AN ACT Relating to limited cooperative associations; amending RCW 23.95.105, 23.95.305, and 23.86.030; adding a new section to chapter 23.86 RCW; adding a new section to chapter 24.06 RCW; and adding a new chapter to Title 23 RCW.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

PART 1

GENERAL PROVISIONS

(a) "Articles of organization" means the articles of organization of a limited cooperative association required by section 301 of this act. The term includes the articles as amended or restated.

(b) "Board of directors" means the board of directors of a limited cooperative association.

(c) "Bylaws" means the bylaws of a limited cooperative association. The term includes the bylaws as amended or restated.

(d) "Contribution," except as used in section 1008(3) of this act, means a benefit that a person provides to a limited cooperative association to become or remain a member or in the person's capacity as a member.

(e) "Cooperative" means a limited cooperative association or an entity organized under any cooperative law of any jurisdiction.

(f) "Director" means a director of a limited cooperative association.

(g) "Distribution," except as used in section 1007(1) of this act, means a transfer of money or other property from a limited cooperative association to a member because of the member's financial rights or to a transferee of a member's financial rights.

(h) "Financial rights" means the right to participate in allocations and distributions as provided in sections 1001 through 1010 and 1201 through 1213 of this act but does not include rights or obligations under a marketing contract governed by sections 701 through 704 of this act.

(i) "Governance rights" means the right to participate in governance of a limited cooperative association.

(j) "Investor member" means a member that has made a contribution to a limited cooperative association and:

(i) Is not required by the organic rules to conduct patronage with the association in the member's capacity as an investor member in order to receive the member's interest; or

(ii) Is not permitted by the organic rules to conduct patronage with the association in the member's capacity as an investor member in order to receive the member's interest.

(k) "Limited cooperative association" means an association formed under this chapter or that becomes subject to this chapter under sections 201 through 214 of this act.

(l) "Member" means a person that is admitted as a patron member or investor member, or both, in a limited cooperative association. The term does not include a person that has dissociated as a member.

(m) "Member's interest" means the interest of a patron member or investor member under section 601 of this act.

(n) "Members meeting" means an annual members meeting or special meeting of members.

(o) "Organic rules" means the articles of organization and bylaws of a limited cooperative association.

(p) "Organizer" means an individual who executes the initial articles of organization.

(q) "Patron member" means a member that has made a contribution to a limited cooperative association and:

(i) Is required by the organic rules to conduct patronage with the association in the member's capacity as a patron member in order to receive the member's interest; or

(ii) Is permitted by the organic rules to conduct patronage with the association in the member's capacity as a patron member in order to receive the member's interest.

(r) "Patronage" means business transactions between a limited cooperative association and a person which entitle the person to receive financial rights based on the value or quantity of business done between the association and the person.

(s) "Required information" means the information a limited cooperative association is required to maintain under section 110 of this act.

(t) "Voting group" means any combination of one or more voting members in one or more districts or classes that under the organic rules or chapter 23.95 RCW or this chapter are entitled to vote and can be counted together collectively on a matter at a members meeting.

(u) "Voting member" means a member that, under the organic law or organic rules, has a right to vote on matters subject to vote by members under the organic law or organic rules.

(v) "Voting power" means the total current power of members to vote on a particular matter for which a vote may or is to be taken.

(2) The following definitions from RCW 23.95.105 apply to this chapter: "Entity," "execute," "executes," and "executed," "foreign," "jurisdiction," "jurisdiction of formation," "organic law," "person," "principal office," "property," "receipt," "record," "registered agent," "state," and "transfer."

(a) Ownership, financing, and receipt of benefits by the members for whose interests the association is formed; and

(b) Separate investments in the association by members who may receive returns on their investments and a share of control.

(2) The fact that a limited cooperative association does not have one or more of the characteristics described in subsection (1) of this section does not alone prevent the association from being formed under and governed by this chapter nor does it alone provide a basis for an action against the association.

(2) A limited cooperative association may be organized for any lawful purpose, regardless of whether for profit.

(3) Unless the articles of organization state a term for a limited cooperative association's existence, the association has perpetual duration.

(1) The internal affairs of a limited cooperative association; and

(2) The liability of a member as a member and a director as a director for the debts, obligations, or other liabilities of a limited cooperative association.

(2) A limited cooperative association may not conduct an activity that, under law of this state other than this chapter, may be conducted only by an entity that meets specific requirements for the internal affairs of that entity unless the organic rules of the association conform to those requirements.

(2) The matters referred to in (a) through (k) of this subsection may be varied only in the articles of organization. The articles may:

(a) State a term of existence for the association under section 104(3) of this act;

(b) Limit or eliminate the acceptance of new or additional members by the initial board of directors under section 302(2) of this act;

(c) Vary the limitations on the obligations and liability of members for association obligations under section 504 of this act;

(d) Require a notice of an annual members meeting to state a purpose of the meeting under section 508(2) of this act;

(e) Vary the board of directors meeting quorum under section 815(1) of this act;

(f) Vary the matters the board of directors may consider in making a decision under section 820 of this act;

(g) Specify causes of dissolution under section 1202(1) of this act;

(h) Delegate amendment of the bylaws to the board of directors pursuant to section 405(6) of this act;

(i) Provide for member approval of asset dispositions under section 1401 of this act;

(j) Subject to section 820 of this act, provide for the elimination or limitation of liability of a director to the association or its members for money damages pursuant to section 818 of this act;

(k) Provide for permitting or making obligatory indemnification under section 901(1) of this act; and

(l) Provide for any matters that may be contained in the organic rules, including those under subsection (3) of this section.

(3) The matters referred to in (a) through (y) of this subsection may be varied only in the organic rules. The organic rules may:

(a) Require more information to be maintained under section 110 of this act or provided to members under section 505(10) of this act;

(b) Provide restrictions on transactions between a member and an association under section 111 of this act;

(c) Provide for the percentage and manner of voting on amendments to the organic rules by district, class, or voting group under section 404(1) of this act;

(d) Provide for the percentage vote required to amend the bylaws concerning the admission of new members under section 405(5)(e) of this act;

(e) Provide for terms and conditions to become a member under section 502 of this act;

(f) Restrict the manner of conducting members meetings under sections 506(3) and 507(5) of this act;

(g) Designate the presiding officer of members meetings under sections 506(5) and 507(7) of this act;

(h) Require a statement of purposes in the annual meeting notice under section 508(2) of this act;

(i) Increase quorum requirements for members meetings under section 510 of this act and board of directors meetings under section 815 of this act;

(j) Allocate voting power among members, including patron members and investor members, and provide for the manner of member voting and action as permitted by sections 511 through 517 of this act;

(k) Authorize investor members and expand or restrict the transferability of members' interests to the extent provided in sections 602 through 604 of this act;

(l) Provide for enforcement of a marketing contract under section 704(1) of this act;

(m) Provide for qualification, election, terms, removal, filling vacancies, and member approval for compensation of directors in accordance with sections 803 through 805, 807, 809, and 810 of this act;

(n) Restrict the manner of conducting board meetings and taking action without a meeting under sections 811 and 812 of this act;

(o) Provide for frequency, location, notice, and waivers of notice for board meetings under sections 813 and 814 of this act;

(p) Increase the percentage of votes necessary for board action under section 816(2) of this act;

(q) Provide for the creation of committees of the board of directors and matters related to the committees in accordance with section 817 of this act;

(r) Provide for officers and their appointment, designation, and authority under section 822 of this act;

(s) Provide for forms and values of contributions under section 1002 of this act;

(t) Provide for remedies for failure to make a contribution under section 1003(2) of this act;

(u) Provide for the allocation of profits and losses of the association, distributions, and the redemption or repurchase of distributed property other than money in accordance with sections 1004 through 1007 of this act;

(v) Specify when a member's dissociation is wrongful and the liability incurred by the dissociating member for damage to the association under section 1101 (2) and (3) of this act;

(w) Provide the personal representative or other legal representative of a deceased member or a member adjudged incompetent with additional rights under section 1103 of this act;

(x) Increase the percentage of votes required for board of director approval of:

(i) A resolution to dissolve under section 1205(1)(a) of this act;

(ii) A proposed amendment to the organic rules under section 402(1)(a) of this act; and

(iii) A proposed disposition of assets under section 1403(1) of this act; and

(y) Vary the percentage of votes required for members approval of:

(i) A resolution to dissolve under section 1205 of this act;

(ii) An amendment to the organic rules under section 405 of this act; and

(iii) A disposition of assets under section 1404 of this act.

(4) The organic rules must address members' contributions pursuant to section 1001 of this act.

(a) A list containing the name, last known street address and, if different, mailing address, and term of office of each director and officer;

(b) The initial articles of organization and all amendments to and restatements of the articles, together with an executed copy of any power of attorney under which any article, amendment, or restatement has been executed;

(c) The initial bylaws and all amendments to and restatements of the bylaws;

(d) All filed articles of merger, interest exchange, conversion, and domestication;

(e) All financial statements of the association for the six most recent years;

(f) The six most recent annual reports delivered by the association to the secretary of state;

(g) The minutes of members meetings for the six most recent years;

(h) Evidence of all actions taken by members without a meeting for the six most recent years;

(i) A list containing:

(i) The name, in alphabetical order, and last known street address and, if different, mailing address of each patron member and each investor member; and

(ii) If the association has districts or classes of members, information from which each current member in a district or class may be identified;

(j) The federal income tax returns, any state and local income tax returns, and any tax reports of the association for the six most recent years;

(k) Accounting records maintained by the association in the ordinary course of its operations for the six most recent years;

(l) The minutes of directors meetings for the six most recent years;

(m) Evidence of all actions taken by directors without a meeting for the six most recent years;

(n) The amount of money contributed and agreed to be contributed by each member;

(o) A description and statement of the agreed value of contributions or benefits other than money made or provided and agreed to be made or provided by each member;

(p) The times at which, or events on the happening of which, any additional contribution is to be made by each member;

(q) For each member, a description and statement of the member's interest or information from which the description and statement can be derived; and

(r) All communications concerning the association made in a record to all members, or to all members in a district or class, for the six most recent years.

(2) If a limited cooperative association has existed for less than the period for which records must be maintained under subsection (1) of this section, the period records must be kept is the period of the association's existence.

(3) The organic rules may require that more information be maintained.

(1) Delivery of record: RCW 23.95.110.

(2) Filing with secretary of state: RCW 23.95.200 through 23.95.265.

(3) Name of entity: RCW 23.95.300 through 23.95.315.

(4) Registered agent of entity: RCW 23.95.400 through 23.95.460.

