State of Illinois
2019 and 2020


Introduced , by Rep. Carol Ammons


New Act
805 ILCS 310/22  from Ch. 32, par. 326
815 ILCS 5/3  from Ch. 121 1/2, par. 137.3

    Creates the Limited Cooperative Association Act. Authorizes the organization of a limited cooperative association, as an entity distinct from its members, for any lawful purpose, whether or not for profit. Provides that a limited cooperative association may be a collective worker cooperative in which there is only one class of members consisting of worker-members who manage all of the affairs of the limited cooperative association or a worker cooperative or employment cooperative 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. Contains provisions regarding: findings; formation; articles of organization; organization; bylaws; members; community investors; voting; a board of directors; an assembly; dissolution; conversion; and applicability of securities laws. Amends the Co-operative Act and the Illinois Securities Law of 1953 to make conforming changes. Effective immediately.

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1    AN ACT concerning business.
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
4    Section 1. Short title. This Act may be cited as the
5Limited Cooperative Association Act.
6    Section 5. Findings. The General Assembly finds and
7declares all of the following:
8        (1) the cooperative form of doing business provides an
9    efficient and effective method for persons to transact
10    business, offer, and obtain goods and services, and it is
11    in the best interests of the people of the State of
12    Illinois to promote, foster, and encourage the utilization
13    of cooperatives in appropriate instances;
14        (2) the Co-operative Act and Agricultural Co-Operative
15    Act have provided for the promotion, fostering, and
16    encouragement of consumer and producer cooperatives; have
17    made distribution of agricultural products between
18    producer and consumer more efficient; have stabilized the
19    marketing of agricultural products; and have provided for
20    the organization and incorporation of cooperative
21    corporations, all as contemplated at the time of the
22    original adoption;
23        (3) it is in the best interests of the people of the



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1    State of Illinois to preserve the provisions of the
2    Co-operative Act as it has been in force and interpreted in
3    the State and to continue the provisions thereof for
4    agriculture, but also to expand the provisions of Illinois
5    cooperative law to provide greater direction and
6    flexibility in its provisions and to enable all types of
7    industries and enterprises to avail themselves of the
8    benefits of the cooperative form of doing business in
9    accordance with the provisions of this Act;
10        (4) a worker cooperative has the purpose of creating
11    and maintaining sustainable jobs and generating wealth in
12    order to improve the quality of life of its worker-members,
13    dignify human work, allow workers' democratic
14    self-management, and promote community and local
15    development in this State;
16        (5) the purpose of this Act is to create a new business
17    entity better suited for worker cooperatives and
18    multi-stakeholder cooperatives, and to create more
19    visibility and financing options for cooperatives. This
20    Act is intended to provide a definition of worker
21    cooperative for purposes of this Act, and not for purposes
22    of other laws.
23    Section 10. Definitions. In this Act:
24    "Collective worker cooperative" means a limited
25cooperative association that elects to be a worker cooperative



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1in which there is only one class of members consisting of
2worker-members who manage all of the affairs of the limited
3cooperative association.
4    "Community investor" means a person who is not a patron
5member and who holds a share or other proprietary interest in a
6limited cooperative association.
7    "Distribution" means a transfer of money or other property
8from a limited cooperative association to a member because of
9the member's financial rights or to a transferee of a member's
10financial rights.
11    "Member" means any person who, pursuant to a specific
12provision of a limited cooperative association's articles or
13bylaws, has the right to vote for the election of a director or
14directors, or possesses proprietary interests in the limited
15cooperative association.
16    "Worker cooperative" or "employment cooperative" means a
17limited cooperative association formed under this Act that
18includes a class of worker-members who are natural persons
19whose patronage consists of labor contributed to or other work
20performed for the limited cooperative association. Election to
21be organized as a worker cooperative or an employment
22cooperative does not create a presumption that workers are
23employees of the corporation for any purposes. At least 51
24percent of the workers shall be worker-members or candidates.
25    "Worker-member" means a member of a worker cooperative who
26is a natural person and also a patron of a worker cooperative.



