Senate Bill No. 504

(By Senators Miller, Williams and D. Hall)

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[Introduced March 12, 2013; referred to the Committee on Agriculture and Rural Development; and then to the Committee on the Judiciary.]

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A BILL to repeal §19-4-26 and §19-4-30 of the Code of West Virginia, 1931, as amended; and to amend and reenact §19-4-1, §19-4-2, §19-4-6, §19-4-10, §19-4-19, §19-4-21 and §19-4-29 of said code, all relating to cooperative associations; permitting three or more persons producing agricultural products to form a profit or nonprofit cooperative association; providing that certain credit union provisions apply; permitting the association be managed by not fewer than three directors; requiring cooperative associations file annual reports with the Secretary of State; requiring the term cooperative or its abbreviation be in the name of the association; prohibiting a farmer’s marketing association from using the term cooperative or its abbreviation as part of its name unless certain conditions are met; stating that the business corporation or nonprofit corporation laws apply to cooperatives; clarifying definitions; and clarifying articles of incorporation and directors of cooperative associations.

Be it enacted by the Legislature of West Virginia:

    That §19-4-26 and §19-4-30 of the Code of West Virginia, 1931, as amended, be repealed; and that §19-4-1, §19-4-2, §19-4-6, §19-4-10, §19-4-19, §19-4-21 and §19-4-29 of said code be amended and reenacted, all to read as follows:

ARTICLE 4. COOPERATIVE ASSOCIATIONS.

§19-4-1. Definitions.

    The following words as used in this article, unless the context otherwise requires or a different meaning is specifically prescribed, shall have the following meanings As used in this article:

    (a) "Agricultural products" mean horticultural, viticultural, forestry, dairy, livestock, poultry, bee and any farm products, in their natural form or processed;

    (b) "Member" actual members of associations without capital stock and holders of common stock in associations means a member of an association without capitol stock, and a holder of common stock in an association organized with capital stock;

    (c) "Association," “Cooperative association” or “association” means any corporation organized under the provisions of this article. Such Each association shall be deemed nonprofit also comply with the business corporation provisions of chapter thirty-one-d or the nonprofit corporation provisions of chapter thirty-one-e of this code.

§19-4-2. Who may organize.

    Five Three or more persons engaged in the production of agricultural products may form a nonprofit, cooperative association and/or agricultural credit association, with or without capital stock. and five Three or more cooperative associations may form an agricultural credit association, and/or cooperative association, with or without capital stock, under the provisions of this article and in compliance with the credit union provisions of chapter thirty-one-c of this code.

§19-4-6. Articles of incorporation.

    Each association formed under this article must shall prepare and file articles of incorporation, setting forth:

    (a) The name of the association, which shall include the words “cooperative,” “co-operative,” or “co-op,” and words or abbreviations designating a corporation;

    (b) The purposes for which it is formed;

    (c) The place where its principal business will be transacted;

    (d) The period, if any prescribed, for the duration of the corporation;

    (e) The number of incorporators which shall not be less than five three, the number of directors which shall not be less than five three and may be any number in excess thereof, or it may be set forth that the number of directors shall be fixed by the bylaws;

    (f) If organized without capital stock, whether the property rights and interest of each member be are equal or unequal; and if unequal, the general rule or rules applicable to all members, or the classes of members, by which the whose property rights and interest, respectively, of each member may and shall be are determined and fixed; and provision for the admission of new members who shall, or shall not be, may be entitled to share in the property of the association with the old members, in accordance with such the general rule or rules. This provision or paragraph of the articles of incorporation shall not be altered, amended, or repealed except by the written consent or vote of three fourths of the members;

    (g) If organized with capital stock and authorized to issue only one class of stock, the total number of shares of stock which the association shall have authority to issue, and including: (1) The par value of each of such the shares; or (2) a statement that all such the shares are to be without par value; or,

    (h) If the association is to be authorized to issue more than one class of stock, the total number of shares of all classes of stock which the association shall have authority to may issue, and including: (1) The number of shares of each class thereof that are to have a par value and the par value of each share of each such by class; and/or (2) the number of such shares that are to be without par value; and (3) a statement of all or any of the designations and the powers, preferences, and rights, and the qualifications, limitations or restrictions thereof, which that are permitted by the provisions of section thirteen of this article in respect of any to a class or classes of stock of the association and the fixing of which fixed by the articles of incorporation is desired, and an express grant of such authority as it may then be desired to grant to the board of directors to fix or by resolution or resolutions any thereof that may be desired but which shall not be fixed by such articles; of the board of directors;

    (i) The articles must be subscribed by the incorporators and acknowledged by one of them before an officer authorized by the law of this state to take and certify acknowledgments of deeds and conveyances; and shall be shall be signed, notarized and filed in accordance with the provisions of the general business or nonprofit corporation law laws of this state; and, when so filed, such articles of incorporation, or certified copies thereof, shall be received in all the courts of this state and other places as prima facie evidence of the facts contained therein and of the due incorporation of such association;

    The Secretary of State shall provide suitable application blanks and supply them on request;

    (h) (j) The articles may also contain any provisions which the incorporators may choose to insert for the management of the business and for the conduct of the affairs of the association, and any provisions creating, managing, defining, limiting and/or or regulating the powers and affairs of the association, the directors, and the stockholders, or any class of the stockholders or, in the case of an association which is to have no capital stock, of the members of such the association. Provided, That such provisions are not contrary to the laws of the state.

