nomination or election of directors by districts or classes, directly or by district delegates.
- If a class of members consists of a single member, the articles or bylaws may provide for the member to appoint a director or directors.
- Unless the articles or bylaws otherwise provide, cumulative voting for directors is prohibited.
- Except as otherwise provided by the articles, bylaws, subsection (6) of this section, or section 7-58-303, 7-58-516, 7-58-517, or 7-58-809, member directors must be elected at an annual members meeting.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 791, § 1, effective April 2, 2012.
7-58-805. Term of director.
- Unless the articles or bylaws otherwise provide, and subject to subsections (3) and (4) of this section and section 7-58-304 (4), the term of a director expires at the annual members meeting following the director's election or appointment.
- Unless the articles or bylaws otherwise provide, a director may be reelected.
- Except as otherwise provided in subsection (4) of this section, a director continues to serve until a successor director is elected or appointed and qualifies or the director is removed, resigns, is adjudged incompetent, or dies.
- Unless the articles or bylaws otherwise provide, a director shall not serve the remainder of the director's term if the director ceases to qualify to be a director.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 792, § 1, effective April 2, 2012.
7-58-806. Resignation of director.
A director may resign at any time by giving notice in a record to the limited cooperative association. Unless the notice states a later effective date, a resignation is effective when the notice is received by the association.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 792, § 1, effective April 2, 2012.
7-58-807. Removal of director.
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Unless the articles or bylaws otherwise provide:
- Members may remove a director with or without cause.
- A member or members holding at least ten percent of the total voting power entitled to be voted in the election of a director may demand removal of the director by one or more signed petitions submitted to the officer of the limited cooperative association charged with keeping its records.
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Upon receipt of a petition for removal of a director, an officer of the association or the board of directors shall:
- Call a special meeting of members to be held not later than ninety days after receipt of the petition by the association; and
- Mail or otherwise transmit or deliver in a record to the members entitled to vote on the removal, and to the director to be removed, notice of the meeting that complies with section 7-58-508.
- A director is removed if the votes in favor of removal are equal to or greater than the votes required to elect the director.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 792, § 1, effective April 2, 2012.
7-58-808. Suspension of director by board.
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A board of directors may suspend a director if, considering the director's course of conduct and the inadequacy of other available remedies, immediate suspension is necessary for the best interests of the association and the director is engaging, or has engaged, in:
- Fraudulent conduct with respect to the association or its members;
- Gross abuse of the position of director;
- Intentional or reckless infliction of harm on the association; or
- Any other behavior, act, or omission as provided by the articles or bylaws.
- A suspension under subsection (1) of this section is effective for a period determined by the board of directors, not to exceed sixty days, unless, before the end of the suspension period, the board calls and gives notice of a special meeting of members for removal of the director, in which case the suspension is effective until the earlier of adjournment of the members meeting or removal of the director.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 793, § 1, effective April 2, 2012.
7-58-809. Vacancy on board.
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Unless the articles or bylaws otherwise provide, a vacancy on the board of directors must be filled:
- Within a reasonable time by majority vote of the remaining directors, until the next annual members meeting or a special meeting of members is called to fill the vacancy; and
- For the balance of the unexpired term by members at the next annual members meeting or a special meeting of members called to fill the vacancy.
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Unless the articles or bylaws otherwise provide, if a vacating director was elected or appointed by a class of members or a district:
- The new director must be of that class or district; and
- The selection of the director for the unexpired term must be conducted in the same manner as would the selection for that position without a vacancy.
- If a member appointed a vacating director, the articles or bylaws may provide for that member to appoint a director to fill the vacancy.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 793, § 1, effective April 2, 2012.
7-58-810. Remuneration of directors.
Unless the articles or bylaws otherwise provide, the board of directors may set the remuneration of directors and of nondirector committee members appointed under section 7-58-817 (1).
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 794, § 1, effective April 2, 2012.
7-58-811. Meetings.
- A board of directors shall meet at least annually and may hold meetings inside or outside this state.
- Unless the articles or bylaws otherwise provide, a board of directors may permit directors to attend or conduct board meetings through the use of any means of communication if all directors attending the meeting can communicate with each other during the meeting.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 794, § 1, effective April 2, 2012.
7-58-812. Action without meeting.
- Unless prohibited by the articles or bylaws, any action that may be taken by a board of directors may be taken without a meeting if each director consents in a record to the action.
- Consent under subsection (1) of this section may be withdrawn by a director in a record at any time before the limited cooperative association receives consent from all directors.
- A record of consent for any action under subsection (1) of this section may specify the effective date or time of the action.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 794, § 1, effective April 2, 2012.
7-58-813. Meetings - notice.
- Unless the articles or bylaws otherwise provide, a board of directors may establish a time, date, and place for regular board meetings, and notice of the time, date, place, or purpose of those meetings is not required.
- Unless the articles or bylaws otherwise provide, notice of the time, date, and place of a special meeting of a board of directors must be given to all directors at least three days before the meeting, the notice must contain a statement of the purpose of the meeting, and the meeting is limited to the matters contained in the statement.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 794, § 1, effective April 2, 2012.
7-58-814. Waiver of notice of meeting.
- Unless the articles or bylaws otherwise provide, a director may waive any required notice of a meeting of the board of directors in a record before, during, or after the meeting.
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Unless the articles or bylaws otherwise provide, a director's participation in a meeting is a waiver of notice of that meeting unless:
- The director objects to the meeting at the beginning of the meeting or promptly upon the director's arrival at the meeting and does not thereafter vote in favor of or otherwise assent to the action taken at the meeting; or
- The director promptly objects upon the introduction of any matter for which notice under section 7-58-813 is required and has not been given and does not thereafter vote in favor of or otherwise assent to the action taken on the matter.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 795, § 1, effective April 2, 2012.
7-58-815. Quorum.
- Unless the articles or bylaws provide for a greater number, a majority of the total number of directors specified by the articles or bylaws constitutes a quorum for a meeting of the directors.
- If a quorum of the board of directors is present at the beginning of a meeting, any action taken by the directors present is valid even if withdrawal of directors originally present results in the number of directors being fewer than the number required for a quorum.
- A director present at a meeting but objecting to notice under section 7-58-814 (2) does not count toward a quorum.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 795, § 1, effective April 2, 2012.
7-58-816. Voting.
- Each director has one vote for purposes of decisions made by the board of directors.
- Unless the articles or bylaws otherwise provide, the affirmative vote of a majority of directors present at a meeting is required for action by the board of directors.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 795, § 1, effective April 2, 2012.
7-58-817. Committees.
- Unless the articles or bylaws otherwise provide, a board of directors may create one or more committees and appoint one or more individuals to serve on a committee.
- Unless the articles or bylaws otherwise provide, an individual appointed to serve on a committee of a limited cooperative association need not be a director or member.
- An individual who is not a director and is serving on a committee has, with respect to the subject matter of the committee, the same rights, duties, and obligations as a director serving on the committee.
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Unless the articles or bylaws otherwise provide, and subject to the oversight responsibility of the board of directors, each committee of a limited cooperative association may exercise the powers delegated to it by the board of directors, but a committee may not:
- Approve allocations or distributions except according to a formula or method prescribed by the board of directors;
- Approve or propose to members action requiring approval of members; or
- Fill vacancies on the board of directors or any of its committees.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 795, § 1, effective April 2, 2012.
7-58-818. Standards of conduct and liability.
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Except as otherwise provided in section 7-58-820:
- The discharge of the duties of a director or member of a committee of the board of directors is governed by the law applicable to directors of entities organized under the "Colorado Business Corporation Act", articles 101 to 117 of this title; and
- The liability of a director or member of a committee of the board of directors is governed by the law applicable to directors of entities organized under the "Colorado Business Corporation Act", articles 101 to 117 of this title.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 796, § 1, effective April 2, 2012.
7-58-819. Conflict of interest.
- The law applicable to conflicts of interest relating to a director of an entity organized under the "Colorado Business Corporation Act", articles 101 to 117 of this title, governs conflicts of interest relating to a limited cooperative association and a director.
- A director does not have a conflict of interest under this article or the articles and bylaws solely because the director's conduct relating to the duties of the director may further the director's own interest.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 796, § 1, effective April 2, 2012.
7-58-820. Other considerations of directors.
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Unless the articles otherwise provide, in considering the best interests of a limited cooperative association, a director of the association in discharging the duties of director, in conjunction with considering the long- and short-term interest of the association and its members, may consider:
- The interest of employees, customers, and suppliers of the association;
- The interest of the community in which the association operates; and
- Other cooperative principles and values that may be applied in the context of the decision.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 796, § 1, effective April 2, 2012.
7-58-821. Right of director or committee member to information.
A director or a member of a committee appointed under section 7-58-817 may obtain, inspect, and copy all information regarding the state of activities and financial condition of the limited cooperative association and other information regarding the activities of the association if the information is reasonably related to the performance of the director's duties as director or the committee member's duties as a member of the committee. Information obtained in accordance with this section may not be used by a director or a committee member in any manner that would violate any duty of or to the association.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 796, § 1, effective April 2, 2012.
7-58-822. Appointment and authority of officers.
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A limited cooperative association has the officers:
- Provided in the articles or bylaws; or
- Established by the board of directors in a manner not inconsistent with the articles and bylaws.
- The articles or bylaws may designate or, if the articles or bylaws do not designate, the board of directors shall designate, one of the association's officers for preparing all records required by section 7-58-112 and for the authentication of records.
- Unless the articles or bylaws otherwise provide, the board of directors shall appoint the officers of the limited cooperative association.
- Officers of a limited cooperative association shall perform the duties the articles and bylaws prescribe or as authorized by the board of directors in a manner not inconsistent with the articles and bylaws.
- The election or appointment of an officer of a limited cooperative association does not of itself create a contract between the association and the officer.
- Unless the articles or bylaws otherwise provide, an individual may simultaneously hold more than one office in a limited cooperative association.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 797, § 1, effective April 2, 2012.
7-58-823. Resignation and removal of officers.
- The board of directors may remove an officer at any time with or without cause.
- An officer of a limited cooperative association may resign at any time by giving notice in a record to the association. Unless the notice specifies a later time, the resignation is effective when the notice is received by the association.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 797, § 1, effective April 2, 2012.
PART 9 INDEMNIFICATION
7-58-901. Indemnification.
- Indemnification of an individual who has incurred liability or is a party, or is threatened to be made a party, to litigation because of the performance of a duty to, or activity on behalf of, a limited cooperative association is governed by the "Colorado Business Corporation Act", articles 101 to 117 of this title.
- A limited cooperative association may purchase and maintain insurance on behalf of any individual against liability asserted against or incurred by the individual to the same extent and subject to the same conditions as provided by the "Colorado Business Corporation Act", articles 101 to 117 of this title.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 797, § 1, effective April 2, 2012.
PART 10 CONTRIBUTIONS, ALLOCATIONS, AND DISTRIBUTIONS
7-58-1001. Members' contributions.
The articles or bylaws must establish the amount, manner, or method of determining any contribution requirements for members or must authorize the board of directors to establish the amount, manner, or other method of determining any contribution requirements for members.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 798, § 1, effective April 2, 2012.
7-58-1002. Contribution and valuation.
- Unless the articles or bylaws otherwise provide, the contributions of a member to a limited cooperative association may consist of tangible or intangible property or other benefit to the association, including money, labor or other services performed or to be performed, promissory notes, other agreements to contribute money or property, and contracts to be performed.
- The receipt and acceptance of contributions and the valuation of contributions must be reflected in a limited cooperative association's records.
- Unless the articles or bylaws otherwise provide, the board of directors shall determine the value of a member's contributions received or to be received, and the determination by the board of directors of valuation is conclusive for purposes of determining whether the member's contribution obligation has been met.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 798, § 1, effective April 2, 2012.
7-58-1003. Contribution agreements.
