Chapter 193

193.443(5) (5) Asset securitization. For purposes of debt financing, the board may transfer any or all of the cooperative’s property to a special purpose entity owned or controlled by the cooperative for an asset securitization.

193.443 History History: 2005 a. 441.

193.445 193.445 Audit committee. The board shall establish an audit committee, consisting of members who will ensure an independent review of the cooperative’s finances, to review the financial information and accounting reports of the cooperative. The board shall present audited financial statements to the members unless all of the following apply:

193.445(1) (1) The articles or bylaws permit financial statements that are not audited.

193.445(2) (2) The financial statements clearly state that they are not audited and a statement is included in the financial statement describing the difference between the financial statements and audited financial statements that are prepared according to generally accepted accounting processes.

193.445 History History: 2005 a. 441.

193.451 193.451 Committees.

193.451(1) (1) Generally; special litigation committee. The board, by resolution, may establish committees having the authority of the board in the management of the business of the cooperative to the extent described in the resolution. The board, by resolution, may establish a special litigation committee of specified duration under this subsection, consisting of one or more independent directors or other independent persons, to consider the legal rights of and remedies available to the cooperative and whether those rights should be enforced and those remedies should be pursued. Any committee established under this subsection, other than a special litigation committee, is subject at all times to the direction and control of the board. The board may amend a resolution establishing a special litigation committee.

193.451(2) (2) Membership. A committee established under sub. (1) shall consist of one or more individuals. Unless the articles or bylaws provide otherwise, committee members need not be directors.

193.451(3) (3) Committee procedure. The procedures for a board meeting apply to a meeting of a committee established under sub. (1) and to committee members to the same extent as those procedures apply to a board meeting and directors.

193.451(4) (4) Minutes. The chairperson of a committee established under sub. (1) shall ensure that minutes, if any, of committee meetings are provided, upon request, to members of the committee and to any director.

193.451(5) (5) Standard of conduct for directors. Establishment of, delegation of authority to, and action by a committee under sub. (1) does not alone constitute compliance by a director with s. 193.455 (1).

193.451(6) (6) Duties of committee members; limitation of liability. Sections 193.455, 193.461, and 193.465 apply to members of committees established under sub. (1) to the same extent as those sections apply to directors.

193.451 History History: 2005 a. 441.

193.455 193.455 Conduct and liability of directors.

193.455(1) (1) Standard and liability.

193.455(1)(a) (a) A director shall discharge the duties of the office of director in good faith, in a manner the director reasonably believes to be in the best interests of the cooperative, and with the care an ordinarily prudent person in a like position would exercise under similar circumstances. A director who so performs his or her duties may not be held liable by reason of being or having been a director.

193.455(1)(b) (b) 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 may consider any of the following:

193.455(1)(b)1. 1. The effects of the action on employees, suppliers, creditors, and customers of the cooperative.

193.455(1)(b)2. 2. The effects of the action on communities in which the cooperative operates.

193.455(1)(b)3. 3. The effects of the action on members and stockholders.

193.455(1)(b)4. 4. The economy of this state.

193.455(1)(b)5. 5. The long-term and short-term interests of the cooperative and its patron members, including the possibility that these interests may be best served by the continued independence of the cooperative.

193.455(1)(b)6. 6. Any other factors the director considers pertinent.

193.455(2) (2) Reliance.

193.455(2)(a) (a) A director may rely on information, opinions, reports, or statements, including financial statements and other financial data, if prepared or presented by any of the following:

193.455(2)(a)1. 1. One or more officers or employees of the cooperative whom the director reasonably believes to be reliable and competent in the matters presented.

193.455(2)(a)2. 2. Counsel, public accountants, or other persons as to matters that the director reasonably believes are within the person’s professional or expert competence.

193.455(2)(a)3. 3. A committee established under s. 193.445 or 193.451 (1) on which the director does not serve, as to matters within its designated authority, if the director reasonably believes the committee to merit confidence.

193.455(2)(b) (b) Paragraph (a) does not apply to a director who has knowledge concerning the matter in question that makes the director’s reliance under par. (a) unwarranted.

193.455(3) (3) Presumption of assent. A director who is present at a meeting of the board when an action is approved by the board is presumed to have assented to the action approved, unless the director is prohibited by a conflict of interest from voting on the action or does any of the following:

193.455(3)(a) (a) Objects at the beginning of the meeting to the transaction of business because the meeting is not lawfully called or convened and fails to participate in the meeting after the objection.

193.455(3)(b) (b) Votes against the action at the meeting.

