Illinois General Assembly

  Bills & Resolutions  
  Compiled Statutes  
  Public Acts  
  Legislative Reports  
  IL Constitution  
  Legislative Guide  
  Legislative Glossary  

 Search By Number
 (example: HB0001)
Search Tips

Search By Keyword

Public Act 101-0292


 

Public Act 0292 101ST GENERAL ASSEMBLY

  
  
  

 


 
Public Act 101-0292
 
HB3663 EnrolledLRB101 09719 JLS 54819 b

    AN ACT concerning business.
 
    Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
 
    Section 1. Short title. This Act may be cited as the
Limited Worker Cooperative Association Act.
 
    Section 5. Findings. The General Assembly finds and
declares all of the following:
        (1) the cooperative form of doing business provides an
    efficient and effective method for persons to transact
    business, offer, and obtain goods and services, and it is
    in the best interests of the people of the State of
    Illinois to promote, foster, and encourage the utilization
    of cooperatives in appropriate instances;
        (2) the Co-operative Act and Agricultural Co-Operative
    Act have provided for the promotion, fostering, and
    encouragement of consumer and producer cooperatives; have
    made distribution of agricultural products between
    producer and consumer more efficient; have stabilized the
    marketing of agricultural products; and have provided for
    the organization and incorporation of cooperative
    corporations, all as contemplated at the time of the
    original adoption;
        (3) it is in the best interests of the people of the
    State of Illinois to preserve the provisions of the
    Co-operative Act as it has been in force and interpreted in
    the State and to continue the provisions thereof for
    agriculture, but also to expand the provisions of Illinois
    cooperative law to provide greater direction and
    flexibility in its provisions and to enable all types of
    industries and enterprises to avail themselves of the
    benefits of the cooperative form of doing business in
    accordance with the provisions of this Act;
        (4) a worker cooperative has the purpose of creating
    and maintaining sustainable jobs and generating wealth in
    order to improve the quality of life of its worker-members,
    dignify human work, allow workers' democratic
    self-management, and promote community and local
    development in this State;
        (5) the purpose of this Act is to create a new business
    entity better suited for worker cooperatives and
    multi-stakeholder cooperatives, and to create more
    visibility and financing options for cooperatives. This
    Act is intended to provide a definition of worker
    cooperative for purposes of this Act, and not for purposes
    of other laws.
 
    Section 10. Definitions. In this Act:
    "Candidate" means a worker who is being considered for
membership in a worker cooperative, as defined in the
cooperative association's articles or bylaws.
    "Collective worker cooperative" means a limited
cooperative association that only has one class of members
consisting of worker-members who manage all of the affairs of
the limited cooperative association.
    "Community investor" means a person who is not a member and
who holds a share or other proprietary interest in a limited
cooperative association.
    "Distribution" means a transfer of money or other property
from a limited cooperative association to a member because of
the member's financial rights or to a transferee of a member's
financial rights.
    "Member" means any person who, pursuant to a specific
provision of a limited cooperative association's articles or
bylaws, has the right to vote for the election of a director or
directors, or possesses proprietary interests in the limited
cooperative association.
    "Multi-stakeholder cooperative" means a cooperative
organized under this Act that has different classes of members
whose rights and proprietary interests shall be determined by
the articles or bylaws. At least 51% of the members shall be
worker-members or candidates. A multi-stakeholder cooperative
is a worker cooperative for purposes of this Act.
    "Worker cooperative" means a limited cooperative
association formed under this Act that includes a class of
worker-members who are natural persons whose patronage
consists of labor contributed to or other work performed for
the limited cooperative association. Election to be organized
as a worker cooperative does not create a presumption that
workers are employees of the corporation for any purposes. A
worker cooperative formed under this Act may include additional
classes of members whose rights and proprietary interests shall
be determined by the articles or bylaws. At least 51% of the
workers shall be worker-members or candidates.
    "Worker" means a natural person contributing labor or
services to a worker cooperative.
    "Worker-member" means a member of a worker cooperative who
is a natural person and also a patron of a worker cooperative.
 