Persons may enter into agreements to make contributions to a limited cooperative association before or after it is formed. Those agreements are enforceable by the association in accordance with their terms.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 798, § 1, effective April 2, 2012.
7-58-1004. Allocations of profits and losses.
- Unless the articles or bylaws otherwise provide, all profits and losses of a limited cooperative association must be allocated to patron members. Unless the articles or bylaws otherwise provide, losses of the association must be allocated in the same proportion as profits.
- The articles or bylaws may provide for allocating profits of a limited cooperative association among members, among persons that are not members but conduct business with the association, to an unallocated account, or to any combination thereof.
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If a limited cooperative association has investor members, the articles or bylaws may not reduce the allocation to patron members to less than fifty percent of profits. For purposes of this subsection (3), the following rules apply:
- Amounts paid or due on contracts for the delivery to the association by patron members of products, goods, or services are not considered amounts allocated to patron members.
- Amounts paid, due, or allocated to investor members as a stated fixed or variable rate of return on investment are not considered amounts allocated to investor members if the determination of the return is not related to or based on profits.
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Unless prohibited by the articles or bylaws, in determining the profits for allocation under subsections (1), (2), and (3) of this section, the board of directors may first deduct and set aside a part of the profits to create or accumulate:
- Unallocated capital; and
- Reasonable unallocated reserves for specific purposes, including expansion and replacement of capital assets; education, training, and cooperative development; creation and distribution of information concerning principles of cooperation; and community responsibility.
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Subject to subsections (1) and (6) of this section and the articles and bylaws, the board of directors shall allocate the amount remaining after any deduction or setting aside of amounts under subsection (4) of this section:
- To patron members in the ratio of each member's patronage to the total patronage of all patron members during the period for which allocations are to be made; and
- To investor members, if any, in the ratio of each investor member's contributions to the total contributions of all investor members.
- For purposes of allocation of profits and losses or specific items of profits or losses of a limited cooperative association to members, the articles or bylaws may establish allocation units or methods based on separate classes of members or, for patron members, on class, function, division, district, department, allocation units, pooling arrangements, members' contributions, or other equitable methods.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 798, § 1, effective April 2, 2012.
7-58-1005. Distributions.
- Unless the articles or bylaws otherwise provide and subject to section 7-58-1007, the board of directors may authorize, and the limited cooperative association may make, distributions to members.
- Unless the articles or bylaws otherwise provide, distributions to members may be made in any form, including money, capital credits, allocated patronage equities, revolving fund certificates, and the limited cooperative association's own or other securities.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 799, § 1, effective April 2, 2012.
7-58-1006. Redemption or repurchase.
Property distributed to a member by a limited cooperative association, other than money, may be redeemed or repurchased as provided in the articles or bylaws, but a redemption or repurchase may not be made without authorization by the board of directors. The board may withhold authorization for any reason in its sole discretion. A redemption or repurchase is treated as a distribution for purposes of section 7-58-1007.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 800, § 1, effective April 2, 2012.
7-58-1007. Limitation on distributions.
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A limited cooperative association may not make a distribution if, after the distribution:
- The association would not be able to pay its debts as they become due in the ordinary course of the association's activities; or
- The association's assets would be less than the sum of its total liabilities.
- A limited cooperative association may base a determination that a distribution is not prohibited under subsection (1) of this section on financial statements prepared on the basis of accounting practices and principles that are reasonable in the circumstances or on a fair valuation or other method that is reasonable in the circumstances.
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Except as otherwise provided in subsection (4) of this section, the effect of a distribution allowed under subsection (2) of this section is measured:
- In the case of distribution by purchase, redemption, or other acquisition of financial rights in the limited cooperative association, as of the date money or other property is transferred or debt is incurred by the association; and
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In all other cases, as of the date:
- The distribution is authorized, if the payment occurs not later than one hundred twenty days after that date; or
- The payment is made, if payment occurs more than one hundred twenty days after the distribution is authorized.
- If indebtedness is issued as a distribution, each payment of principal or interest on the indebtedness is treated as a distribution, the effect of which is measured on the date the payment is made.
- For purposes of this section, "distribution" does not include reasonable amounts paid to a member in the ordinary course of business as payment or compensation for commodities, goods, past or present services, or reasonable payments made in the ordinary course of business under a bona fide employee retirement or other benefits program.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 800, § 1, effective April 2, 2012.
7-58-1008. Liability for improper distributions - limitation of action.
- A director who consents to a distribution that violates section 7-58-1007 is personally liable to the limited cooperative association for the amount of the distribution that exceeds the amount that could have been distributed without the violation if it is established that, in consenting to the distribution, the director failed to comply with section 7-58-818 or 7-58-819.
- A member or transferee of financial rights that received a distribution knowing that the distribution was made in violation of section 7-58-1007 is personally liable to the limited cooperative association to the extent that the distribution exceeded the amount that could have been properly paid.
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A director against whom an action is commenced under subsection (1) of this section may:
- Implead in the action any other director who is liable under subsection (1) of this section and compel contribution from the director; and
- Implead in the action any person that is liable under subsection (2) of this section and compel contribution from the person in the amount the person received as described in subsection (2) of this section.
- An action under this section is barred if it is commenced later than three years after the distribution.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 801, § 1, effective April 2, 2012.
7-58-1009. Relation to state securities law.
Any security, patronage refund, per unit retain certificate, capital credit, evidence of membership, preferred equity certificate, or other equity instrument issued, sold, or reported by a limited cooperative association as an investment in its stock or capital to the patron members of the association or by an entity subject to this article or a similar law of any other jurisdiction and authorized to transact business or conduct activities in this state is exempt from the securities laws contained in the "Colorado Securities Act", article 51 of title 11, C.R.S. Such securities, patronage refunds, per unit retain certificates, capital credits, or evidences of membership, preferred equity certificates, or other equity instruments may be issued, sold, or reported to patron members of the association or entity lawfully by the issuer or its directors, officers, members, or salaried employees without the necessity of the issue or its directors, officers, members, or employees being registered as brokers or dealers under the "Colorado Securities Act", article 51 of title 11, C.R.S.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 801, § 1, effective April 2, 2012.
7-58-1010. Alternative distribution of unclaimed property, distributions, redemptions, or payments.
A limited cooperative association may provide in its articles or bylaws for the disposition of funds when declared payable by the association and remaining unclaimed by the holder for three years after notification has been mailed to the holder's last-known address of record on the books of the association, which disposition may consist of transferring the funds to the general operating account of the association.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 801, § 1, effective April 2, 2012.
PART 11 DISSOCIATION
7-58-1101. Member's dissociation.
- A member has the power to dissociate at any time, rightfully or wrongfully, by notice in a record.
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Unless the articles or bylaws otherwise provide, a member's dissociation from a limited cooperative association is wrongful only if the dissociation:
- Breaches an express provision of the articles or bylaws; or
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Occurs before the termination of the limited cooperative association and:
- The person is expelled as a member under paragraph (c) or (d) of subsection (4) of this section; or
- In the case of a person that is not an individual, trust other than a business trust, or estate, the person is expelled or otherwise dissociated as a member because it dissolved or terminated in bad faith.
- Unless the articles or bylaws otherwise provide, a person that wrongfully dissociates as a member is liable to the limited cooperative association for damages caused by the dissociation. The liability is in addition to any other debt, obligation, or liability of the person to the association.
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A member is dissociated from the limited cooperative association as a member when:
- The association receives notice from the member in a record of dissociation as a member or, if the member specifies in the notice an effective date later than the date the association received notice, on that later date;
- An event stated in the articles or bylaws as causing the member's dissociation as a member occurs;
- The member is expelled as a member under the articles or bylaws;
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The member is expelled as a member by the board of directors because:
- It is unlawful to carry on the association's activities with the member as a member;
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There has been a transfer of all the member's financial rights in the association, other than:
- A creation or perfection of a security interest; or
- A charging order in effect under section 7-58-605 that has not been foreclosed;
- The member is a limited liability company or partnership that has been dissolved and its business is being wound up;
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The member is a corporation or cooperative and:
- The member filed a statement of dissolution or the equivalent, or the jurisdiction of formation revoked the member's charter or right to conduct business;
- The association sends a notice to the member that it will be expelled as a member for a reason described in sub-subparagraph (A) of this subparagraph (IV); and
- Not later than ninety days after the notice was sent under sub-subparagraph (B) of this subparagraph (IV), the member did not reinstate or the jurisdiction of formation did not reinstate the member's charter or right to conduct business; or
- The member is an individual and is adjudged incompetent;
- In the case of a member who is an individual, the individual dies;
- In the case of a member that is a trust or is acting as a member by virtue of being a trustee of a trust, all the trust's financial rights in the association are distributed;
- In the case of a member that is an estate, the estate's entire financial interest in the association is distributed;
- In the case of a member that is not an individual, partnership, limited liability company, cooperative, corporation, trust, or estate, the member is terminated; or
- The association's participation in a merger if, under the plan of merger as approved under part 16 of this article, the member ceases to be a member.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 802, § 1, effective April 2, 2012.
7-58-1102. Effect of dissociation as member.
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Upon a member's dissociation, subject to section 7-58-1103:
- The dissociated member has no further rights as a member; and
- Any financial rights owned by the dissociated member in the dissociated member's capacity as a member immediately before dissociation are owned by the dissociated member as a transferee.
- A dissociated member's dissociation as a member does not of itself discharge the dissociated member from any debt, obligation, or liability to the limited cooperative association that the dissociated member incurred under the articles or bylaws, by contract, or by other means while a member.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 803, § 1, effective April 2, 2012.
7-58-1103. Power of estate of member.
Unless the articles or bylaws provide for greater rights, if a member is dissociated in accordance with section 7-58-1101 (4)(d)(V) or (4)(e), the member's personal representative or other legal representative may exercise the rights of a transferee of the member's financial rights and, for purposes of settling the estate of a deceased member, may exercise the informational rights of a current member to obtain information under section 7-58-505 (1).
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 804, § 1, effective April 2, 2012.
PART 12 DISSOLUTION
7-58-1201. Dissolution - winding up.
A limited cooperative association may be dissolved only as provided in this part 12 and in part 9 of article 90 of this title, and upon dissolution its business and activities must be wound up as provided in this part 12 and part 9 of article 90 of this title.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 804, § 1, effective April 2, 2012.
7-58-1202. Voluntary dissolution.
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Except as otherwise provided in sections 7-58-1203 and 7-90-908, a limited cooperative association is dissolved and its activities must be wound up:
- Upon the occurrence of an event or at a time specified in the articles;
- Upon the action of the association's organizers, board of directors, or members under section 7-58-1205 or 7-58-1206; or
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Ninety days after the dissociation of a member that results in the association having one patron member and no other members, unless the association:
- Has a sole member that is a cooperative; or
- Not later than the end of the ninety-day period, admits at least one member in accordance with the articles or bylaws and has at least two members, at least one of which is a patron member.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 804, § 1, effective April 2, 2012.
7-58-1203. Judicial dissolution - grounds.
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A limited cooperative association may be dissolved in a proceeding brought in court by the attorney general if it is established that:
- The association obtained its articles of organization through fraud; or
- The association has continued to exceed or abuse the authority conferred upon it by law.
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A limited cooperative association may be dissolved in a proceeding brought in court by a member if it is established that:
- The directors are deadlocked in the management of the association's affairs, the members are unable to break the deadlock, and irreparable injury to the association is occurring or is threatened because of the deadlock;
- The directors or those in control of the association have acted, are acting, or will act in a manner that is illegal, oppressive, or fraudulent;
- The members are deadlocked in voting power and have failed to elect successors to directors whose terms have expired for two consecutive periods during which annual members meetings were held or were to be held; or
- The assets of the association are being misapplied or wasted.