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1    Section 15. Purpose of limited cooperative association.
2    (a) A limited cooperative association is an entity distinct
3from its members.
4    (b) A limited cooperative association may be organized for
5any lawful purpose, whether or not for profit.
6    (c) An association organized under this Act may elect to be
7a worker cooperative with the State of Illinois. Election to be
8organized as a worker cooperative or an employment cooperative
9does not create a presumption that workers are employees of the
10corporation for any purposes.
11    Section 20. Formation of limited cooperative association.
12    (a) A limited cooperative association must be organized by
13one or more organizers.
14    (b) To form a limited cooperative association, one or more
15organizers of the association shall deliver or cause to be
16delivered articles to the Secretary of State for filing.
17    Section 25. Articles of organization.
18    (a) The articles of organization of a limited cooperative
19association shall state:
20        (1) the domestic entity name of the limited cooperative
21    association;
22        (2) the purposes for which the limited cooperative
23    association is formed, which may be for any lawful purpose;



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1        (3) the registered agent name and registered agent
2    address of the association's initial registered agent;
3        (4) the street address and, if different, mailing
4    address of the association's initial principal office;
5        (5) the true name and street address and, if different,
6    mailing address of each organizer; and
7        (6) if relevant, an election to be classified as a
8    worker cooperative primarily managed by worker-owner
9    members.
10    Section 30. Organization of limited cooperative
12    (a) After a limited cooperative association is formed:
13        (1) if initial directors are named in the articles, the
14    initial directors shall hold an organizational meeting to
15    adopt initial bylaws and carry on any other business
16    necessary or proper to complete the organization of the
17    association; or
18        (2) if initial directors are not named in the articles,
19    the organizers shall designate the initial directors and
20    call a meeting of the initial directors to adopt initial
21    bylaws and carry on any other business necessary or proper
22    to complete the organization of the association.
23    (b) Unless the articles otherwise provide, the initial
24directors may cause the limited cooperative association to
25accept members, including those necessary for the association



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1to begin business.
2    (c) Initial directors need not be members.
3    (d) An initial director serves until a successor is elected
4and qualified at a members' meeting or the director is removed,
5resigns, is adjudged incompetent, or dies.
6    Section 35. Bylaws.
7    (a) Bylaws shall include:
8        (1) a statement of the capital structure of the limited
9    cooperative association;
10        (2) the classes or other types of members' interests
11    and relative rights, preferences, and restrictions granted
12    to or imposed upon each class or other type of member's
13    interest, including:
14            (A) a statement concerning the manner in which
15        profits and losses are allocated and distributions are
16        made among patron members and, if community investors
17        are authorized, the manner in which profits and losses
18        are allocated and how distributions are made among
19        investor members and between patron members and
20        community investors;
21            (B) a statement designating voting and other
22        governance rights of each class or other type of
23        members' interests and, if relevant, community
24        investors, including which members have voting power
25        and any restriction on voting power;



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1        (3) a statement of the method for admission of members;
2        (4) a statement that a member's interest is
3    transferable, if it is to be transferable, and a statement
4    of the conditions upon which it may be transferred;
5        (5) a statement concerning:
6            (A) whether persons that are not members but
7        conduct business with the association may be permitted
8        to share in allocations of profits and losses and
9        receive distributions; and
10            (B) the manner in which profits and losses are
11        allocated and distributions are made with respect to
12        those persons; and
13        (6) a statement of the number and terms of directors or
14    the method by which the number and terms are determined;
15    and
16        (7) a statement addressing members' contributions.
17    (b) Bylaws may contain any other provision for managing and
18regulating the affairs of the association.
19    Section 40. Members.
20    (a) To begin business, a limited cooperative association
21must have at least 3 patron members unless the sole member is a
23    (b) A person becomes a member:
24        (1) as provided in the articles or bylaws;
25        (2) as the result of a merger or conversion under



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1    Section 65; or
2        (3) with the consent of all the members.
3    (c) A member, solely by reason of being a member, may not
4act for or bind the limited cooperative association.
5    (d) Unless the articles provide otherwise, a debt,
6obligation, or other liability of a limited cooperative
7association is solely that of the association and is not the
8debt, obligation, or liability of a member solely by reason of
9being a member.
10    (e) The total voting membership body shall constitute the
11assembly of the limited cooperative association.
12    (f) The assembly shall meet annually at a time provided in
13the articles or bylaws or set by the board of directors not
14inconsistent with the articles and bylaws.
15    (g) Failure to hold an annual assembly meeting does not
16affect the validity of any action by the limited cooperative
18    (h) A limited cooperative association shall notify each
19member of the time, date, and place of a members' meeting at
20least 10 and not more than 60 days before the meeting; except
21that, if the notice is of a meeting of the members in one or
22more districts or classes of members, the notice shall be given
23only to members in those districts or classes.
24    Section 45. Voting.
25    (a) The articles or bylaws may allocate voting power among



