What this publication answers
Missouri cooperatives may organize under different state statutes. Chapter 351.1000 to 351.1228, known as the Missouri Cooperative Associations Act, is Missouri’s modern cooperative statute and is especially important for cooperatives that need flexibility in purpose, membership, governance, capital structure, and outside investment.
This publication answers four basic questions:
- What type of cooperative is Chapter 351 designed to support?
- Who can be a member?
- What requirements are created for voting, board governance, and member control?
- What does Chapter 351 allow—and not allow—when it comes to capital, outside investors, and patronage?
Statutory background
Missouri’s Cooperative Associations Act became effective on August 28, 2011. It is located within Chapter 351, Missouri’s General and Business Corporations chapter, but it is a separate cooperative statute for entities organized under Sections 351.1000 to 351.1228.
Chapter 351 was adopted as a modern cooperative act. It was designed to provide a flexible statutory framework for cooperatives while preserving important cooperative features such as member benefit, patronage, board governance, member voting, and member rights.
Several current provisions are especially important for readers to understand:
- Chapter 351 allows a cooperative to conduct or promote any lawful business or purpose for the mutual welfare of its members.
- A cooperative may be organized by one or more persons. Organizers may include individuals or business entities, and the organizers do not have to be members of the cooperative.
- The statute requires bylaws that address the cooperative’s business affairs and structure, member qualifications and rights, capital structure, voting rights, tax classification, allocation of profits and losses, and distribution of cash.
- Chapter 351 allows patron and nonpatron membership interests. It also allows membership interests to be divided into classes or series with different financial rights, governance rights, preferences, redemption terms, and voting rights.
- Chapter 351 gives the cooperative broad operating powers, including the authority to borrow money, make advances to members or patrons, enter contracts, use third-party management, form subsidiaries or affiliated entities, and hold ownership interests in other business entities.
These provisions matter because Chapter 351 is designed less as a statute for one narrow cooperative activity and more as a flexible framework for many cooperative purposes and structures.
Statute summary
Chapter 351 is Missouri’s modern cooperative association statute. It is designed for cooperatives that need flexibility in who can participate, what business the cooperative can conduct, how member rights are structured, and how capital can be raised.
Chapter 351 allows a cooperative to conduct or promote any lawful business or purpose for the mutual welfare of its members. That broad purpose language means Chapter 351 may be used by cooperatives with many different stakeholder groups, business activities, and capital needs.
The statute uses the term “membership interests” rather than common or preferred stock. A membership interest may include financial rights, governance rights, and transfer rights, depending on the statute, articles, bylaws, and terms of the interest.
Chapter 351 also distinguishes between patron members and nonpatron members. Patron members conduct business with or through the cooperative. Nonpatron members may hold membership interests even though they do not conduct patronage with the cooperative. This makes Chapter 351 especially important for cooperatives considering outside capital, multiple membership classes, patronage-based voting, or a more customized governance and capital structure.
The types of cooperatives and activities Chapter 351 fits
Chapter 351 may fit groups that want to organize collectively to do accomplish a broad range of activities, from providing inputs, supplies, services, programs to facilitating production, distribution, marketing, and manufacturing. Speaking broadly, the cooperative can exist for any lawful purpose that aids, assists, or benefits the cooperative.
Chapter 351 may fit agricultural cooperatives, service cooperatives, purchasing cooperatives, processing cooperatives, shared-services cooperatives, producer groups, worker or service-provider groups, multi-stakeholder cooperatives, and cooperatives with more complex capital needs.
The statute is especially relevant when the organizers need flexibility in membership, voting, management, capital, or ownership rights.
Formation basics
Chapter 351 allows a cooperative to be organized by one or more persons. If an organizer is a business entity, the organizer is represented by an authorized officer or director. The organizers do not have to be members of the cooperative.
The cooperative’s name must include one of the required cooperative terms, such as “Cooperative,” “Association,” “Cooperative Association,” “Co-op,” or “C.A.” The name may not imply that the cooperative is a governmental agency.
The articles of incorporation must include the name of the cooperative, its purpose, the name and physical address of each organizer, any delayed effective date, the registered office and registered agent, and the cooperative’s period of duration if it is not perpetual. The purpose may include any lawful business for which a cooperative may be organized under the statute.
