SENATE BILL REPORT

SB 5002

This analysis was prepared by non-partisan legislative staff for the use of legislative members in their deliberations. This analysis is not a part of the legislation nor does it constitute a statement of legislative intent.

As Reported by Senate Committee On:

Law & Justice, January 24, 2019

Title: An act relating to limited cooperative associations.

Brief Description: Concerning limited cooperative associations.

Sponsors: Senators Pedersen and Padden; by request of Uniform Law Commission.

Brief History:

Committee Activity: Law & Justice: 1/17/19, 1/24/19 [DP].

Brief Summary of Bill

  • Establishes a uniform business code governing limited cooperative associations.

  • Sets forth the nature, membership, powers, liabilities, and processes of limited cooperative associations

  • Harmonizes provisions with Title 23B RCW.

  • Authorizes a limited cooperative association to merge with other cooperative associations organized under different provisions of law.

SENATE COMMITTEE ON LAW & JUSTICE

Majority Report: Do pass.

Signed by Senators Pedersen, Chair; Dhingra, Vice Chair; Padden, Ranking Member; Holy, Kuderer, Salomon and Wilson, L..

Staff: Tim Ford (786-7423)

Background: A cooperative association is a unique type of corporation whose members are the joint owners of the entity. The members participate in the cooperative's business for the mutual benefit of all involved. Cooperative associations are governed by chapter 23.86 RCW, and members generally pay a membership fee and acquire an equity interest in the organization. Each member holds equal ownership and participation in control of the cooperative.

The Uniform Law Commission (ULC) was established in 1892, and it studies and reviews states' laws to determine which areas of law should be uniform. The ULC drafted a model Uniform Limited Cooperative Association Act which embodies the traditional elements of cooperative associations, is intended to be more flexible than most current cooperative laws allow, and can be organized to pursue any lawful purpose.

Summary of Bill: A limited cooperative association (association) is an unincorporated association jointly owned by persons for a mutual benefit for any lawful purpose, except for the business of generating, distributing, purchasing or selling electric energy.

Key highlights of the act include:

Appropriation: None.

Fiscal Note: Available.

Creates Committee/Commission/Task Force that includes Legislative members: No.

Effective Date: Ninety days after adjournment of session in which bill is passed.

Staff Summary of Public Testimony: PRO: This is an alternative that provides flexibility and works well with our existing law. A lot of cooperatives across the country lack the ability to raise financing for new buildings or expansion. This bill is the right balance and it does not replace existing entities organized under other laws. It allows investor members but keeps the patron member control as a traditional principle of cooperative associations. This is based on the Uniform Act but the changes harmonize the bill with other Washington laws. This does not cover the business of generating, distributing, purchasing, or selling electric energy.

CON: The inclusion of a voting investor member class makes it no longer a cooperative. Extraction of an investment is not member participation. You should not be able to call it a cooperative. Organic rules should not allow investor members to have their representation or vote proportional to the weight of their investment.

Persons Testifying: PRO: Senator Jamie Pedersen, Prime Sponsor; Michael Hutchings, citizen. CON: Frederick Medlicott, citizen.

Persons Signed In To Testify But Not Testifying: No one.