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A limited cooperative association may be dissolved in a proceeding brought in court by a creditor if it is established that:
- A creditor's claim has been reduced to judgment, the execution on the judgment has been returned unsatisfied, and the association is insolvent; or
- The association is insolvent and the association has admitted in writing that a creditor's claim is due and owing.
- In lieu of dissolution in a proceeding described in subsection (1), (2), or (3) of this section, the court may order any other relief that is appropriate and equitable.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 804, § 1, effective April 2, 2012.
7-58-1204. Judicial dissolution - procedure.
- A judicial proceeding to dissolve a limited cooperative association must be brought in the proper court.
- It is not necessary to make members parties to a judicial proceeding to dissolve a limited cooperative association unless relief is sought against them individually.
- A court in a judicial proceeding brought to dissolve a limited cooperative association may issue injunctions, appoint a receiver or custodian pendente lite with all powers and duties the court directs, take other action required to preserve the limited liability company's assets wherever located, and carry on the business of the association until a full hearing can be held.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 805, § 1, effective April 2, 2012.
7-58-1205. Voluntary dissolution before commencement of activity.
A majority of the organizers or initial directors of a limited cooperative association that has not yet begun business activity or the conduct of its affairs may dissolve the association.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 806, § 1, effective April 2, 2012.
7-58-1206. Voluntary dissolution by the board and members.
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Except as otherwise provided in section 7-58-1205, for a limited cooperative association to voluntarily dissolve:
- A resolution to dissolve must be approved by a majority vote of the board of directors unless a greater percentage is required by the articles or bylaws;
- The board of directors must call a members meeting to consider the resolution, to be held not later than ninety days after adoption of the resolution; and
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The board of directors must mail or otherwise transmit or deliver to each member in a record that complies with section 7-58-508:
- The resolution required by paragraph (a) of this subsection (1);
- A recommendation that the members vote in favor of the resolution or, if the board determines that because of conflict of interest or any other reason it should not make a favorable recommendation, the basis of that determination; and
- Notice of the members meeting, which must be given in the same manner as notice of a special meeting of members.
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Subject to subsection (3) of this section, a resolution to dissolve must be approved by:
- At least two-thirds of the voting power of members present at a members meeting called under paragraph (b) of subsection (1) of this section; and
- If the limited cooperative association has investor members, at least a majority of the votes cast by patron members, unless the articles or bylaws require a greater percentage.
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The articles or bylaws may require that the percentage of votes required under paragraph (a) of subsection (2) of this section is:
- A different percentage that is not less than a majority of members voting at the meeting;
- Measured against the voting power of all members; or
- A combination of paragraphs (a) and (b) of this subsection (3).
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 806, § 1, effective April 2, 2012.
7-58-1207. Winding up.
- A limited cooperative association continues its existence after dissolution only for purposes of winding up its activities.
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In winding up a limited cooperative association's activities, the board of directors shall cause the association to:
- Collect its assets;
- Preserve the association or its property as a going concern for no more than a reasonable time;
- Prosecute and defend actions and proceedings;
- Dispose of its properties that will not be distributed in kind to its members;
- Discharge or make provision for discharging its liabilities;
- Distribute its remaining property among its members; and
- Do every other act necessary to wind up and liquidate its business and affairs.
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After dissolution and upon application of a limited cooperative association, a member, or a holder of financial rights, the proper court may order judicial supervision of the winding up of the association, including the appointment of a person to wind up the association's activities, if:
- After a reasonable time, the association has not wound up its activities; or
- The applicant establishes other good cause.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 807, § 1, effective April 2, 2012.
7-58-1208. Distribution of assets in winding up.
- In winding up a limited cooperative association's business, the association shall apply its assets to discharge its obligations to creditors, including members that are creditors. The association shall apply any remaining assets to pay in money the net amount distributable to members in accordance with their right to distributions under subsection (2) of this section.
- Unless the articles or bylaws otherwise provide, in this subsection (2), "financial interests" means the amounts recorded in the names of members in the records of a limited cooperative association at the time a distribution is made, including amounts paid to become a member, amounts allocated but not distributed to members, and amounts of distributions authorized but not yet paid to members. Unless the articles or bylaws otherwise provide, each member is entitled to a distribution from the association of any remaining assets in the proportion of the member's financial interests to the total financial interests of the members after all other obligations are satisfied.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 807, § 1, effective April 2, 2012.
7-58-1209. Court proceeding.
- Upon application by a dissolved limited cooperative association that has published a notice under section 7-90-912, the proper court may determine the amount and form of security to be provided for payment of claims against the association that are contingent, have not been made known to the association, or are based on an event occurring after the effective date of dissolution but that, based on the facts known to the association, are reasonably anticipated to arise after the effective date of dissolution.
- Not later than ten days after filing an application under subsection (1) of this section, a dissolved limited cooperative association shall give notice of the proceeding to each known claimant holding a contingent claim.
- The court may appoint a representative in a proceeding brought under this section to represent all claimants whose identities are unknown. The dissolved limited cooperative association shall pay reasonable fees and expenses of the representative, including all reasonable attorney fees and expert witness fees.
- Provision by the dissolved limited cooperative association for security in the amount and the form ordered by the court satisfies the association's obligations with respect to claims that are contingent, have not been made known to the association, or are based on an event occurring after the effective date of dissolution, and the claims shall not be enforced against a member that received a distribution.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 808, § 1, effective April 2, 2012.
7-58-1210. Statement of dissolution.
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Upon dissolution, the limited cooperative association shall deliver to the secretary of state, for filing pursuant to part 3 of article 90 of this title, a statement of dissolution stating:
- The domestic entity name of the limited cooperative association; and
- The principal office address of the limited cooperative association's principal office.
- A limited cooperative association is dissolved as provided in section 7-58-1202, 7-58-1203, or 7-90-908.
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A person who is not a director or member has notice of the dissolution of a limited cooperative association on the earlier of:
- The ninetieth day after the limited cooperative association's statement of dissolution is on file with the secretary of state; or
- The date on which the person first has actual knowledge of the dissolution.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 808, § 1, effective April 2, 2012.
PART 13 ACTION BY MEMBER
7-58-1301. Derivative action.
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A member may maintain a derivative action to enforce a right of a limited cooperative association if:
- The member demands in a record that the association bring an action to enforce the right; and
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Any of the following occur:
- The association does not, within ninety days after the association receives the demand, agree to bring the action;
- The association notifies the member in a record that it has rejected the demand;
- Irreparable harm to the association would result by waiting ninety days after the association receives the demand; or
- The association agrees to bring an action demanded and fails to bring the action within a reasonable time.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 809, § 1, effective April 2, 2012.
7-58-1302. Proper plaintiff.
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A derivative action to enforce a right of a limited cooperative association may be maintained only by a person that:
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Is a member or a dissociated member at the time the action is commenced and:
- Was a member when the conduct giving rise to the action occurred; or
- Whose status as a member devolved upon the person by operation of law or the articles or bylaws from a person that was a member at the time of the conduct; and
- Adequately represents the interests of the association.
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Is a member or a dissociated member at the time the action is commenced and:
- If the sole plaintiff in a derivative action dies while the action is pending, the court may permit another member who meets the requirements of subsection (1) of this section to be substituted as plaintiff.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 809, § 1, effective April 2, 2012.
7-58-1303. Pleading.
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In a derivative action to enforce a right of a limited cooperative association, the complaint must state:
- The date and content of the plaintiff's demand under section 7-58-1301 (1)(a) and the association's response;
- If ninety days have not expired since the demand was received by the association, how irreparable harm to the association would result by waiting for the expiration of ninety days; and
- If the association agreed to bring an action demanded, that the action has not been brought within a reasonable time.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 809, § 1, effective April 2, 2012.
7-58-1304. Approval for discontinuance or settlement.
A derivative action to enforce a right of a limited cooperative association may not be discontinued or settled without notice to the association and the court's approval.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 810, § 1, effective April 2, 2012.
7-58-1305. Proceeds and expenses.
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Except as otherwise provided in subsection (2) of this section:
- Any proceeds or other benefits of a derivative action to enforce a right of a limited cooperative association, whether by judgment, compromise, or settlement, belong to the association and not to the plaintiff; and
- If the plaintiff in the derivative action receives any proceeds, the plaintiff shall immediately remit them to the association.
- If a derivative action to enforce a right of a limited cooperative association is successful in whole or in part, the court may award the plaintiff reasonable expenses, including reasonable attorney fees and costs, from the recovery of the association if not otherwise awarded against the defendant.
- On the termination of a derivative proceeding commenced pursuant to this part 13, where the court finds that the proceeding was commenced or maintained without reasonable cause or for an improper purpose, the court may order the plaintiff to pay any of the defendant's reasonable expenses, including attorney fees, incurred by the defendant in connection with the defense of the proceeding.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 810, § 1, effective April 2, 2012.
7-58-1306. Applicability of derivative proceeding to foreign limited cooperative associations.
In any derivative proceeding in the right of a foreign limited cooperative association, the right of a person to commence or maintain a derivative proceeding in the right of a foreign limited cooperative association and any matters raised in the proceeding covered by sections 7-58-1301 to 7-58-1305 are governed by the law of the jurisdiction under which the foreign limited cooperative association was formed; except that any matters raised in the proceeding covered by section 7-58-1304 are governed by the law of this state.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 810, § 1, effective April 2, 2012.
PART 14 FOREIGN COOPERATIVES
7-58-1401. Authority to transact business or conduct activities required.
Part 8 of article 90 of this title, providing for the transaction of business or the conduct of activities by foreign entities, applies to foreign limited cooperative associations.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 811, § 1, effective April 2, 2012.
7-58-1402. Registered agent - service of process.
Part 7 of article 90 of this title, providing for registered agents and service of process, applies to foreign limited cooperative associations.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 811, § 1, effective April 2, 2012.
PART 15 DISPOSITION OF ASSETS
7-58-1501. Disposition of assets not requiring member approval.
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Unless the articles of organization otherwise provide, member approval under section 7-58-1502 is not required for a limited cooperative association to:
- Sell, lease, exchange, license, or otherwise dispose of all or any part of the assets of the association in the usual and regular course of business; or
- Mortgage, pledge, dedicate to the repayment of indebtedness, or otherwise encumber in any way all or any part of the assets of the association, whether or not in the usual and regular course of business.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 811, § 1, effective April 2, 2012.
7-58-1502. Member approval of other disposition or encumbrance of assets.
A sale, lease, exchange, license, or other disposition of assets or an encumbrance of assets of a limited cooperative association, other than a disposition or encumbrance described in section 7-58-1501, requires approval of the association's members under sections 7-58-1503 and 7-58-1504.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 811, § 1, effective April 2, 2012.
7-58-1503. Notice and action on disposition or encumbrance of assets.
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For a limited cooperative association to dispose of or encumber assets under section 7-58-1502:
- A majority of the board of directors, or a greater percentage if required by the articles or bylaws, must approve the proposed disposition or encumbrance; and
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The board of directors must call a members meeting to consider the proposed disposition or encumbrance, hold the meeting not later than ninety days after approval of the proposed disposition or encumbrance by the board, and mail or otherwise transmit or deliver in a record to each member:
- The terms of the proposed disposition or encumbrance;
- A recommendation that the members approve the disposition or encumbrance or, if the board determines that because of conflict of interest or any other reason it should not make a favorable recommendation, the basis for that determination;
- A statement of any condition of the board's submission of the proposed disposition or encumbrance to the members; and
- Notice of the meeting at which the proposed disposition or encumbrance will be considered, which notice must be given in the same manner as notice of a special meeting of members.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 811, § 1, effective April 2, 2012.
7-58-1504. Disposition or encumbrance of assets.
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Subject to subsection (2) of this section, a disposition or encumbrance of assets under section 7-58-1502 must be approved by:
- At least a majority of the voting power of members present at a members meeting called under section 7-58-1503 (1)(b); and
- If the limited cooperative association has investor members, at least a majority of the votes cast by patron members, unless the articles or bylaws require a greater percentage vote by patron members.
