HOUSE BILL REPORT

ESSB 5018

As Amended by the House

BYSenate Committee on Agriculture (originally sponsored by Senators Newhouse, Vognild, Barr, Hansen, Benitz and Rasmussen;by request of Secretary of State)

Revising provisions for cooperative associations.

House Committe on Agriculture & Rural Development

Majority Report:  Do pass with amendments.  (10)

      Signed by Representatives Rayburn, Chair; Kremen, Vice Chair; Nealey, Ranking Republican Member; Baugher, Doty, Grant, McLean, H. Myers, Rasmussen and Youngsman.

House Staff:Tim Burke (786-7103)

AS PASSED HOUSE APRIL 11, 1989

BACKGROUND:

State law contains different statutes governing agricultural cooperative associations and governing cooperative associations in general. The cooperative statutes have not been updated by the Legislature with the same frequency as the state's corporation statutes.  Concerns have been expressed over outdated provisions in the cooperative statutes, as well as over inconsistent provisions.

SUMMARY:

The provisions of the general cooperative statute are revised and the agricultural cooperative law is repealed.  Agricultural cooperatives are placed under the jurisdiction of this revised general statute.  Existing organizations legally using the "cooperative" name will continue to be able to do so.

Among the major changes are the following:

      (1) Agricultural cooperatives organized under the repealed agricultural cooperative law are considered as "incorporated under" the revised general law governing cooperative associations.  However, it will not be necessary that they amend their articles to conform to the new requirements, unless the associations are "otherwise amending" their articles.

      (2) Various provisions in the law governing nonprofit corporations are made applicable to cooperative associations.  These provisions include requirements relating to registered offices and agents; dissolution if an association fails to file an annual report or name a registered agent; reinstatement of a dissolved organization; organization meetings, including notice of meetings and quorum requirements; and authorization for foreign cooperative associations to do business in this state.

      (3) The authority of the director of the Department of Agriculture to approve marketing contract terms, appoint a member to the board of directors of an agricultural cooperative, and to ask for a court-appointed receiver for insolvent agricultural cooperatives is eliminated.

      (4) A cooperative may be incorporated by any number of persons.  The minimum number of directors is reduced to three.

      (5) Under specified circumstances, sales of co-op memberships or shares are exempt from the registration requirements of the state Securities Act.

      (6) A member or shareholder in a cooperative association may dissent to a proposed merger with another association, a conversion to a business corporation, or a sale of substantially all the association's assets.  A dissenting member or shareholder is entitled to be paid the "fair value" for his or her interest.  However, generally the articles of incorporation may provide for payment of a lesser amount, so long as the amount is not less than the amount paid to the association for the interest.

      (7) Auctions of fur pelts conducted by a cooperative association, except in certain circumstances, are exempt from the requirements of the Auctioneer Registration Act.

Fiscal Note:      Not Requested.

House Committee ‑ Testified For:    Karl Kottman, Washington State Council of Farmer Cooperatives; and Don Franklin, Washington State Bar Association.

House Committee - Testified Against:      None Presented.

House Committee - Testimony For:    (1) The state's cooperative laws are so antiquated that a workers cooperative has been formed under the business cooperative laws to avoid the problems in the other.  (2) The current law contains no mechanism for dissolving old, nonexistent cooperatives.  (3) The bill updates and consolidates cooperative association laws.  New requirements for filing annual reports and registering agents will make the information available to the public more consistent with that available regarding corporations.

House Committee - Testimony Against:      None Presented.