    Section 15. Purpose of limited cooperative association.
    (a) A limited cooperative association is an entity distinct
from its members.
    (b) A limited cooperative association may be organized for
any lawful purpose, whether or not for profit.
    (c) An association organized under this Act elects to be a
worker cooperative with the State of Illinois. Election to be
organized as a worker cooperative does not create a presumption
that workers are employees of the corporation for any purposes.
 
    Section 20. Formation of limited cooperative association.
    (a) A limited cooperative association must be organized by
one or more organizers. Organizers need not be members or
worker-members of the worker cooperative.
    (b) To form a limited cooperative association, one or more
organizers of the association shall deliver or cause to be
delivered articles to the Secretary of State for filing.
 
    Section 25. Articles of organization.
    (a) The articles of organization of a limited cooperative
association shall state:
        (1) the domestic entity name of the limited cooperative
    association;
        (2) the purposes for which the limited cooperative
    association is formed, which may be for any lawful purpose;
        (3) the registered agent name and registered agent
    address of the association's initial registered agent;
        (4) the street address and, if different, mailing
    address of the association's initial principal office;
        (5) the true name and street address and, if different,
    mailing address of each organizer; and
        (6) any other provision, not inconsistent with law,
    that the worker-members, members, or organizers elect to
    set out in the articles for the regulation of the internal
    affairs of the worker cooperative, including any
    provisions that, under this Act, are required or permitted
    to be set out in the bylaws of the worker cooperative.
 
    Section 30. Organization of limited cooperative
association.
    (a) After a limited cooperative association is formed:
        (1) if initial directors are named in the articles, the
    initial directors shall hold an organizational meeting to
    adopt initial bylaws and carry on any other business
    necessary or proper to complete the organization of the
    association; or
        (2) if initial directors are not named in the articles,
    the organizers shall designate the initial directors and
    call a meeting of the initial directors to adopt initial
    bylaws and carry on any other business necessary or proper
    to complete the organization of the association.
    (b) Unless the articles otherwise provide, the initial
directors may cause the limited cooperative association to
accept members, including those necessary for the association
to begin business.
    (c) Initial directors need not be members.
    (d) An initial director serves until a successor is elected
and qualified at a members' meeting or the director is removed,
resigns, is adjudged incompetent, or dies.
 
    Section 35. Bylaws.
    (a) Bylaws shall include:
        (1) a statement of the capital structure of the limited
    cooperative association;
        (2) the classes or other types of members' interests
    and relative rights, preferences, and restrictions granted
    to or imposed upon each class or other type of member's
    interest, including:
            (A) a statement concerning the manner in which
        profits and losses are allocated and distributions are
        made among members and, if community investors are
        authorized, the manner in which profits and losses are
        allocated and how distributions are made among
        investor members and between members and community
        investors;
            (B) a statement designating voting and other
        governance rights of each class or other type of
        members' interests and, if relevant, community
        investors, including which members have voting power
        and any restriction on voting power;
        (3) a statement of the method for admission of members;
        (4) a statement that a member's interest is
    transferable, if it is to be transferable, and a statement
    of the conditions upon which it may be transferred;
        (5) a statement concerning:
            (A) whether persons that are not members but
        conduct business with the association may be permitted
        to share in allocations of profits and losses and
        receive distributions; and
            (B) the manner in which profits and losses are
        allocated and distributions are made with respect to
        those persons; and
        (6) a statement of the number and terms of directors or
    the method by which the number and terms are determined;
    and
        (7) a statement addressing members' contributions.
    (b) Bylaws may contain any other provision for managing and
regulating the affairs of the association.
 