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The articles or bylaws may require that the percentage of votes required under paragraph (a) of subsection (1) of this section is:
- A different percentage that is not less than a majority of members voting at the meeting;
- Measured against the voting power of all members; or
- A combination of paragraphs (a) and (b) of this subsection (2).
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Subject to any contractual obligations, after a disposition or encumbrance of assets is approved and at any time before the consummation of the disposition or encumbrance, a limited cooperative association may approve an amendment to the contract for the disposition or encumbrance or the resolution authorizing the disposition or encumbrance or approve abandonment of the disposition or encumbrance:
- As provided in the contract or the resolution; and
- Except as limited or prohibited by the resolution, with the same affirmative vote of the board of directors and of the members as was required to approve the disposition or encumbrance.
- The voting requirements for districts, classes, or voting groups under section 7-58-404 apply to approval of a disposition of assets under this part 15.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 812, § 1, effective April 2, 2012.
PART 16 CONVERSION AND MERGER
7-58-1601. Definitions.
In this part 16, unless the context otherwise requires:
- "Constituent entity" means an entity that is a party to a merger.
- "Constituent limited cooperative association" means a limited cooperative association that is a party to a merger.
- "Converting limited cooperative association" means a converting entity that is a limited cooperative association.
- "Organizational documents" means articles of incorporation, bylaws, articles of organization, operating agreements, partnership agreements, and any other documents serving a similar function in the creation and governance of an entity.
-
"Personal liability" means personal liability for a debt, liability, or other obligation of an entity imposed, by operation of law or otherwise, on a person that co-owns or has an interest in the entity:
- By the entity's organic statute solely because of the person co-owning or having an interest in the entity; or
- By the entity's organizational documents under a provision of the entity's organic statute authorizing those documents to make one or more specified persons liable for all or specified parts of the entity's debts, liabilities, and other obligations solely because the person co-owns or has an interest in the entity.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 812, § 1, effective April 2, 2012.
Cross references: For additional definitions applicable to this part 16, see § 7-90-102.
7-58-1602. Conversion.
A limited cooperative association may convert into any form of entity permitted by section 7-90-201 if the board of directors of the limited cooperative association adopts a plan of conversion that complies with section 7-90-201.3 and the members entitled to vote thereon, if any, if required by section 7-58-1603, approve the plan of conversion.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 813, § 1, effective April 2, 2012.
7-58-1603. Action on plan of conversion by converting limited cooperative association.
-
For a limited cooperative association to convert into another form of entity, a plan of conversion must be approved by a majority of the board of directors, or a greater percentage if required by the articles or bylaws, and the board of directors must call a members meeting to consider the plan of conversion, hold the meeting not later than ninety days after approval of the plan by the board, and mail or otherwise transmit or deliver in a record to each member:
- The plan, or a summary of the plan and a statement of the manner in which a copy of the plan in a record may be reasonably obtained by a member;
- A recommendation that the members approve the plan of conversion or, if the board determines that because of a conflict of interest or any other reason it should not make a favorable recommendation, the basis for that determination;
- A statement of any condition of the board's submission of the plan of conversion to the members; and
- Notice of the meeting at which the plan of conversion will be considered, which notice must be given in the same manner as notice of a special meeting of members.
-
Subject to subsections (3) and (4) of this section, a plan of conversion must be approved by:
- At least a majority of the voting power of members present at a members meeting called under subsection (1) of this section; and
- If the limited cooperative association has investor members, at least a majority of the votes cast by patron members, unless the articles or bylaws require a greater percentage vote by patron members.
-
The articles or bylaws may require that the percentage of votes required under paragraph (a) of subsection (2) of this section is:
- A different percentage that is not less than a majority of members voting at the meeting;
- Measured against the voting power of all members; or
- A combination of paragraphs (a) and (b) of this subsection (3).
- The vote required to approve a plan of conversion must not be less than the vote required for the members of the limited cooperative association to amend the articles of organization.
-
Consent in a record to a plan of conversion by a member must be delivered to the limited cooperative association before delivery of a statement of conversion for filing pursuant to section 7-58-1608 (1) if, as a result of the conversion, the member will have:
- Personal liability for an obligation of the association; or
- An obligation or liability for an additional contribution.
-
Subject to subsection (5) of this section and any contractual rights, after a conversion is approved and at any time before the effective date of the conversion, a converting limited cooperative association may amend a plan of conversion or abandon the planned conversion:
- As provided in the plan; and
- Except as prohibited by the plan, by the same affirmative vote of the board of directors and of the members as was required to approve the plan.
- The voting requirements for districts, classes, or voting groups under section 7-58-404 apply to approval of a conversion under this part 16.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 813, § 1, effective April 2, 2012.
7-58-1604. Merger.
- One or more domestic limited cooperative associations may merge into another domestic entity if the board of directors of each association that is a party to the merger and each other entity that is a party to the merger adopts a plan of merger complying with section 7-90-203.3 and the members entitled to vote thereon, if any, of each such association, if required by sections 7-58-1605 and 7-58-1606, approve the plan of merger.
-
One or more domestic limited cooperative associations may merge with one or more foreign entities if:
- The merger is permitted by section 7-90-203 (2);
- The foreign entity complies with section 7-90-203.7 if it is the surviving entity of the merger; and
- Each domestic limited cooperative association complies with the applicable provisions of sections 7-58-1605 and 7-58-1606 and, if it is the surviving association of the merger, with section 7-58-1608 (2).
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 815, § 1, effective April 2, 2012.
7-58-1605. Notice and action on plan of merger by constituent limited cooperative association.
- For a limited cooperative association to merge with another entity, a plan of merger must be approved by a majority vote of the board of directors or a greater percentage if required by the association's articles or bylaws.
-
The board of directors shall call a members meeting to consider a plan of merger approved by the board, hold the meeting not later than ninety days after approval of the plan by the board, and mail or otherwise transmit or deliver in a record to each member:
- The plan of merger, or a summary of the plan and a statement of the manner in which a copy of the plan in a record may be reasonably obtained by a member;
- A recommendation that the members approve the plan of merger or, if the board determines that because of conflict of interest or any other reason it should not make a favorable recommendation, the basis for that determination;
- A statement of any condition of the board's submission of the plan of merger to the members; and
- Notice of the meeting at which the plan of merger will be considered, which notice must be given in the same manner as notice of a special meeting of members.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 815, § 1, effective April 2, 2012.
7-58-1606. Approval or abandonment of merger by members.
-
Subject to subsections (2) and (3) of this section, a plan of merger must be approved by:
- At least a majority of the voting power of members present at a members meeting called under section 7-58-1605 (2); and
- If the limited cooperative association has investor members, at least a majority of the votes cast by patron members, unless the articles or bylaws require a greater percentage vote by patron members.
-
The articles or bylaws may provide that the percentage of votes required under paragraph (a) of subsection (1) of this section is:
- A different percentage that is not less than a majority of members voting at the meeting;
- Measured against the voting power of all members; or
- A combination of paragraphs (a) and (b) of this subsection (2).
- The vote required to approve a plan of merger must not be less than the vote required for the members of the limited cooperative association to amend the articles of organization.
-
Consent in a record to a plan of merger by a member must be delivered to the limited cooperative association before delivery of a statement of merger for filing pursuant to section 7-58-1608 (2) if, as a result of the merger, the member will have:
- Personal liability for an obligation of the association; or
- An obligation or liability for an additional contribution.
-
Subject to subsection (4) of this section and any contractual rights, after a merger is approved, and at any time before the effective date of the merger, a limited cooperative association that is a party to the merger may approve an amendment to the plan of merger or approve abandonment of the planned merger:
- As provided in the plan; and
- Except as limited by the plan, with the same affirmative vote of the board of directors and of the members as was required to approve the plan.
- The voting requirements for districts, classes, or voting groups under section 7-58-404 apply to approval of a merger under this part 16.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 816, § 1, effective April 2, 2012.
7-58-1607. Merger of parent and subsidiary.
- Notwithstanding sections 7-58-1605 and 7-58-1606, by complying with this section, any parent limited cooperative association owning one hundred percent of the voting power, memberships, or interests of a subsidiary may either merge the subsidiary into itself or merge itself into the subsidiary.
-
Subject to subsection (3) of this section, the boards of directors of the parent association and of the subsidiary shall adopt by resolution a plan of merger that states the following:
- The entity names of the parent association and subsidiary and the entity name of the surviving entity;
- The terms and conditions of the proposed merger;
- The manner and basis of converting the shares of the parent association and subsidiary into shares, obligations, or other securities of the surviving entity or any other limited cooperative association into money or other property in whole or part;
- Any amendments to the organizational documents of the surviving party to be effected by the merger; and
- Any other provisions relating to the merger as are deemed necessary or desirable.
- The members of the parent association are not required to vote on the merger unless the articles, bylaws, or the board require otherwise; except that if, as a result of the merger, the voting shares, memberships, or other interests of members of the parent association would be materially altered, then the members of the parent association have the right to vote on the plan of merger. If the members of the parent association have the right to vote on the plan of merger, the parent association shall mail a copy or summary of the plan of merger to each member of the parent association who has the right to vote on the plan. Notice and meeting requirements as provided for in this article shall apply.
- If the members of the parent limited cooperative association have the right to vote on the plan of merger, unless the articles, bylaws, or the board requires a greater vote, the plan of merger must be approved by a majority of the members of the parent association present and voting on the plan in person or in any other manner authorized by the association pursuant to section 7-58-515.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 816, § 1, effective April 2, 2012.
7-58-1608. Filings required for conversion or merger.
- After a plan of conversion is approved, the converting entity shall deliver to the secretary of state, for filing pursuant to part 3 of article 90 of this title, a statement of conversion pursuant to section 7-90-201.7.
- After a plan of merger is approved, the surviving entity shall deliver to the secretary of state, for filing pursuant to part 3 of article 90 of this title, a statement of merger pursuant to section 7-90-203.7.
- If the plan of conversion or merger provides for amendments to the organizational documents of the converting or surviving entity, the converting or surviving entity shall deliver to the secretary of state, for filing pursuant to part 3 of article 90 of this title, articles of amendment effecting the amendments.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 817, § 1, effective April 2, 2012.
7-58-1609. Effect of conversion or merger.
- The effect of a conversion is determined by section 7-90-202.
- The effect of a merger is determined by section 7-90-204.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 818, § 1, effective April 2, 2012.
7-58-1610. Consolidation.
- Constituent entities that are limited cooperative associations or foreign cooperatives may agree to call a merger a consolidation under this part 16.
- All provisions governing mergers or using the term merger in this part 16 apply equally to mergers that the constituent entities choose to call consolidations under subsection (1) of this section.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 818, § 1, effective April 2, 2012.
7-58-1611. Part not exclusive.
This part 16 does not prohibit a limited cooperative association from being converted or merged under law other than this part 16.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 818, § 1, effective April 2, 2012.
PART 17 MISCELLANEOUS PROVISIONS
7-58-1701. Uniformity of application and construction.
In applying and construing this uniform act, consideration must be given to the need to promote uniformity of the law with respect to its subject matter among states that enact it or similar statutes.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 818, § 1, effective April 2, 2012.
7-58-1702. Relation to electronic signatures in global and national commerce act.
This article modifies, limits, or supersedes the federal "Electronic Signatures in Global and National Commerce Act", 15 U.S.C. sec. 7001 et seq., but does not modify, limit, or supersede section 101 (c) of that act, 15 U.S.C. sec. 7001 (c), or authorize electronic delivery of any of the notices described in section 103 (b) of that act, 15 U.S.C. sec. 7003 (b).
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 818, § 1, effective April 2, 2012.
7-58-1703. Savings clause.
This article does not affect an action or proceeding commenced, or right accrued, before April 2, 2012.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 818, § 1, effective April 2, 2012.
