SF 2987

2nd Engrossment - 81st Legislature (1999 - 2000) Posted on 12/15/2009 12:00am

  1.1                          A bill for an act 
  1.2             relating to cooperatives; amending provisions on the 
  1.3             financing and distribution of income for cooperatives; 
  1.4             amending Minnesota Statutes 1998, section 308A.705, 
  1.5             subdivision 3; Minnesota Statutes 1999 Supplement, 
  1.6             section 80A.15, subdivision 2; repealing Minnesota 
  1.7             Statutes 1998, sections 308A.031; and 308A.161. 
  1.8   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.9      Section 1.  Minnesota Statutes 1999 Supplement, section 
  1.10  80A.15, subdivision 2, is amended to read: 
  1.11     Subd. 2.  The following transactions are exempted from 
  1.12  sections 80A.08 and 80A.16: 
  1.13     (a) Any sales, whether or not effected through a 
  1.14  broker-dealer, provided that: 
  1.15     (1) no person shall make more than ten sales of securities 
  1.16  of the same issuer pursuant to this exemption, exclusive of 
  1.17  sales according to clause (2), during any period of 12 
  1.18  consecutive months; provided further, that in the case of sales 
  1.19  by an issuer, except sales of securities registered under the 
  1.20  Securities Act of 1933 or exempted by section 3(b) of that act, 
  1.21  (i) the seller reasonably believes that all buyers are 
  1.22  purchasing for investment, and (ii) the securities are not 
  1.23  advertised for sale to the general public in newspapers or other 
  1.24  publications of general circulation or otherwise, or by radio, 
  1.25  television, electronic means or similar communications media, or 
  1.26  through a program of general solicitation by means of mail or 
  2.1   telephone; and 
  2.2      (2) no issuer shall make more than 25 sales of its 
  2.3   securities according to this exemption, exclusive of sales 
  2.4   pursuant to clause (1), during any period of 12 consecutive 
  2.5   months; provided further, that the issuer meets the conditions 
  2.6   in clause (1) and, in addition meets the following additional 
  2.7   conditions:  (i) files with the commissioner, ten days before a 
  2.8   sale according to this clause, a statement of issuer on a form 
  2.9   prescribed by the commissioner; and (ii) no commission or other 
  2.10  remuneration is paid or given directly or indirectly for 
  2.11  soliciting any prospective buyers in this state in connection 
  2.12  with a sale according to this clause except reasonable and 
  2.13  customary commissions paid by the issuer to a broker-dealer 
  2.14  licensed under this chapter. 
  2.15     (b) Any nonissuer distribution of an outstanding security 
  2.16  if (1) either Moody's, Fitch's, or Standard & Poor's Securities 
  2.17  Manuals, or other recognized manuals approved by the 
  2.18  commissioner contains the names of the issuer's officers and 
  2.19  directors, a balance sheet of the issuer as of a date not more 
  2.20  than 18 months prior to the date of the sale, and a profit and 
  2.21  loss statement for the fiscal year preceding the date of the 
  2.22  balance sheet, and (2) the issuer or its predecessor has been in 
  2.23  active, continuous business operation for the five-year period 
  2.24  next preceding the date of sale, and (3) if the security has a 
  2.25  fixed maturity or fixed interest or dividend provision, the 
  2.26  issuer has not, within the three preceding fiscal years, 
  2.27  defaulted in payment of principal, interest, or dividends on the 
  2.28  securities. 
  2.29     (c) The execution of any orders by a licensed broker-dealer 
  2.30  for the purchase or sale of any security, pursuant to an 
  2.31  unsolicited offer to purchase or sell; provided that the 
  2.32  broker-dealer acts as agent for the purchaser or seller, and has 
  2.33  no direct material interest in the sale or distribution of the 
  2.34  security, receives no commission, profit, or other compensation 
  2.35  from any source other than the purchaser and seller and delivers 
  2.36  to the purchaser and seller written confirmation of the 
  3.1   transaction which clearly itemizes the commission, or other 
  3.2   compensation. 