    Section 40. Members.
    (a) To begin business, a limited cooperative association
must have at least 3 members unless the sole member is a
cooperative.
    (b) A person becomes a member:
        (1) as provided in the articles or bylaws;
        (2) as the result of a merger or conversion under
    Section 65; or
        (3) with the consent of all the members.
    (c) A member, solely by reason of being a member, may not
act for or bind the limited cooperative association.
    (d) Unless the articles provide otherwise, a debt,
obligation, or other liability of a limited cooperative
association is solely that of the association and is not the
debt, obligation, or liability of a member solely by reason of
being a member.
    (e) The total voting membership body shall constitute the
assembly of the limited cooperative association.
    (f) The assembly shall meet annually at a time provided in
the articles or bylaws or set by the board of directors not
inconsistent with the articles and bylaws.
    (g) Failure to hold an annual assembly meeting does not
affect the validity of any action by the limited cooperative
association.
    (h) A limited cooperative association shall notify each
member of the time, date, and place of a members' meeting at
least 10 and not more than 60 days before the meeting; except
that, if the notice is of a meeting of the members in one or
more districts or classes of members, the notice shall be given
only to members in those districts or classes.
 
    Section 45. Voting.
    (a) The articles or bylaws may allocate voting power among
members on the basis of one or a combination of the following:
        (1) one member, one vote;
        (2) if a member is a cooperative, the number of its
    members; or
        (3) on the basis of use or patronage unless the
    cooperative has elected to be a worker cooperative.
    (b) If the articles or bylaws allocate voting power on the
basis of use or patronage and a member would be denied a vote
because the member did not use the limited cooperative
association or conduct patronage with it during the period on
which the allocation of voting power is determined, the
articles or bylaws must provide that the member shall
nevertheless be allocated a vote equal to at least the minimum
voting power allocated to members who used the association or
conducted patronage with it during the period.
    (c) The articles or bylaws may provide for the allocation
of member voting power by districts or class or any combination
thereof.
    (d) Community investors are not entitled to vote unless the
articles or bylaws provide otherwise.
    (e) At no time shall the members have less than a majority
of the voting power of the limited cooperative association.
 
    Section 50. Board of directors.
    (a) A limited cooperative association must have a board of
directors of at least 3 individuals, unless the limited
cooperative association is a collective worker cooperative.
Subsections (b) through (e) do not apply to collective worker
cooperatives.
    (b) The affairs of a limited cooperative association must
be managed by, or under the direction of, the board of
directors unless the board delegates those duties to the
assembly of the limited cooperative association. The board may
adopt policies and procedures that do not conflict with the
articles, bylaws, or this Act.
    (c) An individual is not an agent for a limited cooperative
association solely by being a director.
    (d) A debt, obligation, or other liability of a limited
cooperative association is solely that of the association and
is not a debt, obligation, or liability of a director solely by
reason of being a director. An individual is not personally
liable, directly or indirectly, for an obligation of an
association solely by reason of being a director.
    (e) Directors shall be elected for terms determined by the
bylaws by a majority vote of the assembly.
 
    Section 55. Assembly.
    (a) A limited cooperative association must have an assembly
as constituted by the body of voting members.
    (b) An individual is not an agent for a limited cooperative
association solely by being a member of the assembly.
    (c) A debt, obligation, or other liability of a limited
cooperative association is solely that of the association and
is not a debt, obligation, or liability of a member of the
assembly solely by reason of being a voting member. An
individual is not personally liable, directly or indirectly,
for an obligation of an association solely by reason of being a
voting member.
 
    Section 60. Dissolution. A limited cooperative association
may be dissolved only by either (1) a two-thirds vote of the
assembly, or (2) a vote of the assembly of a supermajority
threshold stated in the bylaws that is more than two-thirds.
The vote shall be in accordance with Section 55, and upon
dissolution its business and activities must be wound up in the
manner provided under the Limited Liability Company Act for a
limited liability company.
 
    Section 65. Conversion. A limited cooperative association
may convert into any form of entity permitted if the board of
directors of the limited cooperative association adopts a plan
of conversion and the assembly adopts such a plan by a
two-thirds majority vote.
 
    Section 70. Exemption from securities laws. Any security,
patronage refund, per unit retain certificate, or evidence of
membership issued or sold by a cooperative association as an
investment in its capital to the members of a cooperative
association formed under this Act or a similar law of any other
state and authorized to transact business or conduct activities
in this State is exempt from the registration requirements of
the Illinois Securities Law of 1953. Such securities, patronage
refunds, per unit retain certificates, or evidence of
membership may be sold lawfully by the issuer or its members or
salaried employees without the necessity of being registered as
a broker or dealer under the Illinois Securities Law of 1953.
 
