Bill Text: IL HB3663 | 2019-2020 | 101st General Assembly | Introduced
NOTE: There are more recent revisions of this legislation. Read Latest Draft
Bill Title: Creates the Limited Cooperative Association Act. Authorizes the organization of a limited cooperative association, as an entity distinct from its members, for any lawful purpose, whether or not for profit. Provides that a limited cooperative association may be a collective worker cooperative in which there is only one class of members consisting of worker-members who manage all of the affairs of the limited cooperative association or a worker cooperative or employment cooperative that includes a class of worker-members who are natural persons whose patronage consists of labor contributed to or other work performed for the limited cooperative association. Contains provisions regarding: findings; formation; articles of organization; organization; bylaws; members; community investors; voting; a board of directors; an assembly; dissolution; conversion; and applicability of securities laws. Amends the Co-operative Act and the Illinois Securities Law of 1953 to make conforming changes. Effective immediately.
Spectrum: Partisan Bill (Democrat 38-1)
Status: (Passed) 2019-08-09 - Public Act . . . . . . . . . 101-0292 [HB3663 Detail]
Download: Illinois-2019-HB3663-Introduced.html
Bill Title: Creates the Limited Cooperative Association Act. Authorizes the organization of a limited cooperative association, as an entity distinct from its members, for any lawful purpose, whether or not for profit. Provides that a limited cooperative association may be a collective worker cooperative in which there is only one class of members consisting of worker-members who manage all of the affairs of the limited cooperative association or a worker cooperative or employment cooperative that includes a class of worker-members who are natural persons whose patronage consists of labor contributed to or other work performed for the limited cooperative association. Contains provisions regarding: findings; formation; articles of organization; organization; bylaws; members; community investors; voting; a board of directors; an assembly; dissolution; conversion; and applicability of securities laws. Amends the Co-operative Act and the Illinois Securities Law of 1953 to make conforming changes. Effective immediately.
Spectrum: Partisan Bill (Democrat 38-1)
Status: (Passed) 2019-08-09 - Public Act . . . . . . . . . 101-0292 [HB3663 Detail]
Download: Illinois-2019-HB3663-Introduced.html
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1 | AN ACT concerning business.
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2 | Be it enacted by the People of the State of Illinois,
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3 | represented in the General Assembly:
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4 | Section 1. Short title. This Act may be cited as the | ||||||||||||||||||||||||||||
5 | Limited Cooperative Association Act.
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6 | Section 5. Findings.
The General Assembly finds and | ||||||||||||||||||||||||||||
7 | declares all of the following:
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8 | (1) the cooperative form of doing business provides an | ||||||||||||||||||||||||||||
9 | efficient and effective method for persons to transact | ||||||||||||||||||||||||||||
10 | business, offer, and obtain goods and services, and it is | ||||||||||||||||||||||||||||
11 | in the best interests of the people of the State of | ||||||||||||||||||||||||||||
12 | Illinois to promote, foster, and encourage the utilization | ||||||||||||||||||||||||||||
13 | of cooperatives in appropriate instances; | ||||||||||||||||||||||||||||
14 | (2) the Co-operative Act and Agricultural Co-Operative | ||||||||||||||||||||||||||||
15 | Act have provided for the promotion, fostering, and | ||||||||||||||||||||||||||||
16 | encouragement of consumer and producer cooperatives; have | ||||||||||||||||||||||||||||
17 | made distribution of agricultural products between | ||||||||||||||||||||||||||||
18 | producer and consumer more efficient; have stabilized the | ||||||||||||||||||||||||||||
19 | marketing of agricultural products; and have provided for | ||||||||||||||||||||||||||||
20 | the organization and incorporation of cooperative | ||||||||||||||||||||||||||||
21 | corporations, all as contemplated at the time of the | ||||||||||||||||||||||||||||
22 | original adoption; | ||||||||||||||||||||||||||||
23 | (3) it is in the best interests of the people of the |
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1 | State of Illinois to preserve the provisions of the | ||||||
2 | Co-operative Act as it has been in force and interpreted in | ||||||
3 | the State and to continue the provisions thereof for | ||||||
4 | agriculture, but also to expand the provisions of Illinois | ||||||
5 | cooperative law to provide greater direction and | ||||||
6 | flexibility in its provisions and to enable all types of | ||||||
7 | industries and enterprises to avail themselves of the | ||||||
8 | benefits of the cooperative form of doing business in | ||||||
9 | accordance with the provisions of this Act; | ||||||
10 | (4) a worker cooperative has the purpose of creating | ||||||
11 | and maintaining sustainable jobs and generating wealth in | ||||||
12 | order to improve the quality of life of its worker-members, | ||||||
13 | dignify human work, allow workers' democratic | ||||||
14 | self-management, and promote community and local | ||||||
15 | development in this State; | ||||||
16 | (5) the purpose of this Act is to create a new business | ||||||
17 | entity better suited for worker cooperatives and | ||||||
18 | multi-stakeholder cooperatives, and to create more | ||||||
19 | visibility and financing options for cooperatives. This | ||||||
20 | Act is intended to provide a definition of worker | ||||||
21 | cooperative for purposes of this Act, and not for purposes | ||||||
22 | of other laws.
