Illinois General Assembly - Full Text of HB3577
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Full Text of HB3577  102nd General Assembly

HB3577sam001 102ND GENERAL ASSEMBLY

Sen. Laura M. Murphy

Filed: 5/11/2021

 

 


 

 


 
10200HB3577sam001LRB102 13245 KTG 25971 a

1
AMENDMENT TO HOUSE BILL 3577

2    AMENDMENT NO. ______. Amend House Bill 3577 on page 1, by
3replacing lines 5 and 6 with the following:
4"is amended by changing Sections 5, 10, 15, 20, 25, 30, 35, 40,
545, 50, 55, 60, 65, and 70 and adding Sections 12, 16, 21, 22,
636, 37, 51, 52, 61, 62, and 63 as follows:
 
7    (805 ILCS 317/5)
8    Sec. 5. Findings. The General Assembly finds and declares
9all of the following:
10        (1) the cooperative form of doing business provides an
11    efficient and effective method for persons to transact
12    business, offer, and obtain goods and services, and it is
13    in the best interests of the people of the State of
14    Illinois to promote, foster, and encourage the utilization
15    of cooperatives in appropriate instances;
16        (2) the Co-operative Act and Agricultural Co-Operative
17    Act have provided for the promotion, fostering, and

 

 

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1    encouragement of consumer and producer cooperatives; have
2    made distribution of agricultural products between
3    producer and consumer more efficient; have stabilized the
4    marketing of agricultural products; and have provided for
5    the organization and incorporation of cooperative
6    corporations, all as contemplated at the time of the
7    original adoption;
8        (3) it is in the best interests of the people of the
9    State of Illinois to preserve the provisions of the
10    Co-operative Act as it has been in force and interpreted
11    in the State and to continue the provisions thereof for
12    agriculture, but also to expand the provisions of Illinois
13    cooperative law to provide greater direction and
14    flexibility in its provisions and to enable all types of
15    industries and enterprises to avail themselves of the
16    benefits of the worker cooperative form of doing business
17    in accordance with the provisions of this Act;
18        (4) a worker cooperative has the purpose of creating
19    and maintaining sustainable jobs and generating wealth in
20    order to improve the quality of life and economic security
21    of its worker-members, dignify human work, allow workers'
22    democratic self-management, and promote community and
23    local development in this State;
24        (5) the purpose of this Act is to create a new business
25    entity better suited for worker cooperatives and
26    multi-stakeholder cooperatives, and to create more

 

 

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1    visibility and financing options for cooperatives. This
2    Act is intended to provide a definition of worker
3    cooperative for purposes of this Act, and not for purposes
4    of other laws.
5(Source: P.A. 101-292, eff. 1-1-20.)
 
6    (805 ILCS 317/10)
7    Sec. 10. Definitions. In this Act:
8    "Candidate" means a worker who is being considered for
9membership in a worker cooperative, as defined in the
10cooperative association's articles or cooperative agreement
11bylaws.
12    "Collective worker cooperative" means a limited worker
13cooperative association that only has one class of members
14consisting of worker-members who manage all of the affairs of
15the limited cooperative association. If an association's
16articles of organization or cooperative agreement provides
17that it is a collective worker cooperative, then all of the
18members shall be deemed managers.
19    "Community investor" means a person who is not a member
20and who holds a share or other proprietary interest in a
21limited cooperative association.
22    "Distribution" means a transfer of money or other property
23from a limited worker cooperative association to a member
24because of the member's financial rights or to a transferee of
25a member's financial rights.

 

 

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1    "Investor member" means a person who holds a financial
2interest in a limited worker cooperative association. An
3investor member is either not required or not permitted by the
4articles or cooperative agreement to conduct patronage with
5the association in the member's capacity as an investor member
6in order to receive or retain the member's interest.
7    "Limited worker cooperative association" or "association"
8means an association organized under this Act.
9    "Member" means any person who, pursuant to a specific
10provision of a limited worker cooperative association's
11articles or cooperative agreement bylaws, has the right to
12vote for the election of a manager director or managing member
13directors, or possesses any proprietary interests in the
14limited worker cooperative association.
15    "Multi-stakeholder cooperative" means a cooperative
16organized under this Act that has different classes of members
17whose rights and proprietary interests shall be determined by
18the articles or bylaws. At least 51% of the members shall be
19worker-members or candidates. A multi-stakeholder cooperative
20is a worker cooperative for purposes of this Act.
21    "Patron member" means a member of a limited worker
22cooperative association that is required or permitted by the
23association's articles or cooperative agreement to conduct
24patronage with an association in the member's capacity as a
25patron member.
26    "Patronage" means business transactions between a limited

