35-17-315. Creation of capital reserve -- distribution of net earnings. At least once annually, the directors shall determine and distribute net proceeds as follows:

(1) (a) An association organized under this chapter may set aside part of its net earnings as its board of directors considers advisable for the purpose of creating or maintaining a capital reserve. In addition to the capital reserve, the directors may set aside a sum not to exceed 5% of the annual net earnings of the association, which must be used for the purposes of promoting and teaching cooperative organization and principles. The directors may establish and accumulate reserves for buildings, machinery and equipment, depreciation, losses, and other proper purposes.

(b) A share of the net proceeds may be set aside for or paid to employees. This amount for all purposes, except the computation of net proceeds, must be considered an expense of the association.

(c) In an association with capital stock, a dividend may be paid on the capital stock as authorized in the articles. A dividend may not be paid if the association's capital is impaired or the payment of the dividend would result in an impairment of capital.

(2) Net earnings in excess of any deductions in subsection (1) must be distributed annually to patrons on the basis of patronage. An association subject to the provisions of this chapter may distribute net earnings in the following or a combination of the following: cash, credits, stock, revolving fund certificates, other certificates, or securities of the association or of other associations.