DIVIDENDS IN COOPERATIVE GRAIN COMPANIES. 3 
satisfy its debts and distribute its surplus to the stockholders, thus 
reducing the organization to the relative basis upon which it began 
business. The distribution of the surplus to the corporation stock- 
holders before reorganizing is important, since it is held under the 
corporation law that the earned surplus is held for the benefit of the 
stockholders. Aside from this procedure, the company should comply 
with the provisions of law peculiar to the State in which it is located, 
so that it may transact its business legally as a cooperative concern. 
The single elevators organized from the beginning under the co- 
operative law constitute the second class. This class also will include 
the elevators just described after their reorganization. 
A third class may be designated as the county unit plan, such as 
is found operating in Kansas under the control of the Farmers’ 
Union. Under this arrangement, all the elevators belonging to a 
county union are banded together as one cooperative association and 
transact business as a unit. In order to keep a close check upon the 
business under the varying conditions of management in the several 
elevators represented, it has been found advisable to keep the records 
of the company in such a manner as to show the individual earning 
percentage of each elevator. 
As these records are kept in a general office, the distribution of 
the patronage dividend payments from the controlling office is 
possible and may be provided for either by paying a uniform rate 
to all the patrons or by varying the rate according to the percentage 
of profit in each of the elevators. 
The companies of the fourth class are in many particulars similar 
to those of the third class or county unit plan, but are organized on 
a greatly extended scale.t. In addition to the activities usual to 
primary elevators these companies have entered the terminal market 
upon the same basis as a commission company, holding member- 
ships on boards of trade and doing an extensive commission busi- 
ness. Such companies have not been able to pay a patronage divi- 
dend, although specifically organized with the privilege of doing so. 
The inability to pay patronage dividends when operating as a 
commission company has been due to the existence of the commission 
rule commonly applied between members in the various boards of 
trade and chambers of commerce. This rule, prohibiting as it does 
the returning of any part of a trader’s profits to the shippers upon 
the ground that such would constitute a rebate, practically pre- 
cludes the possibility of paying patronage dividends. Where all 
earnings and net profits are figured upon the whole business trans- 
acted by the company as a unit it is impracticable, under this rule, 
to divide the profits upon any. but a stock dividend basis. 
1 Companies operating under the fourth class are at present confined to the Canadian 
Northwest. 