  3.3      (d) Any nonissuer sale of notes or bonds secured by a 
  3.4   mortgage lien if the entire mortgage, together with all notes or 
  3.5   bonds secured thereby, is sold to a single purchaser at a single 
  3.6   sale. 
  3.7      (e) Any judicial sale, exchange, or issuance of securities 
  3.8   made pursuant to an order of a court of competent jurisdiction. 
  3.9      (f) The sale, by a pledge holder, of a security pledged in 
  3.10  good faith as collateral for a bona fide debt. 
  3.11     (g) Any offer or sale to a bank, savings institution, trust 
  3.12  company, insurance company, investment company as defined in the 
  3.13  Investment Company Act of 1940, or other financial institution 
  3.14  or institutional buyer, or to a broker-dealer, whether the 
  3.15  purchaser is acting for itself or in some fiduciary capacity. 
  3.16     (h) An offer or sale of securities by an issuer made in 
  3.17  reliance on the exemptions provided by Rule 505 or 506 of 
  3.18  Regulation D promulgated by the Securities and Exchange 
  3.19  Commission, Code of Federal Regulations, title 17, sections 
  3.20  230.501 to 230.508, subject to the conditions and definitions 
  3.21  provided by Rules 501 to 503 of Regulation D, if the offer and 
  3.22  sale also satisfies the conditions and limitations in clauses 
  3.23  (1) to (10). 
  3.24     (1) The exemption under this paragraph is not available for 
  3.25  the securities of an issuer if any of the persons described in 
  3.26  Rule 252(c) to (f) of Regulation A promulgated by the Securities 
  3.27  and Exchange Commission, Code of Federal Regulations, title 17, 
  3.28  sections 230.251 to 230.263:  
  3.29     (i) has filed a registration statement that is the subject 
  3.30  of a currently effective order entered against the issuer, its 
  3.31  officers, directors, general partners, controlling persons, or 
  3.32  affiliates, according to any state's law within five years 
  3.33  before the filing of the notice required under clause (5), 
  3.34  denying effectiveness to, or suspending or revoking the 
  3.35  effectiveness of, the registration statement; 
  3.36     (ii) has been convicted, within five years before the 
  4.1   filing of the notice required under clause (5), of a felony or 
  4.2   misdemeanor in connection with the offer, sale, or purchase of a 
  4.3   security or franchise, or a felony involving fraud or deceit, 
  4.4   including but not limited to forgery, embezzlement, obtaining 
  4.5   money under false pretenses, larceny, or conspiracy to defraud; 
  4.6      (iii) is subject to an effective administrative order or 
  4.7   judgment entered by a state securities administrator within five 
  4.8   years before the filing of the notice required under clause (5), 
  4.9   that prohibits, denies, or revokes the use of an exemption from 
  4.10  securities registration, that prohibits the transaction of 
  4.11  business by the person as a broker-dealer or agent, or that is 
  4.12  based on fraud, deceit, an untrue statement of a material fact, 
  4.13  or an omission to state a material fact; or 
  4.14     (iv) is subject to an order, judgment, or decree of a court 
  4.15  entered within five years before the filing of the notice 
  4.16  required under clause (5), temporarily, preliminarily, or 
  4.17  permanently restraining or enjoining the person from engaging in 
  4.18  or continuing any conduct or practice in connection with the 
  4.19  offer, sale, or purchase of a security, or the making of a false 
  4.20  filing with a state. 
  4.21     A disqualification under paragraph (h) involving a 
  4.22  broker-dealer or agent is waived if the broker-dealer or agent 
  4.23  is or continues to be licensed in the state in which the 
  4.24  administrative order or judgment was entered against the person 
  4.25  or if the broker-dealer or agent is or continues to be licensed 
  4.26  in this state as a broker-dealer or agent after notifying the 
  4.27  commissioner of the act or event causing disqualification. 
