In dissolution of a cooperative, the statement 'the reserve fund shall be distributed among the members' is:

• A. True
• B. Not specified
• C. False
• D. Depends on charter

Answer: (C)

In dissolution, reserve funds are not meant to be handed back to members. Reserve funds exist to bolster the cooperative’s financial stability and to absorb potential losses, not to be paid out as a dividend. When winding up, the first priority is to satisfy all debts and liabilities to creditors. Only after those obligations are met may any remaining assets be distributed to members, and such distribution follows the rules set in the charter or by law—not by simply releasing the reserve fund itself. Because the reserve fund serves a protective, not distributive, purpose, the statement that it shall be distributed among the members is not correct.