(5) Foreign entities: RCW 23.95.500 through 23.95.555.

(6) Administrative dissolution: RCW 23.95.600 through 23.95.625.

(7) Miscellaneous provisions, including supplemental principles of law and reservation of power to amend or repeal: RCW 23.95.700 through 23.95.715.

PART 2

CONVERSION

(a) "Approve" means, in the case of an entity, for its governors and interest holders to take whatever steps are necessary under the entity's organic rules, organic law, and other law to:

(i) Propose a conversion subject to this subchapter;

(ii) Adopt and approve the terms and conditions of the conversion; and

(iii) Conduct any required proceedings or otherwise obtain any required votes or consents of the governors or interest holders.

(b) "Conversion" means a transaction authorized by sections 202 through 207 of this act.

(c) "Converted entity" means the converting entity as it continues in existence after a conversion.

(d) "Converting entity" means the domestic entity that approves a plan of conversion pursuant to section 203 of this act.

(e) "Interest holder liability" means:

(i) Personal liability for a liability of an entity which is imposed on a person:

(A) Solely by reason of the status of the person as an interest holder; or

(B) By the organic rules of the entity which make one or more specified interest holders or categories of interest holders liable in their capacity as interest holders for all or specified liabilities of the entity; or

(ii) An obligation of an interest holder under the organic rules of an entity to contribute to the entity.

(f) "Plan" or "plan of conversion" means a plan under section 203 of this act.

(g) "Protected agreement" means:

(i) A record evidencing indebtedness and any related agreement in effect on the effective date of this section;

(ii) An agreement that is binding on an entity on the effective date of this section;

(iii) The organic rules of an entity in effect on the effective date of this section; or

(iv) An agreement that is binding on any of the governors or interest holders of an entity on the effective date of this section.

(h) "Qualifying entity" means a domestic entity:

(i) Organized under chapter 23.86 RCW; or

(ii) Organized under chapter 24.06 RCW and taking the election provided in RCW 24.06.032(1).

(i) "Statement of conversion" means a statement under section 206 of this act.

(j) "This subchapter" means this section and sections 202 through 214 of this act.

(2) The following definitions from RCW 23.95.105 apply to this subchapter: "Domestic," "entity," "execute," "executes," and "executed," "foreign," "governor," "interest," "interest holder," "jurisdiction," "jurisdiction of formation," "organic law," "organic rules," "person," "private organic rules," "property," "public organic record," "receipt," "record," "state," "transfer," and "type of entity."

(a) The name and type of entity of the converting entity;

(b) The name of the converted entity;

(c) The manner of converting the interests in the converting entity into interests, securities, obligations, money, other property, rights to acquire interests or securities, or any combination of the foregoing;

(d) The proposed public organic record of the converted entity if it will be a filing entity;

(e) The full text of the private organic rules of the converted entity which are proposed to be in a record;

(f) The other terms and conditions of the conversion; and

(g) Any other provision required by the law of this state or the organic rules of the converting entity.

(2) In addition to the requirements of subsection (1) of this section, a plan of conversion may contain any other provision not prohibited by law.

(1) By a converting entity:

(a) In accordance with the requirements, if any, in its organic rules for approval of a conversion; or

(b) By all of the interest holders of the entity entitled to vote on or consent to any matter if neither the entity's organic law nor the entity's organic rules provide for approval of a conversion; and

(2) In a record, by each interest holder of a converting entity which will have interest holder liability for debts, obligations, and other liabilities that are incurred after the conversion becomes effective, unless, in the case of an entity that is not a business or nonprofit corporation:

(a) The organic rules of the entity provide in a record for the approval of a conversion in which some or all of its interest holders become subject to interest holder liability by the vote or consent of fewer than all the interest holders; and

(b) The interest holder voted for or consented in a record to that provision of the organic rules or became an interest holder after the adoption of that provision.

(a) In the same manner as the plan was approved, if the plan does not provide for the manner in which it may be amended; or

(b) By its governors or interest holders in the manner provided in the plan, but an interest holder that was entitled to vote on or consent to approval of the conversion is entitled to vote on or consent to any amendment of the plan that will change:

(i) The amount or kind of interests, securities, obligations, money, other property, rights to acquire interests or securities, or any combination of the foregoing, to be received by any of the interest holders of the converting entity under the plan;

(ii) The public organic record, if any, or private organic rules of the converted entity which will be in effect immediately after the conversion becomes effective, except for changes that do not require approval of the interest holders of the converted entity under its organic law or organic rules; or

(iii) Any other terms or conditions of the plan, if the change would adversely affect the interest holder in any material respect.

(2) After a plan of conversion has been approved and before a statement of conversion is effective, the plan may be abandoned as provided in the plan. Unless prohibited by the plan, a converting entity may abandon the plan in the same manner as the plan was approved.

(3) If a plan of conversion is abandoned after a statement of conversion has been delivered to the secretary of state for filing and before the statement is effective, a statement of abandonment, executed by the converting entity, must be delivered to the secretary of state for filing before the statement of conversion is effective. The statement of abandonment takes effect on filing, and the conversion is abandoned and does not become effective. The statement of abandonment must contain:

(a) The name of the converting entity;

(b) The date on which the statement of conversion was filed by the secretary of state; and

(c) A statement that the conversion has been abandoned in accordance with this section.

(2) A statement of conversion must contain:

(a) The name, jurisdiction of formation, and type of entity of the converting entity;

(b) The name of the converted entity;

(c) If the statement of conversion is not to be effective upon filing, the later date and time on which it will become effective, which may not be more than ninety days after the date of filing;

(d) A statement that the plan of conversion was approved in accordance with this subchapter; and

(e) The public organic record of the converted entity, as an attachment.

(3) In addition to the requirements of subsection (2) of this section, a statement of conversion may contain any other provision not prohibited by law.

(4) The public organic record of the converted entity must satisfy the requirements of the law of this state, except that the public organic record does not need to be executed and may omit any provision that is not required to be included in a restatement of the public organic record.

(5) A plan of conversion that is executed by a converting entity and meets all the requirements of subsection (2) of this section may be delivered to the secretary of state for filing instead of a statement of conversion and on filing has the same effect. If a plan of conversion is filed as provided in this subsection, references in this subchapter to a statement of conversion refer to the plan of conversion filed under this subsection.

(6) A statement of conversion is effective on the date and time of filing or the later date and time specified in the statement of conversion.

(7) The conversion becomes effective when the statement of conversion is effective.

(a) The converted entity is:

(i) Organized under and subject to the organic law of the converted entity; and

(ii) The same entity without interruption as the converting entity;

(b) All property of the converting entity continues to be vested in the converted entity without transfer, reversion, or impairment;

(c) All debts, obligations, and other liabilities of the converting entity continue as debts, obligations, and other liabilities of the converted entity;

(d) Except as otherwise provided by law or the plan of conversion, all the rights, privileges, immunities, powers, and purposes of the converting entity remain in the converted entity;

(e) The name of the converted entity may be substituted for the name of the converting entity in any pending action or proceeding;

(f) If a converted entity is a filing entity, its public organic record is effective;

(g) The private organic rules of the converted entity which are to be in a record, if any, approved as part of the plan of conversion are effective; and

(h) The interests in the converting entity are converted, and the interest holders of the converting entity are entitled only to the rights provided to them under the plan of conversion and to any appraisal rights they have under the converting entity's organic law.

(2) Except as otherwise provided in the organic law or organic rules of the converting entity, the conversion does not give rise to any rights that an interest holder, governor, or third party would have upon a dissolution, liquidation, or winding up of the converting entity.

(3) When a conversion becomes effective, a person that did not have interest holder liability with respect to the converting entity and becomes subject to interest holder liability with respect to a domestic entity as a result of the conversion has interest holder liability only to the extent provided by the organic law of the entity and only for those debts, obligations, and other liabilities that are incurred after the conversion becomes effective.

(4) When a conversion becomes effective, the interest holder liability of a person that ceases to hold an interest in a converting entity with respect to which the person had interest holder liability is subject to the following rules:

(a) The conversion does not discharge any interest holder liability under the organic law of the converting entity to the extent the interest holder liability was incurred before the conversion became effective.

(b) The person does not have interest holder liability under the organic law of the domestic entity for any debt, obligation, or other liability that is incurred after the conversion becomes effective.

(c) The organic law of the converting entity continues to apply to the release, collection, or discharge of any interest holder liability preserved under (a) of this subsection as if the conversion had not occurred.

(d) The person has whatever rights of contribution from any other person as are provided by other law or the organic rules of the converting entity with respect to any interest holder liability preserved under (a) of this subsection as if the conversion had not occurred.

(5) A conversion does not require the entity to wind up its affairs and does not constitute or cause the dissolution of the entity.

(2) A conversion effected under this subchapter may not create or impair a right, duty, or obligation of a person under the statutory law of this state relating to a change in control, takeover, business combination, control-share acquisition, or similar transaction involving a domestic merging, acquired, converting, or domesticating business corporation unless the approval of the plan is by a vote of the members or directors which would be sufficient to create or impair the right, duty, or obligation directly under the law.

(1) Delivery of record;

(2) Filing with secretary of state;

(3) Name of entity;

(4) Registered agent of entity; and

(5) Miscellaneous provisions, including reservation or power to amend or repeal and supplemental principles of law.

PART 3

ORGANIZATION OF LIMITED COOPERATIVE ASSOCIATION

(2) The articles of organization must state:

(a) The name of the limited cooperative association, which must comply with RCW 23.95.300 and 23.95.305(5);

(b) The purposes for which the association is formed;

(c) The street and mailing addresses in this state of the initial registered agent;

(d) The street and mailing addresses of the initial principal office;

(e) The name and street and mailing addresses of each organizer; and

(f) The term for which the association is to exist if other than perpetual.

(3) Subject to section 109 of this act, articles of organization may contain any other provisions in addition to those required by subsection (1) of this section.

(4) A limited cooperative association is formed after articles of organization that substantially comply with subsection (1) of this section are delivered to the secretary of state, are filed, and become effective under RCW 23.95.210.

(a) If initial directors are named in the articles of organization, the initial directors shall hold an organizational meeting to adopt initial bylaws and carry on any other business necessary or proper to complete the organization of the association; or

(b) If initial directors are not named in the articles of organization, the organizers shall designate the initial directors and call a meeting of the initial directors to adopt initial bylaws and carry on any other business necessary or proper to complete the organization of the association.

(2) Unless the articles of organization otherwise provide, the initial directors may cause the limited cooperative association to accept members, including those necessary for the association to begin business.

