ORGANIZATION OF COOPERATIVE GRAIN ELEVATOR COMPANIES. 25 



by-laws or plan of operation the patronage dividend or other features 

 which especially characterize cooperative companies in the new 

 statute, would be entitled to declare itself a cooperative company for 

 the purpose of coming under the provisions of this law may be open 

 to question. There may be opportunity for proper objection on the 

 part of dissenting stockholders claiming a right to share in future 

 profits under the arrangement in force at the time of becoming stock- 

 holders. However, no serious difficulties are usually encountered, 

 since most of the stockholders who are inclined to dissent realize 

 that they can not control against a majority of the members and 

 that they will fare better to accept the terms offered them than 

 to have a new company organized, the old organization abandoned, 

 and its property brought to forced sale in dissolution proceedings. 



In reorganizing it sometimes is found desirable to fix the property 

 interest which members have in the surplus or undivided profits of 

 the old organization. Some of the members of the old organization 

 may not wish to be members under the new arrangement; perhaps 

 new members are to be admitted, which makes it necessary to fix 

 the interests of old members before they shall become confused with 

 the interests of new members. Several methods are open, none of 

 which is entirely free from objection under all conditions: 



(1) The surplus may be distributed in the form of a cash dividend. 



(2) The surplus may be distributed in the form of a stock divi- 

 dend, each member receiving additional stock shares in an amount 

 equal to his share in the surplus. 



(3) The surplus may be left intact but new members may be re- 

 quired to pay for stock an amount above par which will make their 

 contribution to the surplus fund equal to the interests of the other 

 members. 



In many instances the business of the old organization has been 

 extended and the surplus employed in such manner as to make it 

 practically impossible to distribute it by cash dividend, and the 

 first method can rarely be employed to advantage. 



Many companies find objection to the second method for the rea- 

 son that increasing the capital stock increases the amount of interest 

 or dividend on capital stock required to be paid before any of the 

 earnings are available for patronage refunds. A more vital objec- 

 tion would seem to be that when the surplus is converted into capital 

 stock the impairment of such capital stock through possible busi- 

 ness loss assumes a far more serious aspect than a depletion of 

 the surplus through the same cause. It may also occur that when 

 a member is the owner of shares up to the limit which is allowed 

 a single member, the conversion of surplus into capital will have the 

 effect of giving to a member shares of stock in excess of the number 

 which he is entitled to hold. 