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1patron members on the basis of one or a combination of the
3        (1) one member, one vote;
4        (2) if a patron member is a cooperative, the number of
5    its patron members; or
6        (3) on the basis of use or patronage unless the
7    cooperative has elected to be a worker cooperative.
8    (b) If the articles or bylaws allocate voting power on the
9basis of use or patronage and a member would be denied a vote
10because the member did not use the limited cooperative
11association or conduct patronage with it during the period on
12which the allocation of voting power is determined, the
13articles or bylaws must provide that the member shall
14nevertheless be allocated a vote equal to at least the minimum
15voting power allocated to members who used the association or
16conducted patronage with it during the period.
17    (c) The articles or bylaws may provide for the allocation
18of patron member voting power by districts or class or any
19combination thereof.
20    (d) If the articles or bylaws provide for community
21investors, those members are not entitled to vote unless the
22articles or bylaws provide otherwise. The articles or bylaws
23may provide for the allocation of investor member voting power
24by class, classes, or any combination of classes.
25    (e) At no time shall the patron members have less than a
26majority of the voting power of the limited cooperative



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2    Section 50. Board of directors.
3    (a) A limited cooperative association must have a board of
4directors of at least 3 individuals, unless the limited
5cooperative association is a collective worker cooperative.
6Subsections (b) through (e) do not apply to collective worker
8    (b) The affairs of a limited cooperative association must
9be managed by, or under the direction of, the board of
10directors unless the board delegates those duties to the
11assembly of the limited cooperative association. The board may
12adopt policies and procedures that do not conflict with the
13articles, bylaws, or this Act.
14    (c) An individual is not an agent for a limited cooperative
15association solely by being a director.
16    (d) A debt, obligation, or other liability of a limited
17cooperative association is solely that of the association and
18is not a debt, obligation, or liability of a director solely by
19reason of being a director. An individual is not personally
20liable, directly or indirectly, for an obligation of an
21association solely by reason of being a director.
22    (e) Directors shall be elected for terms determined by the
23bylaws by a majority vote of the assembly.
24    Section 55. Assembly.



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1    (a) A limited cooperative association must have an assembly
2as constituted by the body of voting members.
3    (b) An individual is not an agent for a limited cooperative
4association solely by being a member of the assembly.
5    (c) A debt, obligation, or other liability of a limited
6cooperative association is solely that of the association and
7is not a debt, obligation, or liability of a member of the
8assembly solely by reason of being a voting member. An
9individual is not personally liable, directly or indirectly,
10for an obligation of an association solely by reason of being a
11voting member.
12    Section 60. Dissolution. A limited cooperative association
13may be dissolved only by either (1) a two-thirds vote of the
14assembly, or (2) a vote of the assembly of a supermajority
15threshold stated in the bylaws that is more than two-thirds.
16The vote shall be in accordance with Section 55, and upon
17dissolution its business and activities must be wound up in the
18manner provided under the Limited Liability Company Act for a
19limited liability company.
20    Section 65. Conversion. A limited cooperative association
21may convert into any form of entity permitted if the board of
22directors of the limited cooperative association adopts a plan
23of conversion and the assembly adopts such a plan by a
24two-thirds majority vote.