(3) Initial directors need not be members.

(4) An initial director serves until a successor is elected and qualified at a members meeting or the director is removed, resigns, is adjudged incompetent, or dies.

(a) A statement of the capital structure of the limited cooperative association, including:

(i) The classes or other types of members' interests and relative rights, preferences, and restrictions granted to or imposed upon each class or other type of member's interest; and

(ii) The rights to share in profits or distributions of the association;

(b) A statement of the method for admission of members;

(c) A statement designating voting and other governance rights, including which members have voting power and any restriction on voting power;

(d) A statement that a member's interest is transferable if it is to be transferable and a statement of the conditions upon which it may be transferred;

(e) A statement concerning the manner in which profits and losses are allocated and distributions are made among patron members and, if investor members are authorized, the manner in which profits and losses are allocated and how distributions are made among investor members and between patron members and investor members;

(f) A statement concerning:

(i) Whether persons that are not members but conduct business with the association may be permitted to share in allocations of profits and losses and receive distributions; and

(ii) The manner in which profits and losses are allocated and distributions are made with respect to those persons; and

(g) A statement of the number and terms of directors or the method by which the number and terms are determined.

(2) Subject to section 109(3) of this act and the articles of organization, bylaws may contain any other provision for managing and regulating the affairs of the association.

(3) In addition to amendments permitted under sections 401 through 407 of this act, the initial board of directors may amend the bylaws by a majority vote of the directors at any time before the admission of members.

(1) A limited cooperative association's initial articles of organization must be executed by at least one person acting as an organizer.

(2) A statement of withdrawal under RCW 23.95.215 must be executed as provided in that section.

(3) Except as otherwise provided in subsection (4) of this section, a record executed by an existing association must be executed by an officer.

(4) A record filed on behalf of a dissolved association must be executed by a person winding up activities under section 1206(2) of this act or a person appointed under section 1206(3) of this act to wind up those activities.

(5) Any other record delivered on behalf of a person to the secretary of state for filing must be executed by that person.

PART 4

AMENDMENT OF ORGANIC RULES OF LIMITED COOPERATIVE

ASSOCIATION

(2) Unless the organic rules otherwise provide, a member does not have a vested property right resulting from any provision in the organic rules, including a provision relating to the management, control, capital structure, distribution, entitlement, purpose, or duration of the limited cooperative association.

(a) A majority of the board of directors, or a greater percentage if required by the organic rules; or

(b) One or more petitions executed by at least ten percent of the patron members or at least ten percent of the investor members.

(2) The board of directors shall call a members meeting to consider an amendment proposed pursuant to subsection (1) of this section. The meeting must be held not later than ninety days following the proposal of the amendment by the board or receipt of a petition. The board must mail or otherwise transmit or deliver in a record to each member:

(a) The proposed amendment, or a summary of the proposed amendment and a statement of the manner in which a copy of the amendment in a record may be reasonably obtained by a member;

(b) A recommendation that the members approve the amendment, or if the board determines that because of conflict of interest or other special circumstances it should not make a favorable recommendation, the basis for that determination;

(c) A statement of any condition of the board's submission of the amendment to the members; and

(d) Notice of the meeting at which the proposed amendment will be considered, which must be given in the same manner as notice for a special meeting of members.

(2) A nonsubstantive change to a proposed amendment of the organic rules may be made at the members meeting at which the vote on the amendment occurs and need not be separately voted upon by the board of directors.

(3) A vote to adopt a nonsubstantive change to a proposed amendment to the organic rules must be by the same percentage of votes required to pass a proposed amendment.

(2) If a proposed amendment to the organic rules would affect members in two or more districts or classes entitled to vote separately under subsection (1) of this section in the same or a substantially similar way, the districts or classes affected must vote as a single voting group unless the organic rules otherwise provide for separate voting.

(a) At least two-thirds of the voting power of members present at a members meeting called under section 402 of this act; and

(b) If the limited cooperative association has investor members, at least a majority of the votes cast by patron members, unless the organic rules require a greater percentage vote by patron members.

(2) Subject to section 404 of this act and subsections (3) through (6) of this section, an amendment to the bylaws must be approved by:

(a) At least a majority vote of the voting power of all members present at a members meeting called under section 402 of this act, unless the organic rules require a greater percentage; and

(b) If a limited cooperative association has investor members, a majority of the votes cast by patron members, unless the organic rules require a larger affirmative vote by patron members.

(3) The organic rules may require that the percentage of votes under subsection (1)(a) or (2)(a) of this section be:

(a) A different percentage that is not less than a majority of members voting at the meeting;

(b) Measured against the voting power of all members; or

(c) A combination of (a) and (b) of this subsection.

(4) Consent in a record by a member must be delivered to a limited cooperative association before delivery of an amendment to the articles of organization or restated articles of organization for filing pursuant to section 407 of this act, if as a result of the amendment the member will have:

(a) Personal liability for an obligation of the association; or

(b) An obligation or liability for an additional contribution.

(5) The vote required to amend bylaws must satisfy the requirements of subsection (1) of this section if the proposed amendment modifies:

(a) The equity capital structure of the limited cooperative association, including the rights of the association's members to share in profits or distributions, or the relative rights, preferences, and restrictions granted to or imposed upon one or more districts, classes, or voting groups of similarly situated members;

(b) The transferability of a member's interest;

(c) The manner or method of allocation of profits or losses among members;

(d) The quorum for a meeting and the rights of voting and governance; or

(e) Unless otherwise provided in the organic rules, the terms for admission of new members.

(6) Except for the matters described in subsection (5) of this section, the articles of organization may delegate amendment of all or a part of the bylaws to the board of directors without requiring member approval.

(7) If the articles of organization delegate amendment of bylaws to the board of directors, the board shall provide a description of any amendment of the bylaws made by the board to the members in a record not later than thirty days after the amendment, but the description may be provided at the next annual members meeting if the meeting is held within the thirty-day period.

(a) The name of the association;

(b) The date of filing of the association's initial articles; and

(c) The text of the amendment.

(2) Before the beginning of the initial meeting of the board of directors, an organizer who knows that information in the filed articles of organization was inaccurate when the articles were filed or has become inaccurate due to changed circumstances shall promptly:

(a) Cause the articles to be amended; or

(b) If appropriate, deliver an amendment to the secretary of state for filing pursuant to RCW 23.95.110(2).

(3) To restate its articles of organization, a limited cooperative association must deliver to the secretary of state for filing a restatement designated as such in its heading.

(4) Upon filing, an amendment of the articles of organization or other record containing an amendment of the articles which has been properly adopted by the members is effective as provided in RCW 23.95.210.

PART 5

MEMBERS

(2) If a limited cooperative association is to have more than one member upon formation, those persons become members as agreed by the persons before the formation of the association. The organizer acts on behalf of the persons in forming the association and may be, but need not be, one of the persons.

(3) After formation of a limited cooperative association, a person becomes a member:

(a) As provided in the organic rules;

(b) As the result of a conversion effective under sections 201 through 214 of this act;

(c) With the affirmative vote or consent of all the members; or

(d) As provided in section 1202(3) of this act.

(2) A person's status as a member does not prevent or restrict law other than this chapter from imposing liability on a limited cooperative association because of the person's conduct.

(2) The failure of a limited cooperative association to observe formalities relating to the exercise of its powers or management of its activities and affairs is not grounds for imposing liability on any member or director for a debt, obligation, or other liability of the association.

(2) On reasonable notice, a member may inspect and copy during regular business hours, at the principal office or a reasonable location specified by the limited cooperative association, required information listed in section 110(1) (i), (j), (l), (m), (p), and (r) of this act, if:

(a) The member seeks the information in good faith and for a proper purpose reasonably related to the member's interest;

(b) The demand includes a description with reasonable particularity of the information sought and the purpose for seeking the information;

(c) The information sought is directly connected to the member's purpose; and

(d) The demand is reasonable.

(3) Not later than ten business days after receipt of a demand pursuant to subsection (2) of this section, a limited cooperative association shall provide, in a record, the following information to the member that made the demand:

(a) If the association agrees to provide the demanded information:

(i) What information the association will provide in response to the demand; and

(ii) A reasonable time and place at which the association will provide the information; or

(b) If the association declines to provide some or all of the demanded information, the association's reasons for declining.

(4) On ten days' demand made in a record received by a limited cooperative association, a dissociated member may have access to information to which the person was entitled while a member if the information pertains to the period during which the person was a member, the person seeks the information in good faith, and the person satisfies the requirements imposed on a member by subsection (2)(b) of this section. The association shall respond to a demand made pursuant to this subsection in the manner provided in subsection (2)(c) of this section.

(5) Not later than ten business days after receipt by a limited cooperative association of a demand made by a member in a record, but not more often than once in a six-month period, the association shall deliver to the member a record stating the information with respect to the member required by section 110(1)(q) of this act.

(6) In addition to any restriction or condition stated in its organic rules, a limited cooperative association, as a matter within the ordinary course of its activities and affairs, may impose reasonable restrictions and conditions on access to and use of information to be furnished under this section, including designating information confidential and imposing nondisclosure and safeguarding obligations on the recipient. In a dispute concerning the reasonableness of a restriction under this subsection, the association has the burden of proving reasonableness.

(7) A limited cooperative association may charge a person that makes a demand under this section reasonable costs of copying, limited to the costs of labor and material.

(8) A member or dissociated member may exercise rights under this section through an agent or, in the case of an individual under legal disability, a legal representative. Any restriction or condition imposed by the organic rules or under subsection (7) of this section applies both to the agent or legal representative and the member or dissociated member.

(9) The rights stated in this section do not extend to a person as transferee.

(10) The organic rules may require a limited cooperative association to provide more information than required by this section and may establish conditions and procedures for providing the information.

(2) An annual members meeting may be held inside or outside this state at the place stated in the organic rules or selected by the board of directors not inconsistent with the organic rules.

(3)(a) Unless the organic rules otherwise provide:

(i) If the board of directors or another person is authorized in the bylaws to determine the place of annual meetings, the board of directors or such other person may, in the sole discretion of the board of directors or such other person, determine that an annual meeting will not involve a physical assembly of shareholders at a particular geographic location, but instead will be held solely by means of remote communication, in accordance with this subsection (3).

(ii) An association may permit any or all members to participate in an annual members meeting by means of, or conduct the meeting solely through the use of, remote communication. Subject to the provisions of (b) of this subsection, participation by remote communication is to be subject to any guidelines and procedures adopted by or pursuant to the authority of the board of directors.

