Chapter 185

185.363 History History: 1987 a. 13; 2001 a. 16.

185.365 185.365 Consideration of interests in addition to members’ and stockholders’ interests. In discharging his or her duties to the cooperative and in determining what he or she believes to be in the best interests of the cooperative, a director or officer may, in addition to considering the effects of any action on members and stockholders, consider the following:

185.365(1) (1) The effects of the action on employees, suppliers and customers of the cooperative.

185.365(2) (2) The effects of the action on communities in which the cooperative operates.

185.365(3) (3) Any other factors the director or officer considers pertinent.

185.365 History History: 1987 a. 13.

185.367 185.367 Limited liability of directors and officers.

185.367(1) (1) Except as provided in subs. (2) and (3), a director or officer is not liable to the cooperative, its members, stockholders or creditors, or any person asserting rights on behalf of the cooperative, its members, stockholders or creditors, or any other person, for damages, settlements, fees, fines, penalties or other monetary liabilities arising from a breach of, or failure to perform, any duty resulting solely from his or her status as a director or officer, unless the person asserting liability proves that the breach or failure to perform constitutes any of the following:

185.367(1)(a) (a) A willful failure to deal fairly with the cooperative, its members or stockholders in connection with a matter in which the director or officer has a material conflict of interest.

185.367(1)(b) (b) A violation of criminal law, unless the director or officer had reasonable cause to believe his or her conduct was lawful or no reasonable cause to believe his or her conduct was unlawful.

185.367(1)(c) (c) A transaction from which the director or officer derived an improper personal profit.

185.367(1)(d) (d) Willful misconduct.

185.367(2) (2) Except as provided in sub. (3), this section does not apply to any of the following:

185.367(2)(a) (a) A civil or criminal proceeding brought by or on behalf of any governmental unit, authority or agency.

185.367(2)(b) (b) A proceeding brought by any person for a violation of state or federal law where the proceeding is brought pursuant to an express private right of action created by state or federal statute.

185.367(2)(c) (c) The liability of a director under s. 185.37 (1).

185.367(3) (3) Subsection (2) (a) and (b) does not apply to a proceeding brought by a governmental unit, authority or agency in its capacity as a private party or contractor.

185.367 History History: 1987 a. 13.

185.367 Annotation Cooperative indemnification. La Rowe and Weine. WBB Sept. 1988.

185.37 185.37 Liability of directors and members.

185.37(1) (1) Directors who negligently or in bad faith vote for any distribution of assets contrary to this chapter or the articles are jointly and severally liable to the cooperative for the value of assets distributed in excess of the amount which could have been distributed without violating this chapter or the articles. Section 185.367 does not apply to the liability of directors under this subsection.

185.37(2) (2) Members, stockholders and patrons of a cooperative are neither obligated to pay, nor liable upon, any cooperative obligation, except that stockholders are liable to an amount equal to the par value of their shares for debts due an employee for not more than 6 months’ service to the cooperative.

185.37 History History: 1985 a. 30 s. 42; 1987 a. 13.

185.38 185.38 Disposition of assets; right to secure debts.

185.38(1) (1) Except as authorized by the members, the board may not dispose of all or substantially all of a cooperative’s assets. At any meeting the members may authorize the disposition of all or substantially all of a cooperative’s assets if:

185.38(1)(a) (a) Notice that such disposition will be considered at such meeting has been given to all persons entitled to vote thereon; and

185.38(1)(b) (b) Such disposition has been approved by two-thirds of those entitled to vote thereon voting at the meeting.

185.38(1m) (1m) 

185.38(1m)(a) (a) Except as authorized by the members, the board may not dispose of a cooperative’s assets under any of the following circumstances:

185.38(1m)(a)1. 1. Other than in the ordinary course of business.

185.38(1m)(a)2. 2. In a manner that jeopardizes the purpose for which the cooperative was created or its financial vitality.

185.38(1m)(b) (b) At any meeting the members may authorize the disposition of a cooperative’s assets under circumstances described in par. (a) if all of the following apply:

185.38(1m)(b)1. 1. Notice that the disposition will be considered at the meeting has been given to all persons entitled to vote on the matter.

185.38(1m)(b)2. 2. The disposition has been approved by two-thirds of those entitled to vote on the matter who vote at the meeting.

185.38(2) (2) Unless the bylaws provide otherwise, the board may secure payment of a cooperative’s debts by mortgaging the cooperative’s rights, privileges, authority and franchises, revenues and other property.

185.38 History History: 1985 a. 30 s. 42; 2017 a. 76.

185.41 185.41 Cooperative contracts.

185.41(1) (1) If otherwise lawful, contracts for any of the following purposes, whether written or contained in the bylaws, are valid when made between an association and any member in which such member agrees to:

185.41(1)(a) (a) Sell, market or deliver all or any specified part of products produced or to be produced either by the member or under the member’s control to or through the association or any facilities furnished by it.

