Class A redemption

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This has been agreed among those involved by unanimous consent on 20210620.
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Contents

Problem

The three year redemption period on Class A Investment Shares nearly sank us. We need a solution that:

  1. Protects the co-op from a "run on the bank," where more shares are redeemed than our cash flow can possibly provide within three years, and
  2. Provides potential member-funders with some assurance that they can get their money back out — an "exit strategy."

Proposed Solution

  • Remove the three-year redemption clause for Class A Investment Shares
  • Add a general clause for redemption of all shares, along the lines of:
    EcoReality Co-op must not redeem more shares in all classes in a given fiscal year than the sum of new shares issued and that year's retained earnings. unless agreed by the board.
  • Add a clause to Class A Investment Shares that specifically states:
    Shares may be redeemed from time to time, as allowed by (redemption restriction clause, above).
    Shares may be marketed by shareholder for transfer to other suitable potential member-funders. Suitability of other member-funders, and terms of transfer, are subject to approval by the board.

Allowing the marketing of shares will turn shareholders who want out from enemies to promoters. Instead of telling others that we were unjustly keeping their money, they'll tell others that we are so great, those others should buy their shares!

Current Wording

(Rule 20) 7: No class of shares shall ever bear interest nor dividends. (Rule 21)

  1. Member shares: (no change)
  2. Class A shares:
    1. have a par value of $1 per share;
    2. require a minimum initial investment of 10,000 shares;
    3. may be purchased by members or non-members with the approval of the directors;
    4. may not be held jointly;
    5. may bear stock dividends or stock split at a rate that shall be set by the directors from time to time, but at no time shall the rate set be lower than that applied to membership shares;
    6. stock dividends shall be declared and paid on Class A shares before any interest on membership shares, dividends, or patronage rebates are paid out to members;
    7. may be transferred with the approval of the Directors;
    8. have a three-year redemption notice, with a maximum number to be redeemed at one time, to be determined by the directors from time to time, in accordance with Part 4, Division 4 of The Cooperative Association Act;
    9. redemption of a Class A share shall be at its par value;
    10. upon dissolution, will be redeemed prior to membership shares;
    11. at no time shall the number of Class A investment shares issued to non-members exceed 50% of the total number of Class A investment shares.

Proposed Wording

(Rule 21)

  1. Member shares: (no change)
  2. Class A shares:
    1. have a par value of $1 per share;
    2. require a minimum initial investment of 10,000 shares;
    3. may be purchased by members or non-members with the approval of the directors;
    4. may be held jointly;
    5. do not bear interest nor dividend;
    6. may be transferred with the approval of the Directors;
    7. may be redeemed at par value, subject to the following restrictions:
      1. the total of all shares redeemed in any given fiscal year shall not exceed the sum of:
        1. the current fiscal year's retained earnings, and
        2. any new purchase of shares made in the current fiscal year,
      2. in the event that redemption requests in a given fiscal year are not able to be paid out under subsection (1) above, redemption up to the limits imposed in subsection (1) will be made rateably among all redemption requests made in that fiscal year;
    8. upon dissolution, will be redeemed prior to membership shares;
    9. at no time shall the number of Class A investment shares issued to non-members exceed 50% of the total number of Class A investment shares.

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