193.455 History History: 2005 a. 441.

193.461 193.461 Director conflicts of interest.

193.461(1) (1) Conflict voiding certain contracts and transactions. A contract or transaction between a cooperative and a director, as determined under sub. (2) (b) 1., or between a cooperative and a business entity of which at least one of the cooperative’s directors is a governor, director, manager, officer, or legal representative, as determined under sub. (2) (b) 2., or in which at least one of the cooperative’s directors has a material financial interest, as determined under sub. (2) (a), is void unless any of the following apply:

193.461(1)(a) (a) The contract or transaction was fair and reasonable as to the cooperative at the time it was authorized or ratified by the cooperative; the material facts as to the contract or transaction and as to the director’s interest are disclosed or known to the members before the contract or transaction is authorized or ratified by the cooperative; and the material facts as to the contract or transaction and as to the director’s interest are fully disclosed or known to the board or a committee established under s. 193.445 or 193.451 (1), and the board or committee in good faith authorizes or ratifies the contract or transaction. The interested director may not be counted in determining the presence of a quorum at a meeting where the contract or transaction may be authorized or ratified and may not vote on the authorization or ratification. The person asserting the validity of the contract or transaction has the burden of establishing that the contract or transaction was fair and reasonable as to the cooperative at the time it was authorized or ratified by the cooperative.

193.461(1)(b) (b) The contract or transaction is a distribution, or is a contract or transaction that is made available to all members or patron members as part of the cooperative’s business.

193.461(1)(c) (c) The contract or transaction results from a resolution fixing the compensation of a director or of another officer, employee, or agent of the cooperative.

193.461(2) (2) Material financial interest; transactions involving third parties.

193.461(2)(a) (a) For purposes of sub. (1), a director has a material financial interest in each organization in which that director, that director’s spouse, parent, child, or sibling, the spouse of that director’s child or sibling, or the sibling of that director’s spouse has a material financial interest.

193.461(2)(b) (b)

193.461(2)(b)1. 1. For purposes of sub. (1), a contract or transaction between a cooperative and a director or that director’s spouse, parent, child, or sibling, the spouse of that director’s child or sibling, or the sibling of that director’s spouse, is considered to be a transaction between the cooperative and the director.

193.461(2)(b)2. 2. For purposes of sub. (1), a contract or transaction between a cooperative and a business entity of which a director or that director’s spouse, parent, child, or sibling, the spouse of that director’s child or sibling, or the sibling of that director’s spouse, is a governor, director, manager, officer, or legal representative is considered to be a transaction between the cooperative and a business entity of which the director is a governor, director, manager, officer, or legal representative.

193.461 History History: 2005 a. 441.

193.465 193.465 Limitation of director’s liability in articles or bylaws. The articles or bylaws may eliminate or limit a director’s personal liability to the cooperative or its members for monetary damages for violating s. 193.455 (1) (a), except that neither the articles nor the bylaws may eliminate or limit the liability of a director for any of the following:

193.465(1) (1) A breach of the director’s duty of loyalty to the cooperative or its members.

193.465(2) (2) An act or omission not in good faith or that involves intentional misconduct or a knowing violation of law.

193.465(3) (3) A transaction from which the director derived an improper personal benefit.

193.465(4) (4) An act or omission occurring before the date on which the provision in the articles or bylaws eliminating or limiting liability becomes effective.

193.465(5) (5) A knowing violation of ch. 408, subject to s. 193.605, or illegal distributions of cooperative assets.

193.465 History History: 2005 a. 441.

193.471 193.471 Indemnification.

193.471(1) (1) Definitions. In this section:

193.471(1)(a) (a) “Official capacity” means any of the following:

193.471(1)(a)1. 1. A person’s capacity as an officer, employee, or agent of a cooperative or predecessor cooperative.

193.471(1)(a)2. 2. A person’s capacity as a member of a committee of a cooperative under s. 193.445 or 193.451 (1) or of a committee of a predecessor cooperative.

193.471(1)(a)3. 3. With respect to a director, chief executive officer, member, or employee of a cooperative who, at the request of the cooperative, serves as a governor, director, manager, officer, member, partner, trustee, employee, or agent of another organization or employee benefit plan, that person’s capacity as a governor, director, manager, officer, member, partner, trustee, employee, or agent, as applicable, of the other organization or employee benefit plan.

193.471(1)(a)4. 4. With respect to a person who was a director, chief executive officer, member, or employee of a predecessor cooperative and who, at the request of the predecessor cooperative, served as a governor, director, manager, officer, member, partner, trustee, employee, or agent of another organization or employee benefit plan, that person’s capacity as a governor, director, manager, officer, member, partner, trustee, employee, or agent, as applicable, of the other organization or employee benefit plan.