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23 | Section 10. Definitions. In this Act: | ||||||
24 | "Collective worker cooperative" means a limited | ||||||
25 | cooperative association that elects to be a worker cooperative |
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1 | in which there is only one class of members consisting of | ||||||
2 | worker-members who manage all of the affairs of the limited | ||||||
3 | cooperative association. | ||||||
4 | "Community investor" means a person who is not a patron | ||||||
5 | member and who holds a share or other proprietary interest in a | ||||||
6 | limited cooperative association. | ||||||
7 | "Distribution" means a transfer of money or other property | ||||||
8 | from a limited cooperative association to a member because of | ||||||
9 | the member's financial rights or to a transferee of a member's | ||||||
10 | financial rights. | ||||||
11 | "Member" means any person who, pursuant to a specific | ||||||
12 | provision of a limited cooperative association's articles or | ||||||
13 | bylaws, has the right to vote for the election of a director or | ||||||
14 | directors, or possesses proprietary interests in the limited | ||||||
15 | cooperative association. | ||||||
16 | "Worker cooperative" or "employment cooperative" means a | ||||||
17 | limited cooperative association formed under this Act that | ||||||
18 | includes a class of worker-members who are natural persons | ||||||
19 | whose patronage consists of labor contributed to or other work | ||||||
20 | performed for the limited cooperative association. Election to | ||||||
21 | be organized as a worker cooperative or an employment | ||||||
22 | cooperative does not create a presumption that workers are | ||||||
23 | employees of the corporation for any purposes. At least 51 | ||||||
24 | percent of the workers shall be worker-members or candidates. | ||||||
25 | "Worker-member" means a member of a worker cooperative who | ||||||
26 | is a natural person and also a patron of a worker cooperative.
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1 | Section 15. Purpose of limited cooperative association. | ||||||
2 | (a) A limited cooperative association is an entity distinct | ||||||
3 | from its members. | ||||||
4 | (b) A limited cooperative association may be organized for | ||||||
5 | any lawful purpose, whether or not for profit. | ||||||
6 | (c) An association organized under this Act may elect to be | ||||||
7 | a worker cooperative with the State of Illinois. Election to be | ||||||
8 | organized as a worker cooperative or an employment cooperative | ||||||
9 | does not create a presumption that workers are employees of the | ||||||
10 | corporation for any purposes.
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11 | Section 20. Formation of limited cooperative association. | ||||||
12 | (a) A limited cooperative association must be organized by | ||||||
13 | one or more organizers. | ||||||
14 | (b) To form a limited cooperative association, one or more | ||||||
15 | organizers of the association shall deliver or cause to be | ||||||
16 | delivered articles to the Secretary of State for filing.
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17 | Section 25. Articles of organization. | ||||||
18 | (a) The articles of organization of a limited cooperative | ||||||
19 | association shall state: | ||||||
20 | (1) the domestic entity name of the limited cooperative | ||||||
21 | association; | ||||||
22 | (2) the purposes for which the limited cooperative | ||||||
23 | association is formed, which may be for any lawful purpose; |
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1 | (3) the registered agent name and registered agent | ||||||
2 | address of the association's initial registered agent; | ||||||
3 | (4) the street address and, if different, mailing | ||||||
4 | address of the association's initial principal office; | ||||||
5 | (5) the true name and street address and, if different, | ||||||
6 | mailing address of each organizer; and | ||||||
7 | (6) if relevant, an election to be classified as a | ||||||
8 | worker cooperative primarily managed by worker-owner | ||||||
9 | members.