The articles are filed with the Missouri Secretary of State. A cooperative is formed when the articles and filing fee are filed with and stamped “Filed” by the secretary of state.
The bylaws are central to Chapter 351. They must govern the cooperative’s business affairs and structure, member qualifications and rights, and the classifications, allocations, and distributions of membership interests, unless those matters are already addressed in the articles or by statute.
The bylaws must also state the cooperative’s purpose, capital structure, tax classification, governance rights, voting rights, transferability of membership interests, allocation of profits and losses, distribution of cash, and recordkeeping for patron and, if authorized, nonpatron membership interests.
Membership: Who can belong?
Chapter 351 is not limited to agricultural producers or to a single type of cooperative participant. It allows broad membership structures and recognizes both patron and nonpatron members.
A patron member is a member that conducts patronage with the cooperative. Patronage means business, transactions, or services done by, for, through, or with the cooperative, as determined by the board.
A nonpatron member is a member that does not conduct patronage with the cooperative. A nonpatron membership interest does not require the holder to conduct patronage with the cooperative in order to receive distributions or other financial rights.
This distinction is one of the most important features of Chapter 351. It allows a cooperative to include people or entities that use the cooperative and, if authorized, people or entities that provide capital or hold financial rights without using the cooperative as patrons.
However, those rights are not self-defining. The cooperative’s articles and bylaws should make clear who may become a member, what rights each class of member has, what obligations each class has, how membership interests are issued, and how governance and financial rights are allocated.
Member control and voting
Chapter 351 allows voting rights to be designed through the statute, articles, and bylaws.
As a starting point, a patron member is entitled to one vote on matters voted upon by patron members. However, the articles or bylaws may allow patron members to have additional votes based on patronage criteria. These criteria may include a stipulated amount of business transacted with the cooperative, a stipulated amount of equity allocated to or held by the patron member, or a combination of methods allowed by the statute.
If the cooperative uses units, districts, or other member classifications, the articles or bylaws may also allow delegates to represent members at members’ meetings. Delegates may vote on the basis and with the number of votes prescribed in the articles or bylaws.
Nonpatron members may have voting rights according to the nonpatron membership interests granted in the articles or bylaws. In other words, nonpatron members do not automatically have the same voting rights as patron members, but they may be given voting rights if the governing documents provide them.
Chapter 351 also allows the articles or bylaws to give governance rights to a creditor, security holder, or other nonmembers. If those governance rights are not provided in the articles, bylaws, or statute, creditors, security holders, and other nonmembers do not have governance rights in the cooperative.
This flexibility is powerful, but it requires careful design. Organizers should not assume that “member control” will look the same in every Chapter 351 cooperative. The cooperative’s articles and bylaws determine much of the practical governance structure, including who votes, how voting power is allocated, and what rights nonpatron members or outside capital providers may have.
Board governance and management
A Chapter 351 cooperative is governed by its board. The board acts for and on behalf of the cooperative except for actions reserved to members, managers, the articles, the bylaws, or the statute.
Unless otherwise set forth in the articles or bylaws, the board must have at least five directors. However, a cooperative with 50 or fewer members may have three or more directors if provided in the articles or bylaws. Directors may also be divided into classes, which can allow staggered terms.
Chapter 351 also addresses the role of directors. Unless the articles or bylaws provide otherwise, a director may advocate for members or member groups, but each director’s fiduciary duty is to represent the best interests of the cooperative and all members collectively.
The board may elect a chair and one or more vice chairs. The board must elect or appoint a president and secretary unless the articles or bylaws provide otherwise. The board may also elect additional officers as authorized or required.
Chapter 351 permits the board to employ a chief executive officer to manage the day-to-day affairs and business of the cooperative. The board may also enter into an agreement with a third party to supply management services to the cooperative.
This management flexibility makes Chapter 351 especially relevant for cooperatives that anticipate professional management, third-party management contracts, complex operating arrangements, or customized board and officer structures.
Ownership, capital, and outside investors
Chapter 351 associations are organized around membership interests. A membership interest may include financial rights, governance rights, and rights to assign those rights, subject to the statute, articles, bylaws, and terms of the interest.