193.471(1)(b) (b) “Potential litigant” means a person made or threatened to be made a party to a proceeding by reason of the person’s former or present official capacity.

193.471(1)(c) (c) “Predecessor cooperative” means a domestic or foreign cooperative that was the predecessor of a cooperative in a merger or other transaction in which the predecessor’s existence ceased upon consummation of the transaction.

193.471(1)(d) (d) “Proceeding” means a threatened, pending, or completed civil, criminal, administrative, arbitration, or investigative proceeding, including a proceeding by or in the right of the cooperative.

193.471(1)(e) (e) “Special legal counsel” means counsel who has not represented any of the following:

193.471(1)(e)1. 1. The cooperative or an affiliate.

193.471(1)(e)2. 2. The director, manager, member of a committee under s. 193.445 or 193.451 (1), or employee whose indemnification is in issue.

193.471(2) (2) Indemnification.

193.471(2)(a) (a) Subject to sub. (4), a cooperative shall indemnify a potential litigant against judgments, penalties, and fines applicable to a proceeding, against excise taxes assessed against the person with respect to an employee benefit plan, and against settlements and reasonable expenses, including attorney fees and disbursements, incurred by the potential litigant in connection with the proceeding, if, with respect to the acts or omissions of the potential litigant complained of in the proceeding, all of the following apply:

193.471(2)(a)1. 1. The potential litigant has not been indemnified against the same amounts by another person.

193.471(2)(a)2. 2. The potential litigant acted in good faith.

193.471(2)(a)3. 3. The potential litigant did not receive an improper personal benefit or commit an act for which liability cannot be eliminated or limited under s. 193.465 (2).

193.471(2)(a)4. 4. In the case of a criminal proceeding, the potential litigant had no reasonable cause to believe the acts or omissions were unlawful.

193.471(2)(a)5. 5. In the case of acts or omissions committed in an official capacity, as defined in sub. (1) (a) 1. or 2., the potential litigant reasonably believed that the acts or omissions were in the best interests of the cooperative or predecessor cooperative, as applicable, and, in the case of acts or omissions committed in an official capacity, as defined in sub. (1) (a) 3. or 4., the potential litigant reasonably believed that the conduct was not opposed to the best interests of the cooperative or predecessor cooperative, as applicable. If the acts or omissions relate to conduct as a director, officer, trustee, employee, or agent of an employee benefit plan, the conduct is not considered to be opposed to the best interests of the cooperative or predecessor cooperative if the potential litigant reasonably believed that the conduct was in the best interests of the participants or beneficiaries of the employee benefit plan.

193.471(2)(b) (b) The termination of a proceeding by judgment, order, settlement, or conviction or upon a plea of no contest or its equivalent does not, of itself, establish that the potential litigant did not meet the applicable criteria under par. (a).

193.471(3) (3) Advances. Subject to sub. (4), a potential litigant is entitled, upon written request to the cooperative, to payment or reimbursement by the cooperative of reasonable expenses, including attorney fees and disbursements, incurred by the potential litigant in advance of the final disposition of the proceeding if the potential litigant delivers to the cooperative a written statement that the potential litigant believes in good faith that the applicable criteria for indemnification under sub. (2) (a) have been satisfied and a written undertaking by the potential litigant to repay all amounts so paid or reimbursed by the cooperative if a court determines under sub. (6) (c) that the potential litigant is ineligible for indemnification. The written undertaking is an unlimited general obligation of the potential litigant but need not be secured, and the cooperative shall accept the written undertaking without reference to the potential litigant’s financial ability to make the repayment.

193.471(4) (4) Prohibition, conditions, and limitations on indemnification or advances. The articles or bylaws may prohibit indemnification or advances of expenses otherwise required by subs. (2) and (3). The articles or bylaws may impose limitations on indemnification or advances of expenses or conditions on indemnification or advances of expenses in addition to the conditions contained in subs. (2) and (3), if the limitations or conditions apply equally to all persons or to all persons within a given class. A prohibition, limitation, or condition contained in the articles or bylaws under this subsection does not apply to any person seeking indemnification or advancement of expenses under sub. (2) or (3) with respect to any acts or omissions of the person committed before the effective date of the provision in the articles or the date of adoption of the provision in the bylaws, as applicable, establishing the prohibition, limitation, or condition.