 

 

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1worker cooperative association and a person that entitles the
2person to receive financial rights based on the value or
3quantity of business done between the association and the
4person. The patronage of worker-members may be measured by
5work performed, including, but not limited to, wages earned,
6number of hours worked, number of jobs created, or some
7combination of these measures.
8    "Worker cooperative" means a limited worker cooperative
9association formed under this Act where all patron members of
10an association that includes a class of worker-members who are
11natural persons whose patronage consists of labor contributed
12to or other work performed for the limited worker cooperative
13association. Election to be organized as a worker cooperative
14does not create a presumption that workers are employees of
15the corporation for any purposes. A worker cooperative formed
16under this Act may include additional classes of members whose
17rights and proprietary interests shall be determined by the
18articles or bylaws. At least 51% of the workers shall be
19worker-members or candidates.
20    "Worker" means a natural person contributing labor or
21services to a worker cooperative.
22    "Worker-member" means a member of a worker cooperative who
23is a natural person who is a member of an association formed
24under this Act whose patronage consists of labor contributed
25to or other work performed for the limited and also a patron of
26a worker cooperative association.

 

 

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1    "Written notice of allocation" is defined as in 26 U.S.C.
21388 or its successor.
3(Source: P.A. 101-292, eff. 1-1-20.)"; and
 
4on page 1, by inserting immediately below line 19 the
5following:
 
6    "(805 ILCS 317/15)
7    Sec. 15. Purpose of limited worker cooperative
8association.
9    (a) A limited worker cooperative association is an entity
10distinct from its members.
11    (b) A limited worker cooperative association may be
12organized for any lawful purpose, whether or not for profit.
13    (c) An association organized as a worker cooperative under
14this Act elects to be a worker cooperative with the State of
15Illinois. Election to be organized as a worker cooperative
16does not create a presumption that workers are employees of
17the association corporation for any purposes.
18(Source: P.A. 101-292, eff. 1-1-20.)"; and
 
19on page 2, by inserting immediately below line 6 the
20following:
 
21    "(805 ILCS 317/20)
22    Sec. 20. Formation of limited worker cooperative

 

 

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1association.
2    (a) A limited worker cooperative association must be
3organized by one or more organizers. Organizers need not be
4members or worker-members of the worker cooperative
5association.
6    (b) To form a limited worker cooperative association, one
7or more organizers of the association shall deliver or cause
8to be delivered articles of organization to the Secretary of
9State for filing.
10(Source: P.A. 101-292, eff. 1-1-20.)"; and
 
11on page 7, by replacing lines 13 through 26 with the following:
12        "(5.5) a statement that the association is a worker
13    cooperative or a collective worker cooperative, if
14    applicable; and
15        (6) any other provision, not inconsistent with law,
16    that the worker-members, members, or organizers elect to
17    set out in the articles for the regulation of the internal
18    affairs of the limited worker cooperative association,
19    including any provisions that, under this Act, are
20    required or permitted to be set out in the cooperative
21    agreement bylaws of the limited worker cooperative
22    association."; and
 
23on page 8, by deleting line 1; and
 

 

 

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1on page 8, by inserting immediately below line 2 the
2following:
 
3    "(805 ILCS 317/30)
4    Sec. 30. Organization of limited worker cooperative
5association.
6    (a) After a limited worker cooperative association is
7formed:
8        (1) if initial managers or managing members directors
9    are named in the articles, the initial managers or
10    managing members directors shall hold an organizational
11    meeting to adopt initial cooperative agreement bylaws and
12    carry on any other business necessary or proper to
13    complete the organization of the association; or
14        (2) if initial managers or managing members directors
15    are not named in the articles, the organizers shall
16    designate the initial managers or managing members
17    directors and call a meeting of the initial managers or
18    managing members directors to adopt initial cooperative
19    agreement bylaws and carry on any other business necessary
20    or proper to complete the organization of the association.
21    (b) Unless the articles otherwise provide, the initial
22managers or managing members directors may cause the limited
23worker cooperative association to accept members, including
24those necessary for the association to begin business.
25    (c) Initial managers directors need not be members.