7-58-1704. Effective date.
This article takes effect April 2, 2012.
Source: L. 2011: Entire article added, (SB 11-191), ch. 197, p. 818, § 1, effective April 2, 2012.
PARTNERSHIPS
ARTICLE 60 UNIFORM PARTNERSHIP LAW
Cross references: For the "Colorado Uniform Partnership Act (1997)", see article 64 of this title; for recovery of personal judgments limited to parties served, see § 13-50-105 and rule 54(e), C.R.C.P.; for joint rights and obligations, see article 50 of title 13 and § 38-11-101; for pleading proper parties, see § 13-25-117; for mining partnerships, see article 44 of title 34; for filing affidavits of firm names, see §§ 7-71-101, 7-71-103, 7-71-104, 7-71-106, and 7-71-108; for the "Uniform Records Retention Act", see article 17 of title 6.
Law reviews: For article, "Choice of Entities in Colorado", see 23 Colo. Law. 293 (1993); for article, "Choice of Entity in Colorado: An Update", see 25 Colo. Law. 3 (Oct. 1996); for article, "Colorado Choice of Entity 1998", see 27 Colo. Law. 5 (June 1998); for article, "Contractually Binding Colorado Entities", see 28 Colo. Law. 3 3 (Dec. 1999); for article, "Colorado Choice of Form of Organization and Structure 2001", see 30 Colo. Law. 11 (Oct. 2001); for article "Entity and Trade Name Registration: 2001 Update", see 30 Colo. Law. 81 (Oct. 2001); for article "No Paper Required: Business Entity Legislation Makes Life Easier for Business Lawyers", see 33 Colo. Law 6 (June 2004); for article "Entity and Trade Name Registration: 2004 Update", see 34 Colo. Law. 11 (Jan. 2005).
Section
7-60-101. Short title.
This article shall be known and may be cited as the "Uniform Partnership Law".
Source: L. 31: p. 645, § 1. CSA: C. 123, § 1. CRS 53: § 104-1-1. C.R.S. 1963: § 104-1-1.
ANNOTATION
Law reviews. For article, "One Year Review of Corporations, Partnership, and Agency", see 37 Dicta 11 (1960). For article, "Research and Development Tax Shelter Partnerships", see 11 Colo. Law. 1851 (1982).
The uniform act governs the formation, operation, and dissolution of partnerships and the rights and duties of partners, one to another and to third persons. Mann v. Friden, 132 Colo. 273 , 287 P.2d 961 (1955).
This article governs in a dispute involving a partnership formed before 1998. Adams v. Land Servs., Inc., 194 P.3d 429 (Colo. App. 2008).
Derivative actions not authorized. This act contains no provision analogous to C.R.C.P. 23.1 or § 7-62-1001 that would give a general partner the right to bring a derivative action, absent exceptional circumstances. Adams v. Land Servs., Inc., 194 P.3d 429 (Colo. App. 2008).
7-60-102. Definitions.
As used in this article, unless the context otherwise requires:
- "Bankrupt" includes bankrupt or debtor under the federal bankruptcy code of 1978, title 11 of the United States Code, or insolvent under any state insolvency act.
- "Business" includes every trade, occupation, or profession.
- "Conveyance" includes every assignment, lease, mortgage, or encumbrance.
-
"Court" includes every court and judge having jurisdiction in the case.
(4.5) Repealed.
(4.7) "Limited liability partnership" means a partnership that has registered under section 7-60-144.
- Repealed.
- "Real property" includes land and any interest or estate in land.
- (Deleted by amendment, L. 2004, p. 1421 , § 67, effective July 1, 2004.)
Source: L. 31: p. 645, § 2. CSA: C. 123, § 2. CRS 53: § 104-1-2. C.R.S. 1963: § 104-1-2. L. 80: (1) amended, p. 782, § 1, June 5. L. 95: (4.5) and (7) added, p. 778, § 1, effective May 24. L. 2003: (4.5)(b) and (5)(b) added by revision, pp. 2356, 2357, §§ 347, 348. L. 2004: (4.7) added and (7) amended, p. 1421, § 67, effective July 1.
Editor's note: Subsections (4.5)(b) and (5)(b) provided for the repeal of subsections (4.5) and (5) respectively, effective July 1, 2004. (See L. 2003, pp. 2356, 2357.)
Cross references: For additional definitions applicable to this article, see § 7-90-102.
ANNOTATION
Law reviews. For note, "Corporations -- Investment Clubs", see 31 Rocky Mt. L. Rev. 358 (1959).
Applied in Frazier v. Carlin, 42 Colo. App. 226, 591 P.2d 1348 (1979).
7-60-103. Knowledge and notice.
- A person has "knowledge" of a fact within the meaning of this article not only when the person has actual knowledge thereof but also when the person has knowledge of such other facts as in the circumstances show bad faith.
-
A person has "notice" of a fact within the meaning of this article when the person who claims the benefit of the notice:
- States the fact to such person; or
- Delivers through the mail or by other means of communication a written statement of the facts to such person or to a proper person at such person or recipient's place of business or residence.
Source: L. 31: p. 646, § 3. CSA: C. 123, § 3. CRS 53: § 104-1-3. C.R.S. 1963: § 104-1-3. L. 2004: (1) and (2)(b) amended, p. 1421, § 68, effective July 1.
ANNOTATION
Law reviews. For note, "Corporations -- Investment Clubs", see 31 Rocky Mt. L. Rev. 358 (1959).
7-60-104. Rules of construction.
- The rule that statutes in derogation of the common law are to be strictly construed shall have no application to this article.
- The law of estoppel shall apply under this article.
- The law of agency shall apply under this article.
- This article shall be so interpreted and construed as to effect its general purpose to make uniform the law of those states which enact it.
- This article shall not be construed so as to impair the obligations of any contract existing prior to April 17, 1931, nor to affect any action or proceedings begun or right accrued before said date.
Source: L. 31: p. 646, § 4. CSA: C. 123, § 4. CRS 53: § 104-1-4. C.R.S. 1963: § 104-1-4.
7-60-105. Rules for cases not covered.
In any case not provided for in this article, the rules of law and equity, including the law merchant, shall govern.
Source: L. 31: p. 647, § 5. CSA: C. 123, § 5. CRS 53: § 104-1-5. C.R.S. 1963: § 104-1-5.
7-60-106. Partnership defined.
- A partnership is an association of two or more persons to carry on, as co-owners, a business for profit and includes, without limitation, a limited liability partnership.
- But any association formed under any other statute of this state or any statute adopted by an authority other than the authority of this state is not a partnership under this article unless such association has been a partnership in this state prior to April 17, 1931. This article shall apply to limited partnerships except insofar as the statutes relating to such partnerships are inconsistent herewith.
Source: L. 31: p. 647, § 6. CSA: C. 123, § 6. CRS 53: § 104-1-6. C.R.S. 1963: § 104-1-6. L. 95: (1) amended, p. 778, § 2, effective May 24. L. 2004: (1) amended, p. 1422, § 69, effective July 1.
Cross references: For provisions on limited partnerships, see articles 61 and 62 of this title.
ANNOTATION
Law reviews. For article, "Partnership or LLC: Alternative to an Irrevocable Life Insurance Trust?", see 25 Colo. Law. 43 (Jan. 1996).
A partnership is formed when an agreement is entered into which clearly embodies every element necessary for the formation and creation of a partnership and when it is executed by the parties nothing further remains to be done to legally bring about a partnership relation. Roberts v. Roberts, 113 Colo. 128 , 155 P.2d 155 (1945); Thompson v. McCormick, 149 Colo. 465 , 370 P.2d 442 (1962).
An express agreement is not required to create a partnership; a partnership may be formed by the conduct of the parties. Stratman v. Dietrich, 765 P.2d 603 (Colo. App. 1988); In re Winden, 120 B.R. 570 (Bankr. D. Colo. 1990).
And the partnership relation continues until it is dissolved either by mutual agreement or by action of the parties or decree of court. Thompson v. McCormick, 149 Colo. 465 , 370 P.2d 442 (1962).
Failure by a partner to contribute his share of capital does not necessarily negative existence of a partnership, as such failure may be waived by the other partner where, following execution of the agreement, the other partner authorizes and makes payments of profits to the noncontributing partner. Thompson v. McCormick, 149 Colo. 465 , 370 P.2d 442 (1962).
An agreement providing "all profits and losses in this venture are to be borne equally by the parties", expresses a consideration in the form of mutual promises and is sufficient to bring about a partnership. Thompson v. McCormick, 149 Colo. 465 , 370 P.2d 442 (1962).
And partner's liability for losses indicates right to profit. If a partnership incurs losses and there is no question but that a partner would be liable for his share of the losses under the terms of the partnership agreement, this clearly indicates that the parties intended that partner to have an equal share of the profits. Thompson v. McCormick, 149 Colo. 465 , 370 P.2d 442 (1962).
Applied in Frazier v. Carlin, 42 Colo. App. 226, 591 P.2d 1348 (1979); Damrell v. Creagar, 42 Colo. App. 281, 599 P.2d 262 (1979).
7-60-107. Partnership determined - how.
-
In determining whether a partnership exists these rules shall apply:
- Except as provided by section 7-60-116, persons who are not partners as to each other are not partners as to third persons;
- Joint tenancy, tenancy in common, tenancy by the entireties, joint property, common property, or part ownership does not of itself establish a partnership, whether such co-owners do or do not share any profits made by the use of the property;
- The sharing of gross returns does not of itself establish a partnership, whether or not the persons sharing them have a joint or common right or interest in any property from which the returns are derived;
-
The receipt by a person of a share of the profits of a business is prima facie evidence that the person is a partner in the business, but no such inference shall be drawn if such profits were received in payment:
- As a debt by installments or otherwise;
- As wages of an employee or rent to a landlord;
- As an annuity to a surviving spouse or representative of a deceased partner;
- As interest on a loan, though the amount of payment varies with the profits of the business;
- As the consideration for the sale of a goodwill of a business or other property by installments or otherwise.
Source: L. 31: p. 647, § 7. CSA: C. 123, § 7. CRS 53: § 104-1-7. C.R.S. 1963: § 104-1-7. L. 77: (1)(d)(III) amended, p. 294, § 1, effective July 1. L. 2004: IP(1)(d) amended, p. 1422, § 70, effective July 1.
ANNOTATION
A partnership can only be created by a contract of the parties whereby they agree to place their money, effects, labor, and skill in a lawful business and to divide the profits and bear the loss in certain proportions. Mann v. Friden, 132 Colo. 273 , 287 P.2d 961 (1955).
Mere joint ownership of land does not establish a partnership even though profits are shared. Brown v. Miller, 111 Colo. 327 , 141 P.2d 682 (1943).
Subsection (1)(d) makes receipt of a share of the profits of a business prima facie evidence that the person receiving it is a partner. Quier v. Rickly, 166 Colo. 5 , 177 P.2d 549 (1947); Montgomery v. Tufford, 165 Colo. 18 , 437 P.2d 36 (1968).
And where there is no evidence indicating that the landlord-tenant relationship exists between individuals, the mere fact that profits come from rental property does not bring them within the exception of subsection (1)(d)(II) as "rent to a landlord". Montgomery v. Tufford, 165 Colo. 18 , 437 P.2d 36 (1968).
Assignment of right to profits. Where a partner assigns his rights to profits, but the remaining partners have not agreed to admit the assignee as a partner, § 7-60-127 assures that the assignee does not become a partner without the consent of the remaining partners in contravention of § 7-60-118 (1)(g). Hence, the provision that the partnership is not dissolved merely protects the original parties from an unwanted partner or from a finding of partnership from the fact of the assignee's receipt of a share of the profits. Wester & Co. v. Nestle, 669 P.2d 1046 (Colo. App. 1983).
