Office of the Revisor of Statutes
Minnesota Session Laws - 2000, Regular Session
Key: (1) language to be deleted (2) new language
CHAPTER 379-S.F.No. 2987
An act relating to cooperatives; amending provisions
on the financing and distribution of income for
cooperatives; amending Minnesota Statutes 1998,
section 308A.705, subdivision 3; Minnesota Statutes
1999 Supplement, section 80A.15, subdivision 2;
repealing Minnesota Statutes 1998, sections 308A.031;
and 308A.161.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
Section 1. Minnesota Statutes 1999 Supplement, section
80A.15, subdivision 2, is amended to read:
Subd. 2. The following transactions are exempted from
sections 80A.08 and 80A.16:
(a) Any sales, whether or not effected through a
broker-dealer, provided that:
(1) no person shall make more than ten sales of securities
of the same issuer pursuant to this exemption, exclusive of
sales according to clause (2), during any period of 12
consecutive months; provided further, that in the case of sales
by an issuer, except sales of securities registered under the
Securities Act of 1933 or exempted by section 3(b) of that act,
(i) the seller reasonably believes that all buyers are
purchasing for investment, and (ii) the securities are not
advertised for sale to the general public in newspapers or other
publications of general circulation or otherwise, or by radio,
television, electronic means or similar communications media, or
through a program of general solicitation by means of mail or
telephone; and
(2) no issuer shall make more than 25 sales of its
securities according to this exemption, exclusive of sales
pursuant to clause (1), during any period of 12 consecutive
months; provided further, that the issuer meets the conditions
in clause (1) and, in addition meets the following additional
conditions: (i) files with the commissioner, ten days before a
sale according to this clause, a statement of issuer on a form
prescribed by the commissioner; and (ii) no commission or other
remuneration is paid or given directly or indirectly for
soliciting any prospective buyers in this state in connection
with a sale according to this clause except reasonable and
customary commissions paid by the issuer to a broker-dealer
licensed under this chapter.
(b) Any nonissuer distribution of an outstanding security
if (1) either Moody's, Fitch's, or Standard & Poor's Securities
Manuals, or other recognized manuals approved by the
commissioner contains the names of the issuer's officers and
directors, a balance sheet of the issuer as of a date not more
than 18 months prior to the date of the sale, and a profit and
loss statement for the fiscal year preceding the date of the
balance sheet, and (2) the issuer or its predecessor has been in
active, continuous business operation for the five-year period
next preceding the date of sale, and (3) if the security has a
fixed maturity or fixed interest or dividend provision, the
issuer has not, within the three preceding fiscal years,
defaulted in payment of principal, interest, or dividends on the
securities.
(c) The execution of any orders by a licensed broker-dealer
for the purchase or sale of any security, pursuant to an
unsolicited offer to purchase or sell; provided that the
broker-dealer acts as agent for the purchaser or seller, and has
no direct material interest in the sale or distribution of the
security, receives no commission, profit, or other compensation
from any source other than the purchaser and seller and delivers
to the purchaser and seller written confirmation of the
transaction which clearly itemizes the commission, or other
compensation.
(d) Any nonissuer sale of notes or bonds secured by a
mortgage lien if the entire mortgage, together with all notes or
bonds secured thereby, is sold to a single purchaser at a single
sale.
(e) Any judicial sale, exchange, or issuance of securities
made pursuant to an order of a court of competent jurisdiction.
(f) The sale, by a pledge holder, of a security pledged in
good faith as collateral for a bona fide debt.
(g) Any offer or sale to a bank, savings institution, trust
company, insurance company, investment company as defined in the
Investment Company Act of 1940, or other financial institution
or institutional buyer, or to a broker-dealer, whether the
purchaser is acting for itself or in some fiduciary capacity.
(h) An offer or sale of securities by an issuer made in
reliance on the exemptions provided by Rule 505 or 506 of
Regulation D promulgated by the Securities and Exchange
Commission, Code of Federal Regulations, title 17, sections
230.501 to 230.508, subject to the conditions and definitions
provided by Rules 501 to 503 of Regulation D, if the offer and
sale also satisfies the conditions and limitations in clauses
(1) to (10).