  4.28     The commissioner may waive a disqualification under 
  4.29  paragraph (h) upon a showing of good cause that it is not 
  4.30  necessary under the circumstances that use of the exemption be 
  4.31  denied. 
  4.32     A disqualification under paragraph (h) may be waived if the 
  4.33  state securities administrator or agency of the state that 
  4.34  created the basis for disqualification has determined, upon a 
  4.35  showing of good cause, that it is not necessary under the 
  4.36  circumstances that an exemption from registration of securities 
  5.1   under the state's laws be denied. 
  5.2      It is a defense to a violation of paragraph (h) based upon 
  5.3   a disqualification if the issuer sustains the burden of proof to 
  5.4   establish that the issuer did not know, and in the exercise of 
  5.5   reasonable care could not have known, that a disqualification 
  5.6   under paragraph (h) existed. 
  5.7      (2) This exemption must not be available to an issuer with 
  5.8   respect to a transaction that, although in technical compliance 
  5.9   with this exemption, is part of a plan or scheme to evade 
  5.10  registration or the conditions or limitations explicitly stated 
  5.11  in paragraph (h). 
  5.12     (3) No commission, finder's fee, or other remuneration 
  5.13  shall be paid or given, directly or indirectly, for soliciting a 
  5.14  prospective purchaser, unless the recipient is appropriately 
  5.15  licensed, or exempt from licensure, in this state as a 
  5.16  broker-dealer. 
  5.17     (4) Nothing in this exemption is intended to or should be 
  5.18  in any way construed as relieving issuers or persons acting on 
  5.19  behalf of issuers from providing disclosure to prospective 
  5.20  investors adequate to satisfy the antifraud provisions of the 
  5.21  securities law of Minnesota.  
  5.22     (5) The issuer shall file with the commissioner a notice on 
  5.23  form D as adopted by the Securities and Exchange Commission 
  5.24  according to Regulation D, Code of Federal Regulations, title 
  5.25  17, section 230.502.  The notice must be filed not later than 15 
  5.26  days after the first sale in this state of securities in an 
  5.27  offering under this exemption.  Every notice on form D must be 
  5.28  manually signed by a person duly authorized by the issuer and 
  5.29  must be accompanied by a consent to service of process on a form 
  5.30  prescribed by the commissioner.  
  5.31     (6) A failure to comply with a term, condition, or 
  5.32  requirement of paragraph (h) will not result in loss of the 
  5.33  exemption for an offer or sale to a particular individual or 
  5.34  entity if the person relying on the exemption shows that:  (i) 
  5.35  the failure to comply did not pertain to a term, condition, or 
  5.36  requirement directly intended to protect that particular 
  6.1   individual or entity, and the failure to comply was 
  6.2   insignificant with respect to the offering as a whole; and (ii) 
  6.3   a good faith and reasonable attempt was made to comply with all 
  6.4   applicable terms, conditions, and requirements of paragraph (h), 
  6.5   except that, where an exemption is established only through 
  6.6   reliance upon this provision, the failure to comply shall 
  6.7   nonetheless constitute a violation of section 80A.08 and be 
  6.8   actionable by the commissioner.  
  6.9      (7) The issuer, upon request by the commissioner, shall, 
  6.10  within ten days of the request, furnish to the commissioner a 
  6.11  copy of any and all information, documents, or materials 
  6.12  furnished to investors or offerees in connection with the offer 
  6.13  and sale according to paragraph (h).  
  6.14     (8) Neither compliance nor attempted compliance with the 
  6.15  exemption provided by paragraph (h), nor the absence of an 
  6.16  objection or order by the commissioner with respect to an offer 
  6.17  or sale of securities undertaken according to this exemption, 
  6.18  shall be considered to be a waiver of a condition of the 
  6.19  exemption or considered to be a confirmation by the commissioner 
  6.20  of the availability of this exemption.  