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10 | Section 30. Organization of limited cooperative | ||||||
11 | association. | ||||||
12 | (a) After a limited cooperative association is formed: | ||||||
13 | (1) if initial directors are named in the articles, the | ||||||
14 | initial directors shall hold an organizational meeting to | ||||||
15 | adopt initial bylaws and carry on any other business | ||||||
16 | necessary or proper to complete the organization of the | ||||||
17 | association; or | ||||||
18 | (2) if initial directors are not named in the articles, | ||||||
19 | the organizers shall designate the initial directors and | ||||||
20 | call a meeting of the initial directors to adopt initial | ||||||
21 | bylaws and carry on any other business necessary or proper | ||||||
22 | to complete the organization of the association. | ||||||
23 | (b) Unless the articles otherwise provide, the initial | ||||||
24 | directors may cause the limited cooperative association to | ||||||
25 | accept members, including those necessary for the association |
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1 | to begin business. | ||||||
2 | (c) Initial directors need not be members. | ||||||
3 | (d) An initial director serves until a successor is elected | ||||||
4 | and qualified at a members' meeting or the director is removed, | ||||||
5 | resigns, is adjudged incompetent, or dies.
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6 | Section 35. Bylaws. | ||||||
7 | (a) Bylaws shall include: | ||||||
8 | (1) a statement of the capital structure of the limited | ||||||
9 | cooperative association; | ||||||
10 | (2) the classes or other types of members' interests | ||||||
11 | and relative rights, preferences, and restrictions granted | ||||||
12 | to or imposed upon each class or other type of member's | ||||||
13 | interest, including: | ||||||
14 | (A) a statement concerning the manner in which | ||||||
15 | profits and losses are allocated and distributions are | ||||||
16 | made among patron members and, if community investors | ||||||
17 | are authorized, the manner in which profits and losses | ||||||
18 | are allocated and how distributions are made among | ||||||
19 | investor members and between patron members and | ||||||
20 | community investors; | ||||||
21 | (B) a statement designating voting and other | ||||||
22 | governance rights of each class or other type of | ||||||
23 | members' interests and, if relevant, community | ||||||
24 | investors, including which members have voting power | ||||||
25 | and any restriction on voting power; |
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1 | (3) a statement of the method for admission of members; | ||||||
2 | (4) a statement that a member's interest is | ||||||
3 | transferable, if it is to be transferable, and a statement | ||||||
4 | of the conditions upon which it may be transferred; | ||||||
5 | (5) a statement concerning: | ||||||
6 | (A) whether persons that are not members but | ||||||
7 | conduct business with the association may be permitted | ||||||
8 | to share in allocations of profits and losses and | ||||||
9 | receive distributions; and | ||||||
10 | (B) the manner in which profits and losses are | ||||||
11 | allocated and distributions are made with respect to | ||||||
12 | those persons; and | ||||||
13 | (6) a statement of the number and terms of directors or | ||||||
14 | the method by which the number and terms are determined; | ||||||
15 | and | ||||||
16 | (7) a statement addressing members' contributions. | ||||||
17 | (b) Bylaws may contain any other provision for managing and | ||||||
18 | regulating the affairs of the association.
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19 | Section 40. Members. | ||||||
20 | (a) To begin business, a limited cooperative association | ||||||
21 | must have at least 3 patron members unless the sole member is a | ||||||
22 | cooperative. | ||||||
23 | (b) A person becomes a member: | ||||||
24 | (1) as provided in the articles or bylaws; | ||||||
25 | (2) as the result of a merger or conversion under |
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1 | Section 65; or | ||||||
2 | (3) with the consent of all the members. | ||||||
3 | (c) A member, solely by reason of being a member, may not | ||||||
4 | act for or bind the limited cooperative association. | ||||||
5 | (d) Unless the articles provide otherwise, a debt, | ||||||
6 | obligation, or other liability of a limited cooperative | ||||||
7 | association is solely that of the association and is not the | ||||||
8 | debt, obligation, or liability of a member solely by reason of | ||||||
9 | being a member. | ||||||
10 | (e) The total voting membership body shall constitute the | ||||||
11 | assembly of the limited cooperative association. | ||||||
12 | (f) The assembly shall meet annually at a time provided in | ||||||
13 | the articles or bylaws or set by the board of directors not | ||||||
14 | inconsistent with the articles and bylaws. | ||||||
15 | (g) Failure to hold an annual assembly meeting does not | ||||||
16 | affect the validity of any action by the limited cooperative | ||||||
17 | association. | ||||||
18 | (h) A limited cooperative association shall notify each | ||||||
19 | member of the time, date, and place of a members' meeting at | ||||||
20 | least 10 and not more than 60 days before the meeting; except | ||||||
21 | that, if the notice is of a meeting of the members in one or | ||||||
22 | more districts or classes of members, the notice shall be given | ||||||
23 | only to members in those districts or classes.
