CONTRIBUTIONS, ALLOCATIONS, AND DISTRIBUTIONS — MEMBER CONTROL AGREEMENTS

Iowa Code tit. XII, ch. 501A, subch. X

in effect

Iowa Code § 501A.1001 Authorization, form, and acceptance of contributions.

501A.1001. Authorization, form, and acceptance of contributions. 1. Board to authorize. Subject to any restrictions in this chapter regarding patron and nonpatron membership interests or in the articles or bylaws, and only when authorized by the board, a cooperative may accept contributions, which may be patron or nonpatron membership contributions as determined by the board under subsections 2 and 3, make contribution agreements under section 501A.1003, and make contribution rights agreements under section 501A.1004. 2. Permissible forms. A person may make a contribution to a cooperative by any of the following: a. Paying money or transferring the ownership of an interest in property to the cooperative or rendering services to or for the benefit of the cooperative. b. Executing a written obligation signed by the person to pay money or transfer ownership of an interest in property to the cooperative or to perform services to or for the benefit of the cooperative. 3. Acceptance. A purported contribution shall not be treated or considered as a contribution, unless all of the following apply: a. The board accepts the contribution on behalf of the cooperative and in that acceptance describes the contribution, including terms of future performance, if any, and states the value being accorded to the contribution. b. The fact of contribution and the contribution’s accorded value are both reflected in the required records of the cooperative. 4. Valuation by directors. The determinations of the board as to the amount or fair value or the fairness to the cooperative of the contribution accepted or to be accepted by the cooperative or the terms of payment or performance, including under a contribution agreement in section 501A.1003, and a contribution rights agreement in section 501A.1004, are presumed to be proper if they are made in good faith and on the basis of accounting methods, or a fair valuation or other method, reasonable in the circumstances. Directors who are present and entitled to vote, and who, intentionally or without reasonable investigation, fail to vote against approving a consideration that is unfair to the cooperative, or overvalue property or services received or to be received by the cooperative as a contribution, are jointly and severally liable to the cooperative for the benefit of the then members who did not consent to and are damaged by the action to the extent of the damages of those members. A director against whom a claim is asserted under this subsection, except in case of knowing participation in a deliberate fraud, is entitled to contribution on an equitable basis from other directors who are liable under this subsection. 2005 Acts, ch 135, §73; 2005 Acts, ch 179, §134

Iowa Code § 501A.1002 Restatement of value of previous contributions.

501A.1002. Restatement of value of previous contributions. 1. Definition. As used in this section, an “old contribution” is a contribution reflected in the required records of a cooperative before the time the cooperative accepts a new contribution. 2. Restatement required. Whenever a cooperative accepts a new contribution, the board shall restate, as required by this section, the value of all old contributions. 3. Restatement as to particular series or class to which new contribution pertains. a. Unless otherwise provided in a cooperative’s articles or bylaws, this subsection sets forth the method of restating the value of old contributions that pertain to the same series or class to which the new contribution pertains. In restating the value, the cooperative shall do all of the following: (1) State the value the cooperative has accorded to the new contribution under section 501A.1001, subsection 3, paragraph “a”. (2) Determine what percentage the value stated under subparagraph (1) will constitute, after the restatement required by this subsection, of the total value of all contributions that pertain to the particular series or class to which the new contribution pertains. (3) Divide the value stated under subparagraph (1) by the percentage determined under subparagraph (2), yielding the total value, after the restatement required by this subsection, of all contributions pertaining to the particular series or class. (4) Subtract the value stated under subparagraph (1) from the value determined under subparagraph (3), yielding the total value, after the restatement required by this subsection, of all the old contributions pertaining to the particular series or class. (5) Subtract the value, as reflected in the required records before the restatement required by this subsection, of the old contributions from the value determined under subparagraph (4), yielding the value to be allocated among and added to the old contributions pertaining to the particular series or class. (6) Allocate the value determined under subparagraph (5) proportionally among the old contributions pertaining to the particular series or class, add the allocated values to those old contributions, and change the required records accordingly. b. The values determined under paragraph “a”, subparagraph (5), and allocated and added under paragraph “a”, subparagraph (6), may be positive, negative, or zero. 4. Restatement method for other series or class. Unless otherwise provided in a cooperative’s articles or bylaws, this subsection sets forth the method of restating the value of old contributions that do not pertain to the same series or class to which the new contribution pertains. In restating the value, the cooperative shall do all of the following: a. Determine the percentage by which the restatement under subsection 3 has changed the total contribution value reflected in the required records for the series or class to which the new contribution pertains. b. As to each old contribution that does not pertain to the same series or class to which the new contribution pertains, change the value reflected in the required records by the percentage determined under paragraph “a”. The percentage determined under paragraph “a” may be positive, negative, or zero. 5. New contributions may be aggregated. If a cooperative accepts more than one contribution pertaining to the same series or class at the same time, then for the purpose of the restatement required by this section, the cooperative may consider all the new contributions a single contribution. 2005 Acts, ch 135, §74