(1) The exemption under this paragraph is not available for
the securities of an issuer if any of the persons described in
Rule 252(c) to (f) of Regulation A promulgated by the Securities
and Exchange Commission, Code of Federal Regulations, title 17,
sections 230.251 to 230.263:
(i) has filed a registration statement that is the subject
of a currently effective order entered against the issuer, its
officers, directors, general partners, controlling persons, or
affiliates, according to any state's law within five years
before the filing of the notice required under clause (5),
denying effectiveness to, or suspending or revoking the
effectiveness of, the registration statement;
(ii) has been convicted, within five years before the
filing of the notice required under clause (5), of a felony or
misdemeanor in connection with the offer, sale, or purchase of a
security or franchise, or a felony involving fraud or deceit,
including but not limited to forgery, embezzlement, obtaining
money under false pretenses, larceny, or conspiracy to defraud;
(iii) is subject to an effective administrative order or
judgment entered by a state securities administrator within five
years before the filing of the notice required under clause (5),
that prohibits, denies, or revokes the use of an exemption from
securities registration, that prohibits the transaction of
business by the person as a broker-dealer or agent, or that is
based on fraud, deceit, an untrue statement of a material fact,
or an omission to state a material fact; or
(iv) is subject to an order, judgment, or decree of a court
entered within five years before the filing of the notice
required under clause (5), temporarily, preliminarily, or
permanently restraining or enjoining the person from engaging in
or continuing any conduct or practice in connection with the
offer, sale, or purchase of a security, or the making of a false
filing with a state.
A disqualification under paragraph (h) involving a
broker-dealer or agent is waived if the broker-dealer or agent
is or continues to be licensed in the state in which the
administrative order or judgment was entered against the person
or if the broker-dealer or agent is or continues to be licensed
in this state as a broker-dealer or agent after notifying the
commissioner of the act or event causing disqualification.
The commissioner may waive a disqualification under
paragraph (h) upon a showing of good cause that it is not
necessary under the circumstances that use of the exemption be
denied.
A disqualification under paragraph (h) may be waived if the
state securities administrator or agency of the state that
created the basis for disqualification has determined, upon a
showing of good cause, that it is not necessary under the
circumstances that an exemption from registration of securities
under the state's laws be denied.
It is a defense to a violation of paragraph (h) based upon
a disqualification if the issuer sustains the burden of proof to
establish that the issuer did not know, and in the exercise of
reasonable care could not have known, that a disqualification
under paragraph (h) existed.
(2) This exemption must not be available to an issuer with
respect to a transaction that, although in technical compliance
with this exemption, is part of a plan or scheme to evade
registration or the conditions or limitations explicitly stated
in paragraph (h).
(3) No commission, finder's fee, or other remuneration
shall be paid or given, directly or indirectly, for soliciting a
prospective purchaser, unless the recipient is appropriately
licensed, or exempt from licensure, in this state as a
broker-dealer.
(4) Nothing in this exemption is intended to or should be
in any way construed as relieving issuers or persons acting on
behalf of issuers from providing disclosure to prospective
investors adequate to satisfy the antifraud provisions of the
securities law of Minnesota.
(5) The issuer shall file with the commissioner a notice on
form D as adopted by the Securities and Exchange Commission
according to Regulation D, Code of Federal Regulations, title
17, section 230.502. The notice must be filed not later than 15
days after the first sale in this state of securities in an
offering under this exemption. Every notice on form D must be
manually signed by a person duly authorized by the issuer and
must be accompanied by a consent to service of process on a form
prescribed by the commissioner.
(6) A failure to comply with a term, condition, or
requirement of paragraph (h) will not result in loss of the
exemption for an offer or sale to a particular individual or
entity if the person relying on the exemption shows that: (i)
the failure to comply did not pertain to a term, condition, or
requirement directly intended to protect that particular
individual or entity, and the failure to comply was
insignificant with respect to the offering as a whole; and (ii)
a good faith and reasonable attempt was made to comply with all
applicable terms, conditions, and requirements of paragraph (h),
except that, where an exemption is established only through
reliance upon this provision, the failure to comply shall
nonetheless constitute a violation of section 80A.08 and be
actionable by the commissioner.
(7) The issuer, upon request by the commissioner, shall,
within ten days of the request, furnish to the commissioner a
copy of any and all information, documents, or materials
furnished to investors or offerees in connection with the offer
and sale according to paragraph (h).
(8) Neither compliance nor attempted compliance with the
exemption provided by paragraph (h), nor the absence of an
objection or order by the commissioner with respect to an offer
or sale of securities undertaken according to this exemption,
shall be considered to be a waiver of a condition of the
exemption or considered to be a confirmation by the commissioner
of the availability of this exemption.
(9) The commissioner may, by rule or order, increase the
number of purchasers or waive any other condition of this
exemption.
(10) The determination whether offers and sales made in
reliance on the exemption set forth in paragraph (h) shall be
integrated with offers and sales according to other paragraphs
of this subdivision shall be made according to the integration
standard set forth in Rule 502 of Regulation D promulgated by
the Securities and Exchange Commission, Code of Federal
Regulations, title 17, section 230.502. If not subject to
integration according to that rule, offers and sales according
to paragraph (h) shall not otherwise be integrated with offers
and sales according to other exemptions set forth in this
subdivision.
(i) Any offer (but not a sale) of a security for which a
registration statement has been filed under sections 80A.01 to
80A.31, if no stop order or refusal order is in effect and no
public proceeding or examination looking toward an order is
pending; and any offer of a security if the sale of the security
is or would be exempt under this section. The commissioner may
by rule exempt offers (but not sales) of securities for which a
registration statement has been filed as the commissioner deems
appropriate, consistent with the purposes of sections 80A.01 to
80A.31.