(b) If an association elects to permit participation by means of, or conduct a meeting solely through the use of, remote communication:

(i) The notice of the meeting must specify how a shareholder may participate in the meeting by means of remote communication.

(ii) The corporation must implement reasonable measures to (A) verify that each person participating remotely as a member is a member, and (B) provide each person participating remotely as a member a reasonable opportunity to participate in the meeting and to vote on matters submitted to the members, including an opportunity to read or hear the proceedings of the meeting substantially concurrently with those proceedings.

(iii) Participation in a meeting in accordance with this section constitutes presence in person at that meeting.

(iv) If the board of directors or another authorized person determines to hold an annual members meeting without a physical assembly of members in accordance with this subsection (3), all members entitled to vote at such meeting must have the opportunity to participate in the meeting by remote communication in accordance with this subsection (3).

(4) The board of directors shall report, or cause to be reported, at the association's annual members meeting the association's business and financial condition as of the close of the most recent fiscal year.

(5) Unless the organic rules otherwise provide, the board of directors shall designate the presiding officer of the association's annual members meeting.

(6) Failure to hold an annual members meeting does not affect the validity of any action by the limited cooperative association.

(a) As provided in the organic rules;

(b) By a majority vote of the board of directors on a proposal stating the purpose of the meeting;

(c) By demand in a record executed by members holding at least twenty percent of the voting power of the persons in any district or class entitled to vote on the matter that is the purpose of the meeting stated in the demand; or

(d) By demand in a record executed by members holding at least ten percent of the total voting power of all the persons entitled to vote on the matter that is the purpose of the meeting stated in the demand.

(2) A demand under subsection (1)(c) or (d) of this section must be submitted to the officer of the limited cooperative association charged with keeping its records.

(3) Any voting member may withdraw its demand under subsection (1)(c) or (d) of this section before receipt by the limited cooperative association of demands sufficient to require a special meeting of members.

(4) A special meeting of members may be held inside or outside this state at the place stated in the organic rules or selected by the board of directors not inconsistent with the organic rules.

(5) Unless the organic rules otherwise provide, members may attend or conduct a special meeting of members through the use of any means of communication if all members attending the meeting can communicate with each other during the meeting.

(6) Only business within the purpose or purposes stated in the notice of a special meeting of members may be conducted at the meeting.

(7) Unless the organic rules otherwise provide, the presiding officer of a special meeting of members shall be designated by the board of directors.

(2) Unless the articles of organization otherwise provide, notice of an annual members meeting need not include any purpose of the meeting.

(3) Notice of a special meeting of members must include each purpose of the meeting as contained in the demand under section 507(1) (c) or (d) of this act or as voted upon by the board of directors under section 507(1)(b) of this act.

(4) Notice of a members meeting must be given in a record unless oral notice is reasonable under the circumstances.

(2) A member's participation in a members meeting is a waiver of notice of that meeting unless the member objects to the meeting at the beginning of the meeting or promptly upon the member's arrival at the meeting and does not thereafter vote for or assent to action taken at the meeting.

(a) One member, one vote;

(b) Use or patronage;

(c) Equity; or

(d) If a patron member is a cooperative, the number of its patron members.

(2) The organic rules may provide for the allocation of patron member voting power by districts or class, or any combination thereof.

(1) The total voting power of all patron members may not be less than a majority of the entire voting power entitled to vote.

(2) Action on any matter is approved only upon the affirmative vote of at least a majority of:

(a) All members voting at the meeting unless more than a majority is required by sections 401 through 407, 1201 through 1213, or 1401 through 1404 of this act or the organic rules; and

(b) Votes cast by patron members unless the organic rules require a larger affirmative vote by patron members.

(3) The organic rules may provide for the percentage of the affirmative votes that must be cast by investor members to approve the matter.

(2) If voting by a proxy is permitted, a patron member may appoint only another patron member as a proxy and, if investor members are permitted, an investor member may appoint only another investor member as a proxy.

(3) The organic rules may provide for the manner of and provisions governing the appointment of a proxy.

(4) The organic rules may provide for voting on any question by ballot delivered by mail or voting by other means on questions that are subject to vote by members.

(2) Consent under subsection (1) of this section may be withdrawn by a member in a record at any time before the limited cooperative association receives a consent from each member entitled to vote.

(3) Consent to any action may specify the effective date or time of the action.

(a) For the conduct of patron member meetings by districts and the election of directors at the meetings; or

(b) That districts may elect district delegates to represent and vote for the district at members meetings.

(2) A delegate elected under subsection (1)(b) of this section has one vote unless voting power is otherwise allocated by the organic rules.

(3) The organic rules may provide for the establishment of classes of members, for the preferences, rights, and limitations of the classes, and:

(a) For the conduct of members meetings by classes and the election of directors at the meetings; or

(b) That classes may elect class delegates to represent and vote for the class in members meetings.

(4) A delegate elected under subsection (3)(b) of this section has one vote unless voting power is otherwise allocated by the organic rules.

PART 6

MEMBER'S INTEREST IN LIMITED COOPERATIVE ASSOCIATION

(1) Is personal property;

(2) Consists of:

(a) Governance rights;

(b) Financial rights; and

(c) The right or obligation, if any, to do business with the limited cooperative association; and

(3) May be in certificated or uncertificated form.

(2) Unless the organic rules otherwise provide, if a limited cooperative association has investor members, while a person is a member of the association, the person:

(a) If admitted as a patron member, remains a patron member;

(b) If admitted as an investor member, remains an investor member; and

(c) If admitted as a patron member and investor member remains a patron and investor member if not dissociated in one of the capacities.

(2) Unless the organic rules otherwise provide, a member's interest other than financial rights is not transferable.

(3) Unless a transfer is restricted or prohibited by the organic rules, a member may transfer its financial rights in the limited cooperative association.

(4) The terms of any restriction on transferability of financial rights must be:

(a) Set forth in the organic rules and the member records of the association; and

(b) Conspicuously noted on any certificates evidencing a member's interest.

(5) A transferee of a member's financial rights, to the extent the rights are transferred, has the right to share in the allocation of profits or losses and to receive the distributions to the member transferring the interest to the same extent as the transferring member.

(6) A transferee of a member's financial rights does not become a member upon transfer of the rights unless the transferee is admitted as a member by the limited cooperative association.

(7) A limited cooperative association need not give effect to a transfer under this section until the association has notice of the transfer.

(8) A transfer of a member's financial rights in violation of a restriction on transfer contained in the organic rules is ineffective if the intended transferee has notice of the restriction at the time of transfer.

(2) Unless the organic rules otherwise provide, a member may not create an enforceable security interest in the member's governance rights in a limited cooperative association.

(3) The organic rules may provide that a limited cooperative association has a security interest in the financial rights of a member to secure payment of any indebtedness or other obligation of the member to the association. A security interest provided for in the organic rules is enforceable under, and governed by, chapter 62A.9A RCW.

(4) Unless the organic rules otherwise provide, a member may not compel the limited cooperative association to offset financial rights against any indebtedness or obligation owed to the association.

(2) To the extent necessary to effectuate the collection of distributions pursuant to a charging order under subsection (1) of this section, the court may:

(a) Appoint a receiver of the distributions subject to the charging order, with the power to make all inquiries the judgment debtor might have made; and

(b) Make all other orders necessary to give effect to the charging order.

(3) Upon a showing that distributions under a charging order will not pay the judgment debt within a reasonable time, the court may foreclose the lien and order the sale of the financial rights. Except as otherwise provided in subsection (6) of this section, the purchaser at the foreclosure sale obtains only the financial rights that are subject to the charging order, does not thereby become a member, and is subject to section 603 of this act.

(4) At any time before foreclosure under subsection (3) of this section, the member or transferee whose financial rights are subject to a charging order under subsection (1) of this section may extinguish the charging order by satisfying the judgment and filing a certified copy of the satisfaction with the court that issued the charging order.

(5) At any time before foreclosure under subsection (3) of this section, the limited cooperative association or one or more members whose financial rights are not subject to the charging order may pay to the judgment creditor the full amount due under the judgment and thereby succeed to the rights of the judgment creditor, including the charging order. Unless the organic rules otherwise provide, the association may act under this subsection only with the consent of all members whose financial rights are not subject to the charging order.

(6) If a court forecloses a charging order lien against the sole member of a limited cooperative association:

(a) The court shall confirm the sale;

(b) The purchaser at the sale obtains the member's entire interest, not only the member's financial rights;

(c) The purchaser thereby becomes a member; and

(d) The person whose interest was subject to the foreclosed charging order is dissociated as a member.

(7) This chapter does not deprive any member or transferee of the benefit of any exemption law applicable to the member's or transferee's financial rights.

(8) This section provides the exclusive remedy by which a person seeking in the capacity of judgment creditor to enforce a judgment against a member or transferee may satisfy the judgment from the judgment debtor's financial rights.

PART 7

MARKETING CONTRACTS

(1) Requiring the other person to sell, or deliver for sale or marketing on the person's behalf, a specified part of the person's products, commodities, or goods exclusively to or through the association or any facilities furnished by the association; or

(2) Authorizing the association to act for the person in any manner with respect to the products, commodities, or goods.

(2) A marketing contract may:

(a) Authorize a limited cooperative association to create an enforceable security interest in the products, commodities, or goods delivered; and

(b) Allow the association to sell the products, commodities, or goods delivered and pay the sales price on a pooled or other basis after deducting selling costs, processing costs, overhead, expenses, and other charges.

(3) Some or all of the provisions of a marketing contract between a patron member and a limited cooperative association may be contained in the organic rules.

(2) Upon a breach of a marketing contract, whether by anticipatory repudiation or otherwise, a limited cooperative association may seek:

(a) An injunction to prevent further breach; and

(b) Specific performance.

(3) The remedies in this section are in addition to any other remedies available to an association under law other than this chapter.

PART 8

DIRECTORS AND OFFICERS

(2) The affairs of a limited cooperative association must be managed by, or under the direction of, the board of directors. The board may adopt policies and procedures that do not conflict with the organic rules or this chapter.

(3) An individual is not an agent for a limited cooperative association solely by being a director.

(2) Unless the organic rules otherwise provide, a director may be an officer or employee of the limited cooperative association.

(3) If the organic rules provide for nonmember directors, the number of nonmember directors may not exceed:

(a) One, if there are two through four directors;

(b) Two, if there are five through eight directors; or

(c) One-third of the total number of directors if there are at least nine directors.

(4) The organic rules may provide qualifications for directors in addition to those in this section.

