Equity Redemption: Issues and Alternatives for Farmer Cooperatives

Cooperatives are under increasing pressure to redeem the equities of former and overinvested patrons. This report discusses the issues concerning equity redemption and describes alternative equity redemption plans and methods that can be used to improve or facilitate redemption. Trade-offs between cash patronage refunds, redemption, and growth are examined, and methods for distributing cash benefits to patrons are compared. Legal and tax aspects and board responsibilities are reviewed, and the influences of federated cooperatives and lending institutions are considered. The impact of proposed mandatory redemption programs is evaluated, and procedures for adopting a voluntary redemption program are detailed.