(j) The offer and sale by a cooperative organized under
chapter 308A or under the laws of another state, of its
securities when the securities are offered and sold only to its
members, or when the purchase of the securities is necessary or
incidental to establishing membership in the cooperative, or
when such securities are issued as patronage dividends. This
paragraph applies to a cooperative organized under the laws of
another state only if the cooperative has filed with the
commissioner a consent to service of process under section
80A.27, subdivision 7, and has, not less than ten days prior to
the issuance or delivery, furnished the commissioner with a
written general description of the transaction and any other
information that the commissioner requires by rule or otherwise.
This exemption only applies when the issuing cooperative is
seeking to raise up to $1,000,000.
(l) The issuance and delivery of any securities of one
corporation to another corporation or its security holders in
connection with a merger, exchange of shares, or transfer of
assets whereby the approval of stockholders of the other
corporation is required to be obtained, provided, that the
commissioner has been furnished with a general description of
the transaction and with other information as the commissioner
by rule prescribes not less than ten days prior to the issuance
and delivery.
(m) Any transaction between the issuer or other person on
whose behalf the offering is made and an underwriter or among
underwriters.
(n) The distribution by a corporation of its or other
securities to its own security holders as a stock dividend or as
a dividend from earnings or surplus or as a liquidating
distribution; or upon conversion of an outstanding convertible
security; or pursuant to a stock split or reverse stock split.
(o) Any offer or sale of securities by an affiliate of the
issuer thereof if: (1) a registration statement is in effect
with respect to securities of the same class of the issuer and
(2) the offer or sale has been exempted from registration by
rule or order of the commissioner.
(p) Any transaction pursuant to an offer to existing
security holders of the issuer, including persons who at the
time of the transaction are holders of convertible securities,
nontransferable warrants, or transferable warrants exercisable
within not more than 90 days of their issuance, if: (1) no
commission or other remuneration (other than a standby
commission) is paid or given directly or indirectly for
soliciting any security holder in this state; and (2) the
commissioner has been furnished with a general description of
the transaction and with other information as the commissioner
may by rule prescribe no less than ten days prior to the
transaction.
(q) Any nonissuer sales of any security, including a
revenue obligation, issued by the state of Minnesota or any of
its political or governmental subdivisions, municipalities,
governmental agencies, or instrumentalities.
(r) Any transaction as to which the commissioner by rule or
order finds that registration is not necessary in the public
interest and for the protection of investors.
(s) An offer or sale of a security issued in connection
with an employee's stock purchase, savings, option, profit
sharing, pension, or similar employee benefit plan, if the
following conditions are met:
(1) the issuer, its parent corporation or any of its
majority-owned subsidiaries offers or sells the security
according to a written benefit plan or written contract relating
to the compensation of the purchaser; and
(2) the class of securities offered according to the plan
or contract, or if an option or right to purchase a security,
the class of securities to be issued upon the exercise of the
option or right, is registered under section 12 of the
Securities Exchange Act of 1934, or is a class of securities
with respect to which the issuer files reports according to
section 15(d) of the Securities Exchange Act of 1934; or
(3) the issuer fully complies with the provisions of Rule
701 as adopted by the Securities and Exchange Commission, Code
of Federal Regulations, title 12, section 230.701.
The issuer shall file not less than ten days before the
transaction, a general description of the transaction and any
other information that the commissioner requires by rule or
otherwise or, if applicable, a Securities and Exchange Form S-8.
Annually, within 90 days after the end of the issuer's fiscal
year, the issuer shall file a notice as provided with the
commissioner.
(t) Any sale of a security of an issuer that is a pooled
income fund, a charitable remainder trust, or a charitable lead
trust that has a qualified charity as the only charitable
beneficiary.
(u) Any sale by a qualified charity of a security that is a
charitable gift annuity if the issuer has a net worth, otherwise
defined as unrestricted fund balance, of not less than $300,000
and either: (1) has been in continuous operation for not less
than three years; or (2) is a successor or affiliate of a
qualified charity that has been in continuous operation for not
less than three years.
Sec. 2. Minnesota Statutes 1998, section 308A.705,
subdivision 3, is amended to read:
Subd. 3. [DIVIDENDS.] Dividends may be paid on capital
common stock and nonstock units of equity only if the net income
of the cooperative for the previous fiscal year is
sufficient. Unless otherwise provided in the articles of
incorporation, the dividends are not cumulative.
Sec. 3. [REPEALER.]
Minnesota Statutes 1998, sections 308A.031; and 308A.161,
are repealed.
Sec. 4. [EFFECTIVE DATE.]
Section 1 is effective retroactively from July 1, 1999.
Presented to the governor April 10, 2000
Signed by the governor April 13, 2000, 4:56 p.m.
Official Publication of the State of Minnesota
Revisor of Statutes