§19-4-10. Directors.

    (a) The affairs of the association shall be managed by a board of not less than five three directors, elected by the members or stockholders. from their own number.

    (b) The bylaws may provide that the territory in which the association has members shall be divided into districts and that the directors be elected according to such districts, either directly or by district delegates elected by the members in that district. In such a case the The bylaws shall specify the number of directors to be elected by each district, the manner and the method or of reapportioning the directors and the method of redistricting the territory covered by the association. The bylaws may provide that primary elections shall be held in each district to elect the directors apportioned to such the districts and that the results of all such the primary elections may be ratified by during the next regular meeting of the association or may be considered final. as to the association.

    (c) The bylaws may provide that one or more directors may be appointed by any a public official, or commission or by the other directors. selected by the members or their delegates. Such These public directors shall represent primarily the interest of the general public in such the associations. The public directors so appointed need not be members or stockholders of the association, but shall have the same powers and rights as other directors. Such The directors shall not number more than one fifth of the entire number of directors.

    (d) An association may provide a fair remuneration for the time actually spent by its officers and directors in its service and for the service of the members of its executive committee. No director, during the term of his or her office, shall be a party to a contract for profit with the association differing in any way from the business relations contractual terms accorded regular members or holders of common stock of the association. or others, or differing from terms generally current in that district.

    (e) The bylaws may provide that no director, except the president and secretary, shall occupy any a position in the association on regular salary or substantially full-time pay.

    (f) The bylaws may provide for an executive committee and may allot to such the committee all the functions and powers of the board of directors, subject to the general direction and control of the board.

    (g) When a vacancy on the board of directors occurs other than by expiration of term, the remaining members of the board, by a majority vote, shall fill the vacancy, unless the bylaws provide for an election of directors by district. In such a that case the board of directors shall immediately call a special meeting of the members or stockholders in that district to fill the vacancy.

§19-4-19. Annual reports.

    Each association formed under this article shall prepare an annual report on forms to be furnished by the dean of the college of agriculture at Morgantown, containing the name of the association, its principal place of business, and a general statement of its business operations during the fiscal year, showing the amount of capital stock paid up and the number of stockholders, if a stock association, or the number of members, if a nonstock association; and file one copy of such report with such dean as information for the sole use of such college, and one copy in the office of the secretary of the association, and the latter copy shall be open to inspection by members of the association at all times during office hours provided by and filed with the Secretary of State pursuant to the requirements of section two-a, article one, chapter fifty-nine of this code.

§19-4-21. Use of term "cooperative."

    (a) A cooperative association formed pursuant to this article shall include the words “cooperative”, “co-operative” or “co-op” in the name, and the words or abbreviations designating a corporation.

    No person, firm, corporation or association, hereafter organized or hereafter applying to do business in this state as a (b) A farmers' marketing association for the sale of farm products shall be entitled to use the word "cooperative" is prohibited from using the terms identified in subsection (a) of this section as part of its corporate or other business name or title, unless it has complied with the provisions of this article.

§19-4-29. Application of business corporation laws; nonprofit              corporation laws.

    The provisions of the general business corporation laws in chapter thirty-one-d or the nonprofit corporation laws of this state in chapter thirty-one-e of this code and all powers and rights thereunder shall apply to the associations organized under this article and may be used by them, except where such when the provisions are in conflict with or inconsistent with the express provisions of this article.

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    (NOTE: The purpose of this bill is to permit three or more persons producing agricultural products to form a profit or nonprofit cooperative association. The bill requires that certain credit union provisions apply. The bill permits the association be managed by not fewer than three directors. The bill requires cooperative associations file annual reports with the Secretary of State. The bill requires the term “cooperative” or its abbreviation be in the name of the association unless certain conditions are met. The bill prohibits a farmer’s marketing association from using the term “cooperative” or its abbreviation as part of its name. The bill states that the business corporation or nonprofit corporation laws apply to cooperatives. The bill clarifies definitions. The bill clarifies articles of incorporation and directors of cooperative associations.

    The bill repeals §19-4-26 and §19-4-30.

    Strike-throughs indicate language that would be stricken from the present law, and underscoring indicates new language that would be added.)