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1    Section 70. Exemption from securities laws. Any security,
2patronage refund, per unit retain certificate, or evidence of
3membership issued or sold by a cooperative association as an
4investment in its stock or capital to the members of a
5cooperative association formed under this Act or a similar law
6of any other state and authorized to transact business or
7conduct activities in this State is exempt from the
8requirements of the Illinois Securities Law of 1953. Such
9securities, patronage refunds, per unit retain certificates,
10or evidence of membership may be sold lawfully by the issuer or
11its members or salaried employees without the necessity of
12being registered as a broker or dealer under the Illinois
13Securities Law of 1953.
14    Section 90. The Co-operative Act is amended by changing
15Section 22 as follows:
16    (805 ILCS 310/22)  (from Ch. 32, par. 326)
17    Sec. 22. No corporation or association hereafter organized
18or doing business for profit in this State shall be entitled to
19use the term "Co-operative" as a part of its corporate or other
20business name or title unless it has complied with the
21provisions of this Act, except (1) a corporation organized
22under the Business Corporation Act of 1983 for the purpose of
23ownership or administration of residential property on a



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1cooperative basis, or (2) a cooperative corporation organized
2under the General Not For Profit Corporation Act of 1986 or its
3predecessor or successor statutes, or (3) a limited cooperative
4association organized under the Limited Cooperative
5Association Act. Any corporation or association violating the
6provision of this Section may be enjoined from doing business
7under such name at the instance of any shareholder of any
8association or corporation organized under this Act.
9(Source: P.A. 95-368, eff. 8-23-07.)
10    Section 95. The Illinois Securities Law of 1953 is amended
11by changing Section 3 as follows:
12    (815 ILCS 5/3)  (from Ch. 121 1/2, par. 137.3)
13    Sec. 3. The provisions of Sections 2a, 5, 6 and 7 of this
14Act shall not apply to any of the following securities:
15    A. Any security (including a revenue obligation) issued or
16guaranteed by the United States, any state, any political
17subdivision of a state, or any agency or corporation or other
18instrumentality of any one or more of the foregoing, or any
19certificate of deposit for any such security.
20    B. Any security issued or guaranteed by Canada, any
21Canadian province, any political subdivision of any such
22province, any agency or corporation or other instrumentality of
23one or more of the foregoing, or any other foreign government
24with which the United States then maintains diplomatic



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1relations, if the security is recognized as a valid obligation
2by the issuer or guarantor.
3    C. (1) Any security issued by and representing an interest
4in or a debt of, or guaranteed by, any bank or savings bank,
5bank holding company, or credit union organized under the laws
6of the United States, or any bank, savings bank, savings
7institution or trust company organized and supervised under the
8laws of any state, or any interest or participation in any
9common trust fund or similar fund maintained by any such bank,
10savings bank, savings institution or trust company exclusively
11for the collective investment and reinvestment of assets
12contributed thereto by such bank, savings bank, savings
13institution or trust company or any affiliate thereof, in its
14capacity as fiduciary, trustee, executor, administrator or
16    (2) Any security issued or guaranteed to both principal and
17interest by an international bank of which the United States is
18a member.
19    D. (1) Any security issued by and representing an interest
20in or a debt of, or guaranteed by, any federal savings and loan
21association, or any savings and loan association or building
22and loan association organized and supervised under the laws of
23any state.
24    (2) Any security issued or guaranteed by any federal credit
25union or any credit union, industrial loan association, or
26similar organization organized and supervised under the laws of



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1any state.
2    E. Any security issued or guaranteed by any railroad, other
3common carrier, public utility or holding company where such
4issuer or guarantor is subject to the jurisdiction of the
5Interstate Commerce Commission or successor entity, or is a
6registered holding company under the Public Utility Holding
7Company Act of 1935 or a subsidiary of such a company within
8the meaning of that Act, or is regulated in respect of its
9rates and charges by a governmental authority of the United
10States or any state, or is regulated in respect of the issuance
11or guarantee of the security by a governmental authority of the
12United States, any state, Canada, or any Canadian province.
13    F. Equipment trust certificates in respect of equipment
14leased or conditionally sold to a person, if securities issued
15by such person would be exempt under subsection E of this
17    G. Any security which at the time of sale is listed or
18approved for listing upon notice of issuance on the New York
19Stock Exchange, Inc., the American Stock Exchange, Inc., the
20Pacific Stock Exchange, Inc., the Chicago Stock Exchange, Inc.,
21the Chicago Board of Trade, the Philadelphia Stock Exchange,
22Inc., the Chicago Board Options Exchange, Incorporated, the
23National Market System of the Nasdaq Stock Market, or any other
24exchange, automated quotation system or board of trade which
25the Secretary of State, by rule or regulation, deems to have
26substantially equivalent standards for listing or designation