Iowa Code § 501A.1003 Contribution agreements.

501A.1003. Contribution agreements. 1. Signed writing. A contribution agreement, whether made before or after the formation of the cooperative, is not enforceable against the would-be contributor unless it is in writing and signed by the would-be contributor. 2. Irrevocable period. Unless otherwise provided in the contribution agreement, or unless all of the would-be contributors and, if in existence, the cooperative, consent to a shorter or longer period, a contribution agreement is irrevocable for a period of six months. 3. Current and deferred payment. A contribution agreement, whether made before or after the formation of a cooperative, must be paid or performed in full at the time or times, or in the installments, if any, specified in the contribution agreement. In the absence of a provision in the contribution agreement specifying the time at which the contribution is to be paid or performed, the contribution must be paid or performed at the time or times determined by the board. However, a call made by the board for payment or performance on contributions must be uniform for all membership interests of the same class or for all membership interests of the same series. 4. Failure to pay — remedies. a. Unless otherwise provided in the contribution agreement, in the event of default in the payment or performance of an installment or call when due, the cooperative may proceed to collect the amount due in the same manner as a debt due the cooperative. If a would-be contributor does not make a required contribution of property or services, the cooperative shall require the would-be contributor to contribute cash equal to that portion of the value, as stated in the cooperative’s required records, of the contribution that has not been made. b. (1) If the amount due under a contribution agreement remains unpaid for a period of twenty days after written notice of demand for payment has been given to the delinquent would-be contributor, the membership interests that were subject to the contribution agreement may be offered for sale by the cooperative for a price in money equaling or exceeding the sum of the full balance owed by the delinquent would-be contributor plus the expenses incidental to the sale. (2) If the membership interests that were subject to the contribution agreement are sold according to this paragraph “b”, the cooperative shall pay to the delinquent would-be contributor or to the delinquent would-be contributor’s legal representative the lesser of one of the following: (a) The excess of net proceeds realized by the cooperative over the sum of the amount owed by the delinquent would-be contributor plus the expenses incidental to the sale, less any penalty stated in the contribution agreement, which may include forfeiture of the partial contribution. (b) The amount actually paid by the delinquent would-be contributor. (3) If the membership interests that were subject to the contribution agreement are not sold according to this paragraph “b”, the cooperative may collect the amount due in the same manner as a debt due the cooperative or cancel the contribution agreement according to paragraph “c”. c. If the amount due under a contribution agreement remains unpaid for a period of twenty days after written notice of demand for payment has been given to the delinquent would-be contributor and the membership interests that were subject to the defaulted contribution agreement have not been sold according to paragraph “b”, the cooperative may cancel the contribution agreement. In addition, the cooperative may retain any portion of the contribution agreement price actually paid as provided in the contribution agreement. The cooperative shall refund to the delinquent would-be contributor or the delinquent would-be contributor’s legal representatives any portion of the contribution agreement price as provided in the contribution agreement. 5. Restrictions on assignment. Unless otherwise provided in the articles or bylaws, a would-be contributor’s rights under a contribution agreement shall not be assigned, in whole or in part, to a person who was not a member at the time of the assignment, unless all the members approve the assignment by unanimous written consent. 2005 Acts, ch 135, §75; 2012 Acts, ch 1023, §157

Iowa Code § 501A.1004 Contribution rights agreements.