(a) The number of directors that must be patron members may not be fewer than:

(i) One, if there are two or three directors;

(ii) Two, if there are four or five directors;

(iii) Three, if there are six through eight directors; or

(iv) One-third of the directors if there are at least nine directors; and

(b) A majority of the board of directors must be elected exclusively by patron members.

(2) Unless the organic rules otherwise provide, if a limited cooperative association has investor members, the directors who are not elected exclusively by patron members are elected by the investor members.

(3) Subject to subsection (1) of this section, the organic rules may provide for the election of all or a specified number of directors by one or more districts or classes of members.

(4) Subject to subsection (1) of this section, the organic rules may provide for the nomination or election of directors by districts or classes, directly or by district delegates.

(5) If a class of members consists of a single member, the organic rules may provide for the member to appoint a director or directors.

(6) Unless the organic rules otherwise provide, cumulative voting for directors is prohibited.

(7) Except as otherwise provided by the organic rules, subsection (5) of this section, or sections 302, 516, 517, and 809 of this act, member directors must be elected at an annual members meeting.

(2) Unless the organic rules otherwise provide, a director may be reelected.

(3) Except as otherwise provided in subsection (4) of this section, a director continues to serve until a successor director is elected or appointed and qualifies or the director is removed, resigns, is adjudged incompetent, or dies.

(4) Unless the organic rules otherwise provide, a director does not serve the remainder of the director's term if the director ceases to qualify to be a director.

(1) Members may remove a director with or without cause.

(2) A member or members holding at least ten percent of the total voting power entitled to be voted in the election of a director may demand removal of the director by one or more executed petitions submitted to the officer of the limited cooperative association charged with keeping its records.

(3) Upon receipt of a petition for removal of a director, an officer of the association or the board of directors shall:

(a) Call a special meeting of members to be held not later than ninety days after receipt of the petition by the association; and

(b) Mail or otherwise transmit or deliver in a record to the members entitled to vote on the removal, and to the director to be removed, notice of the meeting which complies with section 508 of this act.

(4) A director is removed if the votes in favor of removal are equal to or greater than the votes required to elect the director.

(a) Fraudulent conduct with respect to the association or its members;

(b) Gross abuse of the position of director;

(c) Intentional or reckless infliction of harm on the association; or

(d) Any other behavior, act, or omission as provided by the organic rules.

(2) A suspension under subsection (1) of this section is effective for thirty days unless the board of directors calls and gives notice of a special meeting of members for removal of the director before the end of the thirty-day period in which case the suspension is effective until adjournment of the meeting or the director is removed.

(a) Within a reasonable time by majority vote of the remaining directors until the next annual members meeting or a special meeting of members called to fill the vacancy; and

(b) For the unexpired term by members at the next annual members meeting or a special meeting of members called to fill the vacancy.

(2) Unless the organic rules otherwise provide, if a vacating director was elected or appointed by a class of members or a district:

(a) The new director must be of that class or district; and

(b) The selection of the director for the unexpired term must be conducted in the same manner as would the selection for that position without a vacancy.

(3) If a member appointed a vacating director, the organic rules may provide for that member to appoint a director to fill the vacancy.

(2) Unless the organic rules otherwise provide, a board of directors may permit directors to attend or conduct board meetings through the use of any means of communication, if all directors attending the meeting can communicate with each other during the meeting.

(2) Consent under subsection (1) of this section may be withdrawn by a director in a record at any time before the limited cooperative association receives consent from all directors.

(3) A record of consent for any action under subsection (1) of this section may specify the effective date or time of the action.

(2) Unless the organic rules otherwise provide, notice of the time, date, and place of a special meeting of a board of directors must be given to all directors at least three days before the meeting, the notice must contain a statement of the purpose of the meeting, and the meeting is limited to the matters contained in the statement.

(2) Unless the organic rules otherwise provide, a director's participation in a meeting is a waiver of notice of that meeting unless:

(a) The director objects to the meeting at the beginning of the meeting or promptly upon the director's arrival at the meeting and does not thereafter vote in favor of or otherwise assent to the action taken at the meeting; or

(b) The director promptly objects upon the introduction of any matter for which notice under section 813 of this act has not been given and does not thereafter vote in favor of or otherwise assent to the action taken on the matter.

(2) If a quorum of the board of directors is present at the beginning of a meeting, any action taken by the directors present is valid even if withdrawal of directors originally present results in the number of directors being fewer than the number required for a quorum.

(3) A director present at a meeting but objecting to notice under section 814(2) (a) or (b) of this act does not count toward a quorum.

(2) Unless the organic rules otherwise provide, the affirmative vote of a majority of directors present at a meeting is required for action by the board of directors.

(2) Unless the organic rules otherwise provide, an individual appointed to serve on a committee of a limited cooperative association need not be a director or member.

(3) An individual who is not a director and is serving on a committee has the same rights, duties, and obligations as a director serving on the committee.

(4) Unless the organic rules otherwise provide, each committee of a limited cooperative association may exercise the powers delegated to it by the board of directors, but a committee may not:

(a) Approve allocations or distributions except according to a formula or method prescribed by the board of directors;

(b) Approve or propose to members action requiring approval of members; or

(c) Fill vacancies on the board of directors or any of its committees.

(1) The discharge of the duties of a director or member of a committee of the board of directors is governed by the law applicable to directors of entities organized under Title 23B RCW; and

(2) The liability of a director or member of a committee of the board of directors is governed by the law applicable to directors of entities organized under Title 23B RCW.

(2) A director does not have a conflict of interest under chapter 23.95 RCW and this chapter or the organic rules solely because the director's conduct relating to the duties of the director may further the director's own interest.

(1) The interest of employees, customers, and suppliers of the association;

(2) The interest of the community in which the association operates; and

(3) Other cooperative principles and values that may be applied in the context of the decision.

(a) Provided in the organic rules; or

(b) Established by the board of directors in a manner not inconsistent with the organic rules.

(2) The organic rules may designate or, if the organic rules do not designate, the board of directors shall designate, one of the association's officers for preparing all records required by section 110 of this act and for the authentication of records.

(3) Unless the organic rules otherwise provide, the board of directors shall appoint the officers of the limited cooperative association.

(4) Officers of a limited cooperative association shall perform the duties the organic rules prescribe or as authorized by the board of directors in a manner consistent with the organic rules.

(5) The election or appointment of an officer of a limited cooperative association does not of itself create a contract between the association and the officer.

(6) Unless the organic rules otherwise provide, an individual may simultaneously hold more than one office in a limited cooperative association.

(2) An officer of a limited cooperative association may resign at any time by giving notice in a record to the association. Unless the notice specifies a later time, the resignation is effective when the notice is given.

PART 9

INDEMNIFICATION

(2) A limited cooperative association may purchase and maintain insurance on behalf of any individual against liability asserted against or incurred by the individual to the same extent and subject to the same conditions as provided by Title 23B RCW.

PART 10

CONTRIBUTIONS, ALLOCATIONS, AND DISTRIBUTIONS

(2) The receipt and acceptance of contributions and the valuation of contributions must be reflected in a limited cooperative association's records.

(3) Unless the organic rules otherwise provide, the board of directors shall determine the value of a member's contributions received or to be received and the determination by the board of directors of valuation is conclusive for purposes of determining whether the member's contribution obligation has been met.

(a) The agreement is irrevocable for six months after the agreement is executed by the person unless all parties to the agreement consent to the revocation.

(b) If a person does not make a required contribution:

(i) The person is obligated, at the option of the association, once formed, to contribute money equal to the value of that part of the contribution that has not been made, and the obligation may be enforced as a debt to the association; or

(ii) The association, once formed, may rescind the agreement if the debt remains unpaid more than twenty days after the association demands payment from the person, and upon rescission the person has no further rights or obligations with respect to the association.

(2) Unless the organic rules or an agreement to make a contribution other than money to a limited cooperative association otherwise provide, if a person does not make a required contribution to an association, the person or the person's estate is obligated, at the option of the association, to contribute money equal to the value of the part of the contribution which has not been made.

(2) Unless the organic rules otherwise provide, all profits and losses of a limited cooperative association must be allocated to patron members.

(3) If a limited cooperative association has investor members, the organic rules may not reduce the allocation to patron members to less than fifty percent of profits. For purposes of this subsection, the following rules apply:

(a) Amounts paid or due on contracts for the delivery to the association by patron members of products, goods, or services are not considered amounts allocated to patron members.

(b) Amounts paid, due, or allocated to investor members as a stated fixed return on equity are not considered amounts allocated to investor members.

(4) Unless prohibited by the organic rules, in determining the profits for allocation under subsections (1) through (3) of this section, the board of directors may first deduct and set aside a part of the profits to create or accumulate:

(a) An unallocated capital reserve; and

(b) Reasonable unallocated reserves for specific purposes, including expansion and replacement of capital assets; education, training, and cooperative development; creation and distribution of information concerning principles of cooperation; and community responsibility.

(5) Subject to subsections (2) and (6) of this section and the organic rules, the board of directors shall allocate the amount remaining after any deduction or setting aside of profits for unallocated reserves under subsection (4) of this section:

(a) To patron members in the ratio of each member's patronage to the total patronage of all patron members during the period for which allocations are to be made; and

(b) To investor members, if any, in the ratio of each investor member's contributions to the total contributions of all investor members.

(6) For purposes of allocation of profits and losses or specific items of profits or losses of a limited cooperative association to members, the organic rules may establish allocation units or methods based on separate classes of members or, for patron members, on class, function, division, district, department, allocation units, pooling arrangements, members' contributions, or other equitable methods.

(2) Unless the organic rules otherwise provide, distributions to members may be made in any form, including money, capital credits, allocated patronage equities, revolving fund certificates, and the limited cooperative association's own or other securities.

(2) A limited cooperative association may not make a distribution, including a distribution under section 1208 of this act, if after the distribution:

(a) The association would not be able to pay its debts as they become due in the ordinary course of the association's activities and affairs; or

(b) The association's total assets would be less than the sum of its total liabilities plus the amount that would be needed, if the association were to be dissolved and wound up at the time of the distribution, to satisfy the preferential rights upon dissolution and winding up of members whose preferential rights are superior to the rights of persons receiving the distribution.

(3) A limited cooperative association may base a determination that a distribution is not prohibited under subsection (2) of this section on:

(a) Financial statements prepared on the basis of accounting practices and principles that are reasonable under the circumstances; or

(b) A fair valuation or other method that is reasonable under the circumstances.