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24 | Section 45. Voting. | ||||||
25 | (a) The articles or bylaws may allocate voting power among |
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1 | patron members on the basis of one or a combination of the | ||||||
2 | following: | ||||||
3 | (1) one member, one vote; | ||||||
4 | (2) if a patron member is a cooperative, the number of | ||||||
5 | its patron members; or | ||||||
6 | (3) on the basis of use or patronage unless the | ||||||
7 | cooperative has elected to be a worker cooperative. | ||||||
8 | (b) If the articles or bylaws allocate voting power on the | ||||||
9 | basis of use or patronage and a member would be denied a vote | ||||||
10 | because the member did not use the limited cooperative | ||||||
11 | association or conduct patronage with it during the period on | ||||||
12 | which the allocation of voting power is determined, the | ||||||
13 | articles or bylaws must provide that the member shall | ||||||
14 | nevertheless be allocated a vote equal to at least the minimum | ||||||
15 | voting power allocated to members who used the association or | ||||||
16 | conducted patronage with it during the period. | ||||||
17 | (c) The articles or bylaws may provide for the allocation | ||||||
18 | of patron member voting power by districts or class or any | ||||||
19 | combination thereof. | ||||||
20 | (d) If the articles or bylaws provide for community | ||||||
21 | investors, those members are not entitled to vote unless the | ||||||
22 | articles or bylaws provide otherwise. The articles or bylaws | ||||||
23 | may provide for the allocation of investor member voting power | ||||||
24 | by class, classes, or any combination of classes. | ||||||
25 | (e) At no time shall the patron members have less than a | ||||||
26 | majority of the voting power of the limited cooperative |
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1 | association.
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2 | Section 50. Board of directors. | ||||||
3 | (a) A limited cooperative association must have a board of | ||||||
4 | directors of at least 3 individuals, unless the limited | ||||||
5 | cooperative association is a collective worker cooperative. | ||||||
6 | Subsections (b) through (e) do not apply to collective worker | ||||||
7 | cooperatives. | ||||||
8 | (b) The affairs of a limited cooperative association must | ||||||
9 | be managed by, or under the direction of, the board of | ||||||
10 | directors unless the board delegates those duties to the | ||||||
11 | assembly of the limited cooperative association. The board may | ||||||
12 | adopt policies and procedures that do not conflict with the | ||||||
13 | articles, bylaws, or this Act. | ||||||
14 | (c) An individual is not an agent for a limited cooperative | ||||||
15 | association solely by being a director. | ||||||
16 | (d) A debt, obligation, or other liability of a limited | ||||||
17 | cooperative association is solely that of the association and | ||||||
18 | is not a debt, obligation, or liability of a director solely by | ||||||
19 | reason of being a director. An individual is not personally | ||||||
20 | liable, directly or indirectly, for an obligation of an | ||||||
21 | association solely by reason of being a director. | ||||||
22 | (e) Directors shall be elected for terms determined by the | ||||||
23 | bylaws by a majority vote of the assembly.
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24 | Section 55. Assembly. |
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1 | (a) A limited cooperative association must have an assembly | ||||||
2 | as constituted by the body of voting members. | ||||||
3 | (b) An individual is not an agent for a limited cooperative | ||||||
4 | association solely by being a member of the assembly. | ||||||
5 | (c) A debt, obligation, or other liability of a limited | ||||||
6 | cooperative association is solely that of the association and | ||||||
7 | is not a debt, obligation, or liability of a member of the | ||||||
8 | assembly solely by reason of being a voting member. An | ||||||
9 | individual is not personally liable, directly or indirectly, | ||||||
10 | for an obligation of an association solely by reason of being a | ||||||
11 | voting member.
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12 | Section 60. Dissolution. A limited cooperative association | ||||||
13 | may be dissolved only by either (1) a two-thirds vote of the | ||||||
14 | assembly, or (2) a vote of the assembly of a supermajority | ||||||
15 | threshold stated in the bylaws that is more than two-thirds. | ||||||
16 | The vote shall be in accordance with Section 55, and upon | ||||||
17 | dissolution its business and activities must be wound up in the | ||||||
18 | manner provided under the Limited Liability Company Act for a | ||||||
19 | limited liability company.
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20 | Section 65. Conversion. A limited cooperative association | ||||||
21 | may convert into any form of entity permitted if the board of | ||||||
22 | directors of the limited cooperative association adopts a plan | ||||||
23 | of conversion and the assembly adopts such a plan by a | ||||||
24 | two-thirds majority vote.