501A.1004. Contribution rights agreements. 1. Agreements permitted. Subject to any restrictions in a cooperative’s articles or bylaws, the cooperative may enter into contribution rights agreements under the terms, provisions, and conditions established by board resolution. 2. Writing required and terms to be stated. Any contribution rights agreement must be in writing and the writing must state in full, summarize, or include by reference all the agreement’s terms, provisions, and conditions of the rights to make contributions. 3. Restrictions on assignment. Unless otherwise provided in a cooperative’s articles or bylaws, a would-be contributor’s rights under a contribution rights agreement shall not be assigned, in whole or in part, to a person who was not a member at the time of the assignment, unless all the members approve the assignment by unanimous written consent. 2005 Acts, ch 135, §76

Iowa Code § 501A.1005 Allocations and distributions — profits, losses, cash, or other assets.

501A.1005. Allocations and distributions — profits, losses, cash, or other assets. 1. Allocation of profits and losses. If nonpatron membership interests are authorized by the patrons, the bylaws shall prescribe the allocation of profits and losses between patron membership interests collectively and any other membership interests. If the bylaws do not otherwise provide, the profits and losses between patron membership interests collectively and other membership interests shall be allocated on the basis of the value of contributions to capital made by the patron membership interests collectively and other membership interests accepted by the cooperative. The allocation of profits to the patron membership interests collectively shall not be less than fifty percent of the total profits in any fiscal year, except if authorized in the cooperative’s articles or bylaws that are adopted by an affirmative vote of the patron members, or in the articles or bylaws as amended by the affirmative vote of the patron members. However, the allocation of profits to the patron membership interests collectively shall not be less than fifteen percent of the total profits in any fiscal year. 2. Distribution of cash or other assets. A cooperative’s bylaws shall prescribe the distribution of cash or other assets of the cooperative among the membership interests of the cooperative. If nonpatron membership interests are authorized by the patrons and the bylaws do not provide otherwise, distributions shall be made to the patron membership interests collectively and other members on the basis of the value of contributions to capital made and accepted by the cooperative, by the patron membership interests collectively, and other membership interests. The distributions to patron membership interests collectively shall not be less than fifty percent of the total distributions in any fiscal year, except if authorized in the articles or bylaws adopted by the affirmative vote of the patron members, or the articles or bylaws as amended by the affirmative vote of the patron members. However, the distributions to patron membership interests collectively shall not be less than fifteen percent of the total distributions in any fiscal year. 2005 Acts, ch 135, §77; 2006 Acts, ch 1030, §59

Iowa Code § 501A.1006 Allocations and distributions — net income.

501A.1006. Allocations and distributions — net income. 1. Distribution of net income. A cooperative may set aside a portion of net income allocated to the patron membership interests as the board determines advisable to create or maintain a capital reserve. 2. Reserves. In addition to a capital reserve, the board may, for patron membership interests, do any of the following: a. Set aside an amount not to exceed five percent of the annual net income of the cooperative for promoting and encouraging cooperative organization. b. Establish and accumulate reserves for new buildings, machinery and equipment, depreciation, losses, and other proper purposes. 3. Patronage distributions. Net income allocated to patron members in excess of dividends on equity and additions to reserves shall be distributed to patron members on the basis of patronage. A cooperative may establish allocation units, whether the units are functional, divisional, departmental, geographic, or otherwise. The cooperative may provide for pooling arrangements. The cooperative may account for and distribute net income to patrons on the basis of allocation units and pooling arrangements. A cooperative may offset the net loss of an allocation unit or pooling arrangement against the net income of other allocation units or pooling arrangements. 4. Frequency of distribution. A distribution of net income shall be made at least annually. The board shall present to the members at their annual meeting a report covering the operations of the cooperative during the preceding fiscal year. 5. Form of distribution. A cooperative may distribute net income to patron members in cash, capital credits, allocated patronage equities, revolving fund certificates, or its own or other securities. 6. Eligible nonmember patrons. A cooperative may provide in the bylaws that nonmember patrons are allowed to participate in the distribution of net income payable to patron members on equal terms with patron members. 7. Patronage credits for ineligible members. If a nonmember patron with patronage credits is not qualified or eligible for membership, a refund due may be credited to the nonmember patron’s individual account. The board may issue a certificate of interest to reflect the credited amount. After the nonmember patron is issued a certificate of interest, the nonmember patron may participate in the distribution of net income on the same basis as a patron member. 2005 Acts, ch 135, §78; 2006 Acts, ch 1030, §60

Iowa Code § 501A.1007 Member control agreements.

