UNITED STATES DEPARTMENT OF AGRICULTURE 



SWV^'^^U 



f BULLETIN No. 1106 f 



"^wnu 



Washington, D. C. 



October 23, 1922 



LEGAL PHASES OF COOPERATIVE ASSOCIATIONS. 



By L. S. HULBEET, 



Assistant in Cooperative Marketing,^ Bureau of Agricultural Economics. 



CONTENTS. 



Page. 



Foreword ^ 



Incorporated associations or corpo- 

 rations : ^ 



Nature and characteristics 2 



Antiquity of corporations 3 



Power to create corporations 4 



Incorporated associations — ^how 



formed 5 



Name of association 7 



Charter — what it is 8 



By-laws 8 



Directors and oflBicers 10 



Who may become members 12 



Subscriber, stock, capital stock- 12 



Stock — how paid for 13 



Voting unit 13 



Restricting transfer of stock— 14 



Lien on stock 17 



Limitation on indebtedness 17 



Liability of corporation for pro- 

 motion expenses 18 



Differences between stock and 



nonstock corporations 19 



Transfer of stock, loss of mem- 

 bership 21 



Dissolution 22 



Contracts 23 



Nature and characteristics 23 



Crop contracts 23 



Pooling : Right to determine 



grade 24 



Liquidated damages 25 



Running with land — 29 



Interference by third persons-- 29 



Promissory notes SO 



Agency 32 



Cooperative associations as 



agents 32 



Agency — Continued. Page. 



Cooperative associations liable 



for acts of agents 35 



Monopolies — restraint of trade 35 



Monopolies 35 



Sherman and Clayton Acts 37 



State statutes exempting farm 



organizations 39 



Section 6 of the Clayton Act— 40 



Right to select customers 41 



California Associated Raisin Co. 



case 42 



Capper-Volstead Act 43 



Federal Trade Commission 47 



Unfair competition 47 



Specific performance — injunctions 49 



Specific performance 49 



Injunctions 50 



Income taxes 53 



Unincorporated associations 55 



Differ from partnerships or cor- 

 porations 55 



Unincorporated associations — 



how formed 56 



Admission of members 57 



Membership nontransferable 57 



Who control an association 58 



Notice of meetings 58 



Unincorporated associations and 



third persons 58 



Money must be used for pur- 

 pose furnished 60 



Expulsion of members 60 



Withdrawing or expelled mem- 

 bers receive nothing 61 



'Dissolution 61 



Appendix 62 



Form of by-laws 62 



Form of contract 72 



FOREWORD. 



It is the purpose of this bulletin to discuss some of the legal ques- 

 tions with respect to the organization, conduct, and operation of 

 cooperative associations. These questions will be considered from 

 the standpoint of incorporated associations with capital stock, in- 

 corporated associations without capital stock, and unincorporated 

 associations. 



1 In view of the widespread interest in the legal phases of cooperative marketing, 

 stimulated by the passage of the Capper-Volstead Act, this exhaustive study has been 

 made of the legal phases of the subject by an investigator who not only has had sev- 

 eral years of actual legal practice, but has had opportunity to make an intensive study 

 of the economic, side of cooperative marketing. 



1416—22- 