 

 

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1    (d) An initial manager or managing member director serves
2until a successor is elected and qualified at a members'
3meeting or the manager or managing member director is removed,
4resigns, is adjudged incompetent, or dies.
5(Source: P.A. 101-292, eff. 1-1-20.)"; and
 
6on page 15, line 10, by changing "$150" to "$100"; and
 
7on page 15, line 11, by changing "$50" to "$25"; and
 
8on page 15, line 17, by changing "$25" to "$5"; and
 
9on page 15, line 21, by changing "$75" to "$50"; and
 
10on page 15, line 24, by changing "$200" to "$75"; and
 
11on page 15, line 25, by changing "$100 plus $50" to "$75 plus
12$25"; and
 
13on page 16, line 5, by changing "$50" to "$25"; and
 
14on page 16, line 7, by changing "$10" to "$5"; and
 
15on page 16, by inserting immediately below line 11 the
16following:
 

 

 

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1    "(805 ILCS 317/40)
2    Sec. 40. Members.
3    (a) An association formed under this Act may include
4multiple classes of patron members whose rights and
5proprietary interests shall be determined by the articles or
6cooperative agreement.
7    (b) (a) To begin business, a limited worker cooperative
8association must have at least 3 members unless the sole
9member is a cooperative.
10    (c) (b) A person becomes a member:
11        (1) as provided in the articles or cooperative
12    agreement bylaws;
13        (2) as the result of a merger or conversion under
14    Section 65; or
15        (3) with the consent of all the members.
16    (d) (c) A member, solely by reason of being a member, may
17not act for or bind the limited worker cooperative
18association.
19    (e) (d) Unless the articles provide otherwise, a debt,
20obligation, or other liability of a limited worker cooperative
21association is solely that of the association and is not the
22debt, obligation, or liability of a member solely by reason of
23being a member.
24    (f) (e) The total voting membership body shall constitute
25the assembly of the limited worker cooperative association.
26    (g) (f) The assembly shall meet annually at a time

 

 

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1provided in the articles or cooperative agreement bylaws or
2set by the board of managers or managing members directors not
3inconsistent with the articles and cooperative agreement
4bylaws.
5    (h) (g) Failure to hold an annual assembly meeting does
6not affect the validity of any action by the limited worker
7cooperative association.
8    (i) (h) A limited worker cooperative association shall
9notify each member of the time, date, and place of a members'
10meeting at least 10 and not more than 60 days before the
11meeting; except that, if the notice is of a meeting of the
12members in one or more districts or classes of members, the
13notice shall be given only to members in those districts or
14classes.
15(Source: P.A. 101-292, eff. 1-1-20.)
 
16    (805 ILCS 317/45)
17    Sec. 45. Voting.
18    (a) The articles or cooperative agreement bylaws may
19allocate voting power among patron members on the basis of one
20or a combination of the following:
21        (1) one member, one vote;
22        (2) if a member is a cooperative, the number of its
23    members; or
24        (3) on the basis of use or patronage unless the
25    association is cooperative has elected to be a worker

 

 

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1    cooperative.
2    (b) If the articles or cooperative agreement bylaws
3allocate voting power to patron members on the basis of use or
4patronage and a patron member would be denied a vote because
5the patron member did not use the limited cooperative
6association or conduct patronage with the association it
7during the period on which the allocation of voting power is
8determined, the articles or cooperative agreement bylaws must
9provide that the patron member shall nevertheless be allocated
10a vote equal to at least the minimum voting power allocated to
11patron members who used the association or conducted patronage
12with the association it during the period.
13    (c) The articles or cooperative agreement bylaws may
14provide for the allocation of member voting power by districts
15or class or any combination thereof.
16    (d) The voting power of members who are not patron members
17may be limited or eliminated. Community investors are not
18entitled to vote unless the articles or bylaws provide
19otherwise.
20    (e) At no time shall worker-members the members have less
21than a majority of the total voting power of a the limited
22worker cooperative association.
23(Source: P.A. 101-292, eff. 1-1-20.)
 
24    (805 ILCS 317/50)
25    Sec. 50. Board of managers or managing members directors.

 

 

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1    (a) A limited worker cooperative association must have a
2board of managers or managing members directors of at least 3
3individuals, unless the limited worker cooperative association
4is a collective worker cooperative. Subsections (b) through
5(e) do not apply to collective worker cooperatives.
6    (b) The affairs of a limited worker cooperative
7association must be managed by, or under the direction of, the
8board of managers or managing members directors unless the
9board delegates those duties to the assembly of the worker
10limited cooperative association. The board may adopt policies
11and procedures that do not conflict with the articles,
12cooperative agreement bylaws, or this Act.
13    (c) An individual is not an agent for a limited worker
14cooperative association solely by being a manager or managing
15member director.
16    (d) A debt, obligation, or other liability of a limited
17worker cooperative association is solely that of the
18association and is not a debt, obligation, or liability of a
19manager or managing member director solely by reason of being
20a manager or managing member director. An individual is not
21personally liable, directly or indirectly, for an obligation
22of an association solely by reason of being a manager or
23managing member director.
24    (e) Directors shall be elected for terms determined by the
25bylaws by a majority vote of the assembly.
26(Source: P.A. 101-292, eff. 1-1-20.)
 

