May 6, 1980
The Honorable Alice Kundert
Secretary of State
State Capitol
Pierre, South Dakota 57501
Official Opinion No. 80-31
Family Farm Act of 1974
Dear Miss Kundert:
You have requested an official opinion from this office in regard to the following factual situation:
FACTS:
SDCL 47-9A-1 states that '. . . notwithstanding the provisions of SDCL 47-2-3, no foreign corporation, and no domestic corporation except as provided herein, shall be formed or licensed under the South Dakota Business Corporation Act for the purpose of owning, leasing, holding or otherwise controlling agricultural land to be used in the business of agriculture.'
Since the effective date, SDCL 47-9A-1 has been interpreted and implemented to exclude foreign corporations from doing business under the Family Farm Act of 1974.
In three separate letters to the Secretary of State and in numerous conversations, the Attorney General's Office has advised the Office of the Secretary of State that foreign corporations did not qualify to conduct business under the Family Farm Act of 1974 (see attached).
Based on the above facts, you have asked the following question:
QUESTION:
Does SDCL 47-9A-1 of the Family Farm Act of 1974 exclude foreign corporations from being qualified to do business in South Dakota under either SDCL 47-9A-14 or SDCL 47-9A-15?
SDCL 47-9A-1 provides:
The Legislature of the state of South Dakota recognizes the importance of the family farm to the economic and moral stability of the state, and the Legislature recognizes that the existence of the family farm is threatened by conglomerates in farming. Therefore, it is hereby declared to be the public policy of this state, and shall be the provision of this chapter, that, notwithstanding the provisions of § 47-2-3, no foreign corporation, and no domestic corporation except as provided herein, shall be formed or licensed under the South Dakota Business Corporation Act for the purpose of owning, leasing, holding or otherwise controlling agricultural land to be used in the business of agriculture.
SDCL 47-9A-16 provides:
Every corporation engaged in farming or proposing to commence farming in this state shall file with the secretary of state a report containing:
1) The name of the corporation and its place of incorporation;
2) The address of the registered office of the corporation in this state, the name and address of its registered agent in this state and, in the case of a foreign corporation, the address of its principal office and its place of incorporation;
3) The acreage and the location listed by section, township and county of each lot or a parcel of land in this state owned or leased by the corporation and used for the growing of crops or the keeping or feeding of poultry or livestock; and
4) The names and addresses of the officers and the members of the board of directors of the corporation.
Since the passage of the Family Farm Act in 1974, the interpretation placed upon SDCL 47-9A-1 by the Attorney General's Office has been that because of the comma following 'foreign corporation' in that statute, the literal language of the statute states that no foreign corporation at all can be established which has purposes of owning, leasing, holding or otherwise controlling agricultural land used in the business of agriculture. Stated another way, the interpretation has been that the proviso 'except as provided herein' refers only to domestic corporations, and does not refer to foreign corporations. Further, it has been the interpretation that foreign corporations which owned farm land in South Dakota prior to the enactment of this law were able to continue to own and operate land in South Dakota under the provisions of SDCL 47-9A-5.
SDCL 47-9A-16 has always been somewhat of a problem in regard to this position since subdivision 2 of that statute contemplates foreign corporations which are engaging in farming or proposing to commence farming in this state. Thus, SDCL 47-9A-16 does in some respects conflict with the interpretation which has been made with respect to 47-9A-1, as discussed above.
SDCL 47-9A-1 specifically recognizes that the existence of the family farm is threatened by conglomerates in farming. Thus, the limitations placed upon corporate farming in South Dakota by SDCL 47-9A-14 and 47-9A-15 authorize only corporations which are family farm corporations or authorized small farm corporations which derive less than twenty percent of the corporation's gross receipts from rents, royalties, dividends, interests and annuities from engaging in business. Thus, the legislative focus has been to limit the influence of conglomerate farming in South Dakota.
In reviewing the provisions of SDCL 47-9A, and further in interpreting the provisions of the entire chapter together, it is my opinion that SDCL 47-9A-1 does not absolutely prevent a foreign corporation from being authorized to do business in South Dakota if the corporation owns, leases, holds or otherwise controls agricultural land. In this regard, foreign corporations I believe should be viewed in the same light as domestic corporations, and the evil which the statute addresses, i.e. conglomerates in farming, can be as readily addressed through treating foreign corporations equally with domestic corporations as it could be by excluding all foreign corporations. Thus, any foreign corporation which would attempt to become authorized to become engaged in farming in South Dakota would have to file as a family farm corporation under SDCL 47-9A-14, or as an authorized small farm corporation under SDCL 47-9A-15. Further, it is my opinion that the exemptions from the chapter listed in SDCL 47-9A-3 through 12 are equally applicable to foreign and domestic corporations.
Candidly, there have been so many problems raised by the previous interpretation that I have determined the issue needed to be reexamined. South Dakota borders on several states that are agricultural also. To absolutely prohibit any and all corporations from these states from operating as family farm and authorized small farm corporations in South Dakota does not seem to me to be consistent with restricting conglomerates. Consequently, I am knowingly revising the previous position this office has taken on the matter since the law was passed in 1974.
Respectfully submitted,
Mark V. Meierhenry
Attorney General