No evidence of joint venture. Where each party was to be separately and solely responsible for the expenses involved in the development of certain land into residential building sites, one party could have enjoyed an individual profit while the other might have sustained an individual loss. For such reason, the parties cannot be said to be actual joint venturers even though the agreement between the parties provided that the "gross sales price" was to be divided equally between them. Colo. Performance v. Mariposa Assoc., 754 P.2d 401 (Colo. App. 1987).
Trial court properly found that plaintiff and defendant had not formed a partnership. There was no agreement between plaintiff and defendant to share profits and losses in the house venture, and execution of a quitclaim deed and promissory note by plaintiff indicated that defendant's contribution was a loan secured by the house as collateral. Reid v. Pyle, 51 P.3d 1064 (Colo. App. 2002).
For the relevant cases decided prior to enactment of the uniform partnership law in 1931, see Leavitt v. Windsor Land & Inv. Co., 54 F. 439 (8th Cir. 1893); Omaha & Grant Smelting & Ref. Co. v. Rucker, 6 Colo. App. 334, 40 P. 853 (1895); Mason v. Sieglitz, 22 Colo. 320, 44 P. 588 (1896); Robinson v. Compher, 13 Colo. App. 343, 57 P. 754 (1899); L. Baldwin & Co. v. Patrick, 39 Colo. 347, 91 P. 828 (1907); Kent v. Cobb, 24 Colo. App. 264, 133 P. 424 (1913); Bond-Connell Sheep & Wool Co. v. Snyder, 68 Colo. 238, 188 P. 740 (1920).
Applied in Golden v. Sanderson, 103 Colo. 359 , 86 P.2d 252 (1938); Damrell v. Creagar, 42 Colo. App. 281, 599 P.2d 262 (1979); Yoder v. Hooper, 695 P.2d 1182 (Colo. App. 1984), aff'd, 737 P.2d 852 ( Colo. 1987 ).
7-60-108. Partnership property.
- All property originally brought into the partnership stock or subsequently acquired by purchase or otherwise on account of the partnership is partnership property.
- Unless the contrary intention appears, property acquired with partnership funds is partnership property.
- Any estate in real property may be acquired in the partnership name. Title so acquired can be conveyed only in the partnership name.
- A conveyance to a partnership in the partnership name, though without words of inheritance, passes the entire estate of the grantor unless a contrary intent appears.
Source: L. 31: p. 648, § 8. CSA: C. 123, § 8. CRS 53: § 104-1-8. C.R.S. 1963: § 104-1-8.
ANNOTATION
Law reviews. For article, "One Year Review of Agency, Partnerships, and Corporations", see 39 Dicta 61 (1962).
The intent of the parties with respect to the issue of contribution of individually held property to the partnership is a question of fact and several factors reflecting the parties' intent shall be weighed by the fact finder. Standring v. Standring, 794 P.2d 1089 (Colo. App. 1990).
Property acquired with partnership funds is presumed to belong to the partnership unless it is shown that all the partners had a contrary intention. This presumption is not negated by property so acquired being placed in the name of one of the individual members. Oswald v. Dawn, 143 Colo. 487 , 354 P.2d 505 (1960); Wise v. Nu-Tone Prods. Co., 148 Colo. 574 , 367 P.2d 346 (1961).
Mutual abandonment of proposed partnership entails return to status quo as to real property. Where real estate is purchased by one partner to be used by a proposed partnership and the suggested partnership is mutually rescinded and abandoned, it is for both parties to return to status quo. Acker v. Johns, 121 Colo. 336 , 216 P.2d 426 (1950).
Where an insurance policy is issued on the life of one member of a partnership with the other partner being the beneficiary, the partnership as contingent beneficiary, and the premiums paid from partnership funds, such policy constitutes a partnership asset in the absence of evidence to indicate a contrary intention on the part of the partners. Wise v. Nu-Tone Prods. Co., 148 Colo. 574 , 367 P.2d 346 (1961).
And the cash value of such a policy during the lifetime of the insured is a partnership asset where all premiums are paid with partnership funds. Wise v. Nu-Tone Prods. Co., 148 Colo. 574 , 367 P.2d 346 (1961).
Moreover, the fact that an accountant does not include the case value of an insurance policy as an asset of the partnership is not always significant in determining whether it is a partnership asset. Wise v. Nu-Tone Prods. Co., 148 Colo. 574 , 367 P.2d 346 (1961).
Where deeds of trust to property owned by the partnership are signed only by the partners in their individual capacity and are recorded under the partners' names, there was no indication in the record of a conveyance by the partnership and the bankruptcy trustee was not charged with constructive knowledge of the deeds of trust signed by the individual partners. Nile Valley Fed. Sav. & Loan Ass'n v. Sec. Title Guarantee Corp., 813 P.2d 849 (Colo. App. 1991).
Applied in Frazier v. Carlin, 42 Colo. App. 226, 591 P.2d 1348 (1979).
7-60-109. Partner agent of partnership.
- Subject to the effect of a statement of partnership authority under section 7-64-303, every partner is an agent of the partnership for the purpose of its business, and the act of every partner, including the execution in the partnership name of any instrument for apparently carrying on in the usual way the business of the partnership of which the partner is a member, binds the partnership, unless the partner so acting has in fact no authority to act for the partnership in the particular matter and the person with whom the partner is dealing has knowledge of the fact that the partner has no such authority.
- An act of a partner which is not apparently for the carrying on of the business of the partnership in the usual way does not bind the partnership unless authorized by the other partners.
-
Unless authorized by the other partners or unless they have abandoned the business, one or more but less than all the partners have no authority to:
- Assign the partnership property in trust for creditors or on the assignee's promise to pay the debts of the partnership;
- Dispose of the goodwill of the business;
- Do any other act which would make it impossible to carry on the ordinary business of the partnership;
- Confess a judgment.
- Repealed.
- No act of a partner in contravention of a restriction on authority shall bind the partnership to persons having knowledge of the restriction.
Source: L. 31: p. 649, § 9. CSA: C. 123, § 9. CRS 53: § 104-1-9. C.R.S. 1963: § 104-1-9. L. 75: (3)(e) repealed, p. 578, § 3, effective July 14. L. 2004: (1) amended, p. 1422, § 71, effective July 1.
ANNOTATION
Law reviews. For article, "A Law Firm Pension Plan?", see 37 Dicta 351 (1960).
Annotator's note. Relevant cases decided prior to the earliest source of § 7-60-109 have been included with the annotations to this section.
Effect of subsection (1) is that the status of a partner, as both principal and agent of the partnership, serves as complete authority with respect to acts which are apparently within the usual course of the partnership's particular business, unless the other party knows that he has no such authority. This obviates the necessity of a specific written authorization from the other partners. Ball v. Carlson, 641 P.2d 303 (Colo. App. 1981).
Each active partner a general agent. When acting in furtherance of the objects and business of the firm and within the scope of its business, one partner is clothed with the full powers of all the partners and is authorized to bind the firm in all transactions, for the very nature and purposes of a partnership association necessarily constitute each active partner a general agent of the firm. Wilcox v. Jackson, 7 Colo. 521 , 4 P. 966 (1884); Sch. Dist. No. 3, Clear Creek County v. Central Sav. Bank & Trust Co., 113 Colo. 487 , 159 P.2d 361 (1945).
This agency principle is subject to the terms of the partnership agreement. Dissenting partners, who had delegated to the managing partners the right to enter into certain transactions, could not later rely on their status as agents of the partnership to attempt to rescind those transactions. Adams v. Land Servs., Inc., 194 P.3d 429 (Colo. App. 2008).
Where a promissory note was made by a partner, purportedly in a partnership capacity, and the partnership's name appeared thereon, which inferred that the note was partnership business, these facts indicated a basis for the court's conclusion that the partner had ostensible authority to sign the note on behalf of the partnership. Rocky Mt. Nat'l Bank v. McCaskill, 16 Colo. 408 , 26 P. 821 (1891); Kruse v. Bank of Fountain Valley, 28 Colo. App. 364, 473 P.2d 171 (1970).
A confession of judgment by one partner without any authority from the other partner is void. Buchanan v. Scandia Plow Co., 6 Colo. App. 34, 39 P. 899 (1895).
Sale of partnership realty. The act of a partner in selling real estate, when in the apparent scope of the partnership's business, is binding upon the partnership and the other partners without obtaining their written consent, notwithstanding the statute of frauds requirement of § 38-10-109, that the authority of an agent to sell real estate must be in writing. Ball v. Carlson, 641 P.2d 303 (Colo. App. 1981).
Transfer of assets under plan authorized by partnership did not violate subsection (3)(c). Silverberg v. Colantuno, 991 P.2d 280 (Colo. App. 1998).
The acts of one joint venturer are binding upon other joint venturers if those acts pertain to matters within the scope of the joint venture, and the joint venturer had authority to act. A.B. Hirschfeld Press v. Weston Group, 824 P.2d 44 (Colo. App. 1991).
Applied in Moynahan v. Prentiss, 10 Colo. App. 295, 51 P. 94 (1897); Singer Hous. Co. v. Seven Lakes Venture, 466 F. Supp. 369 (D. Colo. 1979 ); Erickson v. Oberlohr, 749 P.2d 996 (Colo. App. 1987).
7-60-110. Conveyance of real property.
- Subject to the effect of a statement of partnership authority under section 7-64-303, where title to real property is in the partnership name, any partner may convey title to such property by a conveyance executed in the partnership name; except that the partnership may recover such property unless the partner's act binds the partnership under the provisions of section 7-60-109 (1) or unless such property has been conveyed by the grantee or a person claiming through such grantee to a holder for value without knowledge that the partner, in making the conveyance, has exceeded the partner's authority.
- Where title to real property is in the name of the partnership, a conveyance executed by a partner in the partner's own name passes the equitable interest of the partnership if the act is one within the authority of the partner under the provisions of section 7-60-109 (1).
- Where title to real property is in the name of one or more but not all the partners and the record does not disclose the right of the partnership, the partners in whose name the title stands may convey title to such property, but the partnership may recover such property if the partner's act does not bind the partnership under the provisions of section 7-60-109 (1), unless the purchaser or the purchaser's assignee is a holder for value, without knowledge.
- Where the title to real property is in the name of one or more or all the partners or in a third person in trust for the partnership, a conveyance executed by a partner in the partnership name or in the partner's own name passes the equitable interest of the partnership if the act is one within the authority of the partner under the provisions of section 7-60-109 (1).
- Where the title to real property is in the names of all the partners, a conveyance executed by all the partners passes all their rights in such property.
Source: L. 31: p. 650, § 10. CSA: C. 123, § 10. CRS 53: § 104-1-10. C.R.S. 1963: § 104-1-10. L. 2004: (1) to (4) amended, p. 1422, § 72, effective July 1.
ANNOTATION
Law reviews. For article, "Evidence in the Proof of Real Estate Titles", see 24 Rocky Mt. L. Rev. 424 (1952). For article, "Guess Who's Coming to Closing", see 11 Colo. Law. 689 (1982). For article, "Signatures on Documents Affecting Title to Colorado Real Property -- Part II", see 12 Colo. Law. 258 (1983). For article, "Partnership Status of Joint Ventures in Colorado: Editorial Comments on CRS § 38-30-166 ", see 25 Colo. Law. 61 (Feb. 1996).
This section contemplates that real estate may be a partnership asset whether it is titled in the partnership name or in the name of one or more but not all of the partners; therefore, a written conveyance from a partner who contributes real estate to a partnership, although a factor to consider, is not required to convert the property into partnership property. Courts must look to the parties' intention to determine whether the property is a partnership asset, including consideration of: (1) The language of any partnership agreement; (2) the use of the property in the partnership business; (3) the listing of the property as an asset or liability in the partnership books and tax returns; (4) the construction of improvements on the property at partnership expense; (5) the payment of taxes and insurance premiums on the property out of partnership funds; (6) a party's declaration of intent when entering the partnership; and, generally, (7) the parties' conduct with respect to the property. In re Estate of Grosboll, 2013 COA 141 , 315 P.3d 1284. Applied in Ball v. Carlson, 641 P.2d 303 (Colo. App. 1981).