    Section 90. The Co-operative Act is amended by changing
Section 22 as follows:
 
    (805 ILCS 310/22)  (from Ch. 32, par. 326)
    Sec. 22. No corporation or association hereafter organized
or doing business for profit in this State shall be entitled to
use the term "Co-operative" as a part of its corporate or other
business name or title unless it has complied with the
provisions of this Act, except (1) a corporation organized
under the Business Corporation Act of 1983 for the purpose of
ownership or administration of residential property on a
cooperative basis, or (2) a cooperative corporation organized
under the General Not For Profit Corporation Act of 1986 or its
predecessor or successor statutes, or (3) a limited worker
cooperative association organized under the Limited Worker
Cooperative Association Act. Any corporation or association
violating the provision of this Section may be enjoined from
doing business under such name at the instance of any
shareholder of any association or corporation organized under
this Act.
(Source: P.A. 95-368, eff. 8-23-07.)
 
    Section 95. The Illinois Securities Law of 1953 is amended
by changing Section 3 as follows:
 
    (815 ILCS 5/3)  (from Ch. 121 1/2, par. 137.3)
    Sec. 3. The provisions of Sections 2a, 5, 6 and 7 of this
Act shall not apply to any of the following securities:
    A. Any security (including a revenue obligation) issued or
guaranteed by the United States, any state, any political
subdivision of a state, or any agency or corporation or other
instrumentality of any one or more of the foregoing, or any
certificate of deposit for any such security.
    B. Any security issued or guaranteed by Canada, any
Canadian province, any political subdivision of any such
province, any agency or corporation or other instrumentality of
one or more of the foregoing, or any other foreign government
with which the United States then maintains diplomatic
relations, if the security is recognized as a valid obligation
by the issuer or guarantor.
    C. (1) Any security issued by and representing an interest
in or a debt of, or guaranteed by, any bank or savings bank,
bank holding company, or credit union organized under the laws
of the United States, or any bank, savings bank, savings
institution or trust company organized and supervised under the
laws of any state, or any interest or participation in any
common trust fund or similar fund maintained by any such bank,
savings bank, savings institution or trust company exclusively
for the collective investment and reinvestment of assets
contributed thereto by such bank, savings bank, savings
institution or trust company or any affiliate thereof, in its
capacity as fiduciary, trustee, executor, administrator or
guardian.
    (2) Any security issued or guaranteed to both principal and
interest by an international bank of which the United States is
a member.
    D. (1) Any security issued by and representing an interest
in or a debt of, or guaranteed by, any federal savings and loan
association, or any savings and loan association or building
and loan association organized and supervised under the laws of
any state.
    (2) Any security issued or guaranteed by any federal credit
union or any credit union, industrial loan association, or
similar organization organized and supervised under the laws of
any state.
    E. Any security issued or guaranteed by any railroad, other
common carrier, public utility or holding company where such
issuer or guarantor is subject to the jurisdiction of the
Interstate Commerce Commission or successor entity, or is a
registered holding company under the Public Utility Holding
Company Act of 1935 or a subsidiary of such a company within
the meaning of that Act, or is regulated in respect of its
rates and charges by a governmental authority of the United
States or any state, or is regulated in respect of the issuance
or guarantee of the security by a governmental authority of the
United States, any state, Canada, or any Canadian province.
    F. Equipment trust certificates in respect of equipment
leased or conditionally sold to a person, if securities issued
by such person would be exempt under subsection E of this
Section.
    G. Any security which at the time of sale is listed or
approved for listing upon notice of issuance on the New York
Stock Exchange, Inc., the American Stock Exchange, Inc., the
Pacific Stock Exchange, Inc., the Chicago Stock Exchange, Inc.,
the Chicago Board of Trade, the Philadelphia Stock Exchange,
Inc., the Chicago Board Options Exchange, Incorporated, the
National Market System of the Nasdaq Stock Market, or any other
exchange, automated quotation system or board of trade which
the Secretary of State, by rule or regulation, deems to have
substantially equivalent standards for listing or designation
as required by any such exchange, automated quotation system or
board of trade; and securities senior or of substantially equal
rank, both as to dividends or interest and upon liquidation, to