193.471(5) (5) Reimbursement to witnesses. This section does not require, or limit the ability of, a cooperative to reimburse expenses, including attorney fees and disbursements, incurred by a person in connection with an appearance as a witness in a proceeding at a time when the person is not a potential litigant.

193.471(6) (6) Determination of eligibility.

193.471(6)(a) (a) Except as otherwise provided in this subsection, all determinations whether indemnification of a person is required under sub. (2) and whether payment or reimbursement of expenses is required under sub. (3) shall be made as follows:

193.471(6)(a)1. 1. By the board, except as otherwise provided in this paragraph. The directors who are, at the time, parties to the proceeding may not vote on the question of a determination under this subdivision and may not be counted in determining the presence of a quorum at a meeting at which such a question is voted upon.

193.471(6)(a)2. 2. If a quorum under subd. 1. cannot be obtained because of the number of directors that are parties to the proceeding and except as otherwise provided in this paragraph, by a majority of a committee under s. 193.451 (1) that consists of 2 or more directors not at the time parties to the proceeding and that is duly designated to act in the matter by a majority of all directors, including those who are parties.

193.471(6)(a)3. 3. If a determination is not made under subd. 1. or 2. and except as otherwise provided in this paragraph, by special legal counsel, selected either by the board or a committee under s. 193.451 (1). If selected by the board, the vote and determination of the presence of a quorum shall be made as described in subd. 1. If selected by a committee, the committee shall be designated to act and shall vote in the manner described in subd. 2.

193.471(6)(a)4. 4. Except as otherwise provided under this paragraph, if a determination is not made under subd. 1. or 2. and if a quorum of the board cannot be obtained and a committee cannot be established as required under subd. 3., by special legal counsel, selected by a majority of all directors, including directors who are parties to the proceeding.

193.471(6)(a)5. 5. If a determination is not made under subds. 1. to 4., by the affirmative vote of the members. The membership interests held by parties to the proceeding may not be counted in determining the presence of a quorum at a meeting at which the question of a determination under this subdivision is voted upon and parties holding such membership interests may not vote on the determination.

193.471(6)(b) (b) Except as provided in par. (c), with respect to a person who is not, and was not at the time of the acts or omissions complained of in the proceedings, a director, chief executive officer, or person possessing, directly or indirectly, the power to direct or cause the direction of the management or policies of the cooperative, the determination whether indemnification of the person is required under sub. (2) and whether the payment or reimbursement of expenses is required under sub. (3) shall be made by an annually appointed committee under s. 193.451 (1), having at least one member who is a director. Any such committee shall report at least annually to the board concerning its actions.

193.471(6)(c) (c) Within 60 days after the termination of the applicable proceeding or the receipt of a written request for indemnification by the cooperative, whichever occurs earlier, a person seeking indemnification under sub. (2) or payment or reimbursement of expenses under sub. (3) may petition the circuit court for a determination of the person’s eligibility for indemnification, payment, or reimbursement, if a determination is made under par. (a) or (b) that the person is ineligible, or if no determination is made under par. (a) or (b). The court shall order the cooperative to indemnify the person if indemnification is required under sub. (2) and, if applicable, shall order the cooperative to pay or reimburse the person’s expenses if the payment or reimbursement is required under sub. (3). In addition, if the person is a director or officer of the cooperative, the court shall order the cooperative to indemnify the person if, in view of all the relevant circumstances, the person is fairly and reasonably entitled to indemnification, regardless of whether indemnification is required under sub. (2). In a proceeding under this paragraph, the person seeking indemnification, payment, or reimbursement has the burden of establishing that indemnification is required or that the person is entitled to payment or reimbursement of expenses.

193.471(7m) (7m) Expenses of obtaining court-ordered indemnification. If the court, in a proceeding under sub. (6) (c), determines that the cooperative unreasonably refused a director’s or officer’s request for indemnification under sub. (2), the court shall order the cooperative to pay the officer’s or director’s reasonable expenses incurred to obtain the court-ordered indemnification.

193.471(9) (9) Insurance. A cooperative may purchase and maintain insurance on behalf of a person in that person’s official capacity against any liability asserted against and incurred by the person in or arising from that capacity, whether or not the cooperative would be required to indemnify the person against the liability under sub. (2).

193.471(10) (10) Disclosure. A cooperative that indemnifies or advances expenses to a person under sub. (2) or (3) shall report to the members in writing the amount of the indemnification or advance and to whom and on whose behalf it was paid not later than the date of the first members’ meeting occurring after the payment.

193.471(11) (11) Indemnification of other persons. This section does not limit the power of a cooperative to indemnify persons who do not act in an official capacity.