 

 

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1    (805 ILCS 317/51 new)
2    Sec. 51. Earnings and losses.
3    (a) The net earnings and losses of an association formed
4under this Act shall be apportioned and distributed in such
5manner as the articles or cooperative agreement shall specify.
6Net earnings declared as patronage allocations with respect to
7a period of time, and paid or credited to patron members, shall
8be apportioned among the patron members in accordance with the
9ratio which each patron member's patronage during the
10applicable time period bears to the total patronage by all
11patron members during that period.
12    (b) The apportionment, distribution, and payment of net
13earnings required by subsection (a) of this Section may be in
14cash, credits, or written notices of allocation issued by the
15association.
 
16    (805 ILCS 317/52 new)
17    Sec. 52. System of internal capital accounts.
18    (a) A limited worker cooperative association may establish
19through its articles or cooperative agreement a system of
20internal capital accounts to reflect the book value and to
21determine the redemption price of membership interests and
22written notices of allocation.
23    (b) The articles or cooperative agreement of a limited
24worker cooperative association may permit the periodic

 

 

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1redemption of written notices of allocation and shall provide
2for recall and redemption of membership interests upon
3termination of membership in the association.
4    (c) An association may allocate a portion of retained net
5earnings and net losses to a collective reserve account.
6Earnings assigned to the collective reserve account may be
7used for any and all purposes as determined by the board of
8managers or managing members.
 
9    (805 ILCS 317/55)
10    Sec. 55. Assembly.
11    (a) A limited worker cooperative association, other than a
12collective worker cooperative, must have an assembly as
13constituted by the body of voting members.
14    (b) An individual is not an agent for a limited worker
15cooperative association solely by being a member of the
16assembly.
17    (c) A debt, obligation, or other liability of a limited
18worker cooperative association is solely that of the
19association and is not a debt, obligation, or liability of a
20member of the assembly solely by reason of being a voting
21member. An individual is not personally liable, directly or
22indirectly, for an obligation of an association solely by
23reason of being a voting member.
24(Source: P.A. 101-292, eff. 1-1-20.)"; and
 

 

 

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1on page 21, by inserting immediately below line 25 the
2following:
 
3    "(805 ILCS 317/65)
4    Sec. 65. Conversion. A limited worker cooperative
5association may convert into any form of entity permitted if
6the board of managers or managing members directors of the
7limited worker cooperative association adopts a plan of
8conversion and the assembly adopts such a plan by a two-thirds
9majority vote. In the case of a collective worker cooperative,
10a limited worker cooperative association may convert into any
11form of entity permitted if the members adopt a plan by a
12two-thirds majority vote. Conversions from other forms of
13entities to a limited worker cooperative association are
14governed by the Entity Omnibus Act.
15(Source: P.A. 101-292, eff. 1-1-20.)
 
16    (805 ILCS 317/70)
17    Sec. 70. Exemption from securities laws. Any interest
18security, patronage refund, per unit retain certificate, or
19evidence of membership issued or sold by a limited worker
20cooperative association as an investment in its capital to the
21members of a cooperative association formed under this Act or
22a similar law of any other state and authorized to transact
23business or conduct activities in this State is exempt from
24the registration requirements of the Illinois Securities Law

 

 

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1of 1953. Such interests securities, patronage refunds, per
2unit retain certificates, or evidence of membership may be
3sold lawfully by the issuer or its members or salaried
4employees without the necessity of being registered as a
5broker or dealer under the Illinois Securities Law of 1953.
6(Source: P.A. 101-292, eff. 1-1-20.)
 
7    Section 10. The Entity Omnibus Act is amended by changing
8Section 111 as follows:
 
9    (805 ILCS 415/111)
10    Sec. 111. Application of other Acts. The Business
11Corporation Act of 1983, the General Not For Profit
12Corporation Act of 1986, the Limited Liability Company Act,
13the Uniform Limited Partnership Act (2001), and the Uniform
14Partnership Act (1997) and the Limited Worker Cooperative
15Association Act, as now or hereafter amended, shall govern all
16matters related to the entities named in each of those Acts and
17in this Act except where inconsistent with the letter and
18purpose of this Act. This Act controls in the event of any
19conflict with the provisions of the above-named Acts or other
20laws.
21(Source: P.A. 101-491, eff. 8-23-19.)
 
22    Section 99. Effective date. This Act takes effect July 1,
232021.".