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1as required by any such exchange, automated quotation system or
2board of trade; and securities senior or of substantially equal
3rank, both as to dividends or interest and upon liquidation, to
4securities so listed or designated; and warrants and rights to
5purchase any of the foregoing; provided, however, that this
6subsection G shall not apply to investment fund shares or
7securities of like character, which are being continually
8offered at a price or prices determined in accordance with a
9prescribed formula.
10    The Secretary of State may, after notice and opportunity
11for hearing, revoke the exemption afforded by this subparagraph
12with respect to any securities by issuing an order if the
13Secretary of State finds that the further sale of the
14securities in this State would work or tend to work a fraud on
15purchasers of the securities.
16    H. Any security issued by a person organized and operated
17not for pecuniary profit and exclusively for religious,
18educational, benevolent, fraternal, agricultural, charitable,
19athletic, professional, trade, social or reformatory purposes,
20or as a chamber of commerce or local industrial development
21corporation, or for more than one of said purposes and no part
22of the net earnings of which inures to the benefit of any
23private stockholder or member.
24    I. Instruments evidencing indebtedness under an agreement
25for the acquisition of property under contract of conditional



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1    J. A note secured by a first mortgage upon tangible
2personal or real property when such mortgage is made, assigned,
3sold, transferred and delivered with such note or other written
4obligation secured by such mortgage, either to or for the
5benefit of the purchaser or lender; or bonds or notes not more
6than 10 in number secured by a first mortgage upon the title in
7fee simple to real property if the aggregate principal amount
8secured by such mortgage does not exceed $500,000 and also does
9not exceed 75% of the fair market value of such real property.
10    K. A note or notes not more than 10 in number secured by a
11junior mortgage lien if the aggregate principal amount of the
12indebtedness represented thereby does not exceed 50% of the
13amount of the then outstanding prior lien indebtedness and
14provided that the total amount of the indebtedness (including
15the indebtedness represented by the subject junior mortgage
16note or notes) shall not exceed 90% of the fair market value of
17the property securing such indebtedness; and provided further
18that each such note or notes shall bear across the face thereof
19the following legend in letters at least as large as 12 point
21    L. Any negotiable promissory note or draft, bill of
22exchange or bankers' acceptance which arises out of a current
23transaction or the proceeds of which have been or are to be
24used for current transactions, and which evidences an
25obligation to pay cash within 9 months of the date of issuance
26exclusive of days of grace, or any renewal of such note, draft,



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1bill or acceptance which is likewise limited, or any guarantee
2of such note, draft, bill or acceptance or of any such renewal,
3provided that the note, draft, bill, or acceptance is a
4negotiable security eligible for discounting by banks that are
5members of the Federal Reserve System. Any instrument exempted
6under this subsection from the requirement of Sections 5, 6,
7and 7 of this Act shall bear across the face thereof the
8following legend in letters at least as large as 12 point type:
11ILLINOIS OR THE UNITED STATES.". However, the foregoing legend
12shall not be required with respect to any such instrument:
13        (i) sold to a person described in subsection C or H of
14    Section 4 of this Act;
15        (ii) sold to a "Qualified Institutional Buyer" as that
16    term is defined in Rule 144a adopted under the Securities
17    Act of 1933;
18        (iii) where the minimum initial subscription for the
19    purchase of such instrument is $100,000 or more; or
20        (iv) issued by an issuer that has any class of
21    securities registered under Section 12 of the Securities
22    Exchange Act of 1934 or has any outstanding class of
23    indebtedness rated in one of the 3 highest categories by a
24    rating agency designated by the Department;
25    M. Any security issued by and representing an interest in
26or a debt of, or guaranteed by, any insurance company organized



