Judges: Carla J. Stovall, Attorney General of Kansas
Filed Date: 3/4/1998
Status: Precedential
Modified Date: 7/5/2016
The Honorable Laura L. McClure State Representative, 119th District State Capitol, Room 278-W Topeka, Kansas 66612-1504
Dear Representative McClure:
You inquire whether production contracts, entered into by a farmer and a corporate entity subject to the prohibition against the ownership of agricultural land, have any restrictions on the types of operations or involvement such as swine nursery operations and swine finishing operations. Second, you ask whether an office anywhere in the world would satisfy the requirement that one of the owners be "actively engaged in the labor or management of the farming operation" imposed on family farm corporations.
Production contracts are authorized by K.S.A. 1997 Supp.
"Production contracts entered into by a corporation, trust, limited liability company, limited partnership or corporate partnership and a person engaged in farming for production of agricultural products shall not be construed to mean the ownership, acquisition, obtainment or lease, either directly or indirectly, of any agricultural land in this state."
The statute refers to the provision in K.S.A. 1997 Supp.
Farming is defined in K.S.A. 1997 Supp.
Both a swine nursery and a swine finishing facility involve the production of an agricultural product, as swine are included in the definition of livestock and livestock are agricultural products. The statute has no requirements about what agricultural product is produced, except to require that a person (with whom the corporation is contracting) be engaged in farming. A corporation cannot, however, contract to produce anything but an agricultural product within the restrictions imposed by the definition of farming. For example, a corporation cannot contract with a farmer to produce timber, forest products, nursery products or sod, nor to provide spraying, harvesting or other farm services because these endeavors are not within the definition of farming found at K.S.A. 1997 Supp.
In conclusion it is our opinion that both a swine nursery which produces piglets for sale and a swine finishing operation which involves a farrow to finish operation are appropriate subjects for a production contract between a corporate entity and a farmer.
Your second question involves the third requirement found in the statutory definition of "family farm," K.S.A. 1997 Supp.
"(1) Founded for the purpose of farming and the ownership of agricultural land in which the majority of the voting stock is held by and the majority of the stockholders are persons related to each other, all of whom have a common ancestor within the third degree of relationship, by blood or by adoption, or the spouses or the step children of any such persons, or person acting in a fiduciary capacity for persons so related;
"(2) all of its stockholders are natural persons or persons acting in a fiduciary capacity for the benefit of natural persons; and
"(3) at least one of the stockholders is a person residing on the farm or actively engaged in the labor or management of the farming operation. A stockholder who is an officer of any corporation referred to in this subsection and who is one of the related stockholders holding a majority of the voting stock shall be deemed to be actively engaged in the management of the farming corporation. If only one stockholder is meeting the requirement of this provision and such stockholder dies, the requirement of this provision does not apply for the period of time that the stockholder's estate is being administered in any district court in Kansas." (Emphasis added).
Your question is whether a person meeting the other requirements but having an office anywhere in the world satisfies the third requirement found in K.S.A. 1997 Supp.
K.S.A. 1997 Supp.
"[A]n officer of any corporation referred to in this subsection and who is one of the related stockholders holding a majority of the voting stock."
Thus if a corporation has a stockholder who meets these requirements, he is deemed to be actively engaged in the management of the farming corporation regardless of where the person has an office. The statutory requirement establishes a presumption that the person who meets these requirements is fulfilling the requirement that he or she be actively engaged in the management of the farming operation. The presumption has existed in the statute since its inception in 1981 (L. 1981, Ch. 106, § 1) and it has never been amended. This definition of family farm corporation is the only definition which contains a presumption that can be used to fulfill the actively engaged requirement. There is no similar presumption for any other entity in the Corporate Farming Act that has the actively engaged requirement in its definition. See K.S.A. 1997 Supp.
In conclusion it is our opinion that pursuant to current statutory definitions a family farm corporation may satisfy the third requirement found at K.S.A. 1997 Supp.
Very truly yours,
CARLA J. STOVALL Attorney General of Kansas
Guen Easley Assistant Attorney General
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