185.41(1)(b) (b) Authorize the association or any facilities furnished by it to act for the member in any manner with respect to all or any specified part of such products and any services to be furnished by the member.

185.41(1)(c) (c) Buy or procure all or a specified part of goods or services from or through the association or any facilities furnished by it.

185.41(1)(d) (d) Authorize the association or any facilities furnished by it to act for the member in any manner in the procurement of goods or services.

185.41(2) (2) The term of such contracts may not exceed 5 years, but they may be made self-renewing for periods not exceeding 5 years each, subject to the right of either party to terminate at the end of the original and each renewal term upon giving written notice of such termination during a period specified in such contract. Such period shall be of at least 30 days’ duration during the last year of each term. The association shall furnish to each member-maker a completed original or copy of the member-maker’s contract, and on the member-maker’s request at any time shall promptly furnish the member-maker information as to the member-maker’s rights of termination. The 5-year limitation herein contained shall not apply to contracts for the furnishing of electric energy or service involving an investment by the vendor in fixed assets to be amortized over a longer term.

185.41(3) (3) Such contract may require liquidated damages to be paid by the member in the event of a breach of the contract. Liquidated damages may be either a percentage of the value of the products, goods, or services, or a specific sum, but neither may be more than 30 percent of the value of the products, goods, or services, subject to the breach. Where a specific sum is provided as liquidated damages, but such sum exceeds 30 percent of the value of the products, goods, or services which are the subject of the breach, then the contract shall be construed as providing an amount equal to 30 percent.

185.41(4) (4) If any contract authorized by sub. (1) (a) or (b) contains an assignment to the association of any part or all of funds due or to become due the member during the life of the contract for any product produced or to be produced by the member or for any services performed or to be performed in producing any product, any person who accepts or receives such product from the member is bound by such assignment after receiving written notice from the association or the member of the amount and duration of such assignment. However, as to any seasonal crop, if no funds are paid or become payable by any person under such an assignment for a period of 2 consecutive years during the life of the contract, thereafter the assignment shall not be binding upon any person who receives or accepts such product from the member until the assignment is reaffirmed by the member in writing and written notice thereof is given by the association or the member. Any such reaffirmation shall continue to be effective during the life of the contract until another such lapse of 2 consecutive years shall occur.

185.41 History History: 1985 a. 30 s. 42; 1993 a. 482; 2009 a. 177.

185.42 185.42 Recording of cooperative contracts; effect thereof.

185.42(1) (1) The association may record in the office of the register of deeds of the county in which the member-maker of the contract resides:

185.42(1)(a) (a) A copy of any contract authorized by s. 185.41; and

185.42(1)(b) (b) If a uniform contract is used, a sworn list of the names of all member-makers of that contract residing in the county.

185.42(2) (2) The register of deeds, upon payment of the fee specified under s. 59.43 (2) (ag), shall number each contract consecutively and shall record it. The register of deeds shall enter the name of every member-maker of such a contract in the real estate records index under s. 59.43 (9).

185.42(3) (3) The recording constitutes notice to all persons of the association’s rights under the contract. The recording also constitutes such notice that an interest in the title to all products agreed to be sold by the member-maker of such contract to the association during the term of such contract is vested in the association. In case of a purchase of any such product thereafter by any party other than the association from any party other than the association, no interest of any nature shall pass to such other purchaser; the association may recover the possession of such products from any person in whose possession they may be found, may obtain an injunction to prevent any attempted purchase, receipt or transfer not permitted by the contract or may enforce its rights in any manner permitted by law.

185.42(4) (4) The recording constitutes notice to all persons that the contract is and remains a valid contract until:

185.42(4)(a) (a) It expires according to its terms; or

185.42(4)(b) (b) It is canceled by written mutual agreement of the parties thereto; or

185.42(4)(c) (c) It is annulled or otherwise terminated by final judgment of a court.

185.42(5) (5) Whenever the contract has been terminated in any such manner, the association shall give, upon demand, a statement of termination to the member-maker of the contract. Such member may record such statement in the office of the register of deeds where the contract was originally filed or recorded. At least once each year the association shall record in the office of the register of deeds where the contract was originally filed or recorded, a sworn list of the names of all member-makers whose contract has been terminated in any manner specified by sub. (4) (b) and (c). For any recording under this subsection the register of deeds shall receive the fee specified under s. 59.43 (2) (ag).

185.42 History History: 1981 c. 245; 1985 a. 30 s. 42; 1993 a. 301; 1995 a. 201, 225; 2003 a. 206.

185.43 185.43 Relief against breach or threatened breach.

185.43(1) (1) In the event of a breach or threatened breach of a contract authorized by s. 185.41 by a member, the association shall be entitled to an injunction to prevent the breach or any further breach thereof, and to a decree of specific performance. Upon filing of a verified complaint showing such breach or threatened breach, and upon filing a sufficient bond, the association shall be entitled to a temporary restraining order against the member.