7-60-111. Admission of partner binds partnership.
An admission or representation made by any partner concerning partnership affairs within the scope of the partner's authority as conferred by this article is evidence against the partnership.
Source: L. 31: p. 651, § 11. CSA: C. 123, § 11. CRS 53: § 104-1-11. C.R.S. 1963: § 104-1-11. L. 2004: Entire section amended, p. 1423, § 73, effective July 1.
7-60-112. Notice to partner - effect.
Notice to any partner of any matter relating to partnership affairs and the knowledge of the partner acting in the particular matter acquired while a partner or then present to the partner's mind and the knowledge of any other partner who reasonably could and should have communicated it to the acting partner operate as notice to or knowledge of the partnership, except in the case of a fraud on the partnership committed by or with the consent of that partner.
Source: L. 31: p. 651, § 12. CSA: C. 123, § 12. CRS 53: § 104-1-12. C.R.S. 1963: § 104-1-12. L. 2004: Entire section amended, p. 1423, § 74, effective July 1.
ANNOTATION
Knowledge of one partner concerning the partnership business is knowledge possessed by all the partners. Lee v. Durango Music, 144 Colo. 270 , 355 P.2d 1083 (1960).
When a general partner has knowledge and notice of a matter concerning partnership business, received or acquired while transacting partnership business, that knowledge and notice must generally be imputed to the limited partners. BMS P'ship v. Winter Park Devil's Thumb Inv. Co., 910 P.2d 61 (Colo. App. 1995), aff'd on other grounds, 926 P.2d 1253 ( Colo. 1996 ).
Applied in Spiker v. Hoogeboom, 628 P.2d 177 (Colo. App. 1981); In re Lynch v. Three Ponds Co., 656 P.2d 51 (Colo. App. 1982).
7-60-113. Partner's wrongful acts - liability.
Where, by any wrongful act or omission of any partner acting in the ordinary course of the business of the partnership or with the authority of the other partners, loss or injury is caused to any person, not being a partner in the partnership, or any penalty is incurred, the partnership is liable therefor to the same intent as the partner so acting or omitting to act.
Source: L. 31: p. 652, § 13. CSA: C. 123, § 13. CRS 53: § 104-1-13. C.R.S. 1963: § 104-1-13. L. 2004: Entire section amended, p. 1423, § 75, effective July 1.
ANNOTATION
Law reviews. For note, "Liability of Joint Tortfeasors in Colorado", see 30 Dicta 176 (1953). For article, "One Year Review of Contracts", see 34 Dicta 85 (1957).
Knowledge that note is given outside scope of partnership's business precludes recovery. Where one purchases a note from a partner with the knowledge that it is given for a purpose clearly outside of the scope of the partnership's business, he is not entitled to recover as against the partnership or either of the nonsigning partners. King v. Meckleburg, 43 Colo. 316, 95 P. 951 (1908) (decided prior to the earliest source of § 7-60-113).
Applied in Williams v. Burns, 463 F. Supp. 1278 (D. Colo. 1979).
7-60-114. Partner's breach of trust - liability.
-
The partnership is bound to make good the loss:
- Where one partner acting within the scope of such partner's apparent authority receives money or property of a third person and misapplies it; and
- Where the partnership in the course of its business receives money or property of a third person and the money or property so received is misapplied by any partner while it is in the custody of the partnership.
Source: L. 31: p. 652, § 14. CSA: C. 123, § 14. CRS 53: § 104-1-14. C.R.S. 1963: § 104-1-14. L. 2004: (1)(a) amended, p. 1423, § 76, effective July 1.
ANNOTATION
Law reviews. For note, "Liability of Joint Tortfeasors in Colorado", see 30 Dicta 176 (1953). For article, "One Year Review of Contracts", see 34 Dicta 85 (1957).
Applied in Frazier v. Carlin, 42 Colo. App. 226, 591 P.2d 1348 (1979).
7-60-115. Nature of partner's liability.
-
Except as otherwise provided in subsection (2) of this section, all partners are liable:
- Jointly and severally for everything chargeable to the partnership under sections 7-60-113 and 7-60-114;
- Jointly and severally for all other debts and obligations of the partnership, but any partner may enter into a separate obligation to perform a partnership contract.
-
- Except as otherwise provided in the partnership agreement, partners in a limited liability partnership are not liable directly or indirectly, including by way of indemnification, contribution, or otherwise, under a judgment, decree, or order of a court, or in any other manner, for a debt, obligation, or liability of or chargeable to the partnership while it is a limited liability partnership; except that this subsection (2) shall not affect the liability of a partner in a limited liability partnership for such partner's own negligence, wrongful acts, or misconduct.
- Partners in a limited liability partnership do not become liable, directly or indirectly, for debts, obligations, or liabilities incurred while the partnership was a limited liability partnership merely because the partnership ceases to be a limited liability partnership.
Source: L. 31: p. 652, § 15. CSA: C. 123, § 15. CRS 53: § 104-1-15. C.R.S. 1963: § 104-1-15. L. 73: p. 1082, § 1. L. 95: Entire section amended, p. 778, § 3, effective May 24. L. 2004: (2) amended, p. 1423, § 77, effective July 1.
Cross references: For service on partnerships, see rule 4(e)(4), C.R.C.P.; for judgments against partners and partnerships, see rule 54(e), C.R.C.P.; for judgments against partners not served with process, see rule 106 (a)(5), C.R.C.P.; for joint rights and obligations, see § 13-50-101.
ANNOTATION
Law reviews. For article, "One Year Review of Contracts", see 34 Dicta 85 (1957). For article, "A Law Firm Pension Plan?", see 37 Dicta 351 (1960).
Section 13-21-111.5 abolishing joint and several liability does not apply to partnerships under this section. Bank of Denver v. Southeastern Capital Group, Inc., 763 F. Supp. 1552 (D. Colo. 1991).
Section is not abrogated by § 13-21-111.5 which calculates liability based upon wrongdoer's percentage of fault. Hughes v. Johnson, 764 F. Supp. 1412 (D. Colo. 1991).
Partners and creditors may expressly agree to limit the liability of the partners and the terms of each obligation must be examined to determine the extent of each partner's liability. Black v. First Federal Savings and Loan, 830 P.2d 1103 (Colo. App. 1992).
The creditor's waiver of personal guarantees by the general partners did not waive the general partners' liability under this section where the evidence showed that the creditor did not contemplate a total waiver of liability and nothing in the limited partnership agreement limited the general partners' liability. Black v. First Federal Savings and Loan, 830 P.2d 1103 (Colo. App. 1992).
General partners are estopped to deny the validity of contracts and deeds they enter into if the limited partnership received the full benefits and use of the proceeds for the purposes intended. Black v. First Fed. Sav. & Loan Ass'n, 830 P.2d 1103 (Colo. App. 1992).
Although the general rule is that partners are jointly and severally liable for all debts and obligations of the partnership, partners and creditors may expressly agree to limit the liability of partners for the debts of the partnership, and the terms of each obligation must be ascertained to determine the extent of the partners' liability. Black v. First Fed. Sav. & Loan Ass'n, 830 P.2d 1103 (Colo. App. 1992).
Where partnership is assessed for use taxes and incurs liability owing to its failure to protest liability, taxpayer, as general partner of a limited partnership, is jointly and severally liable therefor. AF Prop. v. Dept. of Rev., 852 P.2d 1267 (Colo. App. 1992).
When issue of material fact existed as to whether general partnership had been assessed with a use tax, trial court erred in entering motion for summary judgment in favor of individual partner on grounds that partner could not be held jointly and severally liable for deficiency owed by partnership. AF Prop. v. Dept. of Rev., 852 P.2d 1267 (Colo. App. 1992).
The trial court's finding that the lender's waiver of personal guarantees did not relieve the general partners on the note is supported by the record including testimony by an officer of the lender that he and other officers did not seek personal guarantees because they considered it redundant in view of the general partner's liability and nothing in the limited partnership agreement expressly limited the general partner's liability for the limited partnership's obligations that might have given notice of such an intent to the lender. Black v. First Fed. Sav. & Loan Ass'n, 830 P.2d 1103 (Colo. App. 1992).
Applied in Singer Hous. Co. v. Seven Lakes Venture, 466 F. Supp. 369 (D. Colo. 1979 ); Ball v. Carlson, 641 P.2d 303 (Colo. App. 1981); Keneco Oil & Gas v. Univ. Nat. Bank, 732 P.2d 247 (Colo. App. 1986).
7-60-116. Liability of purported partner.
- If a person, by words or conduct, purports to be a partner or consents to being represented by another as a partner, in a partnership or with one or more persons not partners, the purported partner is liable to a person to whom the representation is made, if that person, relying on the representation, enters into a transaction with the actual or purported partnership. If the representation, either by the purported partner or by a person with the purported partner's consent, is made in a public manner, the purported partner is liable to a person who relies upon the purported partnership even if the purported partner is not aware of being held out as a partner to the claimant. If a partnership obligation results, the purported partner is liable with respect to that obligation as if the purported partner were a partner in the partnership, and, if the partnership is a limited liability partnership, the purported partner's liability is subject to section 7-60-115 (2) as if the purported partner were a partner in the limited liability partnership. If no partnership obligation results, the purported partner is liable with respect to that liability jointly and severally with any other person consenting to the representation.
- When a partnership liability results, such person is liable as though the person were an actual member of the partnership; except that, in the case of a limited liability partnership, the person's liability is subject to section 7-60-115 (2).
- When no partnership liability results, such person is liable jointly with the other persons, if any, so consenting to the contract or representation as to incur liability, otherwise separately.
- When a person has been thus represented to be a partner in an existing partnership or with one or more persons not actual partners, the purported partner is an agent of the persons consenting to such representation to bind them to the same extent and in the same manner as though the purported partner were a partner in fact with respect to persons who rely upon the representation. Where all the members of the existing partnership consent to the representation, a partnership act or obligation results; but in all other cases it is the joint act or obligation of the person acting and the persons consenting to the representation.
Source: L. 31: p. 653, § 16. CSA: C. 123, § 16. CRS 53: § 104-1-16. C.R.S. 1963: § 104-1-16. L. 95: (2) amended, p. 779, § 4, effective May 24. L. 2004: (1), (2), and (4) amended, p. 1424, § 78, effective July 1.
ANNOTATION
Law reviews. For article, "The Convertible, Participating Mortgage: Planning Opportunities and Legal Pitfalls in Structuring the Transaction", see 54 U. Colo. L. Rev. 295 (1983).
7-60-117. Liability of incoming partner.
A person admitted as a partner into an existing partnership is liable for all the obligations of the partnership arising before such admission as though the person had been a partner when such obligations were incurred; except that this liability shall be satisfied only out of partnership property.
Source: L. 31: p. 654, § 17. CSA: C. 123, § 17. CRS 53: § 104-1-17. C.R.S. 1963: § 104-1-17. L. 2004: Entire section amended, p. 1425, § 79, effective July 1.
ANNOTATION
This section held inapplicable to an incoming partner who expressly assumed a pre-existing obligation. Absent that express assumption however, the incoming partner's personal liability under a modified note would be limited to the amount of the new obligation created after his partnership interest began. Resolution Trust Corp. v. Teem P'ship, 835 F. Supp. 563 (D. Colo. 1993).
7-60-118. Rights and duties of partners.
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The rights and duties of the partners in relation to the partnership shall be determined, subject to any agreement between them, by the following rules:
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Each partner shall be repaid such partner's contributions, whether by way of capital or advances to the partnership property and share equally in the profits and surplus remaining after all liabilities, including those to partners, are satisfied and shall contribute toward the losses whether of capital or otherwise sustained by the partnership according to such partner's share in the profits; except that a partner in a limited liability partnership shall not be obligated to contribute to partnership losses in excess of the partner's interest in the partnership beyond the extent:
- Such obligation to contribute is set out in a writing signed by the partner; or
- Such loss is attributable to an obligation or liability for which the partner would have individual liability under section 7-60-115 (2).