securities so listed or designated; and warrants and rights to
purchase any of the foregoing; provided, however, that this
subsection G shall not apply to investment fund shares or
securities of like character, which are being continually
offered at a price or prices determined in accordance with a
prescribed formula.
    The Secretary of State may, after notice and opportunity
for hearing, revoke the exemption afforded by this subparagraph
with respect to any securities by issuing an order if the
Secretary of State finds that the further sale of the
securities in this State would work or tend to work a fraud on
purchasers of the securities.
    H. Any security issued by a person organized and operated
not for pecuniary profit and exclusively for religious,
educational, benevolent, fraternal, agricultural, charitable,
athletic, professional, trade, social or reformatory purposes,
or as a chamber of commerce or local industrial development
corporation, or for more than one of said purposes and no part
of the net earnings of which inures to the benefit of any
private stockholder or member.
    I. Instruments evidencing indebtedness under an agreement
for the acquisition of property under contract of conditional
sale.
    J. A note secured by a first mortgage upon tangible
personal or real property when such mortgage is made, assigned,
sold, transferred and delivered with such note or other written
obligation secured by such mortgage, either to or for the
benefit of the purchaser or lender; or bonds or notes not more
than 10 in number secured by a first mortgage upon the title in
fee simple to real property if the aggregate principal amount
secured by such mortgage does not exceed $500,000 and also does
not exceed 75% of the fair market value of such real property.
    K. A note or notes not more than 10 in number secured by a
junior mortgage lien if the aggregate principal amount of the
indebtedness represented thereby does not exceed 50% of the
amount of the then outstanding prior lien indebtedness and
provided that the total amount of the indebtedness (including
the indebtedness represented by the subject junior mortgage
note or notes) shall not exceed 90% of the fair market value of
the property securing such indebtedness; and provided further
that each such note or notes shall bear across the face thereof
the following legend in letters at least as large as 12 point
type: "THIS NOTE IS SECURED BY A JUNIOR MORTGAGE".
    L. Any negotiable promissory note or draft, bill of
exchange or bankers' acceptance which arises out of a current
transaction or the proceeds of which have been or are to be
used for current transactions, and which evidences an
obligation to pay cash within 9 months of the date of issuance
exclusive of days of grace, or any renewal of such note, draft,
bill or acceptance which is likewise limited, or any guarantee
of such note, draft, bill or acceptance or of any such renewal,
provided that the note, draft, bill, or acceptance is a
negotiable security eligible for discounting by banks that are
members of the Federal Reserve System. Any instrument exempted
under this subsection from the requirement of Sections 5, 6,
and 7 of this Act shall bear across the face thereof the
following legend in letters at least as large as 12 point type:
"THIS INSTRUMENT IS NEITHER GUARANTEED, NOR IS THE ISSUANCE
THEREOF REGULATED BY ANY AGENCY OR DEPARTMENT OF THE STATE OF
ILLINOIS OR THE UNITED STATES.". However, the foregoing legend
shall not be required with respect to any such instrument:
        (i) sold to a person described in subsection C or H of
    Section 4 of this Act;
        (ii) sold to a "Qualified Institutional Buyer" as that
    term is defined in Rule 144a adopted under the Securities
    Act of 1933;
        (iii) where the minimum initial subscription for the
    purchase of such instrument is $100,000 or more; or
        (iv) issued by an issuer that has any class of
    securities registered under Section 12 of the Securities
    Exchange Act of 1934 or has any outstanding class of
    indebtedness rated in one of the 3 highest categories by a
    rating agency designated by the Department;
    M. Any security issued by and representing an interest in
or a debt of, or guaranteed by, any insurance company organized
under the laws of any state.
    N. Any security issued pursuant to (i) a written
compensatory benefit plan (including without limitation, any
purchase, savings, option, bonus, stock appreciation, profit
sharing, thrift, incentive, pension, or similar plan) and
interests in such plans established by one or more of the
issuers thereof or its parents or majority-owned subsidiaries
for the participation of their employees, directors, general
partners, trustees (where the issuer is a business trust),
officers, or consultants or advisers of such issuers or its
parents or majority-owned subsidiaries, provided that bona
fide services are rendered by consultants or advisers and those