(4) Except as otherwise provided in subsection (5) of this section, the effect of a distribution allowed under subsection (2) of this section is measured:

(a) In the case of a distribution by purchase, redemption, or other acquisition of financial rights in the limited cooperative association, as of the earlier of:

(i) The date money or other property is transferred or debt is incurred by the association; or

(ii) The date the person entitled to the distribution ceases to own the financial rights being acquired by the association in return for the distribution;

(b) In the case of any other distribution of indebtedness, as of the date the indebtedness is distributed; and

(c) In all other cases, as of the date:

(i) The distribution is authorized, if the payment occurs not later than one hundred twenty days after that date; or

(ii) The payment is made, if the payment occurs more than one hundred twenty days after the distribution is authorized.

(5) A limited cooperative association's indebtedness incurred by reason of a distribution made in accordance with this section is at parity with the association's indebtedness to its general, unsecured creditors except to the extent subordinated by agreement.

(6) A limited cooperative association's indebtedness, including indebtedness issued as a distribution, is not a liability for purposes of subsection (2) of this section if the terms of the indebtedness provide that payment of principal and interest is made only if and to the extent that payment of a distribution could then be made under this section. If the indebtedness is issued as a distribution, each payment of principal or interest is treated as a distribution, the effect of which is measured on the date the payment is made.

(7) In measuring the effect of a distribution under section 1208 of this act, the liabilities of a dissolved limited cooperative association do not include any claim that has been disposed of under sections 1209, 1210, or 1211 of this act.

(2) A person that receives a distribution knowing that the distribution violated section 1007 of this act is personally liable to the limited cooperative association but only to the extent that the distribution received by the person exceeded the amount that could have been properly paid under section 1007 of this act.

(3) A director against whom an action is commenced because the director is liable under subsection (1) of this section may:

(a) Implead any other director that is liable under subsection (1) of this section and seek to enforce a right of contribution from the director; and

(b) Implead any person that received a distribution in violation of subsection (2) of this section and seek to enforce a right of contribution from the person in the amount the person received in violation of subsection (2) of this section.

(4) An action under this section is barred unless commenced not later than two years after the distribution.

PART 11

DISSOCIATION

(2) Unless the organic rules otherwise provide, a member's dissociation from a limited cooperative association is wrongful only if:

(a) It is in breach of an express provision of the organic rules; or

(b) It occurs before the termination of the limited cooperative association and:

(i) The person is expelled as a member under subsection (4)(c) or (d) of this section; or

(ii) In the case of a person that is not an individual, trust other than a business trust, or estate, the person is expelled or otherwise dissociated as a member because it dissolved or terminated in bad faith.

(3) Unless the organic rules otherwise provide, a person that wrongfully dissociates as a member is liable to the limited cooperative association and to the other members for damages caused by the dissociation. The liability is in addition to any other debt, obligation, or liability of the person to the association.

(4) A member is dissociated as a member when:

(a) The limited cooperative association receives notice in a record of the member's express will to dissociate as a member, or if the member specifies in the notice an effective date later than the date the association received notice, on that later date;

(b) An event stated in the organic rules as causing the person's dissociation occurs;

(c) The person's entire interest is transferred in a foreclosure sale under section 605(6) of this act;

(d) The person is expelled as a member under the organic rules;

(e) The person is expelled as a member by the board of directors if:

(i) It is unlawful to carry on the limited cooperative association's activities and affairs with the person as a member;

(ii) There has been a transfer of all the member's financial rights in the association, other than:

(A) A transfer for security purposes; or

(B) A charging order in effect under section 605 of this act which has not been foreclosed;

(iii) The person is an unincorporated entity that has been dissolved and its activities and affairs are being wound up;

(iv) The person is a corporation or cooperative and:

(A) The person filed a certificate of dissolution or the equivalent, or the jurisdiction of formation revoked the person's charter or right to conduct business;

(B) The association sends a notice to the person that it will be expelled as a member for a reason described in (e)(iv)(A) of this subsection (4); and

(C) Not later than ninety days after the notice was sent under (e)(iv)(B) of this subsection (4), the person did not revoke its certificate of dissolution or the equivalent, or the jurisdiction of formation did not reinstate the person's charter or right to conduct business; or

(v) The member is an individual and is adjudged incompetent;

(f) In the case of an individual, the individual dies;

(g) In the case of a member that is a testamentary or inter vivos trust or is acting as a member by virtue of being a trustee of a trust, the trust's entire financial rights in the limited cooperative association are distributed;

(h) In the case of a person that is an estate or is acting as a member by virtue of being a personal representative of an estate, the estate's entire financial interest in the association is distributed; or

(i) In the case of a person that is not an individual, partnership, limited liability company, cooperative, corporation, trust, or estate, the existence of the person terminates.

(a) The person's right to participate as a member in the management and conduct of the limited cooperative association's activities and affairs terminates; and

(b) Subject to section 1103 of this act, any financial rights owned by the person in the person's capacity as a member immediately before dissociation are owned by the person as a transferee.

(2) A person's dissociation as a member does not of itself discharge the person from any debt, obligation, or other liability to the limited cooperative association or the other members which the person incurred while a member.

PART 12

DISSOLUTION

(1) Upon the occurrence of an event or at a time specified in the articles of organization;

(2) Upon the action of the association's organizers, board of directors, or members under section 1204 or 1205 of this act; or

(3) Ninety days after the dissociation of a member, which results in the association having one patron member and no other members, unless the association:

(a) Has a sole member that is a cooperative; or

(b) Not later than the end of the ninety-day period, admits at least one member in accordance with the organic rules and has at least two members, at least one of which is a patron member.

(1) In a proceeding initiated by the attorney general, if:

(a) The association obtained its articles of organization through fraud; or

(b) The association has continued to exceed or abuse the authority conferred upon it by law; or

(2) In a proceeding initiated by a member, if:

(a) The directors are deadlocked in the management of the association's affairs, the members are unable to break the deadlock, and irreparable injury to the association is occurring or is threatened because of the deadlock;

(b) The directors or those in control of the association have acted, are acting, or will act in a manner that is illegal, oppressive, or fraudulent;

(c) The members are deadlocked in voting power and have failed to elect successors to directors whose terms have expired for two consecutive periods during which annual members meetings were held or were to be held; or

(d) The assets of the association are being misapplied or wasted.

(a) A resolution to dissolve must be approved by a majority vote of the board of directors unless a greater percentage is required by the organic rules;

(b) The board of directors must call a members meeting to consider the resolution, to be held not later than ninety days after adoption of the resolution; and

(c) The board of directors must mail or otherwise transmit or deliver to each member in a record that complies with section 508 of this act:

(i) The resolution required by (a) of this subsection;

(ii) A recommendation that the members vote in favor of the resolution or, if the board determines that because of conflict of interest or other special circumstances it should not make a favorable recommendation, the basis of that determination; and

(iii) Notice of the members meeting, which must be given in the same manner as notice of a special meeting of members.

(2) Subject to subsection (3) of this section, a resolution to dissolve must be approved by:

(a) At least two-thirds of the voting power of members present at a members meeting called under subsection (1)(b) of this section; and

(b) If the limited cooperative association has investor members, at least a majority of the votes cast by patron members, unless the organic rules require a greater percentage.

(3) The organic rules may require that the percentage of votes under subsection (2)(a) of this section is:

(a) A different percentage that is not less than a majority of members voting at the meeting;

(b) Measured against the voting power of all members; or

(c) A combination of (a) and (b) of this subsection.

(2) In winding up its activities and affairs, the board of directors:

(a) Shall discharge the association's debts, obligations, or other liabilities, settle and close the association's activities, and marshal and distribute the assets of the association; and

(b) May:

(i) Deliver to the secretary of state for filing a statement of dissolution stating the name of the association and that the association is dissolved;

(ii) Preserve the association's activities, affairs, and property as a going concern for a reasonable time;

(iii) Prosecute and defend actions and proceedings, whether civil, criminal, or administrative;

(iv) Transfer the association's property;

(v) Settle disputes by mediation or arbitration;

(vi) Deliver to the secretary of state for filing a statement of termination stating the name of the company and that the company is terminated; and

(vii) Perform other acts necessary or appropriate to the winding up.

(3) After dissolution and upon application of a limited cooperative association, a member, or a holder of financial rights, a superior court may order judicial supervision of the winding up of the association, including the appointment of a person to wind up the association's activities, if:

(a) After a reasonable time, the association has not wound up its activities; or

(b) The applicant establishes other good cause.

(4) If a person is appointed pursuant to subsection (3) of this section to wind up the activities of a limited cooperative association, the association shall promptly deliver to the secretary of state for filing an amendment to the articles of organization to reflect the appointment.

(2) Rescinding dissolution under this section requires:

(a) The affirmative vote or consent of each member;

(b) If a statement of dissolution applicable to the limited cooperative association has been filed by the secretary of state but has not become effective, the delivery to the secretary of state for filing of a statement of withdrawal applicable to the statement of dissolution; and

(c) If a statement of dissolution applicable to the limited cooperative association is effective, the delivery to the secretary of state for filing of a statement of rescission stating the name of the association and that dissolution has been rescinded under this section.

(3) If a limited cooperative association rescinds its dissolution:

(a) The association resumes carrying on its activities and affairs as if dissolution had never occurred;

(b) Subject to (c) of this subsection, any liability incurred by the association after the dissolution and before the rescission is effective is determined as if dissolution had never occurred; and

(c) The rights of a third party arising out of conduct in reliance on the dissolution before the third party knew or had notice of the rescission may not be adversely affected.

(2) Unless the organic rules otherwise provide, in this subsection "financial interests" means the amounts recorded in the names of members in the records of a limited cooperative association at the time a distribution is made, including amounts paid to become a member, amounts allocated but not distributed to members, and amounts of distributions authorized but not yet paid to members. Unless the organic rules otherwise provide, each member is entitled to a distribution from the association of any remaining assets in the proportion of the member's financial interests to the total financial interests of the members after all other obligations are satisfied.

(2) A dissolved limited cooperative association in a record may notify its known claimants of the dissolution. The notice must:

(a) Specify the information required to be included in a claim;

(b) State that a claim must be in writing and provide a mailing address to which the claim is to be sent;

(c) State the deadline for receipt of a claim, which may not be less than one hundred twenty days after the date the notice is received by the claimant; and

(d) State that the claim will be barred if not received by the deadline.

(3) A claim against a dissolved limited cooperative association is barred if the requirements of subsection (2) of this section are met, and:

(a) The claim is not received by the specified deadline; or

(b) If the claim is timely received but rejected by the association:

(i) The association causes the claimant to receive a notice in a record stating that the claim is rejected and will be barred unless the claimant commences an action against the association to enforce the claim not later than ninety days after the claimant receives the notice; and

(ii) The claimant does not commence the required action not later than ninety days after the claimant receives the notice.