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1 | Section 70. Exemption from securities laws. Any security, | ||||||
2 | patronage refund, per unit retain certificate, or evidence of | ||||||
3 | membership issued or sold by a cooperative association as an | ||||||
4 | investment in its stock or capital to the members of a | ||||||
5 | cooperative association formed under this Act or a similar law | ||||||
6 | of any other state and authorized to transact business or | ||||||
7 | conduct activities in this State is exempt from the | ||||||
8 | requirements of the Illinois Securities Law of 1953. Such | ||||||
9 | securities, patronage refunds, per unit retain certificates, | ||||||
10 | or evidence of membership may be sold lawfully by the issuer or | ||||||
11 | its members or salaried employees without the necessity of | ||||||
12 | being registered as a broker or dealer under the Illinois | ||||||
13 | Securities Law of 1953.
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14 | Section 90. The Co-operative Act is amended by changing | ||||||
15 | Section 22 as follows:
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16 | (805 ILCS 310/22) (from Ch. 32, par. 326)
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17 | Sec. 22. No corporation or association hereafter organized | ||||||
18 | or doing
business for profit in this State shall be entitled to | ||||||
19 | use the term
"Co-operative" as a part of its corporate or other | ||||||
20 | business name or title
unless it has complied with the | ||||||
21 | provisions of this Act, except (1) a corporation
organized | ||||||
22 | under the Business Corporation Act of 1983 for the purpose of | ||||||
23 | ownership or administration of residential property on
a |
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1 | cooperative basis, or (2) a cooperative corporation organized | ||||||
2 | under the General Not For Profit Corporation Act of 1986 or its | ||||||
3 | predecessor or successor statutes , or (3) a limited cooperative | ||||||
4 | association organized under the Limited Cooperative | ||||||
5 | Association Act . Any corporation
or association violating the | ||||||
6 | provision of this Section may be enjoined from
doing business | ||||||
7 | under such name at the instance of any shareholder of any
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8 | association or corporation organized under this Act.
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9 | (Source: P.A. 95-368, eff. 8-23-07.)
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10 | Section 95. The Illinois Securities Law of 1953 is amended | ||||||
11 | by changing Section 3 as follows:
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12 | (815 ILCS 5/3) (from Ch. 121 1/2, par. 137.3)
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13 | Sec. 3.
The provisions of Sections 2a, 5, 6 and 7 of this | ||||||
14 | Act shall not
apply to any of the following securities:
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15 | A. Any security (including a revenue obligation) issued or | ||||||
16 | guaranteed
by the United States, any state, any political | ||||||
17 | subdivision of a
state, or any agency or corporation or other | ||||||
18 | instrumentality
of any one or more of the foregoing, or any | ||||||
19 | certificate of deposit for
any such security.
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20 | B. Any security issued or guaranteed by Canada, any | ||||||
21 | Canadian province,
any political subdivision of any such | ||||||
22 | province, any agency or corporation
or other instrumentality of | ||||||
23 | one or more of the foregoing, or any other
foreign government | ||||||
24 | with which the United States then maintains diplomatic
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1 | relations, if the security is recognized as a valid obligation | ||||||
2 | by the issuer
or guarantor.
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3 | C. (1) Any security issued by and representing an interest | ||||||
4 | in or a debt of,
or guaranteed by, any bank or savings bank, | ||||||
5 | bank holding company, or credit
union
organized under the laws | ||||||
6 | of
the United States, or any bank, savings bank, savings | ||||||
7 | institution or trust
company organized and supervised under the | ||||||
8 | laws of any state, or any
interest or participation in any | ||||||
9 | common trust fund or similar fund
maintained by any such bank, | ||||||
10 | savings bank, savings institution or trust
company exclusively | ||||||
11 | for the collective investment and reinvestment of
assets | ||||||
12 | contributed thereto by such bank, savings bank, savings | ||||||
13 | institution
or trust company or any affiliate thereof, in its | ||||||
14 | capacity as fiduciary,
trustee, executor, administrator or | ||||||
15 | guardian.
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16 | (2) Any security issued or guaranteed to both principal and | ||||||
17 | interest by
an international bank of which the United States is | ||||||
18 | a member.
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19 | D. (1) Any security issued by and representing an interest | ||||||
20 | in or a debt
of, or guaranteed by, any federal savings and loan | ||||||
21 | association, or any
savings and loan association or building | ||||||
22 | and loan association organized and
supervised under the laws of | ||||||
23 | any state.
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24 | (2) Any security issued or guaranteed by any federal credit
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25 | union or any credit union, industrial loan association, or | ||||||
26 | similar organization
organized and supervised under the laws of |
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1 | any state.