185.43(2) (2) Any person, with actual or constructive notice that a contract exists, who induces or attempts to induce any member to breach or repudiate the member’s contract with the association, or who in any manner aids a breach of such contract, is liable to the aggrieved party for damages caused by such interference. The association is also entitled to an injunction to prevent any interference or further interference with the contract.

185.43 History History: 1993 a. 482.

185.43 Annotation It is not necessary to have demonstrated an intent to induce a cooperative member to breach or repudiate a contract with an association. Injury is presumed from a violation of the statute. Pure Milk Products Coop. v. NFO, 64 Wis. 2d 241, 219 N.W.2d 564 (1974).

185.44 185.44 Application of ss. 185.41 to 185.43; venue of action.

185.44(1) (1) Sections 185.41 to 185.43 apply after July 13, 1955 to all contracts whether made before or after that date.

185.44(2) (2) The proper place of trial of any action by or against an association when based on ss. 185.41 to 185.43 is in the county where the association has its principal office or registered agent.

185.45 185.45 Apportionment and distribution of proceeds. At least once annually the directors shall determine and distribute net proceeds as follows:

185.45(1) (1) There shall be deducted from total proceeds:

185.45(1)(a) (a) All operating expenses and costs.

185.45(1)(b) (b) The cost of supplies, commodities, equipment and other property or services procured or sold for patrons.

185.45(1)(c) (c) The cost of services performed for patrons.

185.45(1)(d) (d) All taxes and all other expenses.

185.45(1)(e) (e) Reasonable and necessary reserves for depreciation, depletion and obsolescence of physical property, doubtful accounts and other valuation reserves, all of which shall be established in accordance with usual and customary accounting practices.

185.45(2) (2) The remainder of the total proceeds are net proceeds and shall be distributed and paid as follows:

185.45(2)(a) (a) An amount not to exceed 5 percent thereof may be set aside as an educational fund to be used in teaching or promoting cooperative organization or principles. Such funds shall for all purposes except the computation of net proceeds be deemed an expense of operation of the cooperative.

185.45(2)(b) (b) A share of the net proceeds may be set aside for or paid to officers or employees, or both. Such amount shall for all purposes except the computation of net proceeds be deemed an expense of operation of the cooperative.

185.45(2)(c) (c) In a cooperative organized with capital stock such dividend may be paid upon capital stock as is authorized by the articles. No dividend may be paid if the capital is impaired or if payment of such dividend would result in an impairment of capital.

185.45(3) (3) Unless the articles or bylaws otherwise expressly provide, none of the remainder of the net proceeds shall constitute income of the cooperative but all thereof shall be distributed and paid to patrons, whether members or not, as follows:

185.45(3)(a) (a) Reasonable reserves for necessary purposes may be created, which shall be credited to patrons in accordance with the ratio which their patronage bears to total patronage.

185.45(3)(b) (b) All the remainder of the net proceeds shall be distributed and paid to patrons in accordance with the ratio which their patronage bears to total patronage.

185.45(3)(c) (c) There shall be no distinction between the persons entitled thereto, but such reserves and distributions may be based upon business done with particular departments or in particular commodities, supplies or services, or upon classification of business according to the type or nature thereof.

185.45(4) (4) If the articles or bylaws so provide:

185.45(4)(a) (a) Any of the net proceeds may be credited to allocated or unallocated surplus or reserves of the cooperative.

185.45(4)(b) (b) None of the remainder shall constitute income to the cooperative, but all of it shall be distributed and paid in accordance with the ratio which individual patronage bears to total patronage, either to member patrons only, to member patrons only with one or more classes receiving a lower proportion than others or to all patrons with nonmembers receiving a lower proportion than members, as the bylaws provide. There shall be no other distinction between members and nonmembers, but distribution may be based on business done with particular departments, or in particular commodities, supplies or services, or upon classification of business according to type or nature.

185.45(5) (5) The distribution and payment of net proceeds under sub. (3) or (4) may be in cash, credits, stock, certificates of interest, revolving fund certificates, letters of advice, or other certificates or securities of the cooperative or of other associations, limited liability companies or corporations, in other property, or in any combination thereof.

185.45(6) (6) All or any part of the net proceeds may be applied to losses incurred in prior years, and the bylaws may also include any reasonable provisions for the apportionment of losses.

185.45 History History: 1985 a. 30 ss. 23, 42; 1993 a. 112; 2009 a. 177.

185.45 Annotation In an action to enforce a security interest in certificates of deposit, in the absence of an article or bylaw provision crediting net proceeds to surplus or reserves, proceeds from cooperative business in excess of actual expenses and compensation of employees belongs to patrons, not the cooperative. First National Bank of Barron v. Barron County Cooperative Dairy Cattle Breeders Sales Assoc. 77 Wis. 2d 1, 252 N.W.2d 57 (1977).

185.47 185.47 Financial books and records; penalty for refusal to produce.