(4) This section does not apply to a claim based on an event occurring after the date of dissolution or a liability that on that date is contingent.

(2) A notice authorized under subsection (1) of this section must:

(a) Be published at least once in a newspaper of general circulation in the county in this state in which the dissolved limited cooperative association's principal office is located or, if the principal office is not located in this state, in the county in which the office of the association's registered agent is or was last located;

(b) Describe the information required to be contained in a claim, state that the claim must be in writing, and provide a mailing address to which the claim is to be sent; and

(c) State that a claim against the association is barred unless an action to enforce the claim is commenced not later than three years after publication of the notice.

(3) If a dissolved limited cooperative association publishes a notice in accordance with subsection (2) of this section, the claim of each of the following claimants is barred unless the claimant commences an action to enforce the claim against the association not later than three years after the publication date of the notice:

(a) A claimant that did not receive notice in a record under section 1209 of this act;

(b) A claimant whose claim was timely sent to the company but not acted on; and

(c) A claimant whose claim is contingent at, or based on an event occurring after, the effective date of dissolution.

(4) A claim not barred under this section or section 1209 of this act may be enforced:

(a) Against a dissolved limited cooperative association, to the extent of its undistributed assets; and

(b) Except as provided in section 1211 of this act, if the assets of the association have been distributed after dissolution, against a member or holder of financial rights to the extent of that person's proportionate share of the claim or the assets distributed to the person after dissolution, whichever is less, but a person's total liability for all claims under this subsection (4)(b) may not exceed the total amount of assets distributed to the person after dissolution.

(a) At the time of the application:

(i) Are contingent; or

(ii) Have not been made known to the association; or

(b) Are based on an event occurring after the date of dissolution.

(2) Security is not required for a claim that is or is reasonably anticipated to be barred under section 1210 of this act.

(3) Not later than ten days after filing an application under subsection (1) of this section, the dissolved limited cooperative association shall give notice of the proceeding to each claimant holding a contingent claim known to the association.

(4) In a proceeding under this section, the court may appoint a guardian ad litem to represent all claimants whose identities are unknown. The reasonable fees and expenses of the guardian, including all reasonable expert witness fees, must be paid by the dissolved limited cooperative association.

(5) A dissolved limited cooperative association that provides security in the amount and form ordered by the court under subsection (1) of this section satisfies the association's obligations with respect to claims that are contingent, have not been made known to the association, or are based on an event occurring after the effective date of dissolution. Such claims may not be enforced against a member or holder of financial rights on account of assets received in liquidation.

(a) The name of the association;

(b) The date the association dissolved or will dissolve; and

(c) Any other information the association considers relevant.

(2) A person has notice of a limited cooperative association's dissolution on the later of:

(a) Ninety days after a statement of dissolution is filed; or

(b) The effective date stated in the statement of dissolution.

(a) The name of the association;

(b) The date of filing of its initial articles of organization; and

(c) That the association is terminated.

(2) The filing of a statement of termination does not itself terminate the limited cooperative association.

PART 13

ACTIONS BY MEMBERS

(2) A member maintaining a direct action under this section must plead and prove an actual or threatened injury that is not solely the result of an injury suffered or threatened to be suffered by the limited cooperative association.

(1) The member first makes a demand on the directors requesting that they cause the association to bring an action to enforce the right and the directors do not bring the action within a reasonable time; or

(2) A demand under subsection (1) of this section would be futile.

(1) Was a member when the conduct giving rise to the action occurred; or

(2) Whose status as a member devolved on the person by operation of law or pursuant to the terms of the organic rules from a person that was a member at the time of the conduct.

(1) The date and content of plaintiff's demand and the response to the demand by the directors; or

(2) Why the demand should be excused as futile.

(a) Any proceeds or other benefits of a derivative action, whether by judgment, compromise, or settlement, belong to the limited cooperative association and not to the plaintiff; and

(b) If the plaintiff receives any proceeds, the plaintiff shall remit them immediately to the association.

(2) If a derivative action is successful in whole or in part, the court may award the plaintiff reasonable expenses, including reasonable attorneys' fees and costs, from the recovery of the limited cooperative association.

(a) Enforcing a person's right to information under section 505 of this act; or

(b) Granting extraordinary relief in the form of a temporary restraining order or preliminary injunction.

(2) A special litigation committee must be composed of one or more disinterested and independent individuals, who may be members.

(3) A special litigation committee may be appointed:

(a) By a majority of the directors not named as parties in the proceeding; or

(b) If all directors are named as parties in the proceeding, by a majority of the directors named as defendants.

(4) After appropriate investigation, a special litigation committee may determine that it is in the best interests of the limited cooperative association that the proceeding:

(a) Continue under the control of the plaintiff;

(b) Continue under the control of the committee;

(c) Be settled on terms approved by the committee; or

(d) Be dismissed.

(5) After making a determination under subsection (4) of this section, a special litigation committee shall file with the court a statement of its determination and its report supporting its determination and shall serve each party with a copy of the determination and report. The court shall determine whether the members of the committee were disinterested and independent and whether the committee conducted its investigation and made its recommendation in good faith, independently, and with reasonable care, with the committee having the burden of proof. If the court finds that the members of the committee were disinterested and independent and that the committee acted in good faith, independently, and with reasonable care, the court shall enforce the determination of the committee. Otherwise, the court shall dissolve the stay of discovery entered under subsection (1) of this section and allow the action to continue under the control of the plaintiff.

PART 14

DISPOSITION OF ASSETS

(1) Sell, lease, exchange, license, or otherwise dispose of all or any part of the assets of the association in the usual and regular course of business; or

(2) Mortgage, pledge, dedicate to the repayment of indebtedness, or encumber in any way all or any part of the assets of the association whether or not in the usual and regular course of business.

(1) A majority of the board of directors, or a greater percentage if required by the organic rules, must approve the proposed disposition; and

(2) The board of directors must call a members meeting to consider the proposed disposition, hold the meeting not later than ninety days after approval of the proposed disposition by the board, and mail or otherwise transmit or deliver in a record to each member:

(a) The terms of the proposed disposition;

(b) A recommendation that the members approve the disposition, or if the board determines that because of conflict of interest or other special circumstances it should not make a favorable recommendation, the basis for that determination;

(c) A statement of any condition of the board's submission of the proposed disposition to the members; and

(d) Notice of the meeting at which the proposed disposition will be considered, which must be given in the same manner as notice of a special meeting of members.

(a) At least two-thirds of the voting power of members present at a members meeting called under section 1403(2) of this act; and

(b) If the limited cooperative association has investor members, at least a majority of the votes cast by patron members, unless the organic rules require a greater percentage vote by patron members.

(2) The organic rules may require that the percentage of votes under subsection (1)(a) of this section is:

(a) A different percentage that is not less than a majority of members voting at the meeting;

(b) Measured against the voting power of all members; or

(c) A combination of (a) and (b) of this subsection.

(3) Subject to any contractual obligations, after a disposition of assets is approved and at any time before the consummation of the disposition, a limited cooperative association may approve an amendment to the contract for disposition or the resolution authorizing the disposition or approve abandonment of the disposition:

(a) As provided in the contract or the resolution; and

(b) Except as prohibited by the resolution, with the same affirmative vote of the board of directors and of the members as was required to approve the disposition.

(4) The voting requirements for districts, classes, or voting groups under section 404 of this act apply to approval of a disposition of assets under this section and sections 1401 through 1403 of this act.

PART 15

AMENDMENTS TO OTHER LAW

Sec. 1501. RCW 23.95.105 and 2015 c 176 s 1102 are each amended to read as follows:

The definitions in this section apply throughout this chapter unless the context clearly requires otherwise or as set forth in RCW 23.95.400 or 23.95.600.

(1) "Annual report" means the report required by RCW 23.95.255.

(2) "Business corporation" means a domestic business corporation incorporated under or subject to Title 23B RCW or a foreign business corporation.

(3) "Commercial registered agent" means a person listed under RCW 23.95.420.

(4) "Domestic," with respect to an entity, means governed as to its internal affairs by the law of this state.

(5) "Electronic transmission" means an electronic communication:

(a) Not directly involving the physical transfer of a record in a tangible medium; and

(b) That may be retained, retrieved, and reviewed by the sender and the recipient thereof, and that may be directly reproduced in a tangible medium by such a sender and recipient.

(6) "Entity" means:

(a) A business corporation;

(b) A nonprofit corporation;

(c) A limited liability partnership;

(d) A limited partnership;

(e) A limited liability company; ((or))

(f) A general cooperative association; or

(g) A limited cooperative association.

(7) "Entity filing" means a record delivered to the secretary of state for filing pursuant to this chapter.

(8) "Execute," "executes," or "executed" means:

(a) Signed with respect to a written record;

(b) Electronically transmitted along with sufficient information to determine the sender's identity with respect to an electronic transmission; or

(c) With respect to a record to be filed with the secretary of state, in compliance with the standards for filing with the office of the secretary of state as prescribed by the secretary of state.

(9) "Filed record" means a record filed by the secretary of state pursuant to this chapter.

(10) "Foreign," with respect to an entity, means governed as to its internal affairs by the law of a jurisdiction other than this state.

(11) "General cooperative association" means a domestic general cooperative association formed under or subject to chapter 23.86 RCW.

(12) "Governor" means:

(a) A director of a business corporation;

(b) A director of a nonprofit corporation;

(c) A partner of a limited liability partnership;

(d) A general partner of a limited partnership;

(e) A manager of a manager-managed limited liability company;

(f) A member of a member-managed limited liability company;

(g) A director of a general cooperative association; ((or))

(h) A director of a limited cooperative association; or

(i) Any other person under whose authority the powers of an entity are exercised and under whose direction the activities and affairs of the entity are managed pursuant to the organic law and organic rules of the entity.

(13) "Interest" means:

(a) A share in a business corporation;

(b) A membership in a nonprofit corporation;

(c) A share in a nonprofit corporation formed under chapter 24.06 RCW;

(d) A partnership interest in a limited liability partnership;

(e) A partnership interest in a limited partnership;

(f) A limited liability company interest; ((or))

(g) A share or membership in a general cooperative association; or

(h) A member's interest in a limited cooperative association.

