Cooperatives, to be responsible to their owners and
to the laws of the land, are formally organized under a specific law that
fits their purpose for being. They are generally organized under some
state law rather than a federal law and usually under a law in the
state where their headquarters are located. These state laws permit a
company to be created and to exist. Each of them describes the allowable
nature, in a general way, of a company created under them. The company’s
founders choose the law that fits their purposes best and file
"articles of incorporation" with the state’s Secretary of
State. If all is in order, the Secretary of State issues a charter, or
some similar authorization, to show that the company is permitted to be
The company’s articles of incorporation are written by the company’s
founders to describe the purposes and general structure of their
particular company more specifically than the law does, but they must stay
within the limits of the law. The founders also create a set of
"bylaws" to even more specifically spell out how the company
will function. The bylaws must conform to the provisions in the articles
of incorporation. In Iowa, the co-op laws require that the cooperative
company’s members must approve any changes to the articles of
incorporation (as must the Secretary of State), but the bylaws may be
changed either by the members or by the company’s board of directors. In
some states, the board of directors may not change the bylaws without the
approval of the members.
Specific Laws Under Which Iowa Cooperatives are Created and/or Operate
Most farmer cooperatives, petroleum cooperatives, utility cooperatives,
and consumer food cooperatives are organized under Chapter 499 of
the Code of Iowa. A very few were organized under older laws (Chapters 497
or 498) and did not convert to Chapter 499 after it was created by the
Iowa Legislature in 1935. Credit Union cooperatives are organized under Chapter
533. Some cooperatives, most of them farmer cooperatives, were
organized under the general business corporation law in Iowa, which is now
found in Chapter 490, but operate much the same way as cooperatives
organized under cooperative laws. They meet requirements in federal law to
be treated by the federal government as cooperatives but are not required
to meet all of the provisions found in the state’s cooperative laws.
Because they are not organized under a cooperative law, however, they are
not permitted to use the word "cooperative" in their name.
In 1996, a new law was passed which provided the structure for
"closed," or "new generation" cooperatives owned by
farmers. This law is Chapter 501. A summary of it is found at the
beginning of its description.
In 1998, another new law affecting cooperatives was passed which
provides additional choices of organizational structures for farmers
wishing to engage in livestock and poultry production without being held
to the same limits found in Iowa’s Corporate Farming Law as other
organizations must meet which do not meet the specified standards for
farmer ownership. This law is Chapter 10. It is an enabling law,
however, not a law under which companies are organized. A summary of it is
found at the beginning of its description.
The Rural Business-Cooperative Service has a section on
their web site called Library of Publications which contains a listing of
USDA publications which you may find useful. To access this Library of
Publications, click here: http://www.rurdev.usda.gov/rbs/pub/newpub.htm
You Know Your Cooperative?
"Do You Know Your Cooperative" published by
the Iowa Institute for Cooperatives contains 191 common questions and
answers about cooperatives. It was written primarily as a
compact source of cooperative information for members, young people,
employees, and others interested in or connected with farmer
cooperatives. Efforts have been made to limit each question to one
idea, and to make the answers as short and direct as possible.
If you are interested in purchasing a copy, please contact
the IIC Office at 515-292-2667. Single copy cost is $5.00.
Prices for quantities are negotiable.