Chapter 351 expressly allows patron and nonpatron membership interests. Unless otherwise provided in the articles or bylaws, patron membership interests collectively must hold at least 50 percent of the cooperative’s financial rights.
Chapter 351 also allows membership interests to be divided into different classes or series. These classes or series may have different distribution rights, preferences, redemption rights, convertibility features, and full, partial, or no voting rights.
This makes Chapter 351 a flexible statute for cooperatives considering outside or non-user capital. A cooperative may create nonpatron membership interests for investors or other participants who do not conduct patronage with the cooperative. Those interests may carry financial rights and may, if the articles or bylaws provide, carry governance rights.
At the same time, this flexibility requires careful attention to cooperative identity and control. If outside investors or nonpatron members receive financial rights or voting rights, the cooperative must decide how much control and economic benefit should remain with patron members.
Chapter 351 provides tools for outside capital, but the cooperative’s governing documents determine how those tools are used. Chapter 351 also authorizes other capital tools, including borrowing, issuing bonds or other evidence of indebtedness, accepting contributions, using contribution agreements, investing and reinvesting funds, and forming or owning interests in subsidiary or affiliated business entities.
Patronage, marketing contracts, and member benefits
Chapter 351 uses the concept of patronage broadly. Patronage includes business, transactions, or services done by, for, through, or with the cooperative, as determined by the board.
Chapter 351 provides rules for allocating profits and losses and distributing cash or other assets. Unless the articles or bylaws provide otherwise, the board prescribes the allocation of profits and losses between patron membership interests collectively and other membership interests.
Unless otherwise stated in the articles or bylaws, allocation of profits to patron membership interests collectively may not be less than 50 percent of total profits in a fiscal year. In no event may that allocation be less than 15 percent of total profits in a fiscal year.
The same general structure applies to distributions of cash or other assets. Unless otherwise provided, the board prescribes distributions among membership interests. Unless otherwise stated in the articles or bylaws, distributions to patron membership interests collectively may not be less than 50 percent of total distributions in a fiscal year. In no event may distributions to patron membership interests collectively be less than 15 percent of total distributions in a year.
Chapter 351 also permits a cooperative to set aside a portion of net income allocated to patron membership interests to create or maintain a capital reserve. In addition, the board may retain portions of annual net income for promoting and encouraging the cooperative, meeting capital needs, and advancing the cooperative’s business purposes.
Net income allocated to patron members in excess of dividends on equity and additions to reserves is distributed to patron members on the basis of patronage. The cooperative may distribute net income in cash, capital credits, allocated patronage equities, revolving fund certificates, scrip, or its own or other securities, as determined by the board.
Chapter 351 may also allow non-member patrons to participate in distributions of net income payable to patron members if the bylaws provide for it.
Powers and operating authority
Chapter 351 gives cooperatives broad operating authority. A cooperative may perform every act necessary or proper to conduct its business or accomplish its purposes. It also has rights, powers, and privileges granted by Missouri law to business entities, except those inconsistent with the cooperative statute.
A Chapter 351 cooperative may act as agent for its members, enter contracts for itself or on behalf of members or patrons, contract for third-party management services, own and convey real and personal property, borrow money, issue bonds or other evidence of indebtedness, make advances to members or patrons, accept deposits or donations, loan money to or borrow money from members and cooperatives, and invest and reinvest funds.
Chapter 351 also expressly allows the cooperative to purchase, acquire, hold, or dispose of ownership interests in another business entity; form subsidiaries or affiliated entities; form special-purpose business entities to hold assets; and hold stock, equity interests, memberships, nonstock capital interests, and evidence of indebtedness in other business entities.
These powers make Chapter 351 useful for cooperatives that expect to use contracts, partnerships, related entities, shared assets, professional management, or more complex business arrangements.
Meetings, reporting, and tax-related treatments
A Chapter 351 cooperative generally holds a regular members’ meeting annually at a time determined by the board, unless the bylaws provide otherwise. The meeting is held at the cooperative’s principal place of business or another location determined by the bylaws or the board.
