CHAPTER 47-17
COOPERATIVES--DIRECTORS, OFFICERS AND EMPLOYEES
47-17-1 Board of directors as manager of cooperative--Qualifications of directors.
47-17-2 Compensation of directors.
47-17-3 Number of directors.
47-17-4 First directors as temporary board--Election of permanent directors--Territorial directors--Directors' terms of office--Alternates.
47-17-4.1 Use of funds or employee activity to promote election to office prohibited--Directors and officers permitting violation subject to civil fine.
47-17-5 Removal of directors.
47-17-6 Vacancies on board of directors.
47-17-7 Liability of directors for improper distribution of assets.
47-17-7.1 Directors not liable for distribution in good faith reliance on financial statements or accountant's representation.
47-17-8 Board meetings.
47-17-9 Quorum at meeting.
47-17-10 Waiver of notice of meeting.
47-17-11 Specification of purpose of meeting.
47-17-12 Directors' executive committee--Powers of committee.
47-17-13 Action without meeting of directors--Written consent.
47-17-14 Principal officers of cooperative--Election by board of directors.
47-17-15 Other officers.
47-17-16 Authority of officers.
47-17-17 Removal of officers.
47-17-18 Compensation of officers.
47-17-19 47-17-19. Repealed by SL 2007, ch 260, § 8.
47-17-20 Filing false document as felony.
47-17-21 Indemnification of directors, officers, agents, and employees against liability under certain circumstances.
47-17-22 Circumstances under which directors, officers, agents, and employees may not be indemnified.
47-17-23 Indemnification of successful director, officer, agent, or employee for expenses incurred in proceeding.
47-17-1. Board of directors as manager of cooperative--Qualifications of directors.
The business and affairs of a cooperative shall be managed by a board of directors. Each director shall be a member or a representative of a member who is an entity member. The bylaws shall prescribe any other qualifications for directors and may provide that directors be from specified territorial districts.
Source: SDC 1939, § 11.1123 (1) as enacted by SL 1965, ch 23, § 1; SL 2018, ch 260, § 8.
47-17-2. Compensation of directors.
Unless the bylaws of a cooperative provide otherwise, only the members may establish compensation or other benefits for a director, not available generally to officers and employees, for services as director.
Source: SDC 1939, § 11.1128 (1) as enacted by SL 1965, ch 23, § 1.
47-17-3. Number of directors.
The number of directors of a cooperative shall not be less than five, provided that in a cooperative with less than fifty members, the number of directors shall not be less than three. Subject to such limitation, the number shall be fixed in the articles, or if the articles so provide, in the bylaws.
Source: SDC 1939, § 11.1123 (2) as enacted by SL 1965, ch 23, § 1.
47-17-4. First directors as temporary board--Election of permanent directors--Territorial directors--Directors' terms of office--Alternates.
The directors of a cooperative constituting the temporary board, named in the articles, shall hold office until the first member meeting. At that meeting and thereafter, at or in conjunction with the annual member meeting, directors shall be elected by a majority of the members voting in the manner and for the terms provided in the bylaws. If the bylaws provide that directors be from specified territorial districts, the articles may limit voting for any director to members from within the territorial district from which the director is to be elected. The bylaws may provide that directors may be elected at district director election meetings held for said purpose. Unless the bylaws provide otherwise, a director's term of office is one year. Each director holds office for the term for which elected and until the director's successor takes office. The bylaws may permit selection of alternates to take the place of directors absent at a meeting of the board.
Source: SDC 1939, § 11.1123 (3) as enacted by SL 1965, ch 23, § 1; SL 2000, ch 220, § 5; SL 2021, ch 194, § 6.
47-17-4.1. Use of funds or employee activity to promote election to office prohibited--Directors and officers permitting violation subject to civil fine.
No cooperative funds may be used, nor any stock issued, to promote, encourage, or publicly favor the candidacy, election, or reelection of any member to any elective office within the cooperative. No employee of a cooperative may promote, encourage or publicly favor the candidacy, election, or reelection of any member to any elective office within the cooperative, provided that this shall not be construed to deprive employees, who are also members, of the right to vote in cooperative elections.
Directors and officers of any cooperative who knowingly permit such use of funds or employee activity are subject to a civil fine of not more than five hundred dollars for each offense.
Source: SL 1968, ch 11, §§ 1, 2; SL 1983, ch 15, § 40; SL 1983, ch 331, § 4.
47-17-5. Removal of directors.
Unless the bylaws of a cooperative provide otherwise, a director may be removed upon a majority vote of all members.
Source: SDC 1939, § 11.1123 (4) as enacted by SL 1965, ch 23, § 1.
47-17-6. Vacancies on board of directors.
Unless the bylaws of a cooperative provide otherwise, any vacancy existing in the board of directors may be filled until the next annual meeting by appointment by a majority vote of the directors then in office.
Source: SDC 1939, § 11.1123 (5) as enacted by SL 1965, ch 23, § 1.
47-17-7. Liability of directors for improper distribution of assets.
Directors of cooperatives who negligently or in bad faith vote for any distribution of assets contrary to chapters 47-15 to 47-20, inclusive, or the articles are jointly and severally liable to the cooperative for the value of assets distributed in excess of the amount which could have been distributed without violating said chapters or the articles.
Source: SDC 1939, § 11.1129 as enacted by SL 1965, ch 23, § 1.
47-17-7.1. Directors not liable for distribution in good faith reliance on financial statements or accountant's representation.
A director of a cooperative shall not be liable for any unauthorized dividend or distribution of assets if he relied and acted in good faith upon financial statements of the cooperative represented to him to be correct by the president or the officer of the cooperative having charge of his books of account, or stated in a written report by a certified public accountant failing to reflect the financial condition of the cooperative, nor shall he be so liable if in good faith in determining the amount available for any such dividend or distribution he considered the assets to be of their book value.
Source: SL 1978, ch 338, § 3.
47-17-8. Board meetings.
The board of directors of a cooperative shall provide that board meetings are held upon such notice as is prescribed in the bylaws.
Unless the articles of incorporation or bylaws provide otherwise, a member of the board of directors or any committee designated by the board of directors may participate in a meeting of such board or committee by any means of communication through which the member, delegate, or alternate may communicate and vote at the meeting. Participation by such means of communication constitutes presence or attendance at the meeting.
Source: SDC 1939, § 11.1124 (1) as enacted by SL 1965, ch 23, § 1; SL 1997, ch 257, § 1; SL 2021, ch 194, § 7.
47-17-9. Quorum at meeting.
Unless a greater number is required in the bylaws of a cooperative, a majority of the directors in office shall constitute a quorum for transaction of business. Unless a greater number is required in the bylaws, an act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the board.
Source: SDC 1939, § 11.1124 (2) as enacted by SL 1965, ch 23, § 1.
47-17-10. Waiver of notice of meeting.
A signed waiver of notice of a meeting of the board of directors of a cooperative is equivalent to personal notice to the individual signing the waiver. Attendance at a meeting is a waiver of notice of the meeting, except when a director attends the meeting and objects to the transaction of business because the meeting was not lawfully convened.
Source: SDC 1939, § 11.1124 (3) as enacted by SL 1965, ch 23, § 1; SL 2018, ch 260, § 9.
47-17-11. Specification of purpose of meeting.
Unless the bylaws of a cooperative provide otherwise, the purposes of any meeting of the board of directors need not be specified in the notice or waiver of notice of such meeting.
Source: SDC 1939, § 11.1124 (4) as enacted by SL 1965, ch 23, § 1.
47-17-12. Directors' executive committee--Powers of committee.
If the bylaws of a cooperative so provide, the board of directors may elect an executive committee to consist of three or more directors. When the board is not in session, such committee shall have all powers of the board except in respect to:
(1) Powers reserved by the board to itself;
(2) Apportionment or distribution of proceeds;
(3) Election of officers;
(4) Filling of vacancies in the board; and
(5) Amendments to the bylaws.
The board may elect other directors as alternates for members of the executive committee.
Source: SDC 1939, § 11.1125 as enacted by SL 1965, ch 23, § 1.
47-17-13. Action without meeting of directors--Written consent.
Any action which may be taken at a meeting of the directors or executive committee of a cooperative may be taken without a meeting if a writing setting forth and approving the action taken shall be signed by all of the directors or executive committee members entitled to vote on such action. In such cases, such consent shall have the same force and effect as if a meeting had been held.
Source: SDC 1939, § 11.1126 as enacted by SL 1965, ch 23, § 1.
47-17-14. Principal officers of cooperative--Election by board of directors.
The principal officers of a cooperative are a president, one or more vice-presidents as prescribed in the bylaws, a secretary, and a treasurer. The principal officers shall be elected annually by the board of directors at a time and manner pursuant to the bylaws. Each principal officer except the secretary and the treasurer shall be a director of the cooperative. The offices of secretary and treasurer may be combined in one individual.
Source: SDC 1939, § 11.1127 (1) as enacted by SL 1965, ch 23, § 1; SL 2018, ch 260, § 10.
47-17-15. Other officers.
Any officer of a cooperative other than those mentioned in § 47-17-14 may be chosen by the board of directors or as provided in the bylaws.
Source: SDC 1939, § 11.1127 (2) as enacted by SL 1965, ch 23, § 1.
47-17-16. Authority of officers.
All officers of a cooperative shall have such authority and perform such duties as the bylaws provide, or as the board of directors may determine not inconsistent with the bylaws.
Source: SDC 1939, § 11.1127 (3) as enacted by SL 1965, ch 23, § 1.
47-17-17. Removal of officers.
Any officer of a cooperative may be removed by the board of directors whenever in its judgment the best interests of the cooperative will be served thereby. Election or appointment shall not of itself create contract rights.
Source: SDC 1939, § 11.1127 (3) as enacted by SL 1965, ch 23, § 1.
47-17-18. Compensation of officers.
Unless the bylaws of a cooperative provide otherwise, for prior or future services of any officer or employee, the board of directors may provide reasonable compensation, pension, bonuses, or other benefits to such officer or employee, and pension or other benefits to a member of his family or his beneficiaries. No officer or employee who is a director may take part in the vote on his salary for services rendered the cooperative.
Source: SDC 1939, § 11.1128 (2) as enacted by SL 1965, ch 23, § 1.
47-17-20. Filing false document as felony.
A person who files, or causes to be filed, a document required to be filed by this chapter, which he knows to be materially false in any respect, is guilty of a Class 6 felony.
Source: SL 1983, ch 15, § 39.
47-17-21. Indemnification of directors, officers, agents, and employees against liability under certain circumstances.
Except as otherwise provided in § 47-17-22, a cooperative may indemnify a director, officer, agent, or employee who is a party to a proceeding by reason of being a director, officer, agent, or employee, against liability incurred in the proceeding if the director, officer, agent, or employee:
(1) Acted in good faith; and
(2) Reasonably believed:
(a) In the case of conduct in an official capacity, that the conduct was in the best interests of the cooperative; and
(b) In all other cases, that the conduct was at least not opposed to the best interests of the cooperative; and
(3) In the case of any criminal proceeding, had no reasonable cause to believe the conduct was unlawful.
A cooperative may also, except as provided in § 47-17-22, indemnify a director, officer, agent, or employee who is a party to a proceeding against liability incurred in the proceeding if the director, officer, agent, or employee engaged in conduct for which broader indemnification has been made permissible or obligatory under a provision of the articles of incorporation.
The conduct of a director, officer, agent, or employee with respect to an employee benefit plan for a purpose the director, officer, agent, or employee reasonably believed to be in the interests of the participants in, and the beneficiaries of, the plan is conduct that satisfies the requirement of subsection (2)(b).
The termination of a proceeding by judgment, order, settlement, or conviction, or upon a plea of nolo contendere or its equivalent, is not, of itself, determinative that the director, officer, agent, or employee did not meet the relevant standard of conduct described in this section.
Source: SL 2007, ch 260, § 4; SL 2009, ch 232, § 4.
47-17-22. Circumstances under which directors, officers, agents, and employees may not be indemnified.
Unless otherwise ordered by a court, a cooperative may not indemnify a director, officer, agent, or employee:
(1) In connection with a proceeding by or in the right of the cooperative, except for reasonable expenses incurred in connection with the proceeding if it is determined that the director, officer, agent, or employee has met the relevant standard of conduct pursuant to § 47-17-21; or
(2) In connection with any proceeding with respect to conduct for which the director, officer, agent, or employee was adjudged liable on the basis that the director, officer, agent, or employee received a financial benefit to which the director, officer, agent, or employee was not entitled, whether or not involving action in the official capacity of the director, officer, agent, or employee.
Source: SL 2007, ch 260, § 5; SL 2009, ch 232, § 5.
47-17-23. Indemnification of successful director, officer, agent, or employee for expenses incurred in proceeding.
A cooperative shall indemnify a director, officer, agent, or employee who was wholly successful, on the merits or otherwise, in the defense of any proceeding to which the director, officer, agent, or employee was a party by reason of being a director, officer, agent, or employee of the cooperative, against reasonable expenses incurred in connection with the proceeding.
Source: SL 2007, ch 260, § 6; SL 2009, ch 232, § 6.