services are not in connection with the offer and sale of
securities in a capital-raising transaction or (ii) a written
contract relating to the compensation of any such person.
    O. Any option, put, call, spread or straddle issued by a
clearing agency registered as such under the Federal 1934 Act,
if the security, currency, commodity, or other interest
underlying the option, put, call, spread or straddle is not
required to be registered under Section 5.
    P. Any security which meets all of the following
conditions:
        (1) If the issuer is not organized under the laws of
    the United States or a state, it has appointed a duly
    authorized agent in the United States for service of
    process and has set forth the name and address of the agent
    in its prospectus.
        (2) A class of the issuer's securities is required to
    be and is registered under Section 12 of the Federal 1934
    Act, and has been so registered for the three years
    immediately preceding the offering date.
        (3) Neither the issuer nor a significant subsidiary has
    had a material default during the last seven years, or for
    the period of the issuer's existence if less than seven
    years, in the payment of (i) principal, interest, dividend,
    or sinking fund installment on preferred stock or
    indebtedness for borrowed money, or (ii) rentals under
    leases with terms of three years or more.
        (4) The issuer has had consolidated net income, before
    extraordinary items and the cumulative effect of
    accounting changes, of at least $1,000,000 in four of its
    last five fiscal years including its last fiscal year; and
    if the offering is of interest bearing securities, has had
    for its last fiscal year, net income, before deduction for
    income taxes and depreciation, of at least 1-1/2 times the
    issuer's annual interest expense, giving effect to the
    proposed offering and the intended use of the proceeds. For
    the purposes of this clause "last fiscal year" means the
    most recent year for which audited financial statements are
    available, provided that such statements cover a fiscal
    period ended not more than 15 months from the commencement
    of the offering.
        (5) If the offering is of stock or shares other than
    preferred stock or shares, the securities have voting
    rights and the rights include (i) the right to have at
    least as many votes per share, and (ii) the right to vote
    on at least as many general corporate decisions, as each of
    the issuer's outstanding classes of stock or shares, except
    as otherwise required by law.
        (6) If the offering is of stock or shares, other than
    preferred stock or shares, the securities are owned
    beneficially or of record, on any date within six months
    prior to the commencement of the offering, by at least
    1,200 persons, and on that date there are at least 750,000
    such shares outstanding with an aggregate market value,
    based on the average bid price for that day, of at least
    $3,750,000. In connection with the determination of the
    number of persons who are beneficial owners of the stock or
    shares of an issuer, the issuer or dealer may rely in good
    faith for the purposes of this clause upon written
    information furnished by the record owners.
        (7) The issuer meets the conditions specified in
    paragraphs (2), (3) and (4) of this subsection P if either
    the issuer or the issuer and the issuer's predecessor,
    taken together, meet such conditions and if: (a) the
    succession was primarily for the purpose of changing the
    state of incorporation of the predecessor or forming a
    holding company and the assets and liabilities of the
    successor at the time of the succession were substantially
    the same as those of the predecessor; or (b) all
    predecessors met such conditions at the time of succession
    and the issuer has continued to do so since the succession.
    Q. Any security appearing on the List of OTC Margin Stocks
published by the Board of Governors of the Federal Reserve
System or any security incorporated by reference to the List of
OTC Margin Stocks by the Board of Governors of the Federal
Reserve System; any other securities of the same issuer which
are of senior or substantially equal rank; any securities
called for by subscription rights or warrants so listed or
approved; or any warrants or rights to purchase or subscribe to
any of the foregoing.
    R. Any security issued by a bona fide limited worker
cooperative association or by a bona fide agricultural
cooperative operating in this State that is organized under the
laws of this State or as a foreign cooperative association
organized under the law of another state that has been duly
qualified to transact business in this State.
(Source: P.A. 90-70, eff. 7-8-97; 91-809, eff. 1-1-01.)
 
    Section 99. Effective date. This Act takes effect January
1, 2020.

Effective Date: 1/1/2020