At the regular members’ meeting, the officers submit reports to members covering the cooperative’s business for the previous fiscal year, including the cooperative’s financial condition at the close of that year. Unless the statute, articles, or bylaws provide otherwise, directors are elected at the regular members’ meeting, except for directors elected at district or unit meetings.
Chapter 351 permits meetings by remote communication if authorized in the articles or bylaws or as determined by the board. The cooperative must use reasonable measures to verify member participation and provide members a reasonable opportunity to participate and vote when they are entitled to do so.
Chapter 351 also imposes detailed recordkeeping requirements. The cooperative must keep minutes, records of actions taken without meetings, waiver records, appropriate accounting records, current articles and bylaws, member records, lists of directors and officers, financial statements, and tax returns for the prior four tax years. Members have access to certain books and records at proper times upon written notice and for a proper cooperative purpose, subject to confidentiality and other statutory limits.
Chapter 351 requires the bylaws to state the cooperative’s taxation structure, including whether the cooperative elects to be taxed as a corporation or as a partnership. This tax-structure choice is an important design issue and should be considered alongside the cooperative’s ownership, patronage, capital, and distribution structure.
Some Chapter 351 cooperatives may also need to consider whether the New Generation Cooperative Incentive Tax Credit could apply to their activities and member investments. That tax credit has specific eligibility requirements and should not be assumed to apply simply because an entity is organized as a cooperative.
The fit of Chapter 351 to common cooperative activities
Chapter 351 may be a good fit when:
- the cooperative needs a broad lawful purpose;
- the cooperative wants flexibility in membership categories, including patron and nonpatron members;
- the cooperative may need outside or nonuser equity capital;
- the cooperative needs membership interests with different financial rights, voting rights, preferences, or redemption terms;
- the cooperative wants to allow patronage-based voting or other customized voting structures;
- the cooperative expects to use professional management, third-party management, subsidiaries, affiliated entities, or complex contracts;
- the cooperative needs detailed provisions on records, meetings, governance, allocations, distributions, and ownership interests.
Chapter 351 may be less suitable when:
- the organizers prefer a simpler statutory framework with fewer design choices;
- the cooperative does not need flexible membership interests, nonpatron members, or customized voting and financial rights;
- the cooperative does not have access to the legal, accounting, and governance support needed to design membership interests, voting rights, capital rights, and tax classification carefully;
- the flexibility of nonpatron investors or complex membership classes could create confusion about cooperative control and member benefit; or
- a more traditional cooperative statute better matches the cooperative’s purpose, membership, and capital needs.
Questions for organizers, members, and boards
Before organizing under Chapter 351, or in reviewing an existing cooperative’s alignment with the Chapter 351 statute, consider these questions:
- Who are the cooperative’s patron members, and what patronage will they conduct with or through the cooperative?
- Will the cooperative also have nonpatron members or outside capital providers?
- What financial rights and governance rights will each class of membership interest have?
- Should patron members have one vote each, patronage-based voting, equity-based additional votes, delegate voting, or another structure allowed by the statute?
- What voting rights, if any, should nonpatron members, creditors, security holders, or other nonmembers have?
- How much economic benefit should be allocated and distributed to patron members compared with nonpatron members or other membership interests?
- Should the cooperative use third-party management, subsidiaries, affiliates, or special-purpose entities?
- Do the articles and bylaws clearly state the cooperative’s purpose, capital structure, tax classification, governance rights, transfer rights, allocation rules, distribution rules, and recordkeeping obligations?
- Does Chapter 351 provide useful flexibility, or would another Missouri cooperative statute provide a better fit for the cooperative’s purpose and membership?
Bottom line
Chapter 351 is Missouri’s modern and flexible cooperative statute. It is well suited to cooperatives that need broad purposes, flexible membership structures, patron and nonpatron membership interests, customized voting rights, outside capital options, professional management, subsidiaries, affiliates, or detailed governance and capital design.
Its limits are practical rather than narrow. Chapter 351 offers many choices, and those choices must be made carefully. The statute can support a wide range of cooperative structures, but the cooperative’s articles, bylaws, board policies, tax classification, and member agreements must clearly explain how control, ownership, patronage, capital, and economic benefits will work.