501A.1007. Member control agreements. 1. Authorization. A written agreement among persons who are then members, including a sole member, or who have signed subscription or contribution agreements, relating to the control of any phase of the business and affairs of the cooperative, its liquidation, dissolution and termination, or the relations among members or persons who have signed subscription or contribution agreements is valid as provided in subsection 2. Other than the authorization of nonpatron membership interests as provided in section 501A.901 and nonpatron voting rights as provided in section 501A.810, whenever this chapter provides that a particular result may or must be obtained through a provision in a cooperative’s articles or bylaws, the same result can be accomplished through a member control agreement valid under this section or through a procedure established by a member control agreement valid under this section. However, the member control agreement must be authorized by the cooperative’s articles or bylaws and cannot conflict with the cooperative’s articles or bylaws. Any result accomplished through a membership control agreement under this section must be properly disclosed as provided in section 501A.901. 2. Valid execution. Other than patron member voting control under section 501A.810 and patron member allocation and distribution provisions under sections 501A.1005 and 501A.1006, a written agreement among persons described in subsection 1 that relates to the control of or the liquidation, dissolution, and termination of the cooperative, the relations among them, or any phase of the business and affairs of the cooperative is valid if it meets the requirements of this subsection. This includes but is not limited to the management of its business, the declaration and payment of distributions, the sharing of profits and losses, the election of directors, the employment of members by the cooperative, or the arbitration of disputes. The written agreement must be signed by all persons who are then the members of the cooperative, whether or not the members all have voting power, and all those who have signed contribution agreements, regardless of whether those signatories will, when members, have voting power. 3. Other agreements not affected. This section does not apply to, limit, or restrict agreements otherwise valid, nor is the procedure set forth in this section the exclusive method of agreement among members or between the members and the cooperative with respect to any of the matters described. 2005 Acts, ch 135, §79

Iowa Code § 501A.1008 Reversion of disbursements.

501A.1008. Reversion of disbursements. 1. Once a person’s membership interest or other member’s equity in a cooperative is deemed abandoned under section 556.5, the cooperative may retain any disbursement held by the cooperative for or owing to the person. The cooperative may also deliver the disbursement to the treasurer of state for disposition as abandoned property pursuant to sections 556.5 and 556.11. 2. If the cooperative elects to retain the disbursement under this section, the disbursement shall be deposited into a reversion fund established by the cooperative. 3. A disbursement having an aggregate value of fifty dollars or more that is retained by the cooperative shall be forfeited to the cooperative only if the cooperative publishes at least one notice of the abandoned property in a publication regularly distributed to its membership or in a newspaper having a general circulation in the county where the cooperative is located. The notice shall include all of the following: a. The name and address of the cooperative. b. The name of the person who has an interest in the disbursement according to the records of the cooperative. c. A brief description of the type of disbursement retained by the cooperative. d. A statement that the disbursement will be forfeited to the cooperative unless the person files a claim for the disbursement within the period provided for in this section. 4. a. Subject to this subsection, a person asserting an interest in the disbursement may file a claim for it with the cooperative in a manner and according to procedures required by the cooperative. If a person is entitled to an abandoned membership interest, or other interest as provided in section 556.20 or 556.21, the cooperative shall also pay the person the disbursement deposited in the reversion fund that is realized or accrued from the membership interest or other interest. b. If a person has not filed a claim for the disbursement within six months after the first date that the notice of abandoned property is first published as provided in this section, the disbursement shall be forfeited to the cooperative. 5. The disbursements deposited into the reversion fund that are forfeited to the cooperative shall be used as provided in this subsection. The cooperative may authorize the payment of forfeited disbursements to persons claiming interests in forfeited disbursements as provided in the cooperative’s articles of organization or bylaws. Otherwise, forfeited disbursements shall be used as the directors deem suitable for any of the following purposes: a. Teaching and promoting cooperation. The directors may deposit the amounts of disbursements into the education fund as established by the cooperative. b. Economic development including private or joint public and private investments involving the creation of economic opportunities for the cooperative’s members or the retention of existing sources of income that would otherwise be lost. 2005 Acts, ch 135, §80; 2006 Acts, ch 1010, §131

Source: Iowa Legislature (legis.iowa.gov)URL: https://www.legis.iowa.gov/law/iowaCode/sections?codeChapter=501A&year=2026Fetched: 10/20/2026