(a) A cooperative may set aside a portion of net income allocated to the patron membership interests as the board determines advisable to create or maintain a capital reserve.
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Terms Used In Tennessee Code 43-38-902

  • Bylaws: means a written agreement described in §. See Tennessee Code 43-38-103
  • Cooperative: means an association organized under this title conducting business on a cooperative plan as provided under this chapter. See Tennessee Code 43-38-103
  • Distribution: means a direct or indirect transfer of money or other property, except its own membership interests, with or without consideration, or an incurrence or issuance of indebtedness, whether directly or indirectly, including through a guaranty, by a cooperative to or for the benefit of any of its members in respect of membership interests. See Tennessee Code 43-38-103
  • Fiscal year: The fiscal year is the accounting period for the government. For the federal government, this begins on October 1 and ends on September 30. The fiscal year is designated by the calendar year in which it ends; for example, fiscal year 2006 begins on October 1, 2005 and ends on September 30, 2006.
  • Member: means a person or entity reflected on the books of the cooperative as the owner of governance rights of a membership interest of the cooperative and includes patron and nonpatron members. See Tennessee Code 43-38-103
  • Patron: means a person or entity who conducts patronage business with the cooperative. See Tennessee Code 43-38-103
  • Patronage: means business, transactions, or services done for or with the cooperative as defined by the cooperative. See Tennessee Code 43-38-103
(b) In addition to a capital reserve, the board may, for patron membership interests:

(1) Set aside an amount not to exceed five percent (5%) of the annual net income of the cooperative for promoting and encouraging cooperative organization; and
(2) Establish and accumulate reserves for new buildings, machinery and equipment, depreciation, losses, and other proper purposes.
(c) Net income allocated to patron members in excess of dividends on equity and additions to reserves shall be distributed to patron members on the basis of patronage. A cooperative may establish allocation units, whether the units are functional, divisional, departmental, geographic, or otherwise, and pooling arrangements, and may account for and distribute net income to patrons on the basis of allocation units and pooling arrangements. A cooperative may offset the net loss of an allocation unit or pooling arrangement against the net income of other allocation units or pooling arrangements.
(d) Distribution of net income shall be made at least annually. The board shall present to the members at their annual meeting a report covering the operations of the cooperative during the preceding fiscal year.
(e) A cooperative may distribute net income to patron members in cash, capital credits, allocated patronage equities, revolving fund certificates, or its own or other securities.
(f) The cooperative may provide in the bylaws that nonmember patrons are allowed to participate in the distribution of net income payable to patron members on equal terms with patron members.
(g) If a nonmember patron with patronage credits is not qualified or eligible for membership, a refund due may be credited to the patron’s individual account. The board may issue a certificate of interest to reflect the credited amount. After the patron is issued a certificate of interest, the patron may participate in the distribution of income on the same basis as a patron member.
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