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Show SOUTH CENTRAL COMMUNICATIONS PROPOSED BYLAWS CHANGES In March, each of South Central Utah Telephone, Inc's cooperative members received a notice of the annual meeting and also a proposed pro-posed change to the bylaws of the corporation. We would like to herein further clarify the reasons rea-sons for the proposed bylaws changes. Article VII Section 2 explains patrons' capital accounts and also articulates the method by which such capital accounts may be paid to the members (the retirement of capital credits). When South Central was first organized in 1953 as a REA telephone cooperative, a provision was included in the bylaws to protect the financial finan-cial condition of the company. That provision states that capital credits may not be retired unless the owners' equity of the cooperative equals at least 40 percent of the company's total assets, after such retirement. This language was intended to ensure that capital was not retired prior to the completion of necessary plant additions, upgrades, and improvements. That 40 percent cushion is no longer necessary, as South Central's owners' equity totals more than 18 million dollars. That represents owners' equity equi-ty of 34.5 percent, an acceptable ratio in today's economy. But capital credits cannot be retired until the 40 percent provision is removed from the bylaws. The above referenced section also requires that capital be retired on a first-in, first-out (FIFO) basis. This provision limits the Board's ability to retire capital on a timely basis, as the oldest year on the books must be fully retired before the next subsequent year can be considered. The Board has expressed a desire to use a percentage of equities method, whereby the financial condition of the company is examined, and an appropriate amount of capital is retired. The interest of the longer term patrons is still protected, as they will receive a pro rata retirement on a larger capital account, due to their having paid in for more years. In fact, cooperative tax law requires that capital be retired on a pro rata basis and that no member or group of members be discriminated against. The proposed amendment is not contrary con-trary to that requirement, and also requires that the financial condition of the cooperative not be impaired by any capital retirement. Article VI Section 8 provides for the appointment appoint-ment of a general manager by the Board of Directors. The proposed amendment simply "CEO" (Chief Executive Officer) to that of the General Manager. In the current telecommunications telecommunica-tions and business world the CEO is generally recognized as the person responsible for the day-to-day operation of the company. As it becomes increasingly necessary for our General Manager to negotiate interconnection agreements, agree-ments, loan agreements, etc. those with whom he negotiates want to know they are dealing with the person empowered to make such agreements. agree-ments. The title of Chief Executive Officer offers that assurance. Overall responsibility for the cooperative is still vested in the Board of Directors, the members mem-bers of which are elected by the patrons whom they serve. The Board of Directors and management of South Central Utah Telephone Association strongly recommend and endorse the approval of the proposed bylaw amendments and ask for your support. |