  6.21     (9) The commissioner may, by rule or order, increase the 
  6.22  number of purchasers or waive any other condition of this 
  6.23  exemption.  
  6.24     (10) The determination whether offers and sales made in 
  6.25  reliance on the exemption set forth in paragraph (h) shall be 
  6.26  integrated with offers and sales according to other paragraphs 
  6.27  of this subdivision shall be made according to the integration 
  6.28  standard set forth in Rule 502 of Regulation D promulgated by 
  6.29  the Securities and Exchange Commission, Code of Federal 
  6.30  Regulations, title 17, section 230.502.  If not subject to 
  6.31  integration according to that rule, offers and sales according 
  6.32  to paragraph (h) shall not otherwise be integrated with offers 
  6.33  and sales according to other exemptions set forth in this 
  6.34  subdivision. 
  6.35     (i) Any offer (but not a sale) of a security for which a 
  6.36  registration statement has been filed under sections 80A.01 to 
  7.1   80A.31, if no stop order or refusal order is in effect and no 
  7.2   public proceeding or examination looking toward an order is 
  7.3   pending; and any offer of a security if the sale of the security 
  7.4   is or would be exempt under this section.  The commissioner may 
  7.5   by rule exempt offers (but not sales) of securities for which a 
  7.6   registration statement has been filed as the commissioner deems 
  7.7   appropriate, consistent with the purposes of sections 80A.01 to 
  7.8   80A.31. 
  7.9      (j) The offer and sale by a cooperative organized under 
  7.10  chapter 308A or under the laws of another state, of its 
  7.11  securities when the securities are offered and sold only to its 
  7.12  members, or when the purchase of the securities is necessary or 
  7.13  incidental to establishing membership in the cooperative, or 
  7.14  when such securities are issued as patronage dividends.  This 
  7.15  paragraph applies to a cooperative organized under the laws of 
  7.16  another state only if the cooperative has filed with the 
  7.17  commissioner a consent to service of process under section 
  7.18  80A.27, subdivision 7, and has, not less than ten days prior to 
  7.19  the issuance or delivery, furnished the commissioner with a 
  7.20  written general description of the transaction and any other 
  7.21  information that the commissioner requires by rule or otherwise. 
  7.22  This exemption only applies when the issuing cooperative is 
  7.23  seeking to raise up to $1,000,000. 
  7.24     (l) The issuance and delivery of any securities of one 
  7.25  corporation to another corporation or its security holders in 
  7.26  connection with a merger, exchange of shares, or transfer of 
  7.27  assets whereby the approval of stockholders of the other 
  7.28  corporation is required to be obtained, provided, that the 
  7.29  commissioner has been furnished with a general description of 
  7.30  the transaction and with other information as the commissioner 
  7.31  by rule prescribes not less than ten days prior to the issuance 
  7.32  and delivery. 
  7.33     (m) Any transaction between the issuer or other person on 
  7.34  whose behalf the offering is made and an underwriter or among 
  7.35  underwriters. 
  7.36     (n) The distribution by a corporation of its or other 
  8.1   securities to its own security holders as a stock dividend or as 
  8.2   a dividend from earnings or surplus or as a liquidating 
  8.3   distribution; or upon conversion of an outstanding convertible 
  8.4   security; or pursuant to a stock split or reverse stock split. 
  8.5      (o) Any offer or sale of securities by an affiliate of the 
  8.6   issuer thereof if:  (1) a registration statement is in effect 
  8.7   with respect to securities of the same class of the issuer and 
  8.8   (2) the offer or sale has been exempted from registration by 
  8.9   rule or order of the commissioner.  