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2 | E. Any security issued or guaranteed by any railroad, other | ||||||
3 | common
carrier, public utility or holding company where such | ||||||
4 | issuer or guarantor
is subject to the jurisdiction of the | ||||||
5 | Interstate Commerce Commission or
successor entity, or is
a | ||||||
6 | registered holding company under the Public Utility Holding | ||||||
7 | Company Act
of 1935 or a subsidiary of such a company within | ||||||
8 | the meaning of that Act,
or is regulated in respect of its | ||||||
9 | rates and charges by a governmental
authority of the United | ||||||
10 | States or any state, or is regulated in respect of
the issuance | ||||||
11 | or guarantee of the security by a governmental authority of
the | ||||||
12 | United States, any state, Canada, or any Canadian province.
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13 | F. Equipment trust certificates in respect of equipment | ||||||
14 | leased or
conditionally sold to a person, if securities issued | ||||||
15 | by such person
would be exempt under subsection E of this | ||||||
16 | Section.
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17 | G. Any security which at the time of sale
is listed or | ||||||
18 | approved for
listing upon notice of issuance on the New York | ||||||
19 | Stock Exchange, Inc., the
American Stock Exchange, Inc., the | ||||||
20 | Pacific Stock Exchange, Inc., the
Chicago Stock Exchange, Inc., | ||||||
21 | the Chicago Board of Trade, the
Philadelphia
Stock Exchange, | ||||||
22 | Inc., the Chicago Board Options Exchange, Incorporated, the | ||||||
23 | National Market System of the Nasdaq Stock Market, or
any other | ||||||
24 | exchange, automated quotation system or board of trade which | ||||||
25 | the
Secretary of State, by rule or regulation, deems to have | ||||||
26 | substantially
equivalent standards for listing or designation |
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1 | as required by any such
exchange, automated quotation system or | ||||||
2 | board of trade; and securities
senior or of substantially equal | ||||||
3 | rank, both as to dividends or interest and
upon liquidation, to | ||||||
4 | securities so listed or designated; and warrants and
rights to | ||||||
5 | purchase any of the foregoing; provided, however, that this
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6 | subsection G shall not apply to investment fund shares or | ||||||
7 | securities of
like character, which are being continually | ||||||
8 | offered at a price or prices
determined in accordance with a | ||||||
9 | prescribed formula.
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10 | The Secretary of State may, after notice and opportunity | ||||||
11 | for hearing,
revoke the exemption afforded by this
subparagraph | ||||||
12 | with respect to any securities by issuing an order
if the | ||||||
13 | Secretary of State finds that the further sale of the
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14 | securities in this State would work or tend to work a fraud on | ||||||
15 | purchasers of
the securities.
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16 | H. Any security issued by a person organized and operated | ||||||
17 | not for
pecuniary profit and exclusively for religious, | ||||||
18 | educational, benevolent,
fraternal, agricultural, charitable, | ||||||
19 | athletic, professional, trade, social
or reformatory purposes, | ||||||
20 | or as a chamber of commerce or local industrial
development | ||||||
21 | corporation, or for more than one of said purposes and no part
| ||||||
22 | of the net earnings of which inures to the benefit of any | ||||||
23 | private
stockholder or member.
| ||||||
24 | I. Instruments evidencing indebtedness under an agreement | ||||||
25 | for the
acquisition of property under contract of conditional | ||||||
26 | sale.
|
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| |||||||
1 | J. A note secured by a first mortgage upon tangible | ||||||
2 | personal or real
property when such mortgage is made, assigned, | ||||||
3 | sold, transferred and
delivered with such note or other written | ||||||
4 | obligation secured by such
mortgage, either to or for the | ||||||
5 | benefit of the purchaser or lender; or
bonds or notes not more | ||||||
6 | than 10 in number secured by a first mortgage
upon the title in | ||||||
7 | fee simple to real property if the aggregate principal
amount | ||||||
8 | secured by such mortgage does not exceed $500,000 and also does | ||||||
9 | not
exceed 75% of the fair market value of such real property.
| ||||||
10 | K. A note or notes not more than 10 in number secured by a | ||||||
11 | junior
mortgage lien if the aggregate principal amount of the | ||||||
12 | indebtedness
represented thereby does not exceed 50% of the | ||||||
13 | amount of the then
outstanding prior lien indebtedness and | ||||||
14 | provided that the total amount
of the indebtedness (including | ||||||
15 | the indebtedness represented by the
subject junior mortgage | ||||||
16 | note or notes) shall not exceed 90% of the fair
market value of | ||||||
17 | the property securing such indebtedness; and provided
further | ||||||
18 | that each such note or notes shall bear across the face thereof
| ||||||
19 | the following legend in letters at least as large as 12 point
| ||||||
20 | type: "THIS NOTE IS SECURED BY A JUNIOR MORTGAGE".