- The partnership shall indemnify every partner in respect of payments made and personal liabilities reasonably incurred by the partner in the ordinary and proper conduct of its business or for the preservation of its business or property.
- A partner who in aid of the partnership makes any payment or advance beyond the amount of capital that the partner agreed to contribute shall be paid interest from the date of the payment or advance.
- A partner shall receive interest on the capital contributed by the partner only from the date when repayment should be made.
- All partners have equal rights in the management and conduct of the partnership business.
- No partner is entitled to remuneration for acting in the partnership business, but a surviving partner is entitled to reasonable compensation for the partner's services in winding up the partnership affairs.
- No person can become a member of a partnership without the consent of all the partners.
- Any difference arising as to ordinary matters connected with the partnership business may be decided by a majority of the partners; but no act in contravention of any agreement between the partners may be done rightfully without the consent of all the partners.
-
Each partner shall be repaid such partner's contributions, whether by way of capital or advances to the partnership property and share equally in the profits and surplus remaining after all liabilities, including those to partners, are satisfied and shall contribute toward the losses whether of capital or otherwise sustained by the partnership according to such partner's share in the profits; except that a partner in a limited liability partnership shall not be obligated to contribute to partnership losses in excess of the partner's interest in the partnership beyond the extent:
Source: L. 31: p. 654, § 18. CSA: C. 123, § 18. CRS 53: § 104-1-18. C.R.S. 1963: § 104-1-18. L. 95: (1)(a) amended, p. 779, § 5, effective May 24. L. 2004: IP(1)(a), (1)(b), (1)(c), (1)(d), and (1)(f) amended, p. 1425, § 80, effective July 1.
ANNOTATION
Law reviews. For article, "A Law Firm Pension Plan?", see 37 Dicta 351 (1960).
Each partner is to be repaid his contribution, and the partners are to share equally in the profits and surplus after all liabilities, including those to the partners, are satisfied. Rossi v. Rossi, 154 Colo. 21 , 389 P.2d 191 (1963).
And the fact that one partner has failed to make the required capital contribution is not sufficient to impose a forfeiture where the contribution can be deducted from his share of the profits. Thompson v. McCormick, 149 Colo. 465 , 370 P.2d 442 (1962).
A division of the profits may be enforced by a partner entitled to share in the profits. Thompson v. McCormick, 149 Colo. 465 , 370 P.2d 442 (1962).
And where one partner "grubstakes" another partner, he becomes entitled to that partner's agreed share of the profits. Thompson v. McCormick, 149 Colo. 465 , 370 P.2d 442 (1962).
Assignment of partner's right to profits. Where a partner assigns his rights to profits, but the remaining partners have not agreed to admit the assignee as a partner, § 7-60-127 assures that the assignee does not become a partner without the consent of the remaining partners in contravention of subsection (1)(g). Hence, the provision that the partnership is not dissolved merely protects the original parties from an unwanted partner or from a finding of partnership from the fact of the assignee's receipt of a share of the profits. Wester & Co. v. Nestle, 669 P.2d 1046 (Colo. App. 1983).
The rights of a party to a joint venture agreement are subject to any agreements between the parties of the venture. Turkey Creek, LLC v. Rosania, 953 P.2d 1306 (Colo. App. 1998); Adams v. Land Servs., Inc., 194 P.3d 429 (Colo. App. 2008).
Where transactions were authorized and approved by the managing partners, after the objections of the minority partners had been considered, the minority partners were nevertheless bound by the actions of the general partners. Adams v. Land Servs., Inc., 194 P.3d 429 (Colo. App. 2008).
Partner violated subsection (1)(g) by unilaterally including his children in partnership without the other partner's consent. Tucker v. Ellbogen, 793 P.2d 592 (Colo. App. 1989).
Individual members of partnership cannot maintain an action for damages against another member unless there has been an accounting. Boner v. L.C. Fulenwider, Inc., 32 Colo. App. 440, 513 P.2d 730 (1973).
There is no provision in this act which provides a general partner with the right to bring a derivative action. Kline Hotel Partners v. Aircoa Equity Interests, 708 F. Supp. 1193 (D. Colo. 1989).
Trial court properly determined the allocation of losses of partnership on the basis of the partners' ambiguous agreement and testimony by the partners. The court, however, erred in determining that compensation to one partner was an advance against profits to be earned, despite the partners' testimony and the court's earlier finding that the term "draw" in the ambiguous partnership agreement meant compensation to one of the partners in exchange for greater participation in the partnership. Tucker v. Ellbogen, 793 P.2d 592 (Colo. App. 1989).
Applied in Hooper v. Yoder, 737 P.2d 852 (Colo. 1987).
7-60-119. Partnership books.
The partnership books shall be kept, subject to any agreement between the partners, at the principal place of business of the partnership, and every partner shall at all times have access to and may inspect and copy any of them.
Source: L. 31: p. 655, § 19. CSA: C. 123, § 19. CRS 53: § 104-1-19. C.R.S. 1963: § 104-1-19.
ANNOTATION
Applied in Heinold Hog Mkt., Inc. v. McCoy, 700 F.2d 611 (10th Cir. 1983).
7-60-120. Duty to render information.
Partners shall render on demand true and full information of all things affecting the partnership to any partner or the legal representative of any deceased partner under legal disability.
Source: L. 31: p. 656, § 20. CSA: C. 123, § 20. CRS 53: § 104-1-20. C.R.S. 1963: § 104-1-20.
ANNOTATION
Applied in Skeen v. Harms, 10 B.R. 817 (Bankr. D. Colo. 1981).
7-60-121. Accountable as a fiduciary.
- Every partner shall account to the partnership for any benefit and hold as trustee for it any profits derived by such partner without the consent of the other partners from any transaction connected with the formation, conduct, or liquidation of the partnership or from any use by such partner of its property.
- This section applies also to the representatives of a deceased partner engaged in the liquidation of the affairs of the partnership as the personal representatives of the last surviving partner.
Source: L. 31: p. 656, § 21. CSA: C. 123, § 21. CRS 53: § 104-1-21. C.R.S. 1963: § 104-1-21. L. 2004: (1) amended, p. 1425, § 81, effective July 1.
ANNOTATION
Law reviews. For article, "The Fiduciary Duties of General Partners", see 17 Colo. Law. 1959 (1988).
Where a partner exchanges property which belongs to the partnership for real estate and he takes the deed to the real estate in his own name but refuses to transfer any part of the land to the partnership, the land belongs to the partnership and is held by the exchanging partner in trust for the use and benefit of the partnership. Payne v. Martin, 39 Colo. 265, 89 P. 46 (1907) (decided prior to the earliest source of § 7-60-121).
"Benefit" and "profit" would be the rental value of the partnership equipment wrongfully used, not the value of the property upon which it was used. Thompson v. McCormick, 169 Colo. 151 , 454 P.2d 934 (1969).
Partner who excluded other partner from partnership business breached fiduciary duty to wind up partnership expeditiously by: Failing to wind up the partnership in a reasonable period of time; allowing an accumulation of $200,000 in interest on a loan guaranteed by the partnership; allowing various oil and gas leases to expire; and unilaterally including his children in the partnership without the other partner's consent. Tucker v. Ellbogen, 793 P.2d 592 (Colo. App. 1989).
Liabilities that accrued after reasonable time for winding up partnership are to be assessed against the partner responsible for winding up the partnership, as are liabilities affected by the partner's breach of his fiduciary duty in unilaterally bringing his children into partnership without the other partner's consent. Tucker v. Ellbogen, 793 P.2d 592 (Colo. App. 1989).
Partner did not breach fiduciary duty by participating in a personal capacity in the purchase and sale of a lease where the partners had previously agreed to such action by the partner. Tucker v. Ellbogen, 793 P.2d 592 (Colo. App. 1989).
Section does not per se create the level of fiduciary duty required under federal bankruptcy laws for purposes of dischargeability; however, coupled with Colorado case law, a fiduciary obligation is imposed upon partners. In re Winden, 120 B.R. 570 (Bankr. D. Colo. 1990); In re Schwenn, 126 B.R. 351 (Bankr. D. Colo. 1991).
Applied in Yoder v. Hooper, 695 P.2d 1182 (Colo. App. 1984), aff'd, 737 P.2d 852 ( Colo. 1987 ).
7-60-122. Right to an account.
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Any partner shall have the right to a formal account as to partnership affairs:
- If the partner is wrongfully excluded from the partnership business or possession of its property by the other partners;
- If the right exists under the terms of any agreement;
- As provided by section 7-60-121;
- Whenever other circumstances render it just and reasonable.
Source: L. 31: p. 656, § 22. CSA: C. 123, § 22. CRS 53: § 104-1-22. C.R.S. 1963: § 104-1-22. L. 2004: (1)(a) amended, p. 1425, § 82, effective July 1.
ANNOTATION
Having determined that a partnership exists, the right to an accounting necessarily follows. Roberts v. Roberts, 113 Colo. 128 , 155 P.2d 155 (1945).
But no right to receivership. A partner has a right to an accounting, a right to a dissolution, the right to contribution, and various rights on dissolution, but nowhere does the uniform act provide that even a bona fide partner has a right to receivership for property that he says belongs to the firm. Mann v. Friden, 132 Colo. 273 , 287 P.2d 961 (1955).
No right to derivative action, absent exceptional circumstances. Adams v. Land Servs., Inc., 194 P.3d 429 (Colo. App. 2008).
7-60-123. Rights and duties beyond term.
- When a partnership for a fixed term or particular undertaking is continued after the termination of such term or particular undertaking without any express agreement, the rights and duties of the partners remain the same as they were at such termination, insofar as is consistent with a partnership at will.
- A continuation of the business by the partners or such of them as habitually acted therein during the term, without any settlement or liquidation of the partnership affairs, is prima facie evidence of a continuation of the partnership.
Source: L. 31: p. 657, § 23. CSA: C. 123, § 23. CRS 53: § 104-1-23. C.R.S. 1963: § 104-1-23.
7-60-124. Property rights of a partner.
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The property rights of a partner are:
- Such partner's rights in specific partnership property;
- Such partner's interest in the partnership; and
- Such partner's right to participate in the management.
Source: L. 31: p. 657, § 24. CSA: C. 123, § 24. CRS 53: § 104-1-24. C.R.S. 1963: § 104-1-24. L. 2004: Entire section amended, p. 1426, § 83, effective July 1.
7-60-125. Right in specific property.
- A partner is co-owner with the other partners of specific partnership property holding as a tenant in partnership.
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The incidents of tenancy in partnership are such that:
- A partner, subject to the provisions of this article and to any agreement between the partners, has an equal right with the other partners to possess specific partnership property for partnership purposes; except that a partner has no right to possess such property for any other purpose without the consent of the other partners;
- A partner's right in specific partnership property is not assignable except in connection with the assignment of rights of all the partners in the same property;
- A partner's right in specific partnership property is not subject to attachment or execution except on a claim against the partnership. When partnership property is attached for a partnership debt the partners, or any of them, or the representatives of a deceased partner, cannot claim any right under the homestead or exemption laws.
- On the death of a partner, the deceased partner's right in specific partnership property vests in the surviving partner or partners, except where the deceased partner was the last surviving partner, when the right in such property vests in the deceased partner's legal representative. The surviving partner or partners or the legal representative of the last surviving partner has no right to possess the partnership property for any but a partnership purpose.
- A partner's right in specific partnership property is not subject to dower, curtesy, or allowances to widows, heirs, or next of kin.
Source: L. 31: p. 657, § 25. CSA: C. 123, § 25. CRS 53: