KRS 272A.10-040: Allocation of profits and losses.

(1) The organic rules may provide for allocating profits of a limited cooperative

association among members, among persons that are not members but conduct

business with the association, to an unallocated account, or to any combination

thereof. Unless the orga nic rules otherwise provide, losses of the association shall

be allocated in the same proportion as profits.

(2) Unless the organic rules otherwise provide, all profits and losses of a limited

cooperative association shall be allocated to patron members.

(3) If a limited cooperative association has investor members, the organic rules may not

allocate to patron members less than fifty percent (50%) of profits. For purposes of

this subsection, the following rules apply:

(a) Amounts paid or due on contracts fo r the delivery to the association by patron

members of products, goods, or services are not considered amounts allocated

to patron members; and

(b) Amounts paid, due, or allocated to investor members as a stated fixed return

on equity are not considered amounts allocated to investor members.

(4) Unless prohibited by the organic rules, in determining the profits for allocation

under subsections (1), (2), and (3) of this section, the board of directors may first

deduct and set aside a part of the profits to create or accumulate:

(a) An unallocated capital reserve; and

(b) Reasonable unallocated reserves for specific purposes, including:

1. Expansion and replacement of capital assets;

2. Education, training, and cooperative development;

3. Creation and distribu tion of information concerning principles of

cooperation; and

4. Community responsibility.

(5) Subject to subsections (2) and (6) of this section and the organic rules, the board of

directors shall allocate the amount remaining after any deduction or setting aside of

profits for unallocated reserves under subsection (4) of this section:

(a) To patron members in the ratio of each member's patronage to the total

patronage of all patron members during the period for which allocations are to

be made; and

(b) To investor members, if any, in the ratio of each investor member's

contributions to the total contributions of all investor members.

(6) For purposes of allocation of profits and losses or specific items of prof its or losses

of a limited cooperative association to members, the organic rules may establish

allocation units or methods based on separate classes of members or, for patron

members, on class, function, division, district, department, allocation units, po oling

arrangements, members' contributions, or other equitable methods.