(14) "Interest holder" means:

(a) A shareholder of a business corporation;

(b) A member of a nonprofit corporation;

(c) A shareholder of a nonprofit corporation formed under chapter 24.06 RCW;

(d) A partner of a limited liability partnership;

(e) A general partner of a limited partnership;

(f) A limited partner of a limited partnership;

(g) A member of a limited liability company; ((or))

(h) A shareholder or member of a general cooperative association; or

(i) A member of a limited cooperative association.

(15) "Jurisdiction(([,]))," when used to refer to a political entity, means the United States, a state, a foreign country, or a political subdivision of a foreign country.

(16) "Jurisdiction of formation" means the jurisdiction whose law includes the organic law of an entity.

(17) "Limited cooperative association" means a domestic limited cooperative association formed under or subject to chapter 23.--- RCW (the new chapter created in section 1605 of this act) or a foreign limited cooperative association.

(18) "Limited liability company" means a domestic limited liability company formed under or subject to chapter 25.15 RCW or a foreign limited liability company.

(((18))) (19) "Limited liability limited partnership" means a domestic limited liability limited partnership formed under or subject to chapter 25.10 RCW or a foreign limited liability limited partnership.

(((19))) (20) "Limited liability partnership" means a domestic limited liability partnership registered under or subject to chapter 25.05 RCW or a foreign limited liability partnership.

(((20))) (21) "Limited partnership" means a domestic limited partnership formed under or subject to chapter 25.10 RCW or a foreign limited partnership. "Limited partnership" includes a limited liability limited partnership.

(((21))) (22) "Noncommercial registered agent" means a person that is not a commercial registered agent and is:

(a) An individual or domestic or foreign entity that serves in this state as the registered agent of an entity;

(b) An individual who holds the office or other position in an entity which is designated as the registered agent pursuant to RCW 23.95.415(1)(b)(ii); or

(c) A government, governmental subdivision, agency, or instrumentality, or a separate legal entity comprised of two or more of these entities, that serves as the registered agent of an entity.

(((22))) (23) "Nonprofit corporation" means a domestic nonprofit corporation incorporated under or subject to chapter 24.03 or 24.06 RCW or a foreign nonprofit corporation.

(((23))) (24) "Nonregistered foreign entity" means a foreign entity that is not registered to do business in this state pursuant to a statement of registration filed by the secretary of state.

(((24))) (25) "Organic law" means the law of an entity's jurisdiction of formation governing the internal affairs of the entity.

(((25))) (26) "Organic rules" means the public organic record and private organic rules of an entity.

(((26))) (27) "Person" means an individual, business corporation, nonprofit corporation, partnership, limited partnership, limited liability company, general cooperative association, limited cooperative association, unincorporated nonprofit association, statutory trust, business trust, common-law business trust, estate, trust, association, joint venture, public corporation, government or governmental subdivision, agency, or instrumentality, or any other legal or commercial entity.

(((27))) (28) "Principal office" means the principal executive office of an entity, whether or not the office is located in this state.

(((28))) (29) "Private organic rules" means the rules, whether or not in a record, that govern the internal affairs of an entity, are binding on all its interest holders, and are not part of its public organic record, if any. "Private organic rules" includes:

(a) The bylaws of a business corporation and any agreement among shareholders pursuant to RCW 23B.07.320;

(b) The bylaws of a nonprofit corporation;

(c) The partnership agreement of a limited liability partnership;

(d) The partnership agreement of a limited partnership;

(e) The limited liability company agreement; ((and))

(f) The bylaws of a general cooperative association; and

(g) The bylaws of a limited cooperative association.

(((29))) (30) "Proceeding" means civil suit and criminal, administrative, and investigatory action.

(((30))) (31) "Property" means all property, whether real, personal, or mixed or tangible or intangible, or any right or interest therein.

(((31))) (32) "Public organic record" means the record the filing of which by the secretary of state is required to form an entity and any amendment to or restatement of that record. The term includes:

(a) The articles of incorporation of a business corporation;

(b) The articles of incorporation of a nonprofit corporation;

(c) The certificate of limited partnership of a limited partnership;

(d) The certificate of formation of a limited liability company;

(e) The articles of incorporation of a general cooperative association; ((and))

(f) The articles of organization of a limited cooperative association; and

(g) The document under the laws of another jurisdiction that is equivalent to a document listed in this subsection.

(((32))) (33) "Receipt," as used in this chapter, means actual receipt. "Receive" has a corresponding meaning.

(((33))) (34) "Record" means information inscribed on a tangible medium or contained in an electronic transmission.

(((34))) (35) "Registered agent" means an agent of an entity which is authorized to receive service of any process, notice, or demand required or permitted by law to be served on the entity. The term includes a commercial registered agent and a noncommercial registered agent.

(((35))) (36) "Registered foreign entity" means a foreign entity that is registered to do business in this state pursuant to a certificate of registration filed by the secretary of state.

(((36))) (37) "State" means a state of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the United States.

(((37))) (38) "Transfer" includes:

(a) An assignment;

(b) A conveyance;

(c) A sale;

(d) A lease;

(e) An encumbrance, including a mortgage or security interest;

(f) A change of record owner of interest;

(g) A gift; and

(h) A transfer by operation of law.

(((38))) (39) "Type of entity" means a generic form of entity:

(a) Recognized at common law; or

(b) Formed under an organic law, whether or not some entities formed under that law are subject to provisions of that law that create different categories of the form of entity.

(((39))) (40) "Writing" does not include an electronic transmission.

(((40))) (41) "Written" means embodied in a tangible medium.

Sec. 1502.  RCW 23.95.305 and 2015 c 176 s 1302 are each amended to read as follows:

(1)(a) The name of a business corporation:

(i)(A) Except in the case of a social purpose corporation, must contain the word "corporation," "incorporated," "company," or "limited," or the abbreviation "Corp.," "Inc.," "Co.," or "Ltd.," or words or abbreviations of similar import in another language; or

(B) In the case of a social purpose corporation, must contain the words "social purpose corporation" or the abbreviation "SPC" or "S.P.C."; and

(ii) Must not contain any of the following words or phrases: "Bank," "banking," "banker," "trust," "cooperative," or any combination of the words "industrial" and "loan," or any combination of any two or more of the words "building," "savings," "loan," "home," "association," and "society," or any other words or phrases prohibited by any statute of this state.

(b) The name of a professional service corporation must contain either the words "professional service" or "professional corporation" or the abbreviation "P.S." or "P.C." The name may also contain either the words "corporation," "incorporated," "company," or "limited," or the abbreviation "Corp.," "Inc.," "Co.," or "Ltd." The name of a professional service corporation organized to render dental services must contain the full names or surnames of all shareholders and no other word than "chartered" or the words "professional services" or the abbreviation "P.S." or "P.C."

(2) The name of a nonprofit corporation:

(a) May include "club," "league," "association," "services," "committee," "fund," "society," "foundation," "guild," ". . . . . ., a nonprofit corporation," ". . . . . ., a nonprofit mutual corporation," or any name of like import;

(b) Except for nonprofit corporations formed prior to January 1, 1969, must not include or end with "incorporated," "company," "corporation," "partnership," "limited partnership," or "Ltd.," or any abbreviation thereof; and

(c) May only include the term "public benefit" or names of like import if the nonprofit corporation has been designated as a public benefit nonprofit corporation by the secretary of state in accordance with chapter 24.03 RCW.

(3) The name of a limited partnership may contain the name of any partner. The name of a partnership that is not a limited liability limited partnership must contain the words "limited partnership" or the abbreviation "LP" or "L.P." and may not contain the words "limited liability limited partnership" or the abbreviation "LLLP" or "L.L.L.P." If the limited partnership is a limited liability limited partnership, the name must contain the words "limited liability limited partnership" or the abbreviation "LLLP" or "L.L.L.P." and may not contain the abbreviation "LP" or "L.P."

(4) The name of a limited liability partnership must contain the words "limited liability partnership" or the abbreviation "LLP" or "L.L.P." If the name of a foreign limited liability partnership contains the words "registered limited liability partnership" or the abbreviation "R.L.L.P." or "RLLP," it may include those words or abbreviations in its foreign registration statement.

(5)(a) The name of a limited liability company:

(i) Must contain the words "limited liability company," the words "limited liability" and abbreviation "Co.," or the abbreviation "L.L.C." or "LLC"; and

(ii) May not contain any of the following words or phrases: "Cooperative," "partnership," "corporation," "incorporated," or the abbreviations "Corp.," "Ltd.," or "Inc.," or "LP," "L.P.," "LLP," "L.L.P.," "LLLP," "L.L.L.P," or any words or phrases prohibited by any statute of this state.

(b) The name of a professional limited liability company must contain either the words "professional limited liability company," or the words "professional limited liability" and the abbreviation "Co.," or the abbreviation "P.L.L.C." or "PLLC," provided that the name of a professional limited liability company organized to render dental services must contain the full names or surnames of all members and no other word than "chartered" or the words "professional services" or the abbreviation "P.L.L.C." or "PLLC."

(6) The name of a cooperative association organized under chapter 23.86 RCW may contain the words "corporation," "incorporated," or "limited," or the abbreviation "Corp.," "Inc.," or "Ltd."

Sec. 1503.  RCW 23.86.030 and 2015 c 176 s 9103 are each amended to read as follows:

(1) The name of any association subject to this chapter must comply with Article 3 of chapter 23.95 RCW.

(2) No corporation or association organized or doing business in this state shall be entitled to use the term "cooperative" as a part of its corporate or other business name or title, unless it: (a) Is subject to the provisions of this chapter((,)) or chapter 23.78, 23.--- (the new chapter created in section 1605 of this act), or 31.12 RCW; (b) is subject to the provisions of chapter 24.06 RCW and operating on a cooperative basis; (c) is, on July 23, 1989, an organization lawfully using the term "cooperative" as part of its corporate or other business name or title; or (d) is a nonprofit corporation or association the voting members of which are corporations or associations operating on a cooperative basis. Any corporation or association violating the provisions of this section may be enjoined from doing business under such name at the instance of any member or any association subject to this chapter.

(3) A member of the board of directors or an officer of any association subject to this chapter shall have the same immunity from liability as is granted in RCW 4.24.264.

NEW SECTION.  Sec. 1504.  A new section is added to chapter 23.86 RCW to read as follows:

A domestic association organized under this chapter may convert to a limited cooperative association pursuant to sections 201 through 214 of this act.

NEW SECTION.  Sec. 1505.  A new section is added to chapter 24.06 RCW to read as follows:

A domestic corporation organized under this chapter, and taking the election provided in RCW 24.06.032(1), may convert to a limited cooperative association pursuant to sections 201 through 214 of this act.

PART 16

MISCELLANEOUS PROVISIONS

--- END ---