Talk:Coop rules/4 Share Structure

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Proposed change to EcoReality rules to allow limited transfer of shares

This has been agreed among those involved by unanimous consent on 20120125.
Since it has been agreed, the page is locked.
Contact WikiSysop to make small corrections (spelling, grammar, etc.) or add an agenda item to re-visit this agreement at an appropriate meeting.

(These changes are part of the project: necessary changes in involvement in EcoReality)

Problem statement

It has always been our intent that if someone wanted to leave EcoReality and someone else was interested in replacing them, the process should be relatively painless.

Unfortunately, a careful examination of our rules reveal this not to be the case. Our co-op rules, Part 9 (Rules 36 & 37) is a bit contradictory, in that it first says that EcoReality can redeem any of its shares at any price and condition by special resolution, and then says such redemption must be offered ratably and equitably, which means that any offer of share redemption must be offered to all shareholders under the same conditions. So, if one shareholder is offered an immediate buy-out so that another can invest, we would have to offer all others an immediate buy-out, including any who are in a period of waiting for redemption. This could cause an intentional or unintentional "run on the bank," in which it was impossible to replace an investor because many other investors want an immediate cash-out.

Even if we repeal Rule 37, our legal advice is that the Cooperative Association Act requires equitable treatment of other shareholders in that class.

Our share structure currently does not allow transfer of shares. However, our legal advice is that, if it were allowed, a "transfer" of shares is a way around the constraints of Part 9's requirement of equitable treatment. In other words, a transfer is merely a private transaction between private parties. Of course, EcoReality must still be in control of such transactions, or we run the risk of getting in trouble with BC Securities.

Overview

These changes simply allow the transfer of any class of shares, with the approval of the Directors.

Specific changes to EcoReality memorandum and rules

BE IT RESOLVED that the following changes be made to EcoReality Sustainable Land Use and Education Cooperative's Co-op Rule 21::


Rule 21::
  • Replace:
    • 2.7: may not be transferred;
  • With:
    • 2.7: may be transferred with the approval of the Directors;
  • Replace:
    • 3.6: may not be transferred;
  • With:
    • 3.6: may be transferred with the approval of the Directors;
  • Replace:
    • 4.5: may not be transferred;
  • With:
    • 4.5: may be transferred with the approval of the Directors;
  • Replace:
    • 5.5: may not be transferred;
  • With:
    • 5.5: may be transferred with the approval of the Directors;
  • Replace:
    • 6.5: may not be transferred;
  • With:
    • 6.5: may be transferred with the approval of the Directors;



Proposed change to EcoReality memorandum and rules to add three new classes of shares

This special resolution has been agreed among the members and investors by unanimous consent on 20110607.
Since it has been agreed, the page is locked.
Contact WikiSysop to make small corrections (spelling, grammar, etc.) or add an agenda item to re-visit this agreement at an appropriate meeting.

Problem statement

In line with our overall values, EcoReality Co-op is diversifying into areas that will have more than a customer relationship with the general public:

  • We want to add a "box" food delivery program, in which people will invest a suitable amount "up front," then receive "pay outs" in the form of boxes of food.
    • Adding a class of shares simplifies record-keeping and gives food delivery program subscribers legal standing as investors.
  • We want to add legal distribution of raw dairy products.
    • Adding a class of shares devoted to this activity provides legal ownership of the dairy animals and associated infrastructure, as required by Federal laws against distribution of raw dairy products, except to the owners of the animals.
  • We want to add legal distribution of sustainable energy products.
    • Adding a class of shares devoted to this activity allows distribution of co-op produced renewable fuels to share owners, who are then responsible for paying all applicable taxes.

Overview

These changes add three new classes of investment shares to the coop memorandum and Part 4 of the coop rules.

