22 BULLETIN 110 6, U. S. DEPARTMENT OF AGRICULTURE 
purchase by those who would be antagonistic thereto, and thereby 
defeat the purpose for which the association was formed." 
In the North Dakota case just cited the court said : 
If stock in co-operative corporations could be sold and transferred the same 
as corporate stock in ordinary business corporations, to any person whom the 
stockholder saw fit, then it would be possible for persons whose interests were 
antagonistic to the co-operative association to become members therein, and 
thereby defeat the very purpose for which the corporation was formed. So 
it seems not only proper, but necessary, in order that such corporations 
may continue and accomplish the purpose for which they are organized, to 
permit restrictions to be placed upon the right to transfer and own stock 
therein. 
If a statute of the State expressly restricts the transfer of stock 
except under certain conditions, the matter is clear. This was the 
situation in a Minnesota case x where the statute under which the 
association was incorporated provided that " No person shall be 
allowed to become a shareholder in such association except by the 
consent of the managers of the same." The court said : " We have no 
doubt of the validity of such a restriction on the transfer of shares." 
If the statute of the State under which the association is incorporated 
authorizes the inclusion of a provision in the articles of association 
or the certificate of incorporation, or the by-laws, restricting the 
transfer of stock, there would seem to be no doubt concerning the 
right of an association to adopt such a restriction and it would be 
binding on innocent third persons, as one is charged by law with 
notice of the law under which an association is formed and of what 
it permits. 2 
From the cases that have come before the courts it is apparent 
that the required statutory authority need not expressly authorize 
restrictions on the transfer of stock, but general language dealing 
with this subject would seem to be enough. A few illustrations from 
decided cases will shed light on this matter. In a New York case 
the certificates of incorporation of each of the three corporations 
involved, " * * * provided that no stock shall be transferred 
until it was first offered for sale to the other stockholders on terms 
and conditions to be fixed by the by-laws or by an agreement be- 
tween stockholders, but, in case the offer to sell were refused, the 
stock would be no longer subject to the conditions." The court held 
this provision and the by-laws and the agreement connected there- 
with valid and enforceable. Notice of the restrictions on the sale 
of stock was stamped on each certificate of stock. 3 Section 10 of 
the General Corporation Law of New York provides that " The cer- 
tificate of incorporation of any corporation may contain any pro- 
visions for the regulation of the business and the conduct of the 
affairs of the corporation, and any limitation upon its powers, or 
upon the powers of its directors and stockholders, which does not 
exempt them from the performance of any obligation or the per- 
formance of any duty imposed by law." It was apparently in pur- 
suance of this provision that the restrictions on the right to transfer 
the stock were included in the certificates of incorporation. 
99 Chaffee v. Farmers' Co-op. Elevator Co., 39 N. D. 585, 168 N. W. 616 ; Carpenter v. 
Dumrnit [Barley Tobacco Growers' Cooperative Ass'n]. 221 Ky. 67. 297 S. W. 695. 
1 Healey et al. v. Steele Center Creamery Ass'n, 115 Minn. 451, 133 N. W. 69. 
2 Longyear v. Hardman, 219 Mass. 405. 106 N. E. 1012, Ann. Cas. 1916D. 1200; 
Casper v. Kalt-Zimmers Mfg. Co.. 159 Wis. 517, 149 N. W. 754. 
3 Bloomingdale v. Bloomingdale, 177 N. Y. S. 873. 