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1under the laws of any state.
2    N. Any security issued pursuant to (i) a written
3compensatory benefit plan (including without limitation, any
4purchase, savings, option, bonus, stock appreciation, profit
5sharing, thrift, incentive, pension, or similar plan) and
6interests in such plans established by one or more of the
7issuers thereof or its parents or majority-owned subsidiaries
8for the participation of their employees, directors, general
9partners, trustees (where the issuer is a business trust),
10officers, or consultants or advisers of such issuers or its
11parents or majority-owned subsidiaries, provided that bona
12fide services are rendered by consultants or advisers and those
13services are not in connection with the offer and sale of
14securities in a capital-raising transaction or (ii) a written
15contract relating to the compensation of any such person.
16    O. Any option, put, call, spread or straddle issued by a
17clearing agency registered as such under the Federal 1934 Act,
18if the security, currency, commodity, or other interest
19underlying the option, put, call, spread or straddle is not
20required to be registered under Section 5.
21    P. Any security which meets all of the following
23        (1) If the issuer is not organized under the laws of
24    the United States or a state, it has appointed a duly
25    authorized agent in the United States for service of
26    process and has set forth the name and address of the agent



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1    in its prospectus.
2        (2) A class of the issuer's securities is required to
3    be and is registered under Section 12 of the Federal 1934
4    Act, and has been so registered for the three years
5    immediately preceding the offering date.
6        (3) Neither the issuer nor a significant subsidiary has
7    had a material default during the last seven years, or for
8    the period of the issuer's existence if less than seven
9    years, in the payment of (i) principal, interest, dividend,
10    or sinking fund installment on preferred stock or
11    indebtedness for borrowed money, or (ii) rentals under
12    leases with terms of three years or more.
13        (4) The issuer has had consolidated net income, before
14    extraordinary items and the cumulative effect of
15    accounting changes, of at least $1,000,000 in four of its
16    last five fiscal years including its last fiscal year; and
17    if the offering is of interest bearing securities, has had
18    for its last fiscal year, net income, before deduction for
19    income taxes and depreciation, of at least 1-1/2 times the
20    issuer's annual interest expense, giving effect to the
21    proposed offering and the intended use of the proceeds. For
22    the purposes of this clause "last fiscal year" means the
23    most recent year for which audited financial statements are
24    available, provided that such statements cover a fiscal
25    period ended not more than 15 months from the commencement
26    of the offering.



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1        (5) If the offering is of stock or shares other than
2    preferred stock or shares, the securities have voting
3    rights and the rights include (i) the right to have at
4    least as many votes per share, and (ii) the right to vote
5    on at least as many general corporate decisions, as each of
6    the issuer's outstanding classes of stock or shares, except
7    as otherwise required by law.
8        (6) If the offering is of stock or shares, other than
9    preferred stock or shares, the securities are owned
10    beneficially or of record, on any date within six months
11    prior to the commencement of the offering, by at least
12    1,200 persons, and on that date there are at least 750,000
13    such shares outstanding with an aggregate market value,
14    based on the average bid price for that day, of at least
15    $3,750,000. In connection with the determination of the
16    number of persons who are beneficial owners of the stock or
17    shares of an issuer, the issuer or dealer may rely in good
18    faith for the purposes of this clause upon written
19    information furnished by the record owners.
20        (7) The issuer meets the conditions specified in
21    paragraphs (2), (3) and (4) of this subsection P if either
22    the issuer or the issuer and the issuer's predecessor,
23    taken together, meet such conditions and if: (a) the
24    succession was primarily for the purpose of changing the
25    state of incorporation of the predecessor or forming a
26    holding company and the assets and liabilities of the



HB3663- 22 -LRB101 09719 JLS 54819 b

1    successor at the time of the succession were substantially
2    the same as those of the predecessor; or (b) all
3    predecessors met such conditions at the time of succession
4    and the issuer has continued to do so since the succession.
5    Q. Any security appearing on the List of OTC Margin Stocks
6published by the Board of Governors of the Federal Reserve
7System or any security incorporated by reference to the List of
8OTC Margin Stocks by the Board of Governors of the Federal
9Reserve System; any other securities of the same issuer which
10are of senior or substantially equal rank; any securities
11called for by subscription rights or warrants so listed or
12approved; or any warrants or rights to purchase or subscribe to
13any of the foregoing.
14    R. Any security issued by a bona fide limited cooperative
15association or by a bona fide agricultural cooperative
16operating in this State that is organized under the laws of
17this State or as a foreign cooperative association organized
18under the law of another state that has been duly qualified to
19transact business in this State.
20(Source: P.A. 90-70, eff. 7-8-97; 91-809, eff. 1-1-01.)
21    Section 99. Effective date. This Act takes effect upon
22becoming law.