Iowa Code 501A.902 – Assignment of financial rights
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1.
Assignment of financial rights permitted.
Except as provided in subsection 3, a member‘s financial rights are transferable in whole or in part.
Terms Used In Iowa Code 501A.902
- Articles: means the articles of organization of a cooperative as originally filed or subsequently amended as provided in this chapter. See Iowa Code 501A.102
- Cooperative: means a business association organized under this chapter. See Iowa Code 501A.102
- Member: means a person or entity reflected on the books of a cooperative as the owner of governance rights of a membership interest of the cooperative and includes patron and nonpatron members. See Iowa Code 501A.102
- Member control agreement: means an instrument which controls the investment or governance of nonpatron members, which may be executed by the board and one or more nonpatron members and which may provide for their individual or collective rights to elect directors or to participate in the distribution or allocation of profits or losses. See Iowa Code 501A.102
- Membership interest: includes patron membership interests and nonpatron membership interests. See Iowa Code 501A.102
- person: means individual, corporation, limited liability company, government or governmental subdivision or agency, business trust, estate, trust, partnership or association, or any other legal entity. See Iowa Code 4.1
- Uniform Commercial Code: A set of statutes enacted by the various states to provide consistency among the states' commercial laws. It includes negotiable instruments, sales, stock transfers, trust and warehouse receipts, and bills of lading. Source: OCC
2.
Effect of assignment of financial rights.
An assignment of a member’s financial rights entitles the assignee to receive, to the extent assigned, only the share of profits and losses and the distributions to which the assignor would otherwise be entitled. An assignment of a member’s financial rights does not dissolve the cooperative and does not entitle or empower the assignee to become a member, to exercise any governance rights, to receive any notices from the cooperative, or to cause dissolution. The assignment shall not allow the assignee to control the member’s exercise of governance or voting rights.
3.
Restrictions of assignment of financial rights.
a. A restriction on the assignment of financial rights may be imposed in the articles, in the bylaws, in a member control agreement, by a resolution adopted by the members, by an agreement among or other written action by the members, or by an agreement among or other written action by the members and the cooperative. A restriction is not binding with respect to financial rights reflected in the required records before the adoption of the restriction, unless the owners of those financial rights are parties to the agreement or voted in favor of the restriction.
b. Subject to paragraph “c”, a written restriction on the assignment of financial rights that is not manifestly unreasonable under the circumstances and is noted conspicuously in the required records may be enforced against the owner of the restricted financial rights or a successor or transferee of the owner, including a pledgee or a legal representative. Unless noted conspicuously in the required records, a restriction, even though permitted by this section, is ineffective against a person without knowledge of the restriction.
c. With regard to restrictions on the assignment of financial rights, a would-be assignee of financial rights is entitled to rely on a statement of membership interest issued by the cooperative under section 501A.903. A restriction on the assignment of financial rights, which is otherwise valid and in effect at the time of the issuance of a statement of membership interest but which is not reflected in that statement, is ineffective against an assignee who takes an assignment in reliance on the statement.
d. Notwithstanding any provision of law, articles, bylaws, member control agreement, other agreement, resolution, or action to the contrary, a security interest in a member’s financial rights may be foreclosed and otherwise enforced, and a secured party may assign a member’s financial rights in accordance with the uniform commercial code, chapter 554, without the consent or approval of the member whose financial rights are subject to the security interest.