| ||||||
21 | L. Any negotiable promissory note or draft, bill of | ||||||
22 | exchange or
bankers' acceptance which arises out of a current | ||||||
23 | transaction or the
proceeds of which have been or are to be | ||||||
24 | used for current transactions, and
which evidences an | ||||||
25 | obligation to pay cash within 9 months of the date of
issuance | ||||||
26 | exclusive of days of grace, or any renewal of such note, draft,
|
| |||||||
| |||||||
1 | bill or acceptance which is likewise limited, or any guarantee | ||||||
2 | of such
note, draft, bill or acceptance or of any such renewal, | ||||||
3 | provided that the
note, draft, bill, or acceptance is a | ||||||
4 | negotiable security eligible for
discounting by banks that are | ||||||
5 | members of the Federal Reserve System. Any
instrument
exempted | ||||||
6 | under this subsection from the requirement of Sections 5, 6, | ||||||
7 | and 7
of this Act shall bear across the face thereof the | ||||||
8 | following
legend in letters at least as large as 12 point type: | ||||||
9 | "THIS INSTRUMENT
IS NEITHER GUARANTEED, NOR IS THE ISSUANCE | ||||||
10 | THEREOF REGULATED BY ANY AGENCY
OR DEPARTMENT OF THE STATE OF | ||||||
11 | ILLINOIS OR THE UNITED STATES.". However,
the foregoing legend | ||||||
12 | shall not be required with respect to any such instrument:
| ||||||
13 | (i) sold to a person described in subsection C or H of | ||||||
14 | Section 4 of
this Act;
| ||||||
15 | (ii) sold to a "Qualified Institutional Buyer" as that | ||||||
16 | term is defined
in Rule 144a adopted under the Securities | ||||||
17 | Act of 1933;
| ||||||
18 | (iii) where the minimum initial subscription for the | ||||||
19 | purchase of such
instrument is $100,000 or more; or
| ||||||
20 | (iv) issued by an issuer that has any class of | ||||||
21 | securities registered
under Section 12 of the Securities | ||||||
22 | Exchange Act of 1934 or has any
outstanding class of | ||||||
23 | indebtedness rated in one of the 3 highest categories
by a | ||||||
24 | rating agency designated by the Department;
| ||||||
25 | M. Any security issued by and representing an interest in | ||||||
26 | or a debt of,
or guaranteed by, any insurance company organized |
| |||||||
| |||||||
1 | under the laws of any
state.
| ||||||
2 | N. Any security issued pursuant to (i) a written | ||||||
3 | compensatory benefit plan
(including without limitation, any | ||||||
4 | purchase, savings, option, bonus, stock
appreciation, profit | ||||||
5 | sharing, thrift, incentive, pension, or similar plan) and
| ||||||
6 | interests in such plans established by one or more of the | ||||||
7 | issuers thereof or
its parents or majority-owned subsidiaries | ||||||
8 | for the participation of their
employees, directors, general | ||||||
9 | partners, trustees (where the issuer is a
business trust), | ||||||
10 | officers, or consultants or advisers of such issuers or its
| ||||||
11 | parents or majority-owned subsidiaries, provided that bona | ||||||
12 | fide services are
rendered by consultants or advisers and those | ||||||
13 | services are not in
connection with the offer and sale of | ||||||
14 | securities in a capital-raising
transaction or (ii) a written | ||||||
15 | contract relating to the compensation of any
such person.
| ||||||
16 | O. Any option, put, call, spread or straddle issued by a | ||||||
17 | clearing
agency registered as such under the Federal 1934 Act, | ||||||
18 | if the security,
currency, commodity, or other interest | ||||||
19 | underlying the option, put, call,
spread or straddle is not | ||||||
20 | required to be registered under Section 5.
| ||||||
21 | P. Any security which meets all of the following | ||||||
22 | conditions:
| ||||||
23 | (1) If the issuer is not organized under the laws of | ||||||
24 | the United States
or a state, it has appointed a duly | ||||||
25 | authorized agent in the United States
for service of | ||||||
26 | process and has set forth the name and address of the agent
|
| |||||||
| |||||||
1 | in its prospectus.
| ||||||
2 | (2) A class of the issuer's securities is required to | ||||||
3 | be and is registered
under Section 12 of the Federal 1934 | ||||||
4 | Act, and has been so registered for
the three years | ||||||
5 | immediately preceding the offering date.