  8.10     (p) Any transaction pursuant to an offer to existing 
  8.11  security holders of the issuer, including persons who at the 
  8.12  time of the transaction are holders of convertible securities, 
  8.13  nontransferable warrants, or transferable warrants exercisable 
  8.14  within not more than 90 days of their issuance, if:  (1) no 
  8.15  commission or other remuneration (other than a standby 
  8.16  commission) is paid or given directly or indirectly for 
  8.17  soliciting any security holder in this state; and (2) the 
  8.18  commissioner has been furnished with a general description of 
  8.19  the transaction and with other information as the commissioner 
  8.20  may by rule prescribe no less than ten days prior to the 
  8.21  transaction. 
  8.22     (q) Any nonissuer sales of any security, including a 
  8.23  revenue obligation, issued by the state of Minnesota or any of 
  8.24  its political or governmental subdivisions, municipalities, 
  8.25  governmental agencies, or instrumentalities. 
  8.26     (r) Any transaction as to which the commissioner by rule or 
  8.27  order finds that registration is not necessary in the public 
  8.28  interest and for the protection of investors. 
  8.29     (s) An offer or sale of a security issued in connection 
  8.30  with an employee's stock purchase, savings, option, profit 
  8.31  sharing, pension, or similar employee benefit plan, if the 
  8.32  following conditions are met:  
  8.33     (1) the issuer, its parent corporation or any of its 
  8.34  majority-owned subsidiaries offers or sells the security 
  8.35  according to a written benefit plan or written contract relating 
  8.36  to the compensation of the purchaser; and 
  9.1      (2) the class of securities offered according to the plan 
  9.2   or contract, or if an option or right to purchase a security, 
  9.3   the class of securities to be issued upon the exercise of the 
  9.4   option or right, is registered under section 12 of the 
  9.5   Securities Exchange Act of 1934, or is a class of securities 
  9.6   with respect to which the issuer files reports according to 
  9.7   section 15(d) of the Securities Exchange Act of 1934; or 
  9.8      (3) the issuer fully complies with the provisions of Rule 
  9.9   701 as adopted by the Securities and Exchange Commission, Code 
  9.10  of Federal Regulations, title 12, section 230.701. 
  9.11     The issuer shall file not less than ten days before the 
  9.12  transaction, a general description of the transaction and any 
  9.13  other information that the commissioner requires by rule or 
  9.14  otherwise or, if applicable, a Securities and Exchange Form S-8. 
  9.15  Annually, within 90 days after the end of the issuer's fiscal 
  9.16  year, the issuer shall file a notice as provided with the 
  9.17  commissioner. 
  9.18     (t) Any sale of a security of an issuer that is a pooled 
  9.19  income fund, a charitable remainder trust, or a charitable lead 
  9.20  trust that has a qualified charity as the only charitable 
  9.21  beneficiary. 
  9.22     (u) Any sale by a qualified charity of a security that is a 
  9.23  charitable gift annuity if the issuer has a net worth, otherwise 
  9.24  defined as unrestricted fund balance, of not less than $300,000 
  9.25  and either:  (1) has been in continuous operation for not less 
  9.26  than three years; or (2) is a successor or affiliate of a 
  9.27  qualified charity that has been in continuous operation for not 
  9.28  less than three years. 
  9.29     Sec. 2.  Minnesota Statutes 1998, section 308A.705, 
  9.30  subdivision 3, is amended to read: 
  9.31     Subd. 3.  [DIVIDENDS.] Dividends may be paid on capital 
  9.32  common stock and nonstock units of equity only if the net income 
  9.33  of the cooperative for the previous fiscal year is 
  9.34  sufficient.  Unless otherwise provided in the articles of 
  9.35  incorporation, the dividends are not cumulative. 
  9.36     Sec. 3.  [REPEALER.] 
 10.1      Minnesota Statutes 1998, sections 308A.031; and 308A.161, 
 10.2   are repealed. 
 10.3      Sec. 4.  [EFFECTIVE DATE.] 
 10.4      Section 1 is effective retroactively from July 1, 1999.