California Cooperative Corporation Law

By Joe Stone

A consumer cooperative corporation is a special type of corporation that can be formed in California. Unlike a for-profit corporation, the purpose of a consumer cooperative corporation is to serve its members interests, rather than make a profit. A defining aspect of such a corporation is that it is democratically controlled and the members can limit each member of the corporation to one vote regardless of how many shares of the corporation a member owns.

Forming a Consumer Cooperative Corporation

As with all corporations in California, to create a consumer cooperative corporation, you must file articles of incorporation with the Secretary of State's office. The statutory requirements for the articles are set forth in California Corporations Code section 12310, which states that the articles must include the corporation's name and address, as well as a special statement that the corporation is formed under the Consumer Corporation Law and whether member voting will be equal or based on ownership interest. The corporation's name must include the word "cooperative" and an indication of its corporate status by use of a designation such as "Inc." or "Corp."

Membership

Consumer cooperative corporations can have an unlimited number of members or no members at all. If neither the corporation's articles or bylaws state whether it will have members, the corporation shall have no members. A consumer cooperative cooperation without members vests all voting rights in its board of directors. The directors are authorized to issue memberships for no payment or to set the amount of payment required per membership, unless otherwise prohibited by the corporations articles or bylaws. If the director's set the membership payment at $300 or less, the memberships are exempt from registration with the Department of Corporations.

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Uses

A consumer cooperative corporation is the preferred form of corporation to ensure compliance with other laws. For example, in 2008 the California Attorney General recommended the use of such a corporation by qualified persons to comply with the Compassionate Use Act of 1996 regarding medical marijuana. Because the act prohibits diversion of marijuana for non-medical purposes, qualified persons can work cooperatively regarding the handling of the marijuana for the members' benefit and safeguard it from improper diversion.

Worker Cooperative Corporation

In February 2011, the California Assembly introduced a bill to amend the Consumer Cooperative Corporation Law. The primary purpose of the amendment is to permit the formation of a worker cooperative corporation. As of October 2011, the bill has yet to be made into law; however, if it passes, the amendment would permit a corporation to be owned and democratically controlled by its workers.

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What Is the Difference Between a Nonprofit and a Mutual-Benefit Corporation?
 

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