The Board recommends the following amendments in the bylaws of Article VII, concerning capital.
The Board of Directors has approved a proposed bylaw amendment giving members the right to redeem Class B shares for cash.
Existing Class B shares were issued in lieu of patronage and have no fixed maturity date.
When Class B shares were issued in 2015, management believed the shares conformed to applicable tax and securities laws. However, after the shares were issued, New Hampshire Securities Bureau regulators concluded that, under certain circumstances, Class B shares must be issued with a fixed maturity date.
The proposed amendment would allow the Co-op to offer new, redeemable Class B shares with a fixed maturity date. Members will have up to five years to exchange existing Class B shares for new, redeemable Class B shares. The Co-op will provide annual reminders over that five-year period.
The bylaws concerning Class B shares appear below in their proposed amended forms. Click here to see the full texts of the existing bylaws and details of all edits and changes incorporated in the proposed amended forms.
PROPOSED AMENDED BYLAWS
VII, SECTION 1
Stock. There shall be authorized two classes of stock in the Cooperative:
Class A shares, which shall have a par value of five dollars, are shares issued by the Cooperative in consideration for becoming a Member of the Cooperative.
Class B shares, which shall likewise have a par value of five dollars, are shares issued only to Members as patronage refunds in lieu of cash payments. Class B shares may or may not have a fixed maturity date.
The issuance of all shares shall be in compliance with the Cooperative’s Bylaws and Certificate of Organization and with the laws of New Hampshire and the United States, including their securities laws and laws concerning consumer cooperatives. There shall be no fractional shares. Shares may be issued without certificate except as required by law. VII, SECTION 2 Dividends. Maturity Date. There shall be no dividends paid on Class A or Class B shares. The Board of Directors may require that any Class B shares distributed as Net Savings (patronage refund) have a fixed maturity date. The maturity date shall be as determined by the Board of Directors prior to the distribution of the shares as patronage refund. The terms of share redemption upon maturity shall be as determined by the Board of Directors in place at the time of the share redemption.
VII, SECTION 3 Call for Payment. When the Board of Directors determines that the Cooperative has sufficient working capital, the Board may in its discretion call Class B shares for payment at par. The Board, in its discretion, may call Class B shares prior to their fixed maturity date and may elect to call only Class B shares having a specified maturity date and not call Class B shares of a different maturity date.
VII, SECTION 6A
Transitional Provisions Regarding Stock.
The Board of Directors may offer and issue new Class B shares having a fixed maturity date (New Class B shares) to members holding Class B shares as of May 1, 2017 (Old Class B shares). The maturity date shall be set by the Board of Directors, as shall all other terms of the exchange except as provided in these Bylaws. The offer shall be duly noticed to all members at their last known address and the offer shall remain open for a period of time not to exceed 5 years from the date of the offer.
All Old Class B shares shall be cancelled upon a member’s acceptance of the Cooperative’s offer of New Class B shares in exchange for Old Class B shares. At the end of the 5 year exchange period all Old Class B shares which have not been exchanged for New Class B shares shall be cancelled and the holder of said Old Class B shares shall not receive any compensation of any kind in exchange for the cancellation of the Old Class B shares.
This section 6A shall cease to be a part of the Bylaws on the fifth anniversary of the offer, the purpose of section 6A having been served.
The Board recommends the following amendments to correct two problems in bylaws concerning Board member terms and elections.
The bylaws concerning terms and elections appear below in their proposed amended forms. Click here to see the full texts of the existing bylaws and details of all edits and changes incorporated in the proposed amended forms.
Board Member Terms
At present, Bylaw V, Section 1 says that Board members’ terms expire at the Annual Meeting. That is typically the first weekend in April. However, the election continues for a month, and newly elected Board members can’t be seated until the end of the following month. (The election ends after the April Board meeting, and new Board members must undergo background checks by the state liquor agencies.) This means that four or more Board seats are empty for two months every year.
The proposed amendment will make Board terms expire at the start of the first regular Board meeting following the election.
PROPOSED AMENDED BYLAW
V, SECTION 1 Composition of the Board. The governance of the Cooperative shall be vested in a Board of Directors, which shall consist of twelve (12) Members of the Cooperative, each of whom shall be at least 18 years of age. Directors shall be elected by the Membership during the voting held in connection with the Annual Meeting of the Cooperative. Directors shall serve three-year staggered terms so that the regular terms of four Directors expire at the start of the first regular Board meeting following each election.
Becoming A Board Candidate
Bylaw IV, Section 6 and Bylaw VI, Section 7 describe an ambiguous nomination process that has varied from Board to Board.
Present bylaws offer the Nominating Committee no guidance on process or criteria for picking member candidates "deemed to be suitably qualified.” Members rejected by the Nominating Committee can get on the ballot by petition, but are identified as "petition candidates.” Members do not know the reasons for the committee’s disapproval.
If the proposed amendments are accepted, the Nominating Committee will be discontinued. A new Election Committee will standardize the work of encouraging members to become candidates, informing membership about candidates and organizing the election. The new Election Committee will not reject candidates. The Election Committee and Board will count on an informed membership to pick the right candidates. All new Board members will still need to pass the states’ background checks.
The bylaws concerning terms and elections appear below in their proposed amended forms. Click here to see the full texts of the existing bylaws and details of all edits and changes incorporated in the proposed amended forms. PROPOSED AMENDED BYLAWS
IV, SECTION 6 Board Candidacy. Any Member may seek to be a candidate for the Board of Directors by submitting a statement of interests and qualifications to the Election Committee pursuant to the schedule established by that Committee. VI, SECTION 7 Election Committee. There shall be an Election Committee, which shall recruit and encourage candidates to fill vacancies on the Board of Directors. The Election Committee will educate candidates about the responsibilities of Board service, and educate membership about candidates’ qualifications. The Election Committee will not choose or prefer candidates. The Election Committee shall establish the schedule for elections in a manner that provides a reasonable opportunity for eligible Members to seek election. The Board of Directors shall annually elect the Chair of the Election Committee from among the Directors serving non-expiring terms and shall appoint additional persons to the Committee from among the Members of the Cooperative so that the Committee shall consist of at least two Board members (including the Chair) and at least two non-Board members.