| ||||||
6 | (3) Neither the issuer nor a significant subsidiary has | ||||||
7 | had a material
default during the last seven years, or for | ||||||
8 | the period of the issuer's
existence if less than seven | ||||||
9 | years, in the payment of (i) principal,
interest, dividend, | ||||||
10 | or sinking fund installment on preferred stock or
| ||||||
11 | indebtedness for borrowed money, or (ii) rentals under | ||||||
12 | leases with terms of
three years or more.
| ||||||
13 | (4) The issuer has had consolidated net income, before | ||||||
14 | extraordinary items
and the cumulative effect of | ||||||
15 | accounting changes, of at least $1,000,000 in
four of its | ||||||
16 | last five fiscal years including its last fiscal year; and | ||||||
17 | if
the offering is of interest bearing securities, has had | ||||||
18 | for its last fiscal
year, net income, before deduction for | ||||||
19 | income taxes and depreciation, of
at least 1-1/2 times the | ||||||
20 | issuer's annual interest expense, giving effect
to the | ||||||
21 | proposed offering and the intended use of the proceeds. For | ||||||
22 | the
purposes of this clause "last fiscal year" means the | ||||||
23 | most recent year for
which audited financial statements are | ||||||
24 | available, provided that such statements
cover a fiscal | ||||||
25 | period ended not more than 15 months from the commencement
| ||||||
26 | of the offering.
|
| |||||||
| |||||||
1 | (5) If the offering is of stock or shares other than | ||||||
2 | preferred stock or
shares, the securities have voting | ||||||
3 | rights and the rights include (i) the
right to have at | ||||||
4 | least as many votes per share, and (ii) the right to vote
| ||||||
5 | on at least as many general corporate decisions, as each of | ||||||
6 | the issuer's
outstanding classes of stock or shares, except | ||||||
7 | as otherwise required by law.
| ||||||
8 | (6) If the offering is of stock or shares, other than | ||||||
9 | preferred stock or
shares, the securities are owned | ||||||
10 | beneficially or of record, on any date within
six months | ||||||
11 | prior to the commencement of the offering, by at least | ||||||
12 | 1,200
persons, and on that date there are at least 750,000 | ||||||
13 | such shares outstanding
with an aggregate market value, | ||||||
14 | based on the average bid price for that day, of
at least | ||||||
15 | $3,750,000. In connection with the determination of the | ||||||
16 | number
of persons who are beneficial owners of the stock or | ||||||
17 | shares of an issuer,
the issuer or dealer may rely in good | ||||||
18 | faith for the purposes of this clause
upon written | ||||||
19 | information furnished by the record owners.
| ||||||
20 | (7) The issuer meets the conditions specified in | ||||||
21 | paragraphs (2), (3)
and (4) of this subsection P if either | ||||||
22 | the issuer or the issuer and
the
issuer's predecessor, | ||||||
23 | taken together, meet such conditions and if: (a) the
| ||||||
24 | succession was primarily for the purpose of changing the | ||||||
25 | state of incorporation
of the predecessor or forming a | ||||||
26 | holding company and the assets and liabilities
of the |
| |||||||
| |||||||
1 | successor at the time of the succession were substantially | ||||||
2 | the same
as those of the predecessor; or (b) all | ||||||
3 | predecessors met such conditions at the
time of succession | ||||||
4 | and the issuer has continued to do so since the succession.
| ||||||
5 | Q. Any security appearing on the List of OTC Margin Stocks
| ||||||
6 | published by
the Board of Governors of the Federal Reserve | ||||||
7 | System
or any security incorporated by reference to the List
of | ||||||
8 | OTC Margin Stocks by the Board of Governors of the
Federal | ||||||
9 | Reserve System; any other securities
of the same issuer which | ||||||
10 | are of senior or substantially equal rank; any
securities | ||||||
11 | called for by subscription rights or warrants so listed or
| ||||||
12 | approved; or any warrants or rights to purchase or subscribe to | ||||||
13 | any of the
foregoing.
| ||||||
14 | R. Any security issued by a bona fide limited cooperative | ||||||
15 | association or by a bona fide agricultural cooperative
| ||||||
16 | operating
in this State that is organized under the laws of | ||||||
17 | this State or as a
foreign cooperative association organized | ||||||
18 | under the law of another state
that has been duly qualified to | ||||||
19 | transact business in this State.
| ||||||
20 | (Source: P.A. 90-70, eff. 7-8-97; 91-809, eff. 1-1-01.)
| ||||||
21 | Section 99. Effective date. This Act takes effect upon | ||||||
22 | becoming law.
|