§ 7706 — Internal capital accounts and net worth

(a) Purpose of accounts.--A corporation shall establish through its bylaws a system of internal capital accounts to reflect the book value of the corporation and to determine the redemption price of membership shares and written notices of allocation.

(b) Types of accounts.--Internal capital accounts shall be of two types: individual internal capital accounts, one for each member, and a nonindividuated, collective internal capital account, which shall be called the collective reserve account.

(c) Net worth.--The net worth of the corporation shall be reflected in:

(1) The internal capital accounts.

(2) The sum of the par value of all outstanding stock with par value, other than membership shares.

(3) The stated value of evidences of equity in a fund, capital investment or other asset of the corporation.

(d) Procedure.--A corporation shall credit the paid-in membership fee and additional paid-in capital of a member to the member's individual internal capital account and shall also record the apportionment of retained net earnings or net losses to the member's account in accordance with patronage, by appropriately crediting or debiting the member's account. The collective reserve account shall reflect paid-in capital, retained net earnings and net losses not allocated to the capital accounts or members or not attributable to funds under subsection (c)(1) and (3).

(e) Adjustment of balance.--The balances in all of the individual internal capital accounts and the collective reserve account, if any, shall be adjusted at the end of each accounting period so that the sum of these balances and of the amounts under subsection (c)(2) and (3) is equal to the net worth of the corporation.

(f) Use of funds.--Moneys allocated to the internal capital accounts may be used for corporate purposes as determined by the board of directors.

Legislative History

Cross References.Section 7706 is referred to in section 7705 of this title.