LEGAL PHASES OF COOPERATIVE ASSOCIATIONS 21 
This brief sketch on the differences between stock or nonstock 
corporations explains why a stock corporation is generally thought 
of as a commercial organization ; that is, as an organization in which 
money, rather than the personnel of the membership, is the dominant 
factor. By appropriate charter or statutory provisions a stock cor- 
poration may exercise control over its membership resembling that 
exercised by nonstock corporations. Indeed, no reason is apparent 
why the legislature could not endow stock corporations, at least at 
the time of their creation, with as complete control over their mem- 
bership as that possessed by nonstock corporations. In many juris- 
dictions at this time statutes providing for the incorporation of 
cooperative associations with capital stock exist which give such 
associations control over their members or stockholders comparable 
with that fundamentally possessed by nonstock corporations. 
Frequently the phrase "nonprofit, nonstock" is used with refer- 
ence to an association, as though the organization would be one for 
profit if it were formed with capital stock. This is a mistake. An 
association is not nonprofit because it is formed without capital 
stock, but because of the manner in which it operates. In other 
words, an association formed with capital stock may operate on a 
nonprofit basis just as well as an association formed without capital 
stock. An association must have money, and if it is not raised 
through the sale of stock it must be obtained in some other way. 
Indeed capital stock is frequently sold at a price comparable with 
that ordinarily paid for a certificate of membership in a nonstock 
association; so that it would be possible in theory to raise as much 
money through the sale of certificates of membership as it would 
be through the sale of stock certificates. It is the way that an associ- 
ation operates that determines whether it is a profit-making institu- 
tion rather than whether it is formed with or without capital stock. 
RESTRICTIONS AS TO TRANSFER OF STOCK 
May an incorporated cooperative association or any other cor- 
poration restrict the transfer of its stock so as to prevent its being 
held by nonproducers ? The answer is " Yes," if appropriate statu- 
tory authority exists in the State in which the association is incorpo- 
rated. Many of the statutes providing for the incorporation of co- 
operative associations contain provisions restricting the issuance of 
common stock, or its transfer to nonproducers. Associations formed 
under statutes that contain such provisions are thereby prohibited 
from issuing common stock to nonproducers, and in the event of a 
member's attempting to transfer his stock to a nonproducer, the asso- 
ciation could refuse to recognize the same. Under such statutes only 
the holders of the common stock are entitled to vote, and the holders 
of the preferred stock which may be issued by such associations 
under such statutes, are barred from voting by a provision in the 
law. 
In some States and in some instances in which there was no statu- 
tory authority for the restriction, they have been upheld. The 
courts have recognized the importance of allowing cooperative asso- 
ciations to restrict the transfer of their stock so as to prevent its 