Although not limited in the coop memorandum nor the coop rules to these purposes, the intended use of these new share classes are as follows:

Class C "Consumer shares"
These shares are for a community supported agriculture (CSA) system, whereby investors in this class receive boxes of food throughout the growing season.
Class D "Dairy shares"
These shares fund EcoReality Co-op's dairy herd share program. Investments in this class are dedicated to the purchase of dairy animals and associated capital infrastructure. Investors in this class are considered "herd share" owners of the dairy stock, and thus may legally receive raw dairy products, which are illegal to distribute to any but owners of dairy animals.
Class E "Energy shares"
These shares fund EcoReality Co-op's energy production activities. Investments in this class are dedicated to funding capital projects in energy systems, notably biodiesel production and distribution. Investors in this class co-own the EcoReality biodiesel processor, and thus may legally receive co-op produced biodiesel for their personal use.

Specific changes to EcoReality memorandum and rules

Memorandum, Section 3:, add authorization for three more classes of investment shares.
  • Before:
    • An unlimited number of of Class A and Class B investment shares may be issued, having a par value of $1.00 (Canadian Dollars) per share.
  • After:
    • An unlimited number of of Class A, Class B, Class C, Class D, and Class E investment shares may be issued, having a par value of $1.00 (Canadian Dollars) per share.


Rule 20:, add three more classes of investment shares.
  • Before:
    • The capital of the EcoReality Sustainable Land Use and Education Cooperative consists of an unlimited number of membership shares, and an unlimited number of Class A preferred investment shares and an unlimited number of Class B preferred investment shares.
  • After:
    • The capital of the EcoReality Sustainable Land Use and Education Cooperative consists of
      1. an unlimited number of membership shares,
      2. an unlimited number of Class A preferred investment shares,
      3. an unlimited number of Class B preferred investment shares,
      4. an unlimited number of Class C preferred investment shares,
      5. an unlimited number of Class D preferred investment shares,
      6. and an unlimited number of Class E preferred investment shares.


Rule 21:, add new subparagraph 2.11:
  • 2.11. 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.


Rule 21:, add new subparagraph 3.9:
  • 3.9. At no time shall the number of Class B investment shares issued to non-members exceed 50% of the total number of Class B investment shares.


Rule 21:, add new paragraph 4:

4. Class C shares:

4.1. have a par value of $1 per share;
4.2. may be purchased by members or non-members with the approval of the directors;
4.3. may be held jointly;
4.3. do not bear interest nor dividend;
4.4. may not be transferred;
4.5. can only be redeemed in exchange for farm goods, the value of which will be determined from time to time by the CSA program steward as directed by the directors;
4.5.1. upon dissolution, may be redeemed for cash if insufficient farm goods are available for redemption;
4.6. must be redeemed within one year of investment;
4.6.1. Class C shares that are not redeemed within one year of purchase are null and void;
4.7. upon dissolution, will be redeemed for cash after Class B investment shares, but prior to redemption of membership shares.


Rule 21:, add new paragraph 5:

5. Class D shares:

5.1. have a par value of $1 per share;
5.2. may be purchased by members or non-members with the approval of the directors;
5.3. may be held jointly;
5.3. do not bear interest nor dividend;
5.4. may not be transferred;
5.5. can be redeemed at par value;
5.6. require a 90-day redemption notice;
5.7. upon dissolution, will be redeemed after Class C investment shares, but prior to redemption of membership shares.


Rule 21:, add new paragraph 6:

6. Class E shares:

6.1. have a par value of $1 per share;
6.2. may be purchased by members or non-members with the approval of the directors;
6.3. may be held jointly;
6.3. do not bear interest nor dividend;
6.4. may not be transferred;
6.5. can be redeemed at par value;
6.6. require a 90-day redemption notice;
6.7. upon dissolution, will be redeemed after Class D investment shares, but prior to redemption of membership shares.


Rule 22:, delete this rule in its entirety.
  • Before:
    • At no time shall the number of investment shares of any class issued to non-members exceed 50% of the total number of shares in that class.
  